<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FIRST PATRIOT BANKSHARES CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
2,425,782*
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
$17.00 cash per share of Common Stock
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$41,238,294.00**
- --------------------------------------------------------------------------------
(5) Total fee paid:
$8,247.66
- --------------------------------------------------------------------------------
* Consists of 2,020,929 shares of Common Stock to be canceled in exchange for
the right to receive the Merger Consideration and 404,853 shares of Common
Stock that would be issued upon exercise of Stock options and warrants.
** Includes $6,882,501.00 representing the aggregate amount to be paid upon
exchange and cancellation of all options and warrants.
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
$8,247.66
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
Form: PREM 14A, File No.: 000-22578
- --------------------------------------------------------------------------------
(3) Filing party:
First Patriot Bankshares Corporation
- --------------------------------------------------------------------------------
(4) Date filed:
April 24, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
FIRST PATRIOT BANKSHARES CORPORATION
12120 SUNSET HILLS ROAD
RESTON, VIRGINIA 20190
Dear Fellow Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders of
First Patriot Bankshares Corporation, to be held on July 17, 1997 at 7:00 p.m.
local time, at the Hyatt Regency Reston, 1800 President Street, Reston, Virginia
22090.
The Notice of Special Meeting and Proxy Statement which follow describe the
transaction being submitted to shareholders for approval.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted, particularly since the approval of
the transaction described in the accompanying Proxy Statement requires the
affirmative vote of the holders of two-thirds of the Company's issued and
outstanding common stock. Accordingly, even if you expect to be personally
present at the meeting, please be sure that the enclosed Proxy is properly
completed, dated, signed and returned without delay in the enclosed envelope
which requires no postage if mailed in the United States. Telephonic proxies
will not be permitted.
IF YOU HAVE ANY QUESTIONS CONCERNING THIS PROPOSED TRANSACTION OR RELATING
TO THE EXECUTION AND RETURN OF THE ENCLOSED PROXY, PLEASE CALL (TOLL-FREE)
1-800-650-5553.
On behalf of the Officers and Directors of First Patriot Bankshares
Corporation, I wish to thank you for your interest in the Company and I hope
that you will be able to attend our Meeting.
For the Board of Directors,
Carroll C. Markley
President and Chief Executive Officer
June 10, 1997
<PAGE> 3
FIRST PATRIOT BANKSHARES CORPORATION.
12120 SUNSET HILLS ROAD
RESTON, VIRGINIA 20190
---------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 17, 1997
---------------------
NOTICE IS HEREBY GIVEN that a Special Meeting (the "Special Meeting") of
Shareholders of First Patriot Bankshares Corporation, a Virginia corporation
(the "Company"), will be held on July 17, 1997 at 7:00 p.m. local time, at the
Hyatt Regency Reston, 1800 President Street, Reston, Virginia 22090, for the
following purposes:
1. To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger ("Merger Agreement"), dated as of February 18,
1997, among United Bankshares, Inc. ("UBS"); United Bank ("UBV"), a
wholly-owned subsidiary of UBS; UB Holding Company, Inc. ("UBHC"), also a
wholly-owned subsidiary of UBS; the Company; and Patriot National Bank
("PNB"), a wholly-owned subsidiary of the Company. Pursuant to the Merger
Agreement, UBS will acquire the Company through the merger of UBHC with and
into the Company and certain other related transactions. In the Merger,
shareholders of the Company will receive a cash payment of $17.00 for each
share of the Company's Common Stock.
2. To transact such other business as may properly come before the
Special Meeting and any adjournment thereof.
Holders of record of the Company's common stock, par value $2.50 per share
(the "Common Stock"), as of the close of business on May 27, 1997, the record
date fixed by the Board of Directors for such purpose (the "Record Date"), are
entitled to notice of, and to vote at, the Special Meeting and any adjournment
thereof.
The accompanying Proxy Statement describes the Merger Agreement, the
proposed Merger and the actions to be taken in connection with the Merger. To
ensure that your vote will be counted, please complete, date and sign the
enclosed proxy card and return it promptly in the enclosed postage paid
envelope, whether or not you plan to attend the Special Meeting. Your proxy may
be revoked in the manner described in the accompanying Proxy Statement at any
time before it is voted at the Special Meeting.
The Board of Directors recommends that the above proposal be approved. It
is hoped that you will agree with the recommendations of the Board of Directors
and Management, and that you will vote "FOR" the above proposal.
IMPORTANT
APPROVAL OF THE TRANSACTION DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT
REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF TWO-THIRDS OF THE COMPANY'S
ISSUED AND OUTSTANDING COMMON STOCK. ACCORDINGLY, EVEN IF YOU EXPECT TO BE
PERSONALLY PRESENT AT THE MEETING, PLEASE BE SURE THAT THE ENCLOSED PROXY IS
PROPERLY COMPLETED, DATED, SIGNED AND RETURNED WITHOUT DELAY IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE> 4
PLEASE DO NOT SEND YOUR COMMON STOCK CERTIFICATES AT THIS TIME.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ CARROLL C. MARKLEY
--------------------------------------
Carroll C. Markley
President and Chief Executive Officer
/s/ NANCY K. FALCK
--------------------------------------
Nancy K. Falck
Secretary
Dated: June 10, 1997
2
<PAGE> 5
FIRST PATRIOT BANKSHARES CORPORATION
12120 SUNSET HILLS ROAD
RESTON, VIRGINIA 20190
---------------------
PROXY STATEMENT
---------------------
INTRODUCTION
This Proxy Statement is being furnished to the holders of common stock, par
value $2.50 per share (the "Common Stock"), of First Patriot Bankshares
Corporation, a Virginia corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company (the "Board of
Directors" or the "Board") for use at the special meeting of shareholders (the
"Special Meeting") to be held on July 17, 1997 at 7:00 p.m., at the Hyatt
Regency Reston, 1800 President Street, Reston, Virginia 22090, and at any
adjournments or postponements thereof. The Board of Directors has fixed the
close of business on May 27, 1997 as the record date (the "Record Date") for the
Special Meeting with respect to this solicitation.
This Proxy Statement relates to the Agreement and Plan of Merger ("Merger
Agreement"), dated as of February 18, 1997, among United Bankshares, Inc.
("UBS"); United Bank ("UBV"), a wholly-owned subsidiary of UBS; UB Holding
Company, Inc. ("UBHC"), also a wholly-owned subsidiary of UBS; the Company; and
Patriot National Bank ("PNB"), a wholly-owned subsidiary of the Company. A copy
of the Merger Agreement is attached to the accompanying Proxy Statement as
Exhibit A.
Pursuant to the Merger Agreement, (i) UBHC will be merged with and into the
Company (the "Merger" or "Holding Company Merger"), with the Company being the
surviving corporation; (ii) the Company will thereupon become a direct
wholly-owned subsidiary of UBS and change its name to "UB Holding Company,
Inc.", (iii) each outstanding share of Common Stock will be converted into the
right to receive $17.00 dollars in cash (the "Merger Consideration").
Immediately after the Holding Company Merger, PNB will merge with UBV, with UBV
being the surviving corporation.
This Proxy Statement was first sent to shareholders on or about the date
stated in the accompanying Notice of Special Meeting of Shareholders.
Only shareholders of record as of the Record Date are entitled to vote at
the meeting and any adjournments thereof. As of that date, 2,020,929 shares of
Common Stock of the Company were issued and outstanding. Each share outstanding
as of the record date will be entitled to one vote, and shareholders may vote in
person or by proxy. Execution of a proxy will not in any way affect a
shareholder's right to attend the meeting and vote in person. Any shareholder
giving a proxy has the right to revoke it at any time before it is voted by
providing written notice to the Secretary of the Company or by submitting
another proxy bearing a later date. In addition, shareholders attending the
meeting may revoke their proxies at any time prior to the time such proxies are
exercised.
The presence in person or by proxy of the holders of a majority of the
votes entitled to be cast at the meeting will constitute a quorum. Under the
laws of the Commonwealth of Virginia, the affirmative vote of the holders of
sixty-six and two-thirds percent (66 2/3%) of the Company Common Stock issued
and outstanding on the Record Date is required to approve the Merger Agreement.
Abstentions and broker non-votes will be included in the calculation for
purposes of determining whether the Agreement has been approved and will be
treated as "no" votes. All properly executed proxies returned in time to be cast
at the meeting will be voted as specified. If no contrary instruction is
indicated, they will be voted FOR the approval of the Merger Agreement.
In the event that there are not sufficient votes to approve and adopt the
Merger Agreement and the transactions contemplated thereby at the time of the
Special Meeting, the Special Meeting may be adjourned in order to permit further
solicitation of proxies by the Company.
The mailing address and telephone number of the Company's principal
executive offices are: First Patriot Bankshares Corporation, 12120 Sunset Hills
Road, Reston, Virginia 20190, (703) 917-1400. The mailing address and telephone
number of UBS's principal executive offices are United Bankshares, Inc., 500
Virginia Street East, Charleston, West Virginia 25301, (304) 348-8400.
<PAGE> 6
AVAILABLE INFORMATION
No person is authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Proxy Statement, and if given or made, such information or representations
should not be relied upon as having been authorized. The delivery of this Proxy
Statement shall not, under any circumstances, create any implication that there
has been no change in the information set forth or incorporated herein by
reference or in the affairs of the Company, PNB, UBS, UBV or UBHC since the date
of this Proxy Statement. All information regarding UBS, UBV and UBHC in this
Proxy Statement has been supplied by UBS, and all information regarding the
Company and PNB has been supplied by the Company.
The Company and UBS are subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, are required to file reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). Copies of
such reports, proxy statements and other information can be inspected and copied
at the public reference facilities maintained by the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the following
Regional offices of the SEC: Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661-2511; and Suite 1300, 7 World Trade Center, New York, New York
10048. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Each of the Company Common Stock and UBS stock is quoted on the NASDAQ
Stock Market's National Market ("NASDAQ"). Consequently, reports, proxy
statements and other information relating to the Company and UBS may be
inspected at the Public Reference Section of the National Association of
Securities Dealers, Inc. ("NASD") at 1735 K Street, N.W., Washington, D.C.
20006-1506. Copies of such documents can be obtained from the public reference
sections at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Proxy Statement incorporates certain documents by reference which are
not presented herein or delivered herewith. These documents are available upon
request from Nancy K. Falck, Secretary, First Patriot Bankshares Corporation,
12120 Sunset Hills Road, Reston, Virginia 20190, (703) 917-1400. In order to
ensure timely delivery of these documents, any request should be made by July 7,
1997.
The Company hereby undertakes to provide, without charge, to each person,
including any beneficial owner of the Company Common Stock, to whom a copy of
this Proxy Statement has been delivered, upon the written or oral request of any
such person, a copy of any and all of the documents referred to below which have
been or may be incorporated herein by reference, other than exhibits to such
documents, unless such exhibits are specifically incorporated herein by
reference. Requests for such documents should be directed to the person
indicated in the immediately preceding paragraph.
The following documents, which have been filed with the SEC pursuant to the
Exchange Act, are hereby incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1996;
(b) The information set forth under the captions "Management's
Discussion and Analysis", "Notes to Consolidated Financial Statements",
"Selected Consolidated Financial Data", "Quarterly Common Stock Prices and
Dividends" in the Company's 1996 Annual Report to Shareholders; and
(c) The Company's quarterly report on Form 10-Q for the quarter ended
March 31, 1997.
This Proxy Statement is accompanied by a copy of the Company's 1996 Annual
Report to Shareholders. Information set forth under the captions "Financial
Highlights", "The Company", "Letter to Stockholders", and "Directors and
Officers", in the Company's 1996 Annual Report to Shareholders is not part of
this Proxy Statement.
All reports subsequently filed by the Company pursuant to Sections 13(a),
13(c) or 15(d) of the Exchange Act after the date of this Proxy Statement and
prior to the date of the Special Meeting shall be deemed incorporated by
reference into this Proxy Statement and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement to the extent that a statement
contained herein, or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Proxy Statement.
2
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY............................................................................... 4
THE SPECIAL MEETING................................................................... 14
RECORD DATE AND VOTING................................................................ 14
VOTE REQUIRED; REVOCABILITY OF PROXIES................................................ 15
APPRAISAL RIGHTS...................................................................... 15
SOLICITATION OF PROXIES............................................................... 15
SECURITY OWNERSHIP BY COMPANY MANAGEMENT.............................................. 16
PARTIES TO THE MERGER................................................................. 16
THE MERGER............................................................................ 17
OPINION OF FINANCIAL ADVISOR.......................................................... 20
EFFECTIVE DATE AND EFFECTIVE TIME..................................................... 22
EFFECT OF THE MERGER.................................................................. 23
EXCHANGE OF COMMON STOCK FOR CASH..................................................... 23
REPRESENTATIONS AND WARRANTIES........................................................ 24
CONDITIONS TO CONSUMMATION OF THE MERGER.............................................. 24
REGULATORY APPROVALS.................................................................. 24
BUSINESS PENDING THE MERGER........................................................... 25
INTERESTS OF CERTAIN PERSONS IN THE MERGER............................................ 27
EFFECT ON COMPANY BENEFIT PLANS AND RELATED MATTERS................................... 27
CERTAIN EMPLOYEE MATTERS.............................................................. 27
WAIVER AND AMENDMENT.................................................................. 28
TERMINATION........................................................................... 28
ACCOUNTING TREATMENT.................................................................. 28
EXPENSES.............................................................................. 28
CERTAIN FEDERAL INCOME TAX CONSEQUENCES............................................... 28
MARKET PRICES AND DIVIDENDS ON COMMON STOCK........................................... 29
STOCK OWNED BY MANAGEMENT............................................................. 30
PRINCIPAL HOLDERS OF VOTING SECURITIES................................................ 31
INDEPENDENT AUDITORS.................................................................. 31
OTHER MATTERS......................................................................... 32
</TABLE>
3
<PAGE> 8
SUMMARY
The following is a brief summary of information contained elsewhere in this
Proxy Statement. This summary is not a complete statement of all information,
facts or materials to be voted on at the Special Meeting. This summary should
only be read in conjunction with, and is qualified in its entirety by reference
to, the more detailed information contained in this Proxy Statement and the
Exhibits thereto. Unless otherwise defined, capitalized terms used in this
summary have the respective meanings ascribed to them elsewhere in this Proxy
Statement. Shareholders are urged to review carefully this Proxy Statement and
the Exhibits hereto in their entirety.
The Special Meeting........ At the Special Meeting of Shareholders of the
Company and any adjournment thereof (the "Special
Meeting"), the shareholders of the Company will
be asked to consider and vote upon (i) the
approval of the Merger Agreement between UBS,
UBHC, UBV, the Company and PNB and (ii) such
other matters as may properly come before the
Special Meeting. The Special Meeting is scheduled
to be held at 7:00 p.m., local time, on July 17,
1997 at the Hyatt Regency Reston, 1800 President
Street, Reston, Virginia 22090. See "Special
Meeting."
Record Date and Voting..... The Record Date for the Special Meeting is the
close of business on May 27, 1997. At the close
of business on the Record Date, there were
2,020,927 shares of Common Stock outstanding and
entitled to vote, held by 452 shareholders of
record. Each holder of Common Stock on the Record
Date will be entitled to one vote for each share
held of record upon each matter properly
submitted at the Special Meeting or at any
postponement or adjournment thereof. The
presence, either in person or by proxy, of a
majority of the outstanding shares of Common
Stock entitled to be voted is necessary to
constitute a quorum at the Special Meeting. See
"The Special Meeting -- Record Date and Voting."
Vote Required; Revocability
of Proxies................. Under Virginia law, approval and adoption of the
Merger Agreement and the transactions
contemplated thereby will require the affirmative
vote of at least two-thirds of the outstanding
shares of Common Stock entitled to be voted at
the Special Meeting.
Since the required vote of the shareholders of the
Company on the Merger Agreement and the
transactions contemplated thereby is based upon
the total number of outstanding shares of Common
Stock, the failure to submit a proxy card (or
vote in person at the Special Meeting) or the
abstention from voting by a shareholder will have
the same effect as a "NO" vote with respect to
the Merger Agreement and the transactions
contemplated thereby. See "The Special
Meeting -- Vote Required; Revocability of
Proxies."
The presence of a shareholder at the Special
Meeting will not automatically revoke such
shareholder's proxy. However, a shareholder may
revoke a proxy at any time prior to its exercise
by (i) delivering to Nancy K. Falck, Secretary,
First Patriot Bankshares Corporation, 12120
Sunset Hills Road, Reston, Virginia 20190, a
written notice of revocation prior to the Special
Meeting, (ii) delivering to the Company prior to
the Special Meeting a duly executed proxy bearing
a later date or (iii) attending the Special
Meeting and voting in person.
4
<PAGE> 9
Appraisal Rights........... Holders of the Common Stock are not entitled to
dissenters' appraisal rights under Virginia law.
See "The Special Meeting -- Appraisal Rights."
Management Shares.......... As of the Record Date, the directors and executive
officers of the company beneficially owned, in
the aggregate, 498,249 shares of Common Stock
(excluding shares which could be acquired upon
the exercise of options or warrants),
representing approximately 25% of such shares
outstanding. To the knowledge of the Company,
such directors and executive officers of the
Company intend to vote their outstanding shares
of Common Stock for the approval and adoption of
the Merger Agreement and the transactions
contemplated thereby. See "Stock Owned by
Management," "Principal Holders of Voting
Securities."
The Companies
First Patriot Bankshares
Corporation.............. The Company is a Virginia corporation registered as
a bank holding company under the Bank Holding
Company Act of 1956, as amended ("BHCA"). The
Company was incorporated on August 31, 1989
solely to acquire all of the issued and
outstanding capital stock of Patriot National
Bank ("PNB"). The Company has two subsidiaries,
PNB, a fully-owned subsidiary that opened for
business on April 13, 1990, and 2071 Chain Bridge
Road, L.L.C. ("LLC"), a limited liability company
formed for the purpose of purchasing and owning
an office building in the Tysons Corner area that
houses the offices of the Company and PNB. The
Company and PNB own all of the outstanding
interests in LLC. As of March 31, 1997, the
Company had total assets, deposits and
stockholders' equity of $181,760,000,
$149,234,000, and $14,744,000 respectively. The
address of the Company's principal executive
offices is First Patriot Bankshares Corporation,
12120 Sunset Hills Road, Reston, Virginia 20190.
Patriot National Bank...... PNB is a federally-chartered national banking
association and a wholly-owned subsidiary of the
Company. It operates nine offices throughout
Northern Virginia specializing in providing
convenient quality service. PNB also has three
loan production centers located in Virginia and
anticipates opening three more branch offices
during 1997.
United Bankshares, Inc..... United Bankshares, Inc. ("UBS") is a West Virginia
corporation registered as a bank holding company
under the BHCA. It was incorporated on March 26,
1982, and organized on September 9, 1982. As a
holding company, UBS's present business is the
operation of its subsidiaries, United National
Bank, headquartered in West Virginia, and United
Bank, a Virginia state-chartered bank,
headquartered in Arlington, Virginia. UBS also
owns United Venture Fund, Inc., a West Virginia
capital company which is primarily engaged in
lending activities consistent with the
requirements of the West Virginia Capital Company
Act and BHCA. UBS also owns UBCHC, a second tier
bank holding company which owns United National
Bank. As of December 31, 1996, UBS had
consolidated assets of $2 billion 327 million and
stockholders' equity of $259 million. The address
of UBS is United Bankshares, Inc., 500 Virginia
Street East, Charleston, West Virginia 25301.
5
<PAGE> 10
UB Holding Company....... UB Holding Company ("UBHC") is a wholly-owned
subsidiary of UBS, chartered for the purpose of
merging with and into the Company.
United Bank.............. United Bank ("UBV"), a Virginia state-chartered
banking corporation, is a wholly-owned subsidiary
of UBS.
The Merger Transaction..... This Proxy Statement relates to the Agreement and
Plan of Merger ("Merger Agreement"), dated as of
February 18, 1997, among UBS; UBHC, a
wholly-owned subsidiary of UBS; UBV, also a
wholly-owned subsidiary of UBS; the Company; and
PNB, a wholly-owned subsidiary of the Company.
The Merger Agreement provides that UBS will
acquire the Company through the merger of UBHC
with and into the Company, with the Company being
the surviving corporation. Each outstanding share
of Common Stock of the Company will be converted
into the right to receive a cash payment of
$17.00. Thereafter, PNB will merge with and into
UBV, with UBV being the surviving corporation.
See Exhibit A to this Proxy Statement.
Recommendation of the Board
of Directors; Effects of
and Reasons for the
Merger .................. The Board of directors of the Company believes that
the terms of the transactions as set forth in the
Merger Agreement are fair to, and in the best
interests of, the Company and its shareholders.
Accordingly, the Company's Board has unanimously
approved the Merger Agreement and recommends its
approval by the Company's shareholders. See "The
Merger -- Background of the Merger; -- Effect of
and Reasons for the Merger; and -- Opinion of the
Financial Advisor."
Opinion of the Financial
Advisor.................. Baxter Fentriss and Company ("Baxter Fentriss") has
delivered to the Company's Board its written
opinion, dated February 7, 1997, to the effect
that, as of the date of such opinion and based
upon and subject to certain matters as stated
therein, the Merger Agreement is fair, from a
financial point of view, to the shareholders of
the Company. The full text of the opinion of
Baxter Fentriss, which sets forth the procedures
followed, assumptions made, matters considered
and limits of the review by Baxter Fentriss, is
attached as Exhibit B to this Proxy Statement and
should be read carefully in its entirety. See
"The Merger -- Background of the
Merger; -- Opinion of the Financial Advisor" and
Exhibit B to this Proxy Statement.
Effective Date and
Effective Time............. It is anticipated that articles of merger will be
filed with the State Corporation Commission of
Virginia (the "Virginia Commission") in
accordance with the requirements of the Virginia
Corporations Law on (i) a business day designated
by UBS within 10 days after the date of receipt
of all regulatory and shareholder approvals,
expiration of applicable waiting periods and the
satisfaction or waiver of all conditions to the
consummation of the Merger or (ii) on such later
date as the parties may agree. On or about the
same day, the parties will also file the articles
of merger with the Secretary of the State of West
Virginia pursuant to West Virginia law. The date
of such filing with and acceptance by the
Secretary of State of West Virginia of such
articles of merger or such date thereafter as is
specified in the articles
6
<PAGE> 11
of merger will be the "Effective Date" of the
Merger. The "Effective Time" of the Merger will
be the time of such filing with and acceptance by
the West Virginia Secretary of State of such
articles of merger or as otherwise specifically
set forth therein.
Effect of the Merger....... Pursuant to the Merger Agreement, upon the
consummation of the Holding Company Merger, the
articles of incorporation of the Company will
remain the same but the Company's bylaws will be
amended in their entirety to conform to the
bylaws of UBHC in effect immediately prior to
such time. At the Effective Time, the directors
and officers of UBHC will become the directors
and officers of the Company as the surviving
corporation.
Exchange of Common Stock
for Cash................. Promptly after the Effective Time, ChaseMellon
Shareholder Services, L.L.C., as exchange agent
(the "Exchange Agent"), will provide written
instructions to each shareholder of record of the
Company regarding the manner in which
shareholders of the Company may exchange their
shares of Common Stock for payment of the Merger
Consideration. No interest will be paid on the
Merger Consideration. Shareholders should not
surrender their shares of Common Stock until they
have received these written instructions from the
Exchange Agent. See "The Merger -- Exchange of
Common Stock for Cash."
Conditions to the Merger... Consummation of the Merger and the payment of the
Merger Consideration pursuant to the Merger
Agreement are subject to various conditions,
including receipt of the shareholder approval
solicited hereby, receipt of the necessary
regulatory approvals and satisfaction of other
customary closing conditions.
Conduct of Business
Pending the Merger....... Prior to the Effective Time, the Merger Agreement
requires the Company to conduct its business in
the ordinary course consistent with past practice
and subject to certain operating restrictions.
The Company has agreed, among other things, to
maintain its current organization, management and
capital structure and to comply with certain
limitations on incurrence of indebtedness,
increases in compensation and acquisitions or
dispositions of assets. See "The
Merger -- Business Pending the Merger."
Interests of Certain
Persons.................. Certain members of the Company's management and
Board of Directors may be deemed to have
interests in the Merger in addition to their
interest as shareholders of the Company
generally. In addition, the holders of stock
options and warrants, which include members of
the Company's management and Board of Directors,
will have the right to receive cash payments in
exchange for the cancellation of the stock
options and warrants. The aggregate amount which
may be paid to the Company's executive officers
(five persons) and to the Company's nonemployee
directors (six persons) upon the exchange and
cancellation of stock options and warrants is
approximately $1,395,000 and $2,911,000,
respectively. In addition, Carroll C. Markley,
Chief Executive Officer and President of the
Company, has entered into a new employment
contract with UBS, as has Michael W. Clarke,
Executive Vice President of the Company. See "The
Merger -- Interests of
7
<PAGE> 12
Certain Persons in the Merger" and "-- Effect on
Company Benefit Plans and Related Matters."
Accounting Treatment....... The Merger will be treated as a purchase for
accounting purposes. See "The
Merger -- Accounting Treatment."
Certain Federal Income Tax
Consequences of the
Merger................... The Merger will be a taxable transaction to Company
shareholders. Shareholders of the Company will
recognize gain or loss in the Merger in an amount
determined by the difference between the cash
received and their tax basis in the Common Stock
exchanged therefor. For further information
regarding certain federal income tax consequences
to shareholders, see "Certain Federal Income Tax
Consequences."
8
<PAGE> 13
SUMMARY HISTORICAL FINANCIAL INFORMATION
MARKET PRICES AND COMMON STOCK
The Common Stock of the Corporation is listed on NASDAQ under the name
First Patriot Bankshares Corporation and traded under the symbol "FPBK". On
September 13, 1996, the day the Company publicly announced the formation of a
special committee for the purpose of exploring methods of enhancing shareholder
value, the reported closing sale price per share of Common Stock on NASDAQ was
$11.75. On February 18, 1997, the last trading day before the public
announcement of the execution of the Merger Agreement, the reported closing sale
price per share of Common Stock on NASDAQ was $14.75. On June 9, 1997, the last
full trading day prior to the date of this Proxy Statement, the reported closing
sale price per share of Common Stock on NASDAQ was $16.50. For additional
information concerning historical market prices of the Common Stock, see "Market
Prices and Dividends."
The Company first paid a quarterly cash dividend of $.02 per share of
Common Stock in March, 1995. The Company has continued to pay quarterly
dividends since then, raising the dividend to $.03 per share of Common Stock in
November, 1995. The Merger Agreement restricts the ability of the Company to
make distributions to its shareholders, except for regular quarterly cash
dividends of $.03 per share of Common Stock with declaration, record and payment
dates consistent with past practice, on February 28, 1997, and May 30, 1997.
RECENT DEVELOPMENTS
The Company reported net income of $2,090,000, or $0.93 per share, for the
year ended December 31, 1996. For the comparable period ended December 31, 1995,
net income amounted to $1,524,000, or $.0.71 per share. Returns on average
assets and stockholders' equity were 1.25% and 15.66%, respectively, for 1996,
and 1.19% and 13.06%, respectively, for 1995. The earnings improvement in 1996
was attributed primarily to increases in average earning assets, increased fees,
and gains on the sale of loans.
The Company reported net income of $547,000, or $.24 per share for the
first quarter ended March 31, 1997. For the comparable period ended March 31,
1996, the Company reported net income of $391,000 or $.17 per share. Return on
average assets increased from 1.00% for the first quarter of 1996 to 1.21% for
the first quarter of 1997. Return on average equity increased to 14.93% from
11.96% for the first quarter in 1996. The Company attributes the increase in
income for the first quarter of 1997 primarily to the continued growth in PNB's
loan portfolio.
SELECTED CONSOLIDATED FINANCIAL DATA
The following is selected consolidated financial data for the Company and
its subsidiaries for the three month period ended March 31, 1997 and 1996, for
the years ended December 31, 1996, 1995 and 1994 and for each of the five years
ended December 31, 1992 through 1996. The consolidated financial information for
the three month periods ended March 31, 1997 and 1996 has not been audited, but
in the opinion of management of the Company, all adjustments necessary for a
fair presentation have been included. The results of operations for the three
months ended March 31, 1997 are not necessarily indicative of the results of
operations that may be expected for the entire year. The data is qualified in
its entirety by the detailed information and financial statements included in
the Company's Annual Reports on Form 10-K for the years ended December 31, 1995
and December 31, 1996, and in the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997, available as described under "Incorporation of
Certain Documents by Reference," and the other information contained or
incorporated by reference elsewhere in this Proxy Statement.
9
<PAGE> 14
FIRST PATRIOT BANKSHARES CORPORATION
SUMMARY CONSOLIDATED FINANCIAL DATA
TABLE 1 -- SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net interest income................................. $ 8,777 $ 6,969 $ 5,104 $ 3,777 $ 2,752
Provision for loan losses........................... 751 372 178 279 208
Noninterest income.................................. 2,908 2,281 1,505 1,240 347
Noninterest expense................................. 7,748 6,471 4,770 3,795 2,460
--------- --------- --------- --------- ---------
Income before taxes................................. 3,186 2,407 1,661 943 431
Income tax expense.................................. 1,096 883 565 137 148
--------- --------- --------- --------- ---------
Income before extraordinary item.................... 2,090 1,524 1,096 806 283
Extraordinary tax benefit........................... -- -- -- -- 148
--------- --------- --------- --------- ---------
Net income.......................................... $ 2,090 $ 1,524 $ 1,096 $ 806 $ 431
========= ========= ========= ========= =========
Primary earnings per share:
Income before extraordinary item.................. $ 0.93 $ 0.71 $ 0.54 $ 0.51 $ 0.20
Extraordinary tax benefit......................... -- -- -- -- 0.11
--------- --------- --------- --------- ---------
Net income........................................ $ 0.93 $ 0.71 $ 0.54 $ 0.51 $ 0.31
========= ========= ========= ========= =========
Weighted average shares outstanding............... 2,243,695 2,138,556 2,046,960 1,580,113 1,388,567
Fully diluted earnings per share:
Income before extraordinary item.................. $ 0.93 $ 0.71 $ 0.53 $ 0.51 $ 0.20
Extraordinary tax benefit......................... -- -- -- -- 0.11
--------- --------- --------- --------- ---------
Net income........................................ $ 0.93 $ 0.71 $ 0.53 $ 0.51 $ 0.31
========= ========= ========= ========= =========
Weighted average shares outstanding............... 2,249,763 2,148,278 2,061,940 1,580,113 1,388,567
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1996
--------- ---------
<S> <C> <C>
RESULTS OF OPERATIONS
Net interest income............................................................. $ 2,413 $ 2,058
Provision for loan losses....................................................... 218 127
Noninterest income.............................................................. 652 515
Noninterest expense............................................................. 2,025 1,804
--------- ---------
Income before taxes............................................................. 822 642
Income tax expense.............................................................. 275 251
--------- ---------
Net income...................................................................... $ 547 $ 391
========= =========
Primary earnings per share:
Net income.................................................................... $ 0.24 $ 0.17
========= =========
Weighted average shares outstanding........................................... 2,294,865 2,241,837
Fully diluted earnings per share:
Net income.................................................................... $ 0.24 $ 0.17
========= =========
Weighted average shares outstanding........................................... 2,294,865 2,241,837
</TABLE>
10
<PAGE> 15
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
FINANCIAL CONDITION
Assets.............................................. $ 191,852 $ 158,791 $ 104,910 $ 95,304 $ 69,059
Loans, gross........................................ $ 127,868 $ 106,676 $ 75,272 $ 63,253 $ 45,561
Investments & Federal Funds Sold.................... $ 50,781 $ 38,884 $ 15,749 $ 13,213 $ 12,453
Earning assets...................................... $ 178,649 $ 145,560 $ 96,525 $ 90,929 $ 65,242
Deposits............................................ $ 154,329 $ 120,259 $ 84,842 $ 75,969 $ 58,591
Stockholders' equity................................ $ 14,525 $ 12,738 $ 10,832 $ 9,997 $ 6,195
Book value per share................................ $ 7.19 $ 6.35 $ 5.50 $ 5.07 $ 4.46
Common shares outstanding........................... 2,020,929 2,005,200 1,969,896 1,969,896 1,388,567
Number of full service offices...................... 8 8 5 2 1
PERFORMANCE RATIOS
Return on average assets............................ 1.25% 1.19% 1.10% 1.00% 0.78%
Return on average equity............................ 15.66% 13.06% 10.57% 10.98% 7.91%
Net interest margin................................. 5.65% 5.88% 5.41% 4.96% 5.19%
ASSET QUALITY
Allowance for loan losses........................... $ 1,530 $ 1,332 $ 965 $ 793 $ 552
Allowance for loan losses to loans, gross........... 1.20% 1.25% 1.28% 1.25% 1.21%
Nonperforming loans................................. -- -- -- $ 19 $ 97
Nonperforming loans to loans, gross................. -- -- -- 0.03% 0.21%
Net charge-offs to average loans.................... 0.48% -- -- 0.07% --
LIQUIDITY AND CAPITAL RATIOS
Average loans to average deposits................... 86.88% 84.41% 89.00% 80.61% 80.63%
Risk-based capital:
Tier 1............................................ 11.22% 11.59% 15.61% 17.42% 16.55%
Total............................................. 12.39% 12.81% 16.87% 18.67% 17.96%
Leverage............................................ 8.16% 8.27% 10.32% 10.64% 9.88%
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31,
----------------------
1997 1996
--------- ---------
<S> <C> <C>
FINANCIAL CONDITION
Assets.......................................................................... $ 181,760 $ 160,894
Loans, gross.................................................................... $ 126,600 $ 109,531
Investments & Federal Funds Sold................................................ $ 42,679 $ 37,344
Earning assets.................................................................. $ 169,279 $ 146,875
Deposits........................................................................ $ 149,234 $ 125,350
Stockholders' equity............................................................ $ 14,744 $ 12,905
Book value per share............................................................ $ 7.30 $ 6.37
Common shares outstanding....................................................... 2,020,929 2,018,479
Number of full service offices.................................................. 9 8
PERFORMANCE RATIOS
Return on average assets........................................................ 1.21% 1.00%
Return on average equity........................................................ 14.93% 11.96%
Net interest margin............................................................. 5.70% 5.71%
ASSET QUALITY
Allowance for loan losses....................................................... $ 1,748 $ 1,459
Allowance for loan losses to loans, gross....................................... 1.38% 1.33%
Nonperforming loans............................................................. 0 0
Nonperforming loans to loans, gross............................................. 0.00% 0.00%
Net charge-offs to average loans................................................ 0.00% 0.00%
LIQUIDITY AND CAPITAL RATIOS
Average loans to average deposits............................................... 84.41% 84.51%
Risk-based capital:
Tier 1........................................................................ 13.02% 11.47%
Total......................................................................... 11.77% 12.72%
Leverage........................................................................ 8.21% 8.17%
</TABLE>
11
<PAGE> 16
TABLE 2 -- AVERAGE BALANCES, INTEREST INCOME AND EXPENSES, AVERAGE YIELDS AND
RATES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------
1996 1995 1994
--------------------------- -------------------------- -------------------------
INTEREST INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
-------- ------- ------ -------- ------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest earning assets:
Federal funds sold.......... $ 9,122 $ 488 5.35% $ 9,167 $ 539 5.88% $10,322 $ 444 4.30%
Investments:
U.S. Treasury
securities.............. 1,625 98 6.01% 4,228 215 5.09% 7,064 317 4.49%
Obligations of U.S.
government agencies and
corporations............ 28,626 2,014 7.03% 18,825 1,373 7.29% 5,656 304 5.37%
Other securities.......... 962 55 5.71% 1,256 64 5.10% 1,387 63 4.54%
-------- ------- -------- ------- ------- ------
Total investments.... 31,213 2,166 6.94% 24,309 1,652 6.80% 14,107 684 4.85%
Loans(3).................... 114,911 12,036 10.47% 85,083 9,281 10.91% 69,855 6,702 9.59%
-------- ------- -------- ------- ------- ------
Total interest
earning assets..... 155,246 14,690 9.46% 118,559 11,472 9.68% 94,284 7,830 8.30%
Noninterest earning assets:
Cash and due from banks..... 5,953 5,253 3,891
Other assets................ 7,390 5,665 2,400
Less: allowance for loan
losses.................... (1,547) (1,063) (887)
Total noninterest
earning assets..... 11,796 9,855 5,404
-------- -------- -------
Total assets......... $167,042 $128,414 $99,688
======== ======== =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest bearing liabilities
Deposits:
Interest bearing demand... $ 10,529 216 2.05% $ 7,795 189 2.42% $ 6,948 176 2.53%
Savings and money market
account................. 30,398 964 3.17% 24,942 849 3.40% 25,795 746 2.89%
Other time................ 63,928 3,734 5.84% 46,180 2,695 5.84% 30,530 1,406 4.61%
-------- ------- -------- ------- ------- ------
Total interest
bearing deposits... 104,855 4,914 4.69% 78,917 3,733 4.73% 63,273 2,328 3.68%
Short-term borrowings....... 18,600 887 4.77% 14,316 762 5.32% 10,144 398 3.92%
Other borrowings............ 1,125 112 9.95% 100 8 8.00% -- -- --
-------- ------- -------- ------- ------- ------
Total interest
bearing
liabilities........ 124,580 5,913 4.75% 93,333 4,503 4.82% 73,417 2,726 3.71%
Noninterest bearing
liabilities:
Demand deposits............. 27,416 21,880 15,217
Other liabilities........... 1,704 1,528 688
-------- -------- -------
Total noninterest
bearing
liabilities........ 29,120 23,408 15,905
Total liabilities.... 153,700 116,741 89,322
Stockholders' equity.......... 13,342 11,673 10,366
-------- -------- -------
Total liabilities and
stockholders'
equity............. $167,042 $128,414 $99,688
======== ======== =======
Interest spread(1)............ 4.72% 4.85% 4.59%
Net interest income........... $ 8,777 $ 6,969 $5,104
======= ======= ======
Net interest margin(2)........ 5.65% 5.88% 5.41%
</TABLE>
- ---------------
(1) Interest spread is the average yield earned on earning assets less the
average rate incurred on interest bearing liabilities.
(2) Net interest margin is net interest income expressed as a percentage of
average earning assets.
(3) Loan fees included for 1996, 1995, & 1994 are: $465, $440, and $395.
12
<PAGE> 17
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------------------------------
1997 1996
--------------------------- --------------------------
INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
-------- ------- ------ -------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest earning assets:
Federal funds sold................................. $ 6,459 $ 86 5.41% $ 12,396 $ 162 5.26%
Investments:
U.S. Treasury securities......................... 0 0 0.00% 2,991 44 5.86%
Obligations of U.S. government agencies and
corporations................................... 38,774 686 7.18% 23,711 410 6.96%
Other securities................................. 1,001 15 5.94% 939 14 6.00%
-------- ------ -------- ------
Total investments........................... 39,774 701 7.15% 27,640 468 6.81%
Loans.............................................. 125,475 3,278 10.59% 104,549 2,791 10.74%
-------- ------ -------- ------
Total interest earning assets............... 171,708 4,065 9.60% 144,585 3,420 9.51%
Noninterest earning assets:
Cash and due from banks............................ 6,133 6,379
Other assets....................................... 7,534 6,770
Less: allowance for loan losses.................... (1,586) (1,338)
Total noninterest earning assets............ 12,081 11,811
-------- --------
Total assets................................ $183,789 $156,396
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing liabilities
Deposits:
Interest bearing demand.......................... $ 11,911 59 2.00% $ 9,961 53 2.13%
Savings and money market account................. 27,865 229 3.33% 33,676 259 3.09%
Other time....................................... 80,234 1,138 5.75% 54,873 814 5.96%
-------- ------ -------- ------
Total interest bearing deposits............. 120,010 1,425 4.82% 98,510 1,125 4.59%
Short-term borrowings.............................. 17,615 203 4.67% 17,279 212 4.94%
Other borrowings................................... 1,181 24 8.37% 1,197 25 8.30%
-------- ------ -------- ------
Total interest bearing liabilities.......... 138,806 1,652 4.83% 116,986 1,362 4.68%
Noninterest bearing liabilities:
Demand deposits.................................... 28,647 25,595
Other liabilities.................................. 1,470 1,015
-------- --------
Total noninterest bearing liabilities....... 30,117 26,610
Total liabilities........................... 168,923 143,596
Stockholders' equity................................. 14,866 12,800
-------- --------
Total liabilities and stockholders'
equity.................................... $183,789 $156,396
======== ========
Interest spread(1)................................... 4.77% 4.83%
Net interest income.................................. $2,413 $2,058
====== ======
Net interest margin(2)............................... 5.70% 5.73%
</TABLE>
- ---------------
(1) Interest spread is the average yield earned on earning assets less the
average rate incurred on interest bearing liabilities.
(2) Net interest margin is net interest income expressed as a percentage of
average earning assets.
13
<PAGE> 18
THE SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
Each copy of this Proxy Statement mailed to holders of Common Stock of the
Company is accompanied by a proxy card furnished in connection with the
solicitation of proxies by the Board of Directors for use at the Special
Meeting. The Special Meeting is scheduled to be held at Hyatt Regency Reston,
1800 President Street, Reston, Virginia 22090 on July 17 at 7:00 p.m. At the
Special Meeting of Shareholders of the Company and any adjournment thereof (the
"Special Meeting"), the shareholders of the Company will be asked to consider
and vote upon (i) the approval of the Agreement and Plan of Merger ("Merger
Agreement"), dated as of February 18, 1997, among United Bankshares, Inc.
("UBS"); United Bank ("UBV"), a wholly owned subsidiary of UBS; UB Holding
Company, Inc. ("UBHC"), also a wholly-owned subsidiary of UBS; the Company; and
Patriot National Bank ("PNB"), a wholly-owned subsidiary of the Company and (ii)
such other matters as may properly come before the Special Meeting. A copy of
the Merger Agreement is attached to the accompanying Proxy Statement as Exhibit
A.
HOLDERS OF COMMON STOCK ARE REQUESTED PROMPTLY TO COMPLETE, DATE, SIGN AND
RETURN THE ACCOMPANYING PROXY CARD TO THE COMPANY IN THE ENCLOSED POSTAGE PAID
ENVELOPE. THE AFFIRMATIVE VOTE OF NOT LESS THAN TWO/THIRDS OF THE COMPANY'S
OUTSTANDING COMMON STOCK IS NECESSARY TO APPROVE THE MERGER. ACCORDINGLY,
FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL
MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER AGREEMENT.
RECORD DATE AND VOTING
The Board of Directors has fixed the close of business on May 27, 1997 as
the Record Date for the determination of the holders of Common Stock entitled to
receive notice of and to vote at the Special Meeting. Only holders of record of
Common Stock at the close of business on that date will be entitled to vote at
the Special Meeting or at any postponement or adjournment thereof. At the close
of business on the Record Date, there were 2,020,929 shares of Common Stock
outstanding and entitled to vote at the Special Meeting, held by 452
shareholders of record.
Each holder of Common Stock on the Record Date will be entitled to one vote
for each share held of record upon each matter properly submitted at the Special
Meeting or at any postponement or adjournment thereof. The presence, in person
or by proxy, of at least a majority of the outstanding shares of Common Stock
entitled to be voted at the Special Meeting is necessary to constitute a quorum.
Abstentions are included in the calculation of the number of votes represented
at a meeting for purposes of determining whether a quorum has been achieved.
If the enclosed proxy card is properly executed and received by the Company
in time to be voted at the Special Meeting, the shares represented thereby will
be voted in accordance with the instructions marked thereon. Executed proxies
with no instructions indicated thereon will be voted "FOR" the Merger Agreement
and the transactions contemplated thereby.
The Board is not aware of any matters other than those set forth in the
Notice of Special Meeting of Stockholders that may be brought before the Special
Meeting. If any other matters properly come before the Special Meeting, the
persons named in the accompanying proxy will vote the shares represented by all
properly executed proxies on such matters in such manner as shall be determined
by a majority of the Board.
SHAREHOLDERS SHOULD NOT FORWARD ANY COMMON STOCK CERTIFICATES WITH THEIR
PROXY CARDS. IN THE EVENT THE MERGER IS CONSUMMATED, STOCK CERTIFICATES SHOULD
BE DELIVERED IN ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A LETTER OF
TRANSMITTAL WHICH WOULD BE SENT TO SHAREHOLDERS BY THE EXCHANGE AGENT PROMPTLY
AFTER THE EFFECTIVE TIME.
14
<PAGE> 19
VOTE REQUIRED; REVOCABILITY OF PROXIES
The affirmative vote of at least two-thirds of the outstanding shares of
Common Stock entitled to be voted is required in order to approve and adopt the
Merger Agreement and the transactions contemplated thereby.
THE REQUIRED VOTE OF THE SHAREHOLDERS OF THE COMPANY ON THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY IS BASED UPON THE TOTAL
NUMBER OF OUTSTANDING SHARES OF COMMON STOCK, AND NOT UPON THE NUMBER OF SHARES
WHICH ARE ACTUALLY VOTED. ACCORDINGLY, THE FAILURE TO SUBMIT A PROXY CARD OR TO
VOTE IN PERSON AT THE SPECIAL MEETING OR THE ABSTENTION FROM VOTING BY A
SHAREHOLDER WILL HAVE THE SAME EFFECT AS A "NO" VOTE WITH RESPECT TO THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
Brokers who hold shares in street name for customers who are the beneficial
owners of such shares are prohibited from giving a proxy to vote shares held for
such customers on the approval and adoption of the Merger Agreement without
specific instructions from such customers. Given that Virginia law requires the
affirmative vote of two-thirds of the outstanding shares in the Company in order
to approve and adopt the Merger Agreement, the failure of such customers to
provide specific instructions to their brokers will have the effect of a vote
against approval of the Merger Agreement.
The presence of a shareholder at the Special Meeting will not automatically
revoke such shareholder's proxy. However, a shareholder may revoke a Proxy at
any time prior to its exercise by (i) delivering to Nancy K. Falck, Secretary,
First Patriot Bankshares Corporation, 12120 Sunset Hills Road, Reston, Virginia
20190, a written notice of revocation prior to the Special Meeting, (ii)
delivering to the Company prior to the Special Meeting a duly executed proxy
bearing a later date or (iii) attending the Special Meeting and voting in
person.
If a quorum is not obtained, or if fewer shares of Common Stock are voted
in favor of approval and adoption of the Merger Agreement and the transactions
contemplated thereby than the number required for approval, it is expected that
the Special Meeting will be postponed or adjourned for the purpose of allowing
additional time for obtaining additional proxies or votes, and, at any
subsequent reconvening of the Special Meeting, all proxies will be voted in the
same manner as such proxies would have been voted at the original convening of
the Special Meeting (except for any proxies which have effectively been revoked
or withdrawn).
No vote of UBS shareholders is required in connection with the Merger
Agreement.
The obligations of the Company and UBS to consummate the Merger Agreement
are subject, among other things, to the condition that the shareholders of the
Company approve and adopt the Merger Agreement and the transactions contemplated
thereby.
APPRAISAL RIGHTS
Shareholders of the Company have no appraisal rights in connection with the
Merger Agreement and the consummation of the transactions contemplated thereby,
and assuming the Merger Agreement is approved and adopted by the Company's
shareholders, any dissenting, nonvoting or objecting shareholders will be bound
by the vote and will not have any appraisal rights under Virginia law.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of
the Company and its subsidiaries may solicit proxies for the Special Meeting
from shareholders personally or by telephone or telegram without additional
remuneration therefor. The Company will also provide persons, firms, banks and
corporations holding shares in their names or in the names of nominees, which in
either case are beneficially owned by others, proxy material for transmittal to
such beneficial owners and will reimburse such record owners for their
reasonable expenses in doing so. The Company has retained Corporate Investor
Communications, Inc., a
15
<PAGE> 20
proxy soliciting firm ("CIC"), to assist in the solicitation of proxies at a fee
of $3,000, plus reimbursement of certain out-of-pocket expenses. The cost of
solicitation of proxies for the Special Meeting, including the fees of CIC, will
be borne by the Company.
SECURITY OWNERSHIP BY COMPANY MANAGEMENT
As of the Record Date, the directors and executive officers of the Company
beneficially owned, in the aggregate, 498,249 shares of Common Stock (excluding
shares which could be acquired upon the exercise of options), representing
approximately 25% of such shares outstanding. To the knowledge of the Company,
such directors and executive officers of the Company intend to vote their
outstanding shares of Common Stock for the approval and adoption of the Merger
Agreement and the transactions contemplated thereby. See "Stock Owned by
Management," "Principal Holders of Voting Securities."
PARTIES TO THE MERGER
THE COMPANY
First Patriot Bankshares Corporation (the "Company") is a Virginia
corporation registered as a bank holding company under the Bank Holding Company
Act of 1956, as amended ("BHCA"). The Company has two subsidiaries, Patriot
National Bank ("PNB"), a fully owned subsidiary that opened for business on
April 13, 1990, and 2071 Chain Bridge Road, L.L.C. ("LLC"), a limited liability
company formed for the purposes of purchasing and owning an office building in
the Tysons Corner area that houses the offices of the Company and PNB. The
Company and PNB own all the outstanding interests in LLC. As of March 31, 1997,
the Company had total assets, deposits and stockholders' equity of $187,760,000;
$149,234,000; and $14,744,000, respectively. The address of the Company's
principal executive offices is First Patriot Bankshares Corporation, 12120
Sunset Hills Road, Reston, Virginia 20190, and its telephone number is (703)
917-1400.
PATRIOT NATIONAL BANK
Patriot National Bank ("PNB") is a federally chartered national banking
association and a wholly-owned subsidiary of the Company. PNB is a full service
community bank with nine banking offices throughout Northern Virginia. Three
additional branches are anticipated to open during 1997. PNB also operates three
loan production centers in Virginia. The bank provides competitive financial
services, specializing in quality personal service, to businesses and
individuals located in its market. PNB offers a full range of loan products,
ranging from credit cards to permanent real estate loans.
UNITED BANKSHARES, INC.
United Bankshares ("UBS") is a West Virginia corporation registered as a
bank holding company under the BHCA. UBS's principal office is in Charleston,
West Virginia. It was incorporated on March 26, 1982, and organized on September
9, 1982. As a holding company, UBS's present business is the operation of its
subsidiaries, United National Bank, headquartered in West Virginia, and United
Bank, a Virginia state-chartered bank headquartered in Arlington, Virginia. UBS
also owns United Venture Fund, Inc., a West Virginia capital company which is
primarily engaged in lending activities consistent with the requirements of the
West Virginia Capital Company Act and the BHCA. UBS also owns UBCHC, a second
tier bank holding company which owns United National Bank. UBS is the second
largest bank holding company headquartered in West Virginia, with 43 offices
throughout West Virginia as well as offices in McLean and Arlington, Virginia.
As of December 31, 1996, UBS had consolidated assets of $2 billion 327 million
and stockholders' equity of $259 million. The address of UBS is United
Bankshares, Inc., 500 Virginia Street East, Charleston, West Virginia 25301, and
its telephone number is (304) 348-8400.
16
<PAGE> 21
UB HOLDING COMPANY
UB Holding Company ("UBHC") is a West Virginia corporation with its
principal office in Charleston, West Virginia. UBHC is a wholly-owned subsidiary
of UBS, chartered for the purpose of merging with and into the Company.
UNITED BANK
United Bank ("UBV") is a Virginia state-chartered banking corporation with
its principal offices in Arlington, Virginia. UBV is a wholly-owned subsidiary
of UBS.
THE MERGER
GENERAL
The following information, insofar as it relates to matters contained in
the Merger Agreement, is qualified in its entirety by reference to the Merger
Agreement, which is incorporated by reference and attached hereto as Exhibit A.
Stockholders are urged to read the Merger Agreement in its entirety.
THE MERGER
The Merger Agreement provides that UBS will acquire the Company through the
merger of UBHC with and into the Company, with the Company being the surviving
corporation, and the separate existence of UBHC ceasing (the "Merger" or the
"Bank Holding Company Merger"). Each outstanding share of Common Stock of the
Company will be converted into the right to receive a cash payment of $17.00
(the "Merger Consideration"). The Company's name will thereupon change to "UB
Holding Company, Inc." UB Holding Company, Inc. will be a Virginia corporation
with its principal offices in Charleston, West Virginia.
After the completion of the Bank Holding Company Merger, PNB will merge
with UBV, with UBV being the surviving corporation (the "Bank Merger"). The
surviving corporation's name will be "United Bank" and its principal office will
be in Arlington, Virginia. The present offices of PNB will become branch offices
of United Bank.
BACKGROUND OF THE MERGER
During 1996 the Company formulated plans for growth through the opening of
new offices and loan production centers. It became apparent that to achieve the
rate of growth necessary to remain competitive in the Northern Virginia banking
region, a substantial amount of new capital would have to be raised. The Company
also noted the improved market for bank purchases, in particular, the relatively
high prices received in purchases of banks similar to PNB. To address these
issues and evaluate strategies concerning the future of the Company, the Company
formed a Special Committee of the Board of Directors on August 22, 1996, which
consisted of Dan R. Bannister, John H. Rust, Jr., Bronson Ford Byrd and Carroll
C. Markley. In addition, the Company engaged Baxter Fentriss and Company
("Baxter Fentriss") on August 30, 1996 to be the Company's financial advisor.
The focus of the strategic evaluation was to determine the appropriate course of
action for the Company in terms of continued independence versus possible sale
or merger, with the primary objective to identify the action or series of
actions designed to maximize shareholder value. Baxter Fentriss and management
reviewed and discussed with the Special Committee the potential merger pricing
range for the Company as well as pricing levels that would warrant continued
review.
In connection with its engagement, Baxter Fentriss prepared an Offering
Memorandum that included materials regarding the Company and its financial
condition. Baxter Fentriss then confidentially contacted approximately sixty
financial institutions, all financially capable of consummating a transaction of
this size and scope. These institutions represented a broad geographic
dispersion given the relatively modest market share of PNB and included
institutions with operations national and regional in scope and generally
included financial institutions with assets in excess of $500 million (with most
above $1 billion) and having operations in one or all of the states of Virginia,
Maryland, Pennsylvania, West Virginia, North Carolina, Georgia,
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Tennessee, Florida, Alabama, and Ohio. All parties contacted were approved by
the Special Committee and in most cases had informally expressed to Baxter
Fentriss a desire to be in the Virginia market or specifically the Northern
Virginia market. From these confidential contacts, twenty-seven institutions
requested additional information through the Offering Memorandum more fully
describing the Company and its financial and operational abilities. Thereafter,
Baxter Fentriss received six preliminary offers, subject to due diligence review
of the Company.
On December 19, 1996, the Special Committee received a report from Baxter
Fentriss summarizing its activities and the preliminary offers it had received.
The highest offer was for stock valued at $17.60 per share. Based on its review,
the Special Committee recommended that the highest offeror be invited to perform
due diligence of the Company's books and records. The Board then met and
concurred with the Special Committee's recommendation.
Between January 7 and 9, 1997, the offering company performed its due
diligence. On January 15, 1997, the Company was informed that the offeror would
not go forward. The Company understands that the primary reason the offeror did
not proceed was because it and the Company had substantially different policies
regarding lending and investment portfolio strategies, as well as different
operating cultures (rural vs. urban orientations).
The Special Committee then turned its attention to the second best offer,
which was the $17.00 cash offer by UBS. On January 16, 1997, after reviewing the
UBS offer, the Special Committee authorized due diligence by UBS. On January 17,
1997, a meeting between representatives of the Company and UBS took place to
introduce key officers and exchange basic information about the entities.
Between January 21 and January 30, 1997, UBS conducted its due diligence
investigation and indicated that it was ready to negotiate a definitive merger
agreement with the Company. On February 5 and 7, 1997, the Special Committee met
to discuss the UBS offer in further detail. At the February 7 meeting, Baxter
Fentriss gave a special presentation comparing UBS's offer with the other
preliminary offers to purchase the Company. Baxter Fentriss also informed the
Special Committee that it believed the offer from UBS was fair from a financial
point of view to the shareholders of the Company. The Special Committee then
reviewed the detailed Baxter Fentriss report and discussed the offer with legal
counsel. After the discussion, the Special Committee unanimously recommended
that the full Board approve and authorize further negotiations with UBS. The
Board then met to consider the Special Committee's recommendation with members
of Baxter Fentriss and legal counsel available to answer questions. Following
discussion, the Board authorized and directed the Company, Baxter Fentriss and
counsel to proceed to negotiate a definitive agreement with UBS.
Thereafter, officers of UBS and the Company, together with their respective
counsel, negotiated a definitive agreement. After the completion of these
negotiations, at a special meeting of the Board on February 18, 1997, attended
by Baxter Fentriss and the Company's legal counsel, the Board of Directors
considered the proposed Merger Agreement. In advance of the special meeting,
copies of the Merger Agreement were provided to the Board members. At the
meeting, the terms of the proposed Merger and operational, legal and regulatory
issues relating to UBS's proposal were discussed. In addition, Baxter Fentriss
made a presentation regarding the financial aspects of the proposed Merger and
delivered its written opinion that the consideration to be received by the
Company's shareholders pursuant to the Merger Agreement was fair to the
shareholders of the Company from a financial point of view. Following an
analysis presented by the Company's and the Special Committee's respective legal
counsel, the members of the Board of Directors in attendance unanimously
approved the Merger Agreement and authorized its execution and delivery. The
Merger Agreement was executed and delivered by the parties on February 18, 1997
and the Company and UBS issued a joint press release on February 19 announcing
the proposed Merger.
REASONS FOR THE MERGER
The Board of Directors has unanimously approved the Merger Agreement and
the transactions contemplated thereby and has determined that the Merger is in
the best interests of the Company and its stockholders. The Board of Directors
therefore recommends that holders of Common Stock vote "FOR"
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approval and adoption of the Merger Agreement and the transactions contemplated
thereby. See "The Merger -- Background of the Merger" and "Opinion of Financial
Advisor."
In reaching its determination that the Merger Agreement is in the best
interests of the Company and the holders of Common Stock, the Board considered a
number of factors, including, without limitation, the following:
(i) the presentation by, and the written opinion of, Baxter Fentriss
that the cash consideration of $17.00 per share to be received by the
shareholders of the Company pursuant to the Merger Agreement is fair to
such shareholders from a financial point of view (see "The
Merger -- Opinion of Financial Advisor");
(ii) the relationship of the price to be paid pursuant to the Merger
Agreement to the historical and current market prices for the Common Stock
preceding the announcement of the Merger, especially noting the 45% premium
over the $11.75 closing sale price on September 13, 1996, the date of the
public announcement of the formation of the Special Committee;
(iii) the fact that the offering price of $17.00 per share represents
a premium of approximately 15% over the $14.75 closing sale price of the
Common Stock on February 18, 1997, the last trading day before the
announcement of the Merger (see "Market Prices and Dividends on Common
Stock"), and represents a substantial multiple of the $.93 earnings per
share of the Common Stock for 1996, and constitutes approximately a 136%
premium of the proposed price over stated book value at December 31, 1996
(175% premium considering the netted effect of options and warrants);
(iv) the presentation of Baxter Fentriss indicating that the
comparable acquisition multiples for the Company, based on the price
offered by UBS in the Merger, compare favorably with other bank
transactions reviewed by Baxter Fentriss;
(v) the business, financial condition and recent results of operations
of the Company (see "Recent Developments" and "Selected Consolidated
Financial Data") and management's best estimates of the prospects of the
Company (see "The Merger -- Opinion of Financial Advisor");
(vi) the current and prospective environment in which the Company
operates, including national and local economic conditions, the competitive
environment for financial institutions generally, the increased regulatory
burden on financial institutions generally, and the trend toward
consolidation in the financial services industry;
(vii) the extensive process followed by Baxter Fentriss to obtain
acquisition proposals and preliminary bids;
(viii) the fact that the terms of the Merger Agreement were determined
through arms'-length negotiations;
(ix) the terms of the Merger Agreement as reviewed by the Board with
its legal and financial advisors;
(x) the Board's assessment that UBS has the financial capability to
acquire the Company for the Merger Consideration and therefore is likely to
consummate the Merger;
(xi) the Board's belief, after consultation with its legal counsel,
that the required regulatory approvals could be obtained for the Merger;
(xii) the Board's assessment that PNB would better serve the
convenience and needs of its customers and the communities that it serves
through affiliation with a substantially larger bank holding company, such
as UBS, thereby affording PNB access to UBS's financial resources and the
ability to offer an expanded range of potential products and services; and
(xiii) the compatibility of the respective businesses and management
philosophies of the Company and UBS.
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The Board did not quantify or attach any particular weight to the various
factors that it considered in reaching its determination that the Merger is in
the best interests of the Company's shareholders.
OPINION OF FINANCIAL ADVISOR
Baxter Fentriss has acted as financial advisor to the Company in connection
with the merger. Baxter Fentriss assisted the Company in identifying prospective
acquirors.
On February 18, 1997, Baxter Fentriss delivered to the Company its opinion
that as of that date, and on the basis of matters referred to herein, the offer
from UBS was fair, from a financial point of view, to the holders of Common
Stock. In rendering its opinion, Baxter Fentriss consulted with the management
of the Company and UBS; reviewed the Merger Agreement, and certain
publicly-available information on the parties; and reviewed certain additional
materials made available by the management of the respective banks.
In addition, Baxter Fentriss discussed with the management of the Company
and UBS their respective businesses and outlook. No limitations were imposed by
the Company's Board of Directors upon Baxter Fentriss with respect to the
investigation made or procedures followed by it in rendering its opinion. The
full text of Baxter Fentriss' written opinion is attached as Exhibit B to this
Proxy Statement and should be read in its entirety with respect to the
procedures followed, assumptions made, matters considered, and qualifications
and limitations on the review undertaken by Baxter Fentriss in connection
therewith.
Baxter Fentriss' opinion is directed to the Company's Board of Directors
only, and is directed only to the fairness, from a financial point of view, of
the consideration received. It does not address the Company's underlying
business decision to effect the proposed Merger, nor does it constitute a
recommendation to any shareholder of the Company as to how such shareholder
should vote with respect to the Merger at the Special Meeting or as to any other
matter.
Baxter Fentriss' opinion was one of many factors taken into consideration
by the Board of Directors in making its determination to approve the Merger
Agreement, and the receipt of Baxter Fentriss' opinion is a condition precedent
to the consummation of the Merger. The opinion of Baxter Fentriss does not
address the relative merits of the Merger as compared to any alternative
business strategies that might exist for the Company or the effect of any other
business combination in which the Company might engage.
Baxter Fentriss, as part of its investment banking business, is continually
engaged in the valuation of financial institutions and their securities in
connection with mergers and acquisitions and valuations for estate, corporate
and other purposes. Baxter Fentriss is a nationally recognized advisor to firms
in the financial services industry on mergers and acquisitions. The Company
selected Baxter Fentriss as its financial advisor because Baxter Fentriss is an
investment banking firm that focuses on bank and thrift transactions, and
because of the firm's extensive experience and expertise in transactions similar
to the Merger. Baxter Fentriss is not affiliated with UBS or the Company.
In connection with rendering its opinion to the Board of Directors, Baxter
Fentriss performed a variety of financial analyses. In conducting its analyses
and arriving at its opinion as expressed herein, Baxter Fentriss considered such
financial and other factors as it deemed appropriate under the circumstances
including the following: (i) the historical and current financial condition and
results of operations of UBS and the Company including interest income, interest
expense, interest sensitivity, noninterest income, noninterest expense,
earnings, book value, returns on assets and equity, capitalization, the amount
and type of non-performing assets, the impact of holding certain non-earning
real estate assets, the reserve for loan losses and possible tax consequences
resulting from the transaction; (ii) the business prospects of UBS and the
Company; (iii) the economies of UBS's and the Company's respective market areas;
(iv) the historical and current market for UBS and the Company Common Stock;
and, (v) the nature and terms of certain other merger transactions that it
believed to be relevant. Baxter Fentriss also considered its assessment of
general economic, market, financial and regulatory conditions and trends, as
well as its knowledge of the financial institutions industry, its experience in
connection with similar transactions, its knowledge of securities valuation
generally, and its knowledge of merger transactions in Virginia.
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In connection with rendering its opinion, Baxter Fentriss reviewed (i) the
Merger Agreement; (ii) the Annual Reports to shareholders, including the audited
financial statements of the Company for the years ended December 31, 1993, 1994,
and 1995, and unaudited financial data for the year ended December 31, 1996;
(iii) the Annual Reports to shareholders, including the audited financial
statements of UBS for the years ended December 31, 1993, 1994, and 1995, and
unaudited financial data for the year ended December 31, 1996; (iv) the Forms
10K for the Company and UBS for the years ended December 31, 1994, and 1995; (v)
the Forms 10Q for the Company and UBS for the quarters ended March 31, 1996,
June 30, 1996, and September 30, 1996; (vi) pro-forma, combined, unaudited,
condensed balance sheets as of December 31, 1996, as well as pro-forma,
combined, unaudited statements of income for the year ended December 31, 1996.
Baxter Fentriss also (a) held discussions with members of the senior management
of UBS and the Company regarding the historical and current business operation,
financial condition and future prospects of their respective companies; (b)
reviewed the historical market prices and trading activity for the UBS and
Company Common Stock; (c) compared the results of operations of UBS and the
Company with those of certain banking companies that it deemed to be relevant;
and (d) analyzed the pro-forma financial impact of the Merger on UBS.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to partial analysis or summary
description. Moreover, the evaluation of fairness, from a financial point of
view, of the consideration to holders of Company Common Stock was to some extent
a subjective one based on the experience and judgment of Baxter Fentriss and not
merely the result of mathematical analysis of financial data. Accordingly,
notwithstanding the separate factors summarized below, Baxter Fentriss believes
that its analyses must be considered as a whole and that selecting portions of
its analyses and of the factors considered by it, without considering all
analyses and factors, could create an incomplete view of the evaluation process
underlying its opinion. The ranges of valuations resulting from any particular
analysis described below should not be taken to be Baxter Fentriss' view of the
actual value of the Company or UBS.
In performing its analyses, Baxter Fentriss made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of the Company and UBS. The
analyses performed by Baxter Fentriss are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses. Additionally, analyses relating to the values of
businesses do not purport to be appraisals or to reflect the prices at which
businesses actually may be sold. In rendering its opinion, Baxter Fentriss
assumed that, in the course of obtaining the necessary regulatory approvals for
the Merger, no conditions will be imposed that will have a material adverse
effect on the contemplated benefits of the Merger, on a pro-forma basis, to the
Company or UBS.
The following is a summary of analyses performed by Baxter Fentriss in
connection with its opinion.
1. Stock Price History. Baxter Fentriss studied the history of the
trading prices and volume for UBS and Company Common Stock and compared
that to publicly traded banks in Virginia and to the price offered by UBS.
2. Comparative Analysis. Baxter Fentriss compared the price to
earnings multiple, price to book multiple, premium to deposits, and price
to assets of the UBS offer with sixty-eight comparable merger transactions
in Virginia and Maryland. Of the transactions considered, the UBS offer was
ranked the highest on a Price to Book basis, fifteenth highest on a Price
to Earnings basis, fifth highest on a Premium to Deposit basis, and
fourteenth highest on a Price to Asset basis. The pricing statistics for
the Company include the impact of options and warrants. The comparative
multiples included both bank and thrift sales during the last three years.
3. Pro-Forma Impact. Baxter Fentriss considered the pro-forma impact
of the transaction and concluded the transaction should have a positive
long-term impact on UBS and Company shareholders.
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4. Discounted Cash Flow Analysis. Baxter Fentriss performed a
discounted cash flow analysis to determine hypothetical present values for
a share of Company Common Stock as a five and ten year investment. Under
this analysis, Baxter Fentriss considered various scenarios for the
performance of the Common Stock using (i) a range from 8% to 14% in the
growth of the Company's earnings and dividends and (ii) a range from 12
times to 20 times earnings as the terminal value for Company Common Stock.
A discount rate of 13.0% was applied to these alternative growth and
terminal value scenarios. These growth alternatives, terminal values and
discount rates were chosen based upon what Baxter Fentriss, in its
judgment, considered to be appropriate, taking into account, among other
things, the Company's past and current performance, the general level of
inflation, rates of return for fixed income and equity securities in the
marketplace generally and for companies with similar risk profiles. In all
but one of the scenarios considered, the present value of a share of
Company Common Stock was calculated at less than that of the UBS offer.
Thus, Baxter Fentriss' discounted cash flow analysis indicated that Company
shareholders would be in a better financial position by receiving the
consideration offered in the Merger than by continuing to hold Company
Common Stock.
Using publicly available information on UBS and applying the capital
guidelines of banking regulators, Baxter Fentriss' analysis indicated that the
Merger would not seriously dilute the capital and earnings capacity of UBS and
would, therefore, likely not be opposed by the banking regulatory agencies from
a capital perspective. Furthermore, Baxter Fentriss considered the likely market
overlap and the Federal Reserve guidelines with regard to market concentration
and did not believe there to be an issue with regard to possible antitrust
concerns.
Baxter Fentriss has relied, without any independent verification, upon the
accuracy and completeness of all financial and other information reviewed.
Baxter Fentriss has assumed that all estimates, including those as to possible
economies of scale, were reasonably prepared by management, and reflect their
best current judgments. Baxter Fentriss did not make an independent appraisal of
the assets or liabilities of either the Company or UBS, and has not been
furnished such an appraisal.
No company or transaction used as a comparison in the above analysis is
identical to the Company, UBS, or the Merger. Accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that could affect the public trading value of
the companies used for comparison in the above analysis.
Baxter Fentriss has been, or will be, paid (i) an advisory fee of $5,000,
(ii) a merger fee, based on successful completion of the proposed Merger, equal
to 1.00% of aggregate consideration received by the Company or shareholders of
the Company, (iii) a fairness opinion fee of $15,000, and (iv) reasonable
out-of-pocket expenses for its services. The merger fee will be reduced by the
amount of the fairness opinion fee in the event of a successful transaction. The
Company has agreed to indemnify Baxter Fentriss against certain liabilities,
including certain liabilities under federal securities laws.
EFFECTIVE DATE AND EFFECTIVE TIME
It is anticipated that articles of merger will be filed with the State
Corporation Commission of Virginia (the "Virginia Commission") in accordance
with the requirements of the Virginia Corporations Law on (i) a business day
designated by UBS within 10 days after the date of receipt of all regulatory and
shareholder approvals, expiration of applicable waiting periods and the
satisfaction or waiver of all conditions to the consummation of the Merger or
(ii) on such later date as the parties may agree. The parties will also file the
articles of merger with the Secretary of the State of West Virginia pursuant to
West Virginia law. The date of such filing with and acceptance by the Secretary
of State of West Virginia of such articles of merger or such date thereafter as
is specified in the articles of merger will be the "Effective Date" of the
Merger. The "Effective Time" of the Merger will be the time of such filing with
and acceptance by the West Virginia Secretary of State of such articles of
merger or as otherwise specifically set forth therein.
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EFFECT OF THE MERGER
The Merger Agreement provides for the merger of UBHC with and into the
Company. The Company will continue as the surviving corporation as a direct
wholly-owned subsidiary of UBS. At the Effective Time, holders of outstanding
shares of Common Stock will have no further ownership interest in the Company
and therefore will not participate in future potential earnings and growth.
Instead, such holders of shares of Common Stock will be entitled to receive
$17.00 in cash for each share of Common Stock held of record. In the Merger,
each share of common stock of UBHC, issued and outstanding immediately prior to
the Effective Time, will be converted into one share of common stock of the
Company as the surviving corporation of the Merger, which shares will thereafter
constitute all of the issued and outstanding shares of capital stock of the
surviving corporation.
Pursuant to the Merger Agreement, upon the consummation of the Holding
Company Merger, the articles of incorporation of the Company will remain the
same but the Company's bylaws will be amended in their entirety to conform to
the bylaws of UBHC in effect immediately prior to such time.
EXCHANGE OF COMMON STOCK FOR CASH
Promptly after the Effective Time, each shareholder of record of the
Company will be provided with written instructions from ChaseMellon Shareholder
Services, L.L.C., as Exchange Agent, with respect to the manner in which the
Common Stock may be surrendered and exchanged for payment of the Merger
Consideration. CERTIFICATES EVIDENCING SHARES OF COMMON STOCK SHOULD NOT BE
SURRENDERED FOR PAYMENT PRIOR TO RECEIPT OF WRITTEN INSTRUCTIONS FROM THE
EXCHANGE AGENT. As of the Effective Time, UBS will deposit with the Exchange
Agent an amount in cash equal to the product of the number of shares of Common
Stock outstanding immediately prior to the Effective Time and the Merger
Consideration. The source of funds for the payment of the Merger Consideration
by UBS will be a loan obtained by a subsidiary, which will be transferred to
UBS.
If payment in respect of the shares of Common Stock is to be made to a
person other than the person in whose name a surrendered certificate is
registered, it will be a condition to such payment that the certificate so
surrendered be properly endorsed or otherwise in proper form for transfer and
that the person requesting such payment will pay any transfer or other taxes
required by reason of such payment to a person other than the registered holder
of the certificate surrendered or will have established to the satisfaction of
UBS that such tax has been paid or is not applicable.
At the Effective Time, the Company's stock transfer books with respect to
shares of Common Stock will be closed and there will be no further transfers of
such shares. If after the Effective Time certificates or shares of Common Stock
are presented to UBS or the Company as the surviving corporation, they will be
canceled and exchanged for cash in the manner set forth above. One year after
the Effective Time, the Exchange Agent will deliver to UBS any remaining funds
(including the proceeds of any investments thereof) which were made available to
the Exchange Agent to be disbursed to stockholders at the Effective Time.
Thereafter, shareholders will be entitled to look only to UBS with respect to
cash payable upon due surrender of their certificates, subject to applicable
law. If any certificates for shares of Common Stock have not been surrendered
prior to such date on which any payment in respect thereof would otherwise
escheat to or become the property of any governmental unit or agency, the
payment in respect of such certificates will, to the extent permitted by
applicable law, become the property of UBS, free and clear of all claims or
interest of any person previously entitled thereto. UBS, UBHC, the Company, the
Exchange Agent or any other person shall not be liable to any former holder of
Common Stock for any amount delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
No interest will accrue or be paid on any cash payable upon the surrender
of a certificate or certificates which immediately prior to the Effective Time
represent outstanding shares of Common Stock.
If a certificate of Common Stock has been lost, stolen or destroyed,
payment will be made in accordance with the Merger Agreement upon receipt by the
Exchange Agent of appropriate evidence as to such loss, theft
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or destruction, appropriate evidence as to the ownership of such certificate by
the claimant, and customary indemnification.
REPRESENTATIONS AND WARRANTIES
The Company and UBS have made certain representations and warranties to
each other in the Merger Agreement. The Company represents and warrants to UBS,
among other things, as to its organization, capitalization, corporate authority
and approvals, ownership of subsidiaries, enforceability of the Merger Agreement
as to the Company, financial statements and public disclosure materials, absence
of material adverse changes, absence of certain claims and regulatory
proceedings, labor matters and employee benefit plans, title to its assets,
environmental matters and compliance with laws. UBS represents and warrants to
the Company, among other things, as to its organization, corporate authority and
approvals, enforceability of the Merger Agreement as to UBS and UBHC and access
to funds necessary to consummate the Merger and pay the Merger Consideration.
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of the Company and UBS to cause the Merger to be
consummated are subject to certain conditions, including, among other things:
(i) the approval and adoption of the Merger Agreement and the transactions
contemplated thereby by the holders of the requisite number of shares of Common
Stock, (ii) the receipt and effectiveness of all regulatory permits, approvals
and consents required to consummate the Merger and the transactions contemplated
thereby and the expiration of all applicable statutory waiting periods, (iii)
the absence of any statute, rule, order, decree or injunction which enjoins,
prohibits or restricts the consummation of the Merger, (iv) the representations
and warranties of the other party in the Merger Agreement being true and correct
in all material respects as of the dates specified therein, and the performance
by the other party in all material respects of all agreements and covenants
required by the Merger Agreement to be performed by such party and (v) the
delivery to each of the Company and UBS of legal opinions as set forth in the
Merger Agreement. In addition, the obligation of UBS to consummate the Merger is
subject to (i) its receipt from the Company of a title opinion or a title
insurance policy, in form and substance satisfactory to UBS, indicating that LLC
owns the real property at 2071 Chain Bridge Road, free and clear of any
encumbrances, with the exception of the existing deed of trust and with any
noted exceptions acceptable to UBS, (ii) as of the Merger Effective Date, UBS,
in its sole discretion, must be satisfied with the adequacy of the then existing
level of the Company's loan loss reserve, the level of the Company's provision
to the loan loss reserve and with the sufficiency of the write-downs and
charge-offs in the loan portfolio and any requirements imposed in connection
with the Merger by any regulator, provided, however, that UBS will accept the
loan loss reserve provisions and charge-offs of PNB if its loan reserves are
consistent with the performance and reserve levels as of the date of the Merger
Agreement, (iii) UBS shall have received an executed copy of a contract between
UBS, the surviving bank and Mr. Carroll Markley regarding his post-merger
compensation and employment relationship which has the effect of terminating and
superseding his existing employment contract, and (iv) Mr. Michael Clarke shall
have entered into a written amendment to his employment agreement addressing
stock options and bonuses. See "The Merger -- Conduct of Business Pending the
Merger."
The Company and UBS each may waive any condition of the Merger Agreement,
unless such waiver would result in the violation of any law or applicable
regulation.
REGULATORY APPROVALS
Consummation of the Merger is subject to prior receipt of all required
approvals, consents or waivers of the Merger and the Bank Merger by all
applicable federal and state regulatory authorities. In order to consummate the
Merger and the Bank Merger, UBS, the Company, UBHC, PNB and/or UBV must obtain
the prior consent, approval or waiver, as applicable, of the Board of Governors
of the Federal Reserve System ("FRB"), and the Bureau of Financial Institutions
of the Virginia Commission.
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The Merger is subject to the prior approval of the FRB under the BHCA.
Pursuant to the applicable provisions of the BHCA, the FRB may not approve the
Merger if (i) such transaction would result in a monopoly or would be in
furtherance of any combination or conspiracy or monopolize or attempt to
monopolize the business of banking in any part of the United States; or (ii) the
effect of such transaction in any section of the country may be to substantially
lessen competition, or tend to create a monopoly, or in any other manner to
restrain trade, unless the FRB finds that the anticompetitive effects of the
proposed transaction are clearly outweighed in the public interests by the
probable effect of the transaction in meeting the convenience and needs of the
community to be served. In conducting its review of any application for
approval, the FRB is required to consider whether the financial and managerial
resources of the acquiring bank holding company and acquiring bank are adequate
(including consideration by a variety of means of the competence, experience and
integrity of the applicant's directors, officers and principal stockholders and
compliance with, among other things, fair lending laws). The FRB has the
authority to deny an application if it concludes that the combined organization
would have an inadequate capital position or if the acquiring organization does
not meet the requirements of the Community Reinvestment Act of 1977, as amended.
The BHCA provides that a transaction approved by the applicable federal
banking agency generally may not be consummated until 30 days after approval by
such agency. If the U.S. Department of Justice and the relevant agency otherwise
agree, this 30-day period may be reduced to as few as 15 days. During such
period, the U.S. Department of Justice may commence a legal action challenging
the transaction under the antitrust laws. The commencement of an action would
stay the effectiveness of the approval of the federal banking agency unless a
court specifically orders otherwise. If, however, the U.S. Department of Justice
does not commence a legal action during such waiting period, it may not
thereafter challenge the transaction except in an action commenced under Section
2 of the Sherman Antitrust Act.
The approval of the Virginia Commission also is required for consummation
of the Merger. Under Virginia law, the Virginia Commission may disapprove the
application for the transaction if it determines, after considering all relevant
evidence, that the Merger would be detrimental to the safety and soundness of
UBS, the Company or PNB, or would be against the public interest. The factors to
be considered by the Virginia Commission in this regard are substantially
similar to those to be considered by the FRB, as discussed above.
Applications have been filed with applicable regulatory authorities for
approval of the Merger and the Bank Merger. Although neither UBS nor the Company
is aware of any basis for disapproving the Merger and the Bank Merger, there can
be no assurance that all requisite approvals will be obtained. UBS and the
Company are not aware of any other governmental approvals that are required for
consummation of the Merger and the Bank Merger, except as described above.
BUSINESS PENDING THE MERGER
The Merger Agreement contains certain provisions regarding the conduct of
the Company's business pending consummation of the Merger. In particular, prior
to the Effective Time, the Company has agreed to, and to cause its subsidiaries
to:
(i) Take no action, and not permit any action to be taken, which will
have a material effect upon the Company or PNB, or their respective
properties, financial condition, business or operations, including, without
limitation, the commencement of any new branch banking operation except for
the approved office openings in Hastings, Ashburn, Centreville and Herndon,
Virginia, consistent with the established schedule and budget for such
offices;
(ii) Take no action or do anything (a) which will cause the Company or
PNB to be, as of the respective Bank Merger Effective Date or Holding
Company Merger Effective Date, in material violation of any of their
representations, warranties, covenants and agreements contained in the
Merger Agreement or (b) which will materially and adversely affect the
consummation of the transactions contemplated in the Merger Agreement;
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<PAGE> 30
(iii) Take no action to reclassify or alter the Company's or PNB's
authorized stock, to issue shares of capital stock, debt instruments, or
other securities or to amend either company's Articles of Incorporation or
Bylaws; provided, however that shares of the Company Common Stock may be
issued in connection with the exercise of the Company's outstanding options
and warrants identified in the Merger Agreement. The number of shares
issued in connection with outstanding options cannot exceed 133,055 and the
number of shares issued in connection with outstanding warrants cannot
exceed 271,798. Nothing contained in the Merger Agreement precludes the
purchase of Company Common Stock on the market through the Company's
current dividend reinvestment plan consistent with existing practices,
which purchases cannot increase the number of outstanding shares;
(iv) Not pay or declare any dividend or make any other distribution in
respect of the Company shares of Common Stock or acquire for value any of
such shares unless otherwise permitted in the Merger Agreement;
(v) Take no action, and not permit any action to be taken, to
mortgage, pledge, or subject to any lien or any other encumbrance on any of
the Company's or PNB's material assets, to dispose of any material assets,
or to incur or cancel any material debt or claim, except in the ordinary
course of business as theretofore conducted;
(vi) Afford to the officers, attorneys, accountants, and other
authorized representatives of UBS full access to the respective properties,
books, tax returns and records of the Company and PNB, during normal
business hours and upon reasonable request, in order that they may make
such investigations of the affairs of the Company or PNB as deemed
necessary or advisable;
(vii) Promptly advise UBS of any material adverse change in the
financial condition, assets, businesses or operations of the Company or PNB
and any material breach of any representation, warranty, covenant or
agreement made by the Company or PNB in the Merger Agreement;
(viii) Maintain in full force and effect adequate fire, casualty,
public liability, employee fidelity and other insurance coverage in
accordance with its existing coverages to protect the Company and PNB
against losses for which insurance protection can be obtained at reasonable
cost;
(ix) Take no action, and take such reasonable steps as are practicable
to avoid any action to be taken, to change the senior management of the
Company or PNB, or to increase any compensation, benefits, or fees payable
by the Company or PNB to their respective directors, officers, and
employees;
(x) Take no action (a) to acquire, or to be acquired by, to merge or
merge with any company or business, to sell substantially all of the
Company's or PNB's assets, or engage in any similar transaction other than
pursuant to the provisions of the Merger Agreement, or (b) except as
expressly permitted therein, to acquire any branch, or, except in the
ordinary course of business, any material assets of any other company or
business;
(xi) Take no material action, and not permit any material action to be
taken, whatsoever with respect to its properties, assets, businesses or
operations, other than in the ordinary course of its business;
(xii) Continue to make adequate monthly provisions to the loan loss
reserve during 1997; and in addition PNB agrees that it will (a) properly
and timely charge-off any loan losses, as required by any applicable
regulatory agency and prudent banking practices, and (b) at the time of any
such charge-off, PNB will make a provision to the loan loss reserve equal
to the amount of the loss, less the specific amount allocated in the
reserve, if any, relating to the charged-off loan (such specific amounts
having been previously identified in writing by loan and amount);
(xiii) Identify in advance to UBS all loans, including but not limited
to any extension, renewal, modification or refinancing of an existing loan,
in excess of $250,000 and permit a representative of UBS, upon request, to
observe loan committee or board presentations on credit decisions
generally; and
(xiv) Identify in advance to UBS any plan to sell, trade or purchase
any securities in its investment portfolio or purchase any long term
federal funds.
26
<PAGE> 31
Furthermore, each party has agreed to provide the other party and its
representatives with such financial data and other information with respect to
its business and properties as such party shall from time to time reasonably
request. Each party will cause all non-public financial and business information
obtained by it from the other to be treated confidentially. If the Merger is not
consummated, each party will return to the other all non-public financial
statements, documents and other materials previously furnished by such party.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors with respect to
the Merger, shareholders should be aware that certain members of the Board of
Directors and management may be deemed to have interests in the Merger in
addition to their interests as holders of Common Stock.
Carroll C. Markley, President and Chief Executive Officer of the Company,
has agreed to an employment contract to work for UBS after the Merger. The
contract provides that Mr. Markley will receive $120,000 per year for his
services, plus an additional one-time payment of $262,500, payable in equal
monthly installments between the Effective Date of the Merger and December 31,
1998. The contract also provides that should Mr. Markley be terminated without
cause during the year 1999, or during the year 2000, he will receive a severance
payment of $227,500, or $210,000, respectively.
Michael W. Clarke, Executive Vice President of PNB, has agreed to work for
UBS in a similar capacity. He has agreed to amend his employment contract to
clarify that he is entitled to cash bonuses based upon his performance and that
he is entitled to benefits and stock options in accordance with UBS's standard
benefits and plans.
EFFECT ON COMPANY BENEFIT PLANS AND RELATED MATTERS
At the Effective Time, if consistent with the terms of the outstanding
options and warrants, UBS will pay the holders of outstanding options and
warrants to purchase shares of Common Stock the per share amount of the Merger
Consideration less the per share exercise price applicable to such option or
warrant.
Shares of Common Stock of the Company held pursuant to the Company's 401(k)
Plan at the Effective Time will be converted into the Merger Consideration. For
purposes of the Special Meeting, such Common Stock will be voted by the plan
administrator as instructed by each plan participant, or in the absence of
instructions, as determined in the discretion of the plan administrator.
CERTAIN EMPLOYEE MATTERS
Pursuant to the Merger Agreement, UBS agreed to pay specified severance
payments to any employee of the Company or PNB (other than any employee who is
party to an employment agreement) who is involuntarily terminated as a result of
the Mergers, in accordance with UBS standard severance policy, a copy of which
is attached as Exhibit C to the Merger Agreement (The Merger Agreement is
attached as Exhibit A to this Proxy Statement).
Pursuant to the Merger Agreement, each person employed by the Company or
PNB prior to the Effective Time who becomes an employee of UBS or a subsidiary
of UBS following the Effective Time (each a "Continued Employee") shall be
entitled, as an employee of UBS or a subsidiary of UBS, to participate in such
employee benefit plans as may be in effect generally for employees of UBS and
its subsidiaries from time to time (the "UBS Plans"), if such Continued Employee
shall be eligible or selected for participation therein. Continued Employees
will be eligible to participate on the same basis as similarly situated
employees of UBS or UBS's subsidiaries. All such participation shall be subject
to the terms of the UBS plans as may be in effect from time to time.
Notwithstanding the foregoing, participation by Continued Employees in employee
benefit plans of UBS or its subsidiaries with respect to which eligibility to
participate is at the discretion of the employer shall be discretionary with
such employer.
27
<PAGE> 32
UBS and its subsidiaries shall, solely for purposes of vesting and
eligibility to begin participation with respect to the UBS Plans, recognize
credit for each Continued Employee's term of service with the Company and PNB as
such service is recognized by the Company and PNB for purposes of its benefit
plans.
WAIVER AND AMENDMENT
Prior to the Effective Time, any provision of the Merger Agreement may be
(i) waived by the party benefited by the provision or (ii) amended or modified
at any time (including the structure of the transaction) by an agreement in
writing between the parties approved by their respective boards of directors;
provided, however, that after the vote by the holders of the Common Stock, no
amendment may be made that would contravene any applicable law.
TERMINATION
The Merger Agreement may be terminated, and the Merger abandoned, prior to
the Effective Time, either before or after its approval by the holders of Common
Stock as follows: (i) by the mutual consent of the Company and UBS after the
vote of a majority of the members of each of the applicable boards of directors,
(ii) by UBS if any of the conditions required to be satisfied by the Company and
PNB as conditions to the Merger have not been satisfied within the applicable
time limits (see "Conditions to Consummation of the Merger," "Regulatory
Approvals"), (iii) by the Company if the conditions required to be satisfied by
UBS or UBV as conditions to the Merger have not been satisfied within the
applicable time limits (see "Conditions to Consummation of Merger," "Regulatory
Approvals"), (iv) by either party if the Merger will violate any nonappealable
final order, decree or judgment of any court or governmental body which binds
any party, (v) in any event, if the Merger Agreement has not become effective
prior to December 31, 1997.
ACCOUNTING TREATMENT
The Merger, if completed as proposed, will be treated as a purchase for
accounting purposes. Accordingly, under generally accepted accounting
principles, the assets and liabilities of the Company will be recorded on the
books of UBS at their respective fair market values at the time of the
consummation of the Merger.
EXPENSES
The Merger Agreement provides that the Company and UBS will each pay,
without a right to reimbursement from the other party and whether or not the
Merger is consummated, all of its costs incurred in connection with the Merger
Agreement and the transactions contemplated thereby.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion, based on current law, of certain of
the expected federal income tax consequences applicable to shareholders of the
Company who receive cash in exchange for shares of Common Stock pursuant to the
Merger. This summary discusses only certain tax consequences to United States
persons (i.e., citizens or residents of the United States and domestic
corporations) who hold shares of Common Stock as capital assets. It does not
discuss the tax consequences to holders of options or warrants issued by the
Company who receive cash in exchange for their options or warrants pursuant to
the Merger, nor does it discuss the tax consequences that might be relevant to
shareholders who acquired their shares of Common Stock through the exercise of
employee stock options, warrants, or otherwise as compensation. In addition, it
does not discuss the tax consequences that might be relevant to shareholders
entitled to special treatment under the federal income tax law (such as
Individual Retirement Accounts and other deferred accounts, life insurance
companies and tax exempt organizations) or to shareholders who hold their shares
in special circumstances (such as shareholders that hold shares as part of a
straddle or conversion transaction).
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<PAGE> 33
For federal income tax purposes, the Merger will be treated as though UBS
or a subsidiary of UBS purchased the Common Stock directly from the Company's
shareholders. The receipt of cash by a Company shareholder pursuant to the
Merger will be a taxable transaction to such shareholder for federal income tax
purposes. A Company shareholder who receives cash in exchange for shares of
Common Stock will recognize taxable gain or loss for federal income tax purposes
equal to the difference, if any, between the amount of cash received pursuant to
the Merger and such shareholder's tax basis in the shares of Common Stock
surrendered in exchange therefor. In general, such gain or loss will be capital
gain or loss if such shares are capital assets in the hands of such shareholder
at the time of the exchange and will be long-term capital gain or loss if, at
the time of the exchange, such shareholder's holding period for the shares is
more than one year.
Under current law, net capital gains of individuals are taxed at a maximum
federal income tax rate of 28% and corporations are taxed at the same federal
income tax rates as ordinary income. With certain limited exceptions for
individuals, capital losses are deductible only against capital gains and are
not available to offset ordinary income.
Under federal income tax backup withholding rules, the Exchange Agent is
required to withhold and remit to the United States Treasury 31% of the gross
cash proceeds paid to a shareholder or other payee pursuant to the Merger,
unless an exception applies under the applicable law or regulations, or unless
the shareholder or other payee signs a Substitute Form W-9 that provides his or
her taxpayer identification number (employer identification number or social
security number) and certifies that such number is correct. Therefore, unless
such an exception exists and can be proved in a manner satisfactory to UBS and
the Exchange Agent, each shareholder should complete and sign the Substitute
Form W-9 which will be included as part of the letter of transmittal from the
Exchange Agent to be used to surrender Common Stock for cash. The exceptions
provide that certain shareholders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, however, he or she must submit a statement, signed under
penalties of perjury, attesting to his or her exempt status. Any amounts
withheld will be allowed as a credit against the shareholder's federal income
tax, or, in general, refunded by the Internal Revenue Service ("IRS") assuming
that the appropriate procedures are followed.
No ruling has been requested from the IRS as to any of the tax effects to
the Company's shareholders of the transactions discussed in this Proxy
Statement, and no opinion of counsel has or will be rendered to the Company's
shareholders with respect to any of the tax effects of the Merger or the other
related Transactions.
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX AND FINANCIAL ADVISORS AS
TO THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO THEM, AND ALSO AS TO ANY
STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES.
MARKET PRICES AND DIVIDENDS ON COMMON STOCK
MARKET PRICES
The Company Common Stock is listed on NASDAQ under the name "First Patriot
Bankshares Corporation" and traded under the symbol "FPBK." The following table
sets forth for the fiscal quarters indicated, the high and low closing sales
price per share of Common Stock traded on NASDAQ.
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<PAGE> 34
FIRST PATRIOT BANKSHARES
QUARTERLY COMMON STOCK PRICES
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------- ----------------------------- ----------------------------
MARKET PRICE MARKET PRICE MARKET PRICE
---------------- DIVIDENDS ---------------- DIVIDENDS --------------- DIVIDENDS
HIGH LOW DECLARED HIGH LOW DECLARED HIGH LOW DECLARED
------ ------ --------- ------ ------ --------- ------ ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter............... $17.50 $14.63 $0.03 $13.00 $11.50 $0.03 $ 7.00 $5.50 $0.02
Second Quarter.............. 16.00* 16.63* 0.03 12.00 9.25 0.03 8.00 6.38 0.02
Third Quarter............... N/A N/A N/A 12.50 10.00 0.03 10.63 8.00 0.02
Fourth Quarter.............. N/A N/A N/A 16.00 11.50 0.03 13.00 9.00 0.03
</TABLE>
- ---------------
* Through June 9, 1997.
On February 18, 1997, the last trading day before the public announcement
of the execution of the Merger Agreement, the reported closing sale price per
share of Common Stock on NASDAQ was $14.75. On June 9, the last full trading day
prior to the date of this Proxy Statement, the reported closing sale price per
share of Common Stock on NASDAQ was $16.50. Shareholders are urged to obtain
current information with respect to the price of the Common Stock.
DIVIDENDS
The Company first paid a quarterly cash dividend of $.02 per share of
Common Stock in March, 1995. The Company has continued to pay quarterly
dividends since then, raising the dividend to $.03 per share of Common Stock in
November, 1995. The Merger Agreement restricts the ability of the Company to
make distributions to its shareholders, except for regular quarterly cash
dividends of $.03 per share of Common Stock with declaration, record and payment
dates consistent with past practice, on February 28, 1997, and May 30, 1997. See
"The Merger -- Conduct of Business Pending the Merger."
STOCK OWNED BY MANAGEMENT
The following table sets forth information as of February 28, 1997 with
respect to the amount of the Company Common Stock beneficially owned by each
director of the Company, the Chief Executive Officer and each of the four most
highly compensated executive officers of the Company serving at February 28,
1997, and by all directors and executive officers of the Company as a group.
The only persons or entities (including any "group" as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended), known by
the Company to be the beneficial owners of more than 5% of the issued and
outstanding common stock were the three directors as disclosed in "Stock
Ownership of Management" below.
The following table sets forth the beneficial ownership of common stock by
all directors and named executive officers, and all directors and executive
officers of the Company as a group. Each person has sole voting and investment
power unless otherwise indicated. The individual percentages in the last column
assume the exercise by the individual shareholder of his/her options and
warrants but does not assume such an exercise by any other person. These
computations are in accordance with Securities and Exchange Commission rules and
do not necessarily indicate beneficial ownership for any other purpose. Stock
Options
30
<PAGE> 35
and Warrants have been adjusted to reflect a 2 for 1 stock split declared on
April 22, 1993 and a 2% stock dividend declared on May 26, 1994.
STOCK OWNERSHIP OF MANAGEMENT AT FEBRUARY 28, 1997
ACQUIRABLE WITHIN 60 DAYS
<TABLE>
<CAPTION>
SOLE OR SHARED
VOTING OR STOCK PERCENT OF
NAME INVESTMENT POWER OPTIONS WARRANTS TOTAL CLASS
- ------------------------------------------- ---------------- ------- -------- ------- ----------
<S> <C> <C> <C> <C> <C>
Daniel R. Bannister........................ 5,174(1) -- -- 5,174 .25%
Robert M. Barlow........................... 106,443(2) 3,060 51,971 161,474 7.78
Wayne W. Broadwater........................ 38,547(3) 3,060 25,967 67,574 3.29
Bronson F. Byrd............................ 25,184 3,060 14,073 42,317 2.08
Michael W. Clarke.......................... 18,128(4) 25,248 -- 43,376 2.12
Nancy K. Falck............................. 43,427(5) 3,060 24,813 71,300 3.48
Harvey W. Huntzinger....................... 87,198(6) 3,060 51,973 142,231 6.77
Jones V. Isaac............................. 42,598(7) 3,060 51,973 97,631 4.70
Carroll C. Markley......................... 53,619(8) 60,750 26,545 140,914 6.68
John H. Rust, Jr........................... 65,456(9) -- -- 65,456 3.24
All directors and Executive Officers as a
group of 13 persons...................... 498,249 112,936 247,315 858,500 36.05
</TABLE>
- ---------------
(1) Includes 100 shares owned by Mr. Bannister's spouse and 4,668 shares owned
jointly.
(2) Includes 9,426 shares owned by Mr. Barlow's spouse and 228 shares owned
jointly.
(3) Owned jointly with Mr. Broadwater's spouse.
(4) Includes 142 shares held jointly with Mr. Clarke's spouse.
(5) Includes 13,591 shares owned by Mrs. Falck's spouse.
(6) Includes 1,000 shares owned by Mr. Huntzinger's spouse.
(7) Includes 15,300 shares owned by Mr. Isaac's spouse.
(8) Includes 12,001 shares held jointly with Ian C. Markley.
(9) Includes 4,077 shares owned by Mr. Rust's children, 31,756 shares owned by
Rust & Rust, P.C., and 24,596 shares owned by Rust & Rust, P.C. 401(k) Plan.
PRINCIPAL HOLDERS OF VOTING SECURITIES
Other than those directors noted in the table above (see "Stock Owned by
Management"), there are no persons believed by management to be the beneficial
owners of more than five percent of the outstanding Common Stock.
INDEPENDENT AUDITORS
Homes, Lowry, Horn & Johnson, LTD. ("Homes"), is the Company's current
independent auditor and has served as the Company's independent auditor for the
years 1995 and 1996. A representative of Homes is expected to be present at the
Special Meeting and will be given an opportunity to make a statement if he or
she desires to do so and will be available to respond to appropriate questions.
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<PAGE> 36
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Special Meeting other than those matters described above in this Proxy
Statement. If, however, any other matters not now known should properly come
before the Special Meeting, the persons named in the accompanying proxy will
vote such proxy on such matters as determined by a majority of the Board of
Directors.
By Order of the Board
/s/ JOHN H. RUST, JR.
--------------------------------------
John H. Rust, Jr.
Chairman of the Board
Reston, Virginia
June 10, 1997
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<PAGE> 37
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT (the "Agreement"), is made and entered into this 18th day of
February, 1997, among First Patriot Bankshares Corporation ("First Patriot");
Patriot National Bank ("PNB"), a wholly-owned subsidiary of First Patriot;
United Bankshares, Inc. ("UBS"); United Bank ("UBV"), a wholly-owned subsidiary
of UBS; and UB Holding Company, Inc. ("UBHC"), also a wholly-owned subsidiary of
UBS.
WHEREAS, PNB is a federally chartered national banking association with its
principal office in Reston, Virginia and is a wholly-owned subsidiary of First
Patriot;
WHEREAS, UBV is a Virginia state chartered banking corporation organized
and existing under the laws of the Commonwealth of Virginia with its principal
office in Arlington, Virginia and is a wholly-owned subsidiary of UBS;
WHEREAS, First Patriot is a Virginia corporation with its principal offices
located in Reston, Virginia, and is a registered bank holding company under the
Bank Holding Company Act of 1956, as amended;
WHEREAS, UBS and UBHC are West Virginia corporations with their principal
offices located in Charleston, West Virginia and UBS is a registered bank
holding company under the Bank Holding Company Act of 1956, as amended;
WHEREAS, the parties hereto desire to accomplish two merger transactions,
with the first merger being the merger of First Patriot and UBHC, with First
Patriot surviving the merger (the "Holding Company Merger");
WHEREAS, immediately after the consummation of the Holding Company Merger,
PNB shall merge with and into UBV with UBV surviving the merger (the "Bank
Merger");
WHEREAS, under the terms and conditions herein, shareholders of First
Patriot will receive $17.00 in cash for each share of First Patriot common stock
("First Patriot stock") they own as consideration for the Holding Company
Merger;
WHEREAS, for federal income tax purposes, as to the merger involving First
Patriot the transaction is intended to be treated as a purchase of stock under
Internal Revenue Code Section 368(a);
NOW, THEREFORE, for and in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, UBS,
UBHC, UBV, First Patriot and PNB do represent, warrant, covenant and agree as
follows:
ARTICLE I
PLAN OF HOLDING COMPANY MERGER
1.1 Parties to Holding Company Merger and Surviving Holding Company. The
parties to the Plan of Holding Company Merger are UBHC and First Patriot. UBHC
shall merge with and into First Patriot, pursuant to the laws of West Virginia
and Virginia. After the consummation of the Holding Company Merger, First
Patriot will be the Surviving Holding Company. The name of the Surviving Holding
Company will be "UB Holding Company, Inc." and its principal office will be
Charleston, West Virginia.
1.2 Terms of Holding Company Merger. The terms and conditions of the
Holding Company Merger are set forth in this Agreement. Upon satisfaction of all
of the terms and conditions set forth herein, the Holding Company Merger shall
be effective upon the filing of Articles of Merger with, and the issuance of
certificates of merger by the Secretary of the State of West Virginia and the
State Corporation Commission of Virginia. The date of the filing in West
Virginia will be the Holding Company Merger Effective Date.
<PAGE> 38
1.3 Effect of Holding Company Merger. Upon consummation, the Holding
Company Merger shall have the following effects:
(a) The Surviving Holding Company, will upon the time of the Holding
Company Merger and thereafter, possess all of the rights, privileges,
immunities, and franchises of both UBHC and First Patriot.
(b) All property, real, personal and mixed, and all debts due in
whatever amount, and all other choses in action, and all other interests
belonging to or due to UBHC will be taken and deemed to be transferred to
and vested in First Patriot as Surviving Holding Company and all property,
real, personal and mixed, and all debts due in whatever amount, and all
other choses in action, and all other interests belonging to or due to
First Patriot shall remain in Surviving Holding Company without further
act; and the title to any real estate, or any interest therein, vested in
UBHC or First Patriot shall not revert or be in any way impaired by reason
of the Holding Company Merger.
(c) The Surviving Holding Company will be responsible and liable for
all of the liabilities and obligations of UBHC and First Patriot and
neither the rights of creditors not liens upon the property of UBHC and
First Patriot shall be impaired by the Holding Company Merger.
(d) As of the Holding Company Merger Effective Date, the shares of
First Patriot will be cancelled and shareholders of First Patriot will
cease to have any rights as shareholders except for the right to receive
the merger consideration provided herein.
1.4 Consideration. As consideration for the Holding Company Merger,
shareholders of First Patriot will be entitled to receive $17.00 in cash for
each share of First Patriot stock they own (the "Merger Consideration");
provided, however that the maximum number of First Patriot shares for which the
per share Merger Consideration will be paid is 2,425,782 which number may only
be constituted of the shares issued and outstanding on the date hereof,
2,020,929 shares; shares which may be issued due to the exercise of options
outstanding as of the date hereof, 133,055 shares; and shares which may be
issued due to the exercise of warrants outstanding as of the date hereof,
271,798 shares. The maximum total merger consideration is $41,238,294. If
consistent with the terms of the outstanding options and warrants, in lieu of
exercising options at an average option price of $5.84 per share, or warrants at
the warrant price of $4.90 per share, in order to surrender the shares for
Merger Consideration, UBS will pay the holders of options and warrants the
Merger Consideration per share, less the appropriate exercise price.
From and after the date of the Bank Holding Company Merger, the holders of
certificates representing First Patriot shares shall cease to have any rights
with respect to such shares and such shares will thereafter be deemed cancelled
and void. The sole right of such shareholders will be to receive the Merger
Consideration.
1.5 Exchange of Shares. Each holder of certificates representing shares of
the stock of First Patriot will, upon the surrender to Surviving Holding
Company, or its agent, of such certificates in proper form, be entitled to
receive the Merger Consideration. Until any outstanding certificates have been
surrendered, UBS may, at its sole discretion, withhold the Merger Consideration.
Upon the delivery to Surviving Bank Holding Company of the outstanding First
Patriot certificates, there will be delivered to the record holder thereof the
Merger Consideration, without interest.
1.6 Articles of Incorporation and Bylaws of Surviving Holding
Company. Upon the Holding Company Merger being consummated, the Articles of
Incorporation of First Patriot shall be the Articles of Incorporation of the
Surviving Holding Company and the Bylaws of UBHC shall be the Bylaws of the
Surviving Holding Company until altered, amended or repealed in accordance with
their provisions and applicable law. The Surviving Holding Company will be a
Virginia corporation and its taxpayer identification number shall be the
taxpayer identification number of First Patriot.
1.7 Additional Requirements. If at any time, the Surviving Holding Company
shall consider or be advised that any further assignments, conveyances or
assurances are necessary or desirable to vest, perfect or conform in the
Surviving Holding Company the title to any property or rights of UBHC or First
Patriot or are otherwise necessary to carry out the provisions of the Plan of
Holding Company Merger and this Agreement,
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the proper officers and directors of UBHC or First Patriot, as the case may be,
prior to the Holding Company Merger Effective Date, and thereafter, the officers
of the Surviving Holding Company, will execute and deliver any and all property
assignments, conveyances, assurances, and other instruments to vest, perfect or
confirm title to any such property or rights in the Surviving Holding Company
and otherwise carry out the provisions of this Agreement.
ARTICLE II
PLAN OF BANK MERGER
2.1 Parties to Bank Merger and Surviving Bank. The parties to the Plan of
Bank Merger are UBV and PNB. PNB shall merge with and into UBV (the "Bank
Merger"), under the charter of the latter, pursuant to the laws of Virginia and
the United States. The parties will treat the Bank Merger as occurring
immediately after the Holding Company Merger on their respective tax returns.
UBV will be the Surviving Bank. The name of the Surviving Bank shall be "United
Bank" and its principal office will remain at Arlington, Virginia. The present
offices of PNB will become branch offices of UBV.
2.2 Terms of Bank Merger. The terms and conditions of the Bank Merger are
set forth in this Agreement. Upon satisfaction of all of the terms and
conditions set forth herein, the Bank Merger shall be effective upon the date so
indicated by the State Corporation Commission of Virginia.
2.3 Effect of Bank Merger. Upon consummation, the Bank Merger shall have
the following effects:
(a) The Surviving Bank, will upon the time of the Bank Merger and
thereafter, possess all of the rights, privileges, immunities and
franchises, of both UBV and PNB.
(b) All property, real, personal and mixed, and all debts due in
whatever amount, and all other choses in action, and all other interests
belonging to or due to PNB will be taken and deemed to be transferred to
and vested in UBV as the Surviving Bank and all property, real, personal
and mixed, and all debts due in whatever amount, and all other choses in
action, and all other interests belonging to or due to PNB shall remain in
the Surviving Bank without further act; and the title to any real estate,
or any interest therein, vested in UBV or PNB shall not revert or be in any
way impaired by reason of the Bank Merger.
(c) The Surviving Bank will be responsible and liable for all of the
liabilities and obligations of PNB and UBV and neither the rights of
creditors nor liens upon the property of UBV and PNB shall be impaired by
the Bank Merger.
(d) The Surviving Bank will have a capital stock account equal to the
capital accounts of UBV and PNB, or $5,000,000, divided into 1,000,000
shares of common stock of $5.00 par value with surplus of $21,412,000 (UBV
surplus plus PNB capital stock and surplus) and undivided profits of
$5,278,000 such capital account to be adjusted to account for all earnings
and other adjustments between December 31, 1996 and the Bank Merger
Effective Date. As of the Bank Merger Effective Date, the shares of PNB
will be canceled.
2.4 Articles of Incorporation and Bylaws of Surviving Bank. Upon the Bank
Merger being consummated, the Articles of Incorporation and the Bylaws of UBV
shall be the Articles of Incorporation and Bylaws of the Surviving Bank until
altered, amended or repealed in accordance with their provisions and applicable
law. The Surviving Bank will be a state chartered bank and its taxpayer
identification number shall be the taxpayer identification number of UBV.
2.5 Additional Requirements. If at any time, the Surviving Bank shall
consider or be advised that any further assignments, conveyances or assurances
are necessary or desirable to vest, perfect or conform in the Surviving Bank the
title to any property or rights of UBV or PNB or are otherwise necessary to
carry out the provisions of the Plan of Bank Merger and this Agreement, the
proper officers and directors of UBV or PNB, as the case may be, prior to the
Bank Merger Effective Date, and thereafter, the officers of the Surviving Bank,
will execute and deliver any and all property assignments, conveyances,
assurances, and other instruments to
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vest, perfect or confirm title to any such property or rights in the Surviving
Bank and otherwise carry out the provisions of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of UBS, UBHC and UBV. Unless disclosed
in Exhibit A hereto, as of the date of this Agreement, and as of the date of the
consummation of the transactions contemplated herein, UBS, UBHC and UBV
represent and warrant, as of the date hereof and as of the date of consummation
of the transaction contemplated herein, the following to First Patriot and PNB;
(a) Organization. UBS and UBHC are West Virginia corporations duly
organized, validly existing and in good standing under the laws of the
State of West Virginia. UBV is a state banking corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Virginia. Each has the requisite corporate power and authority to own and
lease its properties and to conduct its business as currently conducted and
as currently contemplated to be conducted.
(b) Authority. UBS, UBHC and UBV have the power to enter into this
Agreement and to consummate the transactions contemplated herein. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein have been duly authorized by the Boards of
Directors of UBS, UBHC and UBV. Upon its execution and delivery, this
Agreement constitutes the valid and legally binding obligation of UBS, UBHC
and UBV. The execution and delivery of this Agreement does not and will
not, and the consummation contemplated herein will not, violate (i) any
provisions of the Articles of Incorporation or Bylaws of UBS, UBHC or UBV,
(ii) any laws of the State of West Virginia, the Commonwealth of Virginia
or the United States of America or (iii) any other material restriction to
which any of them is subject.
(c) Applications. UBS, UBHC and UBV, with the cooperation of First
Patriot and PNB, will cause to be filed all necessary regulatory
applications with the appropriate bank regulators to accomplish the
transactions contemplated herein. UBS will pay all expenses associated with
the filing of such regulatory applications, excluding legal and accounting
expenses incurred by First Patriot and PNB in connection therewith.
(d) Registered Bank Holding Company. UBS is a duly registered bank
holding company under the Bank Holding Company Act of 1956, as amended.
(e) Absence of Certain Changes. Except as may be disclosed in Exhibit
A hereto and made a part hereof, since September 30, 1996:
(i) There has been no material change in the operations, financial
condition, or results of operation of UBS or any subsidiary of UBS which
could have a material adverse effect on the consolidated assets,
financial condition, or operations of UBS nor has any event or condition
occurred which is known to its officers which may result in such a
change;
(ii) There has not been any damage, destruction, or loss by reason
of fire, flood, accident or other casualty (whether insured or not
insured) materially and adversely affecting the consolidated assets,
financial condition or operations of UBS; and
(iii) Neither UBS nor any subsidiary of UBS has disposed of or
agreed to dispose of any properties or assets material to UBS, nor has
it leased to others, or agreed to so lease, any of such material
properties or assets.
(f) Litigation. Except as disclosed in Exhibit A, neither UBS nor any
subsidiary of UBS is a party to or, to the knowledge of its executive
officers, threatened with any litigation, action, governmental or other
proceeding, investigation, strike or other labor dispute which might affect
the validity of this Agreement or which, individually or in the aggregate,
might have a materially adverse effect on UBS's consolidated assets,
financial condition, operations or material contractual rights, or its
ability to
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consummate the transactions contemplated herein; and there is no
outstanding order, writ, injunction or decree of any court or governmental
agency against or materially affecting UBS or a material portion of any of
its consolidated businesses or assets.
(g) SEC Reports. Neither the Form 10-K Annual Report to the Securities
and Exchange Commission by UBS for the year ended December 31, 1995, nor
the quarterly Form 10-Q filings made during 1996 contain, as of the date
hereof or as of its date, any untrue statement of a material fact or omit
to state any material fact necessary to make the statement therein, in
light of the circumstances under which such statements were made, not
misleading.
(h) Subsidiaries of UBS. The subsidiaries of UBS consist of
corporations or national banking associations which are duly organized,
validly existing and in good standing under applicable laws. Each has the
corporate power, and all necessary federal, state, and local banking and
other authorizations, to own its property and conduct its business as
currently conducted and as currently contemplated to be conducted. UBS
owns, free and clear of liens and encumbrances of any nature, 100% of the
issued and outstanding stock of its subsidiaries, including UBHC and UBV.
(i) Absence of Defaults and Violation. Except as disclosed in Exhibit
A attached hereto and made a part hereof, neither UBS nor its subsidiaries
(i) are in default under any term or provision of any mortgage, deed of
trust, note, bond, indenture, commitment, contract, agreement, franchise,
permit, license, lease or instrument to which they are a party or by which
any of them or any of their properties is bound and which is material to
the consolidated financial condition, businesses or operations of UBS, (ii)
are subject to any decree, order, writ or injunction of any court or
authority which materially restricts their operations or requires any
material actions, (iii) are in violation of any law, rule or regulation
applicable to them which could materially affect the consolidated
financial, assets businesses or operations of UBS; or (iv) has received
notification from any agency or department of federal, state or local
government or regulatory authority or the staff thereof asserting that any
of them is not in compliance with any of the statutes, regulations, rules
or ordinances which such governmental authority or regulatory authority
enforces, or any threat to revoke any license, franchise, permit or
governmental authorization which could materially affect the consolidated
financial condition, assets, business, or operations of UBS or any of its
subsidiaries.
3.2 Representation and Warranties of First Patriot and PNB. Unless
disclosed in Exhibit B hereto, as of the date of this Agreement and as of the
date of the consummation of the transactions contemplated herein, First Patriot
and PNB represent and warrant the following to UBS, UBHC and UBV:
(a) Organization. PNB is a federally chartered banking association
duly organized, validly existing and in good standing under the laws of the
United States. First Patriot is a Virginia corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Virginia. First Patriot and PNB are the only members of 2071 Chain Bridge
Road LLC ("LLC") which owns the real property headquarters of First Patriot
and PNB in Tysons Corner, Virginia. LLC is a duly organized limited
liability company, validly existing and in good standing under the laws of
the Commonwealth of Virginia. Each has all of the requisite power and
authority to own and lease its properties and to conduct its business as it
is now being conducted and as currently contemplated to be conducted.
(b) Authority of First Patriot and PNB. Subject to all applicable
state and federal regulatory approval, First Patriot and PNB have the power
to enter into this Agreement and to cause the transactions contemplated
herein to be carried out. The execution and delivery of this Agreement and
the consummation of the transactions contemplated herein have been duly
authorized by the Boards of Directors of First Patriot and PNB. Except for
the ratification, confirmation and approval of this Agreement and the
Holding Company Merger by First Patriot's stockholders and PNB's
stockholder, no other acts or proceedings on their part are necessary to
authorize the transactions contemplated by this Agreement. Upon its
execution and delivery, subject only to shareholder ratification,
confirmation and approval, this Agreement constitutes the valid and legally
binding obligation of First Patriot and PNB. Subject to obtaining the
permits, approvals, consents and authorizations set forth in Article V
hereto, the execution and delivery of this Agreement does not, and the
consummation of the transaction contem-
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plated herein will not, violate (i) any provision of the Articles of
Incorporation or the Bylaws of First Patriot or PNB, (ii) any laws of the
Commonwealth of Virginia or of the United States of America or (iii) any
other material restriction of any kind or character to which First Patriot
or PNB is subject. No acceleration of payment, default, breach or
termination will occur in any material respect by virtue of the
consummation of the transaction contemplated in this Agreement under any
material contract, agreement, deed of trust, note, instrument, order,
judgment or decree.
(c) Capital Stock of PNB. PNB has one class of common stock consisting
of 10,000,000 shares of authorized common stock having a par value of $5.00
per share, 600,000 shares of which are issued and outstanding. The
outstanding shares of PNB stock have been duly and validly authorized and
issued and have not been issued in violation of any preemptive rights of
any of its shareholders. PNB has one class of preferred stock consisting of
1,000,000 shares having a par value of $25.00 per share of which no shares
are outstanding. PNB holds no shares of its stock as treasury stock.
(d) Capital Stock of First Patriot. First Patriot has one class of
common stock consisting of 100,000,000 shares of common stock having a par
value of $2.50 per share, of which 2,020,929 shares are issued and
outstanding as of the date of this Agreement. In no event will the issued
and outstanding shares of First Patriot common stock for which UBS will pay
the Merger Consideration exceed 2,425,782. The outstanding shares of First
Patriot stock have been duly and validly authorized and issued and have not
been issued in violation of any preemptive rights of any of its
shareholders. First Patriot holds no shares of its common stock as treasury
stock. First Patriot has one class (which may be divided into series) of
preferred stock consisting of 10,000,000 shares of preferred stock having a
par value of $25.00 per share, of which no shares are outstanding. No
shares of preferred stock will be issued prior to the Merger Effective
Date.
(e) Absence of Certain Changes. Except as disclosed in Exhibit B
attached hereto and made a part hereof, since December 31, 1996:
(i) There has not been any damage, destruction, or loss by reason
of fire, flood, accident or other casualty (whether insured or not
insured) materially and adversely affecting the assets, financial
condition or operations of First Patriot or PNB;
(ii) Neither First Patriot nor PNB has disposed of or agreed to
dispose of any of its material properties or assets, nor has either
leased to others, or agreed to so lease, any of such material properties
or assets;
(iii) There has not been any change in the authorized, issued or
outstanding capital stock of First Patriot, other than that which may
result from the exercise of the options or warrants identified herein,
or PNB or any material change in the outstanding debt of First Patriot
or PNB, other than changes due to payments in accordance with the terms
of such debt and other than the acceptance of deposits by PNB in the
ordinary course of business;
(iv) There has not been, nor will there be on or before the Merger
Effective Date, any declaration, setting aside or payment of any
dividend or distribution in respect of any shares of the common stock of
First Patriot, other than a cash dividend of $.03 per share, to be paid
on February 28, 1997, and on May 30, 1997, if the Closing has not
occurred.
(v) Neither First Patriot nor PNB has granted at any time any
warrant, option or right to acquire, or agreed to repurchase, redeem or
otherwise acquire, any shares of its capital stock or any other of its
securities whatsoever except for the warrants and options identified
herein or as granted or agreed in this Agreement;
(vi) No change has occurred in the personnel who are key personnel
with respect to the operations of First Patriot or PNB; since the annual
salary adjustments effective January 1, 1997, there have been no
material increase in the compensation or fees payable by First Patriot
or PNB to its directors, officers, employees or former employees, nor
has there been any material increase in
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any loans, bonus, insurance, pension or other employee benefit plan,
payment or arrangement for or with any of such directors, officers,
employees or former employees;
(vii) Neither First Patriot nor PNB has made any material loan or
advance, other than in the ordinary course of business;
(viii) Neither First Patriot nor PNB has made any expenditure or
commitment for the purchase, acquisition, construction or improvement of
any capital asset or of capital assets which in the aggregate would be
material;
(ix) Except transactions contemplated herein, neither First Patriot
nor PNB has entered into any other material transaction, contract or
lease, or incurred any other material obligation or liability; and
(x) There has not been any other event, condition or development of
any kind which materially and adversely affects the assets, financial
condition or operations of First Patriot or PNB, and neither has any
knowledge of any such event.
(f) Taxes. Except as disclosed in Exhibit B attached hereto and made a
part hereof:
(i) First Patriot and PNB have filed all federal income tax returns
and all other federal, state, municipal and other tax returns which each
is required to file, have paid all taxes shown to be due on such returns
and, in the opinion of their respective chief executive and financial
officers, have adequately reserved or recognized for all current and
deferred taxes;
(ii) Neither the IRS nor any other taxing authority is now
asserting against First Patriot or PNB, or, to either's knowledge,
threatening to assert against either of them, any material deficiency or
material claim for additional taxes, interest or penalties;
(iii) There is no pending or, to the knowledge of First Patriot or
PNB, threatened examination of the federal income tax returns of First
Patriot or PNB and, except for tax years still subject to the assessment
and collection of additional federal income taxes under the three year
period of limitations prescribed in IRC Section 6501(a), no tax year of
First Patriot or PNB remains open to the assessment and collection of
additional federal income taxes; and
(g) Litigation, Etc. Except as disclosed in Exhibit B attached hereto
and made a part hereof, neither First Patriot nor PNB is a party to or, to
the knowledge of its CEO and CFO, threatened with any litigation, action,
governmental or other proceeding, investigation, strike or other labor
dispute which might affect the validity of this Agreement or which,
individually or in the aggregate, might reasonably be expected to have a
materially adverse affect on its assets, financial condition or operations
or on any of its material contractual rights; and there is no outstanding
material order, writ, injunction or decree of any court or governmental
agency against or affecting First Patriot or PNB or a material portion of
any of their respective businesses or assets.
(h) Absence of Defaults and Violations. Except as disclosed in Exhibit
B attached hereto and made a part hereof, neither First Patriot nor PNB is
(i) in default under any term or provision of any mortgage, deed of trust,
note, bond, indenture, commitment, contract, agreement, franchise, permit,
license, lease or instrument to which they are a party or by which either
of them or their respective properties is bound and which is material to
their financial condition, businesses or operations, (ii) subject to any
judgment, decree or order of any court or order, agreement, or similar
arrangement with a regulatory authority which materially restricts their
operations or requires any material action, (iii) in violation of any law,
rule or regulation known and applicable to them which violation could
materially affect their financial condition, assets, businesses or
operations, or (iv) in receipt of notification from any agency or
department of federal, state or local government or regulatory authority or
the staff thereof asserting that it is not in compliance with any of the
statutes, regulations, rules or ordinances which such governmental
authority or regulatory authority enforces and which lack of compliance
could reasonably be expected to materially affect the financial condition,
assets, business or operations of First Patriot or PNB, or has
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knowledge of any threat to revoke any license, franchise, permit or
governmental authorization which could materially affect their financial
condition, assets, business or operations.
(i) Absence of Undisclosed Assets and of Undisclosed Contingent
Liabilities. Except to the extent reflected on the latest financial
statements of First Patriot or PNB delivered to UBS or except as
disclosed in Exhibit B attached hereto and made a part hereof, neither
First Patriot nor PNB has any undisclosed assets, or any claim,
liability, obligation, or any known asserted claim, secured or
unsecured, any of which is material (whether accrued, absolute,
contingent or otherwise), against them or their assets.
(j) Financial Statements. First Patriot has delivered to UBS copies of
its audited consolidated financial statements and Form 10-K filing of First
Patriot for the fiscal year ended December 31, 1995 and its unaudited
interim financial statements and Form 10-Q filings for the first three
calendar quarters of 1996. First Patriot represents and warrants that its
financial statements which have been or will be delivered pursuant to any
provision of this Agreement fairly present the consolidated financial
position of First Patriot as of the date thereof and the results of its
operations for each period specified therein.
(k) Real Property. LLC owns the real property as shown on Exhibit B.
Except as disclosed on Exhibit B, LLC is the owner of good and marketable
title in fee simple of the real property reflected on its books and records
as being owned by it. PNB is entitled to possession of any leased property
and all such leases are valid and in full force and effect. All real
property owned by LLC or leased by PNB is free and clear of liens and
encumbrances except for liens of record, liens which do not materially
affect the current use of the property or liens for ad valorem taxes not
yet due and payable.
(l) No Adverse Event. Since September 30, 1996, there has been no
change, other than changes in the ordinary course of business, which,
individually or in the aggregate, has or have materially and adversely
affected the financial condition, results of operations or the businesses
of First Patriot or PNB.
(m) Material Contracts. Except as disclosed in Exhibit B attached
hereto and made a part hereof, neither First Patriot nor PNB is a party to,
or bound or affected by, or receives benefits under (i) any material
agreement, arrangement or commitment not cancelable by it without penalty,
other than agreements, arrangements or commitments entered into in the
ordinary course of business consistent with its past practice and
negotiated on an arm's length basis, or (ii) except as set forth in this
Agreement, any material agreement, arrangement or commitment relating to
the employment, election or retention in office of any director or officer
other than agreements, arrangements or commitments entered into in the
ordinary course of business consistent with its past practice and
negotiated on an arm's length basis.
(n) ERISA. Except as disclosed in Exhibit B, (i) each plan subject to
Title IV of ERISA and established or maintained for persons including
employees or former employees of First Patriot or PNB ("Plan") has been
maintained and funded in accordance with its terms and with all provisions
of ERISA applicable thereto; (ii) no event reportable under Section 4043 of
ERISA has occurred and is continuing with respect to any Plan; (iii) no
liability to Pension Benefit Guaranty Corporation has been incurred with
respect to any Plan, other than for premiums due and payable; (iv) no Plan
has been terminated, no proceedings have been instituted to terminate any
Plan, and no decision has been made to terminate or institute proceedings
to terminate any Plan; and (v) there has been no cessation of, and no
decision has been made to cease, operations at a facility or facilities
where such cessation could reasonably be expected to result in a separation
from employment of more than 20% of the total number of employees who are
participants under any Plan.
(o) Regulatory Reports. First Patriot and PNB have filed all material
reports required to be filed by them with all applicable securities and
banking regulators, and with any other regulatory authority to which they
must report.
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(p) Environmental Concerns. Unless otherwise indicated in Exhibit B,
to the knowledge of their respective chief executive and chief financial
officers, neither First Patriot nor PNB own or operate any property where:
1. Material amounts of Hazardous Substances have been generated,
treated, stored, disposed of, incinerated or recycled at or on the
property;
2. Aboveground or underground storage tanks are or have been
located:
3. Spills, discharges, releases, deposits of material amounts of
any Hazardous Substances have occurred;
4. Hazardous Substances have been released on adjacent properties
which could migrate onto the property;
5. An investigation or administrative proceeding by a governmental
agency or a lawsuit by a governmental agency or private third party
occurred involving Applicable Environmental Law; or
6. Solid waste, as defined under State law, has been disposed.
To the knowledge of their respective chief executive and chief
financial officers, neither First Patriot nor PNB has a loan secured by
property which is owned or operated by an entity or person in violation of
Applicable Environmental Law.
For purposes of this Agreement, (1) The term "Applicable Environmental
Law" shall include but shall not be limited to the laws and implementing
regulations of the United States Government, State and local governments,
whether currently in existence or hereafter enacted, that govern; (i) the
existence, cleanup and/or remedy of hazardous substance contamination on
property; (ii) the protection of the environment from released, spilled,
deposited or otherwise emplaced hazardous substance contamination; (iii)
the control of hazardous substances and hazardous substance waste; and (iv)
the reporting, use, generation, transport, treatment and removal of
hazardous substances and (2) The term "Hazardous Substance" shall mean any
substance which at any time is toxic, ignitable, reactive or corrosive and
that is regulated by any Applicable Environmental Law or which has been
determined at any time by any agency or court to be a toxic, ignitable,
reactive or corrosive substance and that is regulated under Applicable
Environmental Law. "Hazardous Substance" includes any and all materials or
substances that are defined as "hazardous wastes", "extremely hazardous
wastes" or a "hazardous substances" pursuant to any Applicable
Environmental Law. "Hazardous Substance" includes, but is not restricted to
asbestos, polycholrinated biphenyls ("PCBs"), nuclear materials and
petroleum.
(q) Registered Bank Holding Company. First Patriot is a duly
registered bank holding company under the Bank Holding Company Act of 1956,
as amended.
(r) Ownership of Subsidiary. First Patriot is the owner of 100% of the
issued and outstanding shares of PNB, free and clear of any lien or
encumbrances. First Patriot and PNB are the only members of LLC.
(s) Standards. For purposes of the representations contained in this
Section 3.2, "material" shall mean a transaction or change in circumstances
involving an amount in excess of $100,000 and "knowledge" of First Patriot
or PNB shall mean the actual knowledge of their respective Chief Executive
Officers and Chief Financial Officers.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Approval of First Patriot Shareholders. First Patriot will submit to
shareholders, as part of the proxy materials prepared for its shareholders'
consideration, this Agreement and the transactions contemplated herein for
approval, ratification and confirmation by the holders of a requisite majority
of the issued and outstanding shares in accordance with law. First Patriot, as a
party to this Agreement, agrees to vote all of the shares of PNB stock it holds
in favor of the Bank Merger and transactions contemplated herein.
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4.2 Approval of UBS as Sole Shareholder of UBHC and UBV. UBHC and UBV will
present this Agreement and Plan of Merger for the approval of their sole
shareholder, UBS. UBS will vote all its shares in UBHC in favor of the Holding
Company Merger. UBS will vote all its shares in UBV in favor of the Bank Merger.
4.3 Regulatory Approval. UBS, UBHC and UBV, with First Patriot and PNB,
will prepare and file, as soon as practicable, with the Board of Governors of
the Federal Reserve System ("FRB"), the Virginia Bureau of Financial
Institutions, and any other applicable regulator all applications required to
seek approval of the Bank Merger and the Holding Company Merger. The parties
hereto agree, to aggressively pursue regulatory approval of the transactions
contemplated herein. First Patriot and/or PNB shall have the right, subject to
the consent of UBS, which shall not be unreasonably withheld, and at their own
expense, to participate in the appeal of any adverse decision. UBS shall provide
First Patriot and PNB with copies of all applications submitted by UBS to such
regulators.
4.4 Conduct of Business by First Patriot and PNB Until Closing. First
Patriot and PNB acknowledge and agree that the obligations contained in this
Section 4.5 are an integral part of the consideration for this Agreement and
that UBS' commitments herein are conditioned upon performance of these
operational covenants. Unless the prior written consent of UBS is obtained, or
unless otherwise provided for herein, First Patriot and PNB, between the date of
this Agreement and the Holding Company Merger Effective Date and Bank Merger
Effective Date, will:
(a) Take no action, and not permit any action to be taken, which will
have a material effect upon First Patriot or PNB, or their respective
properties, financial condition, businesses or operations, including,
without limitation, the commencement of any new branch banking operation
except for the approved office openings in Hastings, Ashburn, Centreville
and Herndon, Virginia consistent with the established schedule and budget
for such offices;
(b) Take no action or do anything (i) which will cause First Patriot
or PNB to be, as of the respective Bank Merger Effective Date or Holding
Company Merger Effective Date, in material violation of any of their
representations, warranties, covenants and agreements contained in this
Agreement or (ii) which will materially and adversely affect the
consummation of the transactions contemplated in this Agreement;
(c) Take no action to reclassify or alter First Patriot's or PNB's
authorized stock, to issue shares of capital stock, debt instruments, or
other securities or to amend either's Articles of Incorporation or Bylaws;
provided, however that shares of First Patriot common stock may be issued
in connection with the exercise of First Patriot's outstanding options and
warrants identified herein. The number of shares issued in connection with
outstanding options may not exceed 133,055 and the number of common shares
issued in connection with outstanding warrants may not exceed 271,798.
Nothing contained herein shall preclude the purchase of First Patriot
shares on the market through its current dividend reinvestment plan
consistent with existing practices, which purchases shall not increase the
number of outstanding shares.
(d) Not pay or declare any dividend or make any other distribution in
respect of First Patriot's shares of common stock or acquire for value any
of such shares unless otherwise permitted in this Agreement;
(e) Take no action, and not permit any action to be taken, to
mortgage, pledge, or subject to any lien or any other encumbrance on any of
First Patriot's or PNB's material assets, to dispose of any material
assets, or to incur or cancel any material debt or claim, except in the
ordinary course of business as heretofore conducted;
(f) Afford to the officers, attorneys, accountants, and other
authorized representatives of UBS full access to the respective properties,
books, tax returns and records of First Patriot and PNB, during normal
business hours and upon reasonable request, in order that they may make
such investigations of the affairs of First Patriot or PNB as it deems
necessary or advisable. The parties hereto and their respective affiliates
shall use all information that each obtains from the other pursuant to this
Agreement solely for
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<PAGE> 47
the effectuation of the transactions contemplated by this Agreement or for
purposes consistent with the intent of this Agreement, and shall not use
any of such information for any other purpose, including, without
limitation, the competitive detriment of any party. Each of the parties
hereto and their respective affiliates shall maintain as strictly
confidential all information it learns from another of the parties hereto
pursuant to this Agreement and shall, at any time, upon request, return
promptly all documentation provided or made available, as identified in the
next sentence, including all copies thereof. Each of the parties may
disclose such information only to its respective affiliates, counsel,
accountants, tax advisers, and consultants and as required by law, to
comply with any regulatory requirements and as required by judicial
process. The confidentiality agreement contained in this section shall
remain operative and in full force and shall survive the termination of
this Agreement.
(g) Promptly advise UBS of any material adverse change in the
financial condition, assets, businesses or operations of First Patriot or
PNB and any material breach of any representation, warranty, covenant or
agreement made by First Patriot or PNB in this Agreement;
(h) Maintain in full force and effect adequate fire, casualty, public
liability, employee fidelity and other insurance coverage in accordance
with its existing coverages to protect First Patriot and PNB against losses
for which insurance protection can be obtained at reasonable cost;
(i) Take no action, and take such reasonable steps as are practicable
to avoid any action to be taken, to change the senior management of First
Patriot or PNB, or to increase any compensation, benefits, or fees payable
by First Patriot or PNB to their respective directors and officers,
employees;
(j) Take no action (i) to acquire, or to be acquired by, to merge or
merge with any company or business, to sell substantially all of First
Patriot's or PNB's assets, or similar transaction other than pursuant to
the provisions of this Agreement, or (ii) except as expressly permitted
herein, to acquire any branch, or, except in the ordinary course of its
business, any material assets of any other company or business;
(k) Take no material action, and not permit any material action to be
taken, whatsoever with respect to its properties, assets, businesses or
operations, other than in the ordinary course of business;
(l) Will continue to make adequate monthly provisions to the loan loss
reserve during 1997; and in addition PNB agrees that it will (i) properly
and timely charge-off any loan losses, as required by any applicable
regulatory agency and prudent banking practices, and (ii) at the time of
any such charge-off, PNB will make a provision to the loan loss reserve
equal to the amount of the loss, less the specific amount allocated in the
reserve, if any, relating to the charged-off loan (such specific amounts
having been previously identified in writing by loan and amount);
(m) Identify in advance to UBS all loans, including but not limited to
any extension, renewal, modification or refinancing of an existing loan, in
excess of $350,000 and permit a representative of UBS, upon request, to
observe loan committee or board presentations on credit decisions
generally; and
(n) Identify in advance to UBS any plan to sell, trade or purchase any
securities in its investment portfolio or purchase any long term federal
funds.
4.5 Conduct of Business by UBS Until Closing. UBS, as a bank holding
company, in the normal conduct of its business, may acquire other banks or bank
holding companies or engage in certain nonbanking activities which are closely
related to banking, all as permitted under federal and state law. Accordingly,
UBS may continue to seek and consider such opportunities and will not be
restrained from doing so by the terms of this Agreement. In the event that UBS
should reach an understanding with another entity regarding a merger, purchase
or consolidation, then, after so advising First Patriot, UBS may proceed with a
merger, purchase or consolidation concurrently with the acquisition by merger
contemplated by this Agreement.
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<PAGE> 48
Unless the prior written consent of First Patriot is obtained, UBS between
the date hereof and the Effective Time of the Merger, shall:
(a) Take no action, and not permit any action to be taken, by it or
its subsidiaries, which will have a material adverse effect upon its
properties, financial condition, businesses or operations;
(b) Take no action or do anything (i) which will cause it to be in
violation of its representations, warranties, covenants and agreements
contained in this Agreement or (ii) which will materially and adversely
affect the consummation of the transaction contemplated in this Agreement;
(c) Promptly advise First Patriot of any material adverse change in
the financial condition, assets, businesses or operations of UBS and any
breach of any representation, warranty, covenant or agreement made by UBS
in this Agreement;
(d) Maintain in full force and effect adequate fire, casualty, public
liability, employee fidelity and other insurance coverage in accordance
with prudent practices to protect fully UBS and its subsidiaries against
losses for which insurance protection can reasonably be obtained.
4.6 Public Disclosures. The parties shall mutually agree in advance upon
the form and substance of all public disclosures concerning this Agreement and
the transactions contemplated hereby.
4.7 Good Faith. UBS and First Patriot shall cooperate fully with each
other and use their best efforts (i) to take or cause to be taken by them, as
promptly as practicable, all actions required under this Agreement, and (ii) to
consummate the transactions contemplated herein at the earliest practicable
date.
4.8 Employees. Employees of First Patriot and PNB shall be eligible, as
soon as practicable after the Effective Date of the Mergers, to participate in
benefit plans substantially similar to those in effect at the present
subsidiaries of UBS. UBS and UBV will endeavor to continue to employ First
Patriot and PNB employees, subject to satisfactory performance; provided,
however, they are under no contractual obligation to do so and no third party
rights are hereby implied or created. First Patriot and PNB employees who may
lose their positions as a result of the Mergers will be eligible for
compensation under UBS standard severance policy, a copy of which is attached as
Exhibit C.
4.9 Access and Information. First Patriot and its subsidiaries shall each
afford to UBS, and to its accountants, counsel and other representatives, full
access during normal business hours, during the period prior to the Effective
Time, to all of its respective properties, books, contracts, commitments and
records and, during such period, First Patriot shall furnish or make available
promptly to UBS (a) a copy of each report, schedule and other documents filed or
received by it during such period pursuant to the requirements of Federal and
state banking and securities law, and (b) all other information concerning its
business, properties and personnel as UBS may reasonably request. In the event
of the termination of this Agreement, UBS shall: (i) hold confidential all
information obtained in connection with the proposed transaction with respect to
First Patriot and PNB which is not otherwise public knowledge; and return all
documents (including all copies thereof) obtained hereunder from the other
party; and (ii) use its best efforts to cause all information obtained by it
pursuant to this Agreement or in connection with the negotiation thereof to be
treated as confidential and shall not use, nor knowingly permit others to use,
any such information unless such information becomes generally available to the
public.
ARTICLE V
CONDITIONS
5.1 Conditions to Obligations of All Parties. Subject to the respective
right of each party to waive any condition required to be met by the other party
hereto by this Section 5.1, the parties are not obligated to consummate, or to
cause to be consummated, the transactions contemplated by this Agreement unless:
(a) Shareholder Approval of Transaction. Before the Closings, First
Patriot and PNB shall have obtained the approval, ratification and
confirmation of this Agreement and the transactions contemplated
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<PAGE> 49
herein by its shareholders, as required by law, and by any applicable
provision of its articles of incorporation and bylaws.
(b) Absence of Restraint. No order to restrain, enjoin or otherwise
prevent the consummation of the transactions contemplated in this Agreement
shall have been entered by any court or administrative body which remains
in effect on the Holding Company Merger Effective Date or the Bank Merger
Effective Date.
(c) Governmental Approvals. There shall have been obtained by the
Holding Company Merger Effective Date and the Bank Merger Effective Date
any and all permits, approvals and consents of every governmental body or
agency which are necessary or appropriate so that consummation of the
transactions contemplated in this Agreement shall be in compliance with all
applicable laws, including, without limitation, those with respect to the
FRB, the Virginia Bureau of Financial Institutions, and any other regulator
with jurisdiction over the transactions.
(d) Compliance with Representations, Warranties and Additional
Agreements. All of the representations and warranties of the parties
contained in this Agreement shall be true in all material respects at and
as of the Holding Company Merger Effective Date and the Bank Merger
Effective Date with the same force and effect as if they had been made at
and as of such dates (except for changes contemplated and permitted by this
Agreement or otherwise consented to in writing by the appropriate party to
this Agreement) and each party shall have complied with and performed, in
all material respects, all of the agreements contained in this Agreement to
be performed by it at or before the Holding Company Merger Effective Date
and the Bank Merger Effective Date. At the Closing of each merger
transaction, each party shall have received from the other party to this
Agreement, a certificate, in affidavit form, dated as of the date of the
Closing, signed by such party's chief executive officer and chief financial
officer, certifying that the foregoing statements made in this Section
5.1(d) are true and correct to the best of their knowledge and belief.
5.2 Additional Conditions to Obligations of UBS.
(a) Counsel's Opinion. UBS shall have received an opinion of counsel
for First Patriot dated as of the Holding Company Merger Effective Date, to
the effect that:
(i) First Patriot is a bank holding company, duly organized,
validly existing and in good standing under the laws of the Commonwealth
of Virginia and is duly authorized to conduct its business in Virginia;
PNB is a federally chartered national banking association, duly
organized, validly existing and in good standing under the laws of the
United States and is duly authorized to conduct its business as
presently conducted and LLC is a limited liability company, duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia and is duly authorized to conduct its business
in Virginia.
(ii) The authorized capital stock and the number of shares issued
and outstanding and the options and warrants, of First Patriot and PNB,
as appropriate, are as stated in the opinion. The issued and outstanding
shares are validly issued, fully paid and non-assessable, and were not
issued in violation of any preemptive rights of the shareholders of
First Patriot or PNB. As of such date, to the best of counsel's
knowledge, there are no other options, warrants, convertible securities
or similar items outstanding on behalf of First Patriot or PNB.
(iii) First Patriot and PNB have the corporate power and authority
to execute, deliver and perform their obligations under this Agreement.
This Agreement has been duly authorized, executed and delivered by each
and constitutes the legal, valid and binding obligation of each,
enforceable in accordance with its terms except as enforceability may be
limited by general equitable principles, bankruptcy, insolvency,
reorganization, moratorium, or other laws affecting creditors' rights
generally.
(iv) All necessary corporate proceedings have been duly and validly
taken by First Patriot and PNB, to the extent required by law, their
respective articles of incorporation and bylaws, or
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<PAGE> 50
otherwise, to authorize the execution and delivery of this Agreement by
First Patriot and PNB and the consummation of the transactions
contemplated herein.
(v) The consummation of the transactions contemplated herein will
not violate or result in a breach of, or constitute a default under the
articles of incorporation or bylaws of First Patriot or PNB or
constitute a breach or termination of, or default under, any agreement
or instrument of which counsel is aware and which would have a material
adverse effect on the business of First Patriot or PNB, and to which
either is a party or by which it or any of its property is bound.
In rendering such opinion, counsel may rely upon certificates from the
officers of First Patriot and PNB and from public officials and may assume that
this Agreement has been duly and validly executed by UBS, UBHC and UBV.
(b) Title Opinion or Title Insurance. UBS must have received a title
opinion or a title insurance policy, in form and substance satisfactory to
UBS, indicating that LLC owns the real property free and clear of liens and
encumbrances with the exception of the existing deed of trust and with any
noted exceptions acceptable to UBS. Typical utility and governmental
easements and rights-of-way will be acceptable provided that they do not
adversely affect the use of the property as it is currently utilized or its
marketability.
(c) UBS Satisfaction with Loan Loss Reserve, Provision of Charge-Offs,
etc. As of the Merger Effective Date, UBS, in its sole discretion, must be
satisfied with the adequacy of the then existing level of First Patriot's
loan loss reserve, the level of First Patriot's provision to the loan loss
reserve and with the sufficiency of the write-downs and charge-offs in the
loan portfolio and any requirements imposed in connection with the merger
by any regulators. In addition, PNB must also reserve for all contingencies
in a manner consistent with the requirements of the regulators and prudent
banking practices. For purposes of this section, UBS will accept the loan
loss reserve, provisions and charge-offs of PNB if its loan portfolio
performance and its loan loss reserve are consistent with the performance
and reserve levels as of the date hereof. Prior to the Merger Effective
Date, UBS with First Patriot's cooperation, will conduct a final review of
the matters contemplated by this paragraph.
(e) Employment Contracts. UBS shall have received an executed copy of
a contract between UBS, the Surviving Bank and Mr. Carroll Markley
regarding his post-merger compensation and employment relationship which
has the affect of terminating and superseding his existing employment
contract. Mr. Michael Clarke shall have entered into a written amendment to
his employment agreement addressing stock options and bonuses. The new
contract with Mr. Markley and amendment to Mr. Clarke's agreement shall be
in the form of the agreements exchanged by the parties at the time this
Agreement is executed.
5.3 Additional Conditions to Obligations of First Patriot and PNB.
(a) First Patriot and PNB shall have received the opinion of counsel
to UBS to the effect that:
(i) UBS and UBHC are each West Virginia corporations are validly
existing and in good standing under the laws of West Virginia and are
duly authorized to own their respective properties and to conduct their
respective businesses as presently conducted. UBV is a Virginia banking
corporation validly existing and in good standing under the laws of
Virginia, is duly authorized to own its properties, and to conduct its
business as presently conducted.
(ii) All necessary corporate proceedings have been duly taken by
UBS, UBHC and UBV to the extent required by law, their articles of
incorporation, bylaws or otherwise, to authorize the execution and
delivery of this Agreement and the consummation of the transactions
contemplated herein. This Agreement constitutes the legal, valid and
binding obligations of UBS, UBHC and UBV and is enforceable against them
in accordance with its terms except as enforceability may be limited by
general equitable principles, bankruptcy, insolvency, reorganization,
moratorium, or other laws affecting creditors rights generally.
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<PAGE> 51
(iii) All regulatory approvals of federal or state banking
regulators necessary to consummate the transactions contemplated herein
have been obtained.
ARTICLE VI
CLOSING
6.1 Closing. The closings (the "Closings") of each merger transaction
shall take place at the principal office of UBS, or such other place as may be
agreeable to the parties hereto, shall consist of the exchange of items required
hereby and the filing of the Articles of Merger. The parties will use their best
efforts to close on or about July 31, 1997. The payment of the consideration for
the Holding Company Merger will commence as soon as possible after the Holding
Company Merger Effective Date.
ARTICLE VII
MISCELLANEOUS
7.1 Termination. This Agreement may be terminated and canceled, and the
transaction contemplated herein may be abandoned, notwithstanding shareholder
authorization, at any time before the Effective Date as follows:
(a) By mutual consent of the Board of Directors of UBS and First
Patriot as evidenced by a majority vote of each of their respective Boards
of Directors; or
(b) By UBS if any of the conditions required to be satisfied by First
Patriot and PNB specified in Section 5.1 and 5.2 hereof shall not have been
satisfied within the time contemplated by this Agreement for consummation
of this transaction; or
(c) By First Patriot if any of the conditions required to be satisfied
by UBS or UBV specified in Section 5.1 or 5.3 hereof shall not have been
satisfied within the time contemplated by this Agreement for consummation
of the transaction; or
(d) By any party if the Merger will violate any nonappealable final
order, decree or judgment of any court of governmental body which binds any
party.
In any event, the obligations of the parties under this Agreement shall
terminate on December 31, 1997, if the Closings have not occurred before that
date, unless the parties hereto mutually agree in writing to an extension of the
time within which to close.
In the event of termination of this Agreement for any reason, each party
shall forthwith deliver to the other parties hereto all documents, work papers
and other material obtained from it or any of its subsidiaries relating to the
transaction contemplated herein, whether obtained before or after the execution
hereof, and will continue to treat as confidential all such information in the
same manner as it treats similar confidential information of its own and shall
cause its and its subsidiaries' employees, agents and representatives, to keep
all such information confidential except for such disclosures that are required
by law or regulation or by rule, order or decree or any court or government
agency.
7.2 Expenses. Each of the parties to this Agreement agrees to pay, without
a right to reimbursement from the other party hereto and whether or not the
transaction contemplated in this Agreement shall be consummated, all of the
costs incurred by it incident to the performance of its obligations under this
Agreement and to the consummation of the transactions contemplated herein.
7.3 Survival of Provisions. The respective representations, warranties,
obligations and other agreements of the parties hereto shall not survive the
Closing.
7.4 Amendment. This Agreement may be amended by mutual consent of the
Boards of Directors of UBS and First Patriot, evidenced by a majority vote of
each of their respective Boards of Directors, at any time before or after
approval thereof by the shareholders; but, after any such shareholder approval,
no
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<PAGE> 52
amendment shall be made to this Agreement which substantially and adversely
changes the terms of the particular agreement without obtaining the further
approval of the respective shareholders of that party. This Agreement may not be
amended except by an instrument in writing duly executed by the appropriate
officers on behalf of each of the parties hereto.
7.5. Assignability. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns,
provided that this Agreement may not be assigned by any party without the prior
written consent of the other parties hereto.
7.6. Notices. Any notice or other communications required or permitted
under this Agreement shall be made in writing and shall be deemed to have been
duly given or received if delivered in person, if sent by telecopier with
acknowledgment of receipt, or if sent by certified mail, with postage prepaid,
addressed as follows:
<TABLE>
<S> <C>
TO UBS: TO FIRST PATRIOT:
Richard M. Adams Carroll C. Markley
Chairman and CEO President and CEO
United Bankshares, Inc. First Patriot Bankshares Corporation
514 Market Street 12120 Sunset Hills Road
Parkersburg, WV 26101 Reston, Virginia 22090
Fax No. (304) 424-8711 Fax No. (703) 917-8336
COPY TO: COPY TO:
Deborah A. Sink, Esq. Terence P. Quinn, Esq.
Bowles Rice McDavid Graff Steptoe & Johnson
& Love, P.L.L.C. 1330 Connecticut Avenue, N.W.
600 Quarrier St. Washington, D.C. 20036
P.O. Box 1386 Fax No. (202) 429-3902
Charleston, WV 25325-1386 AND
Fax No. (304) 347-1124 Cornelius J. Golden, Jr., Esq.
Chadbourne & Parke, L.L.P.
1101 Vermont Avenue, N.W.
Washington, D.C. 20005
Fax No. (202) 289-3002
</TABLE>
7.6 Entire Agreement. This Agreement, together with all exhibits attached
hereto, constitutes the entire agreement among the parties and shall supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter of the transaction contemplated
herein and may not be changed except by amendment pursuant to the provisions of
Section 7.4 of the Agreement.
7.7 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original; but all of which shall constitute one
and the same instrument.
7.8 Governing Law. Subject to the applicable law of the United States of
America, this Agreement shall be governed and construed in all respects,
including, but not limited to, validity, interpretation and effect, pursuant to
the laws of the State of West Virginia.
7.9 Invalid Provisions. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
7.10 Headings and Subheadings. The headings and subheadings used in this
Agreement are included for convenience of reference only and shall have no
effect on the construction or meaning of this Agreement.
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<PAGE> 53
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their corporate officers thereunto duly authorized.
<TABLE>
<S> <C>
Attest: UNITED BANKSHARES, INC.
By: By:
- -------------------------------------------- --------------------------------------------
Its: Its:
- -------------------------------------------- --------------------------------------------
Attest: UBHC HOLDING COMPANY, INC.
By: By:
- -------------------------------------------- --------------------------------------------
Its: Its:
- -------------------------------------------- --------------------------------------------
Attest: UNITED BANK
By: By:
- -------------------------------------------- --------------------------------------------
Its: Its:
- -------------------------------------------- --------------------------------------------
Attest: FIRST PATRIOT BANKSHARES CORPORATION
By: By:
- -------------------------------------------- --------------------------------------------
Its: Its:
- -------------------------------------------- --------------------------------------------
Attest: PATRIOT NATIONAL BANK
By: By:
- -------------------------------------------- --------------------------------------------
Its: Its:
- -------------------------------------------- --------------------------------------------
</TABLE>
17
<PAGE> 54
EXHIBIT A
TO AGREEMENT AND PLAN OF MERGER
No additional disclosures.
18
<PAGE> 55
EXHIBIT B
TO AGREEMENT AND PLAN OF MERGER
No additional disclosures, except any possible tax
effect of the transactions contemplated herein.
19
<PAGE> 56
EXHIBIT C
TO AGREEMENT AND PLAN OF MERGER
UNITED BANKSHARES, INC.
SEVERANCE PAY POLICY
- --------------------------------------------------------------------------------
The purpose of United's severance pay plan is to compensate employees for the
permanent and unavoidable loss of their job as a result of circumstances beyond
their control. These circumstances include, but are not limited to: reductions
in work force size, mergers and technological changes.
Calculation of severance pay for a particular employee will be governed by the
following:
- An employee who resigns or who is dismissed for cause prior to the
date set by the bank for termination is not eligible for severance
pay.
- No severance will be paid to an employee with less than one year of
continuous service.
- Years of service will be rounded to the next higher year upon
completion of six months and one day from the employee's date of hire
(month and day).
- Years of service will be calculated based on the scheduled termination
date.
- One week's pay is defined as 1/52nd of current annualized base salary
or forty hours times the current hourly rate of pay. Commissions,
bonuses, overtime, etc. are not included.
- The lump sum severance payment net of required withholdings will be
made at the next regularly scheduled payroll date after the employee's
termination date.
Calculation of severance pay:
- Two weeks' pay times the number of years of service to a maximum of
thirteen weeks' pay.
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EXHIBIT B
February 7, 1997
The Board of Directors
First Patriot Bankshares Corporation
2071 Chain Bridge Road
Vienna, VA 22182
Dear Members of the Board:
First Patriot Bankshares Corporation, Vienna, Virginia ("Patriot") and United
Bankshares, Inc., Charleston, West Virginia ("United") have negotiated an
agreement providing for the acquisition of Patriot by United ("Acquisition").
The terms of the Acquisition are set forth in a proposed Agreement and Plan of
Merger.
The terms of the Acquisition provide that, with the possible exception of those
shares as to which dissenter's rights may be perfected, each common share of
Patriot will be converted into the right to receive cash of $17.00.
You have asked our opinion as to whether the proposed transaction pursuant to
the terms of Acquisition is fair to the respective shareholders of Patriot from
a financial point of view.
In rendering our opinion, we have evaluated the consolidated financial
statements of Patriot and United available to us from published sources. In
addition, we have, among other things: (a) to the extent deemed relevant,
analyzed selected public information of certain other financial institutions and
compared Patriot and United from a financial point of view to the other
financial institutions; (b) considered the historical market price of the common
stock of Patriot and United; (c) compared the terms of the Acquisition with the
terms of certain other comparable transactions to the extent information
concerning such acquisitions was publicly available; (d) reviewed the Agreement
and Plan of Merger and related documents; and (e) made such other analyses and
examinations as we deemed necessary. We also discussed with the various senior
officers of Patriot and United the foregoing as well as other matters that may
be relevant.
We have not conducted a due diligence review of United nor have we reviewed the
final Agreement and Plan of Merger, proxy materials, regulatory applications, or
other documents which must be prepared prior to completion of any transaction.
We have not independently verified the financial and other information
concerning Patriot, or United, or other data which we have considered in our
review. We have assumed the accuracy and completeness of all such information;
however, we have no reason to believe that such information is not accurate and
complete. Our conclusion is rendered on the basis of securities market
conditions prevailing as of the date hereof and on the conditions and prospects,
financial and otherwise, of Patriot and United as they exist and are known to us
as of December 31, 1996.
We have acted as financial advisor to Patriot in connection with the Acquisition
and will receive from Patriot a fee for our services, a significant portion of
which is contingent upon the consummation of the Acquisition.
It is understood that this opinion may be included in its entirety in any
communication by Patriot or the Board of Directors to the stockholders of
Patriot. The opinion may not, however, be summarized, excerpted from or
otherwise publicly referred to without our prior written consent.
Based on the foregoing, and subject to the limitations described above, we are
of the opinion that the consideration is fair to the shareholders of Patriot
from a financial point of view.
Sincerely,
Baxter Fentriss and Company
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<PAGE> 58
FIRST PATRIOT BANKSHARES CORPORATION
12120 Sunset Hills Road
RESTON, VIRGINIA 22090
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints each of Michael W. Clarke, Stephanie H. Ogle
and Robert C. Shoemaker as Proxies each with full power of substitution and
hereby authorizes them to represent and vote, as designated below, all the
shares of First Patriot Bankshares Corporation (the "Company") held of record
by the undersigned on May ___, 1997, at the special meeting of stockholders to
be held on June ___, 1997, or any adjournment thereof.
FOR ABSTAIN AGAINST
1. Approval of the merger of United Bankshares, Inc. [ ] [ ] [ ]
with and into the Company -- a transaction in which
each share of Company common stock will be converted
into $17.00 cash.
In their discretion, the proxies are authorized to vote upon other business as
may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1 AND IN THE DISCRETION OF THE PROXIES UPON ANY OTHER
MATTER THAT MAY PROPERLY COME BEFORE THE MEETING.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, guardian or agent, please give full title as such. If a partnership,
please sign in the partnership name by authorized person.
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope.
Date , 1997
---------------------
------------------------------------
Signature
------------------------------------
Signature
