As filed with the Securities and Exchange Commission on______________,1995on December 22, 1995
REGISTRATION NO. 33-______
________________________________________________________________________________33-_______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
__________
UNITED BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
WEST VIRGINIA 6711 55-0641179
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Code) Identification No.)
UNITED CENTER
500 VIRGINIA STREET, EAST
CHARLESTON, WEST VIRGINIA 25301
(304) 348-8400
(Address and telephone number of principal executive offices)
__________
JOSEPH WILLIAM SOWARDS
COPY: DEBORAH A. SINK, ESQ.
UNITED BANKSHARES, INC.
BOWLES RICE MCDAVID
514 MARKET ST.
GRAFF & LOVE
PARKERSBURG, WV 26102
1600 COMMERCE SQUARE
CHARLESTON, WV 25301
(304) 424-8761 (304) 347-1124
(Name, address and telephone number of agent for service)
COPY: DEBORAH A. SINK, ESQ. J. CHRISTOPHER THOMAS GERARD L. HAWKINS, ESQ.
BOWLES RICE MCDAVID PRESIDENT AND CHIEF OPERATING OFFICER ELIAS, MATZ, TIERNAN & HERRICK, L.L.P.
GRAFF & LOVE EAGLE BANCORP, INC. 734 15TH STREET, N.W.
1600 HUNTINGTON SQUARE 227 CAPITOL STREET WASHINGTON, D.C. 20005
CHARLESTON, WV 25301 CHARLESTON, WEST VIRGINIA 25301 (202) 347-0300
(304) 347-1124 (304) 340-4632
__________
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
__________
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
TITLE OF SECURITIES AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
BE REGISTERED PROPOSED MAXIMUMOFFERING PRICE (2) AGGREGATE OFFERING REGISTRATION
PER UNIT (1) OFFERING PRICE (1) FEE (2) FEE (2)
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK
$2.50 PAR VALUE 271,000 $28.30 $555,550 $191.553,138,888 $ 32.63 $ 102,421,915.40 $ 35,318.15
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(1) THIS REGISTRATION STATEMENT COVERS THE MAXIMUM NUMBER OF SHARES OF COMMON
STOCK OF THE REGISTRANT ISSUABLE UPON CONSUMMATION OF THE MERGER OF EAGLE
BANCORP, INC. ("EAGLE") INTO THE REGISTRANT.
(2) ESTIMATED SOLELY FOR THE PURPOSE OF CALCULATINGCALCULATION OF THE REGISTRATION FEE.
PURSUANT TO RULES 457(F)(2) AND 457(C) UNDER THE SECURITIES ACT OF 1933,
THE REGISTRATION FEE PURSUANT TO RULE 457(F)(2)IS BASED ON UNITED BANKSHARES, INC.THE AVERAGE OF THE HIGH AND LOW PRICES
OF THE EAGLE COMMON STOCK BEINGAS REPORTED ON THE NASDAQ STOCK MARKET'S
NATIONAL MARKET ON DECEMBER 18, 1995, AND COMPUTED BASED ON THE MAXIMUM
NUMBER OF SHARES (2,729,468) THAT MAY BE EXCHANGED FOR 201,100 SHARES OF FIRST COMMERCIAL BANK AND A $28.16 BOOK VALUE
FOR FIRST COMMERCIAL BANK STOCK ON MARCH 31, 1995, LESS CASH PAID BY REGISTRANT
OF $26.25 PER SHARE.THE SECURITIES
BEING REGISTERED.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SECTION 8(A) MAY
DETERMINE.
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UNITED BANKSHARES, INC.
CROSS REFERENCE SHEET PURSUANT TO RULEITEM 501(b) Form S-4 Section Caption
Item Number and Caption in Prospectus*
----------------------- --------------
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus.......................... Cross Reference Sheet; Prospectus
Page; Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus................. TABLE OF CONTENTS
3. Risk Factors, Ratio of Earnings to
Fixed Charges and Other
Information......................... SUMMARY, THE PROPOSED TRANSACTION
4. Terms of the Transaction............ SUMMARY, THE PROPOSED TRANSACTION
5. Proforma Financial Information......REGULATION S-K
Form S-4 Section Caption
Item Number and Caption in Prospectus*
----------------------- --------------
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus.............................. Cross Reference Sheet; Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus..................... Table of Contents; Available
Information; Information
Incorporated by Reference
3. Risk Factors, Ratio of Earnings to
Fixed Charges and Other
Information............................. Summary; The Merger; Description
of UBS Capital Stock;
Comparison of Shareholders' Rights
4. Terms of the Transaction................ Summary; The Merger; Description
of UBS Capital Stock; Comparison
of Shareholders' Rights;
Comparative Per Share Data; UBS
and Eagle Selected Pro Form
Consolidated Financial Data
5. Pro Forma Financial Information......... Pro Forma Consolidated Financial
Statements
6. Material Contracts with the
Company Being Acquired.................. The Merger
7. Additional Information Required for
Reoffering by Persons and
Parties Deemed to be
Underwriters............................ Not Applicable
8. Interests of Named Experts
and Counsel............................. Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Not Applicable
6. Material Contracts with the
Company Being Acquired..............
Information Incorporated
Item Number and Caption in Prospectus*
----------------------- --------------
10. Information with Respect to
S-3 Registrants......................... Information Incorporated by
Reference
11. Incorporation of Certain Information
by Reference............................ Information Incorporated by
Reference
12. Information with Respect to S-2 or
S-3 Registrants......................... Not Applicable
13. Incorporation of Certain Information
by Reference............................ Not Applicable
14. Information with Respect to
Registrants Other than S-3
or S-2 Registrants...................... Not Applicable
15. Information with Respect to
S-3 Companies........................... Not Applicable
16. Information with Respect to Information Incorporated
S-2 or S-3 Companies.................... by Reference
17. Information with Respect to
Companies Other than
S-3 or S-2 Companies.................... Not Applicable
18. Information if Proxies,
Consents or Authorizations
are to be Solicited..................... Special Meeting of Eagle
Bancorp, Inc. Shareholders;
Special Meeting of United
Bankshares, Inc. Shareholders;
Summary; Information Incorporated
by Reference; Management of UBS
after the Merger
19. Information if Proxies,
Consents or Authorizations
are Not to be Solicited
or in an Exchange Offer................. Not Applicable
7. Additional Information Required for
Reoffering by Persons and
Parties Deemed to be
Underwriters........................ Not Applicable
8. Interests of Named Experts
and Counsel......................... LEGAL MATTERS, EXPERTS
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities......................... PART I
10. Information with Respect to
S-3 Registrants..................... DESCRIPTION OF UBS
11. Incorporation of Certain Information
by Reference........................ PART I
12. Information with Respect to S-2 or
S-3 Registrants..................... Not Applicable
Form S-4 Section Caption
Item Number and Caption in Prospectus*
----------------------- --------------
13. Incorporation of Certain Information
by Reference........................ ADDITIONAL INFORMATION
14. Information with Respect to
Registrants Other than S-3
or S-2 Registrants.................. Not Applicable
15. Information with Respect to
S-3 Companies....................... DESCRIPTION OF UNITED BANKSHARES,
INC.
16. Information with Respect to
S-2 or S-3 Companies................ Not Applicable
17. Information with Respect to
Companies Other than
S-3 or S-2 Companies................ DESCRIPTION OF FIRST COMMERCIAL
BANK
18. Information if Proxies,
Consents or Authorizations
are to be Solicited................. SPECIAL MEETING OF FIRST
COMMERCIAL BANK SHAREHOLDERS
19. Information if Proxies,
Consents or Authorizations
are Not to be Solicited
or in an Exchange Offer............. Not Applicable
20. Indemnification of Directors
and Officers........................ PART II Indemnification of
Directors and Officers of UBS and
its Subsidiaries
21. Exhibits and Financial Statement
Schedules........................... EXHIBIT INDEX, INDEX TO FINANCIAL
STATEMENTS
22. Undertakings........................ PART II
* This Registration Statement on Form S-4 contains a prospectus/joint proxy
statement to be sent to the shareholders of the company the Registrant proposes
to acquire via a merger transaction, First Commercial Bank.
PROSPECTUS/PROXY STATEMENT
UNITED BANKSHARES, INC.
271,000 SHARES OF COMMON STOCK
United Bankshares,Eagle Bancorp, Inc. ("UBS") hereby offers up to 271,000 shares, in
the aggregate, of its common stock, $2.50 par value,, as well as to the
Registrant's shareholders, who must vote on the merger.
[EAGLE BANCORP, INC. LETTERHEAD]
___________, 1996
Dear Shareholder:
You are cordially invited to attend a Special Meeting of First Commercial Bank, a Virginia banking institution with its principal office
in Arlington, Virginia, ("FCB") in exchange for upShareholders
of Eagle Bancorp, Inc. to 201,100 shares of the
stock of FCB. Under the terms ofbe held at ________________,
___________________________, on __________, 1996 at ________.m., local time. At
this meeting, you will be asked to consider and approve the Agreement and Plan
of Merger dated March
6,August 18, 1995 between UBS and FCB (the "Merger Agreement") between United
Bankshares, Inc. ("UBS") and Eagle Bancorp, Inc. ("Eagle"), shareholders other thanwhich sets forth the
Control Shareholders (as defined herein)terms and conditions under which Eagle will upon consummationmerge with and into UBS (the
"Merger").
Pursuant to the terms of the transaction, at their option,Merger Agreement and upon the effective
date of the Merger, shareholders of Eagle will be entitled to receive (i)1.15
shares of UBS common stock ("in exchange for each share of Eagle common stock
owned. No fractional shares of UBS Stock"),common stock will be issued in connection
with the Merger and, in lieu thereof, UBS will pay Eagle shareholders the value
of any fractional shares of UBS common stock in cash.
The Merger is subject to approval of the holders of a majority of the
outstanding shares of Eagle. Completion of the Merger is also subject to the
approval by the holders of a majority of the issued and outstanding shares of
UBS, receipt of all required regulatory approvals and other conditions described
in the enclosed materials.
A notice of the Special Meeting, a proxy for your use in connection
with that meeting, and a Prospectus/Joint Proxy Statement describing the
proposed transaction in detail accompany this letter. We urge you to read all of
these documents carefully before deciding how to vote your shares.
Your Board of Directors has unanimously determined that the Merger is
fair to and in the best interests of Eagle and its shareholders. Accordingly,
your Board of Directors unanimously recommends that you vote "FOR" approval of
the Merger Agreement.
We hope that you will attend the Special Meeting. Regardless of your
plans to attend, we urge you, because of the importance of this matter, to
execute and mail the enclosed proxy in the envelope provided. If you decide to
attend the meeting, you may withdraw your proxy and vote in person on all
matters brought before it.
Sincerely,
_______________________________________
William W. Wagner
Chairman and Chief Executive
Officer
EAGLE BANCORP, INC.
227 Capitol Street
Charleston, West Virginia 25301
(304) 340-4600
NOTICE OF SPECIAL MEETING OF EAGLE BANCORP, INC. SHAREHOLDERS
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that, pursuant to the call of the Board of
Directors, a Special Meeting of Shareholders of Eagle Bancorp, Inc. will be held
at ________________________________, Charleston, West Virginia on ___________,
1996 at __:__ _.m., local time, for the purpose of considering and voting upon
the following matter:
To consider and vote upon an Agreement and Plan of Merger dated August
18, 1995 between United Bankshares, Inc. and Eagle Bancorp, Inc. A copy of the
Agreement is attached as Annex A to the accompanying Prospectus/Joint Proxy
Statement.
The close of business on _______, 199_, has been fixed by the Board of
Directors as the record date for determining shareholders entitled to notice of
and to vote at this Special Meeting.
THE BOARD OF DIRECTORS OF EAGLE HAS UNANIMOUSLY DETERMINED THE MERGER
TO BE FAIR TO AND IN THE BEST INTERESTS OF EAGLE AND ITS SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.
Charleston, West Virginia By Order of the Board of Directors
________, 1996
__________________________________
T. Sam Scipio, Jr.
Senior Vice President
and Secretary
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YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. 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 AGREEMENT. ACCORDINGLY, EVEN IF YOU PLAN TO
BE PRESENT AT THE SPECIAL MEETING, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN
AND RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS
POSSIBLE. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE EITHER IN PERSON OR
BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY
TIME PRIOR TO THE EXERCISE THEREOF.
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[UNITED BANKSHARES, INC. LETTERHEAD]
___________, 1996
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders
of United Bankshares, Inc. to be held at ________________,
________________________, on __________, 1996 at ________.m., local time. At
this meeting, you will be asked to consider and approve the Agreement and Plan
of Merger dated August 18, 1995 (the "Merger Agreement") among United
Bankshares, Inc. ("UBS") and Eagle Bancorp, Inc. ("Eagle"). Eagle will merge
with and into UBS (the "Merger").
UBS shareholders must vote on the Merger under the West Virginia
Corporation Act. UBS shareholders will continue to hold their UBS Stock after
the Merger, except for those shareholders electing to exercise dissenters'
rights. Dissenting shareholders who follow the statutory procedures described in
the enclosed Prospectus/Joint Proxy Statement will be entitled to receive the
fair value of their shares.
Pursuant to the terms of the Merger Agreement and upon the effective
date of the Merger, shareholders of Eagle will be entitled to receive 1.15
shares of UBS common stock in exchange ratiofor each share of Eagle common stock
owned. No fractional shares of UBS common stock will be issued in connection
with the Merger and, in lieu thereof, UBS will pay Eagle shareholders the value
of any fractional shares of UBS common stock in cash.
The Merger is subject to approval of the holders of a majority of the
outstanding shares of UBS. Completion of the Merger is also subject to the
approval by the holders of a majority of the issued and outstanding shares of
Eagle, receipt of all required regulatory approvals and other conditions
described herein,in the enclosed materials.
A notice of the Special Meeting, a proxy for your use in connection
with that meeting, and $26.25a Prospectus/Joint Proxy Statement describing the
proposed transaction in cashdetail accompany this letter. We urge you to read all of
these documents carefully before deciding how to vote your shares.
Your Board of Directors has unanimously determined that the Merger is
fair to and in the best interests of UBS and its shareholders. Accordingly, your
Board of Directors unanimously recommends that you vote "FOR" approval of the
Merger Agreement.
We hope that you will attend the Special Meeting. Regardless of your
plans to attend, we urge you, because of the importance of this matter, to
execute and mail the enclosed proxy in the envelope provided. If you decide to
attend the meeting, you may withdraw your proxy and vote in person on all
matters brought before it.
Sincerely,
________________________________________
Richard M. Adams
Chairman and
Chief Executive Officer
UNITED BANKSHARES, INC.
United Center
500 Virginia Street, East
Charleston, West Virginia 25301
(304) 348-8400
NOTICE OF SPECIAL MEETING OF UNITED BANKSHARES, INC. SHAREHOLDERS
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that, pursuant to the call of the Board of
Directors, a Special Meeting of Shareholders of United Bankshares, Inc. will be
held at ________________________________, ___________________, West Virginia on
___________, 1996 at __:__ _.m., local time, for the purpose of considering and
voting upon the following matter:
To consider and vote upon an Agreement and Plan of Merger dated August
18, 1995 between United Bankshares, Inc. and Eagle Bancorp, Inc. A copy of the
Agreement is attached as Annex A to the accompanying Prospectus/Joint Proxy
Statement.
The close of business on _______, 199_, has been fixed by the Board of
Directors as the record date for determining shareholders entitled to notice of
and to vote at this Special Meeting.
THE BOARD OF DIRECTORS OF UBS HAS UNANIMOUSLY DETERMINED THE MERGER TO
BE FAIR TO AND IN THE BEST INTERESTS OF UBS AND ITS SHAREHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.
Charleston, West Virginia By Order of the Board of Directors
________, 1996
__________________________________
Richard M. Adams
Chairman of the Board and
Chief Executive Officer
- --------------------------------------------------------------------------------
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. 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 AGREEMENT. ACCORDINGLY, EVEN IF YOU PLAN TO
BE PRESENT AT THE SPECIAL MEETING, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN
AND RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS
POSSIBLE. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE EITHER IN PERSON OR
BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY
TIME PRIOR TO THE EXERCISE THEREOF.
- --------------------------------------------------------------------------------
UNITED BANKSHARES, INC.
PROSPECTUS
----------
UNITED BANKSHARES, INC. AND EAGLE BANCORP, INC.
JOINT PROXY STATEMENT
3,138,888 SHARES OF COMMON STOCK
This Prospectus/Joint Proxy Statement is being furnished in connection
with the solicitation of proxies by the Board of Directors of United Bankshares,
Inc. ("UBS") and the Board of Directors of Eagle Bancorp, Inc. ("Eagle") to be
used at a special meeting of stockholders of UBS and Eagle, respectively, to be
held on _________, ____________, 1996 (the "UBS Special Meeting" and the "Eagle
Special Meeting," respectively, and together the "Special Meetings"). The
purpose of the Special Meetings is to consider and vote upon an Agreement and
Plan of Merger, dated as of August 18, 1995, between UBS and Eagle (the "Merger
Agreement"), which provides, among other things, for the merger of Eagle with
and into UBS (the "Merger").
Upon consummation of the Merger, each share of common stock they ownof Eagle,
par value $.10 per share ("Eagle Stock") (other than any shares held by UBS or a
subsidiary thereof other than in FCBa fiduciary capacity or (ii) allin satisfaction of a
debt previously contracted) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to receive
1.15 shares of common stock of UBS, par value $2.50 per share ("UBS Stock"),
plus cash in lieu of any fractional share interest, as described in this
Prospectus/Joint Proxy Statement. See "Summary," "The Merger" and Annex A.
This Prospectus/Joint Proxy Statement also constitutes a prospectus of
UBS relating to the amountshares of $52.57 per shareUBS Stock issuable to holders of FCB Stock. No fractionalEagle Stock upon
consummation of the Merger. Based on 2,729,468 shares of Eagle Stock outstanding
on the date hereof, a maximum of 3,138,888 shares of UBS Stock will be issued. In lieu thereof, shareholders will receive a cash payment as provided
for inissuable
upon consummation of the Merger Agreement.
Information concerning the proposed acquisition is contained in the
following Proxy Statement which is part of this Prospectus. The date of this
Prospectus/Proxy Statement is ____________, 1995.
THERE ARE RISKS ASSOCIATED WITH ACQUISITION OFMerger.
THE SECURITIES OFFERED HEREIN. SEE SUMMARY-RISK FACTORS.
---
THESE SECURITIESHEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS/JOINT PROXY STATEMENT IS _____________,
1996.
AVAILABLE INFORMATION
Each of UBS and Eagle is subject to the information and reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance with those requirements, files reports, proxy and
information statements, and other information with the Securities and Exchange
Commission (the "SEC"). The documents filed by UBS and Eagle with the SEC can be
inspected and copied at the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the SEC's Regional Office in New
York, which is located at 7 World Trade Center, Suite 1300, New York, New York
10048. Each of the UBS Stock and the Eagle Stock is quoted on the NASDAQ Stock
Market's National Market ("NASDAQ"). Consequently, reports, proxy statements and
other information relating to UBS and Eagle also may be inspected and copied 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.
This Prospectus/Joint Proxy Statement does not contain all of the
information set forth in the Registration Statement on Form S-4, of which this
Prospectus/Joint Proxy Statement is a part, and exhibits thereto (together with
the amendments thereto, the "Registration Statement") which has been filed by
UBS with the SEC under the Securities Act of 1933, as amended (the "Securities
Act") and the regulations thereunder, certain portions of which have been
omitted pursuant to the regulations of the SEC and to which portions reference
is hereby made for further information.
No person has been authorized to give any information or make any
representation not contained in this Prospectus/Joint Proxy Statement in
connection with the offer and proxy solicitations contained herein, and, if
given or made, such information or representation must not be relied upon as
having been authorized by UBS. NEITHER THE DELIVERY OF THIS PROSPECTUS/JOINT
PROXY STATEMENT NOR ANY DISTRIBUTION OF THE SECURITIES TO WHICH THIS
PROSPECTUS/JOINT PROXY STATEMENT RELATES SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF UBS or any of its subsidiaries. This Prospectus/Proxy Statement
does not constitute an offer to sell or a solicitation of an offer to buy any of
the securities offered hereby to any person to whom it is unlawful to make such
an offer and any sale made hereunder shall create, under any circumstances, an
implication that there has been no change in the affairs of UBS or any of its
subsidiaries since the date hereof.
AVAILABLEOR EAGLE
SINCE THE DATE HEREOF OR THAT THE INFORMATION UBS is subject to the information and reporting requirements of the
Securities Exchange Act of 1934, as amended, and, in accordance with those
requirements, files reports, proxy and information statements, and other
information with the Securities and Exchange Commission (the "SEC") and with the
National Association of Securities Dealers Automated Quotations Systems National
Market System ("NASDAQ/NMS"). The documents filed by UBS with the SEC can be
inspected and copied at the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. The documents filed by UBS with
NASDAQ/NMS can be inspected and copied at the Public Reference section of
NASDAQ/NMS at 1737 K Street, N.W., Washington DC 20006-1506. Copies of such
documents can be obtained from the public reference sections at prescribed
rates.CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS/JOINT PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR
SOLICITATION TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH AN OFFER
OR SOLICITATION IS NOT LAWFUL.
INFORMATION INCORPORATED BY REFERENCE
UBS
The following documents previously filed with the SEC by UBS pursuant
to Section 13 or 14 of the Securities Exchange Act of 1934, as amended,(File
No.0-13322) are hereby incorporated herein by reference:
1. Annual Report on Form 10-K for the fiscal year ended
December 31, 1994;
2. Quarterly ReportReports on Form 10-Q for the quarterquarters ended March
31, June 30, and September 30, 1995;
and
3. Proxy Statement for the Annual Meeting of Shareholders heldForm 8-K filed on April 24,July 21, 1995.
4. Form 8-K filed on August 25, 1995.
5. Form 8-K filed on November 30, 1995.
6. Form 8-K filed on December 13, 1995.
All documents filed by UBS pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, after the date of this ProspectusProspectus/Joint Proxy
Statement and prior to the date of the Special Meeting of Shareholders of FCBMeetings shall be deemed to be
incorporated by reference in this ProspectusProspectus/Joint Proxy Statement and to be a
part hereof from the date of filing of such documents. Any statement
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this ProspectusProspectus/Joint Proxy Statement to the extent that a
statement contained herein or in any other such 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
Prospectus.Prospectus/Joint Proxy Statement.
THIS PROSPECTUSPROSPECTUS/JOINT PROXY STATEMENT INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS
ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST FROM JOSEPH WM.
SOWARDS, UNITED BANKSHARES, INC., 514 MARKET STREET, PARKERSBURG, WEST VIRGINIA
26102.26102 (TELEPHONE NUMBER (304) 424-8761). IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY _______________,_________, 1996.
EAGLE
A copy of Eagle's Annual Report to Shareholders for the year ended
December 31, 1994, and Quarterly Report on Form 10-Q for the three months ended
September 30, 1995, accompanies this Prospectus/Joint Proxy Statement.
The following documents previously filed with the SEC by Eagle (File
No. 0-17003) are hereby incorporated herein by reference:
1. Annual Report on Form 10-K for the fiscal year ended
December 31, 1994;
2. Quarterly Reports on Form 10-Q for the quarters ended March
31, June 30 and September 30, 1995; and
3. Form 8-K filed on August 21, 1995.
All documents filed by Eagle pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus/Joint Proxy
Statement and prior to date of the Special Meetings shall be deemed to be
incorporated by reference in this Prospectus/Joint Proxy Statement and to be a
part hereof from the date of filing of such documents. Any statement
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus/Joint Proxy Statement to the extent that a
statement contained herein or in any other such 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
Prospectus/Joint Proxy Statement.
THIS PROSPECTUS/JOINT PROXY STATEMENT INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS
ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST FROM STOCKHOLDER
RELATIONS, EAGLE BANCORP, INC., 227 CAPITOL STREET, CHARLESTON, WEST VIRGINIA
25301 (TELEPHONE NUMBER (304) 340-4600). IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY _________, 1996.
TABLE OF CONTENTS
PROSPECTUS/PROXY STATEMENT........................................... 1
INTRODUCTION......................................................... 1
SPECIAL MEETING OF FCB SHAREHOLDERS.................................. 3
Purpose and Vote Required....................................... 3
Proxies......................................................... 4
SUMMARY.............................................................. 6
FCB............................................................. 6
UBS............................................................. 6
Comparison of Shareholders' Rights.............................. 7SUMMARY.......................................................................1
The Special Meetings.....................................................1
Parties to the Merger....................................................2
The Merger Agreement............................................ 7and the Bank Merger...........................................2
Eagle Reasons for the Merger/Fairness Opinion......................... 8
Merger Consideration............................................ 9
Shareholder Approval............................................ 9Opinion of Financial Advisor to Eagle.......3
UBS Reasons for the Merger...............................................3
Interests of Certain Persons in the Merger...............................3
Accounting Treatment............................................ 10Treatment.....................................................4
Certain Federal Income Tax Consequences................................................ 10
Risk Factors.................................................... 11
Dividend Policy of UBS.......................................... 11Consequences..................................4
Regulatory Approvals.....................................................4
Conditions to Consummation of the Merger........................ 11Merger.................................5
Payment of Merger Consideration................................. 12
Comparative Stock Prices........................................ 12
THE PROPOSED TRANSACTION............................................. 16
THE MERGER........................................................... 16
Reasons for the Merger.......................................... 16
Merger Consideration............................................ 18
EngagementConsideration..........................................5
Resale of Financial Advisor................................. 22
Role of FCB's Financial Advisor................................. 24
Opinion of Financial Advisor.................................... 24
Effect on the Corporate Parties................................. 29
Tax Consequences................................................ 29
Conditions to Consummation of the Merger........................ 31
Termination of the Merger Agreement............................. 38
Merger Effective Date........................................... 39
Accounting Treatment............................................ 39UBS Stock......................................................5
Comparison of Shareholders' Rights.............................. 40
Issuance and Exchange of Stock Certificates..................... 41Rights.......................................5
Dissenters' Rights.............................................. 42Rights.......................................................5
COMPARATIVE STOCK PRICES AND DIVIDENDS........................................6
COMPARATIVE PER SHARE DATA........................................... 44
FCBDATA....................................................7
UBS AND EAGLE BANCORP, INC.
SELECTED CONSOLIDATED FINANCIAL DATA.......................................... 46DATA.....................................9
UBS AND EAGLE
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA..........................14
INTRODUCTION.................................................................17
SPECIAL MEETING OF EAGLE SHAREHOLDERS........................................17
Time and Place..........................................................17
Shares Outstanding and Entitled to Vote; Record Date....................17
Purpose and Vote Required...............................................17
Proxies.................................................................18
SPECIAL MEETING OF UBS SHAREHOLDERS..........................................19
Time and Place..........................................................19
Shares Outstanding and Entitled to Vote; Record Date....................19
Purpose and Vote Required...............................................19
Proxies.................................................................20
CERTAIN BENEFICIAL OWNERS OF UBS STOCK.......................................20
i
CERTAIN BENEFICIAL OWNERS OF EAGLE STOCK.....................................23
THE MERGER...................................................................24
General.................................................................25
The Merger Consideration................................................25
Exchange of Eagle Stock Certificates....................................25
Background of and Reasons for the Merger................................26
Opinion of Financial Advisor to Eagle...................................28
Effect on the Corporate Parties.........................................32
Certain Federal Income Tax Consequences.................................33
Conditions to Consummation of the Merger................................34
Regulatory Approval.....................................................35
Business Pending the Merger.............................................37
No Solicitation.........................................................38
Effective Time of the Merger; Termination and Amendment.................39
Interests of Certain Persons in the Merger..............................40
Certain Employee Matters................................................41
Resale of UBS Stock.....................................................42
Expenses of the Merger; Termination Fee.................................43
Stockholder Agreements..................................................44
Accounting Treatment....................................................44
COMPARISON OF SHAREHOLDERS' RIGHTS...........................................44
Authorized Capital Stock................................................45
Issuance of Capital Stock...............................................45
Voting Rights...........................................................46
Dividends and Other Distributions.......................................46
Terms and Size of Board of Directors....................................47
Director Vacancies and Removal of Directors.............................47
Director Conflict of Interest Transactions..............................48
Exculpation of Directors................................................48
Shareholder Nominations.................................................48
Shareholder Proposals...................................................49
Special Meetings of Shareholders........................................49
Shareholder Action without a Meeting....................................49
Shareholders' Right to Examine Books and Records........................50
Amendment of Governing Instruments......................................50
Mergers, Consolidations and Sales of Assets.............................51
Business Combinations with Certain Persons..............................51
Dissenters' Rights of Appraisal.........................................52
DISSENTERS' RIGHTS...........................................................52
ii
MANAGEMENT OF UBS AFTER THE MERGER...........................................55
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS..................................55
DESCRIPTION OF UNITED BANKSHARES, INC................................ 48
Organizational History and Subsidiaries......................... 48
Business of UBS................................................. 48
Business of Subsidiary Banks.................................... 49
Dividends....................................................... 49
Market and Stock Prices of UBS.................................. 50
Other Information............................................... 51
DESCRIPTION OF FIRST COMMERCIAL BANK................................. 52
General......................................................... 52
Competition..................................................... 52
Regulation and Supervision...................................... 53
Description of Properties....................................... 54
Legal Proceedings............................................... 54
Market for Common Equity
and Related Stockholder Matters............................ 55
Market Information.............................................. 55
Directors....................................................... 56
Executive Officers.............................................. 56
Family Relationships............................................ 57
Control Shareholders' Chapter 11 Proceedings.................... 57
Executive Compensation.......................................... 58
(1) Other Annual Compensation................................... 59
(2) All Other Compensation...................................... 59
Directors Compensation.......................................... 59
Executive Bonus Plan............................................ 60
Executive Salary Continuation Plan.............................. 60
Employment Agreements........................................... 61
Security Ownership of Certain Beneficial Owners and
Management................................................. 62
Certain Relationships and Related Transaction................... 63UBS STOCK.....................................................63
REGULATION AND SUPERVISION........................................... 64
General......................................................... 64SUPERVISION OF UBS............................................64
UBS General.............................................................64
Non-banking Activities Permitted to UBS......................... 66UBS.................................65
Credit and Monetary Policies and Related Matters................ 67Matters........................65
Capital Requirements............................................ 69
Historical and Pro Forma Capital Ratios......................... 72Requirement.....................................................66
Federal Deposit Insurance Corporation Improvement Act of 1991....................................................... 741991...........68
Reigle-Neal Interstate Banking Bill............................. 75
EXPERTS.............................................................. 76Bill.....................................69
RECENT LEGISLATIVE DEVELOPMENTS..............................................69
Recapitalization of SAIF................................................69
Pending Legislation Regarding Bad Debt Reserves.........................70
EXPERTS......................................................................71
LEGAL MATTERS........................................................ 76
SOURCES OF INFORMATION............................................... 77
ADDITIONAL INFORMATION............................................... 77MATTERS................................................................71
PROPOSALS FOR THE 1996 ANNUAL MEETING........................................72
ii
FINANCIAL INFORMATION CONCERNING
FIRST COMMERCIAL BANK......................................... F-1
FCB Management's Discussion and Analysis for the period
ended March 31, 1995.......................................... F-2
FCB Financial Statements as of March 31, 1995 and for the
period ended March 31, 1995 (unaudited)....................... F-10
FCB Management's Discussion and Analysis of Financial
Condition and Results of Operation for the years
ended December 31, 1994 and 1993.............................. F-23
FCB Audited Financial Statements (as of December 31,
1994 and for the years ended December 31, 1994,
1993 and 1992)................................................ F-37
EXHIBITS
ExhibitAnnex A - Agreement and Plan of Merger........................... E-1
Exhibit B - Baxter, Fentriss and Company Fairness Opinion.......... E-58
Exhibit C - Tax Opinion............................................ E-61
iii
[FIRST COMMERCIAL BANK LETTERHEAD]
_______________________, 1995
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders
of First Commercial Bank to be held at _________________________, ____________,
Virginia, on _________________________, 1995 at _______________________, local
time. At this meeting, you will be asked to consider and approve the Agreement and Plan of Merger, dated March 6,as of
August 18, 1995, (the "Merger Agreement") among United
Bankshares, Inc. ("UBS"),between UBS and Eagle
Annex B Opinion of Wheat First Commercial Bank ("FCB")Butcher Singer
Annex C Sections 31-1-122 and Commercial Interim
Bank ("Interim Bank"), a Virginia banking corporation to be formed as a wholly-
owned subsidiary of UBS to facilitate its acquisition of FCB. FCB will merge
with and into Interim Bank (the "Merger"). Interim Bank will be the surviving
bank and will change its name to "First Commercial Bank." Contemporaneously
with the Merger, Bank First, N.A. ("Bank First"), a wholly-owned national
banking subsidiary of UBS with its principal office in McLean, Virginia, will
also merge into Interim Bank. Again, Interim Bank will survive, resulting in a
state-member bank with the title "First Commercial Bank," having its principal
office in Arlington, Virginia (at the present office of FCB) and a branch in
McLean, Virginia (at the present office of Bank First).
Pursuant to the terms31-1-123 of the
Merger Agreement and upon the effective
date of the Merger, shareholders of FCB, other than certain Control
Shareholders, will be entitled to receive one of two forms of merger
consideration ("Merger Consideration"). FCB shareholders may elect to receive
(i) 1.12 shares of UBS stock plus $26.25 in cash in exchange for each share of
FCB stock or (ii) all cash in the amount of $52.57 per share of FCB stock. No
fractional shares of UBS stock will be issued in connection with the Merger and,
in lieu thereof, UBS will pay shareholders the value of any fractional shares of
UBS stock in cash. In addition, the exchange ratio may change in certain
circumstances as more fully described in the accompanying proxy materials.
The Merger is subject to approval of the holders of a majority of the
outstanding shares of FCB. Completion of the Merger is also subject to
regulatory approval and other conditions described in the enclosed materials.West Virginia Corporation Act
iii
SUMMARY
THE FOLLOWING IS A notice of the Special Meeting, a proxy for your use in connection
with that meeting, and a Prospectus/Proxy Statement describing the proposed
transaction in detail accompany this letter. We urge you to read all of these
documents carefully before deciding how to vote your shares.
Your Board of Directors has approved the Merger. Accordingly, your
Board of Directors unanimously recommends that you VOTE FOR the Merger.
I hope that you will attend the Special Meeting. Regardless of your
plans to attend, I urge you, because of the importance of this matter, to
execute and mail the enclosed proxy in the envelope provided. If you decide to
attend the meeting, you may withdraw your proxy and vote in person on all
matters brought before it.
Sincerely,
_____________________________
2
[FIRST COMMERCIAL BANK LETTERHEAD]
NOTICESUMMARY OF SPECIAL MEETINGTHE INFORMATION CONTAINED IN THIS
PROSPECTUS/JOINT PROXY STATEMENT. THIS SUMMARY IS NOT INTENDED TO BE A COMPLETE
STATEMENT OF SHAREHOLDERSALL MATERIAL CONTAINED IN THIS PROSPECTUS/JOINT PROXY STATEMENT AND
IT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that, pursuant to the call of the Board of
Directors, aMORE DETAILED DISCUSSIONS
CONTAINED ELSEWHERE IN THIS DOCUMENT, IN THE ACCOMPANYING ANNEXES ATTACHED
HERETO AND THE INFORMATION INCORPORATED HEREIN BY REFERENCE. SHAREHOLDERS
SHOULD READ THIS ENTIRE PROSPECTUS/JOINT PROXY STATEMENT CAREFULLY.
THE SPECIAL MEETINGS
The UBS Special Meeting of Shareholders of First Commercial Bank will be held at __________________________, Virginia______________,
________________, _________________, on _____________ 1995__, 1996, at _________,__:00 _.m.,
local time, forand the purpose of considering and voting upon the
following matters:
1. To consider and vote upon an Agreement and Plan of Merger dated
March 6, 1995 by and among United Bankshares, Inc. ("UBS"), First Commercial
Bank and Commercial Interim Bank. A copy of the Agreement is attached as
Exhibit A to the accompanying Prospectus/Proxy Statement which you are urged to
read carefully.
2. To act upon any other business which may properly come before theEagle Special Meeting or any adjournment or adjournments thereof. The Boardwill be held at _________________,
_________________, ________________, on __________ __, 1996, at __:__ _.m.,
local time. Only the holders of Directorsrecord of outstanding shares of UBS Stock and
Eagle Stock at present knows of no other business to come before this Special
Meeting.
Thethe close of business on _____________________________, 1995, has been
fixed by the Board of Directors as the record date for determining shareholders___________ __, 199_ (the "UBS Record
Date") and ___________ __ (the "Eagle Record Date"), respectively, are entitled
to notice of and to vote at this Special Meeting.
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE REGARDLESS OF YOUR PLANS TO ATTEND THIS SPECIAL MEETING. IF YOU DO
ATTEND, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
INDIVIDUALS HAVE BEEN NAMED IN THE PROXY TO VOTE THE SHARES
REPRESENTED BY PROXY. IF YOU WISH TO CHOOSE SOME OTHER PERSON TO ACT AS YOUR
PROXY, MARK OUT THE PRINTED NAME AND WRITE IN THE NAME OF THE PERSON YOU SELECT
IN THE SPACE PROVIDED IN THE PROXY.
By Order of the Board of Directors
__________________________________, 1995
___________________________________
Name & Title
3
PROSPECTUS/PROXY STATEMENT
--------------------------
UNITED BANKSHARES, INC.
514 Market Street
Parkersburg, West Virginia 26102
(304) 424-8800
FIRST COMMERCIAL BANK, A VIRGINIA BANKING CORPORATION
3801 Wilson Boulevard
Arlington, Virginia 22203UBS Special Meeting and the Eagle Special
Meeting, respectively. At the UBS Record Date, _________ shares of FCB ShareholdersUBS Stock
were outstanding and entitled to be held ____________________, 1995
INTRODUCTION
------------
This Prospectus/Proxy Statement is being furnished by First Commercial
Bank ("FCB") in conjunction withvoted, and at the solicitation by its BoardEagle Record Date
2,729,468 shares of Directors of
proxies for the special meeting of shareholdersEagle Stock were outstanding and entitled to be held ________, 1995 (the
"Special Meeting") and by United Bankshares, Inc. ("UBS") in connection with the
issuance of its shares.voted.
At the Special Meeting, shareholdersMeetings and at any adjournment or adjournments
thereof, stockholders of UBS and Eagle will consider and vote upon the approval of an Agreement and Plan of Merger
dated March 6, 1995
(the "Merger Agreement"), by and between UBS, FCB and Commercial Interim Bank
("Interim Bank"), a Virginia banking corporation to be formed as a wholly-owned
subsidiary of UBS to facilitate its acquisition of FCB. FCB will merge with and
into Interim Bank (the "Merger"). Interim Bank will be the surviving bank and
will change its name to "First Commercial Bank." Contemporaneously with the
Merger, Bank First, N.A. ("Bank First"), a wholly-owned national banking
subsidiary of UBS with its principal office in McLean, Virginia, will also merge
into Interim Bank. Again, Interim Bank will survive, resulting in a state
member bank with the title "First Commercial Bank," its principal office in
Arlington, Virginia (at the present office of FCB) and a branch in McLean,
Virginia (at the present office of Bank First).Agreement. The terms of the Bank First
merger with and into Interim Bank are set forth in a separate Agreement and Plan
of Merger dated March 6,
1
1995, by and between UBS, Bank First, Interim Bank and UBF Holding Company, Inc.
("UBF," a second-tier bank holding company which owns Bank First).
Information relevant to the special meeting of FCB shareholders is set
forth below, followed by a summary of information contained in the
Prospectus/Proxy Statement. All shareholders should review this entire
Prospectus/Proxy Statement, including all exhibits hereto.
2
SPECIAL MEETING OF FCB SHAREHOLDERS
PURPOSE AND VOTE REQUIRED
The purpose of the Special Meeting of FCB shareholders is to act upon
the Merger Agreement and the proposed merger of FCB with and into Interim Bank.
If the Merger is consummated, FCB shareholders will exchange each share of the
common stock of FCB ("FCB Stock") they hold for 1.12 shares of the common stock
of UBS ("UBS Stock") and $26.25 in cash; with the exchange ratio to be adjusted
if certain circumstances exist as described in the section hereof captioned "THE
MERGER-Merger Consideration." No fractional shares of UBS Stock will be issued
in connection with the Merger and, in lieu thereof, UBS will pay cash for any
fractional shares, also described in the above-referenced section. FCB
shareholders, other than James B. and Janet Brockett (the "Control
Shareholders") also have the option of accepting all cash in amount of $52.57
per share. A detailed description of this transaction is set forth in this
Prospectus/Proxy Statement and the exhibits attached to it. See the sections of
---
this Proxy Statement titled SUMMARY and THE PROPOSED TRANSACTION.
SHAREHOLDERS ARE URGED TO READ THIS ENTIRE DOCUMENT CAREFULLY BEFORE VOTING
THEIR SHARES.
FCB's Board of Directors has unanimously approved the proposed Merger
and recommends that the shareholders of FCB VOTE FOR the Merger. See the
---
sections of this Proxy Statement titled SUMMARY and THE PROPOSED TRANSACTION and
the paragraphs thereunder captioned "Reasons For the Merger."
With respect to the vote on the Merger, FCB shareholders are entitled
to cast one vote for each share of FCB Stock they hold on the record date of
________, 1995. To approve the Merger, aaffirmative vote of the two-thirdsholders of a majority of each of the
issued and outstanding UBS Stock and the Eagle Stock, voting in person or by
proxy, is necessary to approve the Merger Agreement on behalf of UBS and Eagle,
respectively.
As of the UBS Record Date, the directors and executive officers of UBS
and their affiliates in the aggregate beneficially owned 1,993,850 shares, or
16.87%, of the outstanding UBS Stock, excluding shares subject to options. Each
of the directors of UBS, who own _____ shares, or ___%, of the outstanding UBS
Stock in the aggregate, has entered into an agreement with Eagle which requires,
among other things, that each such director vote all shares of FCB
3
UBS Stock
is required. As of April 15, 1995, the Directors and Executive Officers
of FCB had the authority to vote, directly or indirectly, approximately 70% of
the issued and outstanding shares of FCB Stock. The ability of the Control
Shareholders to vote the 68.6% of FCB Stock they own is subject to receiving the
approval of the United States Bankruptcy Court for the Eastern District of
Virginia, which approval was received by a court order dated June 20, 1995 that
became final and nonappealable on June 30, 1995. See DESCRIPTION OF FCB -
Control Shareholders' Chapter 11 Proceeding. Subject to the receipt of such
approval, the management of FCB expects that such shares will be voted FOR
approvalbeneficially owned in favor of the Merger Agreement. See "Certain Beneficial
Owners of UBS Stock" and therefore THAT THE MERGER WILL BE APPROVED.
PROXIES
A proxy for use by FCB shareholders in connection with the Special
Meeting is enclosed with this Prospectus/Proxy Statement which will be mailed to
FCB shareholders on or about ___________, 1995. The proxy will be voted as
specified thereon by the shareholder. Where no specification is made on the
Proxy, a properly executed Proxy will be voted FOR approval of the Merger."The Merger-Stockholder Agreements."
As of the dateEagle Record Date, the directors and executive officers of
Eagle and their affiliates in the aggregate beneficially owned 738,658 shares,
or 27.1%, of the mailingoutstanding Eagle Stock. Each of this Prospectus/Proxy Statement, the managementdirectors and executive
officers of FCB is not awareEagle has entered into an agreement with UBS which requires, among
other things, that each such person vote all shares of any business to be acted upon at the Special
Meeting other than considerationEagle Stock beneficially
owned in favor of the Merger Agreement. See "Certain Beneficial Owners of Eagle
Stock" and it"The Merger-Stockholder Agreements."
PARTIES TO THE MERGER
EAGLE. Eagle is not anticipated that
other matters will be brought beforea Delaware corporation and a registered savings and
loan holding company under the meeting. As previously communicated,Home Owners' Loan Act ("HOLA") and regulations
promulgated thereunder by the annual meetingOffice of shareholders of FCB has been postponed indefinitelyThrift Supervision ("OTS"). Eagle was
incorporated in view of the pending Merger. FCB's Board of Directors, at its ____________, 1995
meeting, amended FCB's bylaws to permit such a postponement in order to avoid
the expense of the annual meeting. If for any reason the Merger does not take
place, the management of FCB will call a meeting of shareholdersMarch 1988 for the purpose of conductingacquiring all of the regularcapital stock
of First Empire Federal Savings and Loan Association ("First Empire"). First
Empire is a consumer-oriented financial institution which accepts deposits and
utilizes its deposits as the primary source of funds to originate loans. First
Empire focuses its lending activities on first mortgage loans secured by
existing real estate. As of September 30, 1995, Eagle had consolidated assets of
$374.9 million and shareholders' equity of $48.2 million. See "Information
Incorporated By Reference" and Eagle's annual business meeting. If any other matter should
be
4
brought before the Special Meeting, each shareholder will be entitledreport to cast
one vote for each share of FCB Stock held on the record date on each such
matter. The persons appointed as proxies may vote on such matters according to
the direction of FCB's Board of Directors.
Any shareholder has the right to revoke his or her proxy anytime
before it is voted by notifying the judges of election appointedshareholders and
Form 10-K Report for the meeting
either in person or in writing prior to the vote. Written instructions or
substitute proxies sent prior to the meeting may be addressed to the secretary
of FCB at its offices.
The proxy solicitation of shareholders of FCB is made by FCB's Board
of Directors and the cost of such solicitation will be paid by FCB. In addition
to soliciting by mail, directors, officers and regular employees of FCB, who
will receive no compensation for their services other than their regular
salaries and fees, may solicit proxies by telephone, telegraph, mail, or
personal interview. Brokerage houses, nominees, fiduciaries and other
custodians have been requested to forward solicitation materials to the
beneficial owners of FCB Stock held in their names and will be reimbursed for
their expenses in doing so.
5
SUMMARY
The following is a summary of the information contained in this
Prospectus/Proxy Statement. This summary is not intended to be a complete
statement of all material contained in this Prospectus/Proxy Statement and it is
qualified in its entirety by reference to the more detailed discussions
contained elsewhere in this document and in the accompanying exhibits.
Shareholders should read this entire Prospectus/Proxy Statement carefully.
FCB
FCB is a Virginia banking corporation. It was incorporated on August
2, 1972. FCB is a state chartered bank and a member of the Federal Reserve
System. As ofyear ended December 31, 1994, and March 31,Form 10-Q Report for
the three months ended September 30, 1995, respectively, FCB had
total assets of $60,834,000 and $61,098,000 and total shareholders' equity of
$5,724,000 and $5,691,000.
UBSwhich accompany this Prospectus/Joint
Proxy Statement.
UBS. UBS is a West Virginia corporation and a registered bank holding
company pursuant to the Bank Holding Company Act of 1956, as amended.amended ("BHCA").
It was incorporated on March 26, 1982, and organized on September 9, 1982. As a
bank holding company, UBS's present business is the operation of its three bank
subsidiaries, United National Bank ("UNB"),and United National Bank-South ("UNB-
S"), both of which are national banks headquartered in West Virginia, and First
Commercial Bank, First, N.A.a Virginia state chartered member bank headquartered in
Arlington, Virginia. UBS also owns United Venture Fund, Inc., ("UVF"), 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 Bank Holding Company Act.BHCA. UBS also owns UBF Holding Company, Inc. and UBC Holding Company, a second-tier bank holding companiescompany
which own Bank First and
UNB, respectively.owns UNB. As of December 31, 1994, and March 31,September 30, 1995, respectively, UBS had consolidated assets of
$1,787,641,000 and $1,792,217,000$1,773.3 million and stockholders' equity of $179,746,000$191.3 million. See "Information
Incorporated By Reference".
THE MERGER AND THE BANK MERGER
In accordance with the terms of and $183,339,000.
6
COMPARISON OF SHAREHOLDERS' RIGHTS
UBS is a West Virginia corporation and a bank holding company while
FCB is a Virginia corporation and a state chartered bank. The rights ofsubject to the shareholders of each are differentconditions set
forth in certain respects. One significant
difference is with regard to shareholders' preemptive rights. In the case of
UBS, shareholders do not have preemptive rights and additional shares may be
issued without offering current shareholders the opportunity to maintain their
ownership position. FCB shareholders do have preemptive rights and are
therefore entitled to purchase shares in any new issuance of stock sufficient to
maintain their ownership position. Another significant difference is that,
pursuant to Section 6.1-43 of the Virginia Banking Act, FCB shareholders do not
have dissenters' rights to elect to receive the appraised value of their shares
in lieu of the Merger Consideration. UBS shareholders do have such rights under
the West Virginia Corporation Act, W.Va. Code (S)(S) 31-1-122 and 123. A third
important difference is that UBS shareholders have the right to vote
cumulatively in the election of directors while FCB shareholders do not. No
anti-takeover provisions have been added to the articles of incorporation or
bylaws of UBS or FCB; such matters are governed in the case of both entities by
the respective corporate laws applicable to each. See THE PROPOSED TRANSACTION
---
- - Comparison of Shareholders' Rights.
THE MERGER AGREEMENT
UBS proposes to acquire FCB via the merger of FCBAgreement, Eagle will be merged with and into Interim Bank. Interim Bank is inUBS, with UBS
as the process of being organized under Virginia
law. It will become a party to the Merger Agreement upon its execution of an
Adoption Agreement. Under the terms of the Merger Agreement, Interim Bank will
survive the Merger ("Surviving Bank").
7
surviving corporation. Pursuant to the terms of the Merger Agreement and
upon the effective date of the Merger, shareholders of FCB, other than the Control Shareholders,Eagle will be entitled to
receive one of two forms of consideration (the "Merger
Consideration"). FCB Shareholders may elect to receive: (i) 1.121.15 shares of UBS Stock plus $26.25 in cash in exchange for each share of FCBEagle Stock they
own or
(ii) all(the "Exchange Ratio"), plus cash in the amountlieu of $52.57 perany fractional share of FCB Stock. To the extent
minority shareholders opt to receive all cash and giving effect to amounts paid
for fractional shares, the Control Shareholders, James and Janet Brockett, will
receive a greater proportion of UBS Stock to assure criteria for a tax-free
exchange will be met.interest
(the "Merger Consideration"). No fractional shares of UBS Stock will be issued
in connection with the Merger and, in lieu thereof, UBS will pay shareholders
the value of any fractional shares of UBS Stock in cash, as described herein.
The
exchange ratio may change if certain circumstances exist. See THE"THE MERGER-Merger Consideration."
In connection with the Merger Agreement, First Empire and UNB entered
into an Agreement and Plan of Merger dated as of August 18, 1995 (the "Bank
Merger Agreement"). The Bank Merger Agreement sets forth the terms and
conditions, which include consummation of the Merger, pursuant to which First
Empire will merge with and into UNB following consummation of the Merger.
2
For further information on the Merger Agreement and its terms and the
related Merger and Bank Merger, see THE
PROPOSED TRANSACTION"The Merger" and ExhibitAnnex A hereto.
EAGLE REASONS FOR THE MERGER/FAIRNESS OPINION It is the opinion of the management of FCB that the Merger will
provide benefits for FCB shareholders by permitting the Surviving Bank to be
more efficient and competitive. Those who opt to receive UBS Stock plus cash
will hold a more liquid security than they presently hold and it is one based
upon a larger, more diversified organization. Those shareholders who opt to
receive all cash will have an opportunity to liquidate their shares at an
attractive price. While the original impetus to sell FCB stemmed from the
personal requirements of the Control Shareholders, the Board of Directors
believes that the transaction negotiated with UBS is in the best interests of
all shareholders. See THE PROPOSED TRANSACTION - THE MERGER-Reasons for the
Merger and DESCRIPTION OF FIRST COMMERCIAL BANK - Control Shareholders' Chapter
11
8
Proceeding. Among other things, the Board of Directors is relying upon the
fairness opinion of Baxter Fentriss and Company, an investment banking firm
located in Richmond, Virginia, which specializes in banking transactions.FINANCIAL ADVISOR TO EAGLE
The Board of Directors of FCB has carefully considered the current economic
environmentEagle evaluated numerous financial, legal
and the terms ofmarket considerations in deciding to approve the Merger AgreementAgreement. See "The
Merger-Background of and unanimously recommends
approval of the Merger. See THE PROPOSED TRANSACTION -THE MERGER - Reasons for ---
the Merger.
MERGER CONSIDERATION
The Merger Consideration for each share of FCB Stock and the other
terms of the Merger Agreement were reached through arm's-length negotiations
between the managements of UBS and FCB.- Eagle."
The Board of Directors of FCBEagle has received a written opinion from
Wheat First Butcher Singer ("Wheat First") to the effect that, based on the
factors stated therein, the Exchange Ratio to be received by stockholders of
Eagle pursuant to the Merger Agreement is fair to the stockholders of Eagle from
a financial point of view. For information on the assumptions made, matters
considered and limits of the review by Wheat First, see "The Merger - Opinion of
Financial Advisor to Eagle." A copy of the opinion of Wheat First is attached
hereto as Annex B and should be read in its entirety.
UBS REASONS FOR THE MERGER
UBS' management and Board of Directors view the proposed transaction
as a desirable opportunity to add a high performance company, new geographic
markets and new product markets to the UBS organization. The Merger will
strengthen UBS' current offices in the Charleston, Morgantown and Beckley areas
and will further expand its presence into southern and western West Virginia,
and the Martinsburg and Bridgeport areas. In addition, UBS will acquire Eagle's
presence in the mortgage banking market and believes that the termscombined company
can further expand this particular line of business. See "The Merger-Background
of and Reasons for the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Pursuant to the Merger Agreement, UBS agreed (i) to take such action
as is necessary to elect J. Christopher Thomas, William W. Wagner and Paul
Clinton Winter, Jr. as directors of UBS upon consummation of the Merger Agreement, includingand to
include such persons as nominees for election as directors of UBS at the exchange ratio, are fairfirst
annual meeting of stockholders of UBS following consummation of the Merger, (ii)
to honor the terms of (a) the employment agreements among Eagle, First Empire
and equitableeach of Messrs. Thomas and Wagner and A. Lawrence Crimmins, Jr. and T. Sam
Scipio, Jr. and (b) the Supplemental Retirement Plan maintained by First Empire
for certain of its executive officers, (iii) to continue rights to
indemnification and liability insurance for directors and officers of Eagle and
First Empire for specified periods, (iv) to pay severance payments in accordance
with a schedule to the FCB shareholders. The managementsMerger Agreement to any employee of Eagle or First Empire
(other than any employee who is party to an employment agreement) whose
employment is involuntarily terminated at or during the one-year period
following consummation of the Merger, (v) to offer employment to (a) J.
Christopher Thomas as Executive Vice President of UBS and FCB
considered various factorsPresident and Chief
Executive Officer of a to-be-formed mortgage banking subsidiary ("MBS") of UNB,
(b) William W. Wagner as
3
Executive Vice President of UBS and Chairman of MBS, (c) T. Sam Scipio, Jr. as
Executive Vice President and Chief Operating Officer of MBS and (d) certain
other non-executive officers, in negotiatingeach case with a base salary equal to the
exchange ratio. For information
on howrespective employee's base salary with Eagle and First Empire immediately prior
to consummation of the exchange ratioMerger. The aggregate amount of severance benefits to
which Messrs. Wagner, Thomas, Crimmins and Scipio would be entitled pursuant to
his employment agreement in the event his employment was determined, see THE PROPOSED TRANSACTION - THE
MERGER - Exchange Ratio. FCB has retained Baxter Fentriss and Company to issue
a fairness opinion. See THE PROPOSED TRANSACTION - THE MERGER - Engagementterminated for good
reason following consummation of
---
Financial Advisor and Exhibit B.
SHAREHOLDER APPROVAL
Under Virginia corporate law, the Merger Agreement mustin 1996 is estimated to be confirmed,
ratified$403,650,
$403,650, $444,088 and approved by$266,110, respectively. See "The Merger - Interests of
Certain Persons in the holders of at least two-thirds of the issued and
outstanding shares of FCB and of Interim Bank. UBS will approve the Merger as
sole shareholder of Interim Bank.
9
Merger."
ACCOUNTING TREATMENT
As presented in this Prospectus/Proxy Statement and the relevant
financial sections included herein, theThe parties expect the Merger to be accounted for under the purchase methodpooling of
accounting. Under the purchaseinterests method of accounting, and it is a condition to the acquired institution's balance sheet is adjusted to current
fair values asrespective
obligations of the parties that their independent public accountants issue a
letter to them on the closing date of the Merger. Any excess consideration paid over the
net current fair value of assets acquired and liabilities assumed will be
recorded as goodwill. The results of operations of FCB will be included in UBS's
consolidated financial statements from the date of the Merger. Pro forma
financial information concerningthat the Merger is not included herein since the
addition of FCB would not have materially affected UBS historical financial
information presented without FCB.shall be accounted for in
this manner under generally accepted accounting principles. See "The Merger -
Accounting Treatment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is structuredintended to bequalify as a tax-freereorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). Therefore,
in general, an Eagle stockholder who receives shares of UBS Stock in exchange
transaction for federal income tax purposesshares of Eagle Stock pursuant to the extent that UBS Stock is received. GainMerger will recognize no gain or -------------
loss should be recognized by shareholders
as a result of the transactions,Merger, except that gain or loss will be recognized with
respect to
the extent of any cash received: (i) in addition to stock consideration ($26.25
per share); (ii) as the entire Merger Consideration ($52.57 per share); or (iii)received by an Eagle stockholder in lieu of any fractional
shares. Shareholdersshare interest. Generally, the income tax basis of the UBS Stock received will
equal the income tax basis of the Eagle Stock surrendered and, provided that the
surrendered Eagle Stock was held as a capital asset on the date of the Merger,
the holding period of the UBS Stock received will include the holding period of
the Eagle Stock surrendered. Eagle shareholders should consult their tax
advisors concerning all tax consequences of the consummation of the Merger as it
relates to their own circumstances, including but not limited to, consequences
under federal, state and local income tax and other tax laws. For a more
detailed discussion of the tax consequences of the Merger and the opinionopinions of
counsel to be rendered regarding the federal income tax consequences to FCB shareholders,
see THE PROPOSED TRANSACTION - THE MERGER - Tax Consequences.
10
RISK FACTORS
FCB shareholders who opt to receive UBS Stock plus cash will be
exchanging their FCB Stock for UBS Stock. Many of the
risks associatedMerger in connection with holding FCB Stock will be similar to the risks of holding UBS Stock. There are
risks inherent in any equity investment. Both companiesclosing thereof. See "The Merger - Certain Federal
Income Tax Consequences."
REGULATORY APPROVALS
The Merger and the Bank Merger are subject to substantialthe prior approval or
consent of certain federal and state and federal regulation,regulatory authorities, including regulationthe Board
of business
opportunitiesGovernors of the Federal Reserve System ("FRB"), the Comptroller of the
Currency ("OCC"), the OTS and the ability to pay dividends. For information onWest Virginia Board of Banking and Financial
Institutions ("WV Board"). Applications have been or will be filed with such
regulatory authorities for approval of the impact of
regulation, see REGULATION AND SUPERVISION.
AsMerger and the Bank Merger. While the
parties expect regulatory approval, there can be no assurance that the necessary
regulatory approvals will be obtained or as to the transactions described herein, there is a risk that thetiming or conditions of such
approvals. See "The Merger will not receive the required regulatory approvals or shareholder
approvals or that other conditions to consummation may not be met.
DIVIDEND POLICY OF UBS
UBS shareholders are entitled to receive dividends when and as
declared by UBS's Board of Directors as funds are legally available therefor.
Payment of dividends by UBS is dependent upon payment of dividends by its
banking subsidiaries. Historically, UBS has paid dividends to its shareholders
quarterly. See DESCRIPTION OF UBS - Dividends.
---Regulatory Approvals."
4
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to various conditions, including
the approval of the Merger Agreement by the requisite Eagle and UBS shareholder
vote, receipt of all necessary regulatory approvals of the Merger and certain bankruptcy
court approvals.other
requirements set forth in the Merger Agreement. For further information as to
these and the other conditions to consummation of the Merger, see THE PROPOSED TRANSACTION"The Merger -
THE MERGERRegulatory Approvals" and "The Merger - Conditions to Consummation of the
Merger.
11
"
PAYMENT OF MERGER CONSIDERATION
As soon as practicable after the consummation of the Merger,
shareholders of FCB, other than the Control Shareholders,Eagle will be mailed written materials permitting them to elect the Merger Consideration they prefer with instructions as to
how to exchange their certificates for the formMerger Consideration. Certificates
evidencing Eagle Stock should not be returned to Eagle with the enclosed proxy
and should not be forwarded until after receipt of a letter of transmittal which
will be provided to Eagle shareholders upon consummation of the Merger.
RESALE OF UBS STOCK
The shares of UBS Stock to be issued in connection with the Merger
Consideration theywill be freely tradeable by the holders of such shares, provided that the resale
of shares held by persons who may be deemed to be "affiliates" of Eagle and UBS
under applicable federal securities laws will be subject to the requirements of
such laws and regulations thereunder, as well as restrictions which are intended
to ensure that the Merger will be accounted for as a pooling of interests under
generally accepted accounting principles. See "The Merger - Resale of UBS
Stock."
COMPARISON OF SHAREHOLDERS' RIGHTS
UBS is a West Virginia corporation subject to the provisions of the
West Virginia Corporation Act ("WVCA") and Eagle is a Delaware corporation
subject to the provisions of the Delaware General Corporation Law ("DGCL"). Upon
consummation of the Merger, shareholders of Eagle will become shareholders of
UBS and their rights will be governed by the Articles of Incorporation and
Bylaws of UBS and the WVCA. The rights of shareholders of UBS are different in
certain respects from the rights of shareholders of Eagle. See "Comparison of
Shareholders' Rights."
DISSENTERS' RIGHTS
Pursuant to Section 262 of the DGCL, holders of Eagle Stock do not
have selected.the right to dissent from the Merger and obtain an appraised value of their
shares of Eagle Stock. Pursuant to Sections 31-1-122 and 31-1-123 of the WVCA,
holders of UBS Stock who (i) file with UBS prior to or at the UBS Special
Meeting a written objection to the Merger Agreement and (ii) do not vote in
favor of the Merger Agreement, may make a written demand of UBS within ten days
after the date of the UBS Special Meeting for the payment of the fair value of
their shares of UBS Stock as of the day prior to the date on which the vote was
taken on the Merger Agreement at the UBS Special
5
Meeting, excluding any appreciation or depreciation in anticipation of such
corporate action. The written objection and written demand required to be
delivered by a dissenting UBS stockholder is in addition to and separate from
any proxy or vote against the Merger Agreement. The procedures which must be
followed in connection with the exercise of dissenters' rights by dissenting
stockholders of UBS are described herein under "Dissenters' Rights" and in
Sections 31-1-122 and 31-1-123 of the WVCA, copies of which are attached hereto
as Annex C to this Prospectus/Joint Proxy Statement. Failure to take any step in
connection with the exercise of such rights may result in termination or waiver
thereof.
COMPARATIVE STOCK PRICES AND DIVIDENDS
The following table presents the high and low prices of the UBS Stock
and FCBthe Eagle Stock and the dividends declared per share during the periods
set forth as follows:indicated:
UBS FCB
(Historical Basis) (Historical Basis)
------------------ ------------------Eagle
------ -----
Dividends Dividends
Declared Declared
High Low Per Share High Low Per Share
---- --- --- ----- ---- --- --- -----
1993
----
1st Quarter 23.50 19.25 8.40 8.00$23.50 $19.25 $ .23 $18.00 $14.50 $ .35(1)
2nd Quarter 22.75 19.75 8.40 8.00.23 22.00 16.50 .10
3rd Quarter 25.75 21.50 8.40 8.00.24 29.00 17.00 .12
4th Quarter 28.50 25.25 15.00 8.00.25 33.00 25.00 .12
1994
----
1st Quarter 27.25 25.50 8.00 8.00.26 33.00 27.00 .59(1)
2nd Quarter 26.75 25.00 8.00 8.00.26 33.00 28.00 .14
3rd Quarter 25.75 24.00 8.00 8.00.27 33.00 28.00 .14
4th Quarter 24.75 23.00 8.00 8.00.27 33.00 27.00 .14
1995
----
1st Quarter 26.00 23.25 8.00 8.00.29 33.00 27.50 .44(1)
2nd Quarter 27.50 25.25 8.00 8.00
through June 1,.29 32.00 28.00 .14
3rd Quarter 30.50 26.25 .29 33.00 29.00 .14
4th Quarter _____ _____ _____ _____ _____ _____
1996
----
1st Quarter
(through
____, 1996) _____ _____ _____ _____ _____ _____
(1) Includes special dividends of $.25, $.45 and $.30 per share paid in
February 1993, 1994 and 1995, respectively.
The source of stock price information for UBS and Eagle is the National
Association of Securities Dealers Automated Quotations System/National Market
System ("NASDAQ/NMS").NASDAQ. UBS
stock is listed under the trading symbol "UBSI." FCB's management compiledEagle stock is also listed on
NASDAQ under the 12symbol
6
information based upon trades known to it."EBCI". The above quotations reflect inter-
dealerinter-dealer prices, without retail mark-up,mark-
up, mark-down or commission and may not represent actual transactions.
The following table presents the high and low market prices of UBS and
FCBEagle Stock as well as equivalent per share data, as of March 3,August 17, 1995, the
closest date immediately before the public announcement of the proposed Merger
for which information is available:
UBS FCB/1/Eagle
(Historical FCB/2/Eagle (Equivalent
Basis) (Historical Basis) Per Share)(1)
-------------- ------------------ -----------
------------------ ------------
High Low High Low High Low
---- --- ---- ------- ---- ---
$25.125 $25.00 $ 8.40 $ 8.00 $28.14 $28.00
Pro Rata Cash/3/ 26.25 26.25
----- -----
Total Consideration $54.39 $54.25
===== =====
Cash Alternative $52.57 $52.57
===== =====$29.75 $29.50 $34.00 $29.00 $34.21 $33.93
From information available, the respective managements believe that
the historical high and low prices in the table accurately reflect the amounts
at which its stock was traded during the periods indicated.
______________________
/1/ _______________
(1)Equivalent per share prices are calculated by multiplying the historical
prices of UBS Stock by the exchange ratioExchange Ratio of 1.121.15 shares of UBS Stock
for one (1) share of FCBEagle Stock.
/2/ ThereStockholders are advised to obtain current market quotations for the
UBS Stock and the Eagle Stock. Because the Exchange Ratio is no regular market for FCB stock and FCB therefore cannot
providefixed,
stockholders of Eagle are not assured of receiving a specific market value data as of
March 3, 1995. The price indicated is as of
December 31, 1994, the date closest to and prior to the date of the public
announcementUBS Stock upon consummation of the Merger. /3/ Under this calculation, it is assumed that all FCB shareholders
receive 1.12 shares of UBS stock plus $26.25 in cash for each share of FCB stock
they own. Shareholders should compare the consideration they would receive under
the option to receive UBS stock plus cash as set forth above and the option to
receive cash only.
13
Shareholders should be aware that as more FCB shareholders, other than
the Control Shareholders, elect the all cash option, the Control Shareholders
will receive a greater equivalent per share amount if theThe market price of the UBS Stock
exceeds $23.49upon consummation of the Merger may be higher or lower than the market price at
the time the Merger Agreement was executed, at the date of mailing of this
Prospectus/Joint Proxy Statement or at the time of the Special Meetings.
COMPARATIVE PER SHARE DATA
The table which follows presents certain historical per share. With respect to the Control Shareholders, set forth
below is a table presenting the highshare data for
UBS and low market prices of UBS StockEagle, pro forma combined per share data and FCB
Stock as well as equivalent per share data
at the dates and for the periods indicated, giving effect to the Merger using
the pooling of interests method.
The per share data included in the tables which follow should be read
in conjunction with the historical financial statements of UBS and Eagle and the
related notes accompanying each such financial statements, in each case as
incorporated by reference herein, or included in the accompanying reports of
March 3, 1995, the closest date
immediately before the public announcementEagle. The data presented is not necessarily indicative of the proposed Merger, assumingresults which
would have been obtained if the combination had been consummated in the periods
indicated or which may be obtained in the future.
7
COMPARATIVE PER SHARE DATA (UNAUDITED)
(Data in dollars, Except shares)
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30 DECEMBER 31
___________
1995 1994 1993 1992
---- ---- ---- ----
UBS
Historical:
Net income $ 1.77 $ 2.08 $ 1.82 $ 1.52
Book value at end of period 16.19 15.21 14.34 13.44
Cash dividends declared 0.87 1.06 0.95 0.85
Average shares outstanding 11,889,568 11,993,062 11,922,521 10,737,688
EAGLE
Historical:
Net income $ 1.53 $ 2.01 $ 2.24 $ 1.67
Book value at end of period 17.66 16.81 15.78 14.20
Cash dividends declared 0.72 1.01 0.69 0.41
Average shares outstanding 2,729,468 2,729,468 2,718,930 2,650,592
PRO FORMA COMBINED
(UNAUDITED) (1)
Net income $ 1.68 $ 2.01 $ 1.85 $ 1.51
Book value at end of period 15.74 15.09 14.21 13.22
Cash dividends declared 0.87 1.06 0.95 0.85
Average shares outstanding 15,072,863 15,131,950 15,049,291 13,785,869
EAGLE EQUIVALENT PER SHARE
DATA (UNAUDITED) (2)
Net income $ 1.93 $ 2.31 $ 2.13 $ 1.74
Book value at end of period 18.10 17.35 16.34 15.20
Cash dividends declared 1.00 1.22 1.09 0.98
(1) Assumes receipt of 100% of the minority FCB shareholders electoutstanding shares of Eagle common stock in
exchange for UBS common stock at an exchange ratio of 1.15 to 1.
(2) The equivalent per share amounts are the result of multiplying the cash
option:dividends declared by UBS, the pro forma combined net income, and pro
forma combined book value by the 1.15 to 1 exchange ratio of UBS common
stock for each common share of EAGLE.
8
UBS AND EAGLE BANCORP, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected historical consolidated financial data of UBS
and Eagle for the five years ended December 31, 1994 is derived in part from the
audited consolidated financial statements. The historical consolidated
financial data of UBS and Eagle for the nine months ended September 30, 1995 and
1994 is derived from unaudited consolidated financial statements of each
company. The unaudited consolidated financial statements include all
adjustments, consisting of normal recurring accruals, which are considered
necessary by the managements of UBS and Eagle for a fair presentation of the
financial position and results of operations of UBS and Eagle for these periods,
respectively. Operating results for the nine months ended September 30, 1995
are not necessarily indicative of the results that may be expected for any other
interim period or the entire year ending December 31, 1995.
The UBS selected historical consolidated financial data set forth
below should be read in conjunction with, and is qualified in its entirety by,
the historical consolidated financial statements of UBS, including the related
notes, incorporated herein by reference. See "Available Information" and
"Information Incorporated by Reference."
The Eagle selected historical consolidated financial data set forth
below should be read in conjunction with, and is qualified in its entirety by,
the historical consolidated financial statements of Eagle, including the related
notes, incorporated herein by reference and in the reports of Eagle that
accompany this Prospectus/Joint Proxy Statement. See "Available Information"
and "Information Incorporated by Reference."
9
UBS
SELECTED FINANCIAL DATA
(In Thousands Except for Per Share Data)
Unaudited
FCB
(Equivalent
UBSAt or for the
nine months ended
September 30
--------- --
1995 1994
---- ----
Total interest income $101,423 $89,369
Total interest expense 40,554 32,010
Net interest income 60,869 57,359
Provision for possible
loan losses 1,550 1,368
Other income 9,509 9,076
Other expenses 36,210 36,283
Income taxes 11,492 10,038
Income before cumulative
effect of accounting change 21,126 18,746
Net income 21,126 18,746
Cash dividends 10,274 9,408
Per Share
(Historical FCB for Control
Basis)/1/ (Historical Basis) Shareholders)/2/
--------- ------------------ ----------------
High Low High Low High Lowcommon share:
Income before cumulative
effect of accounting change 1.77 1.57
Net income 1.77 1.57
Cash dividends 0.87 0.79
Book value (1) 16.19 15.00
Return on average
shareholders' equity 15.10% 14.14%
Return on average assets 1.59% 1.44%
Average assets 1,771,007 1,744,375
Investment securities (1) 324,084 391,923
Net loans (1) 1,319,061 1,260,858
Total assets (1) 1,773,289 1,777,496
Total deposits (1) 1,435,348 1,440,238
Long-term borrowings (1) 33,900 68,043
Total borrowing
and other liabilities (1) 146,648 159,042
Shareholders' equity (1) 191,293 178,216
___________________
(1) At end of period.
10
UBS
SELECTED FINANCIAL DATA
(In Thousands Except for Per Share Data)
At or for the Year Ended December 31
------------------------------------
1994 1993 1992 1991 1990
---- --- ---- --- ---- ------- ----
$25.125 $25.00 $ 8.00 $ 8.00 $41.04 $40.85
Pro Rata Cash/3/ 14.18 14.18
----- -----
Total Considerationinterest income $121,157 $116,505 $113,502 $126,863 $135,712
Total interest expense 43,887 45,009 49,897 64,851 75,926
Net interest income 77,270 71,496 63,605 62,012 59,786
Provision for Control Shareholders $55.22 $55.03
===== =====possible
loan losses 1,818 4,332 4,242 7,635 7,441
Other income 11,222 12,673 11,123 10,051 9,532
Other expenses 48,676 49,690 46,991 45,102 44,999
Income taxes 13,096 9,770 7,136 5,555 4,643
Income before cumulative
effect of accounting change 24,902 20,377 16,359 13,771 12,235
Net income 24,902 21,706 16,359 13,771 12,235
Cash Only Optiondividends 12,604 10,918 7,914 7,077 6,244
Per common share:
Income before cumulative
effect of accounting change 2.08 1.71 1.52 1.31 1.18
Net income 2.08 1.82 1.52 1.31 1.18
Cash dividends 1.06 0.95 0.85 0.81 0.75
Book value (1) 15.21 14.34 13.44 12.66 12.03
Return on average
shareholders' equity 13.98% 13.00% 11.60% 10.73% 9.96%
Return on average assets 1.42% 1.27% 1.09% 0.97% 0.85%
Average assets 1,753,324 1,706,639 1,496,148 1,417,506 1,434,057
Investment securities (1) 360,883 430,427 390,017 311,298 334,253
Net loans (1) 1,297,077 1,161,772 1,097,785 940,413 937,491
Total assets (1) 1,787,641 1,720,184 1,688,903 1,425,006 1,443,024
Total deposits (1) 1,434,852 1,430,529 1,411,892 1,212,619 1,220,482
Long-term borrowings (1) 83,972 32,203 28,067 2,025 2,295
Total borrowings
and other liabilities (1) 173,043 118,683 116,791 80,006 96,411
Shareholders' equity(1) 179,746 170,972 160,220 132,381 126,131
___________________________
(1) At end of period.
11
EAGLE
SELECTED FINANCIAL DATA
(In Thousands Except for Per Share Data)
Unaudited
At or for allthe
nine months ended
September 30
------------
1995 1994
---- ----
Total interest income $22,023 $19,369
Total interest expense 11,450 8,420
Net interest income 10,573 10,949
Provision for possible
loan losses 185 303
Other income 1,787 761
Other expenses 6,043 5,281
Income taxes 1,944 1,910
Income before cumulative
effect of accounting change 4,188 4,216
Net income 4,188 4,216
Cash dividends 1,965 2,375
Per common share:
Income before cumulative
effect of accounting change 1.53 1.54
Net income 1.53 1.54
Cash dividends 0.72 0.87
Book value (1) 17.66 16.50
Return on average
shareholders' equity 11.93% 12.85%
Return on average assets 1.46% 1.62%
Average assets 382,328 345,985
Investment securities (1) 11,252 9,171
Net loans (1) 343,445 341,204
Total assets (1) 374,926 369,948
Total deposits (1) 306,367 276,104
Long-term borrowings (1) 15,480 44,851
Total borrowings
and other FCB Shareholders $52.57 $52.57
===== =====liabilities (1) 20,349 48,799
Shareholders' equity (1) 48,210 45,045
________________________
(1) At end of period.
12
EAGLE
SELECTED FINANCIAL DATA
(In Thousands Except for Per Share Data)
At or for the Year Ended December 31
------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Total interest income $26,480 $24,119 $22,927 $19,183 $17,071
Total interest expense 11,785 10,028 10,922 10,671 10,260
Net interest income 14,695 14,091 12,005 8,512 6,811
Provision for possible
loan losses 384 498 566 268 202
Other income 1,016 1,627 766 841 1,262
Other expenses 7,232 6,417 5,635 5,255 4,559
Income taxes 2,613 2,712 2,144 1,319 819
Net income 5,482 6,091 4,426 2,511 2,493
Cash dividends 2,757 1,859 1,045 824 568
Per common share:
Net income 2.01 2.24 1.67 0.98 0.98
Cash dividends 1.01 0.69 0.41 0.33 0.23
Book value (1) 16.81 15.78 14.20 13.15 12.75
Return on average
shareholders' equity 12.40% 15.10% 12.60% 7.79% 8.13%
Return on average assets 1.55% 2.03% 1.66% 1.21% 1.39%
Average assets 354,152 300,236 266,833 208,085 179,928
Investment securities (1) 11,186 9,272 12,635 10,876 5,693
Net loans (1) 355,198 281,787 249,846 206,233 160,375
Total assets (1) 382,699 315,268 279,373 241,364 189,116
Total deposits (1) 277,663 267,386 236,542 203,024 154,719
Long-term borrowings (1) 402 361 624 692 487
Total borrowings
and other liabilities (1) 58,746 4,446 4,136 4,294 2,417
Shareholders' equity (1) 45,888 43,075 38,071 33,354 31,493
_____________________________
/1/ With respect(1) At end of period.
13
UBS AND EAGLE
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table sets forth selected unaudited consolidated pro
forma financial data of UBS and Eagle at the dates and for the periods
indicated, giving effect to the Control Shareholders, assuming allMerger using the pooling of interests method of
accounting. See "The Merger-Accounting Treatment of the Merger" and "Pro Forma
Consolidated Financial Statements."
The selected unaudited consolidated pro forma financial data set forth
below should be read in conjunction with, and is qualified in its entirety by,
the historical consolidated financial statements of UBS and Eagle, including the
related notes, which are incorporated herein by reference and which are in the
reports of Eagle that accompany this Prospectus/Joint Proxy Statement, and in
conjunction with the selected consolidated historical and other FCB
shareholders electunaudited pro
forma combined condensed consolidated financial information appearing elsewhere
herein. See "Available Information," "Information Incorporated by Reference"
and "Pro Forma Consolidated Financial Statements." The data set forth below is
not necessarily indicative of the results of the future operations of UBS upon
consummation of the Merger or the actual results that would have been achieved
had the Merger been consummated prior to takethe periods indicated.
UBS
PRO FORMA SELECTED FINANCIAL DATA
(In Thousands Except for Per Share Data)
Unaudited
At or for the
nine months ended
September 30
------------
1995 1994
---- ----
Total interest income $123,446 $108,738
Total interest expense 52,004 40,430
Net interest income 71,442 68,308
Provision for possible
loan losses 1,735 1,671
Other income 11,296 9,837
Other expenses 42,253 41,564
Income taxes 13,436 11,948
Net income 25,314 22,962
Cash dividends (1) 10,274 9,408
Per common share:
Income before cumulative
effect of accounting change 1.68 1.52
Net income 1.68 1.52
Cash dividends (1) 0.87 0.79
Book value (2) (3) 15.74 14.87
Return on average
shareholders' equity 14.43% 13.85%
Return on average assets 1.57% 1.46%
Average assets 2,153,335 2,090,360
Investment securities (2) 335,336 401,094
Net loans (2) 1,662,506 1,602,062
Total assets (2)(3) 2,148,927 2,147,444
Total deposits (2) 1,741,715 1,716,342
Long-term borrowings (2) 49,380 112,894
Total borrowings
and other liabilities (2)(3) 171,796 207,841
Shareholders' equity (2)(3) 235,416 223,261
__________________
(1) Cash dividends are the amounts declared by United and do not include cash
equivalent per share pricesdividends of acquired subsidiaries prior to the dates of consummation.
(2) At end of period.
(3) Reflects nonrecurring charges and related tax effects which will result
directly from the Merger and be included in the consolidated income
statement of UBS within the year after the Merger.
UBS and EAGLE
PRO FORMA SELECTED FINANCIAL DATA
(In Thousands Except for Per Share Data)
Unaudited
At or for the Year Ended December 31,
---------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Total interest income $147,637 $140,624 $136,429 $146,046 $152,783
Total interest expense 55,672 55,037 60,819 75,522 86,186
Net interest income 91,965 85,587 75,610 70,524 66,597
Provision for possible
loan losses 2,202 4,830 4,808 7,903 7,643
Other income 12,238 14,300 11,889 10,892 10,794
Other expenses 55,908 56,107 52,626 50,357 49,558
Income taxes 15,709 12,482 9,280 6,874 5,462
Income before cumulative
effect of accounting change 30,384 26,468 20,785 16,282 14,728
Net income 30,384 27,797 20,785 16,282 14,728
Cash dividends (1) 15,361 12,777 8,959 7,901 6,812
Per common share:
Income before cumulative
effect of accounting change 2.01 1.76 1.51 1.21 1.11
Net income 2.01 1.85 1.51 1.21 1.11
Cash dividends (1) 1.06 0.95 0.85 0.81 0.75
Book value (2) 15.09 14.21 13.22 12.39 11.83
Return on average
shareholders' equity 13.67% 13.41% 11.80% 10.14% 9.59%
Return on average assets 1.44% 1.39% 1.18% 1.00% 0.91%
Average assets 2,107,476 2,006,875 1,762,981 1,625,591 1,613,985
Investment securities (2) 372,069 439,699 402,652 322,174 339,946
Net loans (2) 1,652,275 1,443,559 1,347,631 1,146,646 1,097,866
Total assets (2) 2,170,340 2,035,452 1,968,276 1,666,370 1,632,140
Total deposits (2) 1,712,515 1,697,915 1,648,434 1,415,643 1,375,201
Long-term borrowings (2) 84,374 32,564 28,691 2,717 2,782
Total borrowings
and other liabilities (2) 231,789 123,129 120,927 84,300 98,828
Shareholders' equity (2) 225,634 214,047 198,291 165,735 157,624
________________
(1) Cash dividends are calculatedthe amounts declared by multiplying historical pricesUnited and do not include cash
dividends of acquired subsidiaries prior to the dates of consummation.
(2) At end of period.
INTRODUCTION
This Prospectus/Joint Proxy Statement is being furnished to the
holders of UBS Stock and Eagle Stock in connection with the solicitation of
proxies by an exchange ratiothe Boards of 1.634Directors of UBS and Eagle for use at the UBS Special
Meeting and the Eagle Special Meeting, respectively, and at any adjournment or
adjournments thereof. This Prospectus/Joint Proxy Statement also serves as a
prospectus of UBS in connection with the issuance of UBS Stock to holders of
Eagle Stock upon consummation of the Merger.
This Prospectus/Joint Proxy Statement, the attached notices of Special
Meetings of Stockholders and the form of proxy and other documents enclosed
herewith are being first mailed to stockholders of UBS and Eagle on or about
_____________ __, 1996.
SPECIAL MEETING OF EAGLE SHAREHOLDERS
TIME AND PLACE
The Eagle Special Meeting will be held at ____________, on _________,
1996 at _.m., local time.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
The close of business on ____________, 1995 has been fixed by the
Board of Directors of Eagle as the record date for the determination of holders
of Eagle Stock entitled to notice of and to vote at the Eagle Special Meeting
and any adjournment or adjournments thereof. At the close of business on the
Eagle Record Date, there were 2,729,468 shares of Eagle Stock outstanding and
entitled to vote. At the Eagle Special Meeting, Eagle shareholders will be
entitled to cast one vote for each share of Eagle Stock they hold on the Eagle
Record Date.
PURPOSE AND VOTE REQUIRED
The purpose of the Special Meeting of Eagle shareholders is to act
upon the Merger Agreement. Pursuant to applicable law and the articles of
incorporation and bylaws of Eagle, no other business may properly come before
the Eagle Special Meeting and any adjournment or adjournments thereof.
A detailed description of the Merger Agreement is set forth in this
Prospectus/Joint Proxy Statement and the exhibits attached to it. See the
sections of this Prospectus/Joint Proxy Statement titled "Summary" and "The
Merger."
SHAREHOLDERS ARE URGED TO READ THIS ENTIRE DOCUMENT CAREFULLY BEFORE VOTING
THEIR SHARES.
Eagle's Board of Directors has unanimously approved the proposed
Merger Agreement and unanimously recommends that the shareholders of Eagle vote
"FOR" approval of the Merger Agreement.
17
The presence in person or by proxy of at least a majority of the
outstanding shares of Eagle Stock entitled to vote is necessary to constitute a
quorum at the Eagle Special Meeting. The affirmative vote of the holders of a
majority of the outstanding Eagle Stock is required for approval of the Merger
Agreement at the Eagle Special Meeting.
Under rules of the New York Stock Exchange, the proposal to adopt the
Merger Agreement is considered a "non-discretionary item" whereby brokerage
firms may not vote in their discretion on behalf of their clients if such
---
clients have not furnished voting instructions. Abstentions and such broker
"non-votes" will be considered in determining the presence of a quorum at the
Eagle Special Meeting but will not be counted as a vote cast for the Merger
Agreement. Because the proposal to adopt the Merger Agreement is required to be
approved by the holders of a majority of the outstanding shares of Eagle Stock,
abstentions and broker "non-votes" will have the same effect as a vote against
this proposal.
PROXIES
A proxy for use by Eagle shareholders in connection with the Eagle
Special Meeting is enclosed with this Prospectus/Joint Proxy Statement. The
proxy will be voted as specified thereon by the shareholder, and where no
specification is made on the proxy, a properly executed proxy will be voted
"FOR" approval of the Merger Agreement.
Any stockholder of Eagle giving a proxy has the power to revoke it at
any time before it is exercised by (i) filing with the Secretary of Eagle
written notice thereof (T. Sam Scipio, Jr., Senior Vice President and Secretary,
Eagle Bancorp, Inc., 227 Capitol Street, Charleston, West Virginia 25301); (ii)
submitting a duly-executed proxy bearing a later date; or (iii) appearing at the
Eagle Special Meeting and giving the Secretary notice of his or her intention to
vote in person. Proxies solicited hereby may be exercised only at the Eagle
Special Meeting and any adjournment thereof and will not be used for any other
meeting.
Eagle will bear its costs of mailing this Prospectus/Joint Proxy
Statement to its shareholders, as well as all other costs incurred by it in
connection with the solicitation of proxies from its shareholders on behalf of
its Board of Directors. In addition to solicitation by mail, the directors,
officers and employees of Eagle and its subsidiaries may solicit proxies from
Eagle shareholders by telephone, telegram or in person without compensation
other than reimbursement for their actual expenses. Arrangements also will be
made with brokerage firms and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of stock held of
record by such persons, and Eagle will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in connection therewith.
18
SPECIAL MEETING OF UBS SHAREHOLDERS
TIME AND PLACE
The UBS Special Meeting will be held at ______________, on
_____________, 1996 at _.m., local time.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
The close of business on ________________, 1995 has been fixed by the
Board of Directors of UBS as the record date for the determination of holders of
UBS Stock entitled to notice of and to vote at the UBS Special Meeting and any
adjournment or adjournments thereof. At the close of business on the UBS Record
Date, there were ____ shares of UBS Stock outstanding and entitled to vote. At
the UBS Special Meeting, UBS shareholders will be entitled to cast one vote for
one (1)each share of FCB Stock.UBS Stock they hold on the UBS Record Date.
PURPOSE AND VOTE REQUIRED
The exchange ratiopurpose of the Special Meeting of UBS shareholders is obtainedto act upon
the Merger Agreement. No other business may properly come before the UBS
Special Meeting or any adjournment or adjournments thereof.
A detailed description of the Merger Agreement is set forth in this
Prospectus/Joint Proxy Statement and the exhibits attached to it. See the
sections of this Prospectus/Joint Proxy Statement titled "Summary" and "The
Merger."
SHAREHOLDERS ARE URGED TO READ THIS ENTIRE DOCUMENT CAREFULLY BEFORE VOTING
THEIR SHARES.
UBS' Board of Directors has unanimously approved the proposed Merger
Agreement and unanimously recommends that the shareholders of UBS vote "FOR"
approval of the Merger Agreement.
The presence in person or by dividingproxy of at least a majority of the
outstanding shares of UBS Stock entitled to vote is necessary to constitute a
quorum at the UBS Special Meeting. The affirmative vote of the holders of a
majority of the outstanding UBS Stock is required for approval of the Merger
Agreement at the UBS Special Meeting.
Under rules of the New York Stock Exchange, the proposal to adopt the
Merger Agreement is considered a "non-discretionary item" whereby brokerage
firms may not vote in their discretion on behalf of their clients if such
clients have not furnished voting instructions. Abstentions and such broker
"non-votes" will be considered in determining the presence of a quorum at the
UBS Special Meeting but will not be counted as a vote cast for the Merger
Agreement. Because the proposal to adopt the Merger Agreement is required to be
approved by the holders of a majority of the outstanding shares of UBS Stock,
abstentions and broker "non-votes" will have the same effect as a vote against
this proposal.
19
PROXIES
A proxy for use by UBS shareholders in connection with the UBS Special
Meeting is enclosed with this Prospectus/Joint Proxy Statement. The proxy will
be voted as specified thereon by the shareholder, and where no specification is
made on the Proxy, a properly executed proxy will be voted FOR approval of the
Merger Agreement.
Any shareholder has the right to revoke his or her proxy anytime
before it is exercised by: (i) filing with the Secretary of UBS written notice
thereof (Joseph Wm. Sowards, Executive Vice President and Secretary, United
Bankshares, Inc., 514 Market Street, Parkersburg, West Virginia 26102); (ii)
submitting a duly executed proxy bearing a later date; or (iii) appearing at the
UBS Special Meeting and giving the Secretary notice of his or her intention to
vote in person.
The proxy solicitation of shareholders of UBS is made by UBS' Board of
Directors and the cost of such solicitation will be paid by UBS. In addition to
soliciting by mail, directors, officers and regular employees of UBS, who will
receive no compensation for their services other than their regular salaries and
fees, may solicit proxies by telephone, telegraph, mail, or personal interview.
Brokerage houses, nominees, fiduciaries and other custodians have been requested
to forward solicitation materials to the beneficial owners of UBS Stock held in
their names and will be reimbursed by UBS for their expenses in doing so.
In order to facilitate and expedite distribution of these proxy
solicitation materials to brokers, fiduciaries, custodians, nominee holders and
institutional investors, UBS has retained Corporate Investor Communications,
Inc. of Carlstadt, New Jersey ("CIC"). Pursuant to a retention letter dated
___________ __, 1995, CIC will contact all broker and other nominee accounts
identified on UBS' shareholder mailing list in order to facilitate determination
of the number of sets of proxy materials such accounts require for purposes of
forwarding the same to the beneficial owners. CIC will then assist in the
delivery of proxy materials to these accounts for distribution. CIC will also
assist in distribution of proxy materials to institutional investors. CIC will
follow-up with the brokers, other nominee accounts and institutional investors,
requesting return of proxies. UBS is not retaining CIC to solicit proxies from
registered holders or from non-objecting beneficial owners. CIC's fee for the
above services is $__________, plus reasonable disbursements which may include
the broker search, printing, postage, courier charges, filing reports, data
transmissions and other expenses approved by UBS.
CERTAIN BENEFICIAL OWNERS OF UBS STOCK
The following table lists each shareholder of United who is the beneficial
owner of more than 5% of United Stock, as of September 30, 1995.
20
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNERSHIP CLASS OF BENEFICIAL OWNER
-------------------- ----- -------------------
(1) United National Bank Trust Department 927,747 7.85%
514 Market Street Parkersburg WV 26101
(913,999 shares or 7.74% are
registered under the nominee name of
Bank of New York)
(1) The voting and investment authority for the shares held by the Trust
Department is exercised by UNB's Board of Directors.
Share ownership of UBS directors is set forth below as of September 30,
1995. Directors have sole voting and investment authority of directly owned
shares. The total of directly owned shares also includes stock options granted
to executive officers pursuant to incentive stock option plans. For four of the
directors who are executive officers, direct ownership includes options to
purchase shares as follows: Richard M. Adams, 79,500, shares Douglass H. Adams,
10,200 shares, Thomas A. McPherson, 16,200 shares, and I. N. Smith, Jr., 14,250
shares. The options to purchase shares included in the direct ownership of all
executive officers as a group total 231,550. Indirect shares for each individual
director include those owned by spouses and immediate family members, unless
otherwise indicated. These shares do not include the Trust Shares discussed
below.
Beneficially
Director Owned Shares Percentage
-------- ----- ------ ----------
Richard M. Adams 309,399 2.62% (1)
I. N. Smith, Jr. 233,490 1.98 (2)
Douglass H. Adams 43,623 * (3)
Robert G. Astorg 13,140 * (4)
Thomas J. Blair, III 142,960 1.21 (5)
Harry L. Buch 6,063 *
R. Terry Butcher 24,000 * (6)
John W. Dudley 8,703 *
H. Smoot Fahlgren 135,974 1.15
Theodore J. Georgelas 49,666 *
C. E. Goodwin 16,892 * (7)
F. T. Graff, Jr. 8,000 * (8)
Leonard A. Harvey 30,518 * (9)
Andrew J. Houvouras 28,184 * (10)
Russell L. Isaacs 20,958 *
Robert P. McLean 6,032 * (11)
Thomas A. McPherson 64,636 *
G. Ogden Nutting 326,328 2.76 (12)
William C. Pitt, III 5,000 *
Charles E. Stealey 79,030 * (13)
Warren A. Thornhill, III 224,727 1.90 (14)
Harold L. Wilkes 1,977 *
James W. Word, Jr. 60,017 * (15)
Directors and Executive
Officers as a group
(28 persons) 1,993,830 16.87 (16)
--------- -----
21
(1) Mr. Adams owns 218,538 shares of UBS Stock directly and 90,861 shares
indirectly. Of the 90,861 shares indirectly owned by Mr. Adams, 25,590
shares are in the Stevenson Trust over which he exercises voting power,
34,605 shares owned by the members of his immediate family and 30,666
shares are held in two family trusts over which he exercises voting power
but no investment authority. Messrs. Richard M. Adams and Douglass H. Adams
are brothers.
(2) Mr. Smith owns 13,306 shares of UBS Stock directly and 220,184 shares
indirectly. Of the 220,184 shares indirectly owned beneficially by Mr.
Smith, 14,700 shares are owned by members of his immediate family and 4,000
shares are owned by the mother of Mr. Smith over which he has power of
attorney. The following shares owned of record by others may be deemed to
be owned by Mr. Smith under the rules and regulations of the Securities and
Exchange Commission: Kanawha City Company 15,000 shares; Kanawha Company
56,000 shares; Roane Land Company 484 shares; Roxalana Land Company 75,000
shares; and West Virginia Coal Land Company 55,000 shares.
(3) Mr. Adams owns 41,072 shares of UBS Stock directly and 2,551 shares
indirectly. Messrs. Richard M. Adams and Douglass H. Adams are brothers .
(4) Mr. Astorg owns 12,313 shares of UBS Stock directly and 827 shares
indirectly.
(5) Mr. Blair owns 135,860 shares of UBS Stock directly and 7,100 shares
indirectly.
(6) Mr. Butcher owns 23,500 shares of UBS Stock directly and 500 shares
indirectly.
(7) Mr. Goodwin owns 15,620 shares of UBS Stock directly and 1,272 shares
indirectly.
(8) Mr. Graff owns 2,000 shares of UBS Stock directly and 6,000 shares
indirectly. The indirectly owned shares are held by a bank in a trustee
account for Mr. Graff over which he exercises voting and dispositive power.
(9) Mr. Harvey owns 29,659 shares of UBS Stock directly and 859 shares
indirectly.
(10) Mr. Houvouras owns 439 shares of UBS Stock directly and 27,745 shares
indirectly. The indirect shares are owned by a company in which Mr.
Houvouras is a partner.
(11) Mr. McLean owns 4,633 shares of UBS Stock directly and 1,399 shares
indirectly.
(12) Mr. Nutting owns 326,328 shares of UBS Stock indirectly. The voting and
investment authority for the indirectly owned shares of Mr. Nutting are as
follows: he has beneficial ownership, through shared investment or voting
authority of 326,328 shares consisting of 20,952 shares held by Mr. Nutting
as co-trustee, and 277,376 shares registered in the name of The Ogden
Newspapers, Inc. of which Mr. Nutting is President. He is also a settlor
and sole beneficiary of a trust which contains 28,000 shares.
(13) Mr. Stealey owns 30,668 shares of UBS Stock directly and 48,362 shares
indirectly. Mr. Stealey's mother holds 7,354 of the indirect shares over
which Mr. Stealey has power of attorney and the other 41,008 indirect
shares are held in a trustee account for Mr. Stealey over which he
exercises voting and investment authority.
(14) Mr. Thornhill owns 131,997 shares of UBS Stock directly and 92,730
shares indirectly.
(15) Mr. Word owns 33,680 shares of UBS directly and 26,337 shares
indirectly.
(16) All directors and executive officers of United as a group, 28 persons, own
1,134,331 shares of UBS Stock directly and 859,499 shares indirectly. Not
included in indirectly owned shares are 927,747 shares of UBS Stock held by
UNB's Trust Department serving in a fiduciary or agency capacity (the
"Trust Shares"). The voting and investment authority for the Trust Shares
held by the Trust Department is exercised by UNB's Board of Directors. The
members of UNB's Board of Directors who are also directors or executive
officers of UBS are: Richard M. Adams, I. N. Smith, Jr., and Gary L. Ellis.
In addition, the 49,930 shares are held by the Trust Department of United
National Bank-South of which 43,297 shares are held in the nominee name of
Big Clock Investment Company and are voted by UNB-S's Board of Directors.
The members of UNB-S's Board who are also directors or executive officers
of UBS are Gary L. Ellis, Warren A. Thornhill, III, and Robert P. McLean.
22
CERTAIN BENEFICIAL OWNERS OF EAGLE STOCK
The following table sets forth information concerning (i) the only
persons or entities, including any "group" as that term is used in Section
13(d)(3) of the Exchange Act, who or which was not affiliated with Eagle and was
known to Eagle to be the beneficial owner of more than 5% of the issued and
outstanding Eagle Stock on the Eagle Record Date and (ii) the shares of Eagle
Stock beneficially owned by each director of Eagle and all directors and
executive officers of Eagle as a group. The address of Messrs. J. Christopher
Thomas and William W. Wagner is in care of Eagle, 227 Capitol Street,
Charleston, West Virginia 25301, and the address of Mr. Paul C. Winter Jr. is
P.O. Box 386, Logan, West Virginia 25601.
Name and Address of Eagle Stock Beneficially
Beneficial Owner Owned as of December 14, 1995(1)
- ------------------- -----------------------------
No. %
---- --
5% Holders
(other than Directors):
W.W. McDonald Land 166,868 6.1%(2)
Company, Bruce McDonald
Holding Company and
Triadelphia Land Co.(2)
c/o P.O. Box 1706
Logan, West Virginia 25601
Directors:
Willie D. Akers 22,956 0.8(3)
Frank I. Blankinship, Jr. 31,916 1.2(4)
A. Lawrence Crimmins, Jr. 59,289 2.2(5)
John G. Hutchinson -- 0.0(6)
Charles F. Payne 44,032 1.6(7)
J. Christopher Thomas 161,978 5.9(8)
William W. Wagner 216,678 7.9(9)
Paul C. Winter, Jr. 161,620 5.9(10)
Edward J. Wood 7,124 0.3(11)
Directors and executive
officers as a group
(10 persons) 738,658 27.1(12)
___________
23
(1) Pursuant to rules promulgated under the Exchange Act, a person or entity is
considered to beneficially own shares of Eagle Stock if he or she directly
or indirectly has or shares (1) voting power, which includes the power to
vote or to direct the voting of the shares; or (2) investment power, which
includes the power to dispose or direct the disposition of the shares.
Unless otherwise indicated, a director has sole voting power and sole
investment power with respect to the indicated shares. The number of shares
UBS will issue, 225,232, which the Control
Shareholders will receive if no FCB stockholders elect to take stock,beneficially owned by the 137,883directors set forth above is determined under
rules under the Exchange Act, and the information is not necessarily
indicative of beneficial ownership for any other purpose.
(2) Based on a Schedule 13D filed under the Exchange Act, which indicates that
132,868 shares are held by the W.W. McDonald Land Company, 26,000 shares
are held by the Bruce McDonald Holding Company and 8,000 shares are held by
the Triadelphia Land Co. The companies have common boards of directors,
common management officials and may be deemed to constitute a group for
purposes of beneficial ownership under the Exchange Act.
(3) Includes 7,000 shares owned jointly with Mr. Akers' wife, with whom voting
and dispositive power is shared, and 4,956 shares held by Mr. Akers'
children, which may be deemed to be beneficially owned by Mr. Akers. Also
includes 11,000 shares held by a company which Mr. Akers owns. Does not
include 2,000 shares owned jointly by Mr. Akers' wife and another relative;
Mr. Akers disclaims beneficial ownership of such shares.
(4) Includes 4,000 shares held by Mr. Blankinship's wife, which may be deemed
to be beneficially owned by Mr. Blankinship.
(5) Includes 9,635 shares held in Eagle's Employee Stock Ownership Plan
("ESOP") which are allocated to Mr. Crimmins' account and 6,132 shares held
by Mr. Crimmins' wife and children.
(6) Does not include 30,534 shares held by Mr. Hutchinson's wife and children;
Mr. Hutchinson disclaims beneficial ownership of such shares. Also does not
include shares held by Mr. Thomas, a cousin by marriage.
(7) Includes 38,100 shares which are jointly owned with Mr. Payne's spouse and
immediate family members, with whom voting and dispositive power is shared.
(8) Includes 11,978 shares held in the ESOP which are allocated to Mr. Thomas'
account. Does not include shares held by Mr. Hutchinson, a cousin by
marriage.
(9) Includes 77,000 shares held jointly with Mr.. Wagner's wife, with whom
voting and dispositive power is shared, and 11,978 shares held in the ESOP
which are allocated to Mr. Wagner's account. Does not include shares held
by Mr. Winter, a cousin.
(10) Includes 35,753 shares held in trusts for Mr. Winter's mother and children
for which Mr. Winter acts as executor. Also includes 16,000 shares held by
a company which Mr. Winter serves as President and 800 shares held by Mr.
Winter's wife, which may be deemed to be beneficially owned by Mr. Winter.
Does not include shares held by Mr. Wagner, a cousin.
(11) Includes 300 shares held in a trust for Mr. Wood's grandchildren, for which
Mr. Wood is custodian. Does not include 14,106 shares held by Mr. Wood's
wife; Mr. Wood disclaims beneficial ownership of such shares.
(12) Includes 41,222 shares of FCBCommon Stock the Control Shareholders will exchange.
/2/ There is no regular market for the FCB Stock and FCB therefore cannot
provide market value data as of March 3, 1995. The price indicated is as of
December 31, 1994, the date closest to and priorwhich have been allocated to the
dateaccounts of executive officers pursuant to the public
announcement of the Merger.
/3/ Based on the assumption that the Control Sareholders will exchange a
total of 137,883 shares of FCB stock for 225,232 shares of UBS stock and receive
cash consideration of $1,955,557 at the high and low prices for UBS stock shown
above.
14
Set forth below is a summary of the exhange options available and the
resulting impact on Control Shareholders and all other FCB shareholders:
Based upon a share price of UBS stock of $25.00
if shareholders other than Control Shareholders
elect to receive ALL CASH CASH & STOCK
then equivalent value received by
CONTROL SHAREHOLDERS WOULD BE: $55.03 $54.25
and equivalent value received by
ALL OTHER SHAREHOLDERS WOULD BE: $52.57 $54.25
Based upon a price per share of UBS stock of
$25.125 if shareholders other than control
shareholders elect to receive ALL CASH CASH & STOCK
then equivalent value received by
CONTROL SHAREHOLDERS WOULD BE: $55.22 $54.39
and equivalent value received by
ALL OTHER SHAREHOLDERS WOULD BE: $52.57 $54.39
15
ESOP.
THE PROPOSED TRANSACTIONMERGER
The following is a discussion of the material aspects of the proposed
transaction. It includes a summary of the terms of the Merger Agreement whichand is
qualified in its entirety by reference to the agreement annexedAgreement, which is attached to
this documentProspectus/Joint Proxy Statement as Exhibit A, which is incorporated herein by reference.
THE MERGER
REASONS FOR THE MERGER
UBS. In the opinion of the management of UBS, the proposed
---
transactions will be in the best interests of UBS shareholders.Annex A.
24
GENERAL
The Merger will
permit UBS to expand its operations in the Northern Virginia market. The Merger
will permit the Surviving Bank to compete more effectively with other financial
institutions in its market.
Substantial changes have reshaped the financial services industry
since the early 1980's. Deregulation has had the effect of intensifying
competition among banks and other financial institutions for deposits, loans and
other financial services. New banking laws have encouraged bank mergers and
increased the number of branch banks, and these developments have also
contributed to increased competition in the industry. There is also a strong
industry trend toward consolidation.
FCB. The initial impetus for the proposed transaction stemmed from
---
the Control Shareholders' need to liquidate all or a portion of their shares in
FCB to satisfy the requirements of their creditors in a proceeding under Chapter
11 of the Federal Bankruptcy Code (the "Chapter 11 Proceeding"). The Control
Shareholders desired to liquidate their FCB shares in an orderly manner, thus
maximizing the amount realized. Given the relatively
16
limited public market for FCB shares, the Control Shareholders, the Board of
Directors and the management of FCB determined to pursue a sale of FCB in a
transaction benefitting all shareholders. To this end, on July 1, 1994, FCB
engaged Baxter Fentriss and Company as agent and financial advisor to FCB to
explore a merger, sale or other business combination involving FCB.
In making the decision to recommend the UBS merger proposal to the FCB
shareholders, the FCB Board also considered market and competitive factors. As
mentioned above, the banking industry is facing many challenges that create
substantial uncertainty about the future of the industry and FCB's ability to
maintain its financial performance. In addition to these industry-wide
challenges, community banks like FCB may find it difficult to maintain
satisfactory levels of profitability due to the increased level of competition
they face for loans and deposits. This competition increasingly comes in the
form of larger, multistate institutions that have name recognition, marketing
efforts and advertising budgets that a community bank cannot match. Moreover,
larger institutions are generally able to offer customers a wider array of
financial products and services due to their higher levels of expertise, greater
amounts of capital and other resources which are available to larger
institutions. These factors have played an important part in creating the
strong trend toward consolidation in the banking industry.
After discussions and arm's-length negotiations with several possible
candidates, the BoardBoards of Directors of FCB decided the terms of the offer made by
UBS were the most favorable to FCB and its shareholders. Baxter Fentriss and
Company, in its role as financial advisor to FCB, has recommended that FCB
accept the UBS merger proposal and has delivered a fairness opinion to FCB in
connection with the proposed transaction. See THE MERGER - Opinion of
---
Investment Banker and Exhibit B. Therefore, the Board of Directors of FCB
selected UBS as the best merger partner for FCB
17
and, with the unanimous approval of the Board of Directors, FCB entered into the
definitive Merger Agreement on March 6, 1995.
The Board of Directors of FCB hasEagle have determined that itthe
Merger is advisablefair to and in the best interests of FCB's minority shareholders to provide themthe stockholders of UBS and
Eagle, respectively, and have unanimously approved the Merger Agreement.
ACCORDINGLY, THE BOARDS OF DIRECTORS OF UBS AND EAGLE UNANIMOUSLY RECOMMEND THAT
THE STOCKHOLDERS OF UBS AND EAGLE, RESPECTIVELY, VOTE "FOR" APPROVAL OF THE
MERGER AGREEMENT.
THE MERGER CONSIDERATION
In accordance with an
option to accept $52.57 in cash in full paymentthe terms of their FCB shares, rather than
part cash and part UBS stock. FCB negotiated for, and UBS agreedsubject to the inclusion of an all cash alternative as a form of Merger Consideration. This
option permits any minority shareholder who wishes to do so to liquidate his or
her investment in FCB in a convenient manner, without the necessity and expense
of first acquiring UBS shares in the merger and then selling such shares. This
structure is possible because the Control Shareholders are willing to accept
(and would prefer to receive, for personal tax planning purposes) more UBS Stock
and less cash for their FCB shares. Dissenters' rights (which would permit
shareholders to receive the fair value of their shares in cash) are not
available under Virginia law to FCB shareholders in connection with the proposed
transaction.
MERGER CONSIDERATION
As consideration for the Merger, shareholders of FCB, other than the
Control Shareholders will be entitled to receive either stock and cash or all
cash asconditions set
forth in (a) or (b) below:
(a) Sharesthe Merger Agreement, Eagle will be merged with and into UBS, with UBS
as the surviving corporation of UBS Stock plus cash forthe Merger. The Merger Agreement provides that
at the Effective Time each outstanding share of FCBEagle Stock they own.
Except as provided(other than any
shares held by UBS or a subsidiary thereof other than in paragraph (b) below asa fiduciary capacity or
in satisfaction of a debt previously contracted) shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into the
right to the Control
Shareholders, FCB shareholders will receive 1.121.15 shares of UBS Stock plus $26.25
in cash for each share of FCB Stock they own; provided, however, if UBS Stock
has an average closing price of less than $23.50 per share for the 20 trading
days immediately prior to the Merger Effective Date (the "Average Price"), then
the exchange
18
ratio shall be adjusted upward, to a maximum of 1.348 shares of UBS Stock for
each share of FCB Stock, so that the proportion of UBS Stock to the total Merger
Consideration shall be equal to or greater than 50% of the total Merger
Consideration, as defined below. (The exchange ratio, as adjusted, if necessary,
is referred to as the "Applicable Exchange Ratio").
(b) Cash consideration equal to $52.57.
For each share of FCB Stock as to which an FCB shareholder elects to
receive all cash, the Control Shareholders agree to accept the additional UBS
Stock (and, correspondingly less than $26.25 per FCB share in cash) so that
greater than 50% of the total Merger Consideration will be paid in UBS Stock.
The amount of cash to be received by the Control Shareholders will equal $26.25
times 201,100 (the number of FCB shares), minus all cash to be paid to all other
shareholders [whether such shareholders elect to receive all cash or cash and
UBS Stock].
The proportion of UBS Stock to total consideration shall be calculated
as set forth below:
a = the closing price of UBS Stock on the Merger Effective Date,
times 201,100, times the Applicable Exchange Ratio
b = all cash paid to FCB shareholders,
Proportion of UBS Stock = a
-
to total Merger Consideration a + b
Notwithstanding the foregoing, UBS may terminate the Merger Agreement
if (i) application of the ratio adjustment set forth above would result in the
issuance of more than 271,000 shares of UBS Stock or (ii) if the Average Price
is $27 or greater. FCB may terminate this Agreement if the Average Price is $20
or
19
less. If any of the termination rights described in this paragraph arise, the
parties will attempt to renegotiate the ratio and/or cash consideration to
result in an aggregate consideration of not less than $52.57 per share of FCB
Stock. The total consideration of UBS Stock and cash (including cash paid to
FCB shareholders electing stock and cash or all cash) is referred to herein as
the "Merger Consideration."
No fractional shares of UBS Stock will be issued in connection with
the Merger and, in lieu thereof, FCBEagle shareholders will be entitled to receive
cash based upon the Average Priceclosing per share forprice of the UBS Stock on NASDAQ on the
business day preceding the consummation of the Merger, without interest. No
shareholder will be entitled to dividends, voting rights or any other rights in
respect of any fractional shares. If the outstanding shares of UBS stockStock are
changed into a different number or class by virtue of any reclassification,
split, stock dividend, exchange of shares or similar event, then the exchange ratio provided hereinExchange
Ratio will be adjusted proportionately. The issuance of UBS Stock for other
corporate purposes, such as for other acquisitions or pursuant to stock option
plans, will not result in an adjustment to the exchange ratio.Exchange Ratio. From and after
the consummation of the Merger, Effective Date, FCBEagle shareholders will cease to have any rights
with respect to such shares other than the right to receive the Merger
Consideration, and such shares will thereafter be deemed cancelled and void.
The sole rights of such shareholders will be to receive the Merger
Consideration.
Each FCB shareholder (other than the Control Shareholders) will have
the opportunity to make a binding election whether to accept $52.57 in cash in
full payment for his or her shares at the time such shares are surrendered to
UBS. ANY FCB SHAREHOLDER WHO FAILS TO MAKE AN ELECTION, FOR ANY REASON, WILL
RECEIVE UBSEXCHANGE OF EAGLE STOCK AND CASH.
Except for any shares of FCB as to which a shareholder elects to
receive all cash, eachCERTIFICATES
Each holder of certificates representing shares of the stock
of FCBEagle Stock will,
upon the surrender to UBS, or its agent, of such certificates in proper form, be
entitled 20
to receive a certificate or certificates representing the number of
whole shares of the common stock of UBS Stock into which the surrendered certificates shall have
been converted by reason of the Merger. Until surrendered for exchange, each
outstanding certificate of FCB submitted for exchange for UBSEagle Stock shall be deemed for all corporate
purposes to evidence the ownership of the full number of shares of stock of UBS Stock
into which such shares have been converted by reason of the Merger.
Shareholders electing to receive all cash shall, upon surrender of
their FCB certificates, be entitled to $52.57 per share.
Until an FCBEagle shareholder's outstanding certificates have been
surrendered, UBS may, at its sole discretion, withhold, with respect to such
FCBEagle shareholder, as applicable (i) the certificates representing the shares of
its
stockUBS Stock into which such FCBEagle shares are converted by
25
reason of the Merger; and (ii) the distribution of any and all dividends and
payment for fractional shares with respect to the stock of UBS Stock to which the FCBEagle
shareholder is entitled; and/or
(iii) the cash consideration for the shares of such FCB shareholder.entitled. Upon the delivery to UBS of the outstanding FCBEagle
certificates by an FCBEagle shareholder, there will be delivered to the record
holder thereof (i) the certificate representing the shares of the stock of UBS Stock to which
the exchanging FCBEagle holder is entitled, along with any dividends thereon along with the cash portion of the consideration,and
any payment for fractional shares, all without interest; or (ii)interest.
CERTIFICATES EVIDENCING EAGLE STOCK SHOULD NOT BE RETURNED TO EAGLE
WITH THE ENCLOSED PROXY AND SHOULD NOT BE FORWARDED UNTIL AFTER RECEIPT OF A
LETTER OF TRANSMITTAL WHICH WILL BE PROVIDED TO EAGLE SHAREHOLDERS BY MELLON
BANK, N.A., PITTSBURGH, PENNSYLVANIA, THE EXCHANGE AND TRANSFER AGENT FOR THE
UBS STOCK, UPON CONSUMMATION OF THE MERGER.
BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER. In early 1994, certain members of management
of Eagle received an oral, unsolicited expression of interest from another West
Virginia-based financial institution to engage in a business combination, and in
May 1994 Eagle retained Wheat First to assist it in connection with the
cash
consideration, without interest, as appropriate.
The Merger Consideration was negotiated through arm's-lengthevaluation of such a business combination. Although informal discussions ensued
between representatives of the managements of Eagle and this potential acquiror
during the summer and fall of 1994, no agreements, arrangements or
understandings were reached by the parties in this regard.
Subsequently, in light of the general status of and consolidation
trends in the financial services industry and Eagle's circumstances and
prospects, the Executive Committee of the Board of Directors of Eagle decided to
formally consider and analyze Eagle's strategic alternatives. On February 21,
1995, representatives of Wheat First met with the Executive Committee to discuss
various strategic alternatives available to Eagle, including acquisitions of and
by Eagle, special dividends to stockholders of Eagle and repurchases of Eagle
Stock by Eagle. On June 15, 1995, Eagle retained Wheat First to formally
evaluate the prospects of a sale of Eagle as a means of enhancing shareholder
value.
During July 1995, Wheat First contacted nine other relatively
proximate bank holding companies, selected by Eagle and reviewed by Wheat First,
which might have the interest in and capability of acquiring Eagle.
Subsequently, Wheat First provided a memorandum containing certain information
relating to Eagle to eight of these companies which indicated an interest in
reviewing such memorandum.
Potential acquirors were instructed to provide Wheat First with non-
binding indications of interest in acquiring Eagle by August 2, 1995, and on
such date three bank holding companies submitted such indications of interest.
On August 4, 1995, the Board of Directors met with representatives of Wheat
First to consider the indications of interest. At this meeting, the Board of
Directors of Eagle instructed management of Eagle and Wheat First to proceed
with negotiations with UBS. In the ensuing days, the parties and their
respective representatives and advisors
26
negotiated the terms of the transaction, conducted due diligence activities and
prepared and negotiated the required documentation.
On August 18, 1995, the Board of Directors of Eagle met to consider
the offer of UBS and FCB. The parties considered
historical factors such as asset quality, typethe definitive Merger Agreement and mixrelated documentation.
At this meeting, Eagle's financial and legal advisors detailed the negotiations
which had taken place since the prior meeting of depositsthe Board of Directors and earnings.
The potential for future earnings through economiesthe
due diligence activities conducted on behalf of scaleEagle. Representatives of Wheat
First presented an updated financial analysis of the proposed transaction,
discussed in detail the negotiations which resulted in the agreed upon Exchange
Ratio and stated their oral opinion that the Exchange Ratio was alsofair to the
stockholders of Eagle from a factor
in negotiating the exchange ratio. Another important factor was FCB's market
and its additionfinancial point of view. Legal counsel to existing UBS markets.
21
The parties considered various exchange ratio scenarios comparing book
value, market value, price to earnings ratios, capital ratios and market price
per share. The parties toEagle
reviewed the Merger Agreement met and discussedrelated documentation with the financial
andBoard of
Directors, as well as other terms with their respective legal and financial advisors.considerations. The Merger Agreement was
unanimously approved by the Board of Directors of Eagle at this meeting.
REASONS FOR THE MERGER - EAGLE. The Board of Directors of FCB believes thatEagle, with
the assistance of outside legal and financial advisors, evaluated the financial,
legal and other considerations bearing on the decision to approve the Merger
Agreement. The terms of the proposedMerger Agreement, including the Exchange Ratio,
are a result of arm's-length negotiations between representatives
of UBS and Eagle. In reaching its determination to approve the Merger Agreement,
the Board of Directors considered a number of factors, including the following:
(i) the Exchange Ratio in relation to the market value, book value and
earnings per share of the Eagle Stock, (ii) information relating to the
financial condition, results of operations, capital levels, asset quality and
prospects of UBS and Eagle, as well as the ability of the combined enterprise to
compete in relevant banking markets, (iii) the current and prospective
environment for financial institutions generally, and the trend toward
consolidation in the financial services industry, (iv) the general structure of
the transaction, including the exchange ratio are fair and equitable to its
shareholders and, accordingly, the Board recommends a favorable vote FOR the
Merger.
ENGAGEMENT OF FINANCIAL ADVISOR
At a special meeting held on June 30, 1994, the FCB Board of Directors
decided to entertain a sale of FCB. At that same meeting, the Board decided to
retain Baxter Fentriss and Company ("Baxter Fentriss") as FCB's agent and
financial advisor in connection with the exploration, review and development of
merger, acquisition and business combination proposals. Baxter Fentriss is an
investment banking firm and advises financial institutions in connection with
mergers and acquisitions. According to Baxter Fentriss, it is continually
engaged, among other things, in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and valuations for
estate, corporate and other purposes.
The Board's selection of Baxter Fentriss was made on the
recommendation of FCB's Chairman and the Executive Committee of the Board. This
recommendation was based on: (1) a presentation made to the Executive Committee
by Mr. James Baxter, president of Baxter Fentriss; (2) references provided by
Baxter Fentriss; and (3) recommendations received by the Chairman from six banks
that had used Baxter Fentriss in the past.
An engagement letter was signed between FCB and Baxter Fentriss on
July 1, 1994. Under the terms of that letter, Baxter
22
Fentriss undertook to: (a) advise FCB generally concerning mergers,
acquisitions and restructuring; (b) explore the interest level of select buyers
willing to make an offer for FCB; (c) evaluate the financial and non-financial
terms of any offer and seek to improve such terms; (d) advise and assist FCB in
acquisition negotiations relating to price, structure, terms and conditions with
any potential buyers; (e) provide an opinion to the FCB Board of Directors
regarding the fairness of any acquisition transaction from a financial viewpoint
to the shareholders of FCB; (f) communicate with any independent public
accountants, consultants, and tax and legal counsel on behalf of FCB; and (g)
take such incidental or related actions on behalf of FCB as may be appropriate.
FCB agreed to indemnify Baxter Fentriss and its officers, employees and agents
against liabilities (including certain potential liabilities under federal
securities laws) arising out of the performance of its services, other than
losses resulting from the negligence, misconduct or bad faith of Baxter
Fentriss.
FCB paid Baxter Fentriss a $10,000 advisory fee at the inception of
the engagement. FCB also agreed to pay Baxter Fentriss a transaction fee equal
to 1.25% of any consideration paid upon any merger, business combination,
restructuring or asset sale. FCB agreed to pay one-fourth of the expected
transaction fee upon the execution of a definitive agreement for a business
combination or restructuring. This amount ($34,181) was paid to Baxter Fentriss
in April, 1995. The remaindertax-free nature of the transaction fee, less a creditto
stockholders of $5,000
for one-halfEagle, (v) the opinion of the advisory fee, will be paid to Baxter Fentriss when the
Merger is consummated. FCB did not pay Baxter Fentriss any separate or
additional consideration for its fairness opinion. See THE PROPOSED TRANSACTION
---
- -- THE MERGER -- Opinion of Financial Advisor.
23
ROLE OF FCB'S FINANCIAL ADVISOR
Once retained, Baxter Fentriss commenced the process of identifying
potential suitors for FCB. Using information provided by FCB, Baxter Fentriss
prepared a summary description of FCB, which was sent to a number of banks and
bank holding companies. Significant interest was shown by a number of potential
acquirers.
On September 21, 1994, the FCB Board approved the commencement of due
diligence by potential acquirers and authorized Baxter Fentriss and FCB
management to negotiate towards a definitive agreement for the acquisition of
FCB. Negotiations were held with potential acquirers over the next four months.
Baxter Fentriss took the lead in this process on FCB's behalf.
On January 24, 1995, Baxter Fentriss made a presentation to the FCB
Board analyzing two pending offers to acquire FCB. Based on this presentation
and its own analysis, the Board approved the Merger and authorized FCB to move
towards a definitive agreement with UBS.
In its roleWheat First as financial advisor to FCB, Baxter Fentriss was actively
involved in the negotiation and analysis of the proposed Merger Consideration.
However, Baxter Fentriss did not determine or specifically recommend the amount
of the Merger Consideration. Baxter Fentriss is not affiliated, and has no
other agreements or arrangements, with UBS or FCB.
OPINION OF FINANCIAL ADVISOR
On May 12, 1995 Baxter Fentriss delivered to FCB its opinion that as
of such date, and on the basis of matters referred to herein, the Merger is
fair, from a financial point of view, to the shareholders of FCB. According to
Baxter Fentriss, it consulted with the management of FCB and UBS; reviewed the
Agreement and Plan of Merger, and certain publicly available
24
information on the parties; and reviewed certain additional materials made
available by the management of the respective banks in rendering its opinion.
No limitations were imposed by FCB'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 Prospectus/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 FCB's Board of Directors only,
and is directed only to the fairness, from a
financial point of view, of the MergerExchange Ratio to be paid to the shareholdersholders
of FCB. It doesthe Eagle Stock, (vi) the results of the solicitation of potential acquirors
of Eagle, as discussed above, (vii) a review of alternatives to the Merger,
including the alternative of remaining independent and growing internally, with
and without a distribution of a portion of Eagle's capital as a special dividend
to stockholders, (viii) a review of the terms of the Merger Agreement with
Eagle's financial and legal advisors and (ix) the impact of the Merger and
related transactions on the employees of Eagle and the customers and communities
served by it. In making its determination, the Board of Directors did not
address FCB's underlying
business decisionattempt to effectprioritize or weight the foregoing factors.
REASONS FOR THE MERGER - UBS. In the opinion of the Management of UBS,
the proposed transactions will be in the best interests of UBS shareholders.
UBS' Management and Board of Directors view the proposed transaction as a
desirable opportunity to add a high performance company, new geographic markets
and new product markets to the UBS organization. The Merger nor does it constitutewill strengthen UBS'
current offices in the Charleston, Morgantown and Beckley areas and will further
expand its presence into southern West Virginia and the Martinsburg and
Bridgeport areas. In addition, UBS will acquire Eagle's presence in the mortgage
banking market and believes that the combined company can further expand this
particular line of business.
27
OPINION OF FINANCIAL ADVISOR TO EAGLE
Eagle retained Wheat First to act as its financial advisor in
connection with the Merger and to render a recommendationwritten opinion to any FCB shareholderthe Eagle Board of
Directors as to howthe fairness, from a financial point of view, to the holders of
Eagle Stock of the Exchange Ratio. Wheat First is a nationally recognized
investment banking firm regularly engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. The Eagle Board of Directors selected Wheat First to serve as
its financial advisor in connection with the Merger on the basis of such shareholder should votefirm's
expertise.
Representatives of Wheat First attended the meeting of the Eagle Board
of Directors on August 18, 1995, at which the Merger Agreement was considered
and approved. At the meeting, Wheat First issued its oral opinion that, as of
such date, the Exchange Ratio was fair, from a financial point of view, to the
holders of Eagle Common Stock. A written opinion dated as of the date of this
Prospectus/Joint Proxy Statement has been delivered to the Eagle Board of
Directors to the effect that, as of such date, the Exchange Ratio is fair, from
a financial point of view, to the holders of Eagle Stock.
THE FULL TEXT OF WHEAT FIRST'S OPINION AS OF THE DATE OF THIS
PROSPECTUS/JOINT PROXY STATEMENT, WHICH SETS FORTH CERTAIN ASSUMPTIONS MADE,
MATTERS CONSIDERED AND LIMITATIONS ON REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX B
TO THIS PROSPECTUS/JOINT PROXY STATEMENT, AND SHOULD BE READ IN ITS ENTIRETY.
WHEAT FIRST'S OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT
OF VIEW, OF THE EXCHANGE RATIO THE HOLDERS OF EAGLE STOCK AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER OF EAGLE AS TO HOW SUCH
SHAREHOLDER SHOULD VOTE ON THE MERGER AGREEMENT.
In arriving at its opinion, Wheat First reviewed certain publicly
available business and financial information relating to Eagle and UBS and
certain other information provided to it, including, among other things the
following: (i) Eagle's Annual Reports to Stockholders, Annual Reports on Form
10-K and related financial information for the three fiscal years ended December
31, 1994; (ii) Eagle's Quarterly Reports on Form 10-Q and related financial
information for the three months ended September 30, 1995, June 30, 1995 and
March 31, 1995; (iii) UBS' Annual Reports to Stockholders, Annual Reports on
Form 10-K and related financial information for the three fiscal years ended
December 31, 1994; (iv) UBS's Quarterly Reports on Form 10-Q and related
financial information for the three months ended September 30,1995, June 30,
1995, and March 31, 1995; (v) certain publicly-available information with
respect to historical market prices and trading activity for the proposed merger atEagle Stock and
the MeetingUBS Stock and for certain publicly-traded financial institutions which Wheat
First deemed relevant; (vi) certain publicly-available information with respect
to banking companies and the financial terms of certain other mergers and
acquisitions which Wheat First deemed relevant; (vii) the Merger Agreement;
(viii) the Registration Statement, including this Prospectus/Joint Proxy
Statement; (ix) other financial information concerning the businesses and
operations of Eagle and UBS, including certain audited financial information and
certain internal financial analyses and forecasts for Eagle prepared by the
senior management of
28
these companies; and (x) such financial studies, analyses, inquiries and other
matters as it deemed necessary. In addition, Wheat First met with members of
senior management of Eagle and UBS to discuss the business and prospects of each
company.
In connection with its review, Wheat First relied upon and assumed the
accuracy and completeness of all of the foregoing information provided to it or
publicly-available, including representations and warranties of Eagle and UBS
included in the Merger Agreement, and Wheat First has not assumed any
responsibility for independent verification of such information. Wheat First
relied upon the managements of Eagle and UBS as to the reasonableness and
achievability of their financial and operational forecasts and projections, and
the assumptions and bases therefore, provided to it, and assumed that such
forecasts and projections reflect the best currently available estimates and
judgments of such managements and that such forecasts and projections will be
realized in the amounts and in the time periods currently estimated by such
managements. Wheat First also assumed, without independent verification, that
the aggregate allowances for loan losses and other contingencies for Eagle and
UBS are adequate to cover such losses. Wheat First did not review any individual
credit files of Eagle or UBS, nor did it make an independent evaluation or
appraisal of the assets or liabilities of Eagle or UBS.
Additionally, Wheat First considered certain financial and stock
market data of Eagle and UBS and compared that data with similar data for
certain publicly-held financial institutions and considered the financial terms
of certain other matter.
Baxter Fentriss'comparable transactions that recently have been announced or
effected, as further discussed below. Wheat First also considered such other
information, financial studies, analyses and investigations and financial,
economic and market criteria as it deemed relevant.
In connection with rendering its opinion, Wheat First performed a
variety of financial analyses. 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 the
fairness, from a financial point of view, of the Exchange Ratio to holders of
Eagle Stock was to some extent a subjective one based on the experience and
judgment of Wheat First and not merely the result of mathematical analysis of
financial data. Accordingly, notwithstanding the separate factors summarized
below, Wheat First 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
Wheat First's view of the actual value of Eagle or UBS.
In performing its analyses, Wheat First made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of Eagle or UBS. The analyses
performed by Wheat First 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
29
purport to be appraisals or to reflect the prices at which businesses actually
may be sold. In rendering its opinion, Wheat First 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 UBS.
Wheat First's opinion is just one of the many factors taken into
consideration by FCB'sthe Eagle Board of Directors in making its determinationdetermining to approve the
Merger Agreement, and the receipt of Baxter Fentriss'Agreement. Wheat First's opinion is a condition
precedent to FCB's consummating the proposed Merger. The opinion of Baxter
Fentriss does not address the relative merits of
the proposed Merger as compared to any alternative business strategies that might exist for
FCB orEagle, nor does it address the effect of any other business combination in which
FCBEagle might engage.
Baxter Fentriss has represented that it performed a variety of
financial analyses in connection with rendering its opinion to FCB's Board of
Directors. Baxter Fentriss has represented that, in conducting its analyses and
arriving at its opinion as expressed herein, it considered such financial and
other
25
factors as it deemed appropriate under the circumstances including, among
others, the following: (i) the historical and current financial condition and
results of operations of UBS and FCB including interest income, interest
expense, interest sensitivity, non-interest income, non-interest 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 FCB;
(iii) the economies of UBS's and FCB's respective market areas; (iv) the
historical and current market for FCB Common Stock; and (v) the nature and terms
of certain other merger transactions that it believed to be relevant. Baxter
Fentriss has represented that it 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 the Metropolitan Washington DC market.
Baxter Fentriss has represented that in connection with rendering its
opinion, it reviewed (i) the Merger Agreement; (ii) drafts of this Prospectus/
Proxy Statement; (iii) the Annual Reports to shareholders, including the audited
financial statements of FCB and UBS; (iv) pro forma combined unaudited condensed
balance sheets as of December 31, 1994, and pro forma combined statements of
income for the year ended December 31, 1994, presented by UBS; (v) certain
additional financial and operating information with respect to the business,
operations and prospects of UBS and FCB as it deemed appropriate. Baxter
Fentriss has represented that it also (a) held discussions with members of the
senior management of UBS and FCB 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 common stock of FCB and UBS; (c) compared the results of operations of FCB
with those of certain banking
26
companies that it deemed to be relevant; (d) analyzed the pro forma financial
impact of the proposed merger on UBS; (e) analyzed the pro forma financial
impact of the proposed merger on FCB; and (f) conducted such other studies,
analyses, inquiries and examinations as Baxter Fentriss deemed appropriate.
The following is a summary providedof the analyses performed by Baxter Fentriss of selected
analyses performedWheat First in
connection with its opinion.
1. Stock Price History. Baxter Fentriss studiedoral opinion delivered to the historyEagle Board of Directors on
August 18, 1995:
COMPARISON OF SELECTED COMPANIES. Wheat First compared the financial
performance and market trading information of UBS to that of a group of regional
bank holding companies (the "Group"). This group included: BT Financial
Corporation, Centura Banks, Inc., CCB Financial Corporation, City Holding
Company, FNB Corporation, First Commonwealth Financial Corporation, F & M
National Corporation, First Western Bancorp, Inc., Jefferson Bankshares, Inc.,
Mid Am, Inc., One Valley Bancorp of WV, Inc., Pikeville National Corporation,
S&T Bancorp, Inc., Trans Financial, Inc., USBANCORP, Inc., United Carolina
Bancshares Corporation and WesBanco, Inc.
Based on financial data as of and for the three-month period ended
March 31, 1995, or June 30, 1995, UBS had: (i) equity to assets of 10.59%
compared to an average of 8.93% of the ----- ----- -------
trading pricesGroup; (ii) nonperforming assets to loans
and volumereal estate owned of 0.40% compared to an average of 0.86% for FCBthe Group;
(iii) reserves for loan losses to nonperforming assets of 379.64% compared to an
average of 214.98% for the Group; (iv) returns on average assets before
extraordinary items of 1.59% compared to an average of 1.07% for the Group; and
(v) returns on average equity before extraordinary items of 15.06% compared to
an average of 12.10% for the Group.
Based on the market values as of August 17, 1995, and financial data
as of June 30, 1995, UBS Common Stockhad: (i) a stock price to book value multiple of
182.73% compared to an average of 154.44% for the Group; (ii) a stock price to
"First Call" (as hereinafter defined) 1995 estimated earnings per share before
extraordinary items multiple of 12.34x compared to an average of 12.07x for the
Group; (iii) a stock price to "First Call" 1996 estimated earnings per share
multiple of 11.24x compared to an average of 10.80x for the Group; and (iv) an
indicated dividend yield of 4.00% compared to an average of 3.25% for the Group.
"First Call" is a data service that monitors and publishes a compilation of
earnings estimates produced by selected research analysts regarding companies of
interest to publicly traded banksinstitutional investors.
ANALYSIS OF SELECTED TRANSACTIONS. Wheat First performed an analysis
of premiums paid in 17 selected pending or recently completed acquisitions of
thrifts or thrift holding companies headquartered in the VirginiaSoutheast and West Virginia market and to the price
offered by UBS. AsMid-
Atlantic, with a return on average assets of December 31, 1994, FCB's fully diluted book value was
$28.46 and0.95% or greater
30
for the last trades known to FCBquarter prior to the announcement of the acquisition occurred around $8.00 per share.
2. Comparative Analysis. Baxter Fentrissrespective transaction and
announced between January 1, 1994, and August 11, 1995 (the "Selected
Transactions"). Multiples of book value, tangible book value, trailing twelve
months earnings and annualized latest quarter earnings, as well as deposit
premiums paid in the Selected Transactions were compared to the price to
----------- --------
earnings multiple, price to book multiplemultiples and
price to assets multiplepremiums implied by the consideration offered by UBS in the Merger. The Selected
Transactions included the following pending transactions: CitFed Bancorp,
Inc./PSB Holdings Corporation and First American Corporation/Heritage Federal
Bancshares, Inc. The Selected Transactions included the following completed
transactions: Valley National Bancorp/Lakeland First Financial Group, Inc.; UJB
Financial Corporation/Bancorp New Jersey; NBD Bancorp, Inc./DeerBank
Corporation; Fifth Third Bancorp/Falls Financial, Inc.; Centura Banks,
Inc./First Southern Bancorp, Inc.; First National Bancorp/FF Bancorp, Inc.;
First Financial Corporation/FirstRock Bancorp, Inc.; Bank South
Corporation/Gwinnett Bancshares, Inc.; Integra Financial Corporation/Lincoln
Savings Bank; Sovereign Bancorp, Inc./Charter FSB Bancorp, Inc.; UJB Financial
Corporation/Palisade Savings Bank; Huntington Bancshares Incorporated/FirstFed
Northern Kentucky Bancorp, Inc.; NBD Bancorp, Inc./AmeriFed Financial
Corporation; First Commonwealth Financial Corporation/Reliable Financial
Corporation; and Union Planters Corporation/BNF Bancorp.
Based on the market value of the UBS offer with other comparable merger transactions inStock on August 17, 1995, and
financial data as of June 30, 1995, the Metropolitan
Washington DC market after considering FCB's non-performing assets and other
variables. The comparative multiples included both bank and thrift sales duringanalysis yielded ratios of the last three years. The proposed priceimplied
consideration to be paid by UBS to FCB representedEagle: (i) to book value of 193.33% compared
to an average of 166.13% of the Selected Transactions; (ii) to tangible book
value of 193.33%, compared to an average of 166.73% for the Selected
Transactions; (iii) to trailing twelve months earnings of 16.76x compared to an
average of 14.84x for the Selected Transactions; and (iv) to latest quarter
earnings annualized of 16.03x compared to an average of 14.64x for the Selected
Transactions. Additionally, Wheat First examined the implied consideration less
tangible equity as a pricefunction of total deposits, yielding a ratio of 14.29%
compared to an average of 8.85% for the Selected Transactions.
DISCOUNTED DIVIDENDS ANALYSIS. Using discounted dividends analysis,
Wheat First estimated the present value of the future stream of dividends that
Eagle could produce over the next five years, under various circumstances,
assuming the company performed in accordance with the earnings forecasts of
management and an assumed level of expense savings were achieved. Wheat First
then estimated the terminal values for the Eagle Stock at the topend of the range of transactions announcedperiod
by applying multiples ranging from 11x to 13x earnings projected in the Metropolitan Washington
DC market in terms of price to book and price to normalized earnings.
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.
4. Discounted Cash Flow Analysis. Baxter Fentriss performed a
---------- ---- ---- --------
discounted cash flow analysis to determine hypothetical present values for a
share of FCB's common stock as a 5 and 10 year investment. Under this analysis,
Baxter Fentriss considered
27
various scenarios for the performance of FCB's stock using (i) a range from 0%
to 10% in the growth of FCB's earnings and dividends and (ii) a range from 6
times to 12 times earnings as the terminal value for FCB's stock. A range of
discount rates from 11% to 15% were applied to these alternative growth and
terminal value scenarios. These ranges of discount rates, growth alternatives,five.
The dividend streams and terminal values were then discounted to present values
using different discount rates (ranging from 8% to 11%) chosen based upon what Baxter Fentriss, in its
judgment, considered to be appropriate taking into account, among other things,
FCB's past and current performance,reflect
different assumptions regarding the general level of inflation,required rates of return to holders or
prospective buyers of Eagle Stock. This discounted dividend analysis indicated
reference ranges of between $21.96 and $28.40 per share for fixed income and equity securitiesEagle Stock. These
values compare to the implied consideration to be offered by UBS to Eagle in the
marketplace generallyMerger of $33.35 based on the market value of Common Stock on August 17, 1995.
In connection with its written opinion as of the date hereof, Wheat
First confirmed the appropriateness of its reliance on the analyses used to
render its August 18, 1995, opinion by performing procedures to update certain
of such analyses and by reviewing the assumptions on which such analyses were
based and the factors considered in connection therewith.
31
No company or transaction used as a comparison in the above analysis
is identical to Eagle, 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.
The Wheat First opinion dated the date of this Prospectus/Joint Proxy
Statement is based solely upon the information available to Wheat First and the
economic, market and other circumstances as they existed as of such date. Events
occurring after that date could materially affect the assumptions and
conclusions contained in our opinion. Wheat First has not undertaken to reaffirm
or revise its opinion or otherwise comment on any events occurring after the
date hereof.
As compensation for Wheat First's rendering of its fairness opinion
and for companies with similar risk profiles. In allits financial advisory services, Eagle has agreed to pay Wheat First
fees equal to the sum of (i) $200,000 and (ii) the dollar amount equal to 5.0%
of the scenarios considered,"Added Value" received by Eagle shareholders in an Acquisition
Transaction. For the present valuepurposes of athe previous sentence, Added Value shall equal
the product of (i) the consideration, per share, received by Eagle shareholders
in excess of FCB's common stock was calculated at less than$28.00 per share and (ii) the number of shares of Eagle Stock
outstanding or subject to options or warrants. As the consideration in the
Merger consists of UBS Stock, the value of the UBS offer. Thus, according to Baxter Fentriss, its discounted
cash flow analysis indicated that FCBconsideration received by Eagle
shareholders wouldwill be in a better
financial positiondetermined by receivingmultiplying the Exchange Ratio by the average
closing price of the UBS common stock and cash offered inStock on NASDAQ as reported by The Wall Street Journal
(or, if not reported thereby, any other authoritative source) for the proposed merger transaction rather than continuing to hold FCB's common stock.
Baxter Fentriss has represented that its analysis indicated that,
using publicly available information on UBS and applying20 days
preceding the capital guidelines
of banking regulators, the proposed 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 has represented that it 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 represented that it has relied, without any
independent verification, upon the accuracy and completeness of all financial
and other information reviewed, and 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 has
28
represented that it did not make an independent appraisalclosing of the assets orAcquisition Transaction. Eagle has agreed to
reimburse Wheat First for its out-of-pocket expenses incurred in connection with
the activities contemplated by its engagement, regardless whether the Merger is
consummated. Eagle has further agreed to indemnify Wheat First against certain
liabilities, including certain liabilities under federal securities laws. The
payment of either FCB or UBS, and that it hasthe above fees is not been furnished such an
appraisal.contingent upon Wheat First rendering a
favorable opinion with respect to the Merger.
EFFECT ON THE CORPORATE PARTIES
UnderSubject to the terms and conditions set forth in the Merger Agreement,
FCBEagle will merge with and into Interim Bank.
Interim BankUBS, which will survive the Merger. Immediately priorSubject to
the terms and conditions set forth in the Bank Merger Agreement, immediately
following the merger of FCBEagle into Interim Bank, BankUBS, First Empire will merge into Interim Bank,UNB, with
Interim Bank
surviving the Merger. Interim Bank, as the Surviving Bank, will change its name
to "First Commercial Bank"UNB surviving. Eagle and will operate as a Virginia state chartered bank.
It will be a member of the Federal Reserve System. It will have its main office
in Arlington, Virginia, at the present location of FCB and a branch in McLean,
Virginia, at the present office of Bank First. Bank First and FCBEmpire will cease to exist as corporate entities
upon consummation of the Merger and allthe Bank Merger, respectively, and each of
its respective assets, liabilities and operations will transfer to Interim Bank as Surviving Bank. UBS also intendsand UNB,
respectively. UNB will continue to eliminate the
second-tier bank holding company which owns Bank First, UBF, by causing it to
merge into UBSoperate as a partnational bank with its principal
office in Parkersburg, West Virginia. The present offices of an internal reorganization.First Empire will
become branch offices or loan production offices of UNB. Under the terms of the
Merger Agreement, UNB will cause the formation of a mortgage banking company.
Its officers and board of directors will include certain of the executive
officers and board members of Eagle.
32
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General. The UBF/UBS mergerfollowing is a partsummary description of the merger agreement between UBS, UBF, Bank First and Interim Bank,
which also provides for the Bank First/Interim Bank merger. The resultmaterial
-------
federal income tax consequences of the reorganization transactions andMerger to shareholders of Eagle. This
summary is not a complete description of all of the consequences of the Merger
will beand, in particular, may not address federal income tax considerations that may
affect the treatment of a shareholder which, at the Effective Time, already owns
some UBS will directly own
100%Stock, is not a U.S. citizen, is a tax-exempt entity or an individual
who acquired Eagle Stock pursuant to an employee stock option, or exercises some
form of the issued and outstanding shares of Surviving Bank.
TAX CONSEQUENCES
The merger of FCB and Interim Bank has been structured to qualify as a
tax-free reorganization under Section 368 (a)(l)(A) of the Internal Revenue Code
of 1986, as amended (the "Code"). FCBcontrol over Eagle. In addition, no information is relying upon the written opinion of
Robins, Kaplan, Miller & Ciresi, Washington, D.C., counsel to FCB, asprovided herein with
respect to the tax consequences of the Merger under applicable foreign, state or
local laws. Consequently, each shareholder of Eagle is advised to FCB and its shareholders. A draftconsult a tax
advisor as to the specific tax consequences of the opiniontransaction to that
shareholder. The following discussion is attached heretobased on the Code, as Exhibit C. At closing, Robins,
29
Kaplan, Miller & Ciresi, Washington, D.C. will either issue its opinionin effect on the
date of this Prospectus/Joint Proxy Statement, without consideration of the
particular facts or circumstances of any holder of Eagle Stock.
The Merger. Each party's obligation to effect the Merger will not be consummated. Theis
----------
conditioned on the delivery of an opinion when issued, will state that:
1. The statutory mergerto Eagle from Elias, Matz, Tiernan &
Herrick, L.L.P., special counsel to Eagle, and the delivery of FCB with and into Interim Bank will
constitute a tax-free reorganization within the meaning of Sections 368(a)(1)(A)
and 368(a)(2)(D)an opinion to UBS
from Bowles Rice McDavid Graff & Love, counsel to UBS, each dated as of the
Code.
2. TheEffective Time, based upon certain customary representations and assumptions set
forth therein, with respect to certain federal income tax consequences of the
Merger.
Assuming such opinions are delivered and the Merger is consummated,
the material federal income tax consequences of the Merger to the shareholders
of Eagle will be as follows:
No gain if any, realized by a FCB shareholderor loss will be recognized to shareholders of Eagle upon receiptthe
exchange of their Eagle Stock solely for shares of UBS Stock plus cash(including any
fractional share interest to which they may be entitled) pursuant to the Merger.
The basis of the UBS Stock to be received by an Eagle shareholder receiving
solely UBS Stock will be recognized, but notthe same as his or her basis in an amountthe Eagle Stock
surrendered in excess of the
cash received as part of the Merger, including cash received in lieu of
fractional shares. The provisions of Section 302 of the Code will govern whether
the character of the gain will be ordinary income or capital gain.
3.exchange therefor. The holding period of the shares of UBS Stock
to be received by each holder of FCBan Eagle shareholder receiving solely UBS Stock will include
the period during which such Eagle shareholder held the FCBEagle Stock surrendered
and
exchangedin exchange therefor, provided the surrendered Eagle Stock was held providedby such
FCBshareholder as a capital asset on the date of the Merger.
Shareholders of Eagle will receive cash in lieu of a fractional share
of UBS Stock wasand such fractional share interest will be treated as if the
shareholders actually received the fractional share from UBS and then UBS
redeemed it for cash. Such cash payments will be treated by the former Eagle
shareholders as having been received as full payment in exchange for the
fractional share interests so redeemed. Gain or loss will be realized and
recognized by each such Eagle shareholder equal to the difference between the
amount of cash received for the fractional share and the tax basis of the
fractional share. If the fractional share is a capital asset in the hands of an
Eagle shareholder, then the holder at the time of the consummation of the Merger.
4. A FCB shareholder who elects to receive all cash and receives
solely cash in exchange for his FCB Stock should be treated as having received
such cash in redemption of FCB Stock subject to the provisions of Sections 302
and 318 of the Code.gain or loss recognized will constitute a capital
gain or loss.
33
THE MERGER MAY HAVE CONSEQUENCES AFFECTING TAXES OTHER THAN THE FEDERAL INCOME
TAX CONSEQUENCES DISCUSSED ABOVE. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISORS
CONCERNING ALL TAX CONSEQUENCES OF THE CONSUMMATION OF THE MERGER AS IT RELATES
TO THEIR OWN CIRCUMSTANCES, INCLUDING BUT NOT LIMITED TO CONSEQUENCES UNDER
FEDERAL, STATE AND LOCAL INCOME TAX AND OTHER TAX LAWS.
30
CONDITIONS TO CONSUMMATION OF THE MERGER
Subject to waiver by the parties, unless otherwise prohibited by law,
consummation of the Merger will take place only if certain conditions set forth
in theThe Merger Agreement are satisfied. The principal conditions, which have not
yet been satisfied, are as follows:
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, 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 Merger
----------- -------- -- -----------
Effective Date, FCB must have obtained the approval, ratification and
confirmation of this Agreement and the transactions contemplated herein by the
requisite vote of its shareholders, as required by law and by any applicable
provision of its articles of incorporation and bylaws.
(b) Commercial Interim Bank. UBS must have caused the
---------- ------- ----
organization and chartering of Commercial Interim Bank and Commercial Interim
Bank must have executed the Adoption Agreement.
(c) Absence of Restraint. No order to restrain, enjoin or
------- -- ---------
otherwise prevent the consummation of the transactions contemplated in this
Agreement may have been entered by any court or administrative body which
remains in effect on the Merger Effective Date.
(d) Governmental Approvals. There shall have been obtained by
------------ ---------
the Merger Effective Date any and all permits, approvals and consents of every
governmental body or agency which are necessary or appropriate soprovides that consummation of the Merger 31
will be in compliance with all applicable laws, including, without limitation,
those with respectis
subject to the Federal Reserve Board,satisfaction of certain conditions, or the Virginia Bureauwaiver of Financial Institutions and any other regulator with jurisdiction over the
transactions.
(e) Compliance with Representations, Warranties and Additional
---------- ---- ---------------- ---------- --- ----------
Agreements. All of the representations and warranties of the parties contained
- ----------
in the Merger Agreement must be true in all material respects at and as of the
Merger Effective Date (except for changes contemplated and permitted by this
Agreement or otherwise consented to in writingsuch
conditions by the appropriate party or parties entitled to this
Agreement) and each party must have complied with and performed, in all material
respects, all of the agreements contained in the Merger Agreement to be
performed by itdo so, at or before the Merger Effective
Date.
(f) Securities Law Compliance. No order suspending the
---------- --- ----------
effectiveness of UBS's Registration Statement filed with the SEC may have been
issued which remains in effect on the dateTime. Each of the Closing, and no proceedings
for that purpose shall, before the Closing, have been initiated or, to the best
knowledge of UBS, threatened. All state securities and "blue sky" permits or
approvals required to carry out the transactions contemplated in this Agreement
shall have been received to permit free trading of the UBS stock issued to the
non-affiliate FCB shareholders.
2. Additional conditions to obligations of UBS:
(a) Counsel's Opinion. UBS must receive an opinion of counsel
--------- -------
for FCB dated as of the Merger Effective Date, to the effect that:
(i) FCB is a state chartered bank duly organized, validly
existing and in good standing under the laws of the Commonwealth of Virginia.
32
(ii) The authorized capital stock and the number of shares
issued and outstanding of FCB 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 FCB. As
of such date, to the best of counsel's knowledge, there are no options,
warrants, convertible securities or similar items outstanding on behalf of FCB.
(iii) FCB has the corporate power and authority to execute,
deliver and perform itsparties' obligations under the Merger Agreement. The Merger
Agreement has been duly authorized, executed and delivered by FCB and
constitutes the legal, valid and binding obligation of FCB, 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) The modificationsis subject to
the employment arrangements
contemplated by the Merger Agreement and executed on or prior to the Merger
Effective Date have been duly authorized, executed and delivered by the parties
thereto and constitute the legal, valid and binding obligation of each party
thereto and are enforceable in accordance with their terms.
(v) All necessaryfollowing conditions: (i) all corporate proceedings have been duly and
validly taken by FCB, to the extent required by law, its respective articles of
incorporation and bylaws, or otherwise, to authorize the execution and delivery
of this Agreement by FCB and the consummation of the transactions contemplated
herein.
(vi) Counsel has reviewed the proxy statement and, with
respect to all information relating to FCB contained therein, counsel does not
know of any misleading statement of any material fact or failure to state a
material fact which was
33
necessary to be stated to prevent the statements made from being false or
misleading in any material respect, except as to financial data, as to which
counsel expresses no opinion.
(vii) The consummation of the transactions contemplated
herein in the Merger Agreement will not violate or result in a breach of, or
constitute a default under the articles of incorporation or bylaws of FCB 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 FCB, and to which either is a party or by which it or
any of its property is bound.
(b) Affiliates Agreements. UBS must have received an agreement
---------- ----------
executed and delivered by each shareholder of FCB who, in the reasonable opinion
of UBS, may be deemed an affiliate of FCB as that term is defined in Rule 145
promulgated by the Securities and Exchange Commission.
(c) Executives and Contracts. Section 3.10 of the Merger
---------- --- ---------
Agreement requires that:
(i) All employment contracts presently in effect at FCB shall be
terminated in a form and manner satisfactory to UBS on or before the Merger
Effective Date.
(ii) The Supplemental Executive Retirement Plan ("SERP") of
James Brockett and Janet Brockett and the Deferred Compensation Agreement of
James Brockett shall remain in effect. The SERPs of Charles Brockett, Lionel
Taylor and Harry Scott shall be reduced to $35,000 per year, with such amendment
to be accomplished in form and manner satisfactory to UBS. All SERPs and James
Brockett's Deferred Compensation Plan must be actuarially funded through life
insurance or other arrangement on or before the Merger Effective Date such that
satisfaction of the obligations has
34
been provided for. James Brockett and Janet Brockett shall retire on or before
the Merger Effective Date or October 31, 1995, whichever is later. James
Brockett's deferred compensation plan shall be amended such that he need not be
employed on January 1, 1996, to be eligible for the deferred compensation of
$100,000 a year for four (4) years, commencing upon consummation. All such
actions shall be approved by the FCB Board of Directors and consented to, in
writing, by the individuals affected.
(iii) Prior to the Merger Effective Date, FCB may pay a pro rata
annual bonus, up to an annual amount of $200,000, provided that the amount has
been accrued monthly and subject to agreed upon monthly financial performance.
(iv) All key man and Split Dollar life insurance policies must
be cancelled on or before the Merger Effective Date, except for the Split Dollar
Life Insurance Agreement with James Brockett, unless utilized to satisfy the
requirements of (b) above or unless it is possible to transfer the policies net
of the cash surrender value (satisfying all premium loan repayments) to the
insured.
(d) UBS Satisfaction with Loan Loss Reserve, Provision of
--- ------------ ---- ---- ---- -------- --------- --
Charge-Offs, Funding of Benefits, Other Reserve Accounts, etc. As of the Merger
- ------------ ------- -- --------- ----- ------- --------- ---
Effective Date, UBS, in its sole discretion, must be satisfied with the adequacy
of the then existing level of FCB's loan loss reserve and with the sufficiency
of the write-downs and charge-offs in the loan portfolio, such level and
sufficiency to be consistent with the requirements of any regulators and prudent
banking practices. In addition, FCB must also fund the SERPs, 1995 bonuses and
the deferred retirement obligation identified in Section 3.10 of the Merger
Agreement, and reserve for all contingencies in a manner consistent with the
requirements of the regulators and prudent banking practices; provided, however,
that absent a material adverse change in the
35
financial condition of FCB, if FCB makes the additional $500,000 provision to
the loan loss reserve, the $50,000 provision to its OREO reserve and the $35,000
provision to its repossession reserve set forth in Section 3.5(l), the reserves
shall be deemed to be adequate.
(e) Control Shareholders. The Control Shareholders shall use
------- ------------
their best efforts to obtain, on or before July 15, 1995, theaction (including approval of
the
Bankruptcy Court for the Eastern District of Virginia, which shall be final and
nonappealable, as to the transactions by the Control Shareholders contemplated
herein and their related contractual agreements, including the power and
authority to vote their shares of FCB stock in favor of the Merger, to enter
into this Agreement and carry out the provisions applicable to them, to transfer
their shares of FCB stock for the Merger Consideration, free and clear of any
and all liens, security interests and other encumbrances, and any and all
related actions; which approval must be, in form and substance, satisfactory to
UBS. Such approval must contemplate and approve the range of cash and stock
consideration the Control Shareholders could receive under the terms of this
Agreement. The Control Shareholders satisfied this condition by obtaining the
requisite court order on June 20, 1995, which became final and non-appealable on
June 30, 1995.
3. Additional Conditions to the Obligations of FCB:
(a) FCB shall have received the opinion of counsel to UBS
to the effect that:
(i) UBS is a West Virginia corporation, validly existing
and in good standing under the laws of West Virginia and is duly authorized to
own its properties and to conduct its business as presently conducted.
Commercial Interim Bank is validly existing and in good standing under the laws
of the Commonwealth of Virginia and is duly authorized to own its properties and
to conduct its business as presently conducted.
36
(ii) Allshareholders) necessary corporate proceedings have been duly
taken by UBS to the extent required by law, their articles of incorporation,
articles of association, bylaws or otherwise, to authorize the execution and delivery of the Merger
Agreement and the Bank Merger Agreement and consummation of the transactions
contemplated herein. The Merger Agreement constitutesthereby shall have been duly and validly taken; (ii) the legal, valid and
binding obligationreceipt of
UBS and Commercial Interim Bank (once it executes the
Adoption Agreement) 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.
(iii) To the best of counsel's knowledge, all necessary regulatory approvals, of federalconsents or state banking regulators necessarywaivers required to consummate
the Merger and the Bank Merger by any governmental authority, and the expiration
of all notice periods and waiting periods with respect thereto, provided,
however, that no required approval, consent or waiver shall be deemed to have
been obtained.received if it shall include any condition or requirement that,
individually or in the aggregate, would (a) result in a material adverse effect
on the financial condition, results of operations, business or prospects of UBS
on a consolidated basis, or (b) reduce the economic or business benefits of the
transactions contemplated by the Agreement to UBS in so significant a manner
that UBS, in its reasonable judgment, would not have entered into the Agreement;
(iii) none of UBS, Eagle or their respective subsidiaries shall be subject to
any statute, rule, regulation, order or decree which prohibits, restricts or
makes illegal the consummation of the Merger or the Bank Merger; (iv) Counsel has reviewed the
proxy statementRegistration Statement shall have become effective under the Securities Act, and
with
respectUBS shall have received all permits, authorizations or exemptions necessary
under all state securities laws to all information relating toissue UBS Stock in connection with the
Merger, and neither the Registration Statement nor any such permit,
authorization or exemption shall be subject to a stop order or threatened stop
order by any governmental authority; (v) the shares of UBS Stock to be issued in
connection with the Merger shall have been approved for listing on NASDAQ; (vi)
each of UBS and Commercial
Interim Bank contained therein, and knows of no respect in which the proxy
statement contained any false or misleading statement of any material fact or of
any failure to state a material fact which was necessary to be stated to prevent
the statements made from being false or misleading in any material respect,
except as to the financial statements and other financial data as to which
counsel expresses no opinion.
(b) Tax Opinion. On or before the Closing, FCB mustEagle shall have
--- ------- received an opinion from Robins, Kaplan, Miller & Ciresi, Washington, D.C., in a
form reasonably satisfactory to UBS'sof its respective counsel
to the effect that:
(i) The statutory merger of FCB with and into Commercial
Interim Bankthat the Merger will constitutequalify as a tax-free reorganization within the
meaning of Section 368(a)(i)(A) and Section 368(a)(2)(D) of the Code;
37Code and with respect to certain other related
federal income tax considerations; and (vii) Ernst & Young, LLP, shall have
issued letters, dated as of the Effective Time (as defined below), to UBS and
Eagle to the effect that, based upon the Merger Agreement and related agreements
and the facts and circumstances then known to it, the Merger shall be accounted
for as a pooling of interests under generally accepted accounting principles.
In addition to the foregoing conditions, the obligations of UBS under
the Agreement are conditioned upon (i) the accuracy in all material respects as
of the date of the Merger Agreement and as of the Effective Time of the
representations and warranties of Eagle set forth in the Merger Agreement,
except as to any representation or warranty which specifically relates to an
earlier date and except as otherwise contemplated by the Merger Agreement; (ii)
the performance of all material
34
covenants and obligations required to be complied with and satisfied by Eagle;
(iii) the receipt of a certificate from a specified officer of Eagle with
respect to compliance with the conditions relating to (i) and (ii) immediately
above as set forth in the Merger Agreement; (iv) the receipt of certain legal
opinions from Eagle's legal counsel; and (v) Eagle shall have furnished to UBS
such certificates of its officers or others and such other documents to evidence
fulfillment of the conditions relating to it as UBS may reasonably request. Any
of the foregoing conditions may be waived by UBS.
In addition to the other conditions set forth above, Eagle's
obligations under the Agreement are conditioned upon (i) the accuracy in all
material respects as of the date of the Merger Agreement and as of the Effective
Time of the representations and warranties of UBS set forth in the Merger
Agreement, except as to any representation or warranty which specifically
relates to an earlier date and except as otherwise contemplated by the Merger
Agreement; (ii) the performance of all material covenants and obligations
required to be complied with and satisfied by UBS; (iii) the receipt of a
certificate from a specified officer of UBS with respect to compliance with the
conditions relating to (i) and (ii) immediately above as set forth in the Merger
Agreement; (iv) the receipt of certain legal opinions from legal counsel to UBS;
(v) the receipt of an opinion of Wheat First to the effect that the
consideration to be provided by UBS to shareholders of Eagle pursuant to the
Merger Agreement is fair to such shareholders from a financial point of view, a
copy of which is included as Annex B to this Prospectus/Joint Proxy Statement,
which opinion shall not have been withdrawn prior to the meeting of shareholders
of Eagle at which the Merger Agreement is considered by such shareholders; and
(vi) UBS shall have furnished to Eagle such certificates of its officers or
others and such other documents to evidence fulfillment of the conditions
relating to them as Eagle may reasonably request. Any of the foregoing
conditions may be waived by Eagle.
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, Eagle, First Empire and/or UNB must obtain the
prior consent, approval or waiver, as applicable, of the FRB, the OCC, the OTS
and the WV Board.
The gain,Merger is subject to the prior approval of the FRB under the BHCA
and the Bank Merger is subject to the prior approval of the OCC under the Bank
Merger Act provisions of the Federal Deposit Insurance Act ("BMA"). Pursuant to
the applicable provisions of the BHCA and the BMA, the FRB may not approve the
Merger and the OCC may not approve the Bank Merger if (i) such transaction would
result in a monopoly or would be in furtherance of any realizedcombination 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, in each case unless the FRB
or the OCC, as applicable, 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, each of the FRB and the OCC is required to consider whether the
financial
35
and managerial resources of the acquiring bank holding company and acquiring
bank are adequate (including consideration by a FCB shareholder upon
receiptvariety 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). Each of the FRB and the OCC 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.
Each of the BHCA and the BMA 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.
Regulations of the OTS require that it be notified of the Bank Merger
at least 30 days prior to the effective date of the transaction, but not later
than the date on which an application relating to the proposed transaction is
filed with the OCC. Such notification must demonstrate compliance with
applicable stockholder approval requirements.
The approval of the WV Board also is required for consummation of the
Merger. Under West Virginia law, the WV Board will not approve an application
for such a transaction unless it determines, after a consideration of all
relevant evidence, that it would contribute to the financial strength and
success of the applicant and promote the convenience and needs of the public.
The WV Board will also consider the record of performance of the parties in
serving the credit needs of the communities in which they have operated in the
past. The factors to be considered by the WV Board in this regard are
substantially similar to those to be considered by federal banking agencies, as
discussed above.
Applications have been or will be filed with applicable regulatory
authorities for approval of the Merger and the Bank Merger. Although neither UBS
nor Eagle 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, that
such approvals will be received on a timely basis or that such approvals will
not impose conditions or requirements which, individually or in the aggregate,
would (i) result in a material adverse effect on the financial condition,
results of operations, business or prospects of UBS on a consolidated basis or
(ii) reduce the economic or business benefits of the transactions contemplated
by the Agreement to UBS in so significant a manner that UBS, in its reasonable
judgment, would not have entered into the Merger Agreement. If any such
condition or requirement is imposed, the Merger Agreement permits the Board of
Directors of UBS to terminate the Merger Agreement.
36
BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, Eagle has agreed to use all
reasonable efforts to (i) preserve its business organization and that of its
subsidiaries intact, (ii) keep available to itself and UBS the present services
of the employees of Eagle and its subsidiaries and (iii) preserve for itself and
UBS the goodwill of the customers of Eagle and its subsidiaries and others with
whom business relationships exist. In addition, under the terms of the Merger
Agreement, Eagle has agreed not to take certain actions, nor permit its
subsidiaries to take certain actions, without the prior written consent of UBS,
including, among other things, the following: (i) declare, set aside, make or
pay any dividend or other distribution in respect of Eagle Stock or the capital
stock plusof any subsidiary of Eagle, except for regular quarterly cash will be recognized, butdividends at
a rate per share of Eagle Stock not in an amount in excess of $.14 per share, provided that
if the cash receivedMerger does not occur prior to the record date for the dividend which
relates to the second quarter of 1996 (June 14, 1996), the regular per share
quarterly dividend on the Eagle Stock shall be increased to an amount determined
by multiplying the per share dividend on the UBS Stock for such quarter by 1.15;
(ii) issue, grant or authorize any capital stock of Eagle or rights to acquire
the same or effect any recapitalization, reclassification, stock dividend, stock
split or like change in capitalization; (iii) amend its articles of
incorporation, charter or bylaws; impose, or suffer the imposition of, any
material lien, charge or encumbrance on any share of stock held by Eagle in any
subsidiary, or permit any such lien to exist; or waive or release any material
right or cancel or compromise any material debt or claim; (iv) increase the rate
of compensation of, pay or agree to pay any bonus or severance to, or provide
any other new employee benefit or incentive to, any of its directors, officers
or employees, except (a) as partmay be required pursuant to binding commitments as
of the date of the Agreement and disclosed to UBS and (b)such as may be granted
in the ordinary course of business consistent with past practice; (v) enter into
or modify any employee benefit plan or make any contributions to Eagle's defined
benefit pension plan or ESOP, other than in the ordinary course of business
consistent with past practice; (vi) enter into (a) any agreement, arrangement or
commitment not made in the ordinary course of business, (b) any agreement,
indenture or other instrument relating to the borrowing of money by Eagle or any
subsidiary thereof or guarantee by Eagle or any subsidiary thereof of any such
obligation, except for borrowings in the ordinary course of business consistent
with past practice, (c) any employment, consulting or severance contracts or
agreements, or amend any such existing agreement, or (d) any contract, agreement
or understanding with a labor union; (vii) change its methods of accounting or
tax reporting, except as may be required by changes in generally accepted
accounting principles or applicable law; (viii) make any capital expenditures in
excess of $50,000 individually or $250,000 in the aggregate, other than pursuant
to binding commitments existing on the date of the Merger including cash receivedAgreement and other
than expenditures necessary to maintain existing assets in lieugood repair; (ix)
file any applications or make any contract with respect to branching or site
location or relocation; (x) acquire in any manner whatsoever (other than to
realize upon collateral for a defaulted loan) any business or entity; (xi) enter
into any futures contract, option contract, interest rate caps, interest rate
floors, interest rate exchange agreement or other agreement for purposes of
fractional shares. The provisionshedging interest rate risk; (xii) enter or agree to enter into any agreement or
arrangement granting any preferential right to purchase any of Section 302its assets or
rights or requiring the consent of any party to the transfer and assignment of
any such assets or rights; (xiii) take any action that would result in any of
the
Code will govern
whether37
representations and warranties of Eagle contained in the characterMerger Agreement not to
be true and correct in any material respect at the Effective Time; or (xiv)
agree to do any of the gain will beforegoing.
Pursuant to the Merger Agreement, UBS agreed that during the period
from the date of the Merger Agreement to the Effective Time, except as expressly
contemplated or permitted by the Agreement or with the prior written consent of
Eagle, UBS and its subsidiaries shall carry on their respective businesses in
the ordinary incomecourse consistent with past practice and use all reasonable efforts
to preserve intact their present business organizations and relationships. In
addition, under the terms of the Merger Agreement, UBS agreed not to take the
following actions, nor permit its subsidiaries to take the following actions,
without the prior written consent of Eagle: (i) declare, set aside, make or capital gain;
(iii) The holding periodpay
any dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of the UBS Stock, other than regular quarterly
cash dividends which are not in excess of $.30 per share of UBS Stock; (ii)
issue any shares of its capital stock other than pursuant to (a) rights granted
pursuant to the UBS employee stock benefit plans, (b) the Merger Agreement or
(c) any acquisition to the extent permitted under section (v) below; (iii)
effect any recapitalization, reclassification, stock split or like change in
capitalization; (iv) amend its articles of incorporation, charter or bylaws in a
manner which would adversely affect the terms of the UBS Stock or the ability of
UBS and UNB to consummate the Merger and the Bank Merger; (v) make any
acquisition (including acquisitions of branch offices and related deposit
liabilities) or take any other action that individually or in the aggregate
could materially adversely affect the ability of UBS to consummate the
transactions contemplated by the Merger Agreement in a reasonably timely manner,
or participate in any merger, consolidation or other transaction in which UBS is
not the surviving corporation; (vi) take any action that would result in any of
the representations and warranties of UBS contained in the Merger Agreement not
to be true and correct in any material respect at the Effective Time; or (vii)
agree to do any of the foregoing.
Furthermore, each party 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.
NO SOLICITATION
Pursuant to the Agreement, neither Eagle nor any subsidiary of Eagle,
nor any of the directors, officers, employees, representatives or agents of
Eagle or other persons controlled by Eagle, shall solicit or encourage inquiries
or proposals with respect to, furnish any information relating to, or
participate in any negotiations or discussions concerning, any acquisition,
lease or purchase of all or a substantial portion of the assets of, or any
equity interest in, Eagle or any subsidiary of Eagle, or any business
combination with Eagle or any subsidiary of Eagle, other than as contemplated by
the Merger Agreement (except where the failure to furnish such information or
participate in such negotiations or discussions would in the reasonable advice
of counsel to Eagle constitute a breach of the fiduciary or legal obligations of
Eagle's Board of Directors). Eagle is
38
required to immediately notify UBS orally and in writing if any such inquiries
or proposals are received by, each
holderand such information is required from, or any such
negotiations or discussions are sought to be initiated with, Eagle or any
subsidiary of FCB's Stock will include the period during which FCB Stock surrendered
in exchange therefor was held, provided such Stock was a capital asset in the
handsEagle.
EFFECTIVE TIME OF THE MERGER; TERMINATION AND AMENDMENT
The Effective Time of the shareholder atMerger shall be the date and time of the
Closing;filing of (i) articles of merger with the Secretary of State of West Virginia
and (iv) A FCB shareholder who elects to receive all cash(ii) a certificate of merger with the Secretary of State of Delaware, unless
a different date and receives solely cashtime is specified as the effective time in exchange for his or her FCB Stocksuch articles of
merger and certificate of merger. The Effective Time shall be as set forth in
such articles of merger and certificate of merger, which will be treated as
having received such cash in redemptionfiled only
after the receipt of his or her FCB Stock subject to the
provisions of Sections 302 and 318all requisite regulatory approvals of the Code.
(c) Fairness Opinion. The boardMerger and the
Bank Merger, approval of the Merger Agreement by the requisite vote of UBS
shareholders and Eagle's shareholders and the satisfaction or waiver of FCB shall
-------- -------
have received the opinion of Baxter Fentriss and Company that the transaction is
fair, from a financial perspective, to the shareholders of FCB.
(d) Consent of NationsBank or Repayment of Capital Loan. FCB
------- -- ----------- -- --------- -- ------- ----
will either obtain the consent of NationsBankall
other conditions to the Merger as required by its
loan agreement with NationsBankand the Bank Merger.
A closing (the "Closing") shall take place immediately prior to the
Effective Time on a day within 31 calendar days following the satisfaction or
FCB will repaywaiver (to the remaining balance
(approximately $500,000)extent permitted) of all the conditions to consummation of the
$750,000 loan. See Section entitled "RegulationMerger specified in the Merger Agreement (other than the delivery of
certificates, opinions and Supervision".
TERMINATION OF THE MERGER AGREEMENTother instruments and documents to be delivered at
the Closing), or on such other date as the parties may mutually agree upon.
The Merger Agreement may be terminated, either before or after
approval by the shareholders of Eagle and UBS, as follows: (i) at any time on or
prior to the Merger
Effective DateTime by the mutual consent in writing of the Boardsparties;
(ii) at any time on or prior to the Effective Time in the event of Directorsa material
breach by the other party of FCB and UBSany representation, warranty, material covenant or
agreement, which breach has not been cured within the time period specified in
the Merger Agreement; (iii) at any time by either party in writing if any
application for any required federal or state regulatory approval has been
denied or is approved with any condition or requirement which would prevent
satisfaction of the event thatregulatory condition to UBS's obligation to consummate the
criteria set forthMerger, and the time period for appeals and requests for reconsideration has
run; (iv) at any time by either party in writing if the shareholders of Eagle or
UBS fail to approve the Merger Agreement are not satisfied within
38
at a meeting duly called for the
time contemplated therein. The Merger Agreement has a termination date of
December 31, 1995, and must be consummated by that datepurpose, unless the parties
agree, in writing,failure of such occurrence is due to an extensionthe failure of the
time.
MERGER EFFECTIVE DATE
No specific date for consummation of the Merger isparty seeking to terminate to perform or observe in any material respect its
agreements set forth in the Merger Agreement; however(v) by either party in writing in
the parties have agreedevent that the Merger is not consummated by June 30, 1996, provided that
this right to use their best effortsterminate shall not be available to consummate by October 31, 1995. However, it isany party whose failure to
perform an obligation under the intentionMerger Agreement resulted in the failure of the parties to
consummate as soon as possible after receipt of required shareholder and
regulatory approvals and after satisfaction of all conditions to consummation.
ACCOUNTING TREATMENT
As presented in this Prospectus/Proxy Statement and the relevant
financial sections included herein, the parties expect the
Merger to be accounted forconsummated by such date; (vi) by Eagle in the event that the
average closing price of the UBS Stock on the NASDAQ over the 20 trading days
commencing on the first business day following the receipt of the required
approval of the FRB or the OCC, whichever is later, is less than $25.00; and
(vii) at any time by either party in writing if such party is not in default
under the Merger Agreement and such party determines in good faith that any
condition precedent to such party's obligations to consummate the Merger is or
would be impossible to satisfy, and such condition is not waived by the other
party. In the event of termination, the Merger Agreement shall become null and
void, except that certain provisions thereof relating to expenses, termination
fee and
39
confidentiality shall survive any such termination and any such termination
shall not relieve any breaching party from liability for any willful breach of
any covenant, undertaking, representation or warranty giving rise to such
termination.
To the extent permitted under applicable law, the Merger Agreement may
be amended or supplemented at any time by written agreement of the parties
whether before or after the approval of UBS' or Eagle's shareholders, provided
that after any such approval the Merger Agreement may not be amended or
supplemented in a manner which modifies either the amount or form of the
consideration to be received by Eagle's shareholders or otherwise materially
adversely affects Eagle or UBS shareholders without further approval by those
shareholders who are so affected.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the Board of Directors of Eagle who are executive
officers of Eagle and an executive officer of Eagle who is not a director may be
deemed to have interests in the Merger in addition to their interests as
stockholders generally. The Board of Directors of Eagle was aware of these
factors and considered them, among other matters, in approving the Agreement and
the transactions contemplated thereby.
ELECTION OF DIRECTORS OF UBS. Pursuant to the Merger Agreement, UBS
agreed that it will take such action as is necessary to cause J. Christopher
Thomas, William W. Wagner and Paul Clinton Winter, Jr. to be elected as
directors of UBS upon consummation of the Merger for a term which expires at the
annual meeting of the shareholders of UBS following their initial election. In
addition, UBS agreed to include such persons as nominees for election as
directors of UBS at the first annual meeting of stockholders of UBS following
the Effective Time.
INDEMNIFICATION AND INSURANCE. Pursuant to the Merger Agreement, UBS
agreed, from and after the Effective Time through the sixth anniversary of the
Effective Time, to cause UBS to indemnify and hold harmless each present and
former director or officer of Eagle or any Eagle subsidiary determined as of the
Effective Time (the "Indemnified Parties") against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent to which such Indemnified Parties were entitled
under the Bylaws of Eagle or First Empire, respectively, in each case as in
effect on the date of the Merger Agreement.
Pursuant to the Merger Agreement, UBS also agreed to permit Eagle to
purchase method of accounting. Underinsurance coverage on substantially the purchase
method of accounting,same terms and conditions as
the acquired institution's balance sheet is adjusted to
current fair valuesliability insurance provided by Eagle for its directors and officers as of
the date of the Merger Agreement for a period of two years following the
Effective Time, provided that in no event shall Eagle expend, in order to obtain
such insurance, any amount per annum in excess of 125% of the amount of the
actual premiums paid as of the date of the Merger Agreement by Eagle for such
insurance (the "Maximum Amount"). If the amount of the annual premiums
necessary to maintain or procure such insurance coverage
40
exceeds the Maximum Amount, Eagle shall use all reasonable efforts to maintain
the most advantageous policies of directors' and officers' insurance obtainable
for an annual premium equal to the Maximum Amount.
EMPLOYMENT AGREEMENTS. Pursuant to the Merger Agreement, UBS and UNB
agreed to honor the terms of the employment agreements among Eagle, First Empire
and each of Messrs. Wagner, Thomas, Crimmins and Scipio. The aggregate amount of
severance payments to which Messrs. Wagner, Thomas, Crimmins and Scipio would be
entitled pursuant to his employment agreement in the event his employment was
terminated for good reason following consummation of the Merger in 1996 is
estimated to be $403,650, $403,650, $444,088, and $266,110, respectively.
SUPPLEMENTAL EMPLOYMENT RETIREMENT PLAN. Pursuant to the Merger
Agreement, UBS and UNB also agreed to honor the terms of the Supplemental
Employment Retirement Plan maintained by First Empire for certain designated
executive officers of Eagle, consisting solely of Messrs. Wagner, Thomas,
Crimmins and Scipio. If the employment of a participant in this plan is
involuntarily terminated without cause or if certain adverse actions are taken
with respect to his employment without his consent, then the participant shall
be entitled to benefits commencing at age 55 computed as though the participant
had continued in the service of Eagle and First Empire until such time and as
though the participant continued to earn the annualized earnings for the
calendar year during which such termination of employment occurs.
EMPLOYMENT. Pursuant to the Merger Agreement, UBS agreed to offer
employment to (a) Mr. Thomas as Executive Vice President of UBS and President
and Chief Executive Officer of MBS, (b) Mr. Wagner as Executive Vice President
of UBS and Chairman of MBS, (c) Mr. Scipio as Executive Vice President and Chief
Operating Officer of MBS and (d) certain other non-executive officers, in each
case with a base salary equal to the respective employee's base salary with
Eagle and First Empire immediately prior to consummation of the Merger.
Any excess consideration paid
overCERTAIN EMPLOYEE MATTERS
Pursuant to the netMerger Agreement, UBS agreed to pay specified
severance payments to any employee of Eagle or First Empire (other than any
employee who is party to an employment agreement) who is involuntarily
terminated at or during the one-year period following consummation of the Merger
as a result of the elimination of a job position.
Pursuant to the Merger Agreement, each person employed by Eagle or an
Eagle subsidiary 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 and otherwise
shall not be participating in a similar plan formerly maintained by Eagle or an
Eagle subsidiary which continues to be maintained by UBS and its subsidiaries
following the Effective Time. Continued Employees will be eligible to
participate on the same basis as similarly situated employees of UBS
41
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.
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 Eagle and its
subsidiaries as such service is recognized by Eagle and its subsidiaries for
purposes of its benefit plans.
UBS has agreed to give employees of Eagle and its subsidiaries the
same priority for open positions at UBS or any UBS subsidiary for a period of
one (1) year for which they qualify as existing employees of UBS and UBS's
subsidiaries, provided that any decision to offer employment shall be made in
the sole discretion of UBS.
The Merger Agreement provides that Eagle's ESOP shall be terminated in
accordance with its terms and applicable laws and regulations upon consummation
of the Merger or as soon thereafter as is practicable.
RESALE OF UBS STOCK
The UBS Stock issued pursuant to the Merger will be freely
transferable under the Securities Act, except for shares issued to any Eagle
shareholder who may be deemed to be an affiliate of UBS for purposes of Rule 144
promulgated under the Securities Act ("Rule 144") or an affiliate of Eagle for
purposes of Rule 145 promulgated under the Securities Act ("Rule 145") (each an
"Affiliate"). Affiliates will include persons (generally executive officers,
directors and 10% shareholders) who control, are controlled by or are under
common control with (i) UBS or Eagle at the time of the Eagle Special Meeting or
(ii) UBS at or after the Effective Time.
Rules 144 and 145 will restrict the sale of UBS Stock received in the
Merger by Affiliates and certain of their family members and related interests.
Generally speaking, during the two years following the Effective Time, those
persons who are Affiliates of UBS at or following the Effective Time, may
publicly resell any UBS Stock received by them in the Merger, subject to certain
limitations as to, among other things, the amount of UBS Stock sold by them in
any three-month period and as to the manner of sale. After the two-year period,
such Affiliates may resell their shares without such restrictions so long as
there is adequate current fair valuepublic information with respect to UBS as required by
Rule 144. Persons who are Affiliates of UBS after the Effective Time may
publicly resell the UBS Stock received by them in the Merger subject to similar
limitations and subject to certain filing requirements specified in Rule 144.
The ability of Affiliates to resell shares of UBS Stock received in
the Merger under Rule 144 or 145 as summarized herein generally will be subject
to UBS's having satisfied its Exchange Act reporting requirements for specified
periods prior to the time of sale. Affiliates also would be permitted to resell
UBS Stock received in the Merger pursuant to an effective registration
42
statement under the Securities Act or another available exemption from the
Securities Act registration requirements. This Prospectus/Joint Proxy Statement
does not cover any resales of UBS Stock received by persons who may be deemed to
be Affiliates of UBS or Eagle in the Merger.
SEC guidelines regarding qualifying for the pooling of interests
method of accounting also limit sales of shares of the acquiring and acquired
company by affiliates of either company in a business combination. SEC
guidelines indicate further that the pooling of interests method of accounting
generally will not be challenged on the basis of sales by affiliates of the
acquiring or acquired company if they do not dispose of any of the shares of the
corporation they received in connection with a merger during the period
beginning 30 days before the merger and ending when financial results covering
at least 30 days of post-merger operations of the combined entity have been
published.
Eagle agreed in the Merger Agreement to use its best efforts to cause
each person who may be deemed to be an Affiliate of Eagle to deliver to UBS a
letter agreement intended to preserve the ability to treat the Merger as a
pooling of interests and ensure compliance with the Securities Act.
For information concerning additional resale restrictions which are
applicable to the directors and executive officers of Eagle, see "The Merger -
Stockholder Agreements."
EXPENSES OF THE MERGER; TERMINATION FEE
The Merger Agreement provides that each party thereto shall each bear
and pay all costs and expenses incurred by it in connection with the
transactions contemplated by the Merger Agreement, including fees and expenses
of its own financial consultants, accountants and counsel.
The Merger Agreement also provides that, notwithstanding any provision
to the contrary, if the Merger Agreement is terminated in accordance with its
terms (other than if terminated by Eagle pursuant to Section 7.1(b) thereof as a
result of a breach by UBS of its obligations under the Merger Agreement) and
prior to such termination a Termination Event, as defined, shall have occurred,
Eagle will upon demand pay to UBS in immediately available funds $1,500,000. For
purposes of the Merger Agreement, a Termination Event means either of the
following:
(i) Eagle or any Eagle Subsidiary, without having received UBS's
prior written consent, shall have entered into an agreement to engage in an
Acquisition Transaction with any person (as defined in the Merger
Agreement) other than UBS or any affiliate of UBS or the Board of Directors
of Eagle shall have recommended that the shareholders of Eagle approve or
accept any Acquisition Transaction with any person other than UBS or any
affiliate of UBS. For purposes of the Agreement, "Acquisition Transaction"
means (a) a merger or consolidation, or any similar transaction, involving
Eagle or any Eagle Subsidiary, (b) a purchase, lease or other acquisition
of all or substantially all of the assets acquiredof Eagle or any Eagle Subsidiary
or (c) a purchase or other acquisition of any equity securities of Eagle or
any Eagle Subsidiary; or
43
(ii) After a bona fide proposal is made by any person other than
UBS or any affiliate of UBS to Eagle or its shareholders to engage in an
Acquisition Transaction, either (i) Eagle shall have breached any covenant
or obligation contained in the Merger Agreement and such breach would
entitle UBS to terminate the Merger Agreement, or (ii) the holders of Eagle
Stock shall not have approved the Merger Agreement at the meeting of such
shareholders held for the purpose of voting on the Merger Agreement, such
meeting shall not have been held or shall have been canceled prior to
termination of the Merger Agreement.
STOCKHOLDER AGREEMENTS
In conjunction with the Merger Agreement, UBS entered into a
Stockholder Agreement, dated as of August 18, 1995, with the directors and
executive officers of Eagle, and Eagle entered into a Stockholder Agreement,
dated as of the same date, with the directors of UBS. Each such director or
executive officer of Eagle or UBS, in his capacity as a shareholder of Eagle or
UBS agreed, among other things, not to sell, pledge, transfer or otherwise
dispose of his shares of Eagle Stock or UBS Stock prior to the Special Meetings
of shareholders, respectively, at which the Merger Agreement is considered and
to vote such shares of stock in favor of the Merger Agreement.
ACCOUNTING TREATMENT
Consummation of the Merger is conditioned upon the receipt by UBS and
Eagle of a letter, dated as of the Effective Time, from Ernst & Young LLP, the
independent public accountants of UBS and Eagle, to the effect that the Merger
shall be accounted for as a pooling of interests. Under the pooling of
interests method of accounting, the assets and liabilities assumed willof Eagle would be
added to those of UBS at their recorded as good will. Thebook values and the shareholders' equity
accounts of UBS and Eagle would be combined on UBS's consolidated balance sheet.
On a pooling of interests accounting basis, income and other financial
statements of UBS issued after consummation of the Merger would be restated
retroactively to reflect the consolidated combined financial position and
results of operations of FCB will be includedUBS and Eagle as if the Merger had taken place prior to
the periods covered by such financial statements. The unaudited pro forma
financial information contained in UBS's consolidated financial statements fromthis Prospectus/Joint Proxy Statement has
been prepared using the datepooling of interests accounting method to account for
the Merger. Proforma
financial information concerning the Merger is not included herein since the
addition of FCB would not have materially affected UBS historical financial
information as presented without FCB.
39
See "UBS and Eagle Selected Pro Forma Consolidated Financial Data"
and "Pro Forma Consolidated Financial Statements."
COMPARISON OF SHAREHOLDERS' RIGHTS
UBS is a West Virginia corporation subject to the provisions of the
WVCA and Eagle is a Delaware corporation subject to the provisions of the DGCL.
Upon consummation of the Merger, shareholders of Eagle will become shareholders
of UBS and their rights as shareholders of UBS will be governed by the Articles
of Incorporation ("Articles") and Bylaws of UBS and the WVCA.
44
THE FOLLOWING SUMMARY IS NOT INTENDED TO BE A COMPLETE STATEMENT OF
THE DIFFERENCES AFFECTING THE RIGHTS OF EAGLE'S SHAREHOLDERS, BUT RATHER
SUMMARIZES THE MORE SIGNIFICANT DIFFERENCES AFFECTING THE RIGHTS OF SUCH
SHAREHOLDERS AND CERTAIN IMPORTANT SIMILARITIES; THE SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE ARTICLES AND BYLAWS OF UBS, THE CERTIFICATE OF
INCORPORATION AND BYLAWS OF EAGLE AND APPLICABLE LAWS AND REGULATIONS.
AUTHORIZED CAPITAL STOCK
Eagle. Eagle's Certificate of Incorporation authorizes the issuance
-----
of up to 5,000,000 shares of Eagle Stock, of which 2,729,468 were outstanding as
of the Eagle Record Date, and up to 2,500,000 shares of preferred stock, par
value $.10 per share ("Eagle Preferred Stock"), of which no shares are issued
and outstanding. The Eagle Preferred Stock is issuable in series, each series
having such rights and preferences as Eagle's Board of Directors may fix and
determine by resolution.
UBS. UBS' Articles authorize the issuance of up to 20,000,000 shares
---
of UBS Stock and no shares of preferred stock.
ISSUANCE OF CAPITAL STOCK
Eagle. Under the DGCL, Eagle may issue shares of Eagle capital stock
-----
and rights or options for the purchase of shares of capital stock of Eagle on
such terms and for such consideration as may be determined by the Board of
Directors of Eagle. Neither the DGCL nor the Certificate of Incorporation and
Bylaws of Eagle require shareholder approval of any such actions. However, the
Bylaws of the NASD generally require corporations, such as Eagle, with
securities which are quoted on NASDAQ to obtain shareholder approval of certain
issuances of common stock and most stock compensation plans for directors,
officers and key employees of the corporation. Shareholder approval of stock-
related compensation plans also may be sought in certain instances in order to
comply with the DGCL or to qualify such plans for favorable federal income tax
and securities law treatment under current laws and regulations.
UBS. Under the WVCA, UBS may issue shares of UBS capital stock and
---
rights or options for the purchase of shares of capital stock of UBS on such
terms and for such consideration as may be determined by the Board of Directors
of UBS. Neither the WVCA nor the Articles and Bylaws of UBS require shareholder
approval of any such actions. However, the Bylaws of the NASD generally require
corporations, such as UBS, with securities which are quoted on NASDAQ to obtain
shareholder approval of certain issuances of common stock and most stock
compensation plans for directors, officers and key employees of the corporation.
Shareholder approval of stock-related compensation plans also may be sought in
certain instances in order to qualify such plans for favorable federal income
tax and securities law treatment under current laws and regulations.
45
VOTING RIGHTS
Eagle. Each share of Eagle Stock is entitled to one vote per share on
-----
all matters properly presented at meetings of shareholders of Eagle. Eagle's
Certificate of Incorporation and Bylaws do not permit shareholders to cumulate
their votes in an election of directors.
UBS. Each share of UBS Stock is entitled to one vote per share on all
---
matters properly presented at meetings of shareholders of UBS. Pursuant to the
WVCA and the West Virginia Constitution, holders of UBS Stock have cumulative
voting rights in elections of directors. Cumulative voting enables each
shareholder to give one nominee for director as many votes as is equal to the
total number of nominees multiplied by the number of shares voted, or to
distribute such votes on the same basis among two or more nominees.
DIVIDENDS AND OTHER DISTRIBUTIONS
Eagle. The DGCL generally provides that, subject to any restrictions
-----
in the corporations's certificate of incorporation, dividends may be declared
from the corporation's surplus or, if there is no surplus, from its net profits
for the fiscal year in which the dividend is declared and/or the preceding
fiscal year. However, if the corporation's capital (generally defined in the
DGCL as the sum of the aggregate par value of all shares of the corporation's
capital stock, where all such shares have a par value and the board of directors
has not established a higher level of capital) has been diminished to an amount
less than the aggregate amount of the capital represented by the issued and
outstanding stock of all classes having a preference upon the distribution of
assets, dividends may not be declared and paid out of such net profits until the
deficiency in such capital has been repaired.
UBS. The WVCA generally provides that UBS may pay dividends in cash
---
or property out of unreserved and unrestricted earned surplus. Only under
certain very limited circumstances could UBS distribute from capital surplus.
Eagle and UBS. Each of Eagle and UBS is a legal entity separate and
-------------
distinct from its respective banking/thrift subsidiaries. Eagle's and UBS'
principal source of revenue for general corporate purposes, such as the payment
of dividends on Eagle Stock and UBS Stock, respectively, consists of dividends
from First Empire in the case of Eagle and dividends from UBS's banking
subsidiaries in the case of UBS. The payment of dividends by a bank holding
company while
FCB is a Virginia corporationsuch as UBS and a state member bank. However, current FCBby the banking/thrift subsidiaries of Eagle and UBS shareholders' rightsis
subject to various regulatory requirements, such as the maintenance of adequate
capital in accordance with regardthe requirements of applicable laws and regulations.
For example, the Federal Deposit Insurance Act generally prohibits an
undercapitalized depository institution from paying dividends. In addition, if,
in the opinion of the applicable federal banking agency, a bank holding company
or a bank under its jurisdiction is engaged in or is about to redemption by each respective issuer,engage in an
unsafe or unsound practice (which, depending on the financial condition of the
institution, could include the payment of dividends), such authority may
require, after notice and liquidation are substantially parallel.
One significant difference is with regard to shareholders' preemptive
rights. Inhearing, that such organization cease and desist from
such practice. The federal banking agencies also have issued policy statements
which provide that bank holding companies and
46
insured depository institutions should generally only pay dividends out of
current operating earnings. Similar authority exists in the case of UBS, shareholders dothe OTS and
savings associations under its jurisdiction.
TERMS AND SIZE OF BOARD OF DIRECTORS
Eagle. The Bylaws of Eagle provide that the number of directors shall
-----
not have preemptive rights andbe less than five nor more than 15. The Bylaws of Eagle also provide that
the ---number of directors may at any time be increased or decreased by a vote of a
majority of the whole Board of Directors and a majority of the Continuing
Directors, as defined in Eagle's Certificate of Incorporation.
Pursuant to the Certificate of Incorporation and Bylaws of Eagle, the
Board of Directors of Eagle is divided into three classes as nearly equal in
number as possible and approximately one-third of the directors are elected
annually to serve three-year terms.
UBS. The Bylaws of UBS provide that the number of directors shall be
---
not less than five nor more than thirty-five. The Bylaws also provide that the
number may be increased or decreased by an amendment to the Bylaws.
DIRECTOR VACANCIES AND REMOVAL OF DIRECTORS
Eagle. Eagle's Certificate of Incorporation provides that any vacancy
-----
occurring in the Board of Directors, including any vacancy created by reason of
an increase in the number of directors, shall be filled by a majority vote of
the directors then in office, whether or not a quorum is present, or by a sole
remaining director, and any director so chosen shall hold office for the
remainder of the term to which the director has been selected and until his or
her successor shall have been elected and qualified.
Eagle's Certificate of Incorporation provides that any director may be
removed from office only with cause by an affirmative vote of not less than two
thirds of the authorityvotes eligible to issue additionalbe cast by stockholders at a duly constituted
meeting of stockholders called expressly for such purpose.
UBS. UBS' Bylaws provide that any vacancy occurring in the Board of
---
Directors, including any vacancy created by reason of an increase in the number
of directors, shall be filled by a majority vote of the directors then in
office, whether or not a quorum is present, and any director so chosen shall
hold office for the remainder of the term to which the director has been
selected and until his or her successor shall have been elected and qualified.
Removal of directors is governed by the WVCA, which provides that one
or more directors, or the entire board, may be removed, with or without cause,
by the shareholders at a meeting called for that purpose by a vote of the
holders of a majority of the shares then entitled to vote at an election of
directors.
47
DIRECTOR CONFLICT OF INTEREST TRANSACTIONS
Eagle. The DGCL generally provides that contracts or transactions
-----
involving a Delaware corporation and an interested director (or officer) of that
corporation are not void or voidable solely because of such director's (or
officer's) interest if: (i) the material facts are disclosed and a majority of
disinterested directors on the board of directors or a committee thereof
authorize the contract or transaction in good faith, (ii) the material facts are
disclosed and shareholders of the corporation approve the contract or
transaction in good faith, or (iii) the contract or transaction is fair to the
corporation at the time it is authorized, approved or ratified by the board of
directors, a committee or the shareholders.
UBS. Director conflicts of interest are governed by the WVCA, which
---
provides that no contract or other transaction between UBS and one or more of
its directors or between UBS and an entity in which one or more of its directors
are financially interested will be void or voidable simply because of the
relationship or because such directors may be present at a meeting of the UBS
board which authorizes such contract or transaction, as long as certain
disclosures as to the relationships have made to those voting on the contract or
transactions, there is a sufficient vote to approve the same without obtainingthe vote of
the interested director or directors, and the contract or transaction is fair
and reasonable to UBS.
EXCULPATION OF DIRECTORS
Eagle. Eagle's Certificate of Incorporation provides that no director
-----
of Eagle shall be personally liable to Eagle or its stockholders for monetary
damages for any breach of fiduciary duty by such director as a director,
provided that a director shall be liable to the extent provided by applicable
law (i) for a breach of the director's duty of loyalty to Eagle or its
shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Section
174 of the DGCL or (iv) for any transaction from which the director derived an
improper personal benefit. This provision of the Certificate of Incorporation
of Eagle is based on a virtually identical provision in the DGCL.
UBS. The WVCA does not provide for director exculpation or limitation
---
of directors' liability.
SHAREHOLDER NOMINATIONS
Eagle. Eagle's Bylaws provide that nominations by shareholders for
-----
election as a director must be made in writing and delivered to or mailed and
received by the Secretary of Eagle not less than 60 days prior to the
anniversary date of the immediately preceding annual meeting; and with respect
to an election to be held at a special meeting of shareholders, notice by the
shareholder must be so delivered or mailed and received not later than the close
of business on the 10th day following the day on which the notice of the special
meeting was mailed. Such shareholder's notice shall set forth (a) as to each
person whom the shareholder proposes to nominate for election or re-election as
a director and as to the shareholder giving the notice (i) the name, age,
business address and residence address of such person, (ii) the principal
occupation or employment of such person,
48
(iii) the class and number of shares of Eagle Stock which are beneficially owned
by such person on the date of such shareholders' notice and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies with respect to nominees for election as directors,
pursuant to Regulation 14A under the Exchange Act; and (b) as to the shareholder
giving the notice (i) the name and address, as they appear on Eagle's books, of
such shareholder and any other shareholders known by such shareholder to be
supporting such nominees and (ii) the class and number of shares of Eagle Stock
which are beneficially owned by such shareholder to be supporting such nominees
on the date of such shareholder notice.
UBS. UBS' Bylaws provide that shareholder nominations of directors
---
must be made in writing, signed by the shareholder and received by the Chairman
or President no later than ten days from the date the notice of meeting of
shareholders was mailed. The Bylaws also make provision for nominations if
notices are mailed with less than thirteen days' time prior to the meeting.
SHAREHOLDER PROPOSALS
Eagle. Eagle's Bylaws provide that a proposal by shareholders for
-----
submission to a vote of shareholders at an annual meeting must be made in
writing and delivered to or mailed and received by the Secretary of Eagle not
less than 60 days prior to the anniversary date of the immediately preceding
annual meeting. A shareholders' notice to the Secretary shall set forth as to
each matter the shareholder proposes to bring before the annual meeting (i) a
brief description of the business desired to be brought before the annual
meeting, (ii) the name and address, as they appear on Eagle's books, of the
shareholder proposing such business, (iii) the class and number of shares of
Eagle Stock which are beneficially owned by the shareholder and (iv) any
material interest of the shareholder in such business.
UBS. UBS' corporate governance documents are silent as to shareholder
---
proposals. Proposals must be made in accordance with applicable SEC regulations
and instructions regarding the same are included in UBS' shareholder proxy
materials.
SPECIAL MEETINGS OF SHAREHOLDERS
Eagle. Eagle's Certificate of Incorporation provides that, except as
-----
otherwise required by law, special meetings of the shareholders of Eagle may be
called only by (i) the Board of Directors pursuant to a resolution approved by
the affirmative vote of the directors then in office, (ii) the Chairman of the
Board or (iii) the President.
UBS. UBS' Bylaws provide that special meetings of UBS
---
shareholders may be called by the Board of Directors, the Chairman, the
President, or the holders of not less than one-tenth of the UBS Stock
outstanding.
SHAREHOLDER ACTION WITHOUT A MEETING
Eagle. Eagle's Certificate of Incorporation provides that no action
-----
required by the DGCL to be taken at any annual or special meeting of
shareholders, nor any action which may be
49
taken at any annual or special meeting of shareholders, may be taken without a
meeting, without prior notice and without a vote of such shareholders.
UBS. UBS' Bylaws would permit shareholder action without a meeting
---
upon the unanimous written consent of all shareholders.
SHAREHOLDERS' RIGHT TO EXAMINE BOOKS AND RECORDS
Eagle. Eagle's Bylaws provide that a list of shareholders of Eagle
-----
shall be available for inspection by any shareholder entitled to vote for a
period of not less than 10 days before and during each such meeting of
shareholders. The DGCL generally provides that a shareholder, in person or by
his attorney or other agent, shall, upon written demand under oath stating the
purpose thereof, have the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
shareholders and its other books and records, and to make copies or extracts
therefrom. The DGCL authorizes a shareholder of a Delaware corporation to bring
a legal action in the Delaware Court of Chancery for an order to compel such
inspection if the shareholder's demand is denied by the corporation or it is not
replied to by the corporation within five business days.
UBS. UBS' Bylaws provide that the books and records may be examined at
---
any time by any director, any committee of the shareholders appointed by the
shareholders for that purpose or by the holders of one-tenth of the UBS Stock
outstanding. The WVCA provides that any shareholder, after having been a
shareholder for six months, or the owner of five percent of UBS Stock, without
regard to the length of ownership, may, upon written demand, for any proper
purpose, inspect the relevant books and records and make extracts therefrom. The
WVCA also affords legal remedies to a shareholder improperly denied access,
including a penalty equal to ten percent of the value of the shares held by the
shareholder.
AMENDMENT OF GOVERNING INSTRUMENTS
Eagle. No amendment may be made to Eagle's Certificate of
-----
Incorporation unless it is first approved by the Board of Directors of Eagle and
thereafter it is approved by the holders of a majority of the shares of Eagle
entitled to vote generally in an election of directors, provided that (i) the
affirmative vote of the holders of a least two thirds of such shares shall be
required to amend any provision which is inconsistent with Article 6 (Preemptive
Rights), Article 7 (Directors), Article 8 (Meetings of Stockholders and Bylaws)
and Article 10 (Amendments) and (ii) Articles 9.1 and 9.2 of the Certificate of
Incorporation (dealing with certain business combinations, as described below)
shall be amended in the manner set forth in Article 9.2(d).
Eagle's Certificate of Incorporation and Bylaws provide that the
Bylaws of Eagle may be amended by (i) a majority of directors then in office or
(ii) two thirds of the total votes eligible to be cast by shareholders at a duly
constituted meeting of shareholders called expressly for such purpose.
UBS. Pursuant to the WVCA, UBS' Articles may be amended, following
---
approval of the amendment by the Board of Directors, by the affirmative vote of
the holders of a
50
majority of the UBS Stock entitled to vote thereon. UBS' Bylaws may be amended
by the majority of the Board of Directors voting at a duly called meeting at
which a quorum is present. Such amendment is subject to repeal or change by the
affirmative vote of the holders of a majority of the outstanding UBS Stock.
MERGERS, CONSOLIDATIONS AND SALES OF ASSETS
Eagle. The DGCL requires the approval of shareholdersthe Board of Directors and
without first offering newly issued
shares to existing shareholders for purchase. FCB shareholders do have
preemptive rights and are therefore-----
the holders of a majority of the outstanding stock of Eagle entitled to purchase shares in any new
issuance of stock sufficient to maintain their ownership position.
Another significant difference is that, pursuant to Section 6.1-43 of
the Virginia Banking Act, FCB shareholders do not have dissenters' rights of
appraisal which would give them the right, in certain transactions, to opt to
receive an appraised valuevote
thereon for their shares in lieu of the transaction
consideration. UBS shareholders do have such rights pursuant to the West
Virginia Corporation Act, W.Va. Code (S)(S) 122mergers or consolidations, and 123. Pursuant to these
provisions, in the event of a merger, consolidationfor sales, leases or any sale or exchangeexchanges of all
or substantially all of the propertyassets of Eagle. The DGCL generally permits Eagle to
merge with another corporation without obtaining the approval of Eagle's
shareholders if: (i) Eagle is the surviving corporation of the merger; (ii) the
merger agreement does not amend Eagle's Certificate of Incorporation; (iii) each
share of Eagle's stock outstanding immediately prior to the effective date of
the merger is to be an identical outstanding or treasury share of Eagle after
the merger; and (iv) any authorized but unissued shares or treasury shares of
Eagle Stock to be issued or delivered under the plan of merger plus those
initially issuable upon conversion of any other securities or obligations to be
issued or delivered under such plan do not exceed 20% of the shares of Eagle
Stock outstanding immediately prior to the effective date of the merger.
UBS. The WVCA requires the approval of the Board of Directors and the
---
holders of a majority of the outstanding stock of UBS entitled to vote thereon
for mergers, consolidations, and sales, leases, exchanges, or other dispositions
of all or substantially all the assets of UBS.
BUSINESS COMBINATIONS WITH CERTAIN PERSONS
Eagle. Eagle's Certificate of Incorporation contains a provision
-----
which requires that mergers and certain other business combinations with a
"related person," as defined, be approved by the holders of not less than 80% of
the outstanding voting stock of Eagle and an "independent majority of
stockholders," as defined, unless certain price and procedural requirements are
met or the Board of Directors approves the merger or other business combination
in the manner provided therein. A "related person" for this purpose generally
includes any person, firm or entity which is the beneficial owner of ten percent
or more of the voting shares of Eagle.
Section 203 of the DGCL imposes certain restrictions on business
combinations between Eagle and large shareholders. Specifically, Section 203
provides that a Delaware corporation shall not engage in any "business
combination" (as defined in Section 203, generally including mergers, sales and
leases of assets, issuances of securities and similar transactions) with any
"interested stockholder" (as defined in Section 203, generally the beneficial
owner of 15% or more of the corporation's voting stock) for a period of three
years following the time that such stockholder became an interested stockholder,
unless (i) prior to such time the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder, (ii) upon consummation of the
transaction which
51
resulted in the interested stockholder becoming such, the interested stockholder
owned at least 85% of the voting stock of the corporation (excluding shares held
by persons who are both officers and directors and shares held by certain
employee benefit plans) or (iii) at or subsequent to such time the business
combination is approved by the board of directors and authorized at an annual or
special meeting of stockholders, and not by written consent, by the affirmative
vote of at least two-thirds of the outstanding voting stock which is not owned
by the interested stockholder.
UBS. Neither the corporate governance documents of UBS nor the WVCA
---
contain comparable provisions regarding business combinations.
DISSENTERS' RIGHTS OF APPRAISAL
Eagle. Under the DGCL, a shareholder of a Delaware corporation
-----
generally has the right to dissent from any merger or consolidation involving
the corporation or sale of all or substantially all of the corporation's assets,
subject to specified procedural requirements. However, no such appraisal rights
are available for the shares of any class or series of a corporation's capital
stock if (i) as of the record date fixed to determine the shareholders entitled
to receive notice of and to vote at the meeting of shareholders to act upon the
agreement of merger or consolidation, such shares were either listed on a
national securities exchange, designated as a national market system security on
an interdealer system by the NASD or held of record by more than 2,000
shareholders, or (ii) the corporation is the surviving corporation of a merger
and the merger did not require the approval of the corporation's shareholders,
unless in either case, the holders of such stock are required by an agreement of
merger or consolidation to accept for that stock something other than: (a)
shares of stock of the corporation surviving or resulting from the merger or
consolidation; (b) shares of stock of any other corporation that, at the
effective date of the merger, will be listed on a national securities exchange,
designated as a national market system security on an interdealer system by the
NASD or held of record by more than 2,000 shareholders; (c) cash in lieu of
fractional shares of a corporation not madedescribed in the ordinary course of business, a shareholder may exercise dissenters' rights
as to allclause (a) or a part(b) above; or (d)
any combination of the shares owned. By following prescribed statutory
procedures,of stock and cash in lieu of fractional shares
described in clauses (a) through (c) above. Shareholders of Eagle do not have
the right to dissent from the Merger pursuant to the DGCL. See "Dissenters'
Rights."
UBS. Under the WVCA, a shareholder is entitledof a West Virginia corporation has
---
the right to dissent from any merger, consolidation or sale of substantially all
of the corporation's assets. These rights and how they are to be exercised are
described in this Prospectus/Joint Proxy Statement at the section captioned
"Dissenters' Rights."
DISSENTERS' RIGHTS
Pursuant to Section 262 of the DGCL, stockholders of Eagle do not have
the right to dissent from the Merger and obtain an appraised value of their
shares of Eagle Stock.
52
UBS shareholders eligible to vote on the Merger Agreement have certain
statutory rights to dissent and to elect to receive cash for their shares under
Sections 31-1-122 and 31-1-123 of the WVCA, copies of which are included as
Annex C hereto. A brief description of these rights follows. This discussion
does not purport to cover every aspect of the applicable statutes and
shareholders of USB are referred to Annex C for the complete text of the
relevant statutory provisions.
UBS shareholders who object to the Merger and who comply with the
provisions of (S) 31-1-123 of the WVCA may demand the right to receive a cash
payment from UBS for the "fair value" of their stock as determined as of the shares
as to which he or she has exercised dissenters' rights.
A third significant difference is that UBS shareholders have the
right, under the West Virginia Corporation Act and the
40
West Virginia Constitution, to vote their shares cumulatively in the election of
directors while FCB shareholders do not have cumulative voting rights. UBS
shareholders may vote the number of shares owned for as many persons as there
are directors to be elected, or to cumulate the votes by giving one candidate as
many votes as the number of directors there are to be elected times the number
of shares to be voted, or by distributing such votes on the same principle among
any number of candidates.
No antitakeover provisions have been addedday
prior to the articles of
incorporation or bylaws of UBS or FCB; such matters are governed indate on which the case of
both entitiesMerger was approved by the applicable corporate laws. UBS shareholders currently have
cumulative voting rights with regard to the election of directors and these
rights will continue for UBS shareholders following the Merger. FCB and UBS
shareholders do not have conversion rights, nor are there redemption or sinking
fund provisions with respect to any of their stock.
UBS must look to the ability of its subsidiaries to pay dividends in
order to pay dividends to its shareholders.
The dividends payable by UBS
subsidiaries, which are national bank subsidiaries, are dependent upon their
earnings and profitability and compliance with certain federal banking law
requirements. The dividends paid by FCB are also dependent upon its earnings
and profitability and compliance with state and banking law requirements.
Following consummationUnder (S) 31-1-123 of the Merger, dividends received by UBS shareholders
will continue to be dependent upon payment of dividends by its banking
subsidiaries. See DESCRIPTION OF UBS - Dividends.
---
ISSUANCE AND EXCHANGE OF STOCK CERTIFICATES
Mellon Bank, N.A., Pittsburgh, Pennsylvania, acts as Exchange and
Transfer Agent for UBS Stock ("Transfer Agent"). As
41
soon as practicable after the Merger Effective Date, the shareholders of FCB
will receive written instructions from UBS or the Transfer Agent with respect to
the right of FCB shareholders (other than the Control Shareholders) to elect (1)
to accept $52.57 in cash per share in full payment of their shares or (2) to
exchange their FCB Stock for UBS Stock and $26.25 in cash per share. IF AN FCB
SHAREHOLDER FAILS AFFIRMATIVELY TO ELECT TO RECEIVE THE $52.57 CASH PAYMENT FOR
HIS OR HER FCB SHARES, HE OR SHE WILL RECEIVE UBS STOCK AND $26.25 IN CASH FOR
EACH FCB SHARE.
Upon delivery of their FCB stock certificates pursuant to the written
instructions, FCB shareholders will be sent their portion of the Merger
Consideration (whether all cash, or cash and UBS Stock), together with cash for
any fractional shareWVCA, such "fair value" of UBS Stock to which a particular shareholder is entitled.
Until exchanged, the stock certificates of FCB will evidence for all corporate
purposes ownershipshall not
include any appreciation or depreciation of the numberprice of whole shares of UBS Stock
into which they
are converted as a resultresulting from anticipation of the Merger.
UNTIL SUCH OUTSTANDING CERTIFICATES
HAVE BEEN EXCHANGED,To exercise their dissenters' rights, UBS MAY, AT ITS SOLE OPTION, WITHHOLD: (I) THE MERGER
CONSIDERATION, INCLUDING THE CERTIFICATES REPRESENTING THE SHARES OFshareholders electing to
dissent ("Dissenting UBS STOCK
INTO WHICH THE FCB SHARES ARE CONVERTED AND (II) THE DISTRIBUTION OF ANY AND ALL
CASH CONSIDERATION, DIVIDENDS OR PAYMENTS FOR FRACTIONAL SHARES WITH RESPECT TO
THE UBS STOCK TO WHICH THE SHAREHOLDER IS ENTITLED. UPON DELIVERY OF THE
OUTSTANDING CERTIFICATES IN ACCORDANCE WITH THE WRITTEN INSTRUCTIONS, UBS WILL
DELIVER THE ABOVE ITEMS TO THE SHAREHOLDER PROVIDED THAT ANY CASH WILL BE
DELIVERED WITHOUT INTEREST.
The shares of UBS Stock to be issued pursuant to the Merger are
registered under the Securities Act of 1933, as amended (the "1933 Act"Shareholders").
Directors, officers and principal shareholders of FCB may be considered to be
"affiliates" for purposes of Rule 145 promulgated under the 1933 Act.
Therefore, they may be deemed to be "underwriters" subject to the limitations
imposed by Rule 145
42
upon the disposition of their shares of UBS Stock received pursuant to the
Agreement. In light of these limitations, which do not apply to FCB shareholders
generally, the individuals who may be considered affiliates must enter into
agreementsfile with UBS to the effect that the shares of UBS they receive pursuant
to the Merger will not be sold or otherwise disposed of except in accordance
with the 1933 Act and Rule 145 promulgated thereunder. The individuals who may
be considered affiliates and who will execute the affiliates' agreements have
been advised of these requirements and restrictions.
DISSENTERS' RIGHTS
The Virginia Banking Act specifically excludes the application of
dissenters' rights of appraisal to mergers of Virginia banks. See Va. Code Ann.
---
(S) 6.1-43 (1993). FCB shareholders who do not wish to receive shares of UBS
Stock as part of the Merger Consideration should elect the "all cash"
alternative. See THE PROPOSED TRANSACTION - THE MERGER - Merger Consideration.
---
43
COMPARATIVE PER SHARE DATA
The table which follows, presents historical per share data for UBS and FCB, pro
forma combined per share data and equivalent per share data showing the value of
one share of FCB common stock in the combined corporation. Such data is based
on historical financial statements for UBS and FCB and pro forma combined
amounts giving effect to the exchange of 1.12 shares of UBS common stock for
each share of FCB common stock plus an additional $26.25 of cash consideration
paid for each share of FCB common stock.
For purposes of determining the value of consideration in the proposed
transaction, which will be recorded using the purchase method of accounting, UBS
common stock has been valued at $25 per share, or the price as reported on the
NASDAQ National Market System as of March 6, 1995. Management of UBS believes
that use of such date is appropriate at this time for valuing the proposed
transaction consideration because of the lengthy time period between initiation
and expected consummation. For further discussion of the consideration, see THE
PROPOSED TRANSACTION - THE MERGER - Merger Consideration.
The per share data included in the tables which follow should be read in
conjunction with the historical financial statements of UBS and FCB and the
related notes accompanying each such financial statement. The data presented is
not necessarily indicative of the
44
results which would have been obtained if the combination had been consummated
in the periods indicated or which may be obtained in the future.
COMPARATIVE PER SHARE DATA (UNAUDITED)
(Data in dollars, Except shares)
THREE MONTHS
ENDED YEAR ENDED
MARCH 31 DECEMBER 31
1995 1994
---- ----
UNITED BANKSHARES, INC. ("UBS")
Historical:
Net income .58 2.08
Book value at end of period 15.53 15.21
Cash dividends declared 0.29 1.06
Average shares outstanding 11,809,055 11,993,062
FIRST COMMERCIAL BANK ("FCB")
Historical:
Net income (0.24) 3.04
Book value at end of period 28.30 28.46
Cash dividends declared 0.20
Average shares outstanding 201,100 201,100
PRO FORMA COMBINED (UNAUDITED) (1)
Net income 0.57 2.11
Book value at end of period 15.74 15.17
Average shares outstanding 12,034,287 12,218,294
FCB EQUIVALENT PER SHARE DATA (UNAUDITED) (2)
Net income 0.64 2.36
Book value at end of period 17.63 16.99
Cash dividends declared 0.32 1.19
(1) Assumes receipt of 100% of the 201,100 shares of FCB common stock for no
more than 271,000 shares of UBS common stock valued at $25 per share plus
an additional $26.25 of cash consideration paid for each share of FCB
common stock.
(2) The equivalent per share amounts are the result of multiplying the cash
dividends declared by UBS, the pro forma combined net income, and pro
forma combined book value by the 1.12 to 1 exchange ratio of UBS common
stock for each common share of FCB.
45
First Commercial Bank
SELECTED FINANCIAL DATA
(In Thousands Except for Per Share Data)
For the Three For the
Months Ended Year Ended
March 31 December 31
1995 1994
---------------- --------------
Total interest income $ 1,302 $ 5,036
Total interest expense 516 1,882
Net interest income 786 3,154
Provision for possible
loan losses 150 20
Other income 124 265
Other expenses 838 2,472
Income taxes (29) 316
Income before cumulative
effect of accounting change (49) 611
Net income (49) 611
Cash dividends 40
Per common share:
Income before cumulative
effect of accounting change (0.24) 3.04
Net income (0.24) 3.04
Cash dividends 0.20
Book value per share 28.30 28.46
Return on average
shareholders' equity -3.41% 11.08%
Return on average assets -0.33% 0.99%
Average assets 59,087 61,516
Investment securities 8,491 8,448
Net loans 43,588 42,812
Total assets 61,098 60,834
Total deposits 53,693 53,225
Long-term borrowings 460 492
Total borrowings
and other liabilities 1,714 1,885
Shareholders' equity 5,691 5,724
46
FIRST COMMERCIAL BANK
SELECTED FINANCIAL DATA
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
FIVE YEAR SUMMARY
---- ---- -------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
TOTAL INTEREST INCOME $ 5,036 $ 4,935 $ 5,253 $ 5,637 $ 6,179
TOTAL INTEREST EXPENSE 1,882 1,999 2,390 3,134 3,531
NET INTEREST INCOME 3,154 2,936 2,863 2,503 2,648
PROVISION FOR POSSIBLE
LOAN LOSSES 20 460 694 740 360
OTHER INCOME 265 422 230 313 301
OTHER EXPENSES 2,472 2,388 2,203 2,021 2,453
INCOME TAXES 316 196 46 3 22
INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 611 314 150 52 114
NET INCOME 611 314 150 52 114
CASH DIVIDENDS 40 40 40 40 40
PER COMMON SHARE:
INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 3.04 1.56 0.74 0.26 0.56
NET INCOME 3.04 1.56 0.74 0.26 0.56
CASH DIVIDENDS 0.20 0.20 0.20 0.20 0.20
BOOK VALUE PER SHARE 28.46 25.72 24.36 23.82 23.76
RETURN ON AVERAGE
SHAREHOLDERS' EQUITY 11.08% 6.10% 3.10% 1.10% 2.30%
RETURN ON AVERAGE ASSETS 0.99% 0.40% 0.20% 0.10% 0.20%
AVERAGE ASSETS 61,516 66,270 61,801 60,678 60,410
INVESTMENT SECURITIES 8,448 15,515 10,674 9,710 11,152
NET LOANS 42,812 40,569 40,492 45,517 41,213
TOTAL ASSETS 60,834 71,791 60,693 63,707 62,304
TOTAL DEPOSITS 53,225 61,761 54,355 54,920 52,561
LONG-TERM BORROWINGS 493 563 613 663 694
TOTAL BORROWINGS
AND OTHER LIABILITIES 1,885 4,857 1,440 3,997 4,965
SHAREHOLDERS' EQUITY 5,724 5,173 4,899 4,790 4,778
47
DESCRIPTION OF UNITED BANKSHARES, INC.
ORGANIZATIONAL HISTORY AND SUBSIDIARIES
UBS is a West Virginia corporation registered as a bank holding
company pursuant to the Bank Holding Company Act of 1956, as amended. The
headquarters of UBS are located in United Center, at 500
Virginia Street, East, Charleston, West Virginia.Virginia 25301, Attention: Secretary,
prior to or at the UBS Special Meeting, a written objection to the proposed
merger. A Dissenting Shareholder may dissent as to less than all of shares of
UBS Stock owned beneficially by him. If the Merger is approved by the UBS
shareholders, and a Dissenting Shareholder did not vote the related shares in
favor of the Merger, he must then, within ten days after the date on which the
vote was incorporatedtaken, file with UBS a written demand for payment of the fair value of
such shares.
Within 20 days after demanding payment for his shares, each Dissenting
Shareholder must submit the certificate or certificates representing his shares
to UBS for notation thereon that such demand has been made. His failure to do
so shall, at the option of UBS, terminate his rights under Section 3-1-122 and
31-1-123 of the WVCA unless a court of general civil jurisdiction, for good and
sufficient cause shown, shall otherwise direct. If shares of UBS Stock
represented by a certificate on March 26, 1982, and
organized on September 9, 1982. UBS began conducting business on May 1, 1984,which notation has been so made shall be
transferred, each new certificate issued therefor shall bear similar notation,
together with the acquisitionname of three (3) banks. On October 1, 1985, these three (3)
subsidiaries were mergedthe original dissenting holder of such shares, and on November 1, 1985, were renamed United National
Bank ("UNB").
Since that timea
transferee of such shares shall acquire by such transfer no rights in UBS, as
applicable, other than those which the original Dissenting Shareholder had after
making demand for payment under Section 31-1-123 of the WVCA.
A demand filed by a Dissenting Shareholder may not be withdrawn unless
UBS consents. Within ten days after the Effective Date of the Merger, UBS shall
give written notice thereof to each Dissenting Shareholder who has acquired various subsidiary banks through
merger. Asmade a resultdemand
as required by the WVCA, and shall make a written offer to each such Dissenting
Shareholder to pay for his related shares at a specified price deemed by UBS to
be the fair value thereof. Such notice and offer shall be accompanied by a
balance sheet of an internal reorganization involving the merger of two
(2) subsidiaries into UNB effective January 1, 1993, UBS owns three (3)
subsidiary banks as of March 31, 1995: UNB, United National Bank-South ("UNB-
S")the latest available date and Bank First, N.A. ("Bank First")not more than 12
months prior to the making of such offer, and a profit and loss statement for
the 12 months period ended on the date of such balance sheet. If within 30 days
after the Effective Date, the fair value of such shares is agreed upon between
any Dissenting Shareholder and UBS, payment therefor shall be made within 90
days
53
after the Effective Date, upon surrender of the certificate(s) representing
such share(s). UNBUpon payment of the agreed value a Dissenting Shareholder shall
cease to have any interest in such shares.
If within the 30-day period described above, a Dissenting Shareholder
and Bank First are eachUBS do not agree as to the wholly-owned subsidiaryfair value of second-tier bank holding companies, UBC Holding
Company, Inc.the shares, UBS shall within 30
days after receipt of written demand from any Dissenting Shareholder, which
written demand must be given within 60 days after the Effective Date, file a
complaint in a court of general civil jurisdiction in the county where UBS'
principal office is located requesting that the fair value of such shares be
determined, or UBS may file such a complaint within such 60-day period at its
own election. If UBS fails to bring such action within the 60-day period, and UBF, respectively, each of which isat
this time cannot predict whether it would file such a wholly-owned subsidiarycomplaint, any Dissenting
Shareholder may do so in the name of UBS. UNB has its main office in Parkersburg, West Virginia, UNB-S has its
main office in Beckley, West Virginia, and Bank First has its main office in
McLean, Virginia.
In additionIf no complaint is filed, Dissenting
Shareholders may be deemed to its bank subsidiaries, UBS chartered and capitalized
United Venture Fund, Inc., a West Virginia corporation which has qualified as a
Capital Companyhave waived their rights under the West Virginia Capital Company Act. This subsidiary
makes loansWVCA. All
Dissenting Shareholders, except those who have agreed upon a price to be paid
for their shares by UBS, may be made parties to the proceeding and limited equity investments, consistentmay receive a
copy of the petition or summons. All Dissenting Shareholders who are parties to
the proceeding shall be entitled to judgment against UBS for the amount of the
fair value of their shares plus accrued interest except any Dissenting
Shareholder whom the court determines not to be entitled to receive payment for
his shares. The judgment shall be payable only upon and concurrently with the
Bank Holding
Company Act, intendedsurrender to resultUBS of the certificate(s) representing such share(s).
Section 31-1-123(e) of the WVCA provides that any costs and expenses
of any such proceeding shall be determined by the court and assessed against
UBS, except that all or any part of such costs and expenses may be assessed
against all or some Dissenting Shareholders, in amounts the court finds
equitable, to the extent the court finds the Dissenting Shareholders did not act
in good faith in contesting UBS' offer. Such expenses shall not include
experts' or contributeattorneys' expenses and fees unless the court, in its discretion,
awards such fees and expenses.
Reference is made to new jobs and/or industry in
West Virginia.
BUSINESS OF UBS
As a bank holding company registered underAnnex C attached hereto for the Bank Holding Company
Actcomplete text of 1956, as amended, UBS's present business is the operation of its bank
subsidiaries. As of December 31, 1994, and March 31, 1995, respectively, UBS's
consolidated assets approximated $1,787,641,000 and $1,792,217,000 and total
shareholders' equity approximated $179,746,000 and $183,339,000.
UBS is permitted to acquire other banks and bank holding companies as
well as thrift institutions. UBS is also permitted to engage in certain non-
banking activities which are closely related to banking under
the provisions of Section 31-1-122 and 33-1-123 of the Bank Holding Company Act andWVCA relating to the
Federal Reserve Board's Regulation Y.
Management continues to consider such opportunities as they arise andrights of dissenting shareholders. The statements made in this regard, management from timesummary of such
provisions are qualified in their entirety by reference to time makes inquiries, proposals, offersAnnex C. The
provisions of Section 31-1-123 of the WVCA are technical and complex and it is
suggested that any shareholder who desires to exercise his or 48her right to
dissent consult counsel because failure to comply strictly with such provisions
may defeat his dissenters' rights.
54
expressionsMANAGEMENT OF UBS AFTER THE MERGER
Upon consummation of interestthe Merger, the directors and executive officers
of UBS will be the directors and executive officers of UBS immediately prior to
the Merger, except certain directors and executive officers of Eagle will become
directors and executive officers of UBS, as to potential opportunities. No agreements or
understandings to acquire other banks or bank holding companies or non-banking
subsidiaries or to engage in other non-banking activities, other than those
identified herein, presently exist.
BUSINESS OF SUBSIDIARY BANKS
Asdescribed under "The Merger -
Interests of March 31, 1995, UBS affiliates operated 39 banking offices in
West Virginia and one office in Virginia. UBS, through its affiliates, conducts
a full service commercial and consumer banking business. Included among the
banking services offered are the acceptance of deposits in checking, savings,
time and money market accounts; the making and servicing of personal,
commercial, floor plan and student loans; and the making and servicing of
construction and real estate loans. Also offered are individual retirement
accounts, safe deposit boxes, wire transfers and other standard banking products
and services. As a part of their lending function, UNB, UNB-S and Bank First
offer credit card services including accounts issued under the name of certain
correspondent banks.
UNB and UNB-S also maintain trust departments which act as trustees
under wills, trust and pension and profit sharing plans, as executors and
administrators of estates, as guardians for the estate of minors and
incompetents, and perform a variety of investment and security services. UNB
trust services are available to customers of affiliate banks. UNB provides
services to its correspondent banks such as check clearing, safekeeping and the
buying and selling of federal funds.
UNB and UNB-S are members of a regional network of automated teller
machines known as the MAC ATM network while Bank First participatesCertain Persons in the MOST
network. Through MAC and MOST, all of UBS's subsidiary banks are participants
in a network known as Cirrus which provides banking on a nationwide basis.
DIVIDENDS
As of March 31, 1995, UBS had 20,000,000 authorized shares of common
stock, par value $2.50 per share, of which 11,954,453 were issued and
outstanding, including 152,770 shares of treasury stock. These shares were held
by approximately 5,087 shareholders of record.
The shareholders of UBS are entitled to receive dividends when and as
declared by its Board of Directors. Dividends are paid quarterly. Aggregate
dividends were .29 per share for the first quarter of 1995, $1.06 per share in
1994, and $.95 per share in 1993. Dividends are paid out of funds legally
available and the payment of dividends is subject to the restrictions set forth
in the West Virginia Corporation Act.
49
Payment of dividends by UBS is dependent upon payment of dividends to
it by its subsidiary banks. The ability of national banks to pay dividends is
subject to certain limitations imposed by the national banking laws. The Office
of the Comptroller of the Currency ("OCC") may prohibit dividends if it deems
the payment to be an unsafe or unsound banking practice. The OCC has issued
guidelines for dividend payments by national banks, emphasizing that proper
dividend size depends on the bank's earnings and capital.
MARKET AND STOCK PRICES OF UBS
UBS Stock is traded over the counter on the National Association of
Securities Dealers Automated Quotations System ("NASDAQ") under the trading
symbol UBSI.Merger."
The following table presentssets forth certain information about each director
and executive officer of Eagle who will become a director and, in the highcase of
Messrs. Thomas and low pricesWagner, an executive officer of UBS's common
stock duringUBS upon consummation of the
periods set forth below:Merger.
UBS
Historical Basis
-----------------
1995 High Low
---- ----Position with Eagle and
Principal Occupation
Name Age During the Past Five Years Since(1)
----- --- --------------------------- --------
Second Quarter through $27.50 $25.25
June 1, 1995
J. Christopher Thomas 46 Director, President and 1978
Chief Operating Officer of
Eagle and First Quarter $26.00 $23.25
1994
----
Fourth Quarter 24.75 23.00
Third Quarter 25.75 24.00
Second Quarter 26.75 25.00Empire
William W. Wagner 63 Chairman and Chief 1959
Executive Officer of Eagle
and First Quarter 27.25 25.50
1993
----
Fourth Quarter 28.50 25.25
Third Quarter 25.75 21.50
Second Quarter 22.75 19.75Empire
Paul C. Winter, Jr. 48 Director of Eagle and First Quarter 23.50 19.251977
Empire; President, Bray &
Oakley Insurance Agency,
Inc., Logan, West Virginia
The prices listed above__________________
(1) Includes service with predecessor institutions.
Additional information about the foregoing persons is contained in
Eagle's Proxy Statement for its 1995 annual meeting of stockholders, relevant
portions of which are based upon information available to UBS's
management from NASDAQ listings. No attempt has been made by UBS's management to
ascertain the prices for every sale of UBS Stock during the periods indicated.
However, based on the information available, UBS's management believes that the
50
prices accurately represent the amounts at which UBS's Stock was traded during
the periods indicated.
OTHER INFORMATION
UBS Stock is actively traded in the over-the-counter market under the
NASDAQ symbol UBSI. Since information regarding UBS is readily available to
investors, the law permits this document to be abbreviated by incorporating
information regarding UBSincorporated by reference in this Prospectus/Joint Proxy
Statement pursuant to certain reports and other documents
filed with the SEC. See INFORMATION INCORPORATED BY REFERENCE. Other than as
described herein, there have been no material changes in the affairs of UBS
since the filing of itsEagle's Annual Report on Form 10-K for the year ended
December 31, 1994 that have not been described in a subsequent report filed with1994. See "Information Incorporated by Reference" and "Available
Information."
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed consolidated
balance sheet combines the SEC
pursuant toconsolidated historical balance sheets of UBS and
Eagle, assuming the Securities and Exchange Act of 1934,Merger was
55
consummated as amended.
51
DESCRIPTION OF FIRST COMMERCIAL BANK
GENERAL
FCB is a Virginia banking corporation and a member of the Federal
Reserve System. It was charteredbeginning of the earliest period presented on August 2, 1972. FCB is located
approximately ina pooling of
interests accounting basis.
The following unaudited pro forma combined condensed consolidated
statements of operations present the geographical centercombined consolidated statements of
Arlington County, Virginia.operations of UBS and Eagle, assuming UBS and Eagle had been combined at the
beginning of each period presented on a pooling of interests basis.
For a description of the pooling of interests accounting method, see
"The Merger-Accounting Treatment."
The main office address is 3801 Wilson Boulevard, Arlington, Virginia. FCBpro forma financial data does not have any branches. On December 31, 1994, FCB had 23 full-time employees.
The banking services offeredgive effect to the public are services normally
associated with a commercial bank including, but not necessarily limited to,
checking accounts,anticipated cost
savings programs, safe deposit boxes, and commercial and
consumer-type loans. FCB does not operate a trust department nor does it own
any subsidiaries or bank related enterprises. FCB is independently owned with
381 shareholders of record owning 201,100 shares of the total stock outstanding.
As of December 31, 1994, and March 31, 1995, respectively, FCB had total assets
approximating $60,834,000 and $61,098,000 and total stockholders equity
approximately $5,724,000 and $5,691,000.
COMPETITION
Arlington County consists of approximately 25.7 square miles in area
and has a population of approximately 167,000. There are 13 banks operating in
Arlington County with approximately 69 offices. Of the 13 banks, FCB is one of
three independent banks. In addition, there are 6 savings banks with 10 offices
and 11 credit unions that compete for loans and deposits in Arlington County.
52
REGULATION AND SUPERVISION
The operations of FCB are subject to federal and state statutes which
apply to state member banks of the Federal Reserve System.
The stock of FCB is subject to the registration requirements of the
Securities Act of 1933. FCB is subject to the periodic reporting requirements
of the Securities Exchange Act of 1934. These include, but are not limited to,
the filing of annual, quarterly and other current reports with the Board of
Governors of the Federal Reserve System.
FCB as a state member bank is supervised and regularly examined by the
Virginia Bureau of Financial Institutions and the Federal Reserve Board. Such
supervision and examination by the Virginia Bureau of Financial Institutions and
the Federal Reserve Board is intended primarily for the protection of depositors
and not for the stockholders of FCB.
In order to comply with the capital adequacy guidelines for state
member banks established by the Board of Governors of the Federal Reserve System
("FRS"), FCB borrowed $750,000 (the "Capital Loan") from Sovran Bank, N.A. (now,
NationsBank of Virginia, N.A.) pursuant to a Capital Note Agreement dated
September 15, 1988. The loan is classified as secondary capital in accordance
with FRS guidelines. As of December 31, 1994, the outstanding principal balance
of the Capital Loan was $492,297. Currently, FCB has sufficient capital without
the Capital Loan to comply with the FRS capital adequacy guidelines currently in
effect. The rate of interest on the Capital Loan (prime plus 0.5%)
significantly exceeds FCB's current cost of funds. In addition, the Capital
Loan contains certain affirmative and negative covenants regulating the
activities of FCB. One of those covenants prohibits FCB from entering into any
merger transaction without the prior written
53
consent of NationsBank. Accordingly, FCB intends to repay the Capital Loan in
full on or before the Merger Effective Date.
DESCRIPTION OF PROPERTIES
FCB occupies a four-story brick building at 3801 Wilson Boulevard,
Arlington, Virginia. FCB is under a 20-year lease with Aries Investment Company
for approximately 11,354 square feet of ground on which FCB's office building
was constructed. In March of 1994 FCB exercised its option to extend the lease
until December 2004. FCB has an additional option to extend the lease for
another 10 years. The current annual rent is $95,402. The office building is
owned by FCB.
In April 1986, FCB entered in a lease agreement with The Young Group,
Inc. for the premises of 6661 Old Dominion Drive, McLean, Virginia. The
premises provided 1,790 square feet, which FCB intended to use as a branch
location. The lease term was ten (10) years with renewal options of five (5)
years for annual rental of $77,901. Effective February 1, 1990, FCB had
subleased the branch office under a lease that expires June 30, 1996, and
provides for rental income of $81,480 per year. The rent under both leases is
adjusted at five year intervals for inflation.
LEGAL PROCEEDINGS
FCB is the defendant in a case styled Weichert Company of Virginia,
Inc. v. First Commercial Bank which is pending before the Arlington County
Circuit Court. The case had been scheduled for trial by jury in November 1994,
however, the case was nonsuited by Weichert. A new trial date will be
established by the Court in 1995. The case is an action wherein Weichert
Company of Virginia, Inc. seeks to recover approximately $154,000 plus $500,000
in punitive damages in connection with an account that Weichert alleges was
wrongfully set off.the Merger.
The case was dismissed in the
54
trial court after argument of First Commercial's plea in bar, which asserted
that Weichert lacked standing to bring the suit. The case was reversed and
remanded by the Virginia Supreme Court. FCB plans to continue to contest the
case vigorously. The outcome cannot be predicted at this time.
FCBpro forma information presented is routinely involved in other legal actions which involve
attempts to collect monies due FCB pursuant to loans in default. There are no
other pending legal proceedings, other than ordinary routine litigation
incidental to the business of FCB. Management and legal counsel arenot necessarily indicative of
the opinionresults of operations or the combined financial position that would have
resulted had the ultimate resolutionMerger been consummated at the beginning of these proceedings will not resultthe applicable
periods indicated, nor is it necessarily indicative of the results of operations
in material liability to FCB.
MARKET FOR COMMON EQUITYfuture periods or the future financial position of the combined entities.
The pro forma information should be read in conjunction with the
historical consolidated financial statements of UBS and Eagle, including the
related notes, which are incorporated by reference in this Prospectus/Joint
Proxy Statement, and in conjunction with the selected consolidated historical
and other pro forma financial information, including the notes thereto,
appearing elsewhere in this Prospectus/Joint Proxy Statement. See "Information
Incorporated by Reference."
56
PRO FORMA CONDENSED BALANCE SHEET (UNAUDITED)
UNITED BANKSHARES, INC. AND RELATED STOCKHOLDER MATTERS
FCB's stock is being traded over the counter in the Washington, D. C.
metropolitan area. The trade prices shown below were provided courtesy of
Koonce Securities, Rockville, Maryland. Other transactions may have occurred
which were not reported to FCB. As of June 1, 1995, there were approximately
381 stockholders of record.
MARKET INFORMATIONSUBSIDIARIES
Quarter: First Second Third Fourth
- --------SEPTEMBER 30, 1995
(IN THOUSANDS)
As Reported UBS & EAGLE
----------- Pro Forma Pro Forma
UBS EAGLE Adjustments Consolidated
--- ----- ------ ----- ----------------- ------------
1994 High $8.00 High $8.00 High $8.00 HighASSETS
Cash and due from bank $73,757 $15,773 $89,530
Federal funds sold 12,425 12,425
Investment securities 324,084 11,252 335,336
Loans (net of unearned income) 1,319,061 343,445 1,662,506
Less: allowance for loan losses (20,044) (2,484) (22,528)
------ ----- ------
Net loans 1,299,017 340,961 1,639,978
Bank premises and equipment 29,646 4,200 33,846
Goodwill 7,039 7,039
Other intangible assets 2,044 2,044
Other assets 25,277 2,740 712 (2) 28,729
------ ----- --- ------
TOTAL ASSETS $1,773,289 $374,926 $712 $2,148,927
========== ======== ==== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits $ 8.00
Low $8.00 Low $8.00 Low $8.00 Low224,666 $ 8.00
1993 High $8.40 High $8.40 High $8.40 High $15.00
Low $8.00 Low $8.00 Low $8.00 Low $ 8.00
1992 High $8.00 High $8.00 High $8.00 High $ 8.00
Low $8.00 Low $8.00 Low $8.00 Low $ 8.0013,376 $238,042
Interest-bearing deposits 1,210,682 292,991 1,503,673
--------- ------- ---------
Total deposits 1,435,348 306,367 1,741,715
Short-term borrowings 92,151 92,151
Federal Home Loan Bank borrowings 33,900 15,480 49,380
Other liabilities 20,597 4,869 4,799 (2) 30,265
------ ----- ----- --- ------
TOTAL LIABILITIES 1,581,996 326,716 4,799 1,913,511
STOCKHOLDERS' EQUITY:
Common stock 29,886 273 7,574 (1) 37,733
Surplus 31,972 11,969 (7,574)(1) 36,367
Treasury stock (3,425) (3,425)
Retained earnings l32,170 35,890 (4,087)(2) 163,973
Net unrealized holding gain on available for
sale securities 690 78 768
--- -- ---
TOTAL STOCKHOLDERS' EQUITY 191,293 48,210 (4,087) 235,416
------- ------ ----- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,773,289 $374,926 $712 $2,148,927
========== ======== ==== ==========
The above quotations reflect inter-dealer prices, without retail mark-
up, mark-down or commission and may not represent actual transaction.
55______________________________
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
57
FCB paid an annual cash dividend on common stock of $ .20 per share
for 1993 and 1994.
As part of FCB's loan agreement with NationsBank for the Capital Loan,
FCB has agreed not to pay dividends that would exceed 30% of FCB's net income
for the preceding fiscal year.
DIRECTORS
The following is a list of the Board of Directors, their occupations
for the past five years, approximate ages at this filing, and other pertinent
information:PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
NAMES (AGES) PRINCIPAL OCCUPATION DIRECTOR SINCEUBS & EAGLE
As Reported Pro Forma Pro Forma
-----------
UBS EAGLE Adjustments Consolidated
--- ----- ----------- ------------ -------------------- --------------
Yvonne E. Anderson Real Estate Sales and Investments 1983
(68)
James B. Brockett Chairman of the Board and 1980
(65) President of the Bank
Janet H. Brockett Senior Vice President of Bank 1982
(57)
Charles C. Brockett Vice President and Chief Financial 1993
(31) Officer of Bank
Gayle B. Matthews Attorney at Law 1980
(54)
John F. Rutledge Attorney at Law 1979
(70)
Lionel S. Taylor Executive Vice President of Bank 1988
(54)
Wayne J. Smith President, Wayne J. Smith Company 1990
(55) Association Management and Public
Relations
Messrs. Matthews and Rutledge are retained by FCB from time-to-time to provide
legal services.
EXECUTIVE OFFICERS
NAMES (AGES) POSITION HELD DATES HELD
------------- ------------- ----------
James B. Brockett Chairman and President 1980
(65)
56
Janet H. Brockett Vice President 1980
(57) Senior Vice President 1985
Harry F. Scott Vice President 1980
(51) Senior Vice President 1985
Lionel S. Taylor Senior Vice President 1981
(57) Executive Vice President 1985
Senior Lending Officer
Charles C. Brockett Vice President 1990
(31) Vice President & 1991
Chief Financial Officer
FAMILY RELATIONSHIPS
James B. Brockett and Janet H. Brockett are husband and wife. Charles C.
Brockett is the son of James B. Brockett.
CONTROL SHAREHOLDERS' CHAPTER 11 PROCEEDINGS
In September 1989, Herndon Lumber and Millwork, Inc. of which James B.
Brockett was the president, filed a petition for protection under Chapter 11 of
the United States Bankruptcy Code. Mr. Brockett, who owned a 50% interest, was
not actively involved in the management of the Company, which was involved in
lumber sales. The Company incurred operating losses and became illiquid as a
result of the slowdown in residential construction and the collapse of the real
estate market.
In October 1992, Burke Brockett and Rice Partnership, in which Mr.
Brockett was a general partner with a one-third interest, filed a petition for
protection under Chapter 7 of the United States Bankruptcy Code. The
partnership, which held land for residential development, became illiquid as a
result of the severe decrease in residential construction.
James B. Brockett and Janet H. Brockett filed a petition for
protection under Chapter 11 of the United States Bankruptcy Code on October 28,
1992. The action was taken because of personal guarantees of lease obligations
of Herndon Lumber and Millwork, Inc. referred to above.
57
The Control Shareholders have filed a motion with the Bankruptcy Court
seeking an order permitting them (1) to vote for the Merger; (2) to execute and
perform their obligations under the Merger Agreement; and (3) to exchange their
FCB Stock pursuant to the Merger Agreement, free and clear of all liens and
encumbrances which liens and encumbrances shall be transferred to the UBS Stock
so received in the exchange. This motion was granted by order of the Bankruptcy
Court issued on June 20, 1995 and became nonappealable on June 30, 1995.
The Control Shareholders intend to prepare and file a reorganization
plan for their Chapter 11 Proceedings calling for (i) the substitution of the
UBS Shares as collateral for all claims currently secured by the FCB Stock owned
by the Control Shareholders and (ii) the payment in cash, out of the cash
provided in the Merger Consideration, of allowed claims. The Control
Shareholders anticipate that certain allowed claims will be compromised and
reduced in amount and that certain disputed claims will be disallowed or will be
compromised and reduced in amount, so that the amount of cash payments required
to satisfy claims in the Chapter 11 Proceedings will not exceed the amount of
cash provided as part of the Merger consideration. There can, however, be no
assurance that the reorganization plan will be approved by the Bankruptcy Court
or that the results set forth above will be obtained in the Chapter 11
Proceedings.
EXECUTIVE COMPENSATION
The following table sets forth the total annual compensation paid or
accrued by FCB or for the account of the Chief Executive Officer and each of the
four most highly compensated executive officers of FCB whose total cash
compensation for the calendar year ended December 31, 1994, exceeded $100,000
(James B. Brockett was the only Executive Officer to meet the disclosure
requirement):
58
Annual Compensation
---------------------------------------------------------
NAME AND (1) OTHER ANNUAL (2) ALL OTHER
PRINCIPAL POSITION YEAR SALARY DIRECTOR FEES BONUS COMPENSATION COMPENSATION
James B. Brockett 1994 $150,000 $32,000 $154,062Interest income $101,423 $22,023 $123,446
Interest expense 40,554 11,450 52,004
------ ------ ------
Net interest income 60,869 10,573 71,442
Provision for possible loan losses 1,550 185 1,735
----- --- -----
Net interest income after provision
for possible loan losses 59,319 10,388 69,707
Other income 9,509 1,787 11,296
Other expenses 36,210 6,043 42,253
------ ----- ------
Income before income taxes 32,618 6,132 38,750
Income taxes 11,492 1,944 13,436
------ ----- ------
Net income $ 21,126 $ 4,188 $ 25,314
======== ======= ========
EARNINGS PER COMMON SHARE: $1.77 $1.53 $1.68
- $131,491
Chairman and President 1993 $150,000 $32,000 $102,497 $ - $102,557
1992 $150,000 $32,000 -0- $ - $134,069--------------------------
Average outstanding shares 11,933,975 2,729,468 15,072,863
(1) OTHER ANNUAL COMPENSATION
No officer of the FCB received perquisites and other personal benefits
that exceeded the lesser of either $50,000 or 10% of the annual salary and
bonus shown in the above table. To facilitate performance of their duties, FCB
makes available, at its expense, an automobile to Mr. Brockett as well as to
three other executive officers.
(2) ALL OTHER COMPENSATION
All other compensation includes amounts accrued but not paid under the
FCB deferred compensation agreement of $87,966, amounts accrued but not paid
of $35,108 to provide post retirement insurance benefits and the cost of term
insurance provided for58
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
FOR THE YEAR ENDED DECEMBER 31, 1994
of $8,417.
DIRECTORS COMPENSATION
Directors of FCB receive a fee of $500 for each Board of Directors
meeting. Each member of the Executive Committee receives a fee of $500 for each
Executive Committee meeting.
59
EXECUTIVE BONUS PLAN
On June 9, 1992, at the FCB annual meeting, shareholders of the Bank
voted to amend the bonus formula contained in the employment agreement for James
B. Brockett approved June 12, 1984 to correct an omission in the original
formula. Under the amended bonus plan, bonuses on excess earnings are computed
as follows:(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
================================================================================
BASE EARNINGS (2) FOR BONUS % MAXIMUM BONUS
BONUS RANGE FOR RANGE FOR RANGE
================================================================================UBS & EAGLE
As Reported Pro Forma Pro Forma
-----------
UBS EAGLE Adjustments Consolidated
--- ----- ----------- ------------
200,000 to 600,000 25% $100,000
600,000 to 700,000 20% 20,000
(1) 700,000 to 800,000 15% 15,000
800,000 to 900,000 10% 10,000
Over 900,000 5% 5,000 each
$100,000
Interest income $121,157 $26,480 $147,637
Interest expense 43,887 11,785 55,672
------ ------ ------
Net interest income 77,270 14,695 91,965
Provision for possible loan losses 1,818 384 2,202
----- --- -----
Net interest income after provision
for possible loan losses 75,452 14,311 89,763
Other income 11,222 1,016 12,238
Other expenses 48,676 7,232 55,908
------ ----- ------
Income before income taxes 37,998 8,095 46,093
Income taxes 13,096 2,613 15,709
------ ----- ------
Net income $ 24,902 $ 5,482 $ 30,384
======== ======= ========
EARNINGS PER COMMON SHARE: $2.08 $2.01 $2.01
- --------------------------
Average outstanding shares 11,993,062 2,729,468 15,131,950
59
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
FOR THE YEAR ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
UBS & EAGLE
As Reported Pro Forma Pro Forma
-----------
UBS EAGLE Adjustments Consolidated
--- ----- ----------- ------------
Interest income $116,505 $ 24,119 $ 140,624
Interest expense 45,009 10,028 55,037
------ ------ ------
Net interest income 71,496 14,091 85,587
Provision for possible loan losses 4,332 498 4,830
----- --- -----
Net interest income after provision
for possible loan losses 67,164 13,593 80,757
Other income 12,673 1,627 14,300
Other expenses 49,690 6,417 56,107
------ ----- ------
Income before income taxes 30,147 8,803 38,950
Income taxes 9,770 2,712 12,482
----- ----- ------
Income before cumulative effect
of earnings
================================================================================change in accounting principle 20,377 6,091 26,468
Cumulative effect of change in method
of accounting for income taxes 1,329 1,329
----- -----
Net income $ 21,706 $ 6,091 $ 27,797
======== ======= ========
EARNINGS PER COMMON SHARE:
- --------------------------
Income before cumulative effect of
accounting change $ 1.71 $ 2.24 $ 1.76
Cumulative effect of accounting change 0.11 0.09
---- ----
Net income $ 1.82 $ 2.24 $ 1.85
===== ====== ======
Average outstanding shares 11,922,521 2,718,930 15,049,291
(1) Range added60
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
UNITED BANKSHARES, INC. AND SUBSIDIARIES
FOR THE YEAR ENDED DECEMBER 31, 1992
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
UBS & EAGLE
As Reported Pro Forma Pro Forma
-----------
UBS EAGLE Adjustments Consolidated
--- ----- ----------- ------------
Interest income $113,502 $22,927 $136,429
Interest expense 49,897 10,922 60,819
------ ------ ------
Net interest income 63,605 12,005 75,610
Provision for possible loan losses 4,242 566 4,808
----- --- -----
Net interest income after provision
for possible loan losses 59,363 11,439 70,802
Other income 11,123 766 11,889
Other expenses 46,991 5,635 52,626
------ ------ ------
Income before income taxes 23,495 6,570 30,065
Income taxes 7,136 2,144 9,280
----- ----- -----
Net income $ 16,359 $ 4,426 $ 20,785
======== ======= ========
EARNINGS PER COMMON SHARE: $1.52 $1.67 $1.51
- --------------------------
Average outstanding shares 10,737,688 2,650,592 13,785,869
61
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNITED BANKSHARES, INC. AND SUBSIDIARIES
Notes to Pro Forma Condensed Balance Sheet
- ------------------------------------------
1) The stockholders' equity accounts are adjusted to reflect the issuance of
3,138,888 shares of United common stock at $2.50 par value. The Exchange Ratio
is 1.15 shares of UBS Stock for each share of Eagle Stock outstanding. At
September 30, 1995, there were 2,729,468 shares of Eagle Stock outstanding.
2) To reflect nonrecurring charges and related tax effects which will result
directly from the Merger and be included in the consolidated income statement of
UBS within the year after the merger as follows:
Recapture of pre-1987 bad debt reserve $3,000
Investment banker fee 1,087
------
Net nonrecurring charges $4,087
======
62
DESCRIPTION OF UBS STOCK
The authorized capital stock of UBS consists of 20,000,000 shares of
UBS Stock. The UBS Stock does not represent or constitute a deposit account and
is not insured by the FDIC.
The authorized but unissued shares of UBS Stock are available for
issuance in future mergers or acquisitions, in a future public offering or
private placement or for other general corporate purposes. Except as otherwise
required to approve the transaction in which the additional authorized shares of
UBS Stock would be issued, shareholder approval generally would not be required
pursuant to the requirements for continued listing of the UBS Stock on NASDAQ or
the requirements of any exchange on which the UBS Stock may then be listed.
The following description of the UBS Stock does not purport to be
complete and is qualified in all respects by reference to the Articles and
Bylaws of UBS and the WVCA.
General. Each share of UBS Stock has the same relative rights and is
-------
identical in all respects with amendment
(2) Base earningseach other share of UBS Stock. The UBS Stock is
definednot subject to call for redemption and, upon receipt by UBS of the shares of
Eagle Stock surrendered in exchange for UBS Stock, each share of UBS Stock
offered hereby will be fully paid and non-assessable.
Voting Rights. The holders of UBS Stock possess exclusive voting
-------------
rights in UBS. Each holder of UBS Stock is entitled to one vote for each share
held on all matters voted upon by shareholders, and shareholders are permitted
to cumulate votes in elections of directors.
Dividends. The holders of the UBS Stock are entitled to such dividends
---------
as net income before taxes
A bonus computed under the formula of $154,062 was accrued for 1994.
EXECUTIVE SALARY CONTINUATION PLAN
FCB entered into agreements on April 18, 1986, with certain executive
officersmay be declared from time to induce each executive to remain in his capacity with FCB. The
agreements provide retirement benefits conditional upon the continuous
employment of a period of at least ten years and death benefits payable to their
designated beneficiaries should the executive die while employedtime by FCB.
Effective for 1992, the Board of Directors approved deferred
compensation agreements for Janet H. Brockett and James B. Brockett. The
agreement for Janet H. Brockett is substantially identicalof UBS out of
funds legally available therefor.
Preemptive Rights. Holders of UBS Stock do not have any preemptive
-----------------
rights with respect to any shares which may be issued by UBS in the future;
thus; UBS may sell shares of UBS Stock without first offering them to the agreements
with the other executive officers. The agreement with James B. Brockett
provides for retirement benefits of $100,000 per year for four years conditional
upon Mr. Brockett's employment until January 1,then
holders of the year following his
attaining age sixty-five (65) which date is January 1, 1996.
60
The executive officers covered by the agreements are shown in the
following table.
================================================================================
OFFICER RETIREMENT BENEFIT ANNUAL
------- Age YEARS BENEFITS
---------- ------- --------
- --------------------------------------------------------------------------------
Charles C. Brockett 60 15 $ 80,000
- --------------------------------------------------------------------------------
Janet H. Brockett 60 15 50,000
- --------------------------------------------------------------------------------
James B. Brockett 65 4 100,000
- --------------------------------------------------------------------------------
Harry F. Scott 60 15 85,000
- --------------------------------------------------------------------------------
Lionel S. Taylor 60 15 80,000
================================================================================
The agreements provide for reduced annual benefits should the
executive officer retire prior to retirement age.
On December 31, 1993, a Split Dollar Life Insurance agreement with
James B. Brockett was amended as follows: (a) to provide for interest to FCB at
the rate of 5% compounded annually, beginning October 1, 1989, on the premiums
advanced by FCB, and (b) to limit the number of premium payments of $81,710 made
under the agreement to ten (10). The premium advances made by FCB continue to
be secured by a collateral assignment of the death benefits of the policy.
EMPLOYMENT AGREEMENTS
On December 31, 1992, Mr. Brockett entered into an employment
agreement with FCB for a term of one year. The agreement will automatically
renew unless either party gives written notice to the other of his or its
intention to renew the agreement at least ninety (90) days prior to the
commencement of the renewal period. The agreement provides for a base salary of
$150,000 and any bonus to which he is entitled pursuant to the "Executive Bonus
Plan." The agreement also provides for participation in other employee benefit
plans use of an automobile, three weeks annual vacation and for reimbursement of
the cost of membership and/or monthly dues in professional and civic
organizations approved by the Board of Directors. The agreement
61
provides further that, in the event Mr. Brockett's employment is terminated by
FCB at any time during the terms of the agreement for any reason other than
"cause" (gross negligence, proven dishonesty, or willful violation of law by the
employee), FCB will pay a lump sum amount equivalent to salary and benefits
payable for a period which ranges from nine to twenty-four months, depending on
the length of service. Upon voluntary termination by the employee, FCB will pay
to the employee a lump sum amount equivalent to the salary and benefits payable
for a period which ranges from three to twelve months depending on the length of
service.UBS Stock.
Liquidation. In the event of a change in control andany liquidation, dissolution or winding
-----------
up of UBS, the employee is not assigned
substantiallyholders of the same position or not provided substantially the same
facilities within the trade area of FCB as defined in its Community Reinvestment
Act Statement, then in effect, the employee willUBS Stock would be entitled to terminate his
employment and receive, a lump sumafter
payment of 2.99 times his then annual salary.
FCB has entered into substantially similar agreements with other executive
officers.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows asall debts and liabilities of March 31, 1995, (a) the voting
securitiesUBS, all assets of each person who was known by FCB to beneficially own more than 5%
of any class of FCB's voting securities; and (b) the equity securities,
including optionsUBS available for
the purchase of equity security, of FCB beneficially owned
directly or indirectly by all directors and officers of FCB individually and as
a group.
COMMON SHARES AND
OPTIONS FOR
NAME AND ADDRESS PURCHASE OF PERCENTAGE
OF HOLDER COMMON SHARES (1) OF CLASS
--------- ----------------- --------
James B. Brockett and 137,883 68.6%
Janet H. Brockett
1300 Crystal Drive
Arlington, VA 22202
All directors and 141,167 70.2%
officers as a group (9
in number)
(1) All common shares are held of record and beneficially owned.
62
None of the management shares owned are subject to options, warrants, rights or
conversion privileges. No officer or director other than James and Janet
Brockett beneficially own more than 1%.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTION
Most of the directors, and their related interests maintain normal
banking relationships with FCB. Loans made by FCB to such persons or other
entities were made in the ordinary course of business, were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons, and did
not involve more than normal risk of collectability or present other unfavorable
features.distribution.
63
REGULATION AND SUPERVISION OF UBS
GENERAL
UBS, as a bank holding company, is subject to the restrictions of the
Bank Holding Company Act of 1956, as amended,BHCA, and areis registered pursuant to its provisions. As a registered bank
holding company, UBS is subject to the reporting requirements of the Board of Governors of the Federal Reserve System
("Board of Governors"),FRB, and is
subject to examination by the Board of Governors.FRB.
The Bank Holding Company ActBHCA prohibits the acquisition by a bank holding company of direct
or indirect ownership of more than five percent of the voting shares of any bank
within the United States without prior approval of the Board of Governors and also prohibits the granting of such approval in respect
of any bank within the United States, located outside of the state where the
bank holding company's principal operations are conducted, unless the
acquisition is specifically authorized by the statutes of the state in which the
bank is located. West Virginia law permits certain interstate bank acquisitions.FRB. With certain
exceptions, a bank holding company is prohibited from acquiring direct or
indirect ownership or control or more than five percent of the voting shares of
any company which is not a bank, and from engaging directly or indirectly in
business unrelated to the business of banking or managing or controlling banks.
The Board of Governors of the Federal Reserve System ("Federal Reserve
Board"),FRB, in its Regulation Y, permits bank holding companies to engage
in non-
bankingnon-banking activities closely related to banking or managing or controlling
banks. Approval of the Federal Reserve BoardFRB is necessary to engage in these activities or to make
acquisitions of corporations engaging in these activities as the Federal Reserve BoardFRB determines
whether these acquisitions or activities are in the public interest. In
64
addition, by order, and on a case by case basis, the Federal Reserve BoardFRB may approve other non-bankingnon-
banking activities.
As a bank holding company doing business in West Virginia, UBS is also
subject to regulation by the West VirginiaWV Board of Banking and Financial
Institutions (the "West Virginia Board") and must submit annual reports to the Department.West
Virginia Division of Banking.
Federal law restricts subsidiary banks of a bank holding company from
making certain extensions of credit to the parent bank holding company or to any
of its subsidiaries, from investing in the holding company stock, and limits the
ability of a subsidiary bank to take its parent company stock as collateral for
the loans of any borrower. Additionally, federal law prohibits a bank holding
company and its subsidiaries from engaging in certain tie-in arrangements in
conjunction with the extension of credit or furnishing of services.
The operations of UBS'sUBS' banking subsidiaries, which are national
banking subsidiaries, are subject to federal statutes which apply to national
banks. UBS'sUBS' national banking subsidiaries are primarily regulated by the OCC.
UBS'sUBS' national bank subsidiaries are also subject to regulations promulgated by
the Federal
Reserve BoardFRB and the FDIC. UBS' Virginia subsidiary is a Virginia chartered state
member bank and is subject to regulation by the FRB, the Virginia Corporation
Commission's Bureau of Financial Institutions and the FDIC. As a membermembers of the
FDIC, the deposits of UBS'sUBS' subsidiaries are insured as required by federal law.
The OCC regularly examines revenues, loans, investments, management practices,
and other aspects of UBS'sUBS' subsidiaries. These examinations are conducted
primarily to protect depositors and not shareholders. In addition to these
regular
64
examinations, UBS'sUBS' subsidiary banks each must furnish to the OCC a quarterly
report containing a full and accurate statement of its affairs.
The operations of FCB are subject to Virginia state statutes which
apply to state-chartered banks. As such, its primary regulator is the Virginia
Bureau of Financial Institutions. As a member of the FDIC, deposits of FCB are
insured as provided by federal law. As a member of the Federal Reserve System,
FCB's
65
primary federal regulator is the Federal Reserve Board. The Virginia Bureau of
Financial Institutions, which is the primary state supervisory authority of FCB
along with the Federal Reserve Board, regularly examine reserves, loans,
investments, management practices, and other aspects of FCB's operations. These
examinations are conducted primarily to protect depositors and customers, not
shareholders.
NON-BANKING ACTIVITIES PERMITTED TO UBS
The Federal Reserve BoardFRB permits, within prescribed limits, bank holding companies to
engage in non-banking activities closely related to banking or to managing or
controlling banks. Such activities are not limited to the state of West
Virginia. Some examples of non-banking activities which presently may be
performed by a bank holding company are: making or acquiring, for its own
account or the account of others, loans and other extensions of credit;
operating as an industrial bank, or industrial loan company, in the manner
authorized by state law; servicing loans and other extensions of credit;
performing or carrying on any one or more of the functions or activities that
may be performed or carried on by a trust company in the manner authorized by
federal or state law; acting as an investment or financial advisor; leasing real
or personal property; making equity or debt investments in corporations or
projects designed primarily to promote community welfare, such as the economic
rehabilitation and the development of low income areas; providing bookkeeping
services or financially oriented data processing services for the holding
company and its subsidiaries; acting as an insurance agent or a broker, to a
limited extent, in relation to insurance directly related to an extension of
credit; acting as an underwriter for credit life insurance which is directly
related to extensions of credit by the bank holding company system; providing
courier services for certain financial documents; providing management
consulting advice to nonaffiliated banks; selling retail money orders having a
face value of not more than $1,000, traveler's checks and U. S. savings bonds;
performing appraisals of real estate; arranging commercial 66
real estate equity
financing under certain limited circumstances; providing securities brokerage
services related to securities credit activities; underwriting and dealing in
government obligations and money market instruments; providing foreign exchange
advisory and transactional services; and acting under certain circumstances, as
futures commission merchant for nonaffiliated persons in the execution and
clearance on major commodity exchanges of futures contracts and options.
CREDIT AND MONETARY POLICIES AND RELATED MATTERS
UBS'sUBS' subsidiary banks and FCB are affected by the fiscal and monetary policies
of the federal government and its agencies, including the Federal
Reserve Board.FRB. An important
function of these policies is to curb inflation and control recessions through
control of the supply of money and credit. The operations of UBS'sUBS' subsidiary
banks and FCB are affected by the policies of government regulatory authorities,
including the Federal Reserve BoardFRB which regulates money and credit conditions through open
market operations in United States Government and federal agency securities,
adjustments in the discount rate on member bank borrowings, and requirements
against deposits and regulation of interest rates payable by member banks on
time and savings deposits. These policies have a significant influence on the
growth and distribution of loans, investments and deposits, and interest rates
charged on loans, or paid for time and savings deposits, as well as yields on
investments. The Federal Reserve
BoardFRB has had a significant effect on the operating results of
commercial banks in the past and is expected to continue to do so in the future.
Future policies of the Federal Reserve BoardFRB and other authorities and their effect on future bank
earnings cannot be predicted.
65
The Federal Reserve BoardFRB has a policy to the effect that a bank holding company is
expected to act as a source of financial and managerial strength to each of its
subsidiary banks and to commit resources to support each such subsidiary bank.
Under the 67
source of strength doctrine, the Federal Reserve BoardFRB may require a bank holding
company to contribute capital to a troubled subsidiary bank, and may charge the
bank holding company with engaging in unsafe and unsound practices for failure
to commit resources to such a subsidiary bank. This capital injection may be
required at times when UBS may not have the resources to provide it. Any
capital loans by a holding company to any of the subsidiary banks are
subordinate in right of payment to deposits and to certain other indebtedness of
such subsidiary bank. In addition, the Crime Control Act of 1990 provides that
in the event of a bank holding company's bankruptcy, any commitment by such
holding company to a federal bank or thrift regulatory agency to maintain the
capital of a subsidiary bank will be assumed by the bankruptcy trustee and
entitled to a priority of payment.
In 1989, the United States Congress enacted the Financial Institutions
Reform, Recovery and Enforcement Act ("FIRREA"). Under FIRREA depository
institutions insured by the FDIC may now be liable for any losses incurred by,
or reasonably expected to be incurred by, the FDIC after August 9, 1989, in
connection with (i) the default of a commonly controlled FDIC-insured depository
institution, or (ii) any assistance provided by the FDIC to commonly controlled
FDIC-insured depository institution in danger of default. "Default" is defined
generally as the appointment of a conservator or receiver and "in danger of
default" is defined generally as the existence of certain conditions indicating
that a "default" is likely to occur in the absence of regulatory assistance.
Accordingly, in the event that any insured bank or subsidiary of UBS causes a
loss to the FDIC, other bank subsidiaries of UBS could be liable to the FDIC for
the amount of such loss.
Under federal law, the OCC may order the pro rata assessment of
shareholders of a national bank whose capital stock has become impaired, by
losses or otherwise, to relieve a deficiency in such national bank's capital
stock. This statute also provides for the enforcement of any such pro rata
assessment 68
of shareholders of such national bank to cover such impairment of
capital stock by sale, to the extent necessary, of the capital stock of any
assessed shareholder failing to pay the assessment. Similarly, the laws of
certain states provide for such assessment and sale with respect to the
subsidiary banks chartered by such states. UBS as the sole stockholder of its
subsidiary banks, is subject to such provisions. Virginia law does not provide
for assessment of fully paid shares of bank stock.
CAPITAL REQUIREMENTS
As banking institutions,a holding company UBS and FCB areis subject to finalFRB risk-based capital
guidelines that were issued by the Federal Reserve Board in January,
1989.guidelines. The guidelines establish a systematic analytical framework that
makes regulatory capital requirements more sensitive to differences in risk
profiles among banking organizations, takes off-balance sheet exposures into
explicit account in assessing capital adequacy, and minimizes disincentives to
holding liquid, low-risk assets. Under the guidelines and related policies, bank
holding companies must maintain capital sufficient to meet both a risk-based
asset ratio test and leverage ratio test on a
66
consolidated basis. The risk-
basedrisk-based ratio is determined by allocating assets and
specified off-balance sheet commitments into four weighted categories, with
higher levels of capital being required for categories perceived as representing
greater risk. All of UBS'sUBS' depository institution subsidiaries and FCB are subject to
substantially similar capital requirements adopted by applicable regulatory
agencies.
Generally, under the applicable guidelines, the financial
institution's capital is divided into two tiers. "Tier 1," or core capital,
includes common equity, noncumulative perpetual preferred stock (excluding
auction rate issues) and minority interests in equity accounts of consolidated
subsidiaries, less goodwill and other intangibles. "Tier 2," or supplementary
capital, includes, among other things, cumulative and limited-life preferred
stock, hybrid capital instruments, mandatory convertible securities, 69
qualifying
subordinated debt, and the allowance for loan losses, subject to certain
limitations, less required deductions. "Total capital" is the sum of Tier 1 and
Tier 2 capital. Bank holding companies are subject to substantially identical
requirements, except that cumulative perpetual preferred stock can constitute up
to 25% of a bank holding company's Tier 1 capital.
The guidelines, which became effective December 31, 1990, were phased
in over two years, with the transition, or phase-in period, being completed at
the end of 1992. Effective December 31, 1992, financial institutionsBank holding companies are required to attainmaintain a risk-based ratio of
8%, of which 4% must be Tier 1 capital. The appropriate regulatory authority
may set higher capital requirements when an institution's particular
circumstances warrant.
For purposes of the leverage ratio, the numerator is defined as Tier 1
capital and the denominator is defined as adjusted total assets (as specified in
the guidelines). The guidelines provide for a minimum leverage ratio of 3% for
financial institutionsbank holding companies that meet certain specified criteria, including excellent
asset quality, high liquidity, low interest rate exposure and the highest
regulatory rating. Financial institutionsBank holding companies not meeting these criteria are
required to maintain a leverage ratio which exceeds 3% by a cushion of at least
1001 to 200 basis points.2 percent.
The guidelines also provide that financial institutionsbank holding companies experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels, without
significant reliance on intangible assets. Furthermore, the Federal Reserve
Board'sFRB's guidelines
indicate that the Federal Reserve BoardFRB will continue to consider a "tangible Tier 1 leverage
ratio" in evaluating proposals for expansion or new activities. The tangible
Tier 1 leverage ratio is the ratio of an institution's Tier 1 capital, less all
intangibles, to total assets, less all intangibles.
70
On August 2, 1995, the FRB and other banking agencies issued their
final rule to implement the portion of Section 305 of FDICIA that requires the
banking agencies to revise their risk-based capital standards to ensure that
those standards take adequate account of interest rate risk. This final rule
amends the capital standards to specify that the banking agencies will include,
in their evaluations of a bank's capital adequacy, an assessment of the exposure
to declines in the economic value of the bank's capital due to changes in
interest rates.
Failure to meet applicable capital guidelines could subject the financial institutionbank
holding company to a variety of enforcement remedies available to the federal
regulatory authorities, including limitations on the ability to pay dividends,
the issuance by the regulatory authority of a capital
67
directive to increase capital and termination of deposit insurance by the FDIC,
as well as to the measures described under the "Federal Deposit Insurance
Corporation Improvement Act of 1991" as applicable to undercapitalized
institutions.
As of March 31,September 30, 1995, the historical Tier 1 risk-based ratio, total
risk-based ratio and total assets leverage ratio for UBS and FCB and related pro forma regulatory capital ratios (in accordance with fully phased in requirements)of
UBS were as set forth in the following table, assuming the Merger was
consummated as of such date on a pooling of interests accounting basis as
follows:
71
HISTORICAL AND PROFORMA CAPITAL RATIOS
AS OF MARCH 31, 1995
UBS/
FIRST
COMMERCIAL
PROFORMA FIRSTEAGLE
PRO FORMA
CONSOLIDATED UBS
COMMERCIAL
------------ -------- ----------------------- ---
Risk-based Capital:
Actual Tier 1 14.41% 14.49% 13.26%15.87% 14.76%
Actual Total 15.66% 15.74% 14.51%17.10% 16.01%
Reg Minimum Tier 1 4.00% 4.00% 4.00%
Reg Minimum Total 8.00% 8.00%
8.00%
Excess over Minimum:
Tier 1 10.41% 10.49% 9.26%11.87% 10.76%
Total 7.66% 7.74% 7.51%9.10% 8.01%
Leverage 9.67% 9.67% 9.32%
Equity to
assets 10.22% 10.23% 9.31%10.56% 10.24%
UBS/
1ST
COMMERCIAL
PROFORMA FIRST
CONSOLIDATED UBS COMMERCIAL
------------ --------- ----------
(in millions)
Risk-based Capital:
Actual Tier 1 $179.3 $173.2 $5.7
Actual Total 194.9 188.2 6.2
Reg Minimum Tier 1 49.8 47.8 1.7
Reg Minimum Total 99.5 95.7 3.4
Excess over Minimum:
Tier 1 129.5 125.4 4.0
Total 95.4 92.5 2.8
Leverage 179.3 173.2 5.7
Equity to
assets 189.4 183.3 5.7
72
HISTORICAL AND PROFORMA CAPITAL RATIOS
AS OF DECEMBER 31, 1994
UBS/
FIRST
COMMERCIAL
PROFORMA FIRST
CONSOLIDATED UBS COMMERCIAL
------------- ------------- ----------
Risk-based Capital:
Actual Tier 1 14.13% 14.27% 12.35%
Actual Total 15.38% 15.52% 13.60%
Reg Minimum Tier 1 4.00% 4.00% 4.00%
Reg Minimum Total 8.00% 8.00% 8.00%
Excess over Minimum:
Tier 1 10.13% 10.27% 8.35%
Total 7.38% 7.52% 5.60%
Leverage 9.49% 9.49% 9.44%
Equity to
assets 10.03% 10.05% 9.41%
UBS/
FIRST
COMMERCIAL
PROFORMA FIRST
CONSOLIDATED UBS COMMERCIAL
------------ ------------ ----------
(in millions)
Risk-based Capital:
Actual Tier 1 $175.4 $169.7 $ 5.7
Actual Total 190.9 184.6 6.3
Reg Minimum Tier 1 49.6 47.6 1.9
Reg Minimum Total 99.3 95.1 3.7
Excess over Minimum:
Tier 1 125.8 122.1 3.8
Total 91.6 89.5 2.6
Leverage 175.4 169.7 5.7
Equity to
assets 185.4 179.7 5.7
73
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
In December, 1991, Congress enacted the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), which substantially revisesrevised the
bank regulatory and funding provisions of the Federal Deposit Insurance
Corporation Act and makesmade revisions to several other banking statues.
FDICIA establishes a new regulatory scheme, which ties the level of
supervisory intervention by bank regulatory authorities primarily to a
depository institution's capital category.
68
Among other things, FDICIA authorizes regulatory authorities to take "prompt
corrective action" with respect to depository institutions that do not meet
minimum capital requirements. FDICIA establishes five capital tiers: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically under capitalized.
By regulation, an institution is "well-capitalized" if it has a total
risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of
6% or greater and a Tier 1 leverage ratio of 5% or greater and is not subject to
a regulatory order, agreement or directive to meet and maintain a specific
capital level for any capital measure. Each of the banking subsidiaries of UBS
meetswas a "well capitalized" institution as of September 30, 1995. As well-
capitalized institutions, the definitionbanking subsidiaries of a "well-
capitalized" holding company. FCB is an "adequately capitalized" institution.
As a well-capitalized institution, UBS but not FCB, isare permitted to
engage in a wider range of banking activities, including among other things, the
accepting of "brokered deposits," and the offering of interest rates on deposits
higher than the prevailing rate in their respective markets. Because FCB is not well-
capitalized, FCB must first obtain a waiver from the FDIC in order to engage in
"brokered deposit" activities. Even with a waiver, FCB cannot pay interest
rates on deposits that are significantly above market.
74
Another requirement of FDICIA is that federal banking agencies must
prescribe regulations relating to various operational areas of banks and bank
holding companies. These include standards for internal audit systems, loan
documentation, information systems, internal controls, credit underwriting,
interest rate exposure, asset growth, compensation, a maximum ratio of
classified assets to capital, minimum earnings sufficient to absorb losses, a
minimum ratio of market value to book value for publicly traded shares and such
other standards as the agency deems appropriate.
Since many of the required
regulations have not been promulgated, it is not possible to determine precisely
how these new standards will effect either FCB or UBS. It is generally believed
that the new regulations will increase the regulatory burden of insured
depository institutions and their affiliates.
REIGLE-NEAL INTERSTATE BANKING BILL
In 1994, Congress passed the Reigle-Neal Interstate Banking Bill (the
"Interstate Bill"). The Interstate Bill permits certain interstate banking
activities through a holding company structure, effective September 30, 1995.
It permits interstate branching by merger effective June 1, 1997 unless states
opt-in"opt-in" sooner, or opt out"opt-out" before that date. States may elect to permit de
novo branching by specific legislative election. Virginia has opted-in to interstate
branching by merger; to date, West Virginia has taken no
action.action in this regard to date. The Interstate Bill will permit consolidation of
banking institutions across state lines and, perhaps, de novo entry. As its
provisions become effective, it is likely that the resulting restructurings and
interstate activities will result in the realization of economies of scale
within those institutions with entities in more than one state. One result could
be increased competitiveness, due to the realization of economies of scale
and/or, where permitted, due to de novo market entrants.
75RECENT LEGISLATIVE DEVELOPMENTS
RECAPITALIZATION OF SAIF
The deposits of First Empire are currently insured by the Savings
Association Insurance Fund ("SAIF") of the FDIC. The deposits of the subsidiary
banks of UBS are insured by the Bank Insurance Fund ("BIF") of the FDIC. Both
the SAIF and the BIF are required by law to maintain a reserve ratio of 1.25%
of insured deposits. The BIF has achieved a fully funded status in contrast to
the SAIF and, therefore, as discussed below, the FDIC recently substantially
reduced the average deposit insurance premium paid by commercial banks,
including the subsidiary banks of UBS, to a level approximately 75% below the
average premium paid by saving institutions. SAIF
69
reserves have not grown as quickly as the BIF reserves due to a number of
factors, including the fact that a significant portion of SAIF premiums have
been and are currently being used to make payments on bonds issued in the late
1980s by the Financing Corporation ("FICO") to recapitalize the now defunct
Federal Savings and Loan Insurance Corporation.
The House of Representatives and the Senate of the United States have
provided for a resolution of the recapitalization of the SAIF in the Balanced
Budget Act of 1995, which was sent to the President of the United States on
November 29, 1995 and vetoed by him on December 6, 1995 for reasons unrelated to
the recapitalization of the SAIF. The Reconciliation Bill provides that all
SAIF member institutions will pay a special one-time assessment to recapitalize
the SAIF, which in the aggregate will be sufficient to bring the reserve ratio
in the SAIF Fund to 1.25% of insured deposits. Based on the current level of
reserves maintained by the SAIF Fund, it is currently anticipated that the
amount of the special assessment required to recapitalize the SAIF is estimated
to be approximately 80 to 85 basis points of the SAIF-assessable deposits. The
special assessment would be payable on January 1, 1996, based on the amount of
SAIF deposits on March 31, 1995. It is anticipated that after the
recapitalization of the SAIF, that premiums of SAIF-insured institutions would
be reduced so that they are comparable to those currently being assessed BIF-
insured commercial banks.
The Reconciliation Bill also provides for the merger of the BIF and
SAIF on January 1, 1998, with such merger being conditioned upon the prior
elimination of the thrift charter. The Banking Committees of the House of
Representatives and the Senate in adopting the Reconciliation Bill agreed that
Congress should consider and act upon separate legislation as early as possible
in 1996 to eliminate the thrift charter.
Although the outcome of the proposed legislation cannot be predicted
with certainty, it is likely that some kind of legislative or regulatory action
will be undertaken that will impact First Empire's insured deposits. A one-time
special assessment of 80 basis points would result in First Empire paying
approximately $2.5 million.
In light of the different proposals currently under consideration and
the uncertainty of the legislative process generally, the managements of UBS and
Eagle cannot predict whether legislation reducing SAIF premiums and/or imposing
a special one-time assessment will be adopted, or, if adopted, the amount of the
assessment, if any, that would be imposed on First Empire.
PENDING LEGISLATION REGARDING BAD DEBT RESERVES
Under Section 593 of the Code, thrift institutions such as First
Empire, which meet certain definitional tests primarily relating to their assets
and the nature of their business, are permitted to establish a tax reserve for
bad debts and to make annual additions thereto, which additions may, within
specified limitations, be deducted in arriving at their taxable income. First
Empire's deduction with respect to "qualifying loans," which are generally loans
secured by certain interests in real property, may currently be computed using
an amount based on First Empire's actual loss experience (the "experience
method"), or a percentage equal to 8.0% of First Empire's taxable
70
income (the "percentage of taxable income method"), computed without regard to
this deduction and with additional modifications and reduced by the amount of
any permitted addition to a non-qualifying reserve.
Under the Reconciliation Bill, the percentage of taxable income method
would be repealed and thrift institutions such as First Empire would be
permitted to deduct bad debts only as they occur. In addition, First Empire
would be required to recapture (i.e., take into income) over a multi-year period
the excess of the balance of such reserves as of December 31, 1995, over the
greater of (a) the balance of such reserves as of December 31, 1987 or (b) an
amount that would have been the balance of such reserves as of December 31, 1995
had First Empire always computed the additions to its reserves using the
experience method. However, under the proposed legislation, such recapture
requirements would be suspended for each of two successive taxable years
beginning January 1, 1996, in which First Empire originates a minimum amount of
certain residential loans based upon the average of the principal amounts of
such loans made by First Empire during its six taxable years preceding 1996.
The effect of the foregoing provisions, were they to be adopted as
proposed, would be for First Empire (or UNB as its successor upon consummation
of the Bank Merger) to not have to recapture (i.e., take into income) the
balance of its bad debt reserves as of December 31, 1987. Absent such
legislation, approximately $3.0 million of taxes would have to be paid by UNB
upon consummation of the Bank Merger due to the recapture of the bad debt
reserves established by First Empire under Section 593 of the Code.
It is not possible to predict whether the above-described legislation
relating to taxation of thrift institutions will be enacted into law.
EXPERTS
The consolidated financial statements of FCB at December 31, 1994UBS and 1993, and for each of the three years in the period ended December 31, 1994,
included in this Prospectus/Proxy Statement and Registration Statement have been
audited by S.B. Hoover & Company, L.L.P. independent auditors, as set forth in
their reports included herein.
The consolidated financial statements of UBSEagle at December 31,
1994 and 1993, and for each of the three years in the period ended December 31,
1994, incorporated by reference in this Prospectus/Joint Proxy Statement and the
Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon incorporated by reference
herein. As to the UBS financial statements for the year ended December 31,
1992, Ernst & Young LLP's report is based in part on the report of Somerville &
Company, independent auditors.
The financial statements referred to above are included or are
incorporated in reliance upon such reports given upon the authority of such
firms as experts in accounting and auditing.
Baxter Fentriss and Company has acted as financial advisor to FCB in
connection with the Merger and has delivered an opinion to the FCB Board of
directors on the fairness of the Merger, which opinion is attached hereto as
Exhibit B. FCB will pay Baxter Fentriss and Company a contingent fee upon
consummation of the Merger See THE PROPOSED TRANSACTION - THE MERGER - Opinion
---
of Financial Advisor."
LEGAL MATTERS
The legality of the shares of UBS Stock to be issued upon consummation
of the proposed acquisition described hereinMerger will be passed upon by the law firm of Bowles Rice McDavid Graff &
Love, with offices
71
in Charleston, West Virginia. Bowles Rice McDavid Graff & Love has acted as
counsel to UBS in connection with the Merger and the preparation of this
Prospectus/Joint Proxy Statement.
76
One of UBS'sUBS' directors, F. T. Graff, Jr., is a partner in the law firm
of Bowles Rice McDavid Graff & LoveLove.
PROPOSALS FOR THE 1996 ANNUAL MEETING
In the case of each of UBS and has been associated with this law firmEagle, the deadline set forth in Rule
14a-8 under the Exchange Act for a numberthe submission of years.
Legal matters pertainingproposals by shareholders for
inclusion in the proxy statement and form of proxy to FCB have been examinedbe used by the law offices
of Robins, Kaplan, Miller & Ciresi, Washington, D.C.,UBS and Atlanta, Georgia.
Robins, Kaplan, Miller & Ciresi has prepared the tax opinion referred to herein
and acted as special counsel to FCBEagle
in connection with this Prospectus/Proxy
Statement.
SOURCESits annual meeting of shareholders to be held in April 1996
has passed.
72
ANNEX A
AGREEMENT AND PLAN OF INFORMATION
The information in this Prospectus/Proxy Statement concerning UBSMERGER
BETWEEN
UNITED BANKSHARES, INC.
AND
EAGLE BANCORP, INC.
DATED AS OF AUGUST 18, 1995
A-1
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS........................................... 1
ARTICLE II THE MERGER AND THE BANK MERGER........................ 5
2.1 The Merger............................................ 5
2.2 Effects of the Merger................................. 5
2.3 Effective Time; Closing............................... 6
2.4 Treatment of Acquiror Common Stock.................... 6
2.5 Conversion of Company Common Stock.................... 7
2.6 Exchange of Shares.................................... 7
2.7 Additional Actions.................................... 8
2.8 The Bank Merger....................................... 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY......... 9
3.1 Capital Structure..................................... 9
3.2 Organization, Standing and Authority of the Company... 9
3.3 Ownership of the Company Subsidiaries................. 10
3.4 Organization, Standing and Authority of the
Company Subsidiaries................................. 10
3.5 Authorized and Effective Agreement.................... 10
3.6 Securities Documents and Regulatory Reports........... 12
3.7 Financial Statements.................................. 12
3.8 Material Adverse Change............................... 13
3.9 Environmental Matters................................. 13
3.10 Tax Matters........................................... 14
3.11 Legal Proceedings..................................... 15
3.12 Compliance with Laws.................................. 15
3.13 Deposit Insurance and Other Regulatory Matters........ 16
3.14 Certain Information................................... 16
3.15 Employee Benefit Plans................................ 16
3.16 Certain Contracts..................................... 18
3.17 Brokers and Finders................................... 19
3.18 Insurance............................................. 19
3.19 Properties............................................ 19
3.20 Labor................................................. 19
3.21 Required Vote and Status of the Acquiror.............. 20
3.22 Accounting for the Merger............................. 20
3.23 Disclosures........................................... 20
A-2
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE ACQUIROR....................................... 20
4.1 Capital Structure..................................... 20
4.2 Organization, Standing and Authority of the Acquiror.. 21
4.3 Ownership of the Acquiror Subsidiaries................ 21
4.4 Organization, Standing and Authority of the
Acquiror Subsidiaries................................ 21
4.5 Authorized and Effective Agreement.................... 22
4.6 Securities Documents and Regulatory Reports........... 23
4.7 Financial Statements.................................. 24
4.8 Material Adverse Change............................... 24
4.9 Environmental Matters................................. 25
4.10 Tax Matters........................................... 25
4.11 Legal Proceedings..................................... 25
4.12 Compliance with Laws.................................. 26
4.13 Deposit Insurance..................................... 26
4.14 Certain Information................................... 27
4.15 Employee Benefit Plans................................ 27
4.16 Brokers and Finders................................... 28
4.17 Insurance............................................. 28
4.18 Required Vote......................................... 28
4.19 Accounting for the Merger............................. 29
4.20 Disclosures........................................... 29
ARTICLE V COVENANTS............................................. 29
5.1 Shareholder Meetings.................................. 29
5.2 Regulatory Matters.................................... 29
5.3 Investigation and Confidentiality..................... 30
5.4 Press Releases........................................ 31
5.5 Business of the Parties............................... 31
5.6 Current Information................................... 34
5.7 Indemnification; Insurance, Etc....................... 35
5.8 Directors, Officers and Employees..................... 36
5.9 Mortgage Banking Company.............................. 38
5.10 Certain Policies of the Company....................... 38
5.11 Restrictions on Resale................................ 39
5.12 Disclosure Supplements................................ 39
5.13 Failure to Fulfill Conditions......................... 40
A-3
ARTICLE VI. CONDITIONS PRECEDENT.................................. 40
6.1 Conditions Precedent - The Acquiror and the Company... 40
6.2 Conditions Precedent - The Company.................... 41
6.3 Conditions Precedent - The Acquiror................... 42
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT..................... 43
7.1 Termination........................................... 43
7.2 Effect of Termination................................. 44
7.3 Survival of Representations, Warranties
and Covenants........................................ 44
7.4 Waiver................................................ 45
7.5 Amendment or Supplement............................... 45
ARTICLE VII MISCELLANEOUS......................................... 45
8.1 Expenses; Termination Fee............................. 45
8.2 Entire Agreement...................................... 46
8.3 No Assignment......................................... 47
8.4 Notices............................................... 47
8.5 Interpretation........................................ 48
8.6 Counterparts.......................................... 48
8.7 Governing Law......................................... 48
Annex I Form of Affiliate's Letter
Annex II Form of Opinion of Counsel to the Acquiror
Annex III Form of Opinion of Counsel to the Company
Schedule I Severance Policy
A-4
AGREEMENT AND PLAN OF MERGER
Agreement and its subsidiariesPlan of Merger (the "Agreement"), dated as of August 18,
1995, by and FCB has been supplied by the management of each of the
respective companies.
ADDITIONAL INFORMATION
This Prospectus/Proxy Statement constitutes the Prospectus of UBS that
is part of a Registration Statement filed by UBS under the Securities Act of
1933, as amended, with respect to its common stock offered hereby. As permitted
by the rules and regulations of the Securities and Exchange Commission (the
"Commission"), this Prospectus/Proxy Statement omits certain information set
forth in that Registration Statement. The information omitted may be obtained
from the principal office of the Commission of Washington, D.C. 20549, upon
payment of the fee prescribed by the Commission, or may be examined there
without charge.
77
FINANCIAL INFORMATION CONCERNING
FIRST COMMERCIAL BANK
F-1
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
(FOR QUARTER ENDED MARCH 31, 1995)
F-2
PART I
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
NET INCOME
Net loss for the three months ended March 31, 1995 was $(49,000) compared
to net income of $135,000 for the same period in 1994. The reasons for the
decrease are related to additional expense recorded in accordance with the terms
set forth in a Merger Agreement dated March 6, 1995 between First Commercial
Bank (acquiree) andamong United Bankshares, Inc. (acquiror). The Merger Agreement
provides that, prior(the "Acquiror"), a West Virginia
corporation, and Eagle Bancorp, Inc. (the "Company"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, the parties hereto desire to consummationprovide for the Acquiror's
acquisition of the merger transaction,Company on the Bank conform
its basisterms and conditions herein contained; and
WHEREAS, the parties desire to provide for estimating expenses on loans, foreclosed real estatecertain undertakings,
conditions, representations, warranties and repossessed assets tocovenants in connection with the
methodologytransactions contemplated hereby; and
WHEREAS, simultaneously with the execution of this Agreement, certain
stockholders of the acquiror based upon the acquiror's
ultimate plans for recovery of such loans and assets. In addition to the expense
for loan losses, foreclosed real estate, repossessed assets, the Bank funded
deferred and current compensation plans, and accrued professional fees
associated with the merger transaction.
The accruals pursuant to the MergerCompany are entering into a Stockholder Agreement and the resultant impact on
pre-tax net income amounted to $319,500 for the first three months of 1995.
Therefore, for purposes of evaluation of earnings performance, one must consider
these expensesdated as non-recurring.
NET INTEREST MARGIN
The Bank's net interest margin, adjusted for non-interest bearing deposits,
increased from 5.41% for the three months ended March 31, 1994 to 6.12% for the
same period in 1995. This increase is attributed to the immediate realization of
increases in the prime lending rate and delayed realization of increases in
interest rates paid on deposits.
NONINTEREST INCOME
Total noninterest income increased $45,000 or 57% when comparing the three
month periods ending March 31, 1995 and 1994 respectively. The majority of this
increase is the result of increased overdraft fees collected on deposit
accounts. The balance
of the increase was duedate hereof;
NOW, THEREFORE, in part to increased revenues from
merchant bank card processing and the remaining portion from income recognized
through an executive life insurance program.
F-3
PART I
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
NONINTEREST EXPENSE
Total noninterest expense increased from $607,000 for the three months
ended March 31, 1994 to $838,000 for the same period in 1995. Salaries and
compensation increased $63,000 or 24.8% due to a bonus to the Chief Executive
Officer. Employee benefits increased $107,000 or 127.4% due to the increased
expense related to the proposed funding of all deferred compensation contracts
pursuant to the Merger Agreement. Occupancy, Other Equipment and Data Processing
expenses categories experienced only moderate changes representing normal
fluctuations in costs associated with operation of the physical banking
facility. Other noninterest expenses increased $60,000 or 27.14% which was the
combined result of increased professional fees paid in association with the
proposed Merger Agreement, increased provision for other real estate owned and
repossessed assets.
CASH AND CASH EQUIVALENTS
Total Cash and Cash Equivalents was $5,440,756 at March 31, 1995 and
$5,834,193 at December 31, 1994. This decrease represents only normal
fluctuation in deposit base and loan volume.
LOANS
Total loans increased $775,506 representing a growth of 1.81% during the
first three months of 1995. This increase is due to normal growth through
marketing efforts and a general economic recovery.
NON-ACCRUAL AND PAST DUE LOANS
The following table shows loans placed in a non-accrual status and loans
contractually past due 90 days or more as to principal or interest payments:
(amounts in thousands of dollars)
March 31, December 31,
1995 1994
--------- ------------
Non-Accrual Loans 44 48
Loans Past Due 90 Days or More 612 165
F-4
PART I
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Loans are placed on a non-accrual basis as soon as it determined that the
collection of interest is in doubt regardless of whether or not the loan is
overdue. Loans that are 90 days or more overdue are placed on a non-accrual
basis unless it is believed that the collection is imminent or both the unpaid
principal and interest are fully secured by adequate collateral.
The amount of loans placed on a nonaccrual status remained relatively
unchanged while loans past due 90 days or more increased significantly. The
increase in this category is due to the addition of one nonperforming loan. The
subject loan is considered by management to be adequately secured with regard to
repayment of principal and accrued interest. The borrower has sought protection
under Chapter 11 of the U.S. Bankruptcy Code thereby delaying payment according
to the terms of the loan agreement. The collateral for the loan is currently
being liquidated in stages by the borrower and the Bank will begin to receive
payments by the third quarter of 1995.
LOAN LOSSES AND ALLOWANCE FOR LOAN LOSSES
The Bank has increased its Provision for loan losses to $150,000 for the
first three months of 1995 as compared to $20,000 for the same period in 1994.
The reason for the increase is to conform to the methodology of the acquiror as
discussed earlier in this section. The Bank performs a monthly analysis of its
Allowance for Loan Losses as it relates to problem and potential problem loans.
Effective January 1, 1995, First Commercial Bank adopted Financial
Accounting Standards Board Statement No. 114, "Accounting by Creditors for
Impairment of a Loan, "(SFAS No. 114)" which was amended by Statement No. 118
and is effective for fiscal years beginning after December 15, 1994. Under the
new standard, the 1995 allowance for credit losses related to loans that are
identified for evaluation in accordance with SFAS No. 114 is based on discounted
cash flows using the loan's initial effective interest rate or the fair value of
the collateral for certain collateral dependent loans. Prior to 1995, the
allowance for credit losses related to these loans was based on undiscounted
cash flows or the fair value of the collateral for collateral dependent loans.
The adoption of SFAS No. 114 did not have a material impact on the allowance for
loan losses.
OTHER ASSETS
Other assets, as a whole, changed only moderately and was due to normal
business activity and depreciation of fixed assets.
F-5
PART I
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Other Real Estate Owned
Management of the bank, in the normal course of business, may deem it
necessary to order a foreclosure sale on property securing loans that are not
performing satisfactorily or where other means of collection have been
exhausted. The foreclosure sale may result in the Bank acquiring the subject
property in order to protect its interest. As of March 31, 1995 the Bank had
other real estate holdings of $858,000 representing property acquired as a
result of defaulted loans. The properties consist of two (2) residential
properties, one (1) commercial property, and one (1) agricultural property.
Other real estate owned is reported at the lower of fair value at the date of
foreclosure or the current value less estimated costs to sell. All properties
are being vigorously marketed and it is anticipated that the majority, if not
all, will be liquidated by the end of 1995. Management anticipates no material
loss in the ultimate disposition of these assets.
DEPOSITS
Total deposits increased $468,345 or .9% at March 31, 1995 from December
31, 1994. Non-interest bearing demand deposits decreased $650,232 due to normal
deposit base fluctuation. Interest bearing demand deposits increased $1,118,577
during the same period which is the result of normal deposit growth and a shift
by depositors away from non-bank investments back into traditional bank savings
instruments.
CAPITAL ADEQUACY
The following table lists the primary capital position of the bank as well
as ratios, utilizing adjusted total assets, in accordance with the Capital
Adequacy Guidelines set forth by the Federal Reserve Board of Governors:
March 31, December 31,
1995 1994
---------- ------------
Primary capital to assets 9.15% 9.31%
Tier I leverage ratio 9.28% 9.30%
Total qualifying capital to 10.65% 10.54%
adjusted total assets
F-6
PART I
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Interest Rate Sensitivity
Interest sensitive assets and liabilities are defined as those assets or
liabilities that mature or reprice within a designated time frame. The principal
function of asset and liability management is to maintain an appropriate
relationship between those assets and liabilities that are sensitive to changing
market interest rates. This relationship has become very important, given the
volatility in interest rates over the last several years, due to the potential
impact on earnings. First Commercial Bank closely monitors the sensitivity of
its assets and liabilities on an on-going basis.
The difference between rate sensitive assets and rate sensitive liabilities
for specified periods of time is known as the "gap". It is the policy of
management to maintain a gap to total assets ratio of +/- 3% or a gap to total
earning assets of +/- 5% within the one year horizon. It should be understood
that these ratios are not designated for the purpose of dictating product mix
but are designed to aid management in the overall evaluation of asset and
liability management. Minor deviations from these benchmarks are not viewed as
detrimental, but do provide a reasonable basis for further analysis and
projection of the effects of market interest rate changes.
The gap table presented herein as of March 31, 1995 reveals that the Bank
is moderately liability sensitive through the one year horizon. This occurrence
has not traditionally been one for concern in that it is caused by the large
amount of savings, NOW and money market accounts that, for the purposes of the
table, are all considered as immediately available for repricing. Historically,
these accounts do not dictate immediate adjustments in rate commensurate with a
market change, but have always been much slower to adjust. Therefore, one must
consider the relative high probability that a sudden market change would not
cause an immediate adjustment in these liabilities thereby reducing the adverse
impact of being liability sensitive in an increasing rate environment.
LIQUIDITY
The majority of the Bank's investment portfolio is in highly marketable
U.S. Treasury securities and cash equivalents. Other sources of funds can be
obtained through borrowing from correspondent banks, the Federal Reserve Bank
and through increasing deposits.
F-7
FIRST COMMERCIAL BANK
INTEREST RATE SENSITIVITY GAP
(In Thousands)
MARCH 31, 1995
----------------------------------------------------------------------------------------
ASSETS DAYS TOTAL 1 - 5 OVER 5
---------------------------------------
0 - 90 91 - 180 181 - 365 ONE YEAR YEARS YEARS TOTAL
---------- ------------ ------------- ---------- --------- --------- -------------
Interest-Earning Assets:
- ------------------------
Federal funds sold and securities
purchased under agreements to
resell and other short-term
investments $ 2,750 $ 2,750 $2,750
Investment and Marketable
Equity Securities:
Taxable 993 $495 $2,473 3,961 $4,055 $0 8,016
Tax-exempt 0 100 0 100 0 375 475
Loans, net of unearned
income 24,232 1,993 3,284 29,509 10,953 3,126 43,588
---------- ------------ ------------- ---------- --------- --------- -------------
Total Interest-Earning Assets $27,975 $2,588 $5,757 $36,320 $15,008 $3,501 $54,829
========== ============ ============= ========== ========= ========= =============
LIABILITIES
Interest-Bearing Funds:
- -----------------------
Savings, NOW & MMDA $20,357 $20,357 $20,357
Time deposits of $100,000
and over 3,409 $805 $2,041 6,255 $1,019 7,274
Other time deposits 3,616 2,250 6,056 11,922 7,540 $11 19,473
Capital notes 33 33 66 132 328 460
---------- ------------ ------------- ---------- --------- --------- -------------
Total Interest-Bearing Funds $27,415 $3,088 $8,163 $38,666 $8,887 $11 $47,563
========== ============ ============= ========== ========= ========= =============
Interest Sensitivity Gap $560 ($500) ($2,406) ($2,346) $6,121 $3,490 $7,265
========== ============ ============= ========== ========= ========= =============
Cumulative Gap $560 $60 ($2,346) ($2,346) $3,775 $7,265 $7,265
========== ============ ============= ========== ========= ========= =============
Cumulative Gap as a Percentage
of Total Earning Assets 1.02% 0.11% -4.28% -4.28% 6.89% 13.25% 13.25%
F-8
INTEREST RATE SENSITIVITY GAP
(In Thousands)
DECEMBER 31, 1994
----------------------------------------------------------------------------------------
ASSETS DAYS TOTAL 1 - 5 OVER 5
---------------------------------------
0 - 90 91 - 180 181 - 365 ONE YEAR YEARS YEARS TOTAL
---------- ------------ ------------- ---------- --------- --------- -------------
Interest-Earning Assets:
- ------------------------
Federal funds sold and securities
purchased under agreements to
resell and other short-term
investments $2,300 $2,300 $2,300
Investment and Marketable
Equity Securities:
Taxable 497 $987 $1,463 2,947 $5,026 $0 7,973
Tax-exempt 0 0 0 0 0 475 475
Loans, net of unearned
income 21,643 3,034 3,845 28,522 12,346 1,944 42,812
---------- ------------ ------------- ---------- --------- --------- -------------
Total Interest-Earning Assets $24,440 $4,021 $5,308 $33,769 $17,372 $2,419 $53,560
========== ============ ============= ========== ========= ========= =============
LIABILITIES
Interest-Bearing Funds:
- -----------------------
Savings, NOW & MMDA $20,361 $20,361 $20,361
Time deposits of $100,000
and over 1,486 $1,240 $1,057 3,783 $985 4,768
Other time deposits 3,881 3,356 4,133 11,370 9,487 $0 20,857
Capital notes 33 33 66 132 361 493
---------- ------------ ------------- ---------- --------- --------- -------------
Total Interest-Bearing Funds $25,761 $4,629 $5,256 $35,646 $10,833 $0 $46,479
========== ============ ============= ========== ========= ========= =============
Interest Sensitivity Gap ($1,321) ($608) $52 ($1,877) $6,539 $2,419 $7,081
========== ============ ============= ========== ========= ========= =============
Cumulative Gap ($1,321) ($1,929) ($1,877) ($1,877) $4,662 $7,081 $7,081
========== ============ ============= ========== ========= ========= =============
Cumulative Gap as a Percentage
of Total Earning Assets -2.47% -3.60% -3.50% -3.50% 8.70% 13.22% 13.22%
F-9
FINANCIAL STATEMENTS
(FOR THE QUARTER ENDED MARCH 31, 1995)
(UNAUDITED)
F-10
BALANCE SHEETS
FIRST COMMERCIAL BANK
March 31 December 31
1995 1994
------------ -----------
ASSETS
Cash and due from banks $ 2,691,000 $ 3,534,000
Federal funds sold 2,750,000 2,300,000
------------- -------------
Total cash and cash equivalents 5,441,000 5,834,000
Securities available for sale(at market) 3,961,000 3,912,000
Investment securities(market value-$4,431,000
at March 31, 1995 and $4,335,000 at
December 31, 1994) 4,530,000 4,536,000
Loans
Commercial, financial, and agricultural 11,016,000 10,943,000
Real estate:
Single family residential 10,851,000 11,253,000
Commercial 11,248,000 11,092,000
Construction 7,412,000 6,406,000
Other 273,000 274,000
Installment 2,789,000 2,845,000
------------- -------------
43,589,000 42,813,000
Less: Unearned income (1,000) (1,000)
Allowance for loan losses (811,000) (661,000)
------------- -------------
Net loans 42,777,000 42,151,000
Bank premises and equipment 917,000 933,000
Interest receivable 517,000 511,000
Life Insurance Contracts 1,410,000 1,394,000
Other Real Estate Owned 858,000 873,000
Other assets 687,000 690,000
------------- -------------
TOTAL ASSETS $ 61,098,000 $ 60,834,000
============= =============
LIABILITIES
Domestic deposits
Noninterest-bearing $ 6,589,000 $ 7,239,000
Interest-bearing 47,104,000 45,986,000
------------- -------------
TOTAL DEPOSITS 53,693,000 53,225,000
Accrued expenses and other liabilities 1,254,000 1,392,000
Subordinated Note 460,000 493,000
------------- -------------
TOTAL LIABILITIES 55,407,000 55,110,000
SHAREHOLDERS' EQUITY
Common stock, $5.00 par value;
Authorized-400,000 shares; issued and
outstanding-201,100 at March 31, 1995 and
December 31, 1994 1,005,000 1,005,000
Surplus 1,006,000 1,006,000
Retained earnings 3,684,000 3,733,000
Net unrealized holding loss on securities
available for sale (4,000) (20,000)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 5,691,000 5,724,000
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 61,098,000 $ 60,834,000
============= =============
See notes to financial statements.
F-11
STATEMENTS OF INCOME (UNAUDITED)
FIRST COMMERCIAL BANK
Three Months Ended
March 31,
-------------------
1995 1994
---- ----
INTEREST INCOME
Interest and fees on loans $1,153,000 $1,066,000
Interest on federal funds sold 26,000 36,000
Interest and dividends on securities:
Taxable 116,000 100,000
Exempt from federal taxes 7,000 7,000
---------- ----------
TOTAL INTEREST INCOME 1,302,000 1,209,000
---------- ----------
INTEREST EXPENSE
Interest on deposits 505,000 434,000
Interest on short-term borrowings 0 18,000
Interest on long-term borrowings 11,000 9,000
---------- ----------
TOTAL INTEREST EXPENSE 516,000 461,000
---------- ----------
NET INTEREST INCOME 786,000 748,000
PROVISION FOR POSSIBLE LOAN LOSSES 150,000 20,000
---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 636,000 728,000
---------- ----------
OTHER INCOME
Other charges, commissions, and fees 108,000 77,000
Other income 16,000 2,000
---------- ----------
TOTAL OTHER INCOME 124,000 79,000
---------- ----------
OTHER EXPENSES
Salaries and employee benefits 508,000 338,000
Net occupancy expense 49,000 48,000
Other expense 281,000 221,000
---------- ----------
TOTAL OTHER EXPENSES 838,000 607,000
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (78,000) 200,000
INCOME TAXES (BENEFIT) (29,000) 65,000
---------- ----------
NET (LOSS)INCOME $ (49,000) $ 135,000
========== ==========
(Loss) earnings per common share $ (0.24) $ 0.67
Average outstanding shares 201,100 201,100
See notes to financial statements.
F-12
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY(UNAUDITED)
FIRST COMMERCIAL BANK
Three Months Ended March 31, 1995
------------------------------------------------------------------------
Net
Unrealized
Loss on
Common Stock Securities Total
-------------------
Par Retained Available Shareholders'
Shares Value Surplus Earnings for Sale Equity
--------------------------------------------------------------------
Balance
January 1, 1995 201,100 $1,005,000 $1,006,000 $3,733,000 $ (20,000) $ 5,724,000
Net Income/(Loss) (49,000) (49,000)
Net Change In
Unrealized loss
on securities
available for sale 16,000 16,000
------- ---------- ---------- ---------- ---------- -----------
Balance at
March 31, 1995 201,100 $1,005,000 $1,006,000 $3,684,000 $ (4,000) $ 5,691,000
======= ========== ========== ========== ========== ===========
See notes to financial statements
F-13
STATEMENTS OF CASH FLOWS (UNAUDITED)
FIRST COMMERCIAL BANK
Three Months Ended
March 31
-------------------------------
1995 1994
---- ----
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 12,000 $ 48,000
INVESTING ACTIVITIES
Proceeds from maturities and calls of
securities available for sale 500,000 9,000,000
Purchases of securities available for sale (505,000) (2,012,000)
Net purchase of bank premises and equipment (13,000) 0
Investment in life insurance contracts (5,000) (457,000)
Changes in:
Loans (776,000) (554,000)
-------- --------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (799,000) 5,977,000
-------- ---------
FINANCING ACTIVITIES
Cash dividends paid (40,000) (40,000)
Repayment of long-term borrowings (33,000) (12,000)
Changes in:
Deposits 467,000 (7,004,000)
Federal funds purchased and securities
sold under agreements to repurchase 0 25,000
- ------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 394,000 (7,031,000)
------- ----------
DECREASE IN CASH AND CASH EQUIVALENTS (393,000) (1,006,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,834,000 12,181,000
--------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $5,441,000 $11,175,000
========== ===========
See notes to financial statements.
F-14
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FIRST COMMERCIAL BANK
1. GENERAL
The accompanying unaudited interim financial statements of First Commercial Bank
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions for Form 10-QSB.
Accordingly, the financial information does not contain all of the information
and footnotes required by generally accepted accounting principles. The
financial statements presented in this report have not been audited. The
accounting and reporting policies followed in the presentation of these
financial statements are consistent with those applied in the preparation of the
1994 annual report of First Commercial Bank on Form 10-KSB. In the opinion of
management, adjustments necessary for a fair presentation of financial position
and results of operations for the interim periods have been made. Such
adjustments are of a normal and recurring nature. In addition to normal and
recurring adjustments, $319,500 additional expense was recorded in the first
quarter of 1995. These adjustments are associated with a Merger Agreement dated
March 6, 1995 which is described in greater detail in Part I, Item 2 of this
filing.
Effective January 1, 1995, First Commercial Bank adopted Financial Accounting
Standards Board Statement No. 114, "Accounting by Creditors for Impairment of a
Loan, "(SFAS No. 114)" which was amended by Statement No. 118 and is effective
for fiscal years beginning after December 15, 1994. Under the new standard, the
1995 allowance for credit losses related to loans that are identified for
evaluation in accordance with SFAS No. 114 is based on discounted cash flows
using the loan's initial effective interest rate or the fair value of the
collateral for certain collateral dependent loans. Prior to 1995, the allowance
for credit losses related to these loans was based on undiscounted cash flows or
the fair value of the collateral for collateral dependent loans. The adoption
of SFAS No. 114 did not have a material impact on the allowance for loan losses.
F-15
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
FIRST COMMERCIAL BANK
2. SECURITIES AVAILABLE FOR SALE
The book and estimated fair value of securities available for sale at March 31,
1995, by contractual maturity are as follows:
Estimated
Book Fair
Value Value
------------ ------------
Due in one year or less $ 3,967,000 $ 3,961,000
Due after one year through five years 0 0
Due after five years through ten years 0 0
Due after ten years 0 0
Marketable equity securities 0 0
------------ ------------
Total $ 3,967,000 $ 3,961,000
============ ============
The amortized cost and estimated fair values of securities available for sale
are summarized as follows:
March 31, 1995
--------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $ 3,967,000 $ 2,000 $ 8,000 $ 3,961,000
Marketable equity
securities 0 0 0 0
Other 0 0 0 0
------------- ----------- ----------- ------------
Total $ 3,967,000 $ 2,000 $ 8,000 $ 3,961,000
============= =========== =========== ============
At March 31, 1995, the cumulative net unrealized holding loss on available for
sale securities resulted in an decrease of $4,000 to shareholders' equity.
F-16
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
FIRST COMMERCIAL BANK
2. SECURITIES AVAILABLE FOR SALE - continued
The book and estimated fair value of securities available for sale at December
31, 1994, by contractual maturity are as follows:
Estimated
Book Fair
Value Value
------------ ------------
Due in one year or less $ 2,966,000 $ 2,948,000
Due after one year through five years 979,000 964,000
Due after five years through ten years 0 0
Due after ten years 0 0
Marketable equity securities 0 0
------------ ------------
Total $ 3,945,000 $ 3,912,000
============ ============
The amortized cost and estimated fair values of securities available for sale
are summarized as follows:
December 31, 1994
--------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $ 3,945,000 $ 0 $ 33,000 $ 3,912,000
Marketable equity
securities 0 0 0 0
Other 0 0 0 0
------------ ----------- ----------- ------------
Total $ 3,945,000 $ 0 $ 33,000 $ 3,912,000
============ =========== =========== ============
F-17
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
FIRST COMMERCIAL BANK
3. INVESTMENT SECURITIES
The amortized cost and estimated fair values of investment securities are
summarized as follows:
March 31, 1995
---------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $ 4,055,000 $ 0 $ 66,000 $ 3,989,000
State and political
subdivisions 475,000 3,000 36,000 442,000
------------ ------------ ------------ ------------
Total $ 4,530,000 $ 3,000 $ 102,000 $ 4,431,000
============ ============ ============ ============
December 31, 1994
---------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $ 4,061,000 $ 0 $ 151,000 $ 3,910,000
State and political
subdivisions 475,000 4,000 54,000 425,000
------------ ------------ ------------ ------------
Total $ 4,536,000 $ 4,000 $ 205,000 $ 4,335,000
============ ============ ============ ============
F-18
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
FIRST COMMERCIAL BANK
3. INVESTMENT SECURITIES - continued
The amortized cost and estimated fair value of debt securities at March 31,
1995, and December 31, 1994, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because the issuers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
March 31, 1995
-------------------------
Estimated
Book Fair
Value Value
------------ ------------
Due in one year or less $ 0 $ 0
Due after one year through
five years 4,155,000 4,092,000
Due after five years
through ten years 125,000 122,000
Due after ten years 250,000 217,000
------------ ------------
Total $ 4,530,000 $ 4,431,000
============ ============
December 31, 1994
--------------------------
Estimated
Book Fair
Value Value
------------ ------------
Due in one year or less $ 0 $ 0
Due after one year through
five years 4,061,000 3,910,000
Due after five years
through ten years 225,000 221,000
Due after ten years 250,000 204,000
------------ ------------
Total $ 4,536,000 $ 4,335,000
============ ============
F-19
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
FIRST COMMERCIAL BANK
4. NONPERFORMING LOANS
Nonperforming loans are summarized as follows:
March 31 December 31
1995 1994
------------ -----------
(in thousands)
Loans past due 90 days or more
and still accruing interest $ 612 $ 165
Troubled debt restructurings - -
Nonaccrual loans 44 48
------- ------
$ 656 $ 213
======= ======
5. ALLOWANCE FOR LOAN LOSSES
The adequacy of the allowance for loan losses is based on management's
evaluation of the relative risks inherent in the loan portfolio. A progression
of the allowance for loan losses for the periods presented is summarized as
follows:
Three Months Ended
March 31,
----------------------
1995 1994
-------- ------
(in thousands)
Balance at beginning of
period $ 661 $ 755
Provision charged to expense 150 20
------ ------
811 775
Loans charged-off 0 (2)
Less recoveries 0 0
------ ------
Net Charge-offs 0 (2)
------ ------
Balance at end of period $ 811 $ 773
====== ======
F-20
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
FIRST COMMERCIAL BANK
5. ALLOWANCE FOR POSSIBLE LOAN LOSSES - continued
Effective January 1, 1995, First Commercial Bank adopted Financial Accounting
Standards Board Statement No. 114, "Accounting by Creditors for Impairment of a
Loan, "(SFAS No. 114)" which was amended by Statement No. 118 and is effective
for fiscal years beginning after December 15, 1994. Under the new standard, the
1995 allowance for credit losses related to loans that are identified for
evaluation in accordance with SFAS No. 114 is based on discounted cash flows
using the loan's initial effective interest rate or the fair value of the
collateral for certain collateral dependent loans. Prior to 1995, the allowance
for credit losses related to these loans was based on undiscounted cash flows or
the fair value of the collateral for collateral dependent loans. The adoption
of SFAS No. 114 did not have a material impact on the allowance for loan losses.
6. COMMITMENTS AND CONTINGENT LIABILITIES
There are outstanding commitments which include, among other things, commitments
to extend credit and letters of credit undertaken in the normal course of
business. Outstanding standby letters of credit and commitments to extend
credit amounted to approximately $6,701,000 and $7,145,000 at March 31, 1995 and
December 31, 1994, respectively.
First Commercial Bank is currently involved, in the normal course of business,
in various legal proceedings. Management is vigorously pursuing all of its
legal and factual defenses and, after consultation with legal counsel, believes
that all such litigation will be resolved without material effect on financial
position or results of operations.
F-21
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--Continued
FIRST COMMERCIAL BANK
7. EARNING ASSETS AND INTEREST-BEARING LIABILITIES
The following table shows the daily average balance of major categories of
assets and liabilities for each of the three month periods ended March 31,
1995, and March 31, 1994, with the interest rate earned or paid on such
amount.
Three Months Ended Three Months Ended
March 31, March 31,
1995 1994
------------------------------------- ------------------------------------
(Dollars in Average Avg. Average Avg.
Thousands) Balance Interest Rate Balance Interest Rate
------------------------------------- ------------------------------------
ASSETS
Earning assets:
Federal funds sold and securities
purchased under agreements to
resell and other short-term
investments $ 1,771 $26 5.95% $4,878 $36 2.99%
Investment Securities:
Taxable 8,070 116 5.75% 11,137 100 3.63%
Tax-exempt (1) 475 11 8.93% 475 11 8.93%
------------------------------------- ------------------------------------
Total Securities 8,545 127 5.93% 11,612 111 3.82%
Loans, net of unearned
income (2) 42,635 1,153 10.97% 40,561 1,066 10.66%
Allowance for possible loan
losses (713) (767)
---------------- ---------------
Net loans 41,922 11.15% 39,794 10.86%
------------------------------------- ------------------------------------
Total earning assets 52,238 $1,306 10.14% 56,284 $1,213 8.74%
---------------------- ---------------------
Other assets 6,849 7,334
---------------- ----------------
TOTAL ASSETS $59,087 $63,618
================ ================
LIABILITIES
Interest-Bearing Funds:
Interest-bearing deposits $44,779 $505 4.57% $43,313 $434 4.06%
Federal funds purchased,
repurchase agreements and
other short-term borrowings 0 0 3,331 18 2.19%
Subordinated debt 465 11 9.59% 550 9 6.64%
------------------------------------- ------------------------------------
Total Interest-Bearing Funds 45,244 516 4.63% 47,194 461 3.96%
------------- ----------
Demand deposits 6,758 10,203
Accrued expenses and other
liabilities 1,329 971
---------------- ----------------
TOTAL LIABILITIES 53,331 58,368
Shareholders' Equity 5,756 5,250
---------------- ----------------
TOTAL LIABILITIES AND
AND SHAREHOLDERS EQUITY $59,087 $63,618
================ ================
NET INTEREST INCOME $790 $752
============= ==========
INTEREST SPREAD 5.51% 4.78%
NET INTEREST MARGIN 6.12% 5.41%
(1) The interest income and the yields on nontaxable loans and investment
securities are presented on a tax-equivalent basis using the statutory
federal income tax rate of 34%.
(2) Nonaccruing loans are included in the daily average loan amounts
outstanding.
F-22
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
(FOR YEAR ENDED DECEMBER 31, 1994)
F-23
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
1994 1993 1992 1991 1990
CONDENSED STATEMENTS
OF INCOME
Total interest income $ 5,036 $ 4,935 $ 5,253 $ 5,637 $ 6,179
Total interest expense (1,882) (1,999) (2,390) (3,134) (3,531)
------- ------- ------- ------- -------
Net Interest Income 3,154 2,936 2,863 2,503 2,648
Provision for loan losses (20) (460) (694) (740) (360)
--- ---- ---- ---- ----
Net Interest Income after Provision
for Loan Losses 3,134 2,476 2,169 1,763 2,288
Other operating income 265 422 230 313 301
Other operating expense (2,472) (2,388) (2,203) (2,021) (2,453)
------- ------- ------- ------- -------
Income before Income Tax Expense 927 510 196 55 136
Income tax expense (316) (196) (46) (3) (22)
---- ---- --- -- ---
Net Income $ 611 $ 314 $ 150 $ 52 $ 114
=== === === == ===
Total Assets at Year End $60,834 $71,791 $60,693 $63,707 $62,304
PER SHARE INFORMATION
Earnings per share $ 3.04 $ 1.56 $ .74 $ .26 $ .56
Dividends per share .20 .20 .20 .20 .20
Book value per share 28.46 25.72 24.36 23.82 23.76
FINANCIAL STATEMENT RATIOS
Return on assets .99% .4% .2% .1% .2%
Return on equity 11.1 6.1 3.1 1.1 2.3
Dividend payout 6.6 12.8 26.9 76.9 35.7
Equity to assets 9.4 7.2 8.1 7.5 7.7
F-24
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Net Income
Net income of the Bank increased from $149,566 for 1992 to $314,057 for 1993 and
to $611,098 for 1994. Net income per share was $.74 in 1992, $1.56 in 1993 and
$3.04 in 1994.
Net Interest Margin
The Bank's net interest margin increased to 4.89% in 1992, decreased slightly to
4.81% in 1993 and increased to 5.34% in 1994 as a result of a combination of
factors. The yield on total earning assets decreased from 9.17% in 1992 to 8.20%
in 1993 reflecting lower yields on both loans and investments. The yield on
total earning assets increased to 8.76% in 1994 as a result of higher yields on
federal funds sold and taxable investment securities. The rates on approximately
48% of the Bank's commercial loans are tied to the prime rate. As a result of
declining interest rates, the average yield on loans declined from 10.65% in
1992 to 10.31% in 1993 and to 10.12% in 1994. Average loans increased
approximately $1,000,000 contributing to the improvement in the yield on total
earning assets for 1994. The Bank's cost of funds decreased from 5.37% in 1992
to 4.36% in 1993 and to 4.07% in 1994. The average balance invested in federal
funds increased from $4,921,590 to $7,808,082 in 1993. Funds invested in federal
funds came from increases in deposits and a reduction in average loans
outstanding due to declining demand for loans in 1993. During 1994 the average
investment in federal funds decreased $3,664,343 to $4,143,739 and the average
investment in securities decreased $1,450,097. Funds from the redemption of
investments were used to increase the loan portfolio and payout deposit
withdrawals. During 1994, an increase of .56% in the yield on earning assets
combined with a decrease of .29% in the cost of interest bearing liabilities
resulted in a .53% improvement in the net interest margin. A complete analysis
of the net interest margin is included in Tables 1 to 3 and the changes in net
interest income due to changes in volume and rates are shown in Tables 4 through
6.
Other Income
Service charges increased 26.8% in 1993 due to substantial increases in
overdraft fees paid by several depositors which were discontinued in 1994. In
1993, miscellaneous income included income from the settlement of a loss claim
for $135,000 and the recovery of $13,200 of an appeal bond charged off in 1992.
In 1994, miscellaneous income increased due to an increase of approximately
$20,000 in merchant card processing fees.
Other Expenses
Total other expenses increased 8.4% for 1993 and 3.5% for 1994, as a result of a
combination of factors. Salaries increased in 1993 and 1994 as a result of an
increase in the number of employees and bonuses accrued for the Bank's chief
executive officer of $102,493 in 1993 and $154,062 in 1994. Employee benefit
expenses increased in both 1993 and 1994 as a result of expenses related to the
deferred compensation plan for key officers. Total deferred compensation plan
expenses were $171,837 in 1992, $192,608 in 1993 and $222,385 in 1994. During
1992, the deferred compensation plan was amended to include James B. Brockett
and Janet H. Brockett resulting in the additional expense. It is anticipated
that deferred compensation plan expense will increase approximately 15% in 1995.
F-25
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Future occupancy expense is expected to increase at rates which are equivalent
to inflation. In April 1993, leases on the Bank's computer equipment expired
resulting in a significant decrease in computer rent expense. The equipment was
purchased for approximately $20,000 which was included in furniture and
equipment expense for 1993 because the computer may become obsolete in the near
future.
Repossession expense decreased in 1993 and 1994 reflecting the decrease in the
number of repossessions. The Bank continued to incur legal fees in 1993 and
1994, related to current litigation and operations. The FDIC insurance
assessments increased 12.8% in 1993 reflecting higher assessment rates. In 1992,
other expenses included a $25,000 loss of an appeal bond, of which $13,200 was
recovered in 1993 and included in other income. The additional decrease in other
expenses in 1993 was attributable to decreases in expenses for foreclosed
properties and meals and entertainment.
Investment Securities
Investment securities, composed mainly of U.S. Treasury securities, increased
$4,901,426 in 1993 and decreased $7,066,561 in 1994 in response to changes in
deposits. Management's current strategy is to invest in short-term U. S.
Treasury securities to provide adequate liquidity. Approximately 35% of the
securities will mature in less than one year and 94% in less than 6 years. At
January 1, 1994, the Bank transferred all U. S. Treasury securities maturing
within two years to the available for sale category. The purpose of the
securities in this category is to supplement federal funds sold as a source of
short-term liquidity. The available for sale securities are carried at the
current market value with adjustments to stockholders' equity for the unrealized
gain or loss. It is not anticipated that this accounting method will have a
significant impact on the Banks financial statements because of the quality and
short maturities of the securities. The maturity ranges and the weighted average
yield of the investments are shown in Note 3 to the financial statements.
Loans
Net loans increased 3.6% in 1994 and .60% in 1993 in response to changing loan
demand. Real estate construction loans increased $3,285,000 in 1993 and
$1,068,000 in 1994 to a total of $6,406,000 at December 31, 1994, in response to
the increase in construction activity. Loan origination fees increased from
$68,866 in 1992 to $113,945 in 1993 and $240,380 in 1994, due to the increase in
real estate construction lending. The above fees are not included in interest
income in the net interest margin analysis. The major classifications of loans
are shown in Note 4 to the financial statements.
F-26
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Loan Maturity Distribution
The maturities of loans and their sensitivities to changes in interest
rates at December 31, 1994 are shown in the following schedule:
Predetermined Floating or
Interest Adjustable
Total Rates Rates
Due in three months or less $21,405,000 $ 4,819,000 $16,586,000
Due after three months through twelve
months 6,058,000 6,058,000
Due after one year through five years 12,193,000 12,042,000 151,000
Due after five years 3,109,000 3,109,000
----------- ----------- -----------
42,765,000 $26,028,000 $16,737,000
=========== ===========
Non-accrual loans 47,000
-----------
Total Loans $42,812,000
===========
Non-Accrual and Past Due Loans
The following table shows loans placed in a non-accrual status and loans
contractually past due 90 days or more as to principal or interest
payments:
- - - - - - - - - - December 31, - - - - - - - - - -
1994 1993 1992
Non-Accrual Loans $ 47,588 $ 628,426 $ 440,056
Loans Past Due 90 Days or More 152,905 338,148 514,000
Loans are placed on a non-accrual basis as soon as it is determined that
the collection of interest is in doubt whether or not the loan is overdue.
Loans that are more than 90 days overdue are placed on non-accrual status
unless it is believed collection is imminent or the unpaid principal and
interest is fully secured by adequate collateral.
Potential Problem Loans
At December 31, 1994, management had not identified any potential problem
loans which were not classified as non-accrual or past due.
F-27
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Non-Accrual and Past Due Loans (Continued)
Loan Losses and Allowance for Loan Losses
The Bank's provision for loan losses decreased from $694,231 in 1992 to
$460,000 in 1993 and to $20,000 in 1994 in response to a decrease in loan
charge offs and an improving local economy. Net loan losses as a percentage
of average loans were .27% for 1994 compared with .71% for 1993 and 1.88%
for 1992. The allowance for loan losses as a percentage of loans was 1.54%
at the end of 1994 compared with 1.83% at the end of 1993 and 1.42% at the
end of 1992. Management has determined that the allowance is adequate to
absorb losses in the loan portfolio, however, additions may become
necessary because of changing economic conditions.
A summary of loan losses and recoveries follows:
1994 1993 1992
Balance, Beginning of Period $755,168 $582,856 $692,116
-------- -------- --------
Provision Charged to Expense 20,000 460,000 694,231
-------- -------- --------
Loan Losses
Commercial 153,949 256,363 751,283
Installment loans to individuals 2,680 54,861 59,157
-------- -------- --------
Total Loan Losses 156,629 311,224 810,440
-------- -------- --------
Recoveries
Commercial 42,834 23,536 6,949
-------- -------- --------
Total Recoveries 42,834 23,536 6,949
-------- -------- --------
Net Loan Losses 113,795 287,688 803,491
-------- -------- --------
Balance, End of Period $661,373 $755,168 $582,856
======== ======== ========
Ratio of Net Loan Losses During the Period
to Average Loans Outstanding During the Period .27% .71% 1.88%
F-28
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Loan Losses and Allowance for Loan Losses (Continued)
The balance of the allowance for loan losses was allocated as follows:
December 31, 1994 December 31, 1993 December 31, 1992
Balance at Percent Balance at Percent Balance at Percent
End of of Loan End of of Loans End of of Loans
Period in in Each Period in in Each Period in in Each
Each Loan Loan Each Loan Loan Each Loan Loan
Category Category Category Category Category Category
Commercial $537,560 67% $559,100 67% $399,330 53%
Consumer 54,815 7% 118,000 9% 125,806 9%
Real Estate -0- 26% 0 24% 0 38%
Unallocated 68,998 N/A 78,068 N/A 57,720 N/A
-------- ---- -------- --- -------- ----
Total $661,373 100% $755,168 100% $582,856 100%
======== ==== ======== === ======== ====
Allowance for Loan Losses as
a Percentage of Loans 1.54% 1.83% 1.42%
In determining the balance in the allowance for loan losses management
considers: the composition of the loan portfolio, past loan loss experience,
local economic conditions and a review of individual loans.
Investments in Life Insurance Contracts
The amounts invested in key man and split dollar life insurance contracts
increased from $131,263 during 1993 to $485,899 during 1994. The increase was
the result of prepaying (at a discount) all the premiums due on a policy used to
fund a split dollar agreement. The total investment in life insurance contracts
was $1,394,287 at December 31, 1994, compared with $851,848 at December 31,
1993. Income recognized on the life insurance contracts was $56,540 in 1994 and
$55,479 in 1993.
F-29
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Deposits
Average deposits increased 7.7% in 1993 and decreased 8.8% in 1994 resulting in
total deposits of $53,224,901 at December 31, 1994. For 1994, average non-
interest bearing deposits decreased $6,050,989 resulting in a total of
$7,239,337 at December 31, 1994. The decrease was the result of an abrupt
decrease in the level of real estate escrow deposits that were short term in
nature and abnormally high in 1993 due to the unusual interest rate environment.
As interest rates fell between 1992 and 1994, depositors switched deposits from
certificates of deposit to interest bearing demand deposits. Average
certificates of deposit decreased from $18,105,000 in 1993 to $16,177,311 in
1994, and average interest bearing demand deposits increased from $16,797,000 in
1993 to $20,141,307 in 1994. Average IRA accounts increased 4.5% in 1993,
however, they decreased 6.7% in 1994 as depositors sought higher yields. Year
end balances for certificates of deposit of $100,000 and over decreased from
$5,527,130 at December 31, 1992 to $4,011,094 at December 31, 1994.
The following schedule shows the maturity distribution of certificates of
deposit in excess of $100,000 at December 31, 1994.
(Thousands)
Three months or less $ 1,386
Over three through twelve months 2,061
Over one year through five years 564
------
Total $ 4,011
======
Capital Adequacy
The Federal Reserve Board has established minimum capital ratios which are
calculated as a percentage of risk-weighted assets. At the end of 1994 the
Bank's Tier I capital (stockholders' equity) ratio was 9.1% compared with the
required ratio of 4.00%. The Bank's Tier II capital (stockholders' equity plus
subordinated capital notes and the allowance for loan losses) was 10.54%
compared with the required ratio of 8.00%.
Liquidity
The Bank has implemented a liquidity management policy with the objective of
maintaining sufficient liquid assets to cover all foreseeable demands for cash
and still have excess liquid assets equal to at least 3% of total assets. Excess
liquid assets (liquidity position) is equal to net liquid assets less volatile
liabilities. At December 31, 1994, the liquidity position divided by total
assets was 12.2% compared with 17.0% at December 31, 1993. As part of its
liquidity management policy, management has several options available to
increase liquidity. The Bank is normally a net seller of federal funds which can
be reduced. The Bank keeps a significant portion of its investment portfolio in
unpledged assets that are less than 18 months to maturity which can be sold
without significant loss. The Bank maintains federal funds line of credit of
$1,300,000. The Bank holds commercial loans that can be sold. The Bank may
obtain short-term loans from the Federal Reserve Bank if it should become
illiquid in spite of its liquidity management efforts.
F-30
TABLE 1
AVERAGE BALANCES
YIELDS AND RATES
INCOME AND EXPENSE
1994 1994
Average Income/ Yield/
Balance Expense Rate
Federal Funds Sold $ 4,143,739 $ 164,034 3.96%
----------- ----------
Taxable Investment Securities 8,856,928 413,708 4.67
Tax-Exempt Investment Securities 475,000 42,086 8.86 (1)
----------- ----------
Total Securities 9,331,928 455,794 4.88
----------- ----------
Total Loans - Net of Unearned Income (2) 41,406,504 4,189,809 10.12
----------- ----------
Total Earning Assets - Net of Unearned Income 54,882,171 4,809,637 8.76
----------
Less Allowance for Loan Losses (747,136)
Total Non-Earning Assets 7,380,904
-----------
Total Assets $61,515,939
===========
Interest Bearing Deposits:
Demand deposits $20,141,307 559,562 2.78
Savings 1,635,318 47,792 2.92
Certificates of deposit 16,177,311 765,567 4.73
Individual retirement accounts 6,657,348 443,986 6.67
----------- ----------
Total Interest Bearing Deposits 44,611,284 1,816,907 4.07
----------- ----------
Borrowed Funds:
Subordinated capital note 529,415 40,758 7.70
Short-term borrowings 1,048,928 23,907 2.28
----------- ----------
Total Borrowed Funds 1,578,343 64,665 4.10
----------- ----------
Total Interest Bearing Liabilities 46,189,627 1,881,572 4.07
----------
Non-Interest Bearing Deposits 8,773,473
Other Liabilities 1,039,639
-----------
Total Liabilities 56,002,739
Stockholders' Equity 5,513,200
-----------
Total Liabilities and Capital $61,515,939
===========
Net Interest Income $2,928,065
==========
Differential Between Yield and Rate Paid 4.69%
Net Yield on Interest Earning Assets 5.34%
(1) Taxable equivalent basis using a Federal income tax rate of 34%
(2) Balance includes nonaccrual loans
F-31
TABLE 2
AVERAGE BALANCES
YIELDS AND RATES
INCOME AND EXPENSE
1993 1993
Average Income/ Yield/
Balance Expense Rate
Federal Funds Sold $ 7,808,082 $ 236,106 3.02%
----------- ----------
Taxable Investment Securities 10,307,025 392,794 3.81
Tax-Exempt Investment Securities 475,000 42,086 8.86 (1)
----------- ----------
Total Securities 10,782,025 434,880 4.03
----------- ----------
Total Loans - Net of Unearned Income (2) 40,404,231 4,163,988 10.31
----------- ----------
Total Earning Assets - Net of Unearned Income 58,994,338 4,834,974 8.20
----------
Less Allowance for Loan Losses (742,267)
Total Non-Earning Assets 8,017,676
-----------
Total Assets $66,269,747
===========
Interest Bearing Deposits:
Demand deposits $16,797,343 480,344 2.86
Savings 1,668,872 53,487 3.20
Certificates of deposit 18,105,196 880,541 4.86
Individual retirement accounts 7,136,236 511,388 7.17
----------- ----------
Total Interest Bearing Deposits 43,707,647 1,925,760 4.41
----------- ----------
Borrowed Funds:
Subordinated capital note 581,582 38,303 6.59
Short-term borrowings 1,529,978 34,706 2.27
----------- ----------
Total Borrowed Funds 2,111,560 73,009 3.46
----------- ----------
Total Interest Bearing Liabilities 45,819,207 1,998,769 4.36
----------
Non-Interest Bearing Deposits 14,824,462
Other Liabilities 483,531
-----------
Total Liabilities 61,127,200
Stockholders' Equity 5,142,547
-----------
Total Liabilities and Capital $66,269,747
===========
Net Interest Income $2,836,205
==========
Differential Between Yield and Rate Paid 3.84%
Net Yield on Interest Earning Assets 4.81%
(1) Taxable equivalent basis using a Federal income tax rate of 34%
(2) Balance includes nonaccrual loans
F-32
TABLE 3
AVERAGE BALANCES
YIELDS AND RATES
INCOME AND EXPENSE
1992 1992
Average Income/ Yield/
Balance Expense Rate
Federal Funds Sold $ 2,886,492 $ 102,232 3.54%
---------- ---------
Taxable Investment Securities 9,965,069 447,616 4.49
Tax-Exempt Investment Securities 506,297 44,259 8.74 (1)
---------- ---------
Total Securities 10,471,366 491,875 4.70
---------- ---------
Total Loans - Net of Unearned Income (2) 42,514,627 4,526,941 10.65
---------- ---------
Total Earning Assets - Net of Unearned Income 55,872,485 5,121,048 9.17
---------
Less Allowance for Loan Losses (772,623)
Total Non-Earning Assets 6,701,473
----------
Total Assets $61,801,335
==========
Interest Bearing Deposits:
Demand deposits $13,743,691 523,533 3.81
Savings 1,665,540 66,740 4.01
Certificates of deposit 20,115,421 1,170,518 5.82
Individual retirement accounts 6,831,658 539,863 7.90
---------- ---------
Total Interest Bearing Deposits 42,356,310 2,300,654 5.43
---------- ---------
Borrowed Funds:
Subordinated capital note 631,974 43,386 6.87
Short-term borrowings 1,528,454 46,348 3.03
---------- ---------
Total Borrowed Funds 2,160,428 89,734 4.15
---------- ---------
Total Interest Bearing Liabilities 44,516,738 2,390,388 5.37
---------
Non-Interest Bearing Deposits 12,003,302
Other Liabilities 400,884
----------
Total Liabilities 56,920,924
Stockholders' Equity 4,880,411
----------
Total Liabilities and Capital $61,801,335
==========
Net Interest Income $2,730,660
=========
Differential Between Yield and Rate Paid 3.80%
Net Yield on Interest Earning Assets 4.89%
(1) Taxable equivalent basis using a Federal income tax rate of 34%
(2) Balance includes nonaccrual loans
F-33
TABLE 4
RATE VOLUME ANALYSIS
1994
Change in 1994 1994
Income/ Rate Volume
Expense Effect Effect
Earning Assets:
Federal Funds $ (72,072) $ 38,591 $(110,663)
Taxable Securities 20,914 76,163 (55,249)
Tax-Exempt 0 0 0
--------- --------- ---------
Total Securities 20,914 76,163 (55,249)
Total Loans 25,821 (77,513) 103,334
--------- --------- ---------
Total Earning Assets (25,337) 311,861 (337,198)
--------- --------- ---------
Interest Bearing Liabilities:
Demand deposits 79,218 (16,419) 95,637
Savings (5,695) (4,621) (1,074)
Certificates of deposit (114,974) (21,279) (93,695)
Individual retirement accounts (67,402) (33,066) (34,336)
--------- --------- ---------
Total Interest Bearing Deposits (108,853) (148,703) 39,850
Subordinated capital note 2,455 5,893 (3,438)
Other Borrowing (10,799) 121 (10,920)
--------- --------- ---------
Total Interest Bearing Liabilities (117,197) (133,347) 16,150
--------- --------- ---------
Net Interest Income $ 91,860 $ 445,208 $(353,348)
========= ========= =========
Note: The changes attributable to a rate/volume variance have been allocated to
the rate effect.
F-34
TABLE 5
RATE VOLUME ANALYSIS
1993
Change in 1993 1993
Income/ Rate Volume
Expense Effect Effect
Earning Assets:
Federal Funds $ 133,874 $ (40,350) $ 174,264
Taxable Securities (54,822) (70,176) 15,354
Tax-Exempt (2,173) 562 (2,735)
-------- -------- --------
Total Securities (56,995) (71,596) 14,601
Total Loans (362,953) (138,196) (224,757)
-------- -------- --------
Total Earning Assets (286,074) (572,348) 286,274
-------- -------- --------
Interest Bearing Liabilities:
Demand deposits (43,189) (159,533) 116,344
Savings (13,253) (13,387) 134
Certificates of deposit (289,977) (172,982) (116,995)
Individual retirement accounts (28,475) (52,537) 24,062
-------- -------- --------
Total Interest Bearing Deposits (374,894) (448,272) 73,378
Subordinated capital note (5,083) (1,621) (3,462)
Other Borrowing (11,642) (11,688) 46
-------- -------- --------
Total Interest Bearing Liabilities (391,619) (461,562) 69,943
-------- -------- --------
Net Interest Income $ 105,545 $(110,786) $ 216,331
======== ======== ========
Note: The changes attributable to a rate/volume variance have been allocated to
the rate effect.
F-35
TABLE 6
RATE VOLUME ANALYSIS
1992
Change in 1992 1992
Income/ Rate Volume
Expense Effect Effect
Earning Assets:
Federal Funds $ 17,379 $ (68,975) $ 86,354
Taxable Securities (214,835) (224,845) 10,010
Tax-Exempt (6,129) (1,248) (4,881)
-------- -------- --------
Total Securities (220,964) (227,422) 6,458
Total Loans (204,685) (82,248) (122,437)
-------- -------- --------
Total Earning Assets (408,270) (450,218) 41,948
-------- -------- --------
Interest Bearing Liabilities:
Demand deposits (181,527) (233,905) 52,378
Savings 5,923 (19,838) 25,761
Certificates of deposit (501,399) (385,955) (115,444)
Individual retirement accounts 43,635 (33,541) 77,176
-------- -------- --------
Total Interest Bearing Deposits (633,368) (695,183) 61,815
Subordinated capital note (18,181) (14,072) (4,109)
Other Borrowing (92,482) (25,883) (66,599)
-------- -------- --------
Total Interest Bearing Liabilities (744,031) (745,192) 1,161
-------- -------- --------
Net Interest Income $ 335,761 $ 294,974 $ 40,787
======== ======== ========
Note: The changes attributable to a rate/volume variance have been allocated to
the rate effect.
F-36
AUDITED FINANCIAL STATEMENTS
(AS OF DECEMBER 31, 1994 AND 1993)
AND FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992)
F-37
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of First Commercial Bank
We have audited the accompanying balance sheets of First Commercial Bank as of
December 31, 1994 and 1993, and the related statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Bank's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First Commercial Bank as of
December 31, 1994 and 1993, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
/s/ S. B. Hoover & Company, L.L.P.
-----------------------------------
S. B. Hoover & Company, L.L.P.
January 26, 1995
(Except for Note 17 for which the
date is March 6, 1995)
F-38
FIRST COMMERCIAL BANK
BALANCE SHEETS
December 31,
ASSETS 1994 1993
Cash and due from banks (notes 2 & 15) $ 3,534,193 $ 2,181,459
Federal funds sold (note 15) 2,300,000 10,000,000
----------- -----------
Cash and Cash Equivalents 5,834,193 12,181,459
Securities available for sale (at market value) (note 3) 3,911,875
Securities held to maturity (market value of
$4,335,114 in 1994 and $15,528,269 in 1993) (note 3) 4,536,357 15,514,793
----------- -----------
Total Securities 8,448,232 15,514,793
Loans, net of unearned income (notes 4, 14, 15 & 16) 42,812,089 41,324,015
Less allowance for loan losses (note 5) (661,373) (755,168)
----------- -----------
Net Loans 42,150,716 40,568,847
Bank premises and equipment, net (note 6) 932,851 1,049,436
Interest receivable 511,242 522,500
Life insurance contracts 1,394,287 851,848
Other real estate owned 872,933 525,278
Other assets 689,275 576,713
----------- -----------
Total Assets $60,833,729 $71,790,874
=========== ===========
LIABILITIES
Deposits:
Demand - Noninterest bearing $ 7,239,337 $12,207,426
- Interest bearing 20,153,894 23,178,705
Savings 1,595,427 1,818,421
Certificates of deposit $100,000 and over 4,011,094 4,573,125
Other time deposits 20,225,149 19,983,641
----------- -----------
Total Deposits 53,224,901 61,761,318
Securities sold under repurchase agreements (note 7) 3,295,000
Accrued interest and other liabilities 1,392,768 998,772
Subordinated capital note (note 8) 492,297 562,576
----------- -----------
Total Liabilities 55,109,966 66,617,666
----------- -----------
STOCKHOLDERS' EQUITY (notes 8 & 13)
Common stock, $5 par value, authorized 400,000
shares, issued and outstanding 201,100 shares 1,005,500 1,005,500
Capital surplus 1,005,500 1,005,500
Retained earnings 3,733,086 3,162,208
Net unrealized loss on securities available for sale (20,323)
----------- -----------
Total Stockholders' Equity 5,723,763 5,173,208
----------- -----------
Total Liabilities and Stockholders' Equity $60,833,729 $71,790,874
=========== ===========
The accompanying notes are an integral part of this statement.
F-39
FIRST COMMERCIAL BANK
STATEMENTS OF INCOME
Years Ended December 31,
1994 1993 1992
INTEREST INCOME:
Interest and fees on loans $ 4,430,188 $ 4,277,936 $ 4,674,096
Interest on investment securities
Taxable 413,708 392,794 447,616
Nontaxable 27,778 27,778 29,211
Interest on federal funds sold 164,034 236,106 102,232
---------- ---------- ----------
Total Interest Income 5,035,708 4,934,614 5,253,155
---------- ---------- ----------
INTEREST EXPENSE:
Certificates of deposits over $100,000 159,865 213,608 431,111
Other deposits 1,657,042 1,712,151 1,869,543
Short-term borrowings 23,907 34,707 46,348
Subordinated capital note 40,758 38,303 43,386
---------- ---------- ----------
Total Interest Expense 1,881,572 1,998,769 2,390,388
---------- ---------- ----------
NET INTEREST INCOME 3,154,136 2,935,845 2,862,767
PROVISION FOR LOAN LOSSES (note 5) 20,000 460,000 694,231
---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 3,134,136 2,475,845 2,168,536
---------- ---------- ----------
OTHER INCOME:
Service fees 183,295 230,078 181,386
Miscellaneous 124,594 225,153 57,477
Loss on sale of securities (48,613)
Net gain (loss) on foreclosed real estate 5,582 (32,758) (8,806)
---------- ---------- ----------
Total Other Income 264,858 422,473 230,057
---------- ---------- ----------
OTHER EXPENSES:
Salaries 1,020,564 928,440 760,881
Employee benefits (notes 11 & 12) 390,430 351,433 273,288
Occupancy expenses, net (note 10) 198,640 192,468 188,314
Furniture and equipment expense 176,532 197,188 172,541
Computer rent expense (note 10) 24,678 75,553
Repossession expense 13,448 42,913 77,858
Legal and professional fees 123,842 127,188 108,221
Directors' fees 154,000 150,500 148,000
FDIC insurance assessment 150,905 147,281 130,614
Other expenses 243,446 226,241 267,465
---------- ---------- ----------
Total Other Expenses 2,471,807 2,388,330 2,202,735
---------- ---------- ----------
Income before Income Tax Expense 927,187 509,988 195,858
INCOME TAX EXPENSE (note 9) 316,089 195,931 46,292
---------- ---------- ----------
NET INCOME $ 611,098 $ 314,057 $ 149,566
========== ========== ==========
Net Income per Share $ 3.04 $ 1.56 $ .74
========== ========== ==========
The accompanying notes are an integral part of this statement.
F-40
FIRST COMMERCIAL BANK
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Unrealized
Gain
(Loss)
on Securities
Common Capital Retained Available
Stock Surplus Earnings for Sale Total
BALANCE, DECEMBER 31, 1991 $ 1,005,500 $ 1,005,500 $ 2,779,025 $ $ 4,790,025
Net income 149,566 149,566
Dividends declared, $.20
per share (40,220) (40,220)
---------- ----------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1992 1,005,500 1,005,500 2,888,371 4,899,371
Net income 314,057 314,057
Dividends declared, $.20
per share (40,220) (40,220)
----------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1993 1,005,500 1,005,500 3,162,208 5,173,208
Net income 611,098 611,098
Dividends declared, $.20
per share (40,220) (40,220)
Cumulative effect of change in
accounting principle (net
of income taxes of $1,400)
(Note 1) 2,717 2,717
Decline in fair value (net of
income taxes of ($13,856)) (23,040) (23,040)
---------- ----------- ---------- -------- ----------
BALANCE, DECEMBER 31, 1994 $ 1,005,500 $ 1,005,500 $ 3,733,086 $ (20,323) $ 5,723,763
========== ========== ========== ======== ==========
The accompanying notes are an integral part of this statement.
F-41
FIRST COMMERCIAL BANK STATEMENTS OF CASH FLOWS
Years Ended December 31,
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 611,098 $ 314,057 $ 149,566
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 20,000 460,000 694,231
Depreciation 137,502 141,332 134,805
Net amortization of bond premium 31,106 153,119 279,790
Increase in carrying value of life
insurance policies (56,540) (55,479) (10,707)
Increase in deferred income tax benefit (98,179) (100,065) (13,115)
Loss on sale of assets 43,031 32,758 8,806
(Increase) decrease in other assets (30,541) 150,683 27,326
Increase (decrease) in accrued expenses 242,735 572,080 (199,339)
------------ ------------ ------------
Net Cash Provided by Operating Activities 900,212 1,668,485 1,071,363
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities available for sale 13,000,000
Proceeds from sales of securities available for sale 3,969,375
Purchase of securities available for sale (5,935,624)
Proceeds from maturities of securities held to maturity 0 6,000,000 14,351,317
Purchase of securities held to maturity (4,079,688) (11,054,545) (15,594,870)
Net decrease (increase) in loans (1,918,714) (371,358) 4,121,692
Purchase of bank premises and equipment (20,917) (145,619) (14,557)
Investment in life insurance policies (485,899) (131,263) (43,819)
Proceeds from sale of assets 295,500 470,500 14,885
Investment in other assets (129,595)
------------ ------------ ------------
Net Cash Provided by (Used in) Investing Activities 4,694,438 (5,232,285) 2,834,648
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand and savings deposits (8,643,689) 8,002,504 2,710,570
Net increase (decrease) in time deposits 107,272 (595,752) (3,276,425)
Payments on subordinated capital note (70,279) (50,000) (49,999)
Increase (decrease) in short-term borrowings (3,295,000) 2,895,000 (2,270,759)
Cash dividends paid (40,220) (40,220) (40,220)
------------ ------------ ------------
Net Cash Provided by (Used in) Financing Activities (11,941,916) 10,211,532 (2,926,833)
------------ ------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents (6,347,266) 6,647,732 979,178
Cash and Cash Equivalents, Beginning of Year 12,181,459 5,533,727 4,554,549
------------ ------------ ------------
Cash and Cash Equivalents, End of Year $ 5,834,193 $ 12,181,459 $ 5,533,727
============ ============ ============
Supplemental Information
Cash Paid For:
Interest $ 1,890,381 $ 2,013,536 $ 2,463,479
Income taxes 523,648 76,756 118,000
Noncash Investing Activities:
Transfers from loans to other real estate owned 1,417,345 134,394 883,307
Loans made to facilitate sale of real estate owned 1,100,500 300,000 720,000
The accompanying notes are an integral part of this statement.
F-42
FIRST COMMERCIAL BANK
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles and conform to general
practices within the banking industry. Significant accounting policies are
summarized below.
A. CASH AND CASH EQUIVALENTS
Cash and equivalents includes cash on hand, federal funds sold and
deposits at other financial institutions whose initial maturity is
ninety days or less.
B. INVESTMENT SECURITIES
Debt securities that management has the ability and intent to hold to
maturity are classified as held to maturity and carried at cost,
adjusted for amortization of premium and accretion of discounts using
methods approximating the interest method. Other marketable securities
are classified as available for sale and are carried at fair value.
Unrealized gains and losses on securities available for sale are
recognized as direct increases or decreases in stockholders' equity.
Cost of securities sold is recognized using the specific identification
method.
C. LOANS
Loans are carried on the balance sheet net of the allowance for loan
losses. Interest income on loans is generally calculated by using the
simple interest method on the daily amount of principal outstanding
except where serious doubt exists as to collectibility of the loan, in
which case the accrual of income is discontinued.
D. ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is based upon management's knowledge and
review of the loan portfolio. Estimates of loan losses involve the
exercise of judgement, the use of assumptions with respect to present
economic conditions and knowledge of the environment in which the Bank
operates. Among the factors considered in determining the level of the
allowance are the changes in composition of the loan portfolio, the
amount of delinquent and nonaccrual loans, past loan loss experience
and the value of collateral securing the loans.
E. BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation is charged to income over the estimated
useful lives of the assets on a combination of the straight-line and
accelerated methods. The ranges of the useful livesconsideration of the premises and equipment areof the mutual
covenants and agreements herein contained, the parties hereto do hereby agree as
follows:
F-43
FIRST COMMERCIAL BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
BuildingsARTICLE I
DEFINITIONS
"Association" shall mean First Empire Federal Savings and Improvements 5 - 40 years
Furniture and fixtures 3 -Loan Association.
"Acquiror Closing Price" shall mean the average closing price of the
Acquiror Common Stock on the Nasdaq Stock Market's National Market over the 20
years
Automobiles 2 - 4 years
Maintenance, repairs, and minor improvements are charged to operations
as incurred. Gains and lossestrading days commencing on routine dispositions are reflected in
other income or expense.
F. INCOME TAXES
Amounts provided for income tax expense are based on income reported
for financial statement purposes rather than amounts currently payable
under income tax laws. Deferred taxes, which arise principally from
temporary differences between the period in which certain income and
expenses are recognized for financial accounting purposesfirst business day following the receipt of the
required approval of the FRB and the period in which they affect taxable income, are included inOCC, whichever is later, as reported by the
amounts provided for income taxes. Prior to 1993, deferred income
taxes were provided for usingNasdaq Stock Market's National Market or other authoritative source.
"Acquiror Common Stock" shall mean the provisions of APB 11. Effective
January 1, 1993, the Company adopted Financial Accounting Standards
No. 109, "Accounting for Income Taxes." The effect of this change in
the method of accounting for income taxes was not material and is
included as additional income tax expense for 1993. (See note 9)
G. FORECLOSED REAL ESTATE
Foreclosed real estate is carried at the lower of faircommon stock, par value at the
date of foreclosure or the current fair value minus the estimated
costs to sell. Adjustments to the carrying value are included in the
computation of net income for the period.
H. DEFERRED COMPENSATION CONTRACTS
Expenses for deferred compensation contracts and the related liability
are calculated using the double discounting method.
I. CHANGE IN ACCOUNTING PRINCIPLE
As of January 1, 1994, the Bank adopted Financial Accounting Standard
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" and classified investments with an amortized cost of
$15,039,793 and a market value of $15,043,910 as securities available
for sale. The carrying value$2.50 per
share, of the securities available for sale was
adjusted to market valueAcquiror.
"Acquiror Employee Stock Benefit Plans" shall mean the following employee
benefit plans of the Acquiror: 1988 Incentive Stock Option Plan, 1991 Incentive
Stock Option Plan, United Savings and Stock Investment Plan and United Dividend
Reinvestment Plan.
"Acquiror Financial Statements" shall mean (i) the unrealized gain or loss netconsolidated statements
of income
taxes recordedfinancial condition (including related notes and schedules, if any) of the
Acquiror as an increase or decrease in stockholders' equity as
follows:
F-44
FIRST COMMERCIAL BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Decline in
Fair Value
January 1, During December 31,
1994 1994 1994
Securities available for sale $ 4,117 $(36,896) $(32,779)
Deferred income tax benefit (payable) (1,400) 13,856 12,456
------- -------- --------
Unrealized Gains (Losses) on Securities
Available for Sale $ 2,717 $(23,040) $(20,323)
======= ======== ========
2. CASH AND CASH EQUIVALENTS:
The Bank is required to maintain average reserve balances based on a
percentage of deposits. During 1994 and 1993, the Bank's average reserve
requirements were approximately $390,000. The Bank has met this
requirement through its cash on hand and due from banks.
3. INVESTMENT SECURITIES:
The amortized cost and fair value of investment securities at December
31, 1994, were:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available for Sale
------------------
U. S. Treasury $ 3,944,654 $ -0- $ 32,779 $ 3,911,875
========== ========== ======== ==========
Held to Maturity
----------------
U. S. Treasury
and Agencies $ 4,061,357 $ $ 150,732 $ 3,910,625
Municipals 475,000 3,500 54,011 424,489
---------- ---------- -------- ----------
Totals $ 4,536,357 $ 3,500 $ 204,743 $ 4,335,114
========== ========== ======== ==========
The amortized cost and estimated market values of investment securities
at December 31, 1993, were:
F-45
FIRST COMMERCIAL BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENT SECURITIES (CONTINUED):
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
U. S. Treasury securities $ 15,039,793 $ 9,873 $ 5,756 $ 15,043,910
State, county and municipal
bonds 475,000 11,547 2,188 484,359
----------- ------- ------ -----------
Total $ 15,514,793 $ 21,420 $ 7,944 $ 15,528,269
=========== ======= ====== ===========
The amortized cost and fair value of debt securities at December 31,
1994, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right
to call or prepay obligations with or without call or prepayment
penalties.
Securities Available for Sale Securities Held to Maturity
----------------------------- ---------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
Due in one year or less $ 2,965,707 $2,947,500 $ $
Due after one year through
five years 978,947 964,375 4,061,357 3,910,625
Due five years through
ten years 225,000 220,989
Due after ten years 250,000 203,500
--------- --------- --------- ---------
Total $3,944,654 $3,911,875 $4,536,357 $4,335,114
========= ========= ========= =========
During 1994, the Bank sold available for sale for total proceeds of
$3,969,375 resulting in gross realized losses of $48,613.
Securities with a carrying value of $1,200,000 at December 31, 1994, were
pledged to secure public deposits and for other purposes required by law.
F-46
FIRST COMMERCIAL BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. LOANS:
Major classifications of loans at December 31, 1994 and 1993, are as
follows:
(Rounded to the Nearest Thousand)
1994 1993
Commercial loans $ 22,249,000 $ 22,282,000
Real estate - construction 6,406,000 5,338,000
Real estate - 1-4 family residential 11,253,000 9,864,000
Personal loans 2,845,000 3,582,000
Other loans 59,000 258,000
----------- -----------
42,812,000 41,324,000
Allowance for loan losses (661,000) (755,000)
----------- -----------
Loans, Net $ 42,151,000 $ 40,569,000
=========== ===========
4. LOANS (CONTINUED):
The total loans classified as nonaccrual at December 31, 1994, 1993 and 1992 the proforma interest income that would have been earned in 1994,
1993 and 1992 if such loans had not been classified as nonaccrual and the
amountsA-5
consolidated statements of interest actually included in net incomeoperations, shareholders' equity and cash flows
(including related notes and schedules, if any) of the Acquiror for those years, are
as follows:
1994 1993 1992
Total nonaccrual loans $47,588 $628,426 $440,056
Proforma interest 5,507 72,580 64,066
Interest included in net income 3,490 43,866 25,682
5. ALLOWANCE FOR LOAN LOSSES:
Changes ineach of the
allowance for loan losses were as follows:
1994 1993 1992
Balance, beginning of year $ 755,168 $ 582,856 $ 692,116
Provision charged to operations 20,000 460,000 694,231
Loans charged off (156,629) (311,224) (810,440)
Recoveries 42,834 23,536 6,949
--------- --------- ---------
Balance, end of year $ 661,373 $ 755,168 $ 582,856
========= ========= =========
F-47
FIRST COMMERCIAL BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. BANK PREMISES AND EQUIPMENT:
The major classes of bank premises and equipment and the total
accumulated depreciation at December 31, 1994 and 1993, are as follows:
1994 1993
Buildings $ 1,007,886 $ 1,007,886
Leasehold improvements 174,810 253,515
Furniture and equipment 816,671 938,082
Automobiles 138,711 138,711
---------- ----------
2,138,078 2,338,194
Less accumulated depreciation 1,205,227 1,288,758
---------- ----------
$ 932,851 $ 1,049,436
========== ==========
Depreciation expense was $137,502, $141,332 and $134,805 for thethree years ended December 31, 1994, 1993 and 1992 respectively.
7. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS:
Information on securities sold under repurchase agreements is shown in
the following schedule:
Weighted
Maximum Outstanding Average Average Year End
Outstanding at at Balance Interest Interest
Any Month End Year End Outstanding Rate Rate
1994 $ 3,320,000 $ 0 $ 1,048,928 2.28% N/A
1993 $ 3,295,000 $ 3,295,000 $ 1,529,979 2.27% 2.44%
At December 31, 1994, the Bank had unused lines of credit to purchase
federal funds of $1,300,000.
F-48
FIRST COMMERCIAL BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. SUBORDINATED CAPITAL NOTE:
In order to provide additional regulatory capital the Bank borrowed funds
under a subordinated note from NationsBank for $750,000. The note is
payable in quarterly installments including interest at .5% over
NationsBank's prime with increasing amounts of principal through July 1,
1998. The agreement contains certain default provisions relating to
operations and the maintenance of capital, including the provision that
the Bank will be in default if dividends paid exceed thirty percent (30%)
of the Bank's net income for the preceding fiscal year.
Principal payments on the capital note are scheduled as follows:
1995 $ 131,118
1996 131,118
1997 131,118
1998 98,943
9. INCOME TAXES:
The income tax expense is shown in the following schedule:
1994 1993 1992
Current expense $ 414,268 $ 295,996 $ 59,407
Deferred tax benefit (98,179) (119,012) (13,115)
Change in accounting method 18,947
-------- -------- --------
Income Tax Expense $ 316,089 $ 195,931 $ 46,292
======== ======== =======
9. INCOME TAXES (CONTINUED):
The net deferred tax asset at December 31, 1994 and 1993, is shown in
the following schedule:
1994 1993
Deferred Tax Asset
Deferred compensation plan $ 222,948 $ 147,337
Allowance for loan losses 88,942 122,408
Accrued officer bonus 87,230 34,849
Valuation allowance OREO 13,736 7,971
Unrealized loss on securities 12,456
Other 1,739 1,449
-------- --------
427,051 314,014
-------- --------
Deferred Tax Liabilities
Depreciation 23,234 27,000
Key man insurance policies 25,907 19,739
-------- --------
49,141 46,739
-------- --------
Net Deferred Tax Asset $ 377,910 $ 267,275
======== ========
F-49
FIRST COMMERCIAL BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The components of net deferred income tax benefit resulting from timing
differences in the recognition of revenue and expenses for tax and
financial purposes were as follows:
1994 1993 1992
Allowance for loan losses $ 33,466 $ (29,797) $ 74,276
Accelerated depreciation (3,766) (8,081) 400
Accrued officer bonus (52,381) (34,849)
Deferred compensation plan (75,611) (65,486) (67,016)
Gain on foreclosed real estate 15,802 (27,270)
Change in accounting method 18,947
Other 113 3,399 6,495
------- -------- -------
Net Deferred Income Tax Benefit $(98,179) $(100,065) $(13,115)
======= ======== =======
The difference between income tax expense and the amount computed by
applying the statutory federal income tax rates to pretax income was as
follows:
1994 1993 1992
Statutory federal tax rates applied
to pretax income $ 315,244 $ 173,396 $ 59,635
Change in accounting method 18,948
Nontaxable interest (9,445) (9,445) (11,392)
Nondeductible expense 2,896 2,124 2,820
Officers' life insurance 7,394 9,623 (5,522)
Other 1,285 751
------- -------- --------
Income Tax Expense $ 316,089 $ 195,931 $ 46,292
======== ======== ========
10. OPERATING LEASES:
The Bank has entered into a lease for the land on which the Bank's office
building has been constructed. The current annual rental is $95,402. This
ground lease expires December 5, 2004 and is renewable for an additional
ten years. Periodically, the annual rent is adjusted to reflect increases
in the Consumer Price Index. Additional off-site storage space is leased
on a year-to-year basis. The Bank has a ten year lease for a branch
office with annual rental of $77,901, which expires June 30, 1996.
Effective February 1, 1990, the Bank subleased the branch office under a
lease that expires June 30, 1996 and provides for rental income of
$81,481 per year.
The Bank also leases equipment under various operating leases.
F-50
FIRST COMMERCIAL BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. OPERATING LEASES (CONTINUED):
The net rental expenses of the Bank were as follows:
1994 1993 1992
Facilities leases $ 173,509 $ 170,951 $ 168,066
Less sublease income (81,481) (81,481) (81,481)
-------- -------- --------
92,028 89,470 86,585
Equipment leases 4,650 28,667 80,186
-------- -------- --------
Net Rental Expenses $ 96,678 $ 118,137 $ 166,771
======== ======== ========
Future minimum rental payments under noncancelable leases as of December
31, 1994, are as follows:
Facilities Equipment Total
1995 $ 173,303 $3,411 $ 176,714
1996 134,353 3,411 137,764
1997 95,402 1,421 96,823
1998 95,402 95,402
1999 95,402 95,402
Thereafter 469,058 469,058
---------- ------- ----------
1,062,920 8,243 1,071,163
Less rental income from subleases 122,222 122,222
---------- ------- ----------
$ 940,698 $8,243 $ 948,941
========== ====== ==========
11. DEFERRED COMPENSATION CONTRACTS:
The Bank has entered into deferred compensation contracts with Bank
officers under the Bank's executive salary continuation plan approved in
1986. Beginning in 1991, the Bank began accruing a liability, which at
the date of retirement, will equal the present value of payments to be
made under the contracts. The expense accrued for 1994, 1993 and 1992 was
$222,385, $192,608 and $171,857, respectively.
In addition to the deferred compensation contract, the Bank has a split
dollar life insurance agreement which was amended on December 31, 1993,
under which the Bank has agreed to advance ten annual premiums of $81,710
on a whole life insurance policy ownedfiled by the chief executive officer.
The amount of the advances is recorded as an asset and accrues interest
at 5% compounded annually. The premium advance account is secured by a
collateral assignment of the policy and will be reimbursed upon his
death.
F-51
FIRST COMMERCIAL BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. EMPLOYMENT CONTRACTS:
On December 31, 1992, the Bank entered into employment agreements with
the executive officers of the Bank. The agreements provide for a
continuation of the present salaries and benefits and automatically renew
annually unless either party gives timely notice that the agreement will
not be renewed. In the event that employment is terminated by the Bank
for other than cause, the Bank will pay a lump sum payment equivalent to
salary and benefits for a period which ranges from nine to twenty-four
months depending on the years of service. Upon voluntary termination by
the employee, the Bank will pay a lump sum amount equivalent to salary
and benefits for a period which ranges from three to twelve months
depending on the years of service. In the event of a change in control
and the employee is not assigned substantially the same position or not
provided substantially the same facilities within the trade area of the
Bank as definedAcquiror in
its Community Reinvestment Act Statement, then in
effect,Securities Documents, and (ii) the employee will be entitled to terminate his employment and
receive a lump sum paymentconsolidated statements of 2.99 times the then annual base salary.
13. STOCKHOLDERS' EQUITY:
At December 31, 1994 and 1993, there were 400,000 shares of common stock
authorized of which 201,100 were issued and outstanding of which the
chief executive officer of the Bank beneficially owns 68.6%.
14. RELATED PARTY TRANSACTIONS:
Certain officers, directors, employees and their affiliates are loan
customers of the Bank. In management's opinion, the loans were made in
the ordinary course of business on substantially the same terms,
including interest rates and collateral, as those prevailing at the time
for comparable transactions with unrelated parties. An analysis of loans
to related parties (net of participation) is shown in the following
schedule:
1994 1993
Balance, beginning of year $ 738,713 $ 553,492
New loans made 45,122 344,300
Repayments (118,336) (103,034)
Loans to former officers (11,775)
Loans charged off (44,270)
---------
Balance, end of year $ 665,499 $ 738,713
========= =========
In the ordinary course of business, the Bank had accepted deposits from
related parties and their affiliates of $2,959,823 at December 31, 1994
and $3,474,435 at December 31, 1993.
F-52
FIRST COMMERCIAL BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
15. CONCENTRATION OF CREDIT RISKS:
The Bank has cash deposited in and federal funds sold to one commercial
bank of $5,203,109 and $5,717,140 at December 31, 1994 and 1993,
respectively.
The Bank grants commercial, residential real estate and consumer loans to
customers located primarily in northern Virginia and the District of
Columbia. Collateral held varies, but may include accounts receivable,
marketable securities, deposit accounts, inventory, property, plant and
equipment, real estate, and income producing commercial properties. A
schedule of loans by type is shown in note 4. Included in personal loans
are loans which are secured by mobile homes, totaling $1,877,953 and
$2,273,064 at December 31, 1994 and 1993. Collateral required by the Bank
is determined on an individual basis depending on the nature of the loan
and the financial
condition of the borrower.
16. COMMITMENTS AND GUARANTEES:
The Bank is a party to financial instruments with off-balance sheet riskAcquiror (including related notes and schedules, if any) and
the consolidated statements of operations, shareholders' equity and cash flows
(including related notes and schedules, if any) of the Acquiror included in the
normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit, standby letters of credit and financial guarantees. Those
instruments involve, to varying degrees, elements of credit risk in
excess of the amount recognized in the balance sheet.
The Bank's exposure to credit loss in the event of nonperformanceSecurities Documents filed by the other partyAcquiror with respect to the financial instrument for commitmentsquarterly and
annual periods ended subsequent to extend credit
and standby letters of credit and financial guarantees written is
represented byDecember 31, 1994.
"Bank" shall mean United National Bank.
"Bank Merger" shall have the contractual amount of those instruments. The Bank uses
the same credit policiesmeaning set forth in making commitments and conditional
obligations as it does for the loans reflected in the balance sheet.
Contract Amount
1994 1993
Financial instruments whose contract amounts
represent credit risk:
Commitments to extend credit $ 6,588,432 $ 5,088,000
Standby letters of credit and financial
guarantees written 556,733 657,832
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments
are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Bank
evaluates each customer's credit worthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Bank upon
extension of credit, is based on management's credit evaluation of the
borrower. Collateral held varies, but may include accounts receivable,
marketable securities, deposit accounts, inventory, property, plant and
equipment, real estate, and income producing commercial properties.
F-53
FIRST COMMERCIAL BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
16. COMMITMENTS AND GUARANTEES (CONTINUED):
Standby letters of credit and financial guarantees written are
conditional commitments issued by the Bank to guarantee the performance
of a customer to a third party. The guarantees are primarily issued as
performance bonds relating to construction. The credit risk involved in
issuing letters of credit is essentially the same as that involved in
extending loans to customers.
17. AGREEMENT TO MERGE:
On March 6, 1995, the Board of Directors of First Commercial Bank
("Bank") entered into an agreement to merge with United Bankshares, Inc.
("United"), 514 Market Street, Parkersburg, WV. Under the agreement
United will obtain 100% ownership of the Bank in exchange for 1.12 shares
of the common stock of United and $26.25 in cash for each share of Bank
common stock. Consummation of the transactions is expected in late 1995.
F-54
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
E-1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and
entered into as of this 6th day of March, 1995, among First Commercial Bank, a
Virginia banking corporation ("FCB"); United Bankshares, Inc. ("UBS") and
Commercial Interim Bank, a Virginia banking corporation to be formed as a
wholly-owned subsidiary of UBS.
WHEREAS, FCB is a Virginia state banking institution organized and
existing under the laws of the Commonwealth of Virginia with its principal
office in Arlington, Virginia;
WHEREAS, Commercial Interim Bank will be organized as a Virginia
banking institution with its principal office located in Arlington, Virginia;
WHEREAS, UBS is a West Virginia corporation with its principal office
located in Charleston, West Virginia, and is a registered bank holding company
underSection 2.8 hereof.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended;
WHEREAS,amended.
"BIF" means the parties hereto desire to accomplishBank Insurance Fund administered by the mergerFDIC or any
successor thereto.
"Code" shall mean the Internal Revenue Code of FCB
into Commercial Interim Bank with Commercial Interim Bank surviving1986, as amended.
"Commission" shall mean the Securities and operating underExchange Commission.
"Company Common Stock" shall mean the name "First Commercial Bank" (the "Merger");
WHEREAS, shareholders of FCB will receive shares of UBS common stock, ("UBS stock") and/or cash for eachpar value $0.10 per
share, of FCB common stock ("FCB" stock") they
own as consideration for the Merger; provided, however that no fractional sharesCompany.
"Company Financial Statements" shall mean (i) the consolidated statements
of UBS stock will be issuedfinancial condition (including related notes and in lieu thereof FCB shareholders will receive
cash consideration as provided herein;
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WHEREAS, FCB has authorized capitalschedules, if any) of $2,000,000, divided into
400,000 shares of common stock of $5.00 par value, of which 201,100 are issued
and outstanding, resulting in a capital account of $1,005,500, with surplus of
$1,005,500 and undivided profits of $3,705,741the
Company as of December 31, 1994;
WHEREAS,1994, 1993 and 1992 and the consolidated statements
of operations, shareholders' equity and cash flows (including related notes and
schedules, if any) of the Company for each of the three years ended December 31,
1994, 1993 and 1992 as filed by the Company in its Securities Documents, and
(ii) the consolidated statements of financial condition of the Company
(including related notes and schedules, if any) and the consolidated statements
of operations, shareholders' equity and cash flows (including related notes and
schedules, if any) of the Company included in the Securities Documents filed by
the Company with respect to the quarterly and annual periods ended subsequent to
December 31, 1994.
"Company Preferred Stock" shall mean the shares of preferred stock, par
value $.10 per share, of the Company.
"DGCL" shall mean the General Corporation Law of the State of Delaware.
"Dissenting Shares" shall have the meaning set forth in Section 2.4(b)
hereof.
"Effective Time" shall mean the date and time specified pursuant to Section
2.3 hereof as the effective time of the Merger.
A-6
"Environmental Claim" means any written notice from any governmental
authority or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment, of any Materials of Environmental
Concern.
"Environmental Laws" means any federal, income tax purposes,state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (1) the transactions are
intendedprotection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environment Concern.
The term Environmental Law includes without limitation (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
(S)9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
-- ---
U.S.C. (S)6901, et seq; the Clean Air Act, as amended, 42 U.S.C. (S)7401, et
-- --- --
seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. (S)1251, et
- --- --
seq; the Toxic Substances Control Act, as amended, 15 U.S.C. (S)9601, et seq;
- --- -- ---
the Emergency Planning and Community Right to Know Act, 42 U.S.C. (S)1101, et
--
seq; the Safe Drinking Water Act, 42 U.S.C. (S)300f, et seq; and all comparable
- --- -- ---
state and local laws, and (2) any common law (including without limitation
common law that may impose strict liability) that may impose liability or
obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"FDIA" shall mean the Federal Deposit Insurance Act.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FEFS" means First Empire Federal Services, Inc.
"FHLB" shall mean Federal Home Loan Bank.
"FRB" means the Board of Governors of the Federal Reserve System or any
successor thereto.
"Form S-4" shall mean the registration statement on Form S-4 (or on any
successor or other appropriate form) to be treatedfiled by the Acquiror in connection
with the issuance of shares of Acquiror Common Stock pursuant to the Merger, as
a tax free reorganizationamended and supplemented.
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"Governmental Entity" shall mean any federal or state court, administrative
agency or commission or other governmental authority or instrumentality.
"HOLA" shall mean the Home Owners' Loan Act.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Internal Revenue Code
(S)368(a)(2)(D).
WHEREAS,Environmental Laws.
"MBS" shall mean the mortgage banking subsidiary to be established by the
Acquiror pursuant to the terms of a separateSection 5.9 hereof.
"Merger" shall mean the merger agreement, UBS
also intends to merge Bank First, N.A., a wholly-owned national associationof the Company with and into Commercial Interim Bank, with Commercial Interim Bank to service the merger and the present office of Bank First, N.A. to become a branch office of
the Surviving Bank.
NOW, THEREFORE, for and in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, UBS and
FCB do represent, warrant, covenant and agree (and Commercial Interim Bank will
represent, warrant, covenant and agree) as follows:
ARTICLE I
---------
PLAN OF MERGER
--------------
1.1 Parties to Merger and Surviving Bank. The parties to the Plan of
------------------------------------
Merger are FCB and Commercial Interim Bank. FCB shall merge with and into
Commercial Interim Bank under the charter of the latter,Acquiror
pursuant to the lawsterms hereof.
"OCC" shall mean the Office of Virginiathe Comptroller of the Currency of the U.S.
Department of the Treasury, or any successor thereto.
"OTS" shall mean the Office of Thrift Supervision of the U.S. Department of
the Treasury and its predecessor, the Federal Home Loan Bank Board, or any
successor thereto.
"Previously Disclosed" shall mean disclosed (i) in a letter dated the date
hereof delivered from the disclosing party to the other party specifically
referring to this Agreement and describing in reasonable detail the matters
contained therein, or (ii) a letter dated after the date hereof from the
disclosing party specifically referring to this Agreement and describing in
reasonable detail the matters contained therein and delivered by the other party
pursuant to Section 5.12 hereof.
"Proxy Statement" shall mean the prospectus/proxy statement contained in
the Form S-4, as amended or supplemented, and to be delivered to shareholders of
the Acquiror and the United States. AtCompany in connection with the timesolicitation of their
approval of this Agreement and the transactions contemplated hereby.
"Rights" shall mean warrants, options, rights, convertible securities and
other arrangements or commitments which obligate an entity to issue or dispose
of any of its capital stock or other ownership interests.
"SAIF" means the Savings Association Insurance Fund administered by the
FDIC or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars, proxy
statements, registration statements and all similar documents filed, or required
to be filed, pursuant to the Securities Laws.
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"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the Merger, FCB will cease to
existCommission promulgated thereunder.
"WVCA" shall mean the West Virginia Corporation Act.
"WVBB" shall mean the West Virginia Board of Banking and Commercial Interim Bank will be the Surviving Bank. The name
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Financial
Institutions.
"Subsidiaries" shall mean any corporation, bank, savings association,
partnership, joint venture or other organization more than 10% of the Surviving Bank shall be "First Commercial Bank"stock or
ownership interest of which is owned, directly or indirectly, by an entity.
Other terms used herein are defined in the preamble and its principal office
will beelsewhere in Arlington, Virginia.
1.2 Terms of Merger.this
Agreement.
ARTICLE II
THE MERGER AND THE BANK MERGER
2.1 The Merger
----------
Subject to the terms and conditions of this Agreement, at the Effective
Time (as defined in Section 2.3 hereof), the Company shall be merged with and
into the Acquiror (the "Merger") in accordance with the applicable provisions of
the DGCL and the WVCA. Acquiror shall be the surviving corporation (hereinafter
sometimes called the "Surviving Corporation") of the Merger, are set
---------
forth in this Agreement. Upon satisfaction of alland shall continue
its corporate existence under the laws of the State of West Virginia. The name
of the Surviving Corporation shall continue to be "United Bankshares, Inc." The
Articles of Incorporation and Bylaws of Acquiror, as in effect immediately prior
to the Effective Time, shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation, respectively, until altered, amended or repealed in
accordance with their terms and conditions
set forth herein,applicable law. Upon consummation of the
Merger, the separate corporate existence of the Company shall be effective uponterminate.
2.2 Effects of the date so indicated by
the Virginia State Corporation Commission, Bureau of Financial Institutions
("Bureau").
1.3 Effect of Merger.Merger
---------------------
Upon consummation, the Merger shall have the ----------------
following effects:
(a)effects, in addition
to the effects set forth elsewhere herein and in applicable law:
(i) The Surviving Bank,Corporation will upon the time of the Merger and
thereafter, possess all of the rights,
privileges, immunities and franchises of Commercial Interim Bankboth the Acquiror and FCB.
(b)the Company.
(ii) 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 Commercial Interim Bank and FCBthe Company will be taken and deemed to be transferred to
and vested in Commercial Interim Bankthe Acquiror as the Surviving BankCorporation 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 Commercial Interim Bank and FCBthe Acquiror shall
remain in the Surviving BankCorporation
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without further act; and the title to any real estate, or any interest therein,
vested in FCBthe Acquiror or the Company shall not revert or be in any way impaired
by reason of the Merger.
(c)(iii) The Surviving BankCorporation will be responsible and liable for all of
the liabilities and obligations of Commercial Interim Bank and FCB,
respectively,the Acquiror or the Company and neither the
rights of creditors nor liens upon the property of FCBthe Acquiror and the Company
shall be impaired by the Merger.
2.3 Effective Time; Closing
-----------------------
The Merger including, but not limited to, any
liabilityshall become effective upon the occurrence of FCB arising under its bylaws or the applicable lawsfiling of Virginia in
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connection(i)
Articles of Merger with the indemnificationSecretary of directorsState of the State of West Virginia
pursuant to the WVCA and officers(ii) a Certificate of FCB arising at
anyMerger with the Secretary of
State of the State of Delaware pursuant to the DGCL, unless a later date and
time is specified as the effective time in such Articles of Merger and
Certificate of Merger (the "Effective Time"). A closing (the "Closing") shall
take place immediately prior to the Effective Time at 10:00 a.m., on the fifth
business day following the satisfaction or waiver, to the extent permitted
hereunder, of the conditions to the consummation of the Merger specified in
Article VI of this Agreement (other than the delivery of certificates, opinions
and other instruments and documents to be delivered at the Closing), at the
principal executive offices of the Acquiror in Charleston, West Virginia or at
such other place, at such other time, or on such other date as the parties may
mutually agree upon. At the Closing, there shall be delivered to the Acquiror
and the Company the opinions, certificates and other documents required to be
delivered under Article VI hereof.
2.4 Treatment of Acquiror Common Stock
----------------------------------
(a) Each share of Acquiror Common Stock that is issued and outstanding
immediately prior to the Effective Date.
(d)Time shall remain issued and outstanding and
be unchanged by the Merger, subject to paragraph (b) of this Section 2.4.
(b) Each holder of Acquiror Common Stock shall be entitled to dissent
from the Merger and obtain the fair value of such holder's shares of Acquiror
Common Stock ("Dissenting Shares") in accordance with Sections 31-1-122 and
31-1-123 of the WVCA. The Acquiror shall give the Company prompt notice upon
receipt by the Acquiror of any such written demands for payment of the fair
value of such shares of Acquiror Common Stock and of withdrawals of such demands
and any other instruments provided pursuant to the WVCA (any shareholder duly
making such demand being hereinafter called a "Dissenting Shareholder"). Any
payments made in respect of Dissenting Shares shall be made by the Surviving
Bank will haveCorporation.
A-10
2.5 Conversion of Company Common Stock
----------------------------------
(a) At the Effective Time, each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (other than any shares
held by the Acquiror or any wholly-owned subsidiary thereof other than in a
capital stock accountfiduciary capacity or in satisfaction of a debt previously contracted) shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive 1.15 shares of Acquiror Common Stock,
plus the right to receive cash in lieu of any fractional share, as determined in
accordance with paragraph (b) of this Section 2.5.
(b) Notwithstanding any other provision hereof, no fractional shares of
Acquiror Common Stock shall be issued to holders of Company Common Stock. In
lieu thereof, each holder of shares of Company Common Stock entitled to a
fraction of a share of Acquiror Common Stock shall, at the time of surrender of
the certificate or certificates representing such holder's shares, receive an
amount of cash equal to $2,000,000, divided into 400,000the product arrived at by multiplying such fraction of a
share of Acquiror Common Stock by the closing price of the Acquiror Common Stock
on the Nasdaq Stock Market's National Market on the business day preceding the
Effective Time, as reported by the Nasdaq Stock Market's National Market or
other authoritative source. No such holder shall be entitled to dividends,
voting rights or any other rights in respect of any fractional share.
2.6 Exchange of Shares
------------------
(a) At or after the Effective Time, each holder of a certificate or
certificates theretofore evidencing issued and outstanding shares of common stockCompany
Common Stock, upon surrender of $5.00 par value,
all of which will be issued, with no surplus and undivided profits of $3,705,741
such capital accountthe same to be adjusted to account foran agent, duly appointed by the
Bank First, N.A. merger
and earnings between December 31, 1994 and the Merger Effective Date.
1.4 Consideration. As consideration for the Merger, shareholders of
-------------
FCB, other than James B. and Janet H. Brockett (the "Control Shareholders"Acquiror ("Exchange Agent"), who
do not dissent to this transaction willshall be entitled to receive either stock and
cash or all cash as set forth below:
(a) Shares of UBS stock plus cash for each share of FCB stock
they own: Except as provided in paragraph (b) below as to the Control
Shareholders, FCB shareholders who do not dissent will receive 1.12 shares of
UBS stock plus $26.25 in cash for each share of FCB stock they own. Provided
that, if UBS stock has an average closing price of less than $23.50 per share
for the 20 trading days immediately prior to the Merger Effective Date (the
"Average Price"), or if the exercise of dissenters' rights by FCB shareholders
has the effect, in the aggregate, of reducing the percentage of the total Merger
Consideration (defined below) paid in UBS stock to 50% or less, then the
exchange ratio shall be adjusted upward, to a maximum of 1.348 shares of UBS
stock for each share of FCB stock, such that the proportion of UBS stock to the
total Merger Consideration shall be greater than 50% of the total Merger
Consideration, as defined below. (The exchange ratio, as adjusted, if necessary,
is referred to as the "Applicable Exchange Ratio").
(b) Cash consideration equal to $52.57.
E-5
For each share of FCB stock as to which an FCB shareholder elects to
receive all cash, the Control Shareholders agree to accept the additional UBS
stock (and, correspondingly less than $26.25 per FCB share in cash) so as to
meet the requirement that greater than 50% of the total Merger Consideration be
paid in UBS stock. The amount of cash to be received by the Control
Shareholders shall equal $26.25 times 201,100 (the number of FCB shares), minus
all cash to be paid to all other shareholders (whether such shareholders elect
to receive all cash (including dissenters) or cash and UBS stock).
The proportion of UBS stock to total consideration shall be calculated
as set forth below:
a = the closing price of UBS stock on the Merger Effective Date
times 201,100 times the Applicable Exchange Ratio
b = all cash paid to FCB shareholders, including to FCB
shareholders who dissent from the Merger
Proportion of UBS stock = a
-----
to total Merger Consideration a + b
Notwithstanding the foregoing, UBS may terminate this Agreement if (i)
application of the ratio adjustment set forth above would result in the issuance
of greater than 271,000 shares of UBS stock or (ii) if the Average Price is $27
or greater. FCB may terminate this Agreement if the Average Price is $20 or
less. If any of the termination rights in the foregoing sentences arise, the
parties will attempt to renegotiate the ratio and/or cash consideration to
result in an aggregate consideration of not less than $52.57 per share of FCB
stock. The total consideration of UBS stock and cash (including cash paid to
FCB shareholders electing stock and cash, all cash or exercising dissenters'
rights) is referred to herein as the "Merger Consideration."
E-6
No fractional shares of UBS stock will be issued and in lieu thereof,
FCB shareholders will be entitled to receive cash based upon the Average Price
per share for UBS stock, without interest. If, on or after the date hereof, and
prior to the Merger, the outstanding shares of UBS stock are changed into a
different number or class by virtue of any reclassification, split, stock
dividend, exchange of shares or similar event, then the exchange ratio provided
herein will be adjusted proportionately. The issuance of UBS stock for other
corporate purposes, as contemplated in Section 2.1(l), will not result in an
adjustment to the exchange ratio. From and after the date of the Merger, the
holders of certificates representing FCB shares shall cease to have any rights
with respect to such shares (except dissenters' rights) and such shares will
thereafter be deemed cancelled and void. The sole rights of such shareholders
(excluding dissenters' rights) will be to receive the Merger Consideration.
Any FCB shareholder who fails to make an election will receive stock
and cash. The FCB shareholders (other than Control Shareholders) shall make a
binding election at or prior to the special meeting of FCB shareholders held to
consider the Merger.
1.5 Exchange of Shares. Except for any shares of FCB as to which
------------------
dissenters' rights are exercised pursuant to VA Stock Corporations Act, Virginia
Code Anno. (S)(S) 13.1-729-13.1-741 (1993) ("VA Appraisal Statute") and except
for any shares of FCB as to which a shareholder elects to receive all cash, each
holder of certificates representing shares of the stock of FCB will, upon the
surrender to UBS, or its agent, of such certificates in proper form, be entitled
to receivetherefor a
certificate or certificates representing the number of wholefull shares of Acquiror
Common Stock for which the common stockshares of UBSCompany Common Stock theretofore
represented by the certificate or certificates so surrendered shall have been
converted as provided in Section 2.5 hereof. The Exchange Agent shall mail to
each holder of record of an outstanding certificate which immediately prior to
the Effective Time evidenced shares of Company Common Stock, and which is to be
exchanged for Acquiror Common Stock as provided in Section 2.5 hereof, a form of
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to such certificate shall pass, only upon delivery of
such certificate to the Exchange Agent) advising such holder of the terms of the
exchange effected by the Merger and of the procedure for surrendering to the
Exchange Agent such certificate in exchange for a certificate or certificates
evidencing Acquiror Common Stock.
(b) No holder of a certificate theretofore representing shares of
Company Common Stock shall be entitled to receive any dividends in respect of
the Acquiror Common Stock into which such shares shall have been converted by
virtue of the Merger until the certificate representing such shares is
surrendered in exchange for certificates representing shares of Acquiror Common
Stock. In the event that dividends are declared and paid by the Acquiror in
respect of Acquiror Common Stock after the Effective Time but prior to surrender
of certificates representing shares of Company
A-11
Common Stock, dividends payable in respect of shares of Acquiror Common Stock
not then issued shall accrue (without interest). Any such dividends shall be
paid (without interest) upon surrender of the certificates representing such
shares of Company Common Stock. The Acquiror shall be entitled, after the
Effective Time, to treat certificates representing shares of Company Common
Stock as evidencing ownership of the number of full shares of Acquiror Common
Stock into which the surrenderedshares of Company Common Stock represented by such
certificates shall have been converted, by reasonnotwithstanding the failure on the part
of the Merger. Until surrendered for exchange, each
outstandingholder thereof to surrender such certificates.
(c) The Acquiror shall not be obligated to deliver a certificate or
certificates representing shares of FCB submitted for exchange for UBS stock shallAcquiror Common Stock to which a holder of
Company Common Stock would otherwise be deemed for all corporate purposes to evidence the
E-7
ownershipentitled as a result of the full shares of stock of UBS into whichMerger until
such shares have been
converted by reason ofholder surrenders the Merger. Shareholders electing to receive all cash,
shall, upon surrender of their FCB certificates, be entitled to the cash
consideration provided for herein. Until an FCB shareholder's outstanding
certificates have been surrendered, UBS may, at its sole discretion, withhold,
with respect to such FCB shareholder, as applicable (i) thecertificate or certificates representing the shares
of its stock intoCompany Common Stock for exchange as provided in this Section 2.6, or, in
default thereof, an appropriate affidavit of loss and indemnity agreement and/or
a bond as may be required in each case by the Acquiror. If any certificates
evidencing shares of Acquiror Common Stock is to be issued in a name other than
that in which the certificate evidencing Company Common Stock surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer and that the person requesting such FCB shares are convertedexchange pay to the
Exchange Agent any transfer or other tax required by reason of the Merger; (ii)issuance of a
certificate for shares of Acquiror Common Stock in any name other than that of
the distributionregistered holder of any and all dividends and payment
for fractional shares with respectthe certificate surrendered or otherwise establish to
the stocksatisfaction of UBS to which the FCB
shareholderExchange Agent that such tax has been paid or is entitled; (iii)not
payable.
(d) If, between the cash consideration fordate hereof and the Effective Time, the shares of
such FCB
shareholder. Upon the delivery to UBS of the outstanding FCB certificates by an
FCB shareholder, there will be delivered to the record holder thereof (i) the
certificate representing the shares of the stock of UBS to which the exchanging
FCB holder is entitled any dividends thereon along with the cash portion of the
consideration, any payment for fractional shares, all without interest; or (ii)
the cash consideration, without interest.
1.6 Articles of Incorporation and Bylaws of Surviving Bank. Upon
------------------------------------------------------
the Merger being consummated, the Articles of Incorporation of Commercial
Interim Bank will be the Articles of Incorporation of the Surviving Bank and the
Bylaws of Commercial Interim BankAcquiror Common Stock shall be changed into a different number or class of
shares by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or a stock dividend thereon
shall be declared with a record date within said period, the Bylaws of the Surviving Bank
until altered, amended or repealedexchange ratio set
forth in accordance with their provisions and
applicable law. The Surviving Bank willSection 2.5(a) hereof shall be a state chartered banking corporation
and a member of the Federal Reserve System.
1.7adjusted accordingly. Nothing contained
herein shall be deemed to permit any action which may be proscribed by this
Agreement.
2.7 Additional Requirements.Actions
------------------
If, at any time after the Effective Time, the Surviving Bank
-----------------------Corporation shall
consider or be advised that any further assignments conveyances or assurances in law or any other acts are
necessary or desirable to (i) vest, perfect or conformconfirm, of record or otherwise,
in the Surviving BankCorporation its rights, title or interest in, to or under any
of the titlerights, properties or assets of the Company acquired or to any propertybe acquired by
the Surviving Corporation as a result of, or rights of FCBin connection with, the Merger, or
are(ii) otherwise
necessary to carry out the provisionspurposes of the Plan of Merger and this Agreement, the Company and its
proper officers and directors of FCB as of the Merger Effective Date, and
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thereafter, the officers ofshall be deemed to have granted to the Surviving
Bank, willCorporation an irrevocable power of attorney to execute and deliver anyall such
proper deeds, assignments and assurances in law and to do all property assignments, conveyances, assurances, and other instrumentsacts necessary or
proper to vest, perfect or confirm title to anyand possession of such propertyrights,
properties or rightsassets in the Surviving BankCorporation and otherwise to carry out the
provisionspurposes of this Agreement.Agreement; and the proper officers and directors of the
Surviving Corporation are fully authorized in the name of the Company or
otherwise to take any and all such action.
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2.8 The Bank Merger
---------------
The Acquiror and the Company shall take all action necessary and
appropriate, including causing the entering into of a merger agreement by the
Bank and the Association (the "Bank Merger Agreement"), to cause the Association
to merge with and into the Bank (the "Bank Merger") immediately after
consummation of the Merger in accordance with the applicable laws of the United
States and regulations of the OCC and the OTS thereunder. The Bank shall be the
surviving corporation in the Bank Merger, and shall continue its corporate
existence under the laws of the United States as a wholly-owned subsidiary of
the Acquiror. Upon consummation of the Bank Merger, the separate corporate
existence of the Association shall cease.
ARTICLE II
----------III
REPRESENTATIONS AND WARRANTIES ------------------------------
2.1 RepresentationsOF THE COMPANY
The Company represents and Warrantieswarrants to the Acquiror as follows:
3.1 Capital Structure
-----------------
The authorized capital stock of UBSthe Company consists of 5,000,000 shares of
Company Common Stock and Commercial Interim
------------------------------------------------------------
Bank. Unless disclosed in Exhibit A hereto or previously disclosed in writing to
- ----
FCB, as2,500,000 shares of Company Preferred Stock. As of the
date hereof, there are 2,729,468 shares of this Agreement,Company Common Stock issued and
outstanding and no shares of Company Common Stock are directly or indirectly
held as treasury stock by the Company and no shares of Company Preferred Stock
are issued and outstanding. All outstanding shares of Company Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable.
Except for issued and outstanding shares of Company Common Stock which may be
acquired by employees of the dateCompany and its Subsidiaries pursuant to the
Company's Employee Stock Ownership Plan, which holds 147,682 shares of the consummation of
the transactions contemplated herein, UBS represents and warrants,Company
Common Stock as of the date hereof, there are no Rights authorized, issued or
outstanding with respect to the capital stock of the Company. None of the
shares of the Company capital stock has been issued in violation of the
preemptive rights of any person, firm or entity.
3.2 Organization, Standing and Commercial Interim Bank will representAuthority of the Company
---------------------------------------------------
The Company is a corporation duly organized, validly existing and warrantin good
standing under the laws of the State of Delaware with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such licensing or qualification
and where the failure to be so licensed, qualified or in good standing would
have a material adverse effect on the financial condition, results of operations
or business of the Company on a consolidated basis. The Company is duly
registered as a savings and loan holding company under the HOLA and the
regulations of the OTS thereunder. The Company has heretofore delivered to the
Acquiror true and complete copies of the Certificate of Incorporation and Bylaws
of the Company as in effect as of the date it executes the Adoption Agreement contained in Exhibit B hereto, and ashereof.
A-13
3.3 Ownership of the dateCompany Subsidiaries
-------------------------------------
The only Company Subsidiaries are the Association and FEFS. Except for the
Company Subsidiaries, stock in the FHLB of consummationPittsburgh and securities and other
interests taken in consideration of debts previously contracted, the Company
does not own or have the right to acquire, directly or indirectly, any
outstanding capital stock or other voting securities or ownership interests of
any corporation, bank, savings association, partnership, joint venture or other
organization. The outstanding shares of capital stock or other ownership
interests of each of the transactions contemplated herein,Company Subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable, and are directly or indirectly
owned by the followingCompany free and clear of all liens, claims, encumbrances, charges,
restrictions or rights of third parties of any kind whatsoever. Except as
Previously Disclosed, no Rights are authorized, issued or outstanding with
respect to FCB:
(a) Organization. UBSthe capital stock or other ownership interests of any Company
Subsidiaries and there are no agreements, understandings or commitments relating
to the right of the Company to vote or to dispose of said shares or other
ownership interests.
3.4 Organization, Standing and Authority of the Company Subsidiaries
----------------------------------------------------------------
The Association is a West Virginiasavings association duly organized, validly existing
and in good standing under the laws of the United States, and FEFS is a
corporation duly
------------ organized, validly existing and in good standing under the laws
of the State of West Virginia. UBSEach of the Company Subsidiaries (i) has full
power and authority to own or lease all of its properties and assets and to
carry on its business as now conducted, and (ii) is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a material adverse effect on the financial condition,
results of operations or business of the Company on a consolidated basis. The
Company has heretofore delivered to the Acquiror true and complete copies of the
Charter or Articles of Incorporation and Bylaws of each Company Subsidiary as in
effect as of the date hereof.
3.5 Authorized and Effective Agreement
----------------------------------
(a) The Company has all 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. UBS shall cause Commercial Interim Bank
to be to be formed, and as of the date of its execution of the Adoption
Agreement, it will be a duly organized, validly existing Virginia banking
corporation in good standing under the laws of the Commonwealth of Virginia.
(b) Authority. UBS has and Commercial Interim Bank will have,
---------
the power to enter into this Agreement and (subject to consummatereceipt of all necessary governmental
approvals and the transactions
contemplated herein.approval of the Company's shareholders of this Agreement) to
perform all of its obligations under this Agreement. The execution and delivery
of this Agreement and the consummation of the transactions E-9
contemplated hereinhereby
have been duly and validly authorized by all necessary corporate action in
respect thereof on the Boardpart of Directorsthe Company, except for the approval of UBS
and will be so authorizedthis
Agreement by the Board of Directors of Commercial Interim Bank.
UBS, as sole shareholder of Commercial Interim Bank, will vote all shares of
Commercial Interim Bank in favor ofCompany's shareholders. This Agreement has been duly and
validly executed and delivered by the MergerCompany and the transactions contemplated
herein. No approval is required from UBS shareholders. Upon its execution and
delivery, this Agreement constitutes thea legal, valid and legally
binding obligation of UBSthe Company which is enforceable against the Company in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency and will constituteother laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
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(b) Neither the valid and legally binding obligation of Commercial
Interim Bank upon execution of the Adoption Agreement. The execution and delivery of this Agreement, does not and will not,nor consummation
of the transactions contemplated hereby (including the Merger and the consummation
contemplated herein will not, violateBank
Merger), nor compliance by the Company with any of the provisions hereof (i)
conflict with or result in a breach of any provisions of the ArticlesCertificate of
Incorporation or Bylaws of UBSthe Company or Commercial Interim Bank,the equivalent documents of any
Company Subsidiary, (ii) except as Previously Disclosed, violate, conflict with
or result in a breach of any lawsterm, condition or provision of, or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of the Company or any
Company Subsidiary pursuant to, any material note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which the Company or any Company Subsidiary is a party, or by which any of their
respective properties or assets may be bound or affected, or (iii) subject to
receipt of all required governmental approvals, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or any
Company Subsidiary.
(c) Except for (i) the filing of applications and notices with, and the
consents and approvals of, as applicable, the FRB, the OCC, the OTS and the
WVBB, (ii) the filing and effectiveness of the Form S-4 with the Commission,
(iii) compliance with applicable state securities or "blue sky" laws in
connection with the issuance of Acquiror Common Stock pursuant to this
Agreement, (iv) the approval of this Agreement by the requisite vote of the
shareholders of the Company and the Acquiror, (v) the filing of Articles of
Merger with the Secretary of State of West Virginia the Commonwealth of Virginia or the United States of
America or (iii) any material restriction to which any of them is subject.
(c) Financial Statements. UBS has delivered to FCB copies of
--------------------
its consolidated financial statements for the fiscal year ended December 31,
1994. UBS represents and warrants that the financial statements which have been
or will be delivered pursuant to any provision of this Agreement fairly present
its financial position of as of the date thereof and the results of its
operations and its cash flows for each of the respective periods specified
therein in conformity with generally accepted accounting principles applied on a
consistent basis.
(d) Applications. UBS and Commercial Interim Bank, with the
------------
cooperation of FCB, 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, accounting or other expenses incurred by FCB in
connection therewith.
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(e) Authority to Exchange Shares. The shares of UBS to be
----------------------------
issued pursuant to this Agreement are duly authorized. When issued upon the
terms and conditions specified in this Agreement, the shares will be validly
issued, fully paid and non-assessable. There are no preemptive or similar rights
with regard to the shares of UBS to be issuedWVCA in
connection with the Merger and (vi) the filing of a Certificate of Merger with
the Secretary of State of Delaware pursuant to the DGCL in connection with the
Merger, and except for such filings, authorizations or approvals which are
Previously Disclosed, no consents or approvals of or filings or registrations
with any Governmental Entity or with any third party are necessary on the part
of the Company or any Company Subsidiary in connection with (i) the execution
and delivery by the Company of this Agreement and the consummation by the
Company of the transactions contemplated herein. The shareshereby and (ii) the execution and
delivery by the Association of UBS stockthe Bank Merger Agreement and the consummation by
the Association of the transactions contemplated thereby.
(d) As of the date hereof, neither the Company nor any of the Company
Subsidiaries is aware of any reasons relating to the Company or any of the
Company Subsidiaries (including without limitation Community Reinvestment Act
compliance) why all consents and approvals shall not be issued pursuant
toprocured from all
regulatory agencies having jurisdiction over the transactions contemplated by
this Agreement as shall be necessary for (i) consummation of the transactions
contemplated by this Agreement and (ii) the continuation by the Acquiror after
the Effective Time of the business of the Company as such business is carried on
immediately prior to FCB shareholders will be, when issued, registered with the SEC pursuant to an effective registration on Form S-4 and will be freely
transferrable by all FCB shareholders except those designated as affiliates per
Section 4.2(c).
(f) Registered Bank Holding Company. UBS is a duly registered
-------------------------------
bank holding company under the Bank Holding Company ActEffective Time, free of 1956, as amended.
(g) Absence of Certain Changes. Except as may be disclosed in
--------------------------
Exhibit A hereto and made a part hereof, since December 31, 1994:
(i) There has been no material changeany conditions or requirements
which, in the operations,
financial condition, or resultsreasonable opinion of operation of UBS or any subsidiary of UBS
whichthe Company, could have a material adverse
effect onupon 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;
E-11
(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; and
(iv) UBS has not granted 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 as set forth in
Section 2.1(l) hereof.
(h) 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; 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.
(i) Absence of Undisclosed or Contingent Liabilities. Except to
------------------------------------------------
the extent reflected on the December 31, 1994 consolidated financial statements
of UBS and its subsidiaries delivered to FCB, there exists no claim, liability,
obligation, or any known asserted claim, secured or unsecured (whether accrued,
absolute, contingent or otherwise), that would have a material adverse effect on
the consolidated operations, financial condition or results of operations of
UBS.
(j) No Adverse Event. Since December 31, 1994, there has been
----------------
no change or changes, which, individually or in the
E-12
aggregate, has or have materially and adversely affected the business of UBS.
(k) SEC Reports.the
Acquiror on a consolidated basis or materially impair the value of the Company
and the Company Subsidiaries to the Acquiror.
3.6 Securities Documents and Regulatory Reports
-------------------------------------------
A-15
(a) The Form 10-K Annual ReportCompany has previously delivered or made available to the
Acquiror a complete copy of all Securities Documents filed by the Company
pursuant to the Securities -----------Laws or mailed by the Company to its shareholders as
a class since January 1, 1993. The Company has timely filed with the Commission
all Securities Documents required by the Securities Laws and Exchange Commission by UBS forsuch Securities
Documents complied in all material respect with the year ended December 31, 1993, its
quarterly filings made during 1994 on Form 10-Q,Securities Laws and its current reports made on
Form 8-K made during 1994, if any, dodid not
contain as of the date hereof or as
of their respective dates, any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, provided that information as of a later date shall be deemed to
modify information as of an earlier date.
(b) Since January 1, 1993, each of the Company and the Association has
duly filed with the OTS and the FDIC in correct form the reports required to be
filed under applicable laws and regulations and such reports were in all
material respects complete and accurate and in compliance with the requirements
of applicable laws and regulations, provided that information as of a later date
shall be deemed to modify information as of an earlier date; and the Company has
previously delivered or made available to the Acquiror accurate and complete
copies of all such reports. In connection with the most recent examinations of
the Company and the Association by the OTS, neither the Company nor the
Association was required to correct or change any action, procedure or
proceeding which the Company or the Association believes has not been corrected
or changed as required.
3.7 Financial Statements
--------------------
(a) The Company has previously delivered or made available to the
Acquiror accurate and complete copies of the Company Financial Statements which,
in the case of the consolidated statements of financial condition of the Company
as of December 31, 1994, 1993 and 1992 and the consolidated statements of
operations, shareholders' equity and cash flows for each of the three years
ended December 31, 1994, 1993 and 1992, are accompanied by the audit reports of
Ernst & Young LLP, independent public accountants with respect to the Company.
The Company Financial Statements referred to herein, as well as the Company
Financial Statements to be delivered pursuant to Section 5.6 hereof, fairly
present or will fairly present, as the case may be, the consolidated financial
condition of the Company as of the respective dates set forth therein, and the
consolidated results of operations, shareholders' equity and cash flows of the
Company for the respective periods or as of the respective dates set forth
therein.
(b) Each of the Company Financial Statements referred to in Section
3.7(a) has been or will be, as the case may be, prepared in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as stated therein. The audits of the Company and the Company
Subsidiaries have been conducted in accordance with generally accepted auditing
standards. The books and records of the Company and the Company Subsidiaries are
being maintained in material compliance with applicable legal and accounting
requirements, and such books and records accurately reflect in all material
respects all dealings and transactions in respect of the business, assets,
liabilities and affairs of the Company and the Company Subsidiaries.
A-16
(c) Except and to the extent (i) reflected, disclosed or provided for
in the consolidated statement of financial condition of the Company as of June
30, 1995 (including related notes) and (ii) of liabilities incurred since June
30, 1995 in the ordinary course of business, neither the Company nor any Company
Subsidiary has any liabilities, whether absolute, accrued, contingent or
otherwise, material to the financial condition, results of operations or
business of the Company on a consolidated basis.
3.8 Material Adverse Change
-----------------------
There has not occurred any material adverse change in the Company's
consolidated financial condition, results of operations or business since June
30, 1995, other than changes resulting from or attributable to (i) changes in
laws or regulations, generally accepted accounting principles, or
interpretations thereof, that affect the banking or savings industries generally
(including without limitation prospective changes which result in assessments of
all SAIF-insured institutions which are intended to recapitalize the SAIF), (ii)
changes in the general level of interest rates or (iii) expenses incurred in
connection with the transactions contemplated by this Agreement.
3.9 Environmental Matters
---------------------
(a) To the best of the Company's knowledge, the Company and the Company
Subsidiaries are in compliance with all Environmental Laws, except for any
violations of any Environmental Law which would not, singly or in the aggregate,
have a material adverse effect on the consolidated financial condition, results
of operations or business of the Company. Neither the Company nor any Company
Subsidiary has received any communication alleging that the Company or any
Company Subsidiary is not in such compliance and, to the best knowledge of the
Company, there are no present circumstances that would prevent or interfere with
the continuation of such compliance.
(b) To the best of the Company's knowledge, none of the properties
owned, leased or operated by the Company or the Company Subsidiaries has been or
is in violation of or liable under any Environmental Law, except any such
violations or liabilities which would not singly or in the aggregate have a
material adverse effect on the financial condition, results of operations or
business of the Company on a consolidated basis.
(c) To the best of the Company's knowledge, there are no past or
present actions, activities, circumstances, conditions, events or incidents that
could reasonably form the basis of any Environmental Claim or other claim or
action or governmental investigation that could result in the imposition of any
liability arising under any Environmental Law against the Company or any Company
Subsidiary or against any person or entity whose liability for any Environmental
Claim the Company or any Company Subsidiary has or may have retained or assumed
either contractually or by operation of law, except such which would not have a
material adverse effect on the financial condition, results of operations or
business of the Company on a consolidated basis.
A-17
(d) The Company has not conducted any environmental studies during the
past five years with respect to any properties owned by it or any Company
Subsidiary as of the date hereof.
3.10 Tax Matters
-----------
(a) The Company and the Company Subsidiaries, and each of their
predecessors, have timely filed all federal, state and local (and, if
applicable, foreign) income, franchise, bank, excise, real property, personal
property and other tax returns required by applicable law to be filed by them
(including, without limitation, estimated tax returns, income tax returns,
information returns and withholding and employment tax returns) and have paid,
or where payment is not required to have been made, have set up an adequate
reserve or accrual for the payment of, all taxes required to be paid in respect
of the periods covered by such returns and, as of the Effective Time, will have
paid, or where payment is not required to have been made, will have set up an
adequate reserve or accrual for the payment of, all taxes for any subsequent
periods ending on or prior to the Effective Time. Neither the Company nor any
of the Company Subsidiaries will have any material liability for any such taxes
in excess of the amounts so paid or reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by the Company and the Company Subsidiaries are complete and accurate in
all material respects. Neither the Company nor any of the Company Subsidiaries
is delinquent in the payment of any tax, assessment or governmental charge
(other than non-material real and personal property taxes), and except as
Previously Disclosed none of them has requested any extension of time within
which to file any tax returns in respect of any fiscal year or portion thereof
which have not since been filed. Except as Previously Disclosed, the federal,
state and local income tax returns of the Company and the Company Subsidiaries
have been examined by the applicable tax authorities (or are closed to
examination due to the expiration of the applicable statute of limitations) and
no deficiencies for any tax, assessment or governmental charge have been
proposed, asserted or assessed (tentatively or otherwise) against the Company or
any Company Subsidiary as a result of such examinations or otherwise which have
not been settled and paid. There are currently no agreements in effect with
respect to the Company or any Company Subsidiary to extend the period of
limitations for the assessment or collection of any tax. As of the date hereof,
no audit, examination or deficiency or refund litigation with respect to such
return is pending or, to the best of the Company's knowledge, threatened.
(c) Except as Previously Disclosed, none of the Company or the Company
Subsidiaries (i) is a party to any agreement providing for the allocation or
sharing of taxes, (ii) is required to include in income any adjustment pursuant
to Section 481(a) of the Code by reason of a voluntary change in accounting
method initiated by the Company or the Company Subsidiaries (nor does the
Company have any knowledge that the Internal Revenue Service has proposed any
such adjustment or change of accounting method) or (iii) has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply.
3.11 Legal Proceedings
-----------------
A-18
Except as Previously Disclosed, there are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the best
knowledge of the Company, threatened against the Company or any Company
Subsidiary or against any asset, interest or right of the Company or any Company
Subsidiary, or against any officer, director or employee of any of them that in
any such case, if decided adversely, would have a material adverse effect on the
financial condition, results of operations or business of the Company on a
consolidated basis. Neither the Company nor any of the Company Subsidiaries is a
party to any order, judgment or decree which has or would have a material
adverse effect on the financial condition, results of operations or business of
the Company on a consolidated basis.
3.12 Compliance with Laws
--------------------
(a) Each of the Company and each of the Company Subsidiaries has all
permits, licenses, certificates of authority, orders and approvals of, and has
made all filings, applications and registrations with, federal, state, local and
foreign governmental or regulatory bodies that are required in order to permit
it to carry on its business as it is presently being conducted and the absence
of which could have a material adverse effect on the financial condition,
results of operations or business of the Company on a consolidated basis; all
such permits, licenses, certificates of authority, orders and approvals are in
full force and effect; and to the best knowledge of the Company, no suspension
or cancellation of any of the same is threatened.
(b) Neither the Company nor any of the Company Subsidiaries is in
violation of its respective Certificate of Incorporation, Charter or other
chartering instrument or Bylaws, or of any applicable federal, state or local
law or ordinance or any order, rule or regulation of any federal, state, local
or other governmental agency or body (including, without limitation, all banking
(including without limitation all regulatory capital requirements), securities,
municipal securities, safety, health, environmental, zoning, anti-
discrimination, antitrust, and wage and hour laws, ordinances, orders, rules and
regulations), or in default with respect to any order, writ, injunction or
decree of any court, or in default under any order, license, regulation or
demand of any governmental agency, any of which violations or defaults could
have a material adverse effect on the financial condition, results of operations
or business of the Company on a consolidated basis; and neither the Company nor
any Company Subsidiary has received any notice or communication from any
federal, state or local governmental authority asserting that the Company or any
Company Subsidiary is in violation of any of the foregoing which could have a
material adverse effect on the financial condition, results of operations or
business of the Company on a consolidated basis. Neither the Company nor any
Company Subsidiary is subject to any regulatory or supervisory cease and desist
order, agreement, written directive, memorandum of understanding or written
commitment (other than those of general applicability to all savings
associations or holding companies thereof issued by governmental authorities),
and none of them has received any written communication requesting that they
enter into any of the foregoing.
3.13 Deposit Insurance and Other Regulatory Matters
----------------------------------------------
A-19
(a) The deposit accounts of the Association are insured by the SAIF to
the maximum extent permitted by the FDIA, and the Association has paid all
premiums and assessments required by the FDIA and the regulations thereunder.
(b) The Association is a member in good standing of the FHLB of
Pittsburgh and owns the requisite amount of stock in the FHLB of Pittsburgh.
(c) The Association is a "qualified thrift lender," as such term is
defined in the HOLA and the regulations thereunder.
(d) The Association has at all times qualified as a "domestic building
and loan association," as such term is defined in Section 7701(a)(19) of the
Code, for purposes of Section 593 of the Code.
3.14 Certain Information
-------------------
None of the information relating to the Company and the Company
Subsidiaries to be contained in (i) the Form S-4 will, at the time the Form S-4
becomes effective, contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which such statementsthey were made, not misleading, and (ii) the Proxy
Statement, as of the date(s) such Proxy Statement is mailed to shareholders of
the Company and the Acquiror and up to and including the date(s) of the meetings
of shareholders to which such Proxy Statement relates, will contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, provided that information as of a later date shall be
deemed to modify information as of an earlier date. The Proxy Statement mailed
by the Company to its shareholders in connection with the meeting of
shareholders at which this Agreement will be considered by such shareholders
will comply as to form in all material respects with the Exchange Act and the
rules and regulations promulgated thereunder.
3.15 Employee Benefit Plans
----------------------
(a) The Company has Previously Disclosed all stock option, employee
stock purchase and stock bonus plans, qualified pension or profit-sharing plans,
any deferred compensation, consultant, bonus or group insurance contract or any
other incentive, welfare or employee benefit plan or agreement maintained for
the benefit of employees or former employees of the Company or any Company
Subsidiary (the "Company Employee Plans"), and the Company has previously
furnished or made available to the Acquiror accurate and complete copies of the
same together with (i) the most recent actuarial and financial reports prepared
with respect to any qualified plans, (ii) the most recent annual reports filed
with any governmental agency, and (iii) all rulings and determination letters
and any open requests for rulings or letters that pertain to any qualified plan.
(b) None of the Company, any Company Subsidiary, any pension plan
maintained by any of them and qualified under Section 401 of the Code or, to the
best of the Company's knowledge,
A-20
any fiduciary of such plan has incurred any material liability to the Pension
Benefit Guaranty Corporation or the Internal Revenue Service with respect to any
employees of the Company or any Company Subsidiary. To the best of the Company's
knowledge, no reportable event under Section 4043(b) of ERISA has occurred with
respect to any such pension plan.
(c) Neither the Company nor any Company Subsidiary participates in or
has incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as such term is defined in ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Company Employee Plan which is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) (a "Company Pension
Plan") which is intended to qualify under Section 401 of the Code to the effect
that such plan is qualified under Section 401 of the Code and the trust
associated with such employee pension plan is tax exempt under Section 501 of
the Code. No such letter has been revoked or, to the best of the Company's
knowledge, is threatened to be revoked and the Company does not know of any
ground on which such revocation may be based. Neither the Company nor any
Company Subsidiary has any liability under any such plan that is not reflected
on the consolidated statement of financial condition of the Company at June 30,
1995 included in the Company Financial Statements, other than liabilities
incurred in the ordinary course of business in connection therewith subsequent
to the date thereof.
(e) To the best of the Company's knowledge, no prohibited transaction
(which shall mean any transaction prohibited by Section 406 of ERISA and not
exempt under Section 408 of ERISA or Section 4975 of the Code) has occurred with
respect to any Company Employee Plan which would result in the imposition,
directly or indirectly, of a material excise tax under Section 4975 of the Code
or otherwise have a material adverse effect on the financial condition, results
of operations or business of the Company on a consolidated basis.
(f) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the date
hereof and prior to the Effective Time, under the terms of each Company Employee
Plan or ERISA; no accumulated funding deficiency (as defined in Section 302 of
ERISA or Section 412 of the Code), whether or not waived, exists with respect to
any Company Pension Plan, and there is no "unfunded current liability" (as
defined in Section 412 of the Code) with respect to any Company Pension Plan.
(g) To the best of the Company's knowledge, the Company Employee Plans
have been operated in compliance in all material respects with the applicable
provisions of ERISA, the Code, all regulations, rulings and announcements
promulgated or issued thereunder and all other applicable governmental laws and
regulations.
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