<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 1994
REGISTRATION NO. 33-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
UNION PLANTERS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
TENNESSEE 6712 62-0859007
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Identification No.)
Classification Code Number)
</TABLE>
7130 GOODLETT FARMS PARKWAY
CORDOVA, TENNESSEE 38018
(901) 383-6000
(Address, including zip code, and telephone number of
registrant's principal executive offices)
GARY A. SIMANSON, ESQ.,
ASSISTANT SECRETARY AND ASSOCIATE GENERAL COUNSEL
UNION PLANTERS CORPORATION
7130 GOODLETT FARMS PARKWAY
CORDOVA, TENNESSEE 38018
(901) 383-6590
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
<TABLE>
<S> <C>
MARION S. BOYD, ESQ. RICHARD N. MASSEY, ESQ.
McDonnell Dyer Rose Law Firm
6075 Poplar Avenue, Suite 650 120 East Fourth Street
Memphis, Tennessee 38119 Little Rock, Arkansas 72201
(901) 537-1000 (501) 375-9131
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM
CLASS OF OFFERING AGGREGATE
SECURITIES TO BE AMOUNT TO BE PRICE OFFERING AMOUNT OF
REGISTERED REGISTERED PER UNIT(1) PRICE(2) REGISTRATION FEE
---------- ---------- ----------- -------- ----------------
<S> <C> <C> <C> <C>
Common Stock (par value
$5.00 per share) including
rights to purchase shares
of Series A Preferred Stock 570,625 $22.00 $12,553,750 $4,328.88
</TABLE>
(1) Estimated based on an assumed conversion price range.
(2) Determined pursuant to Rule 457(f).
<PAGE> 2
UNION PLANTERS CORPORATION
CROSS REFERENCE OF ITEMS IN FORM S-4 TO PROSPECTUS
<TABLE>
<CAPTION>
ITEMS IN PART I OF FORM S-4 PROSPECTUS CAPTION OR LOCATION
- --------------------------- ------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus Facing Page, Cross Reference Sheet and Outside Front
Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus Inside Front Cover and TABLE OF CONTENTS
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information SUMMARY, THE MERGER and RECENT DEVELOPMENTS AFFECTING
UPC
4. Terms of the Transaction SUMMARY and THE MERGER
5. Pro Forma Financial Information SUMMARY
6. Material Contracts with the
Company Being Acquired *
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be Underwriters THE MERGER
8. Interests of Named Experts and
Counsel EXPERTS and VALIDITY OF UPC COMMON STOCK
9. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants SUMMARY, THE MERGER, CERTAIN REGULATORY CONSIDERATIONS,
DESCRIPTION OF UPC COMMON AND PREFERRED STOCK
AND INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
11. Incorporation of Certain
Information by Reference INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
12. Information with Respect to S-2
or S-3 Registrants *
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ITEMS IN PART I OF FORM S-4 PROSPECTUS CAPTION OR LOCATION
- --------------------------- ------------------------------
<S> <C> <C>
13. Incorporation of Certain
Information by Reference *
14. Information with Respect to
Registrants Other Than S-3 or
S-2 Registrants *
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to
S-3 Companies *
16. Information with Respect to S-2
or S-3 Companies *
17. Information with Respect to
Companies Other Than S-3 or
S-2 Companies SUMMARY, THE MERGER, MID SOUTH BANCSHARES, INC., MSB
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS AND MID SOUTH
BANCSHARES, INC. FINANCIAL STATEMENTS (APPENDIX A)
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE, THE
SPECIAL MEETING, THE MERGER and EFFECT OF MERGER ON
RIGHTS OF SHAREHOLDERS
19. Information if Proxies, Consents
or Authorizations are not to be
Solicited or in an Exchange Offer *
</TABLE>
* Omitted because the answer is negative or the item is inapplicable.
<PAGE> 4
MID SOUTH BANCSHARES, INC.
WEST COURT AND PRUETT STREETS
PARAGOULD, ARKANSAS 72450
October 7, 1994
TO THE SHAREHOLDERS OF MID SOUTH BANCSHARES, INC.
You are cordially invited to attend a Special Meeting of Shareholders
of Mid South Bancshares, Inc. ("MSB") to be held at the executive offices of
MSB located at West Court and Pruett Streets, Paragould, Arkansas, at 11:00
a.m. Central Time on Friday, November 18, 1994.
At the Special Meeting, you will have the opportunity to consider and
vote on a proposal to approve an Agreement and Plan of Reorganization dated as
of July 8, 1994 (the "Reorganization Agreement"), along with the Plan of Merger
annexed thereto as Exhibit A, pursuant to which MSB Acquisition Company, Inc.,
a newly formed, wholly-owned subsidiary of Union Planters Corporation, would be
merged with and into MSB. The Boards of Directors of MSB and Union Planters
Corporation have approved the Reorganization Agreement and the Plan of Merger
annexed thereto as Exhibit A and the merger contemplated thereby.
In the merger, shareholders of MSB will receive shares of common
stock, $5 par value per share (the "UPC Common Stock"), of Union Planters
Corporation for each share of MSB's common stock, $10.00 par value per share,
the number of which shares being dependent upon the market price of the UPC
Common Stock and determined in accordance with the conversion formula described
in Section 3.1(e) of the Reorganization Agreement. The enclosed Notice of
Special Meeting of Shareholders and the Prospectus and Proxy Statement explain
the merger, the Reorganization Agreement and the Plan of Merger annexed thereto
as Exhibit A and provide specific information relative to the Special Meeting.
Please read these materials carefully and thoughtfully consider the information
contained in them. Your vote is of great importance, as the approval of MSB's
shareholders is required to consummate the merger.
Whether or not you plan to attend the Special Meeting, you are urged
to complete, sign and promptly return the enclosed Proxy Appointment Card to
assure that your shares will be voted at the Special Meeting. For your
convenience, there is included with this material a postage-paid addressed
envelope for returning your proxy card. No additional postage is required if
mailed in the United States.
<PAGE> 5
The Board of Directors of MSB has considered a number of proposals to
sell MSB and has determined that the proposal outlined in the Reorganization
Agreement is the best plan to maximize the interests of the shareholders of
MSB. Accordingly the Board of Directors of MSB recommends that you vote FOR
the proposal being considered.
Sincerely,
MID SOUTH BANCSHARES, INC.
/s/ Steve Gramling
------------------
Steve Gramling
President
PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES AT THIS TIME
<PAGE> 6
MID SOUTH BANCSHARES, INC.
WEST COURT AND PRUETT STREETS
PARAGOULD, ARKANSAS 72450
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 18, 1994
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Mid
South Bancshares, Inc. ("MSB") has been called by the Board of Directors of MSB
and will be held at the executive offices of MSB, West Court and Pruett
Streets, Paragould, Arkansas, on Friday, November 18, 1994, at 11:00 a.m.
Central Time, for the following purposes:
1. To consider and vote upon a proposal to approve an
Agreement and Plan of Reorganization dated as of July 8, 1994 (the
"Reorganization Agreement"), along with the Plan of Merger annexed
thereto as Exhibit A, by and between Mid South Bancshares, Inc.
("MSB"), an Arkansas-chartered bank holding company; Security Bank
("Security"), an Arkansas banking corporation and a wholly-owned
subsidiary of MSB; Farmers and Merchants Bank ("Farmers"), an Arkansas
banking corporation and a wholly-owned subsidiary of MSB; Union
Planters Corporation ("UPC"), a Tennessee-chartered bank holding
company; and MSB Acquisition Company, Inc. ("INTERIM"), an Arkansas
corporation and a newly organized, wholly-owned subsidiary of UPC.
The Reorganization Agreement provides for the merger (the "Merger") of
INTERIM with and into MSB, whereupon the holders of MSB's common
stock, $10.00 par value per share, of record immediately prior to the
effective time of the Merger would receive shares of the common stock,
$5 par value per share, of UPC, for each share of MSB common stock
owned, pursuant to a conversion formula described in the
Reorganization Agreement. The Reorganization Agreement and the Plan
of Merger annexed thereto as Exhibit A and the Merger are more fully
described in the accompanying Prospectus and Proxy Statement; and
2. To transact such other business as may properly come
before the Special Meeting or any adjournments or postponements
thereof. Management is not aware of any other business to be
transacted at the Special Meeting.
SHAREHOLDERS OF MSB HAVE THE RIGHT TO DISSENT FROM THE MERGER PURSUANT
TO, AND IN ACCORDANCE WITH, SECTION 4-26-1007 OF THE ARKANSAS CODE ANNOTATED.
COPIES OF SAID SECTION OF THE ARKANSAS CODE ANNOTATED ACCOMPANY THIS NOTICE AS
APPENDIX C TO THE PROSPECTUS AND PROXY STATEMENT.
Whether or not you plan to attend the Special Meeting, please sign the
enclosed proxy appointment card and return it at once in the stamped return
envelope in order to insure that your shares will be represented at the Special
Meeting. PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME. If you
attend in person, the proxy appointment can be disregarded, if you wish, and
you may vote your own shares.
<PAGE> 7
Only holders of MSB common stock of record at the close of business on
October 4, 1994 will be entitled to receive notice of, and to vote at the
Special Meeting and any adjournments or postponements thereof.
By Order of the Board of Directors
/s/ Steve Gramling
------------------
Steve Gramling
President
Paragould, Arkansas
Dated: October 7, 1994
THE BOARD OF DIRECTORS OF MID SOUTH BANCSHARES, INC. BY UNANIMOUS VOTE
RECOMMENDS THAT THE HOLDERS OF MID SOUTH BANCSHARES, INC. COMMON STOCK VOTE TO
APPROVE THE REORGANIZATION AGREEMENT.
<PAGE> 8
PROSPECTUS
UNION PLANTERS CORPORATION
COMMON STOCK
PROXY STATEMENT
MID SOUTH BANCSHARES, INC.
SPECIAL MEETING TO BE HELD NOVEMBER 18, 1994
This Prospectus and Proxy Statement (the "Prospectus") relates to up
to 570,625 shares of Common Stock (Par Value $5.00 per share) (the "UPC Common
Stock") of Union Planters Corporation ("UPC"), a Tennessee-chartered bank
holding company which is also registered as a savings and loan holding company,
to be issued to shareholders of Mid South Bancshares, Inc. ("MSB"), an
Arkansas-chartered bank holding company, in a merger (the "Merger") of MSB
Acquisition Company, Inc. ("INTERIM"), a newly formed Arkansas-chartered
corporation and a wholly-owned subsidiary of UPC, with and into MSB, pursuant
to an Agreement and Plan of Reorganization dated as of July 8, 1994, by and
between UPC, INTERIM, MSB, Security Bank ("Security"), a wholly-owned Arkansas
state banking subsidiary of MSB, and Farmers and Merchants Bank ("Farmers"), a
wholly-owned Arkansas state banking subsidiary of MSB (the "Reorganization
Agreement"), along with the Plan of Merger annexed thereto as Exhibit A. The
number of shares of UPC Common Stock to be issued by UPC in connection with the
Merger in respect to each outstanding share of MSB common stock, $10.00 par
value per share (the "MSB Common Stock"), is based on a conversion formula more
particularly described in Section 3.1(e) of the Reorganization Agreement, a
copy of which is attached as Appendix B to this Prospectus. See "The
Merger--Terms of the Merger."
Shares of UPC Common Stock are now, and the UPC Common Stock to be
issued in connection with the Merger will be, listed for trading on the New
York Stock Exchange ("NYSE") under the symbol "UPC." The last reported sale
price of UPC Common Stock on the NYSE on September 26, 1994, was $24.63 per
share.
This Prospectus also constitutes a proxy statement and is furnished to
holders of MSB Common Stock in connection with the solicitation of proxies by
the MSB Board of Directors (the "MSB Board") for use at a Special Meeting of
MSB shareholders to be held at 11:00 a.m. Central Time on Friday, November 18,
1994, at the main offices of MSB, West Court and Pruett Streets, Paragould,
Greene County, Arkansas 72450 and at any adjournments or postponements thereof
(the "Special Meeting"). At the Special Meeting, holders of MSB Common Stock
of record as of the close of business October 4, 1994, will consider and vote
upon a proposal to approve the Reorganization Agreement along with the Plan of
Merger annexed thereto as Exhibit A, upon consummation of which (i) all shares
of MSB Common Stock (except for those shares held by any MSB shareholders with
respect to which dissenters' rights shall have been perfected in accordance
with Arkansas law) would be converted exclusively into the right to receive
shares of UPC Common Stock (and cash in lieu of fractional shares) based on a
conversion formula more particularly described in Section 3.1(e) of the
Reorganization Agreement, and (ii) INTERIM would be merged with and into MSB,
with MSB surviving the Merger and continuing to operate under the name of Mid
South Bancshares, Inc. as a wholly-owned subsidiary of UPC.
All information contained in this Prospectus pertaining to UPC and its
subsidiaries has been supplied by UPC, and all information pertaining to MSB,
Security or Farmers has been supplied by MSB. This Prospectus and the
accompanying proxy appointment cards are first being mailed to shareholders of
MSB on or about October 7, 1994.
THE SHARES OF UPC COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
SAVINGS ASSOCIATION INSURANCE FUND, THE BANK INSURANCE FUND OR ANY OTHER
GOVERNMENTAL AGENCY.
<PAGE> 9
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS--PROXY STATEMENT IS OCTOBER 7, 1994.
<PAGE> 10
AVAILABLE INFORMATION
UPC is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by UPC can be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
regional offices of the Commission located at Room 1228, 75 Park Place, New
York, New York 10007 and 500 West Madison Street, Chicago, Illinois 60661-2511.
Copies of such material can be obtained by mail from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, such reports, proxy statements and other
information concerning UPC can be inspected at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005. UPC has filed with
the Commission a Registration Statement (No. 33-_____) on Form S-4 (together
with any amendments thereto, the "Registration Statement") under the Securities
Act of 1933, as amended (the "Securities Act") with respect to the shares of
UPC Common Stock to be issued pursuant to the Reorganization Agreement. This
Prospectus does not contain all of the information set forth in the
Registration Statement and the Exhibits thereto. Certain items were omitted in
accordance with the rules and regulations of the Commission. For further
information regarding UPC and the UPC Common Stock offered by this Prospectus,
reference is made to the complete Registration Statement, including all
amendments thereto and the schedules and exhibits filed as a part thereof.
Statements contained herein concerning provisions of documents are necessarily
summaries of the documents and each statement is qualified in its entirety by
reference to the copy of the applicable document filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by UPC with the Commission
(Commission File Number 0-6919) pursuant to the Exchange Act are hereby
incorporated by reference in this Prospectus:
1. UPC's Annual Report on Form 10-K for the year ended
December 31, 1993;
2. UPC's Quarterly Reports on Form 10-Q dated March 31,
1994 and June 30, 1994;
3. UPC's Current Report on Form 8-K dated September 19,
1994, which includes the supplementary consolidated
financial statements of UPC for the three years ended
December 31, 1993 and for the six months ended June
30, 1994 and 1993 presenting the restatement of UPC's
historical financial statements to reflect recently
completed acquisitions by UPC;
ii
<PAGE> 11
4. UPC's Current Report on Form 8-K dated January 19,
1989, filed on February 1, 1989, in connection with
UPC's designation and authorization of its Series A
Preferred Stock;
5. UPC's Current Reports on Form 8-K dated February 8,
1994, April 14, 1994, May 18, 1994, July 1, 1994,
July 26, 1994, August 18, 1994, August 19, 1994,
September 1, 1994 and September 28, 1994; and
6. The description of the UPC Common Stock contained in
UPC's Registration Statement under Section 12(b) of
the Exchange Act, and any amendment or report filed
for the purpose of updating such description.
UPC's Annual Report on Form 10-K for the year ended December 31, 1993
incorporates by reference specific portions of UPC's Annual Report to
Shareholders for that year ("Annual Report to Shareholders"), but does not
incorporate other portions of the Annual Report to Shareholders. The portion
of the Annual Report to Shareholders captioned "Letter to Shareholders" and
other portions of the Annual Report to Shareholders not specifically
incorporated into the Annual Report on Form 10-K are NOT incorporated herein
and are not a part of the Registration Statement.
All documents filed by UPC with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the shares of UPC
Common Stock offered hereby shall likewise be incorporated herein by reference
and shall become a part hereof from and after the time such documents are
filed. Any statement contained herein or in a document incorporated herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently-filed
document which also is incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
ON THE WRITTEN OR ORAL REQUEST OF EACH PERSON TO WHOM THIS PROSPECTUS
IS DELIVERED, UPC WILL PROVIDE, WITHOUT CHARGE, A COPY OF ANY OR ALL OF THE
DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH
DOCUMENTS). WRITTEN OR TELEPHONE REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED
TO GARY A. SIMANSON, ASSISTANT SECRETARY AND ASSOCIATE GENERAL COUNSEL, UNION
PLANTERS CORPORATION, P.O. BOX 387, MEMPHIS, TENNESSEE 38147, (901) 383-6590.
iii
<PAGE> 12
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS DOCUMENT NOR ANY DISTRIBUTION OF
SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF UPC OR MSB SINCE THE DATE
HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information (ii)
Incorporation of Certain Documents by Reference (ii)
Summary 1
Parties to the Merger 1
Special Meeting of MSB Shareholders 2
Votes Required; Record Date 3
Terms of the Merger 3
Effective Date 3
Reasons for the Merger; Recommendations of Boards of Directors 3
Conditions; Regulatory Approvals 4
Management after the Merger 5
Shareholders' Dissenters' Rights 5
Certain Federal Income Tax Consequences 6
Accounting Treatment 6
Market Prices of Common Stock 6
Selected Consolidated Financial Data 7
Recent Developments Affecting UPC 12
Comparative Pro Forma Per Share Data 15
Pro Forma Condensed Financial Information 17
The Special Meeting 23
Time and Place of Special Meeting; Solicitation of Proxies 23
Votes Required 24
Shareholders' Dissenters' Rights 24
Recommendation 26
The Merger 26
Background of and Reasons for the Merger 26
Terms of the Merger 29
Effective Date and Effective Time of the Merger 31
Surrender of Certificates 31
Conditions to Consummation of the Merger 32
Regulatory Approvals 33
Conduct of Business Pending the Merger 34
Payment of Dividends 35
Waiver and Amendment; Termination 35
Management after the Merger 35
</TABLE>
iv
<PAGE> 13
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MSB Executive Compensation 36
Interests of Certain Persons in the Merger 36
Certain Federal Income Tax Consequences 37
Accounting Treatment 38
Expenses 38
Resales of UPC Common Stock 38
Certain Regulatory Considerations 38
Recent Banking Legislation 44
Depositor Preference 45
Description of UPC Common and Preferred Stock 46
UPC Common Stock 46
Preferred Stock of UPC 47
Certain Provisions That May Have an Anti-Takeover Effect 49
Effect of Merger on Rights of Shareholders 51
Removal of Directors 51
Required Shareholders Votes 51
Election of Directors 51
Method of Casting Votes 51
Mid South Bancshares, Inc. 53
General 53
Property 54
Competition 54
Legal Proceedings 54
Market Price of MSB Common Stock; Dividends 54
Certain Beneficial Holders of MSB Common Stock 54
Holdings of MSB Common Stock by MSB Management 55
MSB Management's Discussion and Analysis of Financial Condition
and Results of Operation 56
Validity of UPC Common Stock 74
Experts 74
Index to Appendices
Appendix A--Mid South Bancshares, Inc. and Subsidiaries Financial Statements.
Appendix B--Agreement and Plan of Reorganization, along with
the Plan of Merger annexed thereto as Exhibit A.
Appendix C--Arkansas Business Corporation Act of 1965--Dissenters' Rights.
</TABLE>
v
<PAGE> 14
SUMMARY
The following summary is not intended to be a complete description of
all material facts regarding UPC, MSB and the matters to be considered at the
Special Meeting, and is qualified in all respects by the information appearing
elsewhere or incorporated by reference in this Prospectus, the Appendices
hereto and the documents referred to herein.
PARTIES TO THE MERGER
UPC. Union Planters Corporation ("UPC") is a multi-state bank holding
company and savings and loan holding company headquartered in Memphis,
Tennessee. At June 30, 1994 (after restatement for Recently Completed
Acquisitions -- see "Recent Developments Affecting UPC -- Restatement of UPC
Financial Data"), UPC had total consolidated assets of approximately $7.5
billion, loans of approximately $3.6 billion, deposits of approximately $6.0
billion and shareholders' equity of approximately $576 million. As of that
date, UPC was the third largest independent bank holding company headquartered
in Tennessee as measured by consolidated deposits. Management's emphasis in
recent years has been to improve asset quality and maintain capital well in
excess of regulatory minimums. At June 30, 1994 (after restatement for Recently
Completed Acquisitions), UPC's ratio of nonperforming loans to total loans was
.53% and nonperforming assets to loans and foreclosed property was 1.56%. UPC's
allowance for losses on loans to total loans at such date was 2.43% and UPC's
allowance for losses on loans to nonperforming loans was 462.40%. Also at such
date, UPC's Tier 1 risk-based capital, total risk-based capital and leverage
ratios were 15.11%, 18.39% and 7.49%, respectively.
UPC conducts its business activities through its principal bank
subsidiary, Union Planters National Bank ("UPNB"), four Tennessee regional bank
subsidiaries (the "Tennessee Regional Banks"), and through 34 community banks
and four savings and loan subsidiaries (collectively, the "Community Banks")
located in Tennessee, Arkansas, Mississippi, Alabama and Kentucky. UPNB was
founded in 1869 and operates 35 branches throughout West Tennessee. The
Regional Banks resulted from a corporate division of UPNB effective on July 1,
1994 as part of UPC's effort to emphasize community management. Those
subsidiaries operate 30, 13, five and 12 branches in Middle Tennessee, East
Tennessee, Chattanooga, and Jackson, Tennessee, respectively. At June 30,
1994, UPNB had total consolidated assets of approximately $3.7 billion (total
assets of approximately $2.4 billion after the corporate division effective
July 1, 1994). For information with respect to the split off of the Regional
Banks and recent changes to UPNB, see "--Recent Developments Affecting UPC."
UPNB provides a diversified range of financial services in the communities in
which it operates, including consumer, commercial and corporate lending, retail
banking and mortgage banking. To enhance fee income, UPNB also is engaged in
mortgage servicing, investment management and trust services, the issuance and
servicing of credit and debit cards and the origination, packaging and
securitization of the government-guaranteed portions of Small Business
Administration (SBA) loans.
In addition to UPNB and the Regional Banks, UPC, through the Community
Banks, operates 159 branches. At June 30, 1994 (after restatement for Recently
Completed Acquisitions), the Community Banks had total combined assets of
approximately $3.8 billion ($2.4 billion in Tennessee, $503 million in
Mississippi, $546 million in Arkansas, $109 million in Kentucky, and $305
million in Alabama). All of the Community Banks have been acquired by UPC
since 1986, generally are located in nonmetropolitan towns and communities and
provide banking services and loan products to such communities, with an
emphasis on one-to-four-family residential mortgages and consumer and small
commercial lending. Of the 34 Community Banks, 21 have the largest deposit
share and nine have the second largest deposit share in their respective
markets based on June 30, 1993 information, providing UPC with a strong
competitive position in those markets.
<PAGE> 15
UPC believes that the Community Banks provide additional
diversification of the funding and revenue sources for UPC, and UPC intends to
continue expansion of the Community Banks/Regional Banks. UPC believes that
its strategy of permitting the Community Banks to retain their names and boards
of directors as well as substantial autonomy in their day-to-day operations
enables UPC to be an attractive acquirer of community banking organizations and
permits such institutions to continue to grow within their markets without
disruption. UPC controls risk through centralized loan review and audit
functions as well as close monitoring of the financial performance of each
Community Bank. UPC also implements its asset and liability management strategy
on a consolidated basis and effects all trades for the investment portfolios of
the Community Banks. UPC seeks economies in the Community Banks through
consolidation of administrative and operational processes and is currently in
the process of converting all of the Community Banks to a common data
processing system. This system conversion should be completed by year-end 1994
and should permit UPC to realize significant cost savings upon full
implementation.
UPC expects to continue to take advantage of the consolidation of the
financial services industry by further developing its franchise through the
acquisition of financial institutions in the major markets of Tennessee and
through the acquisition of community banks that have a significant local market
share, primarily in communities located in Tennessee and contiguous states.
Future acquisitions may entail the payment by UPC of consideration in excess of
the book value of the underlying assets being acquired, may result in the
issuance of additional shares of UPC capital stock or the incurrence of
additional indebtedness by UPC, and could have a dilutive effect on the per
share earnings or book value of the UPC Common Stock. For information with
respect to acquisitions that have been consummated recently or that are
currently pending, see "-- Recent Developments Affecting UPC."
UPC's corporate office is located at 7130 Goodlett Farms Parkway,
Memphis, Tennessee 38018, and its telephone number is (901) 383-6000.
Additional information about UPC is included in documents incorporated
by reference in this Prospectus. See "Incorporation of Certain Documents by
Reference."
MSB. Mid South Bancshares, Inc. is a bank holding company chartered
under the laws of the State of Arkansas whose main office is located at West
Court and Pruett Streets, Paragould, Arkansas 72450 (telephone (501) 239-9571).
MSB's two banking subsidiaries, Security Bank ("Security") and Farmers and
Merchants Bank ("Farmers"), are each banking corporations chartered under the
laws of the State of Arkansas and wholly-owned Arkansas state banking
subsidiaries of MSB. At June 30, 1994, Security and Farmers were rendering
banking services, consisting primarily of traditional deposit and lending
services, from seven banking offices located in Greene and Randolph Counties in
Arkansas. As of June 30, 1994, MSB's total assets were approximately $127.7
million and its deposits were approximately $114.5 million.
2
<PAGE> 16
INTERIM. MSB Acquisition Company, Inc. is a corporation chartered
under the laws of the State of Arkansas and a newly formed wholly-owned
subsidiary of UPC with its principal offices located at 7130 Goodlett Farms
Parkway, Memphis, Tennessee 38018. At the Effective Time of the Merger (as
defined below), INTERIM will, pursuant to the terms of the Reorganization
Agreement and the Plan of Merger, merge with and into MSB, with MSB surviving
the Merger and becoming a wholly-owned subsidiary of UPC and continuing to
operate under the name Mid South Bancshares, Inc.
SPECIAL MEETING OF MSB SHAREHOLDERS
A Special Meeting (the "Special Meeting") of the MSB shareholders will
be held on Friday, November 18, 1994, at 11:00 a.m. Central Time, at the
corporate offices of MSB located at West Court and Pruett Streets, Paragould,
Arkansas 72450, to consider and vote upon a proposal to approve the
Reorganization Agreement and the Plan of Merger annexed thereto as Exhibit A.
See "The Special Meeting."
VOTES REQUIRED; RECORD DATE
Only holders of MSB Common Stock of record at the close of business on
October 4, 1994 (the "Record Date") will be entitled to receive notice of, and
vote at the Special Meeting. The affirmative votes of the holders of at least
two-thirds (2/3) of the total shares of MSB Common Stock outstanding on the
Record Date are required to approve the Reorganization Agreement and the Plan
of Merger. As of October 4, 1994, there were 129,022 shares of MSB Common
Stock entitled to vote.
The directors and executive officers of MSB (the "Management Group")
held beneficially and of record, as of the Record Date, 104,504 shares or
approximately 81% of the outstanding shares of MSB Common Stock. MSB has been
advised by all of the members of the Management Group that these individuals
intend to vote their shares in favor of approval of the Reorganization
Agreement and the Plan of Merger annexed thereto as Exhibits A. See "The
Special Meeting."
TERMS OF THE MERGER
Upon consummation of the Merger, each share of MSB Common Stock which
is outstanding immediately prior to the Effective Time of the Merger (except
for shares with respect to which dissenters' rights shall have been perfected
in accordance with Arkansas law) will be converted exclusively into the right
to receive the number of shares of UPC Common Stock determined pursuant to a
conversion formula set forth in the Reorganization Agreement.
3
<PAGE> 17
The number of shares of UPC Common Stock to be delivered in the Merger
will be determined based on the Current Market Price Per Share of the UPC
Common Stock immediately prior to the Effective Time of the Merger, which
Current Market Price Per Share may move up or down between the date of this
Prospectus and the Effective Time of the Merger. The "Current Market Price Per
Share" is the average price per share of the "last" trades of the UPC Common
Stock as reported in The Wall Street Journal for each of the ten (10) trading
days next preceding the day before the effectiveness of the Merger (the
"Closing Date"). See "The Merger--Terms of the Merger."
EFFECTIVE DATE
The Merger will become effective at the time Articles of Merger along
with the executed Plan of Merger are filed in accordance with the Arkansas
Business Corporation Act of 1965, as amended (the "Act"), or on such later date
and at such later time as the Plan of Merger may specify (the "Effective Time
of the Merger"). Assuming the timely receipt of all regulatory approvals, the
expiration of all statutory waiting periods and the satisfaction or waiver of
all conditions in the Reorganization Agreement, it is intended that the
Articles of Merger along with the Plan of Merger will be filed so as to become
effective on or about December 1, 1994. The effective date of the Merger will
be the day on which the Effective Time of the Merger occurs (the "Effective
Date of the Merger"). Holders of record of MSB Common Stock (the "MSB Record
Holders") immediately prior to the Effective Time of the Merger will be
entitled to receive the consideration for the Merger pursuant to the
Reorganization Agreement and the Plan of Merger annexed thereto as Exhibit A.
REASONS FOR THE MERGER; RECOMMENDATIONS OF BOARDS OF DIRECTORS
The Board of Directors of MSB (the "MSB Board") believes the Merger is
fair to, and in the best interests of, MSB and its shareholders and unanimously
recommends that MSB's shareholders vote FOR approval of the Reorganization
Agreement and the Plan of Merger annexed thereto as Exhibit A. The MSB Board,
after consideration of a number of alternatives available to MSB and MSB's
shareholders, believes that the Merger will enable the MSB shareholders to
participate in opportunities for investment value and growth. The Merger will
give Security and Farmers access to a substantially greater base of capital,
affording Security and Farmers an opportunity to expand services beyond those
presently provided. Moreover, affiliation with UPC will allow Security and
Farmers to compete more effectively in the Northeast Arkansas marketplace and
will provide Security and Farmers with certain economies of scale in their
banking operations. See "The Merger--Background of and Reasons for the
Merger."
CONDITIONS; REGULATORY APPROVALS
Consummation of the Merger is subject to various conditions, including
receipt of the approval of the MSB shareholders, receipt of the necessary
regulatory approvals and satisfaction of customary closing conditions.
4
<PAGE> 18
The regulatory approvals and consents necessary to consummate the
transactions contemplated by the Reorganization Agreement include the prior
approval of the Board of Governors of the Federal Reserve System (the "Federal
Reserve") and the Arkansas State Banking Department (the" Arkansas
Department"). Applications for such approvals have been submitted to each of
the respective regulatory agencies but as of the date of this Prospectus no
approval has been received from either the Arkansas Department or the Federal
Reserve for the parties to consummate the Merger. There can be no assurance as
to when or if UPC will receive the necessary regulatory approvals. See "The
Merger--Conditions to Consummation of the Merger," "--Regulatory Approvals" and
"--Conduct of Business Pending the Merger" and "Certain Regulatory
Considerations."
MANAGEMENT AFTER THE MERGER
At the Effective Time of the Merger, the persons who are serving as
directors and officers of INTERIM immediately prior thereto shall become the
directors and officers of MSB as the surviving corporation, and will hold
office as provided in the Articles of Incorporation and Bylaws of MSB unless
and until their successors have been duly elected or appointed and qualified.
See "The Merger--Management After the Merger."
SHAREHOLDERS' DISSENTERS' RIGHTS
Under the Act, holders of MSB Common Stock outstanding and entitled to
vote at the Special Meeting who do not vote for approval of the Reorganization
Agreement and the Plan of Merger annexed thereto as exhibit A and who comply
with certain notice and other requirements set forth in Section 4-26-1007 of
the Act will have the right to dissent from the Merger and to be paid cash for
the fair value of their shares as of the day prior to the date on which a vote
is taken approving the Merger. (A vote in favor of the Merger will disqualify
a MSB shareholder from exercising such shareholder's dissenters' rights). In
order for a holder of MSB Common Stock to perfect such shareholder's
dissenters' rights, such shareholder must (i) not vote his or her shares of MSB
Common Stock "FOR" approval of the Reorganization Agreement and the Plan of
Merger; (ii) deliver to MSB, prior to or at the Special Meeting at which the
Reorganization Agreement and the Plan of Merger are submitted for shareholder
vote, a written objection to the Reorganization Agreement and the Plan of
Merger; and (iii) within ten (10) days after the date on which the vote is
taken, make written demand to the surviving corporation for the payment of
fair value of his or her shares. The written demand shall state the number and
class of shares owned by the dissenting shareholder. Neither delivery of a
proxy appointment directing a vote against the Reorganization Agreement and the
Plan of Merger nor a failure to vote for the Reorganization Agreement and the
Plan of Merger will constitute such written notice. Certain additional
procedures must be followed in order for an MSB shareholder to exercise
dissenters' rights. Shareholders wishing to dissent from the Reorganization
Agreement are urged to read carefully "The Special Meeting--Shareholders'
Dissenters' Rights" and Appendix C (containing a copy of the section of the
Act pertaining to Dissenters' Rights) attached to this Prospectus and should
consult with their own legal advisors.
5
<PAGE> 19
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is intended for federal income tax purposes that the Merger will be
treated as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended, (the "Code") and accordingly, for
federal income tax purposes, MSB shareholders will realize and recognize gain
or loss (if any) only to the extent of any cash received as consideration for
their MSB Common Stock. MSB shareholders may also recognize gain or loss by
reason of receiving cash in lieu of fractional shares or the exercise of
Dissenters' Rights. See "The Merger-- Certain Federal Income Tax
Consequences."
ACCOUNTING TREATMENT
The Merger will be accounted for as a "pooling of interests" under
generally accepted accounting principles ("GAAP") as described in Accounting
Principles Board Opinion No. 16 and the interpretations thereof.
MARKET PRICES OF COMMON STOCK
UPC Common Stock. The UPC Common Stock is listed and traded on the New
York Stock Exchange (symbol: UPC). The following table sets forth for the
periods indicated the high and low closing sale prices of the UPC Common Stock
on the New York Stock Exchange and the cash dividends declared per share for
the periods indicated:
<TABLE>
<CAPTION>
CASH
PRICE RANGE DIVIDENDS
--------------------------- DECLARED
HIGH LOW PER SHARE
------ ------ ----------
<S> <C> <C> <C>
1994
First Quarter $26.25 $23.13 $.21
Second Quarter 28.75 24.75 .21
Third Quarter through
September 26, 1994 26.00 23.50 .23
----
Total $.65
====
1993
First Quarter $29.13 $22.50 $.18
Second Quarter 29.25 22.63 .18
Third Quarter 30.00 25.00 .18
Fourth Quarter 28.75 23.63 .18
----
Total $.72
====
1992
First Quarter $15.50 $13.75 $.15
Second Quarter 20.13 14.63 .15
Third Quarter 20.75 17.50 .15
Fourth Quarter 24.75 17.75 .15
----
Total $.60
====
</TABLE>
6
<PAGE> 20
The last reported sale price of UPC Common Stock on the New York Stock
Exchange as of September 26, 1994, which was the last practicable date prior to
the mailing of this Prospectus, was $24.63 per share.
MSB Common Stock. The MSB Common Stock is not listed for trading on a
national securities exchange or otherwise publicly traded in any established
securities market. MSB is not aware of any active market or trading in the
shares of MSB Common Stock. See "Mid South Bancshares, Inc. -- Market Price of
MSB Common Stock."
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables present for UPC, MSB, and on a pro forma basis for
UPC, selected unaudited consolidated financial data and ratios. This
information is based on the financial statements of MSB, included herein as
Appendix A, and of UPC included in UPC's Current Report on Form 8-K dated
September 19, 1994 (supplementary consolidated financial statements restated
for Recently Completed Acquisitions), incorporated by reference in this
Prospectus and should be read in conjunction therewith and with the notes
thereto, see "Incorporation of Certain Documents by Reference". Historical
results are not necessarily indicative of results to be expected for any future
period. In the opinion of the managements of the respective companies, all
adjustments necessary to arrive at a fair statement of results of operations of
UPC and MSB, have been included.
7
<PAGE> 21
UPC Selected Consolidated Financial Data
<TABLE>
<CAPTION>
Six Months Ended (1) Years Ended December 31,
-------------------- ------------------------------------------------------
6/30/94 6/30/93 1993 1992 1991 1990 1989
--------- --------- -------- -------- -------- -------- --------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data
Net interest income $131,656 $122,486 $243,843 $200,554 $160,473 $139,984 $127,834
Provision for losses on loans - 7,544 9,743 19,194 25,281 19,262 49,270
Profits and commissions from trading
activities 2,841 3,803 8,720 10,168 14,707 24,268 36,700
Investment securities gains (losses) 210 3,438 4,732 13,363 3,391 (349) (1,047)
Other noninterest income 37,469 36,717 74,464 62,581 53,983 48,160 41,553
Noninterest expense 117,586 114,125 230,319 204,838 169,601 165,479 179,876
-------- -------- --------- -------- --------- --------- ---------
Earnings (loss) before income taxes,
extraordinary item, and accounting
changes 54,590 44,775 91,697 62,634 37,672 27,322 (24,106)
Applicable income taxes (benefit) 16,769 14,660 26,333 17,611 7,538 2,666 (3,298)
-------- -------- --------- -------- --------- --------- ---------
Earnings (loss) before extraordinary
item and accounting changes 37,821 30,115 65,364 45,023 30,134 24,656 (20,808)
Extraordinary item-defeasance of debt,
net of taxes - - (3,206) - - - -
Accounting changes, net of taxes - 5,001 5,001 - - - -
-------- -------- --------- -------- --------- --------- ---------
Net earnings (loss) $ 37,821 $ 35,116 $ 67,159 $ 45,023 $ 30,134 $ 24,656 $ (20,808)
======== ======== ========= ======== ========= ========= =========
Per Common Share Data
Primary
Earnings (loss) before extraordinary
item and accounting changes $ 1.31 $ 1.22 $ 2.63 $ 2.07 $ 1.56 $ 1.17 $ (1.00)
Extraordinary item-defeasance of debt,
net of taxes - - (0.15) - - - -
Accounting changes, net of taxes - 0.23 0.23 - - - -
Net earnings (loss) 1.31 1.45 2.71 2.07 1.56 1.17 (1.00)
Fully diluted
Earnings (loss) before extraordinary
item and accounting changes 1.23 1.15 2.46 2.00 1.55 1.17 (1.00)
Extraordinary item-defeasance of debt,
net of taxes - - (0.12) - - - -
Accounting changes, net of taxes - 0.20 0.19 - - - -
Net earnings (loss) 1.23 1.35 2.53 2.00 1.55 1.17 (1.00)
Cash dividends 0.42 0.36 0.72 0.60 0.48 0.48 0.48
Book value 18.58 17.69 18.63 16.07 17.05 13.85 12.73
Book value assuming conversion of
convertible preferred stock 18.72 18.00 18.77 16.56 14.68 13.38 12.32
</TABLE>
8
<PAGE> 22
UPC Selected Consolidated Financial Data (Continued)
<TABLE>
<CAPTION>
Six Months Ended (1) Years Ended December 31,
------------------------ --------------------------------------------------------------
6/30/94 6/30/93 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data (at period end)
Total assets $7,467,906 $6,587,251 $6,593,695 $5,522,388 $4,031,361 $4,232,047 $4,234,874
Loans, net of unearned income 3,639,444 2,940,230 3,092,828 2,383,830 2,053,490 2,270,229 2,138,159
Allowance for losses on loans 88,476 81,237 81,604 65,415 48,442 51,181 47,105
Investment securities 3,036,137 2,771,368 2,720,066 2,294,565 1,242,188 1,230,047 1,091,904
Deposits 5,989,878 5,587,842 5,471,814 4,665,420 3,423,299 3,544,531 3,336,806
Long-term debt
Parent Company 114,764 74,292 114,729 74,292 38,163 44,662 34,500
Subsidiary Banks 195,684 144,767 182,501 17,864 9,922 4,103 39,021
Total shareholders' equity 575,740 485,782 507,930 383,758 294,309 260,060 262,235
Average assets 7,349,083 6,457,617 6,518,448 5,001,228 4,077,078 4,279,867 4,223,075
Average shareholders' equity (2) 577,061 455,137 476,655 356,003 271,941 266,214 287,127
Average shares outstanding (in
thousands)
Primary 25,449 21,459 21,622 18,765 18,632 20,641 20,761
Fully diluted 29,931 25,426 25,852 21,609 18,986 20,981 20,761
Profitability and Capital Ratios
Before extraordinary item and
accounting changes
Return on average assets 1.04 % 0.94 % 1.00 % 0.90 % 0.74 % 0.58 % NM %
Return on average common
equity (2) 14.25 14.55 15.07 13.64 11.16 9.28 NM
Net earnings
Return on average assets 1.04 % 1.10 % 1.03 % 0.90 % 0.74 % 0.58 % NM %
Return on average common
equity (2) 14.25 17.34 15.55 13.64 11.16 9.28 NM
Net interest income (taxable-
equivalent) to average
earning assets (2) 4.14 4.38 4.52 4.84 4.58 3.96 3.73
Loans/deposits 60.76 52.62 56.52 51.10 59.99 64.05 64.08
Common and preferred dividend
payout ratio 38.24 29.86 33.66 38.13 32.77 39.96 NM
Equity/assets (period end) 7.71 7.37 7.70 6.95 7.30 6.15 6.19
Average shareholders' equity/
average total assets (2) 7.85 7.05 7.31 7.12 6.67 6.22 6.80
Tier 1 capital to risk-weighted
assets (3) 15.11 13.80 15.11 14.49 12.59 10.03 NA
Total capital to risk-weighted
assets (3) 18.39 16.04 18.74 15.77 15.33 12.56 NA
Leverage ratio (3) 7.49 6.86 7.28 7.03 7.14 5.95 5.95
Asset Quality Ratios
Allowance/period end loans 2.43 % 2.76 % 2.64 % 2.74 % 2.36 % 2.25 % 2.20 %
Nonperforming loans/total loans(4) 0.53 0.88 0.72 1.60 1.28 0.92 0.82
Allowance/nonperforming loans (4) 462.40 312.41 368.07 171.92 184.91 246.02 268.99
Nonperforming assets/loans and
foreclosed property (5) 1.56 1.15 0.87 1.88 1.82 1.52 1.19
Provision/average loans NM 0.53 0.33 0.83 1.17 0.87 2.33
Net charge-offs/average loans 0.07 0.51 0.35 0.77 1.30 1.03 2.10
</TABLE>
- ------------------------------------------------------------------------------
(1) Interim period ratios have been annualized where applicable.
(2) Average balances and calculations exclude the impact of the net unrealized
gain (loss) on available for sale investment securities.
(3) The risk-based capital ratios are based upon capital guidelines prescribed
by federal bank regulatory authorities. Under those guidelines, the
required minimum Tier 1 and total capital to risk-weighted assets ratios
are 4% and 8%, respectively. The required minimum leverage ratio of Tier
1 capital to total adjusted assets is 3% to 5%.
(4) Nonperforming loans include loans on nonaccrual status and restructured
loans.
(5) Nonperforming assets include nonperforming loans and foreclosed properties.
NA - Not Available NM - Not Meaningful
9
<PAGE> 23
MSB SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, FOR THE YEARS ENDED DECEMBER 31,
--------------------- --------------------------------
1994 1993 1993 1992 1991 1990 1989
--------------------- -------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income $ 2,379 $ 2,206 $ 4,387 $ 4,693 $ 4,141 $ 3,712 $ 3,167
Provision for loan losses 25 12 292 185 300 241 186
Noninterest income 528 598 1,431 2,237 1,147 978 703
Noninterest expense 2,148 1,976 4,144 4,187 4,043 3,508 3,312
Income before taxes
and accounting change 734 816 1,382 2,558 945 941 372
Minority interest - - - (30) - - -
Income tax expense 257 291 492 810 275 213 -
Accounting change - 83 83 - - - -
Net income 477 608 973 1,718 670 728 372
PER COMMON SHARE DATA
Income before accounting changes 3.70 4.07 6.90 13.37 5.22 5.69 2.91
Accounting change - 0.64 0.64 - - - -
Net income 3.70 4.71 7.54 13.37 5.22 5.69 2.91
Cash dividends - - - - - - -
Book value 47.83 41.42 44.27 36.75 23.26 18.10 12.81
Average shares 129,021 128,914 128,964 128,458 128,423 127,998 127,875
BALANCE SHEET DATA (AT PERIOD END)
Investment securities 31,153 26,274 28,587 25,344 24,327 24,110 27,103
Loans, net of unearned income 80,097 76,233 77,800 74,854 72,645 66,362 59,336
Total assets 127,658 120,689 124,948 124,088 123,163 111,989 101,829
Deposits 114,544 108,754 112,090 112,183 112,391 101,416 92,375
Shareholders' equity 6,172 5,344 5,711 4,727 2,987 2,317 1,639
PROFITABILITY RATIOS(1)
Return on average assets 0.76% 0.98% 0.78% 1.39% 0.55% 0.67% 0.35%
Return on average equity 15.68% 24.27% 18.32% 41.50% 26.22% 34.98% 24.20%
Dividend payout ratio - - - - - - -
ASSET QUALITY DATA
Allowance for loan losses 1,003 746 1,001 815 827 789 792
Net charge-offs 23 80 106 198 262 244 141
Nonperforming loans 639 838 611 918 1,086 1,155 710
Allowance for loan losses to loans,
net of unearned income 1.25% 0.98% 1.29% 1.09% 1.14% 1.19% 1.33%
Foreclosed assets 298 834 637 1,307 1,465 976 935
Nonperforming assets to loans,
net of unearned income, and
foreclosed assets 1.17% 2.17% 1.59% 2.92% 3.44% 3.16% 2.73%
LIQUIDITY AND CAPITAL RATIOS
Loans, net of unearned
income to deposits 69.93% 70.14% 69.41% 66.72% 64.64% 65.44% 64.23%
Average equity to average total assets 4.83% 4.04% 4.29% 3.36% 2.14% 1.94% 1.48%
</TABLE>
(1) Interim periods have been annualized where applicable.
10
<PAGE> 24
Union Planters Corporation
Pro Forma Selected Consolidated Financial Data
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, 1994
----------------------------------------------------------------------------
UPC Shares
Outstanding Total
or to be Total Total Shareholders'
Issued Assets Deposits Equity
------------------- ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
UPC (b) 25,357,816 $ 7,467,906 $ 5,989,878 $ 575,740
MSB 523,000 (c) 127,658 114,544 6,172
-------------- --------------- ------------- -----------
Pro forma total 25,880,816 7,595,564 6,104,422 581,912
Other completed acquisitions (d) 0 0 0 0
Other pending acquisitions:
GSSC 13,486,000 (c) 2,466,209 2,210,705 183,046
Other 185,000 (c) 28,731 24,730 3,828
-------------- --------------- ------------- -----------
Pro forma consolidated 39,551,816 $ 10,090,504 $ 8,339,857 $ 768,786
============== =============== ============= ===========
<CAPTION>
Six Months Ended
June 30, 1994
-------------------------------------
Earnings
(Loss)
Before
Extraordinary
Items and
Total Accounting
Revenues (a) Changes
----------------- -------------------
<S> <C> <C>
UPC (b) $ 172,176 $ 37,821
MSB 5,818 890
----------------- -------------------
Pro forma total 177,994 38,711
Other completed acquisitions (d) 1,150 (476)
Other pending acquisitions:
GSSC 68,842 13,151
Other 602 163
----------------- -------------------
Pro forma consolidated $ 248,588 $ 51,549
================= ===================
<CAPTION>
Twelve Months Ended December 31,
--------------------------------------------------------------------------
1993 1992
----------------------------------- --------------------------------------
Earnings Earnings
(Loss) (Loss)
Before Before
Extraordinary Extraordinary
Items and Items and
Total Accounting Total Accounting
Revenues (a) Changes Revenues (a) Changes
----------------- ----------------- ------------------ -------------------
<S> <C> <C> <C> <C>
UPC (b) $ 331,759 $ 65,364 $ 286,666 $ 45,023
MSB 6,930 1,748 - -
----------------- ----------------- ------------------ -------------------
Pro forma total 338,689 67,112 286,666 45,023
Other completed acquisitions (d) 37,139 1,834 NA NA
Other pending acquisitions:
GSSC 131,876 24,612 107,091 18,227
Other 1,229 361 NA NA
----------------- ----------------- ------------------ -------------------
Pro forma consolidated $ 508,933 $ 93,919 $ 393,757 $ 63,250
================= ================= ================== ===================
<CAPTION>
Twelve Months Ended December 31,
------------------------------------
1991
------------------------------------
Earnings
(Loss)
Before
Extraordinary
Items and
Total Accounting
Revenues (a) Changes
----------------- ----------------
<S> <C> <C>
UPC (b) $ 232,554 $ 30,134
MSB - -
----------------- ----------------
Pro forma total 232,554 30,134
Other completed acquisitions (d) NA NA
Other pending acquisitions:
GSSC 94,557 12,762
Other NA NA
----------------- ----------------
Pro forma consolidated $ 327,111 $ 42,896
================= ================
</TABLE>
___________________
NA = Not applicable.
(a) Total revenues include net interest income plus noninterest income.
(b) Reference is made to UPC's Current Report on Form 8-K which presents
supplementary financial statements for the three years ended December 31,
1993 and for the six months ended June 30, 1994. The supplementary
financial statements have been restated for the BNF Bancorp,
Inc. acquisition for all periods presented and the June 30, 1994
supplementary financial statements have been restated for BNF Bancorp,
Inc., Liberty Bancshares, Inc. and Earle Bancshares, Inc.
(c) The number of shares of UPC Common Stock to be issued in connection with
these acquisitions is subject to change depending on the market price of the
Corporation's Common Stock during the applicable stipulated pricing
periods. The shares above are based on an assumed market price of $24.63.
(d) Amounts for other pending acquisitions represent the pro forma impact of
purchase acquisitions and the pro forma impact of immaterial acquisitions
accounted for as pooling of interests where prior year amounts were not
restated (treated similar to a January 1, 1993 purchase transaction).
11
<PAGE> 25
RECENT DEVELOPMENTS AFFECTING UPC.
Reorganization of UPNB. UPC's Tennessee Regional Banks, which were
split off from UPNB as of July 1, 1994, consist of Union Planters Bank of East
Tennessee, National Association ("Knoxville"), Union Planters Bank of Middle
Tennessee, National Association ("Nashville"), Union Planters Bank of
Chattanooga, National Association ("Chattanooga") and Union Planters Bank of
Jackson, National Association ("Jackson"). UPC injected equity of $101.7
million in the Regional Banks with a majority of the funds ($98 million)
provided by a dividend from UPNB. Each of the Regional Banks acquired from
UPNB, at book value, substantially all of the assets and assumed the
liabilities of the UPNB branches located in its region. While the separation
of the branches previously held by UPNB had no material impact on the
consolidated financial condition of UPC, it is expected to promote the
identification of individual branch operations within their local communities.
UPNB continues to operate branches located in Memphis and West Tennessee.
Earnings Considerations Related to Pending Acquisitions and
Reorganizations.
In connection with UPC's pending acquisition of Grenada Sunburst
System Corporation ("GSSC") in a tax-free reorganization (the "Grenada Sunburst
Acquisition") to be accounted for as a pooling of interests (See " -- Grenada
Sunburst Acquisition") and as part of both companies' continuing efforts to
reduce expenses, both UPC and GSSC have retained the services of Alex
Sheshunoff Management Services, Inc. ("ASMS"), a nationally recognized
consulting firm, to assist in improving the financial performance of each
organization, and to assist in the consolidation of the two organizations.
Through the study of each organization, individually and collectively,
opportunities to reduce costs and reengineer operations in order to become more
efficient will be identified. Management of UPC and GSSC expect that there
will be a reduction in the number of employees and branches in each
organization.
UPC and GSSC expect the acquisition of GSSC to close by December 31,
1994, however there can be no assurance that will be the case, since the
acquisition of GSSC is subject to obtaining regulatory approval and approvals
of shareholders of both UPC and GSSC.
Independent of whether or not the acquisition is consummated, UPC and
GSSC will each offer voluntary early retirement and voluntary separation
programs in the fourth quarter to help facilitate the staff reduction. Charges
associated with the early retirement and separation programs, along with other
acquisition- and consolidation- related expenses are preliminarily estimated to
be between $18 million to $27 million after tax. Management of UPC estimates
that charges associated with these items of between $3 million to $6 million
after tax will be incurred by UPC in the fourth quarter of 1994 regardless of
the status of the merger, with the remaining charges expected to be incurred in
the quarter in which the acquisition of GSSC is actually consummated. The
ranges of charges are based on currently available information as well as
preliminary estimates and are subject to change. The ranges are provided as a
preliminary estimate of the significance of the charges that might occur, and
should be viewed accordingly. The actual charges may vary substantially from
the ranges.
Additional Third and Fourth Quarter 1994 Earnings Considerations.
During the third quarter of 1994, UPC restructured a portion of its
available for sale investment securities portfolio by selling approximately
$425 million of securities which resulted in a loss on the sale of
approximately $4.5 million after tax. The loss had previously been recorded
on UPC's balance sheet as a reduction of shareholders' equity in accordance
with FASB 115. The restructuring was effected to increase book yields, and the
proceeds were invested in higher yielding securities. The average maturity of
securities sold was 13 months and the average maturity of securities purchased
was 30 months.
12
<PAGE> 26
UPC expects to recognize acquisition-related expenses during the third
quarter of 1994 of approximately $1.8 million after tax in connection with the
acquisition of BNF Bancorp, Inc. and Liberty Bancshares, Inc. which were
consummated during the third quarter of 1994.
In addition to the above charges, UPC plans to undertake a marketing
program in the fourth quarter of 1994 to increase the number of account
relationships and the related dollar amount of loans in a segment of its
consumer loan portfolio. A substantial part of the marketing and acquisition
related cost of this program will be incurred during the fourth quarter of 1994
and is expected to result in a significant increase in loan volume, interest
income, and fee income in 1995 and future periods. Based on current estimates,
the cost is anticipated to be between $7 million and $9 million after tax.
This range is provided as a preliminary estimate of the significance of the
charges that might occur, and the actual charges may vary substantially from
the range.
Recently Completed Acquisitions. Since June 30, 1994, UPC has
completed the acquisitions of the following institutions (collectively, the
"Recently Completed Acquisitions"). UPC's Current Report on Form 8-K, dated
September 19, 1994 includes supplementary consolidated financial statements for
1993 which have been restated for BNF Bancorp, Inc. and supplementary
consolidated financial statements for June 30, 1994 which have been restated
for all of the Recently Completed Acquisitions:
<TABLE>
<CAPTION>
METHOD OF
INSTITUTION ASSET SIZE CONSIDERATION ACCOUNTING
- ----------- ---------- ------------- ----------
(In millions)
<S> <C> <C> <C>
Liberty Bancshares, Inc.
and its subsidiary, Liberty
Federal Savings Bank, 1,223,353 Shares Pooling of
Paris, Henry County, Tennessee $181 UPC Common Stock Interests
Earle Bankshares, Inc.
and its subsidiary,
First Southern Bank, 320,112 Shares Pooling of
Earle, Crittenden County, UPC Common Stock Interests
Arkansas 43
BNF BANCORP, Inc. and its
subsidiary BANKFIRST, a federal
savings bank, in Decatur, 2,000,329 Shares Pooling of
Alabama 278 UPC Common Stock Interests
----
Total $502
====
</TABLE>
Pending Acquisitions. Consistent with UPC's acquisition strategy, UPC
has entered into definitive agreements to acquire the following financial
institutions in addition to MSB (collectively, the "Pending Acquisitions")
which management considers probable of consummation and which are expected to
be closed by the end of the fourth quarter of 1994:
<TABLE>
<CAPTION>
CONSIDERATION (2)
-------------
APPROXIMATE
Institution ASSET SIZE VALUE TYPE
- ----------- ---------- ----- ----
(In millions)
<S> <C> <C> <C>
Commercial Bancorp, Inc.
and its subsidary, UPC Common Stock
The Commercial Bank, (Approximately
Obion County, Tennessee $ 29 $ 4.6 185,000 shares)
Grenada Sunburst System Corporation
and its subsidiaries Sunburst Bank, UPC Common Stock
Mississippi, Grenada, Grenada (Approximately
County, Mississippi and Sunburst 13,486,000
Bank, Baton Rouge, Louisiana (1) 2,463 361.0 shares)
------ ------
Totals $2,492 $365.6
====== ======
</TABLE>
- ------------------------
(1) See "--Grenada Sunburst Acquisition" below for additional information
regarding the merger of GSSC Acquisition Company, Inc., a wholly-
owned subsidiary of UPC, with and into this entity.
(2) The number of shares of UPC Common Stock to be issued in connection
with the Pending Acquisitions is subject to change depending on the
market price of UPC's Common Stock during the stipulated pricing
periods. The shares above are based on an assumed current market
price of $24.63, the closing price of UPC Common Stock on September
26, 1994.
13
<PAGE> 27
If the Reorganization, the Pending Acquisitions and the Recently
Completed Acquisitions had been consummated at June 30, 1994, UPC's
consolidated total assets would have increased by approximately $2.6 billion to
approximately $10.1 billion, UPC's consolidated total loans would have
increased by $1.8 billion to approximately $5.4 billion and UPC's consolidated
total deposits would have increased by approximately $2.3 billion to
approximately $8.3 billion, based upon June 30, 1994, pro forma financial
information. See "--Pro Forma Consolidated Financial Information" and the
related pro forma financial information in UPC's Current Reports on Form 8-K
dated August 18, 1994 and the financial statements included in UPC's Current
Report on Form 8-K dated September 19, 1994 incorporated by reference. See
"Incorporation of Certain Documents by Reference."
Grenada Sunburst Acquisition. On July 1, 1994, UPC entered into a
definitive agreement to acquire Grenada Sunburst System Corporation ("GSSC") in
a tax-free reorganization (the "Grenada Sunburst Acquisition") to be accounted
for as a pooling of interests. Based on a current market price of $24.63 for
shares of UPC Common Stock, the Grenada Sunburst Acquisition would result in
the issuance of approximately 13.5 million shares of UPC Common Stock having a
value of approximately $361 million based on UPC's June 30, 1994 closing stock
price of $26.75.
GSSC is a multi-bank holding company headquartered in Grenada,
Mississippi and is the third-largest financial institution headquartered in
Mississippi. As of June 30, 1994, GSSC had total assets of approximately $2.5
billion, total loans of $1.7 billion, total deposits of $2.2 billion, and
shareholders' equity of $183 million. GSSC was organized under the laws of the
State of Delaware on May 20, 1986. GSSC has two major subsidiaries: Sunburst
Bank, Mississippi, and Sunburst Bank, Louisiana. Sunburst Bank, Mississippi,
organized in 1890, and Sunburst Bank, Louisiana, acquired in May 1988
(collectively the "Banks"), had approximately $2.0 billion and $500 million,
respectively, in total assets as of June 30, 1994.
Through the Banks, GSSC is engaged in the general commercial banking
business, conducting operations in 124 locations in 59 communities in
Mississippi and Louisiana. The Banks accept demand deposits and various types
of interest-bearing transaction and time deposit accounts and utilize funds
from such activities to make loans and other investments. In addition, through
GSSC's subsidiary, Sunburst Financial Group, Inc., GSSC offers full-service
brokerage to its customers. The Banks offer a wide range of fiduciary services
through their trust divisions, and mortgage services through Sunburst GSSC
Mortgage Corporation as well as other financial services to their customers.
GSSC has expanded its operations through de novo branch banking and acquisition
of banks in Mississippi and Louisiana. Each branch office of GSSC does
business under the name "Sunburst Bank".
At June 30, 1994, GSSC had approximately 1,700 full-time-equivalent
employees. Sunburst Bank, Mississippi is incorporated under the laws of the
State of Mississippi, and as such is subject to regulation by the Department of
Banking and Consumer Finance for the State of Mississippi. Sunburst Bank,
Louisiana is incorporated under the laws of the State of Louisiana and as such
is subject to regulation by the Office of Financial Institutions for the State
of Louisiana. GSSC is registered as a bank holding company with the Federal
Reserve and is governed by applicable laws and regulations as a bank holding
company. The Banks' deposits are insured by the FDIC, and, therefore, both
banks are subject to regulation by the Federal Deposit Insurance Corporation
and to examination by that corporation.
The acquisition of GSSC is contingent upon the receipt of all
necessary regulatory approvals and the requisite shareholder approvals of GSSC
and UPC and is also subject to satisfaction of customary contractual closing
conditions. The acquisition is expected to be consummated by year-end 1994.
For additional information regarding GSSC, see UPC's Current Report on Form 8-K
dated July 1, 1994, July 26, 1994, August 18, 1994, August 19, 1994 and
September 28, 1994.
Restatement of UPC Financial Data. In connection with the consummation
by UPC of the acquisition of BNF Bancorp, Inc. effective September 1, 1994,
which was a significant acquisition for UPC and which was accounted for by UPC
using the pooling of interests method of accounting, UPC has, consistent with
this method of accounting and in accordance with generally accepted accounting
principles, filed supplementary consolidated financial statements as of and for
the three years ended December 31, 1993, and as of and for the six months ended
June 30, 1994, in a Current Report on Form 8-K dated September 19, 1994
reflecting the Recently Completed Acquisitions.
14
<PAGE> 28
COMPARATIVE PER SHARE DATA
The following table presents selected comparative unaudited per share
data for (i) UPC Common Stock and MSB Common Stock on a supplementary and
historical basis, respectively; (ii) UPC Common Stock on a pro forma basis for
the MSB Acquisition only and for the MSB Acquisition, all Recently Completed
Acquisitions and the Pending Acquisitions; and (iii) MSB Common Stock on an
equivalent pro forma basis for the MSB Acquisition only and for the MSB
Acquisition, all Recently Completed Acquisitions and the Pending Acquisitions,
for the periods indicated. These data are not necessarily indicative of the
results of the future operations of either entity or the actual results that
would have occurred had the Merger been consummated January 1, 1993. The
information as of and for the six months June 30, 1994, and as of and for the
twelve months ended December 31, 1993, reflects on a pro forma basis the
Recently Completed Acquisitions and the Pending Acquisitions. The information
for the years ended December 31, 1992 and 1991 presents only UPC and the
Grenada Sunburst Acquisition. The information is derived from and should
be read in conjunction with the supplementary consolidated financial statements
of UPC (including related notes thereto) which are incorporated by reference,
the historical consolidated financial statements of MSB set forth below in
Appendix A and the unaudited pro forma consolidated financial statements and
related notes in UPC's Current Reports on Form 8-K, dated August 18, 1994 and
September 19, 1994, incorporated by reference. See "Incorporation of Certain
Documents by Reference."
15
<PAGE> 29
Union Planters Corporation
Comparative Per Share Data
<TABLE>
<CAPTION>
Six Months
Ended As of and for the twelve Months Ended December 31,
June 30, --------------------------------------------------
1994 (1) 1993 (1) 1992 (1) 1991 (1)
-------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C>
Book value per common share
UPC 18.58 18.63 16.07 14.72
UPC pro forma (MSB only) 18.44 18.44 16.07 14.72
UPC pro forma (all recently completed and pending
acquisitions) 16.79 16.28 13.87 12.63
MSB 47.83 44.27 36.75 23.26
MSB equivalent pro forma (MSB only) 74.76 74.76 65.15 59.68
MSB equivalent pro forma (all recently completed and
pending acquisitions) (2) 68.07 66.00 56.23 51.20
Cash dividends per share
UPC 0.42 0.72 0.60 0.48
UPC pro forma 0.42 0.72 0.60 0.48
MSB 0.00 0.00 0.00 0.00
MSB equivalent pro forma 1.70 2.92 2.43 1.95
Earnings before extraordinary items and accounting changes
UPC
Primary 1.31 2.63 2.07 1.56
Fully diluted 1.23 2.46 2.00 1.55
UPC pro forma (MSB only)
Primary 1.30 2.61 NM NM
Fully diluted 1.23 2.44 NM NM
UPC pro forma (all recently completed and
and pending acquisitions) (2)
Primary 1.17 2.13 1.77 1.30
Fully diluted 1.13 2.07 1.75 1.30
MSB
Primary 3.70 6.90 13.37 5.22
Fully diluted 3.70 6.90 13.37 5.22
MSB equivalent pro forma (MSB only)
Primary 5.27 10.58 NM NM
Fully diluted 4.99 9.89 NM NM
MSB equivalent pro forma (all recently completed and
pending acquisitions) (2)
Primary 4.74 8.64 7.18 5.27
Fully diluted 4.58 8.39 7.09 5.27
</TABLE>
(1) The equivalent pro forma per share data for MSB are computed by multiplying
MSB's pro forma information by 4.0542.
(2) See also, "Recent Developments Affecting UPC -- Recently Completed
Acquisitions" and "-- Pending Acquisitions." NM - Not Meaningful
16
<PAGE> 30
PRO FORMA CONDENSED FINANCIAL INFORMATION
The following tables contain unaudited consolidated pro forma condensed
financial information showing a statement of earnings for the six months ended
June 30, 1994, and for the years ended December 31, 1993, 1992 and 1991, and a
balance sheet at June 30, 1994, for (i) UPC; (ii) UPC and MSB; and (iii) UPC,
all Pending Acquisitions and MSB. The unaudited pro forma financial
information reflects each transaction using either the pooling of interests or
purchase method of accounting in accordance with the accounting requirements
applicable to each respective transaction. The unaudited pro forma financial
information should be read in conjunction with the supplementary and historical
consolidated financial statements of UPC and MSB, respectively, and in
conjunction with the information presented in UPC's Current Reports on Form 8-K
dated February 8, 1994, April 14, 1994, May 18, 1994, July 1, 1994, July 26,
1994, August 18, 1994, August 19, 1994, September 1, 1994 and September 19,
1994. Pro forma results are not necessarily indicative of future operating
results. See "Incorporation of Certain Documents by Reference" and "Appendix
A."
17
<PAGE> 31
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, 1994
--------------------------------------------
UPC,
All Pending
UPC and Acquisitions
UPC MSB and MSB
------------- ------------- ---------------
<S> <C> <C> <C>
Assets
Cash and due from banks $ 294,565 $ 300,158 $ 420,690
Interest-bearing deposits at financial
institutions 10,689 14,731 17,994
Federal funds sold and securities purchased under
agreements to resell 42,128 42,883 41,223
Trading account securities, at market 148,204 148,204 148,204
Loans held for resale 9,974 9,974 39,026
Investment securities
Available for sale 2,465,523 2,466,062 2,584,600
Held to maturity 570,614 601,228 1,087,717
Loans, net of unearned income 3,639,444 3,719,541 5,389,383
Less:
Allowance for losses on loans (88,476) (89,479) (122,445)
------------- ------------- ---------------
Net loans 3,550,968 3,630,062 5,266,938
Premises and equipment 158,553 163,302 212,960
Accrued interest receivable 62,415 63,659 81,770
Goodwill and other intangibles 45,193 45,193 46,467
Other assets 109,080 110,108 144,479
------------- ------------- ---------------
Total assets $ 7,467,906 $ 7,595,564 $ 10,092,068
============= ============= ===============
Liabilities and shareholders' equity
Deposits
Noninterest-bearing $ 832,603 $ 849,545 $ 1,242,535
Other interest-bearing 5,157,275 5,254,877 7,096,443
------------- ------------- ---------------
Total deposits 5,989,878 6,104,422 8,338,978
Short-term borrowings 506,516 506,516 534,914
Federal Home Loan Bank advances 193,399 193,399 193,399
Long-term debt 117,049 123,217 143,685
Accrued interest, expenses, and taxes 49,392 49,867 63,092
Other liabilities 35,932 36,231 48,098
------------- ------------- ---------------
Total liabilities 6,892,166 7,013,652 9,322,166
------------- ------------- ---------------
Shareholders' equity
Preferred stock
Convertible 87,298 87,298 87,298
Nonconvertible 17,250 17,250 17,250
Common stock 126,788 129,403 198,030
Additional paid-in capital 92,369 91,056 92,570
Net unrealized loss - available for sale securities (13,760) (13,776) (13,581)
Retained earnings 265,795 270,681 388,335
------------- ------------- ---------------
Total shareholders' equity 575,740 581,912 769,902
------------- ------------- ---------------
Total liabilities and
shareholders' equity $ 7,467,906 $ 7,595,564 $ 10,092,068
============= ============= ===============
</TABLE>
18
<PAGE> 32
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF EARNINGS
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1994
--------------------------------------------
UPC,
All Pending
UPC and Acquisitions
UPC MSB and MSB
------------- -------------- ---------------
<S> <C> <C> <C>
Interest income
Interest and fees on loans $ 145,416 $ 148,480 $ 213,844
Interest on investment securities 75,180 75,879 92,797
Interest on deposits at financial institutions 229 368 368
Interest on federal funds sold and securities
purchased under agreements to resell 1,715 1,726 1,433
Interest on trading account securities 3,978 3,978 4,062
Interest on loans held for resale 878 878 2,589
------------- -------------- ---------------
Total interest income 227,396 231,309 315,093
------------- -------------- ---------------
Interest expense
Interest on deposits 81,570 82,915 112,022
Interest on short-term borrowings 6,270 6,270 6,457
Interest on Federal Home Loan Bank advances and
long-term debt 7,900 8,089 9,016
------------- -------------- ---------------
Total interest expense 95,740 97,274 127,495
------------- -------------- ---------------
Net interest income 131,656 134,035 187,598
Provision for losses on loans - 25 1,974
------------- -------------- ---------------
Net interest income after provision for losses on loans 131,656 134,010 185,624
------------- -------------- ---------------
Noninterest income
Service charges on deposit accounts 15,989 16,302 24,783
Profits and commissions from trading activities 2,841 2,841 2,841
Investment securities gains 210 212 266
Other income 21,480 21,693 28,534
------------- -------------- ---------------
Total noninterest income 40,520 41,048 56,424
------------- -------------- ---------------
Noninterest expense
Salaries and employee benefits 52,591 53,623 80,036
Net occupancy expense 9,029 9,409 12,885
Equipment expense 9,173 9,173 13,014
Other expense 46,793 47,529 62,447
------------- -------------- ---------------
Total noninterest expense 117,586 119,734 168,382
------------- -------------- ---------------
Earnings before income taxes, extraordinary
item, and accounting changes 54,590 55,324 73,666
Applicable income taxes 16,769 17,026 22,632
------------- -------------- ---------------
Earnings before extraordinary item and accounting changes $ 37,821 $ 38,298 $ 51,034
============= ============== ===============
Earnings per common share
Primary $ 1.31 $ 1.30 $ 1.17
Fully diluted 1.23 1.23 1.13
Average common shares outstanding (in thousands)
Primary 25,449 25,972 39,697
Fully diluted 29,931 30,454 44,179
</TABLE>
19
<PAGE> 33
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF EARNINGS
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1993
---------------------------------------------------
UPC,
All Pending
UPC Acquisitions
UPC and MSB and MSB
------------- -------------- ----------------
<S> <C> <C> <C>
Interest income
Interest and fees on loans $ 254,259 $ 260,350 $ 426,593
Interest on investment securities 146,950 148,146 197,984
Interest on deposits at financial institutions 1,634 1,975 2,288
Interest on federal funds sold and securities
purchased under agreements to resell 4,602 4,630 5,730
Interest on trading account securities 6,194 6,194 6,194
Interest on loans held for resale 3,336 3,336 7,335
------------- -------------- ----------------
Total interest income 416,975 424,631 646,124
------------- -------------- ----------------
Interest expense
Interest on deposits 154,487 157,365 242,640
Interest on short-term borrowings 6,287 6,293 7,520
Interest on Federal Home Loan Bank advances and
long-term debt 12,358 12,743 13,771
------------- -------------- ----------------
Total interest expense 173,132 176,401 263,931
------------- -------------- ----------------
Net interest income 243,843 248,230 382,193
Provision for losses on loans 9,743 10,035 21,262
------------- -------------- ----------------
Net interest income after provision for losses on loans 234,100 238,195 360,931
------------- -------------- ----------------
Noninterest income
Service charges on deposit accounts 29,274 30,068 50,401
Profits and commissions from trading activities 8,720 8,720 8,771
Investment securities gains 4,732 4,764 4,892
Other income 45,190 45,795 61,576
------------- -------------- ----------------
Total noninterest income 87,916 89,347 125,640
------------- -------------- ----------------
Noninterest expense
Salaries and employee benefits 101,650 103,548 164,915
Net occupancy expense 16,256 17,007 27,557
Equipment expense 16,679 16,679 23,672
Other expense 95,734 97,229 136,523
------------- -------------- ----------------
Total noninterest expense 230,319 234,463 352,667
------------- -------------- ----------------
Earnings before income taxes, extraordinary
item, and accounting changes 91,697 93,079 133,904
Applicable income taxes 26,333 26,825 40,591
------------- -------------- ----------------
Earnings before extraordinary item and accounting changes $ 65,364 $ 66,254 $ 93,313
============= ============== ================
Earnings per common share
Primary $ 2.63 $ 2.61 $ 2.13
Fully diluted 2.46 2.44 2.07
Average common shares outstanding (in thousands)
Primary 21,622 22,145 39,630
Fully diluted 25,852 26,375 44,228
</TABLE>
20
<PAGE> 34
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF EARNINGS
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1992
--------------------------------
UPC UPC AND GSSC
--------------- ----------------
<S> <C> <C>
Interest income
Interest and fees on loans $ 212,225 $ 315,976
Interest on investment securities 129,404 165,005
Interest on deposits at financial institutions 3,999 4,915
Interest on federal funds sold and securities
purchased under agreements to resell 4,280 5,250
Interest on trading account securities 6,648 6,648
Interest on loans held for resale 3,561 7,146
--------------- ----------------
Total interest income 360,117 504,940
--------------- ----------------
Interest expense
Interest on deposits 147,132 209,035
Interest on short-term borrowings 6,942 8,040
Interest on Federal Home Loan Bank advances and
long-term debt 5,489 5,555
--------------- ----------------
Total interest expense 159,563 222,630
--------------- ----------------
Net interest income 200,554 282,310
Provision for losses on loans 19,194 27,182
--------------- ----------------
Net interest income after provision for losses on loans 181,360 255,128
--------------- ----------------
Noninterest income
Service charges on deposit accounts 21,335 35,590
Profits and commissions from trading activities 10,168 10,168
Investment securities gains 13,363 14,019
Other income 41,246 51,670
--------------- ----------------
Total noninterest income 86,112 111,447
--------------- ----------------
Noninterest expense
Salaries and employee benefits 77,245 116,764
Net occupancy expense 13,509 19,989
Equipment expense 12,875 18,186
Other expense 101,209 124,525
--------------- ----------------
Total noninterest expense 204,838 279,464
--------------- ----------------
Earnings before income taxes, extraordinary
item, and accounting changes 62,634 87,111
Applicable income taxes 17,611 23,861
--------------- ----------------
Earnings before extraordinary item and accounting changes $ 45,023 $ 63,250
=============== ================
Earnings per common share
Primary $ 2.07 $ 1.77
Fully diluted 2.00 1.75
Average common shares outstanding (in thousands)
Primary 18,765 32,305
Fully diluted 21,609 35,149
</TABLE>
21
<PAGE> 35
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF EARNINGS
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1991
----------------------------------
UPC UPC and GSSC
---------------- ----------------
<S> <C> <C>
Interest income
Interest and fees on loans $ 227,667 $ 341,936
Interest on investment securities 99,580 141,925
Interest on deposits at financial institutions 7,525 9,898
Interest on federal funds sold and securities
purchased under agreements to resell 6,606 8,791
Interest on trading account securities 5,419 5,419
Interest on loans held for resale 4,784 6,150
---------------- ----------------
Total interest income 351,581 514,119
---------------- ----------------
Interest expense
Interest on deposits 173,295 259,518
Interest on short-term borrowings 12,809 14,383
Interest on Federal Home Loan Bank advances and
long-term debt 5,004 5,196
---------------- ----------------
Total interest expense 191,108 279,097
---------------- ----------------
Net interest income 160,473 235,022
Provision for losses on loans 25,281 34,203
---------------- ----------------
Net interest income after provision for losses on loans 135,192 200,819
---------------- ----------------
Noninterest income
Service charges on deposit accounts 19,868 33,626
Profits and commissions from trading activities 14,707 14,707
Investment securities gains 3,391 2,624
Other income 34,115 41,132
---------------- ----------------
Total noninterest income 72,081 92,089
---------------- ----------------
Noninterest expense
Salaries and employee benefits 71,953 108,490
Net occupancy expense 10,901 17,414
Equipment expense 11,346 16,077
Other expense 75,401 96,494
---------------- ----------------
Total noninterest expense 169,601 238,475
---------------- ----------------
Earnings before income taxes, extraordinary
item, and accounting changes 37,672 54,433
Applicable income taxes 7,538 11,537
---------------- ----------------
Earnings before extraordinary item and accounting changes $ 30,134 $ 42,896
================ ================
Earnings per common share
Primary $ 1.56 $ 1.30
Fully diluted 1.55 1.30
Average common shares outstanding (in thousands)
Primary 18,632 32,172
Fully diluted 18,986 32,526
</TABLE>
22
<PAGE> 36
THE SPECIAL MEETING
TIME AND PLACE OF SPECIAL MEETING; SOLICITATION OF PROXIES
Each copy of this Prospectus mailed to holders of record of MSB Common
Stock is accompanied by a proxy appointment card furnished in connection with
the MSB Board's solicitation of proxies for use at the Special Meeting and at
any adjournments or postponements thereof. The Special Meeting is scheduled to
be held at 11:00 a.m. Central Time on Friday, November 18, 1994, at MSB's main
office located at West Court and Pruett Streets, Paragould, Arkansas 72450.
Only holders of record of MSB Common Stock at the close of business on October
4, 1994, are entitled to receive notice of and to vote at the Special Meeting.
At the Special Meeting, MSB shareholders will consider and vote upon (i) a
proposal to approve the Reorganization Agreement and the Plan of Merger annexed
thereto as Exhibit A and (ii) such other matters as may properly be brought
before the Special Meeting or any adjournments or postponements thereof.
HOLDERS OF MSB COMMON STOCK ARE REQUESTED TO COMPLETE, DATE AND SIGN
THE ACCOMPANYING PROXY APPOINTMENT CARD AND RETURN IT PROMPTLY TO MSB IN THE
ENCLOSED, POSTAGE-PAID ENVELOPE. FAILURE TO RETURN YOUR PROPERLY EXECUTED
PROXY APPOINTMENT CARD OR TO VOTE AT THE SPECIAL MEETING WILL HAVE THE SAME
EFFECT AS A VOTE AGAINST THE REORGANIZATION AGREEMENT AND THE PLAN OF MERGER
ANNEXED THERETO AS EXHIBIT A (BUT WILL NOT BE SUFFICIENT TO PERFECT DISSENTERS'
RIGHTS). MSB SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR
PROXY APPOINTMENT CARDS.
Any holder of MSB Common Stock who has delivered a proxy appointment
may revoke it at any time before it is voted by attending the Special Meeting
and voting in person at the Special Meeting or by giving notice of revocation
in writing or submitting a signed proxy appointment bearing a later date to Mid
South Bancshares, Inc., West Court and Pruett Streets, Paragould, Arkansas
72450, Attention: Corporate Secretary, provided such notice or proxy
appointment is actually received by MSB before the vote of shareholders. A
proxy appointment will not be revoked by death or supervening incapacity of the
shareholder executing the proxy appointment unless, before the shares are
voted, notice of such death or incapacity is filed with the Corporate Secretary
or other person responsible for tabulating the votes on behalf of MSB. The
shares of MSB Common Stock represented by properly executed proxy appointments
received will be voted FOR (or AGAINST, as indicated) approval of the
Reorganization Agreement and the Plan of Merger annexed thereto as Exhibit A.
If any other matters are properly presented at the Special Meeting for
consideration, the persons named in the MSB proxy appointment card enclosed
herewith will have discretionary authority to vote on such matters in
accordance with their best judgment, provided, however, that such discretionary
authority (i) will only be exercised to the extent permissible under applicable
federal or state securities law and (ii) will not extend to any motion to
adjourn the Special Meeting made by MSB for the purpose of soliciting
additional proxy appointments. MSB is unaware of any matter to be presented at
the Special Meeting other than the proposal to approve the Reorganization
Agreement and the Plan of Merger annexed thereto as Exhibit A.
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The cost of soliciting proxies from holders of MSB Common Stock will
be borne by MSB. Such solicitation will be made by mail but also may be made
by telephone or in person by the directors, officers and employees of MSB (who
will receive no additional compensation for doing so).
VOTES REQUIRED
The affirmative votes of the holders of at least two-thirds (2/3) of
the outstanding shares of MSB Common Stock entitled to vote at the Special
Meeting are required in order to approve the Reorganization Agreement and the
Plan of Merger annexed thereto as Exhibit A. Therefore, a failure to return a
properly executed proxy appointment or alternatively to vote in person at the
Special Meeting will have the same effect as a vote against the Reorganization
Agreement and the Plan of Merger (but will not be sufficient to perfect
dissenters' rights). As of the Record Date, there were 129,022 shares of MSB
Common Stock outstanding and entitled to vote at the Special Meeting, with each
share entitled to one vote.
As of the Record Date, the Management Group beneficially owned and
held of record a total of 104,504 shares or approximately 81% of the issued and
outstanding shares of MSB Common Stock. ALL THE MEMBERS OF THE MANAGEMENT
GROUP HAVE ADVISED MSB OF THEIR INTENTION TO VOTE THEIR SHARES IN FAVOR OF THE
REORGANIZATION AGREEMENT AND THE PLAN OF MERGER ANNEXED THERETO AS EXHIBIT A.
SHAREHOLDERS' DISSENTERS' RIGHTS
Any shareholder of MSB entitled to vote on the Reorganization
Agreement and the Plan of Merger annexed thereto as Exhibit A has the right to
receive payment of the fair value of his or her shares of MSB Common Stock upon
compliance with Section 4-26-1007 of the Act. A shareholder may not dissent as
to less than all of the shares that he or she beneficially owns. A nominee or
fiduciary may not dissent on behalf of a beneficial owner as to less than all
of the shares of such beneficial owner held of record by such nominee or
fiduciary. A beneficial owner asserting dissenters' rights to shares held on
his or her behalf must notify MSB in writing of the name and address of the
record holder of the shares, if known to him or her.
Any MSB shareholder intending to enforce his or her dissenters' rights
may not vote in favor of the Reorganization Agreement and the Plan of Merger
(either personally or by proxy) and must (i) deliver to the Corporate Secretary
of MSB prior to the time of the shareholder vote a written objection to the
Reorganization Agreement and the Plan of Merger ("Objection Notice") and (ii)
deliver to the Corporate Secretary of the surviving corporation within ten (10)
days after the date on which the vote was taken a written demand for payment of
the fair value of his or her shares as of the day prior to the date on which
the vote was taken approving the Merger (the "Demand Letter"). The Demand
Letter must state that the shareholder demands payment for his or her shares of
MSB Common Stock if the Merger is effected and include the number of shares of
MSB Common Stock owned by the dissenting MSB shareholder. A vote against
approval of the Reorganization Agreement and the Plan of Merger will not, in
and of itself, constitute an Objection Notice or Demand Letter satisfying the
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requirements of Section 4-26-1007 of the Act. FAILURE TO COMPLY SUBSTANTIALLY
WITH THESE PROCEDURES WILL CAUSE THE MSB SHAREHOLDER TO LOSE HIS OR HER
DISSENTERS' RIGHTS TO RECEIVE CASH PAYMENT FOR THE SHARES. CONSEQUENTLY, ANY
MSB SHAREHOLDER WHO DESIRES TO EXERCISE HIS OR HER RIGHTS TO PAYMENT FOR HIS OR
HER SHARES IS URGED TO CONSULT HIS OR HER LEGAL ADVISER BEFORE ATTEMPTING TO
EXERCISE SUCH RIGHTS.
If the Reorganization Agreement and the Plan of Merger are approved by
MSB's shareholders at the Special Meeting and the Merger is consummated, each
MSB shareholder who does not vote for the Merger and has properly filed an
Objection Notice and Demand Letter will be notified by the surviving
corporation no later than ten (10) days after Effective Date of the Merger that
the Merger was consummated and offering to make payment for the fair value of
the dissenting shareholder's shares pursuant to the Act.
If within thirty (30) days after the Effective Date of the Merger the
fair value of such shares is agreed upon between the dissenting shareholder and
the surviving corporation, then payment of such shares' fair value shall be
made by the surviving corporation to the dissenting shareholder within ninety
(90) days after the Effective Date of the Merger, upon the surrender of the
dissenting shareholder's stock certificate(s) representing his or her shares of
MSB Common Stock.
If within the thirty (30) day period after the Effective Date of the
Merger the dissenting shareholder and the surviving corporation cannot
agree upon the fair value of such shares, then the dissenting shareholder,
within sixty (60) days after the expiration of the thirty (30) day period, may
file a petition in the Circuit Court of Greene County, Arkansas (the "Court"),
asking for a finding and determination of the fair value of the shares and
shall be entitled to judgment against the surviving corporation for the amount
of the fair value to be determined as of the day prior to the date on which the
vote was taken approving the Merger, together with interest thereon to the date
of judgment. The judgment shall be payable only upon and simultaneously with
the surrender to the surviving corporation of the certificate(s) representing
the shares held by such dissenting shareholder. Upon payment of the judgment,
the dissenting shareholder shall cease to have any interest in the shares or in
the surviving corporation.
Unless the dissenting shareholder files the petition within the time
period set forth in the Act, the dissenting shareholder and all persons
claiming such rights under him or her will be bound by the terms of the
Reorganization Agreement and the Plan of Merger.
The foregoing summary of the applicable provisions of Section
4-26-1007 of the Act is not intended to be a complete statement of such
provisions, and is qualified in its entirety by reference to such Section,
which is included as Appendix C hereof.
For a discussion of certain tax consequences in connection with
exercising Dissenters' Rights, see "The Merger--Certain Federal Income Tax
Consequences."
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RECOMMENDATION
For the reasons described below, the MSB Board has adopted the
Reorganization Agreement and the Plan of Merger, believes the Merger is in the
best interest of MSB and its shareholders and unanimously recommends that
shareholders of MSB vote FOR approval of the Reorganization Agreement and the
Plan of Merger.
THE MERGER
The following information concerning the Merger, insofar as it relates
to matters contained in the Reorganization Agreement or the Plan of Merger
annexed thereto as Exhibit A, is qualified in its entirety by reference to the
Reorganization Agreement and the Plan of Merger which is attached hereto as
Appendix B. MSB shareholders are urged to read the Reorganization Agreement
and the Plan of Merger annexed thereto as Exhibit A carefully.
BACKGROUND OF AND REASONS FOR THE MERGER
Background. Mid South Bancshares, Inc. ("MSB") was founded in 1985 to
become the holding company for Security Bank ("Security"), an Arkansas
chartered bank based in Paragould, Arkansas. In December 1987, MSB indirectly
acquired the common stock of the parent corporation of Farmers and Merchants
Bank ("Farmers"), an Arkansas chartered bank in Reyno, Arkansas through
negotiations as a result of debt previously contracted. MSB's primary
marketing area includes Greene and Randolph counties of Northeast Arkansas, an
area of increasing commercial and population growth.
Approximately 57% of MSB's consolidated loan portfolio is comprised of
residential, commercial or agricultural real estate mortgage loans.
Approximately 10% of its loan portfolio consists of commercial loans, 16% in
consumer loans and 10% in agricultural loans.
Economic and regulatory changes, including advances in technology and
increased competition and regulatory complexity, have led to a consolidation
within the banking industry. In Arkansas, a number of banks and bank holding
companies have, during the past few years, been acquired or have engaged in
merger or consolidation transactions due to these pressures.
From time to time, the MSB Board and the management of MSB have
considered various strategies for MSB, including merging with a larger company.
An Arkansas bank holding company in the Summer of 1993 submitted a merger
proposal to the MSB Board, which proposal was withdrawn prior to consideration
by the MSB Board with the stated reason for the withdrawal being strategic
considerations related to geographical expansion.
The initial degree of interest expressed by that party along with the
continuing pace of merger activity among banks prompted the MSB Board to retain
Stephens Inc. on October 19, 1993 as its exclusive financial advisor and to
authorize Stephens Inc. to contact potential merger partners on behalf of MSB.
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Stephens Inc. prepared a list of potentially interested parties based
on its recent experience in similar assignments and on discussions with the
Company. Stephens Inc. compiled a list of ten publicly owned bank holding
companies as potential purchasers of MSB and approached each prospective
purchaser in December of 1993. The list included all four publicly traded bank
holding companies based in Arkansas, along with three companies from Missouri,
two from Tennessee and one from Mississippi.
Seven of these companies were sufficiently interested to execute
confidentiality agreements in order to receive certain financial and
descriptive information regarding MSB. Beginning in January of 1994, Stephens
Inc. began soliciting proposals from these parties. From January through June
of 1994, based on their stated level of interest, three of the companies were
granted permission to meet with MSB and tour MSB's facilities. UPC and one
other interested party presented non-binding proposals for the acquisition of
MSB, which were subsequently refined and enhanced by each party.
UPC's final proposal called for a 100% stock for stock tax-free merger
with a fixed number of shares to be issued to the MSB shareholders to the
extent that the UPC Common Stock price was trading within a given range shortly
prior to closing. Based on the then current market price of UPC Common Stock
(approximately $28.50 at June 6, 1994), the UPC proposal represented
approximately $14.65 million in consideration for MSB. The competing proposal
also called for approximately $14.65 million in consideration, with 60% to 70%
of the consideration to be paid in common stock and the remainder to be paid in
cash.
The UPC proposal was deemed to be superior by the MSB Board based
primarily on a significant difference in dividends per share payouts by the two
parties and the significantly greater liquidity of UPC Common Stock. Based on
its review of the two proposals, the MSB Board authorized the management of MSB
to execute a letter of intent with UPC on June 6, 1994.
After further negotiation and a mutual review by the parties of the
respective operations of the respective parties, UPC, MSB, Security and Farmers
executed the Reorganization Agreement as of July 8, 1994 (a copy of which is
annexed to this Prospectus as Appendix B), which was approved by the MSB Board
at a special meeting on July 8, 1994, and ratified by the Board of Directors of
UPC at its regular meeting held on July 28, 1994.
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MSB Reasons. In light of the foregoing, the MSB Board has voted to
unanimously recommend the approval of the Reorganization Agreement and
the Plan of Merger annexed thereto as Exhibit A by the MSB shareholders for,
and among others, the following reasons:
(i) The consideration to be paid by UPC. See "The Merger -- Terms of the
Merger." Depending on the price of UPC Common Stock used in the calculation,
the transaction value of the consideration to be delivered by UPC reflected a
price-to-book multiple of between 1.75 and 2.04 times MSB's unaudited book
value as of March 31, 1994 and a price-to-earnings multiple of between 12.2 and
13.8 (based on 1993 net income). A representative of Stephens Inc. advised the
MSB Board that these multiples compared favorably with the ratios of recently
completed comparable bank merger transactions in Arkansas;
(ii) The trends in the banking industry are toward consolidation and
increased regulation, particularly, recent changes have resulted in an
environment where community banks have commanded in the past, and for some
indefinite future period will command, attractive purchase prices; and the MSB
Board sought to take advantage of this environment;
(iii) Security and Farmers will benefit from UPC's capital, operations and
regulatory expertise and management talent, and may achieve certain economies
of scale in their banking operations;
(iv) Management of MSB believes that UPC's philosophy is to provide its
community banks with a substantial degree of operating autonomy, generally
leaving existing management in place to manage the institution consistent with
past management culture, so long as such culture is not inconsistent with UPC's
policies and produces results consistent with results achieved while the
institution was independent; and
(v) The annual dividend yield on the UPC Common Stock offered in exchange
for the MSB Common Stock exceeds the historical yield on the MSB Common Stock
and there is a much broader and more liquid market for the UPC Common Stock,
which is listed and traded on the NYSE.
UPC Reasons. Management of UPC has recommended to the UPC Board of
Directors (the "UPC Board"), and the UPC Board has approved the Merger and the
Reorganization Agreement along with the Plan of Merger annexed thereto as
Exhibit A, because (i) MSB has experienced steady and continued growth, (ii)
MSB is located geographically in counties in which UPC has sought to increase
its market share, and (iii) UPC believes that by providing Security and Farmers
with access to the UPC capital base and other banking resources, Security and
Farmers will be well positioned to compete in their respective markets in the
face of enhanced competition from larger, well capitalized institutions.
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TERMS OF THE MERGER
At the Effective Time of the Merger, INTERIM will merge with and into
MSB with MSB surviving the Merger as the surviving corporation and continuing
after the Effective Time of the Merger to operate under the name Mid South
Bancshares, Inc. The surviving corporation would thereby become a wholly-owned
subsidiary of UPC. In the Merger, each share of MSB Common Stock outstanding
immediately prior to the Effective Time of the Merger, other than shares with
respect to which Dissenters' Rights shall have been perfected as described
above, will be converted exclusively into the right to receive shares of UPC
Common Stock as provided in the Reorganization Agreement and the Plan of
Merger.
The number of shares of UPC Common Stock to be received by MSB Record
Holders (other than dissenting MSB Record Holders, who will receive cash only)
in the Merger will be determined pursuant to a conversion formula described in
the Reorganization Agreement which is based on the Current Market Price Per
Share of the UPC Common Stock. The Current Market Price Per Share equals the
average price per share of the "last" trades of the UPC Common Stock on the
NYSE for each of the ten (10) trading days next preceding the Closing Date. No
fractional shares of UPC Common Stock will be issued in respect to MSB Common
Stock, and, after aggregation of the shares (and fractional shares) of UPC
Common Stock to which an MSB Record Holder is entitled, cash will be paid by
UPC in lieu of any remaining fractional share.
The number of shares of UPC Common Stock to be exchanged for each
share of MSB Common Stock issued and outstanding immediately prior to the
Effective Time of the Merger (based on there being no more than 129,366 shares
of MSB Common Stock issued and outstanding immediately prior to the Effective
Time of the Merger) shall be based on an exchange ratio (the "Exchange Ratio")
as determined and set forth in Section 3.1(e) of the Reorganization Agreement.
The Exchange Ratio shall be determined as follows:
(i) In the event the Current Market Price Per Share of UPC Common
Stock should be greater than or equal to $24.00 per share of UPC
Common Stock but less than or equal to $28.00 per share of UPC Common
Stock (the "Primary Collar"), the Exchange Ratio shall be fixed at
4.0542 shares of UPC Common Stock for each share of MSB Common Stock
issued and outstanding at the Effective Time of the Merger;
(ii) In the event the Current Market Price Per Share of UPC Common
Stock should be greater than $28.00 per share of UPC Common Stock but
less than or equal to $30.00 per share of UPC Common Stock (the "Upper
Secondary Collar"), the Exchange Ratio shall be based on (a) a fixed
price of $113.51 per share of MSB Common Stock divided by (b) the
Current Market Price Per Share of UPC Common Stock for each share of
MSB Common Stock validly issued and outstanding at the Effective Time
of the Merger;
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(iii) In the event the Current Market Price Per Share of UPC Common
Stock should be greater than $30.00 per share of UPC Common Stock (the
"Ceiling"), the Exchange Ratio shall be fixed at 3.7837 shares of UPC
Common Stock for each share or MSB Common Stock; provided, however,
UPC would have the right to either deliver the fixed Exchange Ratio of
3.7837 or to terminate the transaction contemplated in the
Reorganization Agreement; provided, however, should UPC elect to
terminate the transaction under this provision, MSB would have the
unilateral right to reinstate the transaction by accepting in exchange
for each share of MSB Common Stock issued and outstanding that number
of shares of UPC Common Stock at the Current Market Price Per Share
sufficient to equal $113.51 per share of MSB Common Stock;
(iv) In the event the Current Market Price Per Share of UPC Common
Stock should be greater than or equal to $22.00 per share of UPC
Common Stock but less than $24.00 per share of UPC Common Stock (the
"Lower Secondary Collar"), the Exchange Ratio shall be based on (a) a
fixed price of $97.30 per share of MSB Common Stock divided by (b) the
Current Market Price Per Share of UPC Common Stock for each share of
MSB Common Stock validly issued and outstanding at the Effective Time
of the Merger; and
(v) In the event the Current Market Price Per Share of UPC Common
Stock should be less than $22.00 per share of UPC Common Stock (the
"Floor"), the Exchange Ratio shall be fixed at 4.4227 shares of UPC
Common Stock for each share of MSB Common Stock; provided, however,
MSB shall have the right to either accept the fixed Exchange Ratio of
4.4227 or to terminate the transaction contemplated in the
Reorganization Agreement; provided, however, should MSB elect to
terminate the transaction under this provision, UPC would have the
unilateral right to reinstate the transaction by delivering in
exchange for each share of MSB Common Stock issued and outstanding
that number of shares of UPC Common Stock at the Current Market Price
Per Share sufficient to equal $97.30 per share of MSB Common Stock.
The Exchange Ratio shall be based on an aggregate of no more than
129,366 shares of MSB Common Stock issued and outstanding immediately prior to
the Effective Time of the Merger; provided, however, that no fractional shares
of UPC Common Stock shall be issued and if, after aggregating all of the shares
of UPC Common Stock to which a MSB Record Holder would be entitled based upon
the Exchange Ratio, there were a fractional share of UPC Common Stock
remaining, such fractional share shall be settled by a cash payment therefor
based upon the Current Market Price Per Share of one (1) full share of UPC
Common Stock.
Holders of MSB Common Stock will have the right to dissent from the
Reorganization Agreement and the Plan of Merger and receive a cash payment
equal to the fair value of their shares, all in conformity with Section
4-26-1007 of the Act. See "The Special Meeting--Shareholders' Dissenters'
Rights."
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EFFECTIVE DATE AND EFFECTIVE TIME OF THE MERGER
Articles of Merger along with the Plan of Merger will be filed as soon
as practicable after all conditions precedent contained in the Reorganization
Agreement have been satisfied or lawfully waived, including receipt of all
regulatory approvals and expiration of all statutory waiting periods, or on
such later date as may be agreed to by UPC and MSB. The Effective Time of the
Merger will be at the time the Articles of Merger along with the Plan of Merger
are filed in the Office of the Arkansas Secretary of State pursuant to the Act
or at such later time as the parties may agree and specify in the Plan of
Merger. The Effective Date of the Merger will be the day on which the
Effective Time of the Merger occurs. It is presently anticipated that the
Articles of Merger will be filed on November 30, 1994, and will specify, by
agreement of the parties, an Effective Time of the Merger of 12:01 a.m.,
Central Time, on December 1, 1994. There can be no assurance that such
intention will be achieved.
SURRENDER OF CERTIFICATES
As promptly as practicable after the Effective Time of the Merger,
Union Planters National Bank, acting in the capacity of exchange agent (the
"Exchange Agent"), will mail to each person who was a holder of record of MSB
Common Stock immediately prior to the Effective Time of the Merger a form
letter of transmittal, together with instructions and a return mailing envelope
(collectively, the "Exchange Materials") to facilitate the exchange of such
holder's certificates formerly representing shares of MSB Common Stock for
certificates representing shares of UPC Common Stock.
HOLDERS OF MSB COMMON STOCK WHO DO NOT INTEND TO EXERCISE DISSENTERS'
RIGHTS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE THE EXCHANGE
MATERIALS FROM THE EXCHANGE AGENT.
Upon receipt of the Exchange Materials, MSB Record Holders should
complete the letter of transmittal in accordance with the instructions provided
and deliver the letter of transmittal, together with all stock certificates
formerly representing shares of MSB Common Stock to the Exchange Agent in the
return envelope provided. Provided the Exchange Agent shall have received the
certificates and related documentation completed in proper form, as soon as
practicable after the Effective Time of the Merger UPC will issue, and the
Exchange Agent will mail, to the MSB Record Holder a certificate representing
the whole number of shares of UPC Common Stock to which such holder is entitled
pursuant to the Reorganization Agreement and a check in the amount of any cash
consideration which may be payable with respect to a fractional share. No
consideration will be delivered to a MSB Record Holder unless and until such
holder shall have properly delivered to the Exchange Agent certificates
formerly representing the shares of MSB Common Stock owned by him or her and in
respect of which he or she claims payment is due, or such documentation, if
applicable, and security in respect of lost or stolen certificates as required
in the Reorganization Agreement.
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No dividend or other distribution with respect to the UPC Common Stock
will be paid or delivered to the holder of any unsurrendered MSB certificate(s)
until the holder surrenders such certificate(s) in accordance with the Exchange
Materials, at which time the holder will be entitled to receive all previously
withheld dividends and distributions, without interest.
After the Effective Time of the Merger, there will be no further
transfers on MSB's stock transfer books of shares of MSB Common Stock issued
and outstanding immediately prior to the Effective Time of the Merger. If
certificates representing shares of MSB Common Stock should be presented for
transfer after the Effective Time of the Merger, they will be returned to the
presenter together with a form of letter of transmittal and exchange
instructions.
Neither UPC, the Exchange Agent, INTERIM nor any other person will be
liable to any former holder of MSB Common Stock for any amount properly
delivered to a public official pursuant to applicable unclaimed property,
escheat or similar laws.
If a certificate formerly representing MSB Common Stock has been lost,
stolen or destroyed, the Exchange Agent will deliver the consideration properly
payable in respect to such certificate in accordance with the Reorganization
Agreement upon receipt of appropriate evidence as to such loss, theft or
destruction; appropriate evidence as to ownership of such certificate by the
claimant; and a lost instrument bond in form satisfactory to UPC and the
Exchange Agent as required by the Exchange Materials.
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of UPC and MSB to effect the Merger are
subject to the satisfaction of the following conditions prior to the Effective
Time of the Merger: (i) approval of the Reorganization Agreement and the Plan
of Merger and the transactions contemplated thereby by the affirmative votes of
the holders of at least two-thirds (2/3) of the total shares of MSB Common
Stock outstanding on the Record Date; (ii) approval of the Reorganization
Agreement and the transactions contemplated thereby by the Federal Reserve and
the Arkansas Department, and the expiration of any statutory waiting periods;
(iii) receipt of all other regulatory and contractual consents necessary to
consummate the transactions contemplated by the Reorganization Agreement; (iv)
the satisfaction of all other requirements prescribed by law as conditions
precedent to the consummation of the transactions contemplated by the
Reorganization Agreement; (v) none of UPC, INTERIM, MSB, Security or
Farmers shall be subject to any order, decree or injunction of a court or agency
which presents a substantial risk of the restraint or prohibition of the
consummation of the Merger or the obtaining of material damages or other relief
in connection therewith; and (vi) the Registration Statement of which this
Prospectus forms a part will have become effective and no stop order suspending
the effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
Commission.
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The obligations of UPC and INTERIM to effect the Merger are further
subject to the satisfaction, or waiver by UPC, of the following conditions: (i)
UPC will have received a legal opinion, dated the date of closing, from counsel
to MSB as to the good standing of MSB, Security and Farmers, the enforceability
and due authorization of the Reorganization Agreement and the receipt of all
required approvals (subject to limitations as permitted in the Reorganization
Agreement); (ii) each of the representations, warranties and covenants of MSB,
Security and Farmers set forth in the Reorganization Agreement will, in all
material respects, be true on, or complied with by, the Effective Date of the
Merger as if made on such date (except to the extent they relate by their terms
to an earlier date) and UPC shall have received a certificate signed by certain
officers of MSB, Security and Farmers to such effect; (iii) there shall have
been no damage or destruction to, or taking of any property of MSB, Security
and Farmers or any material adverse change in the business, financial
condition, results of operations or prospects of MSB, Security and Farmers;
(iv) MSB, Security and Farmers shall not have committed to effect any form of
business combination with, or asset sale to any other person or entity; adopted
any "poison pill", shareholders' rights provision or "golden parachute;" or
taken any other action the effect of which would be to materially diminish the
value of MSB, Security or Farmers to UPC; (v) MSB shall have maintained certain
asset and capital covenants and refrained from declaring or paying any
dividends subsequent to March 31, 1994; and (vi) the Merger shall qualify to be
accounted for using the pooling of interests method of accounting.
The obligations of MSB to effect the Merger are further subject to the
satisfaction, or waiver by MSB, of the following conditions: (i) MSB will have
received a legal opinion, dated the date of closing, from counsel to UPC as to
the good standing of UPC and INTERIM, the enforceability and due authorization
of the Reorganization Agreement, the validity of the UPC Common Stock, the
receipt of required approvals and the absence of conflict with UPC's Charter,
Bylaws and material contracts (subject to limitations as permitted in the
Reorganization Agreement); (ii) each of the representations, warranties and
covenants of UPC set forth in the Reorganization Agreement will, in all
material respects, be true on, or complied with by, the Effective Date of the
Merger as if made on such date (except to the extent they relate by their terms
to an earlier date) and MSB will have received a certificate signed by certain
officers of UPC to that effect; (iii) MSB shall have received from UPC
certificates from UPC executive officers stating that the consummation of the
transaction has been duly authorized and that the persons executing and
delivering documents on behalf of UPC are duly appointed and that their
signatures are genuine; (iv) MSB shall have received from the Exchange Agent a
certificate evidencing receipt of the certificates representing the UPC Common
Stock constituting the consideration payable in the Merger; and (v) there shall
have been no material adverse change in the business, financial, condition,
results of operation or prospects of UPC.
No assurance can be provided as to when, if ever, the regulatory
consents and approvals necessary to consummate the Merger will be obtained (or,
if so obtained, that such consents and approvals will not contain conditions or
requirements which would materially reduce the benefits of, and result in
abandonment of the Merger) or whether all of the other conditions precedent to
the Merger will be satisfied or waived by the party lawfully permitted to do
so.
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REGULATORY APPROVALS
The Merger is subject to prior approval by (i) the Arkansas Department
under Section 23-32-1804 of the Regional Reciprocal Banking Act of 1988, of the
Arkansas Code; and (ii) the Federal Reserve under Section 3 of the Bank Holding
Company Act of 1956, as amended (the "BHCA"), which requires that the Federal
Reserve take into consideration, among other factors, the financial and
managerial resources and future prospects of the institutions and the
convenience and needs of the communities to be served. Applications for such
approvals have been filed with, and are pending before the Federal Reserve and
the Arkansas Department. The BHCA prohibits the Federal Reserve from approving
the Merger if it would result in a monopoly or be in furtherance of any
combination or conspiracy to monopolize or to attempt to monopolize the
business of banking in any part of the United States, or if its effect in any
section of the Country may be substantially to lessen competition or to tend to
create a monopoly, or if it would in any other manner be a restraint of trade,
unless the Federal Reserve finds that the anticompetitive effects of the Merger
are clearly outweighed by the public interest and the probable effect of the
transaction in meeting the convenience and needs of the communities to be
served. The Federal Reserve 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.
Under the BHCA, the Merger may not be consummated until the 30th day
following the date of Federal Reserve approval, during which time the United
States Department of Justice may challenge the Merger on antitrust grounds.
The commencement of an antitrust action would stay the effectiveness of the
Federal Reserve's approval unless a court specifically orders otherwise. As of
the date of this Prospectus, neither the Federal Reserve nor the Arkansas
Department has given its approval of the Merger.
The Merger may not lawfully proceed in the absence of the requisite
regulatory approvals. See "The Merger--Conditions to Consummation of the
Merger" and "--Waiver and Amendment; Termination."
There can be no assurance that the Department of Justice will not
challenge the Merger, or if such challenge is made, as to the result thereof.
CONDUCT OF BUSINESS PENDING THE MERGER
The Reorganization Agreement contains certain restrictions upon the
conduct of MSB's, Security's and Farmers' business pending consummation of
the Merger. In particular, the Reorganization Agreement provides that, except
as otherwise provided in the Reorganization Agreement and/or without the
written consent of UPC, MSB, Security and Farmers respectively may not,
among other things; (i) amend its Charter or Bylaws; (ii) permit any lien to
exist in respect to any share of stock held by MSB; (iii) repurchase any of its
capital stock, split or otherwise subdivide its capital stock, recapitalize in
any way or declare a stock dividend in respect to the MSB Common Stock; (iv)
issue or sell any MSB Common Stock or sell or otherwise dispose of a
substantial part of MSB's, Security's and Farmers' assets or earnings power;
(v) dispose of, discontinue
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<PAGE> 48
or acquire any material assets or businesses other than in the ordinary
course of business; (vi) incur any additional debt in excess of $50,000 except
in the ordinary course of business; (vii) increase compensation, pay bonuses or
enter into severance arrangements except in accordance with past practices;
(viii) amend any existing employment contract with any person having a salary
in excess of $30,000 per year or enter into any new employment contract
providing for an annual salary exceeding $30,000 per year unless MSB or its
subsidiaries may terminate same at will without liability; (ix) adopt any new
benefit plan; (x) enter into any new service contract, purchase contract or
lease agreement that would be material to MSB; (xi) make any capital
expenditures except in the ordinary course of business; (xii) extend credit (or
commit to extend credit) to any officer, director or holder of 10% or more of
MSB Common Stock if such extension of credit would exceed 2% of the capital of
MSB, Security or Farmers, or amend the terms of any such credit; or (xiii)
acquire direct or indirect control over any person or entity except in the
ordinary course of business or in connection with internal reorganizations and
acquisitions in MSB's, Security's or Farmers' fiduciary capacity. Moreover,
MSB, Security and Farmers, respectively shall, among other things, operate in
the usual, regular and ordinary course, preserve its organization and assets
and maintain its rights and franchises, use its best efforts to retain its
customer base and assist UPC in procuring all applicable regulatory approvals.
PAYMENT OF DIVIDENDS
MSB is prohibited under the Reorganization Agreement from paying
dividends or making any other type of distribution with respect to the MSB
Common Stock.
WAIVER AND AMENDMENT; TERMINATION
Prior to the Effective Date of the Merger, any condition of the
Reorganization Agreement may (to the extent allowed by law) be waived by the
party benefitted by the provision or may be amended or modified (including the
structure of the transaction) by an agreement in writing approved by the Boards
of Directors of UPC and MSB; provided, however, that no such amendment may be
effected after shareholder approval of the Reorganization Agreement and the
Plan of Merger without approval of the MSB shareholders if the effect of such
amendment would be to change the amount or the type of consideration to be paid
in the Merger to the MSB Record Holders.
The Reorganization Agreement may be terminated at any time prior to
the Effective Date of the Merger, either before or after approval by the MSB
shareholders, as follows: (i) by the mutual consent of the parties; (ii) by UPC
if MSB, Security or Farmers, respectively, should violate any affirmative
or negative covenant in respect to the operation of its business; (iii) by UPC
or MSB if the Closing Date shall not have occurred by March 31, 1995, unless
the failure is due to the failure of the party seeking to terminate; (iv) by
either party if any governmental or regulatory approval is denied and not
successfully appealed within certain time limits; (v) by either party if the
other party's conditions have not been satisfied or waived as of the Closing
Date or if the other party has committed a material breach that is not cured
within 30 days after the breaching party receives notice of such breach; (vi)
by UPC if there has been a material adverse change in the business, properties,
liabilities or prospects of MSB, Security or Farmers, or if MSB or Security or
Farmers should enter into
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<PAGE> 49
a formal capital plan in cooperation with applicable banking regulators; or
(vii) by UPC should MSB, Security or Farmers enter into any business
combination or any letter of intent or agreement in respect thereof with any
other person.
In the event of the valid termination of the Reorganization Agreement
by either UPC or MSB, the Reorganization Agreement and the Plan of Merger shall
become void, and there will be no liability on the part of either party or
their officers or directors except for liability for breach of the
Reorganization Agreement or for any misstatement or misrepresentation made
prior to such termination.
MANAGEMENT AFTER THE MERGER
The Reorganization Agreement and the Plan of Merger provide that after
the Effective Time of the Merger, the surviving corporation will be managed by
a board of directors consisting of the present members of INTERIM's Board of
Directors (the "INTERIM Board"), all of whom are expected to be qualified to
serve as officers and/or directors of the surviving corporation. All officers
and directors serve one (1) year terms but may be re-elected or reappointed, as
the case may be. Set forth below are those persons who are executive officers
of INTERIM and members of the INTERIM Board, their ages and principal
occupations for the last five years.
Executive Officers and Directors of INTERIM:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Jackson W. Moore 48 Sole Director of INTERIM;
President
</TABLE>
Mr. Moore is President of UPC and has been since April 1, 1989.
Previous to that he was a partner with the law firm of Wildman, Harrold, Allen,
Dixon & McDonnell in Memphis, Tennessee.
MSB EXECUTIVE COMPENSATION
Mr. Moore receives no direct or indirect compensation from INTERIM for
his services as an officer and director of INTERIM. Mr. Moore receives
compensation from UPC for his services as an officer of UPC. This information
is contained in UPC's annual proxy statement to its shareholders. See
"Available Information."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The directors and officers of MSB own approximately 81% of the shares
of MSB Common Stock issued and outstanding and will receive the Merger
consideration described above. All directors of MSB that are also directors of
Security or Farmers are likely to retain their positions as directors of
Security or Farmers.
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<PAGE> 50
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The federal income tax discussion set forth below is abbreviated in
nature and is included for general information only. MSB shareholders are
urged to consult their own tax advisers as to the specific tax consequences to
them of the Merger, including the applicability and effect of federal, state
and local and other tax laws.
General. It is intended that for federal income tax purposes the
Merger will be treated as a reorganization within the meaning of Section 368(a)
of the Code, and that, accordingly, (i) no gain or loss will be recognized by
either UPC or MSB as a result of the Merger, (ii) gain or loss will be
recognized by the MSB shareholders only to the extent of any cash consideration
received in respect to their MSB Common Stock in connection with the Merger
(except as discussed below with respect to cash received in lieu of the
issuance of fractional shares of UPC Common Stock); (iii) the tax basis of UPC
Common Stock to be received by the MSB shareholders in connection with the
Merger will be the same as the basis in the MSB Common Stock surrendered in
exchange therefor, increased by the amount of any gain recognized and reduced
by the amount of cash received with respect thereto and the amount allocable to
a fractional share interest for which cash is received; and (iv) the holding
period of the UPC Common Stock to be received by the MSB shareholders in
connection with the Merger will include the holding period of the MSB Common
Stock surrendered in exchange therefor, provided that the MSB Common Stock is
held as a capital asset at the Effective Time of the Merger.
Consequences of Receipt of Cash in Lieu of Fractional Share. A MSB
shareholder who is entitled to receive cash in lieu of fractional shares of UPC
Common Stock in connection with the Merger will recognize as of the Effective
Date of the Merger gain (or loss) equal to the difference between such cash
amount and the shareholder's basis in the fractional share interest. Any gain
or loss recognized will be capital gain (or loss) if the MSB Common Stock is
held by such shareholder as a capital asset at the Effective Date of the
Merger.
Cash Received by Holders of MSB Common Stock Who Dissent. A
shareholder of MSB who perfects his or her dissenters' rights under the laws of
Arkansas and who receives a cash payment for the value of his or her shares of
MSB Common Stock will be treated as having received such payment in redemption
of such stock. Such redemption will be subject to the conditions and
limitations of Section 302 of the Code, including the attribution rules of
Section 318. In general, if the shares of MSB Common Stock are held by the
holder as a capital asset at the Effective Time of the Merger, such holder will
recognize capital gain or loss measured by the difference between the amount of
cash received by such holder and his or her basis in such shares. Each holder
of MSB Common Stock who contemplates exercising his or her dissenters' rights
should consult his or her own tax advisor as to the possibility that any
payment to him or her will be treated as dividend income.
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<PAGE> 51
ACCOUNTING TREATMENT
The Merger is intended to be treated by UPC and MSB as a "pooling of
interests" for accounting purposes. Accordingly, under generally accepted
accounting principles and Accounting Principles Board Opinion No. 16 for
business combinations, the assets and liabilities of MSB and UPC will be
carried on the books of UPC immediately subsequent to the Effective Time of the
Merger at the amounts recorded on the respective books of each corporation
immediately prior to the Effective Time of the Merger. Net income of UPC
subsequent to the Merger becoming effective will include the net income of MSB
and UPC for the entire fiscal period in which the Merger occurs, which is
expected by UPC and MSB to be fiscal year 1994. Subsequent to the Merger
becoming effective, the reported income of MSB and UPC will be combined and
restated as income of UPC. The unaudited pro forma financial information
contained in this Prospectus has been prepared using the pooling of interests
method of accounting where applicable.
EXPENSES
The Reorganization Agreement provides, in general, that UPC and MSB
will each pay their own expenses in connection with the Reorganization
Agreement and the transactions contemplated thereby, including fees and
expenses of their own accountants, financial advisors and counsel.
RESALES OF UPC COMMON STOCK
The shares of UPC Common Stock issued pursuant to the Reorganization
Agreement will be freely transferable under the Securities Act of 1933 except
for shares issued to any shareholder who may be deemed to be an "affiliate" of
MSB and therefore an "underwriter" in respect to UPC Common Stock for purposes
of Rule 145 under the Securities Act as of the date of the Special Meeting.
Affiliates may not sell their shares of UPC Common Stock acquired in connection
with the Merger except pursuant to an effective registration statement under
the Securities Act (other than on Form S-4) covering such shares or in
compliance with Rule 145 promulgated under the Securities Act or another
applicable exemption from the registration requirements of the Securities Act.
Persons who may be deemed to be affiliates of MSB generally include individuals
or entities that control, are controlled by or are under common control with
MSB and include executive officers, directors or, holders of ten percent (10%)
or more of the MSB Common Stock. UPC may place restrictive legends on
certificates representing UPC Common Stock issued to all persons who are deemed
"underwriters" under Rule 145. The shares of the UPC Common Stock to be
delivered pursuant to the Merger to any MSB shareholder deemed an "affiliate"
of MSB under the Securities Act are subject to the additional restriction on
resale imposed by provisions in the Reorganization Agreement requiring all
affiliates to retain all shares of UPC Common Stock received by them in
connection with the Merger until such time as UPC shall have publicly released
a statement of UPC's consolidated earnings reflecting the combined financial
results of UPC and MSB for a period of not less than thirty (30) days
subsequent to the Effective Date of the Merger. It is not expected that such a
statement would be released until late January of 1995. Shares of UPC Common
Stock delivered to any MSB shareholders deemed affiliates will bear a legend to
that effect. See "Description of UPC Common and Preferred Stock--UPC Common
Stock--Dividends."
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<PAGE> 52
CERTAIN REGULATORY CONSIDERATIONS
General. As a bank holding company, UPC is subject to the regulation and
supervision of the Federal Reserve. In addition, as a savings and loan holding
company, UPC is registered with the Office of Thrift Supervision (the "OTS")
and is subject to OTS regulations, supervision and reporting requirements.
UPC's bank subsidiaries that are national banking associations, including UPNB,
are subject to supervision and examination by the Office of the Comptroller of
the Currency (the "Comptroller") and the Federal Deposit Insurance Corporation
(the "FDIC"). State bank subsidiaries of UPC which are members of the Federal
Reserve System are subject to supervision and examination by the Federal
Reserve and the state banking authorities of the states in which they are
located. State bank subsidiaries which are not members of the Federal Reserve
System are subject to supervision and examination by the FDIC and the state
banking authorities of the states in which they are located. UPC's
federally-chartered savings bank subsidiaries are subject to supervision and
examination by the OTS. UPC's banking subsidiaries are subject to various
requirements and restrictions, including requirements to maintain reserves
against deposits, restrictions on the types and amounts of loans that may be
granted and the interest that may be charged thereon, and limitations on the
types of investments that may be made and the types of services that may be
offered. Various consumer laws and regulations also affect the operations of
the banks. In addition to the impact of regulation, the subsidiary banks are
affected significantly by the actions of the Federal Reserve as it attempts to
control the money supply and credit availability in order to influence the
economy.
The BHCA generally requires the prior approval of the Federal Reserve
where a bank holding company proposes to acquire direct or indirect ownership
or control of more than 5% of the voting shares of any bank or otherwise to
acquire control of a bank or to merge or consolidate with any other bank
holding company. The BHCA generally prohibits the Federal Reserve from
approving an application by a bank holding company to acquire a bank located in
another state, unless such an acquisition is specifically authorized by statute
of the state in which the bank to be acquired is located. Tennessee has
adopted reciprocal interstate banking legislation permitting Tennessee-based
bank holding companies to acquire banks and bank holding companies in certain
other states and allowing bank holding companies located in certain states
other than Tennessee, to acquire banks and bank holding companies in Tennessee.
A bank holding company is generally prohibited under the BHCA from
acquiring voting shares of any company which is not a bank, and from engaging
in any activities other than those of banking or of managing or controlling
banks or furnishing services to or performing services for its subsidiaries. An
exception to these prohibitions permits a bank holding company to engage in, or
to acquire an interest in a company, such as a thrift institution, which
engages in activities that the Federal Reserve has determined are so closely
related to banking or managing or controlling banks as to be a proper incident
thereto.
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Capital Adequacy. The Federal Reserve has adopted risk-based capital
guidelines for bank holding companies. The minimum guideline for the ratio of
total capital ("Total capital") to risk-weighted assets (including certain
off-balance-sheet activities such as standby letters of credit) is 8%. At least
half of the Total capital must be composed of "Tier 1 capital" which consists
of common shareholders' equity, minority interests in the equity accounts of
consolidated subsidiaries, non-cumulative perpetual preferred stock and a
limited amount of cumulative perpetual preferred stock, less goodwill ("Tier 1
capital"). The remainder, which is Tier 2 capital, may consist of subordinated
debt (or certain other qualifying debt issued prior to March 12, 1988), other
preferred stock and a limited amount of loan loss reserves.
In addition, the Federal Reserve has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum ratio of Tier 1 capital to average total assets, less goodwill (the
"Leverage ratio") of 3% for bank holding companies that meet certain specified
criteria, including those having the highest regulatory rating. All other bank
holding companies generally are required to maintain a Leverage ratio of at
least 3% plus an additional cushion of 100 to 200 basis points. The guidelines
also provide that bank holding companies experiencing internal growth or making
acquisitions are expected to maintain strong capital positions substantially
above the minimum supervisory levels without significant reliance on intangible
assets. Furthermore, the Federal Reserve has indicated that it will consider a
"tangible Tier 1 capital leverage ratio" (deducting all intangibles) and other
indicia of capital strength in evaluating proposals for expansion or new
activities. The Federal Reserve has not advised UPC of any specific minimum
Leverage ratio applicable to UPC.
Failure to meet capital requirements can subject an institution to a
variety of enforcement remedies, including issuance of a capital directive, the
termination of deposit insurance by the FDIC and a prohibition on the taking of
brokered deposits. As described below, under the "Prompt Corrective Action"
regulations, substantial additional restrictions can be imposed upon
FDIC-insured institutions that fail to meet applicable capital requirements.
See "-- Prompt Corrective Action."
At June 30, 1994, UPC's Total risk based capital ratio was 18.39%,
Tier 1 capital ratio was 15.11% and Leverage ratio was 7.49%. In addition, each
of UPC's banking subsidiaries satisfied the minimum capital requirements
applicable to it and had the requisite capital levels to qualify as a
"well-capitalized" institution under the prompt corrective action provisions
discussed below.
Prompt Corrective Action. The Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") enacted in December 1991 requires the federal banking
regulators to take prompt corrective action in respect of depository
institutions that do not meet their minimum capital requirements. FDICIA
establishes five capital tiers: "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized." Under capital regulations, a bank is defined to be well
capitalized if it maintains a Leverage ratio of at least 5%, a Tier 1 capital
ratio of at least 6% and a Total capital ratio of at least 10% and is not
otherwise in a "troubled condition" as specified by its appropriate federal
regulatory agency. A bank is defined to be adequately
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<PAGE> 54
capitalized if it meets all of its minimum capital requirements as
described above under "Capital Adequacy." In addition, a bank will be
considered undercapitalized if it fails to meet any minimum required measure,
significantly undercapitalized if it is significantly below such measure and
critically undercapitalized if it fails to maintain a level of tangible equity
equal to not less than 2% of total assets. A bank may be deemed to be in a
capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.
All institutions, regardless of their capital levels, are restricted
from making any capital distribution or paying any management fees that would
cause the institution to fail to satisfy the minimum levels to be considered
adequately capitalized. An undercapitalized institution is: (i) subject to
increased monitoring by the appropriate federal banking regulator; (ii)
required to submit an acceptable capital restoration plan within 45 days; (iii)
subject to asset growth limits; and (iv) required to obtain prior regulatory
approval for acquisitions, branching and new lines of business. The capital
restoration plan must include a guarantee by the institution's holding company
that the institution will comply with the plan until it has been adequately
capitalized on average for four consecutive quarters. Pursuant to the
guarantee, the institution's holding company would be liable up to the lesser
of 5% of the institution's total assets or the amount necessary to bring the
institution into capital compliance as of the date it failed to comply with its
capital restoration plan. If the controlling bank holding company fails to
fulfill its obligations under the guarantee and files (or has filed against it)
a petition under the federal Bankruptcy Code, the appropriate federal banking
regulator could have a claim as a general creditor of the bank holding company,
and, if the guarantee were deemed to be a commitment to maintain capital under
the federal Bankruptcy Code, the claim would be entitled to a priority in such
bankruptcy proceeding over third-party creditors of the bank holding company.
The regulatory agencies have discretionary authority to reclassify
well capitalized institutions as adequately capitalized or to impose on
adequately capitalized institutions requirements or actions specified for
undercapitalized institutions if the agency determines after notice and an
opportunity for hearing that the institution is in an unsafe or unsound
condition or is engaging in an unsafe or unsound practice, which can consist of
the receipt of an unsatisfactory examination rating if the deficiencies cited
are not corrected. A significantly undercapitalized institution, as well as any
undercapitalized institution that did not submit an acceptable capital
restoration plan, may be subject to regulatory demands for recapitalization,
broader application of restrictions on transactions with affiliates,
limitations on interest rates paid on deposits, asset growth and other
activities, possible replacement of directors and officers and restrictions on
capital distributions by any bank holding company controlling the institution.
Any company controlling the institution could also be required to divest the
institution or the institution could be required to divest subsidiaries. The
senior executive officers of a significantly undercapitalized institution may
not receive bonuses or increases in compensation without prior approval and the
institution is prohibited from making payments of principal or interest on its
subordinated debt. If an institution becomes critically undercapitalized, the
institution will be subject to conservatorship or receivership within 90 days
unless periodic determinations are made that
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forbearance from such action would better protect the deposit insurance fund.
Unless appropriate findings and certifications are made by the appropriate
federal bank regulatory agencies, a critically undercapitalized institution
must be placed in receivership if it remains critically undercapitalized on
average during the calendar quarter beginning 270 days after the date it became
critically undercapitalized.
Dividend Restrictions. UPC is a legal entity separate and distinct from UPNB,
the Regional Banks, the Community Banks and its nonbank subsidiaries. UPC's
revenues (on a parent company only basis) result, in significant part, from
dividends paid to UPC by its subsidiaries. The right of UPC, and consequently
the right of creditors and shareholders of UPC, to participate in any
distribution of the assets or earnings of any subsidiary through the payment of
such dividends or otherwise is necessarily subject to the prior claims of
creditors of the subsidiary (including depositors, in the case of banking
subsidiaries), except to the extent that claims of UPC in its capacity as a
creditor may be recognized.
There are statutory and regulatory requirements applicable to the
payment of dividends by UPNB, the Regional Banks and the Community Banks to
UPC. Each national banking association subsidiary of UPC, including UPNB and
the Regional Banks, is required by federal law to obtain the prior approval of
the Comptroller for the payment of dividends if the total of all dividends
declared by the board of directors of such bank in any year will exceed the
total of (i) such bank's net profits (as defined and interpreted by regulation)
for that year plus (ii) the retained net profits (as defined and interpreted by
regulation) for the preceding two years, less any required transfers to
surplus. In addition, national banks may only pay dividends to the extent that
their retained net profits (including the portion transferred to surplus)
exceed statutory bad debts (as defined by regulation). The state-chartered
Community Banks are subject to similar restrictions on the payment of dividends
by the respective state laws under which they are organized. Furthermore, as
described further under "-- Prompt Corrective Action," all depository
institutions are prohibited from paying any dividends, making other
distributions or paying any management fees if, after such payment, the
depository institution would fail to satisfy its minimum capital requirements.
In accordance with the specified calculations, at July 1, 1994, the banking
subsidiaries had approximately $12.8 million available for distribution to UPC
without obtaining regulatory approval. The actual amount of dividends paid will
be limited to a lesser amount by the management of UPC in order to maintain
compliance with UPC's internal capital guidelines and to maintain strong
capital positions in each of the subsidiary banks of UPC. Future dividends will
depend upon the level of earnings of the subsidiary banks of UPC. UPNB
received approval from the Comptroller pursuant to which it did declare and pay
a dividend of approximately $98 million on July 1, 1994 in connection with the
reorganization of UPNB. See "Summary -- Recent Developments Affecting UPC."
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It is the policy of the Federal Reserve that bank holding companies
should pay dividends only out of current earnings. Federal banking regulators
also have the authority to prohibit banks and bank holding companies from
paying a dividend if they should deem such payment to be an unsafe or unsound
practice. In addition, it is the position of the Federal Reserve Board that as
a bank holding company UPC is expected to act as a source of financial strength
to each of its subsidiary banks. See "-- Support of Subsidiary Banks."
Support of Subsidiary Banks. Under Federal Reserve policy, UPC is expected to
act as a source of financial strength to UPNB, the Regional Banks and the
Community Banks and, where required, to commit resources to support each of
such subsidiaries. This support may be required at times when, absent such
Federal Reserve policy, UPC may not be inclined to provide it. Moreover, if one
of its subsidiary banks should become undercapitalized, under FDICIA, UPC would
be required to guarantee the subsidiary bank's compliance with its capital plan
in order for such plan to be accepted by the federal regulatory authority. See
"-- Prompt Corrective Action."
Under the "cross guarantee" provisions of the Federal Deposit
Insurance Act, any FDIC-insured subsidiary of UPC may be held liable for any
loss incurred by, or reasonably expected to be incurred by the FDIC in
connection with (i) the "default" of any other commonly controlled FDIC-insured
subsidiary or (ii) any assistance provided by the FDIC to any commonly
controlled FDIC-insured subsidiary "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.
Because it is a bank holding company, any capital loans made by UPC to
UPNB or any of the Community Banks are subordinate in right of payment to
deposits and to certain other indebtedness of such subsidiary bank. In the
event of a bank holding company's bankruptcy, any commitment by the bank
holding company to a federal bank regulatory agency to maintain the capital of
a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a
priority of payment over certain other creditors of the bank holding company.
Transactions with Affiliates. Provisions of the Federal Reserve Act impose
restrictions on the type, quantity and quality of transactions between
affiliates of an insured bank and the insured bank (including its bank holding
company and its nonbank subsidiaries). The purpose of these restrictions is to
prevent misuse of the resources of the insured institution by its uninsured
affiliates. An exception to most of these restrictions is provided for
transactions between two insured banks that are within the same holding company
where the holding company owns 80% or more of each of these banks (the "sister
bank" exception). The restrictions also do not apply to transactions between an
insured bank and its wholly owned subsidiaries. These restrictions include
limitations on the purchase and sale of assets and extensions of credit by the
insured bank to its holding company or its nonbank subsidiaries. An insured
bank and its subsidiaries are limited in engaging in "covered transactions"
with their nonbank or nonsavings bank affiliates to the following amounts: (i)
in the case of any one such affiliate, the aggregate amount of covered
transactions of the insured bank and its subsidiaries may not exceed 10% of the
capital stock and surplus of the
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insured bank, and (ii) in the case of all affiliates, the aggregate amount of
covered transactions of the insured bank and its subsidiaries may not exceed
20% of the capital stock and surplus of the bank. "Covered transactions" are
defined by statute to include a loan or extension of credit, as well as a
purchase of securities issued by an affiliate, a purchase of assets (unless
otherwise exempted by the Federal Reserve), the acceptance of securities issued
by the affiliate as collateral for a loan and the issuance of a guarantee,
acceptance or letter of credit issued on behalf of an affiliate. Further,
provisions of the Bank Holding Company Act of 1956, as amended, prohibit a
bank holding company and its subsidiaries from engaging in certain tie-in
arrangements in connection with any extension of credit, lease or sale of
property or furnishing of services.
FDIC Insurance Assessments. The subsidiary banks of UPC are subject to FDIC
deposit insurance assessments. The FDIC has adopted a risk-based premium
schedule which has increased the assessment rates for most FDIC-insured
depository institutions. Under the new schedule, the annual premiums initially
range from $.23 to $.31 for every $100 of deposits. Each financial institution
is assigned to one of three capital groups--well capitalized, adequately
capitalized or undercapitalized--and further assigned to one of three subgroups
within a capital group, on the basis of supervisory evaluations by the
institution's primary federal and, if applicable, state supervisors and on the
basis of other information relevant to the institution's financial condition
and the risk posed to the applicable insurance fund. The actual assessment
rate applicable to a particular institution will, therefore, depend in part
upon the risk assessment classification so assigned to the institution by the
FDIC.
RECENT BANKING LEGISLATION
In addition to the matters noted above, FDICIA made other significant
changes to the federal banking laws. FDICIA institutes certain changes to the
supervisory process, including provisions that mandate certain regulatory
agency actions against undercapitalized institutions within specified time
limits.
Standards for Safety and Soundness. FDICIA requires the federal bank
regulatory agencies to prescribe, by regulation, standards for all insured
depository institutions and depository-institution holding companies relating
to: (i) internal controls, information systems and audit systems; (ii) loan
documentation; (iii) credit underwriting; (iv) interest-rate risk exposure; (v)
asset growth; and (vi) compensation, fees and benefits. The compensation
standards must prohibit employment contracts, compensation or benefit
arrangements, stock option plans, fee arrangements or other compensatory
arrangements that would provide excessive compensation, fees or benefits or
could lead to material financial loss, but (subject to certain exceptions) may
not prescribe specific compensation levels or ranges for directors, officers or
employees. In addition, the federal banking regulatory agencies would be
required to prescribe by regulation standards specifying: (i) maximum
classified assets to capital ratios; (ii) minimum earnings sufficient to absorb
losses without impairing capital; and (iii) to the extent feasible, a minimum
ratio of market value to book value for publicly traded shares of depository
institutions and depository institution holding companies.
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<PAGE> 58
Brokered Deposits. The FDIC has adopted regulations governing the
receipt of brokered deposits. Under the regulations, a bank may not lawfully
accept, roll over or renew brokered deposits unless (i) it is well capitalized
or (ii) it is adequately capitalized and receives a waiver from the FDIC. A
bank that may not receive brokered deposits also may not offer "pass-through"
insurance on certain employee benefit accounts. Whether or not it has obtained
such a waiver, an adequately capitalized bank may not pay an interest rate on
any deposits in excess of 75 basis points over certain prevailing market rates
specified by regulation. There are no such restrictions on a bank that is well
capitalized. Because UPNB and all of the Regional Banks and Community Banks had
at June 30, 1994, the requisite capital levels to qualify as well capitalized
institutions, UPC believes the brokered deposits regulation will have no
material affect on the funding or liquidity of UPNB or any of the Community
Banks.
Consumer Protection Provisions. FDICIA seeks to encourage enforcement
of existing consumer protection laws and enacted new consumer-oriented
provisions including a requirement of notice to regulators and customers of any
proposed branch closing and provisions intended to encourage the offering of
"lifeline" banking accounts and lending in distressed communities. FDICIA also
requires depository institutions to make additional disclosures to depositors
with respect to the rate of interest and the terms of their deposit accounts.
Miscellaneous. FDICIA also made extensive changes in the applicable
rules regarding audit, examinations and accounting. FDICIA generally requires
annual on-site full-scope examinations by each bank's primary federal
regulator. FDICIA also imposes new responsibilities on management, the
independent audit committee and outside accountants to develop, approve or
attest to reports regarding the effectiveness of internal controls, legal
compliance and off-balance-sheet liabilities and assets.
FDICIA also required the Federal Reserve to prescribe standards which
limit the risks posed by an insured institution's "exposure" to any other
depository institution to limit the risks that the failure of a large
depository institution would pose to an insured depository institution. FDICIA
broadly defines "exposure" to include extensions of credit to the other
institution; purchases of, or investments in, securities issued by the other
institution; securities issued by the other institution and accepted as
collateral for an extension of credit to any person; and all similar
transactions which the Federal Reserve defines by regulation to be exposure.
The Federal Reserve has proposed procedures and "benchmark" standards to limit
an insured depository institution's credit and settlement exposure to each of
its correspondent banks. The final rules were effective on December 19, 1992,
but provide for a two-year transition period.
DEPOSITOR PREFERENCE
Legislation recently enacted by Congress establishes a nationwide
depositor preference rule in the event of a bank failure. Under this
arrangement, all deposits and certain other claims against a bank, including
the claim of the FDIC as subrogee of insured depositors, would receive payment
in full before any general creditor of the bank would be entitled to any
payment in the event of an insolvency or liquidation of the bank.
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<PAGE> 59
DESCRIPTION OF UPC COMMON AND PREFERRED STOCK
UPC's Charter of Incorporation (the "Charter") currently authorizes
the issuance of 50,000,000 shares of common stock, par value $5.00 per share,
and 10,000,000 shares of preferred stock having no par value (the "UPC
Preferred Stock"). As of August 31, 1994, 25,409,334 shares of UPC Common
Stock were issued and outstanding, and approximately 648,000 shares were
subject to acquisition through the exercise of options granted pursuant to
UPC's 1992 and 1983 Stock Option Plans; approximately 1,183,000 shares were
authorized for issuance pursuant to said plans but not yet subject to option
grants or otherwise issued; and approximately 4,478,000 shares were authorized
for issuance and reserved for conversion of certain shares of UPC Preferred
Stock. Additionally, as of August 31, 1994; 4,095,577 shares of UPC Preferred
Stock were issued and outstanding, consisting of 44,000 shares of UPC's $8.00
Nonredeemable, Cumulative, Convertible Preferred Stock, Series B (the "Series B
Preferred Stock"); 690,000 shares of UPC's 10 3/8% Increasing Rate, Redeemable,
Cumulative Preferred Stock, Series C (the "Series C Preferred Stock"); 253,655
shares of UPC's 9.5% Redeemable, Cumulative Convertible Preferred Stock, Series
D (the "Series D Preferred Stock"); and 3,107,922 shares of UPC's 8%
Cumulative, Convertible Preferred Stock, Series E (the "Series E Preferred
Stock"). As of September 26, 1994, none of UPC's 250,000 authorized shares of
Series A Preferred Stock were issued and outstanding. THE CAPITAL STOCK OF UPC
DOES NOT REPRESENT OR CONSTITUTE A DEPOSIT ACCOUNT AND IS NOT INSURED BY THE
FDIC, THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY
GOVERNMENTAL AGENCY.
UPC COMMON STOCK
General. Shares of UPC Common Stock may be issued at such time or
times and for such consideration (not less than the par value thereof) as the
UPC Board may deem advisable, subject to such limitations as may be set forth
in the laws of the State of Tennessee or UPC's charter or bylaws. UPNB is the
Registrar, Transfer Agent and Dividend Disbursing Agent for shares of UPC
Common Stock.
Dividends. Subject to the preferential dividend rights, if any,
applicable to shares of UPC Preferred Stock and subject to applicable
requirements, if any, with respect to the setting aside of sums for purchase,
retirement or sinking funds for UPC Preferred Stock, the holders of UPC Common
Stock are entitled to receive, to the extent permitted by law, such dividends
as may be declared from time to time by the UPC Board.
UPC has the right to, and may from time to time enter into borrowing
arrangements or issue other debt instruments, the provisions of which may
contain restrictions on payment of dividends and other distributions on UPC
Common Stock and UPC Preferred Stock. As of the date of this Prospectus, no
such restrictions under any such borrowing arrangements or outstanding debt
instruments are in effect.
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<PAGE> 60
Liquidation Rights. In the event of the voluntary or involuntary
liquidation, dissolution, distribution of assets or winding-up of UPC, after
distribution in full of the preferential amounts, if any, to be distributed to
the holders of UPC Preferred Stock, holders of UPC Common Stock will be
entitled to receive all of the remaining assets of UPC of whatever kind
available for distribution to shareholders ratably in proportion to the number
of shares of UPC Common Stock held. The UPC Board may distribute in kind to
the holders of UPC Common Stock such remaining assets of UPC or may sell,
transfer or otherwise dispose of all or any part of such remaining assets to
any other person or entity and receive payment therefor in cash, stock or
obligations of such other person or entity, and may sell all or any part of the
consideration so received and distribute any balance thereof in kind to holders
of UPC Common Stock. Neither the merger or consolidation of UPC into or with
any other corporation, nor the merger of any other corporation into UPC, nor
any purchase or redemption of shares of stock of UPC of any class, shall be
deemed to be a dissolution, liquidation or winding-up of UPC for purposes of
this paragraph.
Because UPC is a holding company, its right and the rights of its
creditors and shareholders, including the holders of UPC Common Stock, to
participate in the distribution of assets of a subsidiary on its liquidation or
recapitalization may be subject to prior claims of such subsidiary's creditors
except to the extent that UPC itself may be a creditor having recognized claims
against such subsidiary.
PREFERRED STOCK OF UPC
Series A Preferred Stock. UPC's Charter provides for the issuance of
up to 250,000 shares (subject to adjustment by action of the UPC Board) of
Series A Preferred Stock under certain circumstances involving a potential
change in control of UPC. None of such shares are outstanding and management
is aware of no facts suggesting that issuance of such shares may be imminent.
The Series A Preferred Stock is described in more detail in UPC's Current
Report on Form 8-K dated January 19, 1989, incorporated by reference herein.
Series B Preferred Stock. In November 1989, UPC issued to two holders,
in a private offering incidental to an acquisition, 44,000 shares of its Series
B Preferred Stock all of which are outstanding as of the date hereof. Such
shares bear a dividend rate of $8.00 per share per annum; dividends are
cumulative. After November 30, 1994 (and in limited circumstances prior
thereto), each share of Series B Preferred Stock is convertible at the option
of the holder into 7.722 shares of UPC Common Stock, with the maximum number of
shares of UPC Common Stock into which such shares may be converted being
339,768. The Series B Preferred Stock is not subject to any sinking fund
provisions and has no preemptive rights. Such shares provide for a liquidation
preference of $100.00 per share plus unpaid dividends accrued thereon and are
not subject to redemption by UPC. Holders of Series B Preferred Stock have no
voting rights except as required by law and certain other limited
circumstances.
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<PAGE> 61
Series C Preferred Stock. In August 1991, UPC issued in a public
offering 690,000 shares of its Series C Preferred Stock all of which are
outstanding as of the date hereof. Such shares have a stated value of $25.00
per share. Dividends are payable at the rates of approximately $.65 per
quarter, increasing to $.68 on November 1, 1994, to $.71 on November 1, 1995
and to $.74 on November 1, 1996; dividends are cumulative. The Series C
Preferred Stock is not convertible, is not subject to any sinking fund
provisions and has no preemptive rights. Such shares provide for a liquidation
preference of $25.00 per share plus unpaid dividends accrued thereon and, with
the prior approval of the Federal Reserve, are subject to redemption by UPC at
$25.00 per share at any time on or after October 31, 1994. Holders of Series C
Preferred Stock have no voting rights except as required by law and in certain
other limited circumstances. UPC management plans to redeem the Series C
Preferred Stock on October 31, 1994 and has received Federal Reserve approval
for the redemption.
Series D Preferred Stock. In connection with the July, 1992
acquisition of Southeastern Bancshares, Inc., UPC issued in a private offering
253,655 shares of Series D Preferred Stock. Such shares have a stated value of
$20.50 per share on which dividends accrue at a rate of 9.5% per annum;
dividends are cumulative. At any time prior to redemption, each share of the
Series D Preferred Stock is convertible at the option of the holder into one
share of UPC Common Stock. The Series D Preferred Stock is not subject to any
sinking fund provisions and has no preemptive rights. Such shares have a
liquidation preference of $20.50 per share plus unpaid dividends accrued
thereon and, at UPC's option, with the prior approval of the Federal Reserve,
are subject to redemption by UPC at any time and from time to time on or after
July 1, 1995. Holders of Series D Preferred Stock have no voting rights except
as required by law and in certain other limited circumstances.
Series E Preferred Stock. In February, 1992, UPC issued in a public
offering 2,200,000 shares of Series E Preferred Stock, all of which (except for
600 previously converted shares) are outstanding as of the date hereof. In the
first two quarters of 1993, UPC issued 908,522 shares of Series E Preferred
Stock in connection with UPC's acquisition of the remaining equity interest in
Bank of East Tennessee and UPC's acquisition of Erin Bank & Trust Company in
Erin, Tennessee, all of which are outstanding as of the date hereof. All
shares of Series E Preferred Stock have a stated value of $25.00 per share.
Dividends are payable at the rate of $.50 per share per quarter and are
cumulative. The Series E Preferred Stock is convertible at the rate of 1.25
shares of UPC Common Stock for each share of Series E Preferred Stock. The
Series E Preferred Stock is not subject to any sinking fund provisions and has
no preemptive rights. Such shares have a liquidation preference of $25.00 per
share plus unpaid dividends accrued thereon and, at UPC's option and with the
prior approval of the Federal Reserve Board, are subject to redemption by UPC
at any time or from time to time after March 31, 1997. Holders of Series E
Preferred Stock have no voting rights except as required by law and in certain
other limited circumstances.
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<PAGE> 62
CERTAIN PROVISIONS THAT MAY HAVE AN ANTI-TAKEOVER EFFECT
Certain provisions of UPC's Charter and Bylaws, and certain provisions
of Tennessee law, may have an anti-takeover effect in that they could prevent,
discourage or delay a change in control of UPC. The following summary briefly
describes certain of those provisions. The summary is not intended to be
complete and is qualified in its entirety by reference to UPC's Charter and
Bylaws and to the Tennessee Code.
Charter and Bylaw Provisions. Pursuant to UPC's Charter, the
directors of UPC are elected for three-year terms of office, and approximately
one-third of the members of the UPC Board are up for election each year. The
Charter also restricts the removal of directors by shareholders.
The Charter requires the affirmative votes of the holders of 66 2/3%
of the outstanding stock for approval of a merger, consolidation or a sale or
lease of all or substantially all of the assets of UPC if the other party to
the transaction is a beneficial owner of 10% or more of the outstanding shares
of UPC. The Charter also requires the affirmative votes of the holders of 66
2/3% of the outstanding stock to amend the Bylaws of UPC and the provisions of
the Charter applicable to UPC's capital stock; to change the number, election
and classification of directors; to give approval of certain transactions as
described above; and to amend certain provisions of the Charter.
Share Purchase Rights Plan. In 1989, the UPC Board adopted a Share
Purchase Rights Plan and distributed a dividend of one Preferred Share Unit
Purchase Right ("Right") for each outstanding share of UPC Common Stock.
Moreover, one Right shall be, automatically and without further action by UPC,
distributed in respect to each share of UPC Common Stock issued thereafter.
The Rights are generally designed to deter coercive takeover tactics and to
encourage all persons interested in potentially acquiring control of UPC to
treat each shareholder on a fair and equal basis. Each Right trades in tandem
with the share of UPC Common Stock to which it relates until the occurrence of
certain events indicating a potential change in control of UPC. Upon the
occurrence of such an event, the Rights would separate from UPC Common Stock
and each holder of a Right (other than the potential acquirer) would be
entitled to purchase certain equity securities at prices below their market
value. UPC has authorized 250,000 shares of Series A Preferred Stock for
issuance under the Share Purchase Rights Plan, but no shares have been issued
as of the date of this Prospectus. Until a Right is exercised, the holder
thereof, as such, will have no rights as a shareholder of UPC, including the
right to vote or to receive dividends.
Provisions of the Tennessee Code. As a Tennessee corporation, UPC is
or could be subject to various legislative acts set forth in Chapter 35 of
Title 48 of the Tennessee Code, which imposes certain restrictions on business
combinations, including, but not limited to, combinations with interested
shareholders similar to those described above.
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The Tennessee Business Combination Act (the "Tennessee BCA") generally
prohibits a "business combination" (generally defined to include mergers, share
exchanges, sales and leases of assets, issuances of securities, and similar
transactions) by UPC or a subsidiary with an "Interested shareholder"
(generally defined as any person or entity which beneficially owns 10% or more
of the voting power of any class or series of UPC's stock then outstanding)
within five years after the person or entity becomes an interested shareholder
unless the business combination or the transaction pursuant to which the
interested shareholder became such was approved by the UPC Board before the
interested shareholder became such, and the business combination satisfies any
other applicable requirements imposed by law or by UPC's Charter or Bylaws.
The Tennessee BCA also severely limits the extent to which UPC or any of its
officers or directors could be held liable for resisting any business
combination.
The Tennessee Control Share Acquisition Act (the "Tennessee CSAA")
restricts the voting powers of shares acquired by a party once a specific level
of control is acquired, unless certain conditions are met. Specifically, the
Tennessee CSAA provides that "Control Shares" will not have the voting rights
to which they normally would be entitled unless approved by the other
shareholders at an annual or special meeting. "Control shares" are shares
that, in the absence of the Tennessee CSAA, would give the acquirer voting
power within any of the following ranges of all of the voting power of UPC: (i)
one-fifth or more but less than one-third; (ii) one-third or more but less than
a majority; or (iii) a majority or more.
In addition, the Tennessee Investor Protection Act places limitations
on certain takeover offers by persons owning 5% or more of any class of equity
securities of UPC.
The provisions described above might be deemed to make UPC less
attractive as a candidate for acquisition by another company than would
otherwise be the case in the absence of such provisions. For example, if
another company should seek a controlling interest of less than 66 2/3% of the
outstanding shares of UPC Common Stock, the acquirer would not thereby obtain
the ability to replace a majority of the UPC Board until at least the second
annual meeting of shareholders following the acquisition, and furthermore the
acquirer would not obtain the ability immediately to effect a merger,
consolidation or other similar business combination unless the described
conditions were met. As a result, UPC's shareholders may be deprived of
opportunities to sell some or all of their shares at prices that represent a
premium over prevailing market prices in a takeover context. The provisions
described above also may make it more difficult for UPC's shareholders to
replace the UPC Board or management, even if the holders of a majority of the
UPC Common Stock should believe that such replacement is in the interests of
UPC. As a result, such provisions may tend to perpetuate the incumbent UPC
Board and management.
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EFFECT OF MERGER ON RIGHTS OF SHAREHOLDERS
At the Effective Date of the Merger, shareholders of MSB (except for
any MSB shareholder properly exercising dissenters' rights) automatically will
become holders of the UPC Common Stock, and their rights as holders of the UPC
Common Stock will be determined by the Tennessee Business Corporation Act and
by UPC's Charter and Bylaws. The following is a summary of the material
differences in the rights of shareholders of UPC and MSB.
REMOVAL OF DIRECTORS
MSB directors may be removed with or without cause by the vote of a
majority of the shareholders entitled to vote at any meeting called for that
purpose.
UPC's Bylaws provide that directors may be removed with or without
cause by vote of the holders of 66 2/3% or more of the outstanding shares
entitled to vote generally in the election of directors.
REQUIRED SHAREHOLDER VOTES
MSB's Articles of Incorporation and Bylaws contain no provisions for
more than a majority vote of all shares entitled to vote on any particular
matter that may be subjected to a shareholder vote, unless the question is one
upon which, by express provision of Arkansas law, a larger or different vote is
required, in which case the express statutory provision shall govern. The UPC
Charter provides that the vote of 66 2/3% or more of the shares entitled to
vote will be required to approve any merger or consolidation of UPC with or
into any other corporation or the sale, lease, exchange or other disposition of
substantially all of UPC's assets, if on the date a binding agreement providing
for such merger, sale or other disposition, the corporation, person or entity
into which UPC would be merged or to which its assets would be sold is the
beneficial owner of 10% or more of the outstanding capital stock of UPC.
ELECTION OF DIRECTORS
MSB's Bylaws provide for only one class of directors, and shareholders
are entitled to elect all MSB directors annually. Cumulative voting for the
election of directors is not permitted. The number of directors may be fixed
from time to time by a majority of the entire MSB Board, but in no event shall
the number of directors be less than one (1).
UPC's Bylaws provide for a classified board of directors consisting of
three classes with staggered terms of three years each. Therefore, UPC
shareholders are entitled to elect only one-third of UPC's directors annually.
The number of directors shall be not less than seven (7) nor more than
twenty-five (25). To increase the number of directors, 66 2/3% of the
directors then in office must concur.
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METHOD OF CASTING VOTES
Voting Rights. Except as provided by law or the Charter of UPC, each
holder of UPC Common Stock shall have one vote on all matters voted upon by
shareholders in respect of each share of UPC Common Stock held. Holders of UPC
Common Stock do not have cumulative voting rights.
MSB's Bylaws provide each common stockholder shall be entitled to one
vote for each share of stock held by him or her at all elections of directors,
each stockholder shall be entitled to as many votes as shall equal the number of
shares of stock multiplied by the number of directors to be elected, but
cumulative voting is not permitted.
Reservation of Shares. Such number of shares of UPC Common Stock as
may from time to time be required for such purpose shall be reserved for
issuance (i) upon conversion of any shares of UPC Preferred Stock or any other
obligation of UPC convertible into shares of UPC Common Stock which is at the
time outstanding, and (ii) upon exercise of any outstanding options or warrants
to purchase shares of UPC Common Stock.
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MID SOUTH BANCSHARES, INC.
GENERAL
Mid South Bancshares, Inc. ("MSB") was organized as an Arkansas
Corporation July 12, 1984, and is headquartered in Paragould, Arkansas. MSB
was originally a one-bank holding company registered with and regulated by the
Federal Reserve. MSB owns 100 percent of the outstanding shares of common
stock of Security Bank, Paragould, Arkansas ("Security") and Farmers and
Merchants Bank, Reyno, Arkansas ("Farmers"). MSB has no employees.
Security was organized as a state bank under the laws of the State of
Arkansas in 1931 and commenced operations in 1931. Security's main office is
located at 101 West Court Street, Paragould, Arkansas 72450. Security is
located in Greene County. Security had total assets as of June 30, 1994 of
$109,983,000, and total deposits of $98,398,000.
As of September 1, 1994, Security had 59 full-time employees and 8
part-time employees operating out of four locations: the Paragould main office,
the Plaza Branch, the Center Hill Branch, and the Marmaduke Branch.
On November 5, 1991, application was made by MSB to the Federal
Reserve for MSB to acquire 98.58 percent of the voting shares of Far-Mer
Bankshares, Inc., Reyno, Arkansas, thereby indicating acquiring its subsidiary
bank, Farmers and Merchants Bank, Reyno, Arkansas ("Farmers"). Approval was
granted January 30, 1992.
Farmers, the oldest bank in Randolph County, was chartered in 1911 as
a state bank under the laws of the State of Arkansas and commenced operations
in 1911. Farmers main office is located at 108 Main Street, Reyno, Arkansas
72462. Farmers had total assets as of June 30, 1994, of $17,589,000 and total
deposits of $16,232,000.
As of September 1, 1994, Farmers had 13 full-time and 2 part-time
employees operating out of three locations: the Reyno Main Office, the
Pocahontas Branch and the Maynard Branch.
Security and Farmers are engaged in the general banking business,
including taking deposits from the public and using such deposits, together
with other funds, to make loans and investments. Both Security and Farmers are
members of the Federal Deposit Insurance Corporation. The deposits of both
banks are insured by the FDIC up to the maximum allowed by law.
Management of both Security and Farmers believes that each bank has a
good relationship with its respective employees. Security provides group
health insurance coverage for its employees, group term life insurance
coverage and matches a portion of employees' contribution to the 401K Plan and
Trust. Farmers pays one-half of the premium for employees' group health
insurance coverage. Group term life insurance coverage is also provided as
well as matching a portion of employees' contribution to the 401K plan and
Trust.
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PROPERTY
Both Security and Farmers own, free of any encumbrances, the property
on which their main offices and branch offices are located. Both banks also
hold from time to time real estate acquired through foreclosure.
COMPETITION
Both Security and Farmers compete with numerous other commercial banks
and other financial institutions in Greene County, Randolph County and
contiguous counties in Arkansas and Missouri. There are other commercial
banks, savings and loan institutions, credit unions, and other companies
offering competing financial services in Greene County, Randolph County, and
surrounding counties.
LEGAL PROCEEDINGS
As of the date of this Prospectus, there are no legal proceedings in
process for MSB, Security or Farmers.
MARKET PRICE OF MSB COMMON STOCK; DIVIDENDS
The MSB Common Stock has no established trading market. There has
been no dividend declared by MSB since the formation of the holding company
July 12, 1984.
CERTAIN BENEFICIAL HOLDERS OF MSB COMMON STOCK
The following table sets forth certain information as of the Record
Date with respect to those known to MSB to be beneficial owners of more than
five percent (5%) of the MSB Common Stock.
<TABLE>
<CAPTION>
Name and Address of Number of % of
Beneficial Owner Shares Total
- ---------------- --------- -----
<S> <C> <C>
Marlin D. Jackson (1) 83,019 64.35%
P. O. Box 729
Conway, AR 72032
Dr. Frank Oldham, Jr. (1) 20,088 15.57%
or Donna Oldham
P. O. Box 1557
Jonesboro, AR 72403
Security Bank Employee 19,788 15.34%
Stock Ownership Plan
and Trust
P. O. Box 670
Paragould, AR 72450
- -----------------------
</TABLE>
(1) The holder is a director of Mid South Bancshares, Inc.
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HOLDINGS OF MSB COMMON STOCK BY MSB MANAGEMENT
The following executive officers and directors of MSB held the
following amounts and percentages of the outstanding MSB Common Stock as of the
Record Date:
<TABLE>
<CAPTION>
Number of % of
Name Shares Total
- ---- --------- -----
<S> <C> <C>
Herb Bland 50 .04
David Dudley 79 .06
William B. Fisher 56 .04
Steve B. Gramling 56 .04
Frank Guinn 100 .08
R. D. Jackson 10 .01
Jerry D. McIntosh 50 .04
Richard M. Nutt 100 .08
Donald I. Purcell 100 .08
C. Mack Shotts 50 .04
Vern Ann Shotts 646 .50
Terry A. Wilkins 100 .08
Marlin D. Jackson 83,019 64.35
Dr. Frank Oldham, Jr. 20,088 15.57
------- -------
All Officers and Directors
as a group 104,504 80.98
</TABLE>
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MSB MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion and tabular data presented below analyze major factors and
trends regarding the consolidated financial condition of Mid South Bancshares,
Inc. and subsidiaries ("MSB") as of December 31, 1993 and 1992, and the
consolidated results of operations of MSB for each of the years ended December
31, 1993, 1992, and 1991 and the six-month periods ended June 30, 1994 and
1993. This discussion should be read in conjunction with the consolidated
financial statements and the notes thereto as of and for the three years in the
period ended December 31, 1993 and as of and for the six-month periods ended
June 30, 1994 and 1993, as presented in Appendix A of this Prospectus and Proxy
Statement.
OVERVIEW
For a summary of selected consolidated financial data as of and for the
years ended December 31, 1989 through 1993 and for the six-months ended June
30, 1994 and 1993, see page 10 of this Prospectus. Since December 31, 1989,
total assets have grown from $101.83 million to $124.95 million at December 31,
1993. This growth rate has continued in 1994, with assets increasing to
$127.66 million at June 30, 1994, which represents an annualized growth rate of
4.34%.
MSB's net income for the year ended December 31, 1992 was $1.72 million,
representing the highest level of earnings for the five year period ended
December 31, 1993, and net income of $372,000 for the year ended December 31,
1989, which represents the lowest earnings for the same five year period. Net
income for the six-month period ended June 30, 1994 was $477,000, representing
a decrease of $131,000 from net income of $608,000 for the same period in 1993.
Included in the six month period ended June 30, 1993 was an $83,000 increase in
net income from the cumulative effect of a change in accounting principle in
connection with the adoption of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes."
Management expects growth to continue in both assets and earnings;
however, such growth is dependent upon the economies of the markets served by
MSB and its relative competitiveness in its local market and other factors
which are discussed below. MSB is headquartered in Paragould, Greene County,
Arkansas.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
NET INCOME - Net income for 1993 was $973,000, a decrease of $745,000 from 1992
net income of $1.72 million. Net income for 1992 increased $1.05 million over
net income of $670,000 for 1991. Net income per common share was $7.54 in
1993, compared to $13.37 in 1992 and $5.22 in 1991. A more detailed analysis
of the components of net income and the changes in such components is included
under the appropriate captions below.
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<PAGE> 70
The return on average assets for the year ended December 31, 1993 was
0.78% compared to 1.39% and 0.55% for 1992 and 1991, respectively. The return
on average equity for 1993 was 18.32% compared to 41.50% and 26.22% for the
years ended December 31, 1992 and 1991, respectively. MSB has neither declared
nor paid dividends to common stockholders for any of the years ended December
31, 1993, 1992 and 1991.
NET INTEREST INCOME - Net interest income, the major component of MSB's income,
is the amount by which interest and fees generated by earning assets exceeds
the total interest cost of funds used to carry them. Table 1 - Average Balance
Sheet and Interest Yields/Rates and Table 2 - Volume and Yield/Rate Analysis
provide an analysis of net interest income for the years ended December 31,
1993, 1992 and 1991.
Net interest income was $4.39 million for the year ended December 31, 1993
compared to $4.69 million and $4.14 million for the years ended December 31,
1992 and 1991, respectively. The fluctuation in net interest income has arisen
from a combination of declining yields and rates combined with overall
increases in volumes of interest bearing assets and liabilities.
PROVISION FOR LOAN LOSSES - The allowance for loan losses is, in the opinion of
management, sufficient to maintain adequate support for the loan portfolio.
The level of provisions for loan losses is based on past loan experience,
growth, and composition of the loan portfolio, as well as current conditions.
MSB recorded provisions for loan losses of $292,000 for 1993, as compared to a
provision of $185,000 and $300,000 for the years ended December 31, 1992 and
1991, respectively. MSB experienced net charge-offs of $106,000 for the year
ended December 31, 1993, as compared to net charge-offs of $198,000 and
$262,000 for the years ended December 31, 1992 and 1991, respectively.
Table 8 in the accompanying information presents a "Summary of Loan Loss
Experience" for the years ended December 31, 1993 and 1992 while Table 7
presents "Nonperforming Assets" as of December 31, 1993 and 1992. The level of
nonperforming assets has decreased over the last two years and management
expects continued decreases due to improvements in the loan portfolio. Even
though the level of performing assets has declined recently, the provision of
$292,000 was recorded in 1993, of which $250,000 was recorded in the fourth
quarter, as a result of overall increases in the level of loans relative to
overall asset growth. The loan to deposit ratio increased from 64.23% in 1989
to 69.41% in 1993. As management expects future levels of loans to remain
fairly constant, the provision was increased in 1993 to recognize the increased
risks of the growing portfolio. Future provisions for loan losses are
dependent upon various factors, including the economy, loan growth and
composition, levels of nonperforming assets and loan loss experience. The
amounts of nonperforming assets represent risks in the loan portfolio; however,
a major portion of such loans are collateralized to various degrees and should
not be interpreted as losses.
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<PAGE> 71
NONINTEREST INCOME - Noninterest income is primarily related to service charges
on deposits and other fees for services as well as investment securities gains.
Total noninterest income for 1993 was $1.43 million, an $806,000 decrease from
the $2.24 million reported for 1992. Noninterest income for 1992 increased
$1.09 million from the $1.15 million reported for 1991. The significant
increase in 1992 was attributable to securities gains realized when MSB
restructured the investment portfolio and sold a large portion of U.S. Treasury
and Agency bonds. The decision to restructure the investment portfolio was
based primarily upon current economic conditions and increasing loan demand.
The effect of the restructuring was to shorten the average maturities of the
portfolio to enable MSB to meet increasing loan demand and better manage
interest rate risk. Since management has the intent and ability to hold the
restructured portfolio to maturity, investments are accounted for as
"held-to-maturity" investment securities. Other changes in noninterest income
from year to year were not attributable to any significant individual items.
Management continues to seek new sources of noninterest income; however,
no significant growth or the maintenance of current levels of noninterest
income can be assured.
NONINTEREST EXPENSE - Total noninterest expenses for 1993 were $4.14 million or
$43,000 less than the $4.19 million reported for 1992. Total noninterest
expenses for 1991 were $4.04 million, resulting in an increase in 1992 of
$144,000.
Salaries, wages and benefits totaled $1.90 million for the year ended
December 31, 1993 compared to $1.84 million and $1.95 million for the years
ended December 31, 1992 and 1991, respectively. The significant decrease in
salaries, wages and benefits in 1992 as compared to 1991 was caused by the
resignation of the former Chief Executive Officer of Security Bank in early
1992. The current Chief Executive Officer was appointed from within,
therefore, the incremental expenses of this position have been absorbed without
significant additional cost. Management does not project any significant
changes in the amount of these expenses.
Occupancy and equipment expense has remained level for the last three
years. Occupancy and equipment expense totaled $752,000 for the year ended
December 31, 1993 compared to $749,000 and $703,000 for the years ended
December 31, 1992 and 1991, respectively. Management does not expect any
significant changes in the amount of such expenses based on planned capital
expenditures.
The overall increase in noninterest expense from 1991 to 1992 was
attributable to $109,000 decrease in salaries, wages and employee benefits,
offset by a $206,000 increase in other operating costs. The decrease in
salaries was due to the resignation of the CEO, as discussed above, and the
increase in other expenses was due to an increase in foreclosure activity
resulting in higher nonperforming assets balances in late 1991 and 1992, and
which produced a significant increase in applicable writedowns and other
expense incident thereto.
Management continues to monitor the level of noninterest expenses to
identify cost reductions where applicable; however, no significant reductions
are expected.
INCOME TAXES - Income tax expense totaled $492,000, $810,000 and $275,000 for
the years ended December 31, 1993, 1992 and 1991, respectively. These amounts
represent effective tax rates of 35.6%, 31.7% and 29.1% for the years ended
December 31, 1993, 1992 and 1991, respectively. Effective tax rates in 1992
and 1991 were lower than that in 1993 primarily as a result of the net
operating loss carryforwards for state income tax purposes which were utilized
to eliminate state income tax expense in 1992 and 1991. Remaining net
operating loss carryforwards were insufficient to eliminate state income taxes
in 1993 and, as a result, state income tax expense of $59,000 was recorded in
1993. Included in income tax expense in 1992 was $352,000 of income tax
expense attributable to net gains on sales of investment securities.
Management expects that future effective tax rates will remain at levels
commensurate with that of 1993.
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<PAGE> 72
At December 31, 1993 MSB had available net operating loss carryforwards
for federal tax purposes totaling $177,000 which may be used to reduce future
income taxes payable and will expire in the year 2002 if not sooner utilized.
The related tax benefit, $60,000, has been recorded as a deferred tax benefit.
Management anticipates future taxable income levels will be sufficient to fully
realize these and other net deferred benefits totaling $226,000 at December 31,
1993.
RESULTS OF OPERATIONS - SIX-MONTH PERIODS ENDED JUNE 30, 1994 AND 1993
NET INCOME - Net income for the six-month period ended June 30, 1994 was
$477,000 or $3.70 per common share, a decrease of $131,000 from net income of
$608,000 or $4.71 per common share reported for the same period in 1993.
Included in the six month period ended June 30, 1993 was an $83,000 increase in
net income from the cumulative effect of a change in accounting principle in
connection with the adoption of Statement of Financial Accounting Standard No.
109, "Accounting for Income Taxes." A detailed analysis of the components of
net income is included below.
The annualized return on average assets for the six-month period ended
June 30, 1994 was 0.76% versus 0.98% for the same period in 1993 and 0.78% for
the year ended December 31, 1993. The annualized return on average
shareholders' equity for the six-month period ended June 30, 1994 was 15.68%,
compared to 24.27% for the same period in 1993 and 18.32% for the year ended
December 31, 1993.
NET INTEREST INCOME - Net interest income is the major component of MSB's
income. Net interest income before the provision for loan losses was $2.38
million and $2.21 million for the six-month periods ended June 30, 1994 and
1993, respectively. Total interest income increased to $3.91 million for the
six-month period ended June 30, 1994 from $3.87 million for the same period in
1993. Total interest expense decreased to $1.53 million for the six-month
period ended June 30, 1994 from $1.66 million for the same period in 1993. The
increases in total
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interest income are attributable to increases in volumes of the interest
bearing assets (primarily loans), net of declining interest rates, and the
stable interest expense is due to increases in volumes of interest bearing
liabilities offset by the declining interest rates on those liabilities.
PROVISION FOR LOAN LOSSES - The provision for loan losses for the six-month
periods ended June 30, 1994 and 1993 was $25,000 and $12,000, respectively.
The allowance for loan losses, which was $1.00 million at June 30, 1994 has
been, in management's opinion, sufficient to absorb any losses inherent in the
loan portfolio. Future provisions for loan losses, if any, will be based upon
past loan experience, growth and composition of the loan portfolio, as well as
the then current and anticipated future economic conditions. The $1.00 million
allowance for loan losses at June 30, 1994 represented 1.25% of gross
outstanding loans as of that date.
A summary of the activity in the allowance for loan losses for the
six-month periods ended June 30, 1994 and 1993 is set forth as follows (000's
omitted):
<TABLE>
<CAPTION>
JUNE 30,
-----------------------
1994 1993
------ ------
<S> <C> <C>
Balance - January 1 $1,001 $ 815
Provision charged to expense 25 12
Net loans charged-off (23) (81)
------ ------
Balance at June 30 $1,003 $ 746
====== ======
</TABLE>
Loans past due 90 days or more and still accruing interest were $7,000 and
$10,000 at June 30, 1994 and December 31, 1993, respectively. At June 30, 1994
and December 31, 1993, MSB had $632,000 and $601,000, respectively, in loans on
nonaccrual status. Loans are placed on nonaccrual status when they become
past-due 90 days as to principal or interest and in the opinion of management
the loans are not in the process of collection or otherwise well secured.
Management has reviewed in detail all loans outstanding as of June 30, 1994
and believes there are no loans outstanding which are not past due or on
nonaccrual status as of June 30, 1994, which would cause management to have
serious doubts as to the ability of such borrowers to comply with the present
loan repayment terms.
MSB's renewal policy consists of an item by item review of maturing loans.
Each maturing loan is evaluated to determine if such loan will be renewed and
if so, at what amount, rate and maturity. Generally, MSB loan maturities are
of a short duration for the purpose of interest rate risk management.
NONINTEREST INCOME - Noninterest income for the six-month period ended June 30,
1994 was $528,000, a decrease of $70,000 from $598,000 for the same period in
1993. The primary sources of noninterest income are from service charges and
various fees on deposits. The decrease is primarily attributable to the
implementation of a marketing program to obtain new transaction deposits during
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<PAGE> 74
1994 which includes lower service charges on these accounts. Management
contemplates that the additional net interest income earned from
investing/loaning the new deposit growth will compensate for the reduced fee
income.
NONINTEREST EXPENSES - Noninterest expenses for the six-month period ended June
30, 1994 were $2.15 million, a $172,000 increase from the $1.98 million
reported for the same period in 1993. The primary components of noninterest
expenses are salaries and wages, occupancy and equipment expenses, FDIC
insurance premiums and other miscellaneous operating expenses. The increase in
these expenses was due to a 5% compensation increase for employees and
increases in marketing and advertising expenses to promote the transaction
deposit account programs discussed previously.
FINANCIAL CONDITION
Total assets have increased at June 30, 1994 to $127.66 million as compared
to $124.95 million at December 31, 1993. Total assets were $124.09 million at
December 31, 1992. In 1994, the growth in assets has been primarily in
investment securities and loans, which were funded by a decrease in money
market assets, an increase in deposits resulting from the marketing efforts
discussed above and in retained earnings of MSB for the six month period.
LOANS - Total loans, net of unearned income, at June 30, 1994 were $80.10
million, compared to $77.80 million and $74.85 million at December 31, 1993 and
1992, respectively. The loan volume is seasonal in nature due to the large
volume of agricultural loans. The peak lending period is usually in August and
the smallest volume of agricultural loans is usually in December, when the
loans are usually paid with proceeds from crop sales.
Table 5 - Gross Loans by Category presents the composition of the loan
portfolio at December 31, 1993 and 1992. Table 6 - Loan Maturities sets forth
the future maturity of loans as of December 31, 1993.
Table 7 - Nonperforming Assets sets forth information on the nonperforming
loans within the loan portfolio at December 31, 1993 and 1992. Although the
amounts shown represent risks in the loan portfolio, the major portion of the
loans are collateralized to various degrees and should not be interpreted as
losses. Commercial and real estate loans are placed on nonaccrual status when
they become ninety days or more past due as to principal or interest unless in
the opinion of management, the loan is both well secured and in the process of
collection.
At June 30, 1994, the loan portfolio contained a concentration (23%) of
agricultural related loans. These loans included agricultural production loans
and real estate loans secured by farm land and are generally dependent upon
crop and commodity prices. The loan portfolio also contained a concentration
(48%) of non-farm real estate loans which are generally dependent on the local
economy. At December 31, 1993, the loan portfolio contained a concentration
(21%) of agricultural related loans and (48%) of non-farm real estate loans.
There were no foreign loans outstanding at June 30, 1994, December 31, 1993 or
1992.
ALLOWANCE FOR LOAN LOSSES - In determining the amount of the provisions for
loan losses and allowance for loan losses, management considers past loan
charge-offs, the level of past due and nonaccrual loans, the size and mix of
the portfolio, loan growth trends, adverse classification at recent regulatory
examinations, general economic conditions in the market area, and most
importantly, a review of individual loans to identify potential credit
problems. The allowance for loan losses is maintained at a level considered
adequate by management to provide for losses in the existing loan portfolio.
In evaluating the adequacy of the allowance, management makes certain estimates
and assumptions which are susceptible to change in the near term. While
management uses available
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<PAGE> 75
information to recognize losses on loans, future additions to the allowance may
be necessary based upon changes in economic conditions. Management believes
the level of the allowances for loan losses is adequate in relation to the
size, mix and quality of the loan portfolio at December 31, 1993.
Table 9 - Allocation of the Allowance for Loan Losses presents an
allocation of the allowance for loan losses by various loan categories. The
allocation is based on a number of qualitative factors, including management's
review of the allowance. The amounts presented are not necessarily indicative
of the actual amounts which will be charged off for any particular loan
category.
INVESTMENT SECURITIES - Investment securities totaled $31.15 million at June
30, 1994, compared to $28.59 million at December 31, 1993. Investment
securities were $25.34 million at December 31, 1992. Investments in securities
are generally made as an alternative deployment of available funds.
Accordingly, the level of investment securities in the future will depend on
various factors, including loan demand and management's ability to attract
loans and deposits.
As of December 31, 1993, the approximate market value of investment
securities exceeded the book value by $116,000, or 0.4%. Table 3 - Investment
Securities sets forth the composition of investment securities portfolio as of
December 31, 1993 and 1992. Table 4 - Investment Securities Portfolio
Maturities and Yields provides an analysis of the maturities and yields of the
investment portfolio as of December 31, 1993.
There were no investment securities (other than securities of the U.S.
Government and its Agencies) which had an aggregate book value as of December
31, 1993 exceeding 10% of stockholders' equity as of that date. The Banks are
prohibited by regulations from holding investments in below investment grade
securities.
MONEY MARKET ASSETS - Federal funds sold and interest-bearing deposits at other
financial institutions totaled $4.80 million at June 30, 1994, compared to
$7.21 million at December 31, 1993, a $2.41 million decrease. This fluctuation
is attributed to the seasonal loan demand and resulting liquidity position.
Generally, liquidity is high in December as the crop loans are repaid with
proceeds of the yearly production. In June, loan demand is high due to the
planting seasons. Accordingly, MSB has the excess liquidity in December and
funds the loan demand in the spring and summer months with this excess
liquidity.
FORECLOSED ASSETS - Foreclosed assets were $298,000 at June 30, 1994, as
compared to $637,000 at December 31, 1993. Foreclosed assets were $1.31 million
at December 31, 1992. The decline is attributable to the sales of other real
estate in 1993, and continuing in 1994.
DEPOSITS - Table 10 - Average Deposits sets forth the average balances of MSB
deposit accounts for 1993 and 1992. Average rates paid on deposits are
reflected in Table 1 - Average Balance Sheet and Interest Yields/Rates.
Customer deposits totaled $114.54 million as of June 30, 1994, a $2.45
million increase over total deposits of $112.09 million as of December 31,
1993. Customer deposits totaled $112.18 million at December 31, 1992. The
significant increase in 1994 was attributable to a purchase of deposits of
approximately $1.50 million from Worthen National Bank in Pocahontas, Arkansas.
In addition, Security Bank has implemented a marketing program to obtain new
transaction deposits in 1994 which includes lower service charges. This
program was the first offered in the local market. Accordingly, the increases
in deposits in 1994 were mainly demand deposit accounts. There can be no
assurance that the marketing program, if continued to be offered, will result
in further new deposit account growth for Security.
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Included in deposits were $4.41 million of time deposits greater than or
equal to $100,000 at June 30, 1994, as compared to $5.22 million at December
31, 1993, the maturities of which are set forth in Table 11 - Time Deposit
Maturities $100,000 or greater.
At June 30, 1994, MSB's loan to deposit ratio was 69.93%, compared to
69.41% at December 31, 1993 and 66.72% at December 31, 1992. This increase
from 1992 to 1993 was representative of the increase in lending activity for
the year.
CAPITAL - Total stockholders' equity as of June 30, 1994 was $6.17 million,
compared to $5.71 million at December 31, 1993 and $4.73 million at December
30, 1992. The increase for each period is attributable to net income for the
applicable period, offset by the SFAS #115 valuation allowance of $16,000 as of
June 30, 1994. MSB has not paid dividends to stockholders during the five
years in the period ending December 31, 1993.
MSB's equity to assets ratio was 4.83% at June 30, 1994, compared to 4.29%
as of December 31, 1993 and 3.36% at December 31, 1992. The ratio of equity to
assets has increased due to profits offset by the growth in assets. The
capital ratios for MSB's subsidiary banks exceed the regulatory minimum levels.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT - MSB views liquidity and
asset/liability management as the ability to assure that funds are available to
support bank requirements, that is the ability to allow depositors ready access
to their monies and credit customers available funds to meet their credit
needs. It is also the process by which MSB monitors and attempts to control
the mix and
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maturities of its assets and liabilities in order to maximize net interest
income. Management maintains balances of federal funds sold and
interest-bearing deposits at other financial institutions in amounts it
believes necessary to meet MSB's daily cash needs. Management does not foresee
any particular matters which might immediately threaten its ability to remain
liquid.
MSB's primary source of liquidity is cash dividends received from its Bank
subsidiaries. Accordingly, its ability to service its debt and other
obligations is dependent upon the profitability of the Banks and their ability
to generate sufficient cash flow to pay dividends to MSB.
The Banks are also restricted under banking regulations as to the amount of
dividends that may be paid to MSB. During the years ended December 31, 1993,
1992 and 1991, the Banks paid cash dividends to MSB totaling $885,000, $0 and
$540,000, respectively.
Note 8 to the consolidated financial statement of MSB at December 31, 1993
provides a discussion of the restrictions upon the Banks' ability to pay
dividends to MSB.
For the year ended December 31, 1993, 1992 and 1991, MSB generated cash
flows from operating activities of $1.30 million, $1.25 million and $1.58
million, respectively, which have been sufficient to pay dividends to MSB to
enable it to service its obligations. Management expects future operating cash
flows to be sufficient in amounts necessary to allow MSB to meet its
obligations. SOURCES AND USES OF FUNDS - MSB has a variety of sources of funds
available, but its primary source is the taking of deposits from customers,
both individual and business. MSB's deposit acquisition strategy is to rely on
a core deposit base of demand deposits as well as savings and time deposits
under $100,000. Next, MSB utilizes time deposits $100,000 and over and public
deposits for additional sources of funds. At December 31, 1993, the percentage
of time deposits $100,000 and over to total deposits was 4.66% compared to
2.60% at December 31, 1992. The acquisition of deposits are from customers,
individuals and businesses within MSB's market area. Management believes that
the rates offered for deposits are competitive with other financial
institutions in MSB's market area. The Banks do not gather deposits through
any brokered means.
MSB also derives funds from maturities of investment securities, which
totaled $16.28 million, $4.32 million and $3.94 million in 1993, 1992 and 1991,
respectively. The significant increase in maturities in 1993 is caused by the
overall shortening of maturities in connection with the portfolio restructuring
discussed above.
MSB's primary use of funds is the making of loans to customers. The loan
to deposit ratio of 69.41% at December 31, 1993 represented a 4% increase in
the loan to deposit ratio of 66.72% at December 31, 1992. The table of MSB's
Selected Consolidated Financial Data on page 10 indicates that MSB continues to
increase the overall relative size of its loan portfolio as evidenced by the
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trend of growth in the loan to deposit ratio. Table 5 presents the composition
of the loan portfolio at December 31, 1993 and 1992. MSB's loan portfolio is
comprised of loans to individuals and businesses secured by various collateral
and in certain circumstances the loans are extended on an unsecured basis.
A secondary use of funds is the purchasing of debt securities for
investment purposes. During 1993, the investment portfolio averaged 20.72% of
total earning assets compared to 19.25% in 1992. Table 3 presents the
composition of the investment securities portfolio at December 31, 1993 and
1992 with the average yields and maturities of the portfolio detailed in Table
4. The portfolio is comprised of U.S. Treasury obligations, obligations of
U.S. Government Agencies, obligations of state and local governments and other
securities. While MSB may continue to upgrade or reposition the portfolio,
management has not in the past nor does it intend to in the future to trade
securities for profit or to depend upon securities gains as a regular source of
income. At December 31, 1993, the market value of the investment portfolio
exceeded the carrying value by approximately $116,000.
On January 1, 1994, the Bank adopted Statement of Financial Accounting
Standards No. 115 Accounting for Certain Investments in Debt and Equity
Securities ("SFAS 115"). The new standard addresses the accounting for
investments in equity securities that have readily determinable fair values and
for all investments in debt securities. The investment securities covered by
this standard are to be classified in one of three categories: (i) debt
securities for which the institution has a positive intent and ability to hold
to maturity are classified as "held-to-maturity" securities and reported at
amortized cost; (ii) debt and equity securities that are bought and held
principally for the purpose of selling them in the near term are classified as
"trading securities" and reported at fair value, with the unrealized gains and
losses included in earnings; and (iii) debt and equity securities not
classified as either held-to-maturity securities or trading securities are
classified as "available-for-sale" securities and reported at fair value, with
unrealized gains and losses excluded from earnings and reported as a separate
component of stockholders' equity.
In connection with the adoption of this statement, $3.45 million of
securities were transferred to the available-for-sale category, with a net
unrealized gain of $17,000, net of deferred income taxes, which was reflected
as a separate component of stockholders' equity. The remaining securities were
classified as held-to-maturity which will continue to be carried at amortized
cost adjusted for amortization of premiums and accretion of discounts.
Management has the intent and ability to hold until maturity those securities
classified as such. The initial adoption did not have any effect on the
results of operations of MSB. (See Note 1 to the December 31, 1993 consolidated
financial statements included in Appendix A.)
At December 31, 1993 MSB's commitments to extend credit totaled $6.32
million. However, some commitments are expected to expire without being drawn
upon and may not result in cash requirements. Accordingly, Management is of
the opinion that the sources of funds discussed above, together with the level
of
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investment securities carried in the available-for-sale portfolio, $1.73
million at June 30, 1994, will be sufficient to enable MSB to meet its
obligations as they arise and to fund future net growth.
REGULATORY ASSESSMENTS - MSB is required to pay certain fees to the FDIC and
the Arkansas State Bank Department. FDIC insurance and regulatory assessments
totaled $293,000, $329,000 and $282,000 for the years ended December 31, 1993,
1992 and 1991, respectively. The current assessment rate is 23 cents per $100
of deposits. Depending on the level and soundness of the FDIC insurance fund
and the Banks' regulatory ratings, this assessment could increase in the
future.
EFFECTS OF INFLATION - A bank's asset and liability structure is primarily
monetary in nature, that is, fixed in terms of monetary amounts. Consequently,
the impact of inflation on a bank differs significantly from an industrial
company. Factors such as interest rates have a more significant impact on a
bank's performance than does general inflation. Interest rates do not
necessarily move in the same direction, or at the same magnitude, as the price
of other goods and services.
ACCOUNTING PRONOUNCEMENTS - See Note 1 to the December 31, 1993 consolidated
financial statements included in Appendix A for a discussion of the following
accounting pronouncements applicable to MSB:
# SFAS 106 - Employers' Accounting for Postretirement Benefits Other
Than Pensions
# SFAS 109 - Accounting for Income Taxes
# SFAS 112 - Employers' Accounting for Postemployment Benefits
# SFAS 114 - Accounting by Creditors for Impairment of a Loan
# SFAS 115 - Accounting for Certain Investments in Debt and Equity
Securities.
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TABLE 1
AVERAGE BALANCE SHEET AND INTEREST YIELDS/RATES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------------
1993 1992 1991
---------------------------- --------------------------- --------------------------
QUARTERLY QUARTERLY QUARTERLY
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
------- -------- ---- ------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets
Loans, net of unearned income(1) $ 76,928 $ 6,091 7.92% $ 78,659 $ 6,882 8.75% $ 72,709 $ 7,472 10.28%
Taxable investment securities 25,885 1,145 4.42 23,952 1,493 6.23 23,617 1,934 8.19
Nontaxable investment securities(2) 687 51 7.42 755 66 8.74 1,530 98 6.41
Federal funds sold 656 28 4.27 1,660 34 2.05 938 53 5.65
Deposits at other financial institutions 7,412 341 4.60 4,558 367 8.05 9,095 615 6.76
-------- ------- ---- -------- ------- ---- -------- ------- ----
Total interest- earning assets 111,568 7,656 6.86 109,584 8,842 8.07 107,889 10,172 9.43
-------- ------- ---- -------- ------- ---- -------- ------- ----
Noninterest earning assets
Cash and due from banks 4,970 6,125 3,927
Premises and equipment 4,532 4,644 4,648
Other assets 3,444 3,673 3,675
Less allowance for loan losses (753) (812) (873)
-------- -------- --------
Total assets $123,761 $123,214 $119,266
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities
Money market accounts $ 6,210 $ 148 2.38% $ 6,069 $ 162 2.67% $ 4,741 $ 207 4.37%
NOW accounts 19,481 412 2.11 18,489 484 2.62 15,802 616 3.90
Savings deposits 13,337 317 2.38 13,915 366 2.63 8,824 492 5.58
Certificates of deposits of $100,000
and over 4,394 124 2.82 3,180 155 4.87 4,669 340 7.28
Other time deposits 51,559 1,877 3.64 54,268 2,551 4.70 60,613 3,747 6.18
Federal funds purchased 344 6 1.74 362 4 1.10 31 2 6.45
Other interest bearing liabilities 5,774 385 6.67 5,989 427 7.13 7,002 627 8.95
-------- ------- ---- -------- ------- ---- -------- ------- ----
Total interest-bearing liabilities 101,099 3,269 3.23 102,272 4,149 4.06 101,682 6,031 5.93
-------- ------- ---- -------- ------- ---- -------- ------- ----
Noninterest-bearing liabilities
Demand deposits 15,680 15,141 13,808
Other liabilities 1,672 1,661 1,221
Stockholders' equity 5,311 4,140 2,555
-------- -------- --------
Total liabilities and stockholders' equity $123,761 $123,214 $119,266
======== ======== ========
NET INTEREST INCOME $ 4,387 $ 4,693 $ 4,141
======== ======== =======
NET YIELD ON INTEREST EARNING ASSETS 3.93% 4.28% 3.84%
==== ==== ====
</TABLE>
(1) Nonaccruing loans are included in the quarterly average loan amount
outstanding and income on such loans, which are immaterial in amounts, is
recognized as received. Loan fees for all three years are included in
the interest amounts for loans, but in each case were immaterial in
amount.
(2) These amounts have not been presented on a tax-equivalent basis.
67
<PAGE> 81
TABLE 2
VOLUME AND YIELD/RATE ANALYSIS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1993 COMPARED TO 1992 1992 COMPARED TO 1991
--------------------- ---------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO CHANGE IN (1) DUE TO CHANGE IN (1)
-------------------- --------------------
VOLUME RATE NET VOLUME RATE NET
------ ---- --- ------ ---- ---
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Loans, net of unearned income $ (147) $ (644) $ (791) $ 579 $ (1,169) $ (590)
Taxable investment securities 113 (461) (348) 27 (468) (441)
Nontaxable investment securities (6) (9) (15) (60) 28 (32)
Federal funds sold (29) 23 (6) 27 (46) (19)
Deposits with other financial institutions 171 (197) (26) (349) 101 (248)
-------- --------- -------- -------- -------- ---------
Change in total income from
interest-earning assets 102 (1,288) (1,186 ) 224 (1,554) (1,330)
Interest paid on:
Money market accounts 4 (18) (14 ) 49 (94) (45)
NOW accounts 25 (97) (72 ) 93 (225) (132)
Savings deposits (15) (34) (49 ) 206 (332) (126)
Certificates of deposits of
$100,000 and over 47 (78) (31 ) (91) (94) (185)
Other time deposits (122) (552) (674) (364) (832) (1,196)
Federal funds purchased 0 2 2 5 (3) 2
Other interest-bearing liabilities (15) (27) (42 ) (84) (116) (200)
-------- --------- -------- -------- -------- ---------
Change in total expense on
interest-bearing liabilities (76) (804) (880) (186) (1,696) (1,882)
-------- --------- -------- -------- -------- ---------
Change in net interest income $ 178 $ (484) $ (306) $ 410 $ 142 $ 552
======== ========= ======== ======== ======== =========
</TABLE>
(1) The change in interest due to both rate and volume has been allocated to
change due to volume and change due to rate in proportion to the
relationship of the absolute dollar amounts of the change in each.
68
<PAGE> 82
TABLE 3
INVESTMENT SECURITIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1993 1992
---- ----
<S> <C> <C>
U.S. Treasury securities $ 20,243 $ 21,340
U.S. Government Agency securities 6,435 1,290
Obligations of states and political subdivisions 830 632
Mortgage-backed securities 687 533
Other stocks and securities 392 1,549
----------- -----------
Total investments $ 28,587 $ 25,344
=========== ===========
</TABLE>
TABLE 4
INVESTMENT SECURITIES PORTFOLIO MATURITIES AND YIELDS
DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WEIGHTED
BOOK VALUE AVERAGE YIELD(1)
---------- -------------
<S> <C> <C>
U. S. Treasury and Government Agency securities:
Within one year $ 3,243 3.65%
One to five years 22,658 4.77
Five to ten years 759(2) 4.71
Over ten years 18 8.80
------------ -----
Total 26,678 4.64
Obligations of state and political subdivisions(1):
Within one year 198 5.66
One to five years 478 6.05
Five to ten years 154 6.26
Over ten years - -
------------ -----
Total 830 6.00
Corporate Bonds:
Within one year 10 9.55
One to five years - -
Five to ten years - -
Over ten years 21 10.09
------------ -----
31 9.92
Mortgage-backed securities 687 6.45
Equity securities with no stated maturity 361 -
------------ -----
Total investments $ 28,587 4.67%
============ =====
</TABLE>
(1) The average yield is not presented on a tax-equivalent basis.
(2) Includes $500,000 of adjustable rate securities which reprice on a
quarterly basis.
69
<PAGE> 83
TABLE 5
GROSS LOANS BY CATEGORY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1993 1992
------------ -----------
<S> <C> <C>
Commercial and industrial $ 7,871 $ 7,947
Real estate:
Secured by single-family residential properties 23,480 23,907
Construction, land development and other
commercial 13,730 14,106
Secured by farmland 8,006 7,894
Agricultural 8,195 5,799
Installment loans to individuals 12,795 12,865
Other loans 3,723 2,336
------------ -----------
Loans, net of unearned income $ 77,800 $ 74,854
============ ===========
</TABLE>
TABLE 6
LOAN MATURITIES (1)
AS OF DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Three months or less $ 31,376
After three months through one year 30,933
After one year through five years 14,990
After five years 501
-----------
Total loans (1) $ 77,800
===========
</TABLE>
(1) All loans are fixed rate as of December 31, 1993.
70
<PAGE> 84
TABLE 7
NONPERFORMING ASSETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1993 1992
-------- --------
<S> <C> <C>
Nonaccrual loans $ 601 $ 778
Loans past due 90 days or more 10 140
Other real estate owned and foreclosed assets 637 1,307
--------- ----------
Total nonperforming assets $ 1,248 $ 2,225
========= ==========
</TABLE>
TABLE 8
SUMMARY OF LOAN LOSS EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
------------------
1993 1992
---- ----
<S> <C> <C>
Balance, January 1 $ 815 $ 827
Provision for loan losses 292 185
Loans charged off:
Commercial, agricultural and real estate (50) (164)
Installment loans to individuals (69) (106)
-------- --------
Total charge-offs (119) (270)
-------- --------
Recoveries:
Commercial, agricultural and real estate 4 60
Installment loans to individuals 9 12
-------- --------
Total recoveries 13 72
-------- --------
Net charge-offs (106) (198)
-------- --------
Balance, December 31 $ 1,001 $ 815
======== ========
Loans, net of unearned income:
Year end $ 77,800 $ 74,854
Average during year 76,928 78,659
Allowance for loan losses to year
end loans, net of unearned income 1.29% 1.09%
Ratio of net charge-offs during the year to
average loans outstanding during the year 0.14% 0.25%
</TABLE>
71
<PAGE> 85
TABLE 9
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1993 1992
------------------ -----------------
AMOUNT % AMOUNT %
------ ---- ------ ---
<S> <C> <C> <C>
Real estate $ 270 27 $ 236 29
Commercial and industrial 250 25 179 22
Agricultural 290 29 261 32
Installment loans to individuals 150 15 130 16
Other 41 4 9 1
------- --- ------ ---
Total Allowance for loan losses $ 1,001 100 $ 815 100
======= === ====== ===
</TABLE>
TABLE 10
AVERAGE DEPOSITS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
------------
1993 1992
---- ----
<S> <C> <C>
Interest bearing:
Demand $ 25,691 $ 24,558
Savings 13,337 13,915
Time 55,953 57,448
Noninterest bearing:
Demand 15,680 15,141
---------- ----------
Total deposit $ 110,661 $ 111,062
========== ==========
</TABLE>
The average interest rates paid on these deposits can be found in Table 1,
Average Balance Sheet and Interest Yields/Rates.
72
<PAGE> 86
TABLE 11
TIME DEPOSIT MATURITIES $100,000 OR GREATER
AS OF DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
3 months or less $ 3,417
Over 3 months through 12 months 1,706
Over 12 months 100
---------
Total $ 5,233
=========
</TABLE>
73
<PAGE> 87
VALIDITY OF UPC COMMON STOCK
The validity of the shares of UPC Common Stock offered hereby will be passed
upon by Gary A. Simanson, Assistant Secretary and Associate General Counsel of
UPC. Gary A. Simanson is an officer of and receives compensation from UPC.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K of Union Planters Corporation for
the year ended December 31, 1993, and the supplementary consolidated financial
statements included on pages 1 through 40 of Exhibit 99(a) of Union Planters
Corporation's Current Report on Form 8-K dated September 19, 1994, have been so
incorporated in reliance on the reports of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of Mid South Bancshares, Inc. and
Subsidiaries as of and for the year ended December 31, 1993, included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The consolidated financial statements of Mid South Bancshares, Inc. and
Subsidiaries at December 31, 1992 and 1991 and for the years then ended,
included in the Proxy Statement of Mid South Bancshares, Inc., which is
referred to and made a part of this Prospectus and Registration Statement of
Union Planters Corporation, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report appearing elsewhere herein, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The consolidated balance sheets of Grenada Sunburst Systems Corporation and
subsidiaries, as of December 31, 1993 and 1992, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1993 have been incorporated in this
Proxy Statement/Prospectus by reference to the Current Report of Union Planters
Corporation on Form 8-K dated July 26, 1994, have been incorporated in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
74
<PAGE> 88
The consolidated financial statements of BNF BANCORP, INC., formerly BANCFIRST
Corporation, ("BNF") as of September 30, 1993 and 1992 and for each of the
three years in the period ended September 30, 1993 incorporated in this Proxy
Statement/Prospectus by reference to the Current Report of Union Planters
Corporation on Form 8-K dated February 8, 1994 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and has been so incorporated in reliance upon
the reports of such firm given upon their authority as experts in accounting
and auditing.
75
<PAGE> 89
UNION PLANTERS CORPORATION
INDEX TO APPENDICES
<TABLE>
<CAPTION>
APPENDIX
NUMBER
- --------
<S> <C> <C>
A-1 -- Mid South Bancshares, Inc. and Subsidiaries Audited Consolidated Financial Statements as of December 31, 1993 and for
the year then ended.
A-2 -- Mid South Bancshares, Inc. and Subsidiaries Audited Consolidated Financial Statements as of December 31, 1992 and 1991,
and for the years then ended.
A-3 -- Mid South Bancshares, Inc. and Subsidiaries Unaudited Consolidated Financial Statements as of June 30, 1994, and for the
six-month periods ended June 30, 1994 and 1993.
B -- Agreement and Plan of Reorganization along with the Plan of Merger annexed thereto as Exhibit A.
C -- Excerpt from Arkansas Business Corporation Act of 1965, as amended--Dissenters' Rights.
</TABLE>
<PAGE> 90
APPENDIX A-1
MID SOUTH BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993
<PAGE> 91
REPORT OF INDEPENDENT ACCOUNTANTS
September 9, 1994
To the Board of Directors and Stockholders of
Mid South Bancshares, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Mid South Bancshares, Inc. and its subsidiaries at December 31, 1993, and the
results of their operations and their cash flows for the year in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Corporation's management; our responsibility is to
express an opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with generally accepted
auditing standards which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, in 1993, the
Corporation changed its method of accounting for income taxes.
Price Waterhouse LLP
Memphis, Tennessee
1
<PAGE> 92
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<S> <C>
ASSETS
- ------
Cash and due from banks $ 5,146
Federal funds sold 450
Interest-bearing deposits at other financial institutions 6,762
Investment securities (Market value: $28,702) 28,587
Loans 77,800
Less: Allowance for loan losses (1,001)
---------
Net loans 76,799
Premises and equipment, net 4,549
Accrued interest receivable 1,350
Other real estate owned 637
Deferred income taxes 226
Other assets 442
---------
Total assets $ 124,948
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits
Noninterest-bearing $ 11,461
Certificates of deposit of $100,000 and over 5,223
Other interest-bearing, including NOW accounts of $19,740 95,406
---------
Total deposits 112,090
Federal funds purchased 925
Accrued interest payable 613
Income taxes payable 184
Other borrowings 5,113
Other liabilities 312
---------
Total liabilities 119,237
---------
Commitments and contingent liabilities (Notes 4, 7, 9, 13, 14 and 15) -
Stockholders' equity
Common stock, $10 par value; 200,000 shares authorized, 129,439
shares issued and 129,012 shares outstanding 1,294
Additional paid-in capital 18
Retained earnings 4,409
Treasury stock, 427 shares held, at cost (10)
---------
Total stockholders' equity 5,711
---------
Total liabilities and stockholders' equity $ 124,948
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 93
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<S> <C>
INTEREST INCOME
Loans, including fees and discounts $ 6,091
Investment securities
Taxable 1,145
Nontaxable 51
Federal funds sold 28
Interest-bearing deposits at other financial institutions 341
---------
Total interest income 7,656
---------
INTEREST EXPENSE
Deposits 2,878
Other borrowings 385
Federal funds purchased 6
---------
Total interest expense 3,269
---------
Net interest income 4,387
Provision for loan losses 292
---------
Net interest income after provision for loan losses 4,095
---------
NONINTEREST INCOME
Service charges on deposit accounts 794
Investment securities gains, net 32
Other 605
---------
Total noninterest income 1,431
---------
NONINTEREST EXPENSE
Salaries, wages and benefits 1,898
Occupancy and equipment 751
Other 1,495
---------
Total noninterest expense 4,144
---------
INCOME BEFORE INCOME TAXES AND ACCOUNTING CHANGE 1,382
Provision for income taxes 492
---------
INCOME BEFORE ACCOUNTING CHANGE 890
Cumulative effect of change in accounting for income taxes 83
---------
NET INCOME $ 973
=========
EARNINGS PER SHARE
Income per share before accounting change $ 6.90
Cumulative effect of change in accounting for income taxes .64
---------
Net income per share $ 7.54
=========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 128,964
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 94
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY
STOCK CAPITAL EARNINGS STOCK TOTAL
---------- ----------- -------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 $ 1,294 $ 15 $ 3,436 $ (18) $ 4,727
Net income - - 973 - 973
Issuance of 404 shares of treasury stock - 3 - 8 11
--------- -------- ------- --------- ----------
Balance at December 31, 1993 $ 1,294 $ 18 $ 4,409 $ (10) $ 5,711
========= ======== ======= ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 95
MID SOUTH BANCHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income $ 973
Adjustments to reconcile net income to net cash provided by operating activities
Cumulative effect of change in accounting for income taxes (83)
Provision for loan losses 292
Provision for losses on other real estate owned 78
Loss on sales of other real estate 31
Investment securities gains, net (32)
Net accretion of investment securities (79)
Depreciation 357
Deferred income taxes (43)
(Increase) decrease in assets
Accrued interest receivable (162)
Other assets 246
Increase (decrease) in liabilities
Accrued interest payable (74)
Income taxes payable 122
Other liabilities (324)
----------
Net cash provided by operating activities 1,302
----------
INVESTING ACTIVITIES
Net increase in interest-bearing deposits at
other financial institutions (618)
Purchases of investment securities (20,742)
Proceeds from sales of investment securities 1,329
Proceeds from maturities and repayments of
investment securities 16,281
Net increase in loans (3,052)
Purchases of premises and equipment (313)
Proceeds from sales of premises and equipment 24
Proceeds from sales of other real estate owned 313
----------
Net cash used in investing activities (6,778)
----------
FINANCING ACTIVITIES
Net decrease in deposits (93)
Issuance of treasury stock 11
Increase in federal funds purchased 925
Principal repayments of other borrowed funds (680)
----------
Net cash provided by financing activities 163
----------
CASH AND CASH EQUIVALENTS
Net decrease (5,313)
Beginning of year 10,909
----------
End of year $ 5,596
==========
SUPPLEMENTAL DISCLOSURES
Cash paid for interest $ 3,343
==========
Cash paid for income taxes $ 415
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 96
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Mid South Bancshares, Inc. (the
"Corporation") and its wholly-owned subsidiaries, Security Bank ("Security")
and Farmers & Merchants Bank ("Farmers") (collectively, "the Banks"), conform
with generally accepted accounting principles and general practices of the
banking industry. The Corporation and the Banks are subject to the regulations
of certain federal and state agencies and undergo periodic examinations by
those regulatory agencies. The following is a description of the more
significant accounting policies:
BASIS OF PRESENTATION. The consolidated financial statements include the
accounts of the Corporation and its subsidiaries after elimination of
significant intercompany accounts and transactions.
STATEMENT OF CASH FLOWS. For purposes of reporting cash flows, cash and cash
equivalents include cash and due from banks and federal funds sold. Federal
funds are generally purchased and sold for one-day periods.
INVESTMENT SECURITIES. Investment securities are stated at cost adjusted for
amortization of premium and accretion of discount, which are recognized as
adjustments to interest income. Gains and losses on investment securities are
recorded when realized on a specific identity basis or when, in the opinion of
management, an unrealized loss is other than temporary in nature. All
investment securities transactions are recorded using a method which
approximates trade-date accounting. At December 31, 1993 management had the
intent and ability to hold all investment securities to maturity.
In May 1993, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain
Investments in Debt and Equity Securities, which is effective for fiscal years
beginning after December 15, 1993. This new standard addresses the accounting
for investments in equity securities that have readily determinable fair values
and for all investments in debt securities. The investment securities covered
by this standard are to be classified into three categories: (i) debt
securities for which the institution has a positive intent and ability to hold
to maturity are classified as "held-to-maturity" securities and reported at
amortized cost; (ii) debt and equity securities that are bought and held
principally for the purpose of selling them in the near term are classified as
"trading securities" and reported at fair value, with unrealized gains and
losses included in earnings; and (iii) debt and equity securities not
classified as either held-to-maturity securities or trading securities are
classified as "available-for-sale" securities and reported at fair value, with
unrealized gains and losses excluded from earnings and reported as a separate
component of stockholders' equity.
Effective January 1, 1994, the Corporation adopted SFAS No. 115. In connection
with the adoption of this statement, $3.45 million of securities were
transferred to the available-for- sale category with the net unrealized gain of
approximately $17,000, net of applicable deferred income taxes, reflected as a
separate component of stockholders' equity. The remaining securities were
classified as held-to-maturity which will continue to be carried at amortized
cost adjusted for amortization of premiums and accretion of discounts. The
initial adoption did not have any effect on the results of operations of the
Corporation.
6
<PAGE> 97
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LOANS. Loans are stated at the principal amount outstanding. Interest income
on loans is accrued using a simple interest method on outstanding balances.
Loan origination fees and direct loan origination costs are recognized
currently as income and period costs, respectively, and do not vary materially
from the results that would be recorded using the deferral method proscribed by
SFAS No. 91, Accounting for Nonrefundable Fees and Costs Associated with
Originating or Acquiring Loans and Initial Direct Costs of Leases.
Loans are generally placed on nonaccrual status and interest is not recorded
currently if payment in full of principal or interest is not expected or when
the payment of principal or interest is more than 90 days past due, unless it
is both well-secured and in the process of collection. Interest income
previously accrued is reversed at that time. Income recognition on installment
loans is discontinued, and the loan is charged off if no payment is received
within 90 and 150 days, respectively. Loans are classified as restructured
when concessions, generally extended maturities or reduced interest rates, have
been granted because of the debtor's inability to meet the original terms.
Interest income on restructured loans is recognized on the accrual basis at the
restructured interest rate.
In May 1993, the FASB issued SFAS No. 114, Accounting by Creditors for
Impairment of a Loan, which is applicable to all creditors and loans. SFAS No.
114 addresses the accounting for the impairment of loans, uncollateralized as
well as collateralized, except large groups of smaller-balance homogeneous
loans (e.g., consumer and mortgage loans) that are collectively evaluated for
impairment; loans carried at fair value or at the lower of cost or fair value;
leases; and debt securities as defined by SFAS No. 115. Such impaired loans
should be measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a practical expedient,
at the loan's observable market price or fair value of the underlying
collateral if the loan is collateral dependent. The Statement also applies to
all loans that are restructured in accordance with SFAS No. 15, Accounting by
Debtors and Creditors for Troubled Debt Restructurings. This Statement applies
to financial statements for fiscal years beginning after December 15, 1994 with
earlier application encouraged. Management has not fully evaluated the impact
of SFAS No. 114; therefore, the impact upon adoption of SFAS No. 114, if any,
on the financial position of the Corporation and its subsidiaries cannot be
estimated at this time. Management is currently reviewing its loan portfolio
to determine which loans must be measured in accordance with SFAS No. 114.
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses represents
management's estimate of losses inherent in the existing loan portfolio. The
allowance for loan losses is increased by provisions for loan losses and
reduced by loans charged off, net of recoveries. Provisions for loan losses
are determined based on management's evaluation of past loan loss experience,
current and anticipated future economic conditions, the level of classified and
nonperforming loans, the composition and size of the portfolio, reviews and
evaluations of specific loans, and the results of regulatory examinations. The
allowance for loan losses is maintained at a level considered adequate by
management to provide for losses in the existing loan portfolio. In evaluating
the adequacy of the allowance, management makes certain estimates and
assumptions which are susceptible to change in the near term. While management
uses available information to recognize losses on loans, future additions to
the allowance may be necessary based on changes in economic conditions.
7
<PAGE> 98
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PREMISES AND EQUIPMENT. Premises and equipment are stated at cost, less
accumulated depreciation. Depreciation provisions are computed principally on
straight-line methods over the estimated useful lives of the assets (buildings
and improvements - 10 to 32 years; furniture and fixtures - 5 to 7 years).
OTHER REAL ESTATE. Other real estate represents real estate acquired through
foreclosure and is stated at the lower of the recorded amount of the loan or
the net realizable value (which approximates the fair value) of the underlying
real estate. Any losses at foreclosure are charged to the allowance for loan
losses.
INCOME TAXES. Effective January 1, 1993, the Corporation adopted the
provisions of SFAS No. 109, Accounting for Income Taxes, and recorded the
cumulative effect of the accounting change of $83,000. SFAS 109 requires a
change from the deferred method of accounting for income taxes to the asset and
liability method. Under the asset and liability method, deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases, and operating loss
carryforwards and other benefits, and relate principally to the allowance for
loan losses and accumulated depreciation on premises and equipment. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The Corporation and Banks file
consolidated federal and state income tax returns.
EMPLOYEE BENEFITS. In December 1990, SFAS No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions, was issued which requires accrual
for the liability for the postretirement benefits during the years the employee
performs services. This Statement generally is effective for fiscal years
beginning after December 15, 1994 for employers with less than 500 employees.
Currently, the Corporation does not provide benefits for retired employees.
In November 1992, SFAS No. 112, Employers' Accounting for Postemployment
Benefits was issued and required adoption in fiscal years beginning after
December 15, 1993. This Statement requires that certain costs of
postemployment benefits must be charged to expense during the years of service
rather than expensing such costs when paid. Currently, the Corporation does
not offer any such postemployment benefits.
EARNINGS PER SHARE. Earnings per share amounts are based on the weighted
average common shares outstanding.
8
<PAGE> 99
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - RESTRICTIONS ON CASH
The Banks are required by the Federal Reserve Bank to maintain average reserve
balances. The average required balance to be maintained for such purpose
during 1993 was approximately $779,000.
NOTE 3 - INVESTMENT SECURITIES
The carrying value and market value of investment securities as of December 31,
1993 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
UNREALIZED
CARRYING ---------- MARKET
VALUE GAINS LOSSES VALUE
--------- ----- ------ -------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 20,243 $ 144 $ (20) 20,367
Securities of U.S. Government agencies 6,435 18 (14) 6,439
Obligations of states and political
subdivisions 830 3 (16) 817
Mortgage-backed and related securities 687 - (3) 684
Other securities 392 3 - 395
--------- -------- ------- -------
Total $ 28,587 $ 168 $ (53) $28,702
========= ======== ======= =======
</TABLE>
Investment securities with a carrying value of approximately $11,960,000 at
December 31, 1993 were pledged to secure public and trust funds on deposit and
for other purposes as required or permitted by law.
9
<PAGE> 100
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the maturities of investment securities at
December 31, 1993 (in thousands):
<TABLE>
<CAPTION>
CARRYING MARKET
VALUE VALUE
--------- -------
<S> <C> <C>
Maturing within one year
U.S. Treasury securities $ 996 $ 995
Securities of U.S. Government agencies 2,246 2,245
Obligations of states and political subdivisions 198 195
Other 10 10
----------- -----------
3,450 3,445
----------- -----------
Maturing after one year but within five years
U.S. Treasury securities 19,228 19,348
Securities of U.S. Government agencies 3,430 3,441
Obligations of states and political subdivisions 478 473
----------- -----------
23,136 23,262
----------- -----------
Maturing after five years but within ten years
Securities of U.S. Government agencies 759 753
Obligations of states and political subdivisions 154 149
----------- -----------
913 902
----------- -----------
Maturing after ten years
U.S. Treasury securities 19 24
Other 21 24
----------- -----------
40 48
----------- -----------
Other securities
Mortgage-backed and related securities 687 684
Equity securities with no stated maturity 361 361
----------- -----------
$ 28,587 $ 28,702
=========== ===========
</TABLE>
Expected maturities of mortgage-backed and related securities will differ from
contractual maturities because borrowers have the right to call or prepay
obligations with or without call or prepayment penalties.
Security is a member of the Federal Home Loan Bank ("FHLB") System.
Accordingly, it is required to maintain an investment in capital stock of the
FHLB of Dallas. At December 31, 1993, the investment in FHLB stock of $352,000
is stated at cost, which approximates market value.
10
<PAGE> 101
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - LOANS
Loans outstanding at December 31, 1993 are summarized as follows (in
thousands):
<TABLE>
<S> <C>
Commercial and industrial $ 7,871
Real estate
Secured by single-family residential properties 23,480
Construction, land development and other commercial 13,730
Secured by farmland 8,006
Agricultural 8,195
Installment loans to individuals 12,795
Other loans 3,723
-----------
Total loans $ 77,800
===========
Nonperforming loans are summarized as follows at December 31, 1993 (in thousands):
Nonaccrual loans $ 601
Loans 90 days or more past due 10
-----------
Total nonperforming loans $ 611
===========
</TABLE>
There were no material outstanding unfunded commitments related to the above
nonperforming loans at December 31, 1993. Interest which would have been
earned under the original terms on nonaccrual loans did not materially differ
from that actually recorded.
CONCENTRATION OF CREDIT RISK. The Banks' lending activities are concentrated
in Greene and Randolph Counties, Arkansas, where they are headquartered, and
the surrounding area. The Banks' customers have similar characteristics
including economic factors and activities, primarily agricultural related. The
loans are collateralized by various security interests, including but not
limited to crops, mortgages, equipment, automobiles and deposits. In some
instances loans are extended on an unsecured basis.
FINANCIAL INSTRUMENTS. The Banks are parties to financial instruments with
off-balance sheet credit risk in the normal course of business in order to meet
the financing needs of its customers. These financial instruments include
commitments to extend credit and letters of credit. These instruments involve,
to varying degrees, elements of credit risk and interest rate risk in excess of
the amounts recognized in the consolidated balance sheet. The contractual
amounts of these instruments reflect the extent of involvement the Banks have
in particular classes of financial instruments.
Off-balance sheet contractual committed amounts at December 31, 1993 are as
follows (in thousands):
Commitments to extend credit $6,321
Standby, commercial and similar letters of credit 775
11
<PAGE> 102
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Commitments to extend credit are agreements to lend to customers 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 Banks evaluate each
customer's credit worthiness on a case-by-case basis, and the amount of
collateral required is determined based on management's credit evaluation of
the counterparty. Collateral held varies but may include accounts receivable,
inventory, property and equipment, income producing properties and securities.
Letters of credit are conditional commitments issued by the Banks to guarantee
the performance of a customer to a third party and are not reflected in the
Corporation's financial statements. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loan
facilities to customers. The Banks, in some cases, hold various types of
collateral to support those commitments for which collateral is deemed
necessary. Letters of credit outstanding at December 31, 1993 expire through
1995.
NOTE 5 - ALLOWANCE FOR LOAN LOSSES
The following summarizes the changes in the allowance for loan losses for the
year ended December 31, 1993 (in thousands):
<TABLE>
<S> <C>
Balance, January 1 $ 815
Provision for loan losses 292
Recoveries of loans previously charged off 13
Amounts charged off (119)
----------
Balance, December 31 $ 1,001
==========
</TABLE>
NOTE 6 - PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31, 1993 is as follows (in
thousands):
<TABLE>
<S> <C>
Land $ 948
Buildings and improvements 4,581
Furniture and fixtures 1,833
----------
7,362
Less accumulated depreciation 2,813
----------
Premises and equipment, net $ 4,549
==========
</TABLE>
12
<PAGE> 103
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - OTHER BORROWINGS
Other borrowings consists of the following (in thousands):
<TABLE>
<S> <C>
Mid South Bancshares, Inc. capital notes,
variable rate at prime of an unrelated financial
institution (6.0% at December 31, 1993)
(subject to a ceiling of 12.5%), due in annual
installments through January 1998, interest payable
quarterly, unsecured $ 1,165
Security Bank capital notes, 9.75%, due in annual
installments through June 1998, interest payable
semi-annually, unsecured 500
Mid South Bancshares, Inc. note payable, to an
unrelated financial institution, variable rate at
prime of an unrelated financial institution plus 1%
(7.0% at December 31, 1993) (subject to an 8.5%
ceiling), due February 1994, secured by 102,817
shares of the Corporation's common stock, substantially
all of the common stock of Security and the personal
endorsement of the Corporation's two majority
shareholders. (Under the most restrictive
covenants associated with this note, the Corporation
is limited as to the amount of dividends it can pay.
Furthermore, the Corporation and Security are
limited in the amount of new debt that they may
issue. The dividend limitations are no more restrictive
than those imposed by regulatory agencies.) (On
February 8, 1994, the Corporation paid $440,251
on this note, and the lender renewed the balance
which is due April 1995, variable rate at prime of
an unrelated financial institution, secured by 82,839
shares of the Corporation's common stock and
substantially all of the common stock of Security.) 2,853
Advance to Security from the Federal Home
Loan Bank, 5.85%, due April 1995, secured by
first mortgage residential loans 595
--------
$ 5,113
========
</TABLE>
13
<PAGE> 104
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In February and May 1994, additional advances from the Federal Home Loan Bank
of $600,000 (6.39%, due monthly through March 2004) and $1 million (5.03%, due
November 1994), respectively, were made. Such advances are secured by first
mortgage residential loans.
The principal maturities of all other borrowings, including maturities on
obligations which have been refinanced, in years subsequent to 1993 are:
$540,251 in 1994; $3,357,692 in 1995; $375,000 in 1996; $405,000 in 1997; and
$435,000 in 1998.
NOTE 8 - SUBSIDIARIES DIVIDENDS
The amount of dividends which the Banks may pay to the Corporation is limited
by applicable laws and regulations. The Banks are incorporated under the laws
of the state of Arkansas and may pay dividends only to the extent of their
unreserved and unrestricted additional paid-in capital and retained earnings.
The Federal Deposit Insurance Corporation ("FDIC"), the Banks' primary
regulator, imposes no dollar limit on dividends paid by state-chartered banks
but requires maintenance of certain capital levels. The Banks, at a minimum,
must maintain total capital greater than or equal to eight percent (8%) of
adjusted total assets (as defined). Under the current FDIC capital guidelines,
the Banks could pay approximately $2.9 million in dividends; however, the Banks
are also further restricted under state banking regulations from paying
dividends in any given year in excess of 50% of the current income of that year
before obtaining regulatory approval which would limit the Banks from paying
additional dividends exceeding approximately $543,000 without regulatory
approval. The above amounts may be paid but, as a practical matter, other
considerations, including past dividend levels, may affect management's
decision with respect to the payment of dividends.
Additionally, the Merger Agreement described in Note 15 restricts the amount of
dividends the Corporation may pay to stockholders prior to the closing of the
transaction.
NOTE 9 - EMPLOYEE BENEFIT PLANS
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST. The Employee Stock Ownership Plan and
Trust ("ESOP") is noncontributory and covers employees having one or more years
of service who work in excess of 1,000 hours a year and who have attained 18
years of age. The amounts of contributions to the ESOP are determined annually
by the Board of Directors and were approximately $20,000 for the year ended
December 31, 1993. At December 31, 1993, the ESOP held 19,788 shares of the
Corporation's stock, all of which were allocated to participants.
PROFIT SHARING PLAN. The Farmers & Merchants Bank Profit Sharing Plan (the
"Profit Sharing Plan") is noncontributory and covers employees of Farmers
having one or more years of service who are at least 21 years of age. The
amounts of contributions to the Profit Sharing Plan are determined annually by
the Board of Directors; there were no contributions during the year ended
December 31, 1993.
14
<PAGE> 105
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
401K PROFIT SHARING PLAN AND TRUST. Effective January 1, 1994, the
Corporation's 401K Plan was formed and became available to employees having one
or more years of service who are at least 18 years of age. Employees may
voluntarily contribute up to 10 percent of their gross compensation on a
pre-tax basis up to a specified maximum, subject to certain Internal Revenue
Service restrictions (amount may change from year to year based on cost of
living index), and the Corporation may, at the discretion of the Board of
Directors, make a matching contribution of up to 100 percent of the amounts
contributed by the employees.
NOTE 10 - OTHER NONINTEREST EXPENSE
Other noninterest expenses for the year ended December 31, 1993 are summarized
as follows (in thousands):
<TABLE>
<S> <C>
FDIC insurance premiums $ 248
Stationery, supplies and postage 167
Expenses of other real estate 109
Other 971
----------
Other noninterest expense $ 1,495
==========
</TABLE>
NOTE 11 - INCOME TAXES
Effective January 1, 1993, the Corporation adopted SFAS No. 109, Accounting for
Income Taxes and recorded an $83,000 benefit due to the cumulative effect of
this change in accounting method. Reference is made to Note 1 for further
discussion of this accounting change.
The components of income tax expense (benefit) for the year ended December 31,
1993 are as follows (in thousands):
<TABLE>
<S> <C>
Current
Federal $ 498
State 37
Deferred
Federal (65)
State 22
----------
Provision for income taxes $ 492
==========
</TABLE>
15
<PAGE> 106
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The net deferred tax asset is comprised of the following at December 31, 1993
(in thousands):
<TABLE>
<S> <C>
Gross deferred assets:
Allowance for loan losses $ 207
Net operating loss carryforwards for tax purposes 60
Write-downs of other real estate owned 84
----------
Gross deferred assets 351
Less valuation allowance -
----------
Total deferred assets 351
----------
Gross deferred liabilities:
Accretion of discount on investment securities 18
Accumulated depreciation on premises and equipment 74
Other 33
----------
Total deferred liabilities 125
----------
Net deferred tax assets $ 226
==========
</TABLE>
A reconciliation of the statutory federal income tax rate to the effective tax
rate for the year ended December 31, 1993 is as follows (dollars in thousands):
<TABLE>
<CAPTION>
% OF
PRE-TAX
AMOUNT INCOME
------ ------
<S> <C> <C>
Computed "expected" tax $ 484 35.0
State income taxes, net of federal tax benefit 39 2.8
Tax-exempt income, net of disallowed interest expense (17) (1.2)
Other (14) (1.0)
------- ----
Provision for income taxes $ 492 35.6
======== ====
</TABLE>
At December 31, 1993, one of the Corporation's subsidiaries had approximately
$177,000 of federal net operating loss carryforwards available to offset future
taxable income and which expire in the year 2002 if not utilized sooner. The
net operating losses were incurred prior to the subsidiary being affiliated
with the Corporation. Accordingly, such future utilization is limited to
approximately $70,000 per year.
Based on the Corporation's historical and current pre-tax earnings, management
believes that it is more likely than not that the Corporation will realize the
benefits of the federal net operating loss carryforwards, and other net
deductible temporary differences will reverse during future periods in which
the Corporation generates federal net taxable income.
16
<PAGE> 107
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - MID SOUTH BANCSHARES, INC. (PARENT COMPANY ONLY) FINANCIAL
INFORMATION (IN THOUSANDS)
CONDENSED BALANCE SHEET
DECEMBER 31, 1993
<TABLE>
<S> <C>
ASSETS
- ------
Due from banks $ 326
Investment in subsidiaries 9,525
Other assets 237
----------
Total assets $ 10,088
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Borrowed funds $ 4,018
Other liabilities 359
Stockholders' equity 5,711
----------
Total liabilities and stockholders' equity $ 10,088
==========
CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
Dividends from Banks $ 575
Interest income 4
----------
Total income 579
----------
Interest expense 280
Other expense 35
----------
Total expenses 315
----------
Income before income taxes, accounting change and
undistributed income of Banks 264
Income tax benefit 62
----------
Income before accounting change and undistributed
income of Banks 326
Cumulative effect of change in accounting for income taxes 83
----------
Income before undistributed income of Banks 409
Undistributed income of Banks 564
----------
Net income $ 973
==========
</TABLE>
17
<PAGE> 108
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income $ 973
Cumulative effect of change in accounting for income taxes (83)
Equity in undistributed income of Banks (564)
Decrease in other assets 104
Increase in other liabilities 111
-----
Net cash provided by operating activities 541
-----
FINANCING ACTIVITIES
Issuance of treasury stock 11
Principal repayments of other borrowed funds (230)
-----
Net cash used in financing activities (219)
-----
CASH AND CASH EQUIVALENTS
Net increase 322
Beginning of year 4
-----
End of year $ 326
=====
</TABLE>
The ability of the parent company, Mid South Bancshares, Inc. to service its
debt is dependent upon the ability of the Banks to pay dividends to the parent
company sufficient to service such debt.
NOTE 13 - RELATED PARTY TRANSACTIONS
The Banks have granted loans to executive officers, directors and principal
stockholders and their affiliates totaling $3,400,000 at December 31, 1993.
During the year ended December 31, 1993, $1,400,000 in new loans were made to
executive officers, directors, principal stockholders and their affiliates and
$3,300,000 repaid. These loans were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with unrelated persons. Management does not expect any
losses from the outstanding related party loans, nor are any of these loans on
nonaccrual status.
The two major stockholders of the Corporation are employed in executive
capacities with an unrelated financial institution. The Corporation purchased,
on a nonrecourse basis, participation interest in certain loans originated by
the unrelated financial institution which aggregated $1.6 million at December
31, 1993.
During 1993, the Corporation paid management fees totaling $34,608 and $29,304,
respectively, to two of its shareholders.
18
<PAGE> 109
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Under the terms of a land lease expiring July 2020, Security leases certain
property used in its operations from a stockholder of the Corporation. Monthly
rentals under this lease approximate $12,000 annually.
NOTE 14 - LEGAL PROCEEDINGS
The Corporation and the Banks are parties to various legal proceedings which
have arisen in the ordinary course of business. Management is of the opinion
that neither the Corporation's financial position nor its results of operations
will be materially adversely affected by the ultimate resolution of these legal
proceedings.
NOTE 15 - PENDING MERGER
In July 1994, the Board of Directors of the Corporation approved an Agreement
and Plan of Reorganization ("Merger Agreement") with another bank holding
company whereby the two parties intend to effectuate a merger of the
Corporation with and into a subsidiary of the other bank holding company. The
merger, which is to be accounted for as a pooling of interests, is dependent
upon the approval of the stockholders of the Corporation and various regulatory
agencies. Additionally, the Corporation is restricted from certain activities
prior to the consummation of the transaction.
19
<PAGE> 110
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APPENDIX A-2
CONSOLIDATED FINANCIAL STATEMENTS
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
Years ended December 31, 1992 and 1991
with Report of Independent Auditors
<PAGE> 111
Mid South Bancshares, Inc. and Subsidiaries
Consolidated Financial Statements
Years ended December 31, 1992 and 1991
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Audited Consolidated Financial Statements
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 112
Report of Independent Auditors
The Board of Directors
Mid South Bancshares, Inc.
We have audited the accompanying consolidated balance sheets of Mid South
Bancshares, Inc. and Subsidiaries as of December 31, 1992 and 1991, and the
related consolidated statements of income, shareholders' equity and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 consolidated financial position of Mid South
Bancshares, Inc. and Subsidiaries at December 31, 1992 and 1991, and the
consolidated results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
Little Rock, Arkansas Ernst & Young LLP
August 29, 1994
1
<PAGE> 113
Mid South Bancshares, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1992 1991
--------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 7,209,332 $ 4,705,258
Federal funds sold 3,700,000 525,000
--------------------------------
Total cash and cash equivalents 10,909,332 5,230,258
Interest bearing deposits with other banks 6,143,763 13,131,612
Investments (1992 and 1991 estimated market values: $25,368,248
and $25,197,564) (Note 2) 25,343,915 24,326,657
Trading account securities - 100,000
Loans (Notes 6, 13, and 14):
Commercial, financial and agricultural 28,226,315 28,187,372
Real estate--construction 1,410,443 1,052,425
Real estate--mortgage 32,402,216 31,056,981
Installment 12,815,008 12,348,272
--------------------------------
Total loans 74,853,982 72,645,050
Less:
Unearned income (210) (809)
Allowance for loan losses (Note 3) (815,079) (827,430)
--------------------------------
Net loans 74,038,693 71,816,811
Premises and equipment (Note 4) 4,616,948 4,633,401
Accrued interest receivable 1,188,215 1,806,141
Deferred income taxes 100,000 100,000
Other assets 1,746,866 2,018,333
--------------------------------
Total assets $ 124,087,732 $ 123,163,213
================================
</TABLE>
2
<PAGE> 114
<TABLE>
<CAPTION>
DECEMBER 31
1992 1991
----------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Noninterest bearing deposits $ 15,278,134 $ 14,035,658
Interest bearing deposits 96,904,810 98,355,070
----------------------------------
Total deposits (Note 7) 112,182,944 112,390,728
Accrued interest payable 686,552 995,552
Income taxes payable 62,369 61,337
Other borrowed funds (Note 9) 945,000 510,000
Other liabilities 636,143 1,065,708
----------------------------------
Liabilities (excluding Subordinated note) 114,513,008 115,023,325
Subordinated and capital notes (Note 10) 1,995,000 2,300,000
Note payable (Note 5) 2,852,943 2,852,943
----------------------------------
Total liabilities 119,360,951 120,176,268
Shareholders' equity (Note 11):
Common Stock, $10 par value--authorized 200,000 shares, issued
and outstanding 129,439 shares 1,294,390 1,294,390
Capital surplus 14,432 -
Undivided profits 3,435,917 1,718,113
Treasury stock (17,958) (25,558)
----------------------------------
Total shareholders' equity 4,726,781 2,986,945
Commitments and contingencies (Note 13)
----------------------------------
Total liabilities and shareholders' equity $ 124,087,732 $ 123,163,213
==================================
</TABLE>
See accompanying notes.
3
<PAGE> 115
Mid South Bancshares, Inc. and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1992 1991
---------------------------------
<S> <C> <C>
Interest income:
Loans, including fees $ 6,881,930 $ 7,472,152
Investment securities:
Taxable 1,493,445 1,934,354
Tax-exempt 66,330 97,758
Other 399,922 667,446
---------------------------------
Total interest income 8,841,627 10,171,710
Interest expense:
Deposits 3,721,555 5,403,448
Other 427,296 627,120
---------------------------------
Total interest expense 4,148,851 6,030,568
---------------------------------
Net interest income 4,692,776 4,141,142
Provision for loan losses (Note 3) 185,181 300,000
---------------------------------
Net interest income after provision for loan losses 4,507,595 3,841,142
Other income:
Service charges on deposit accounts 760,603 728,058
Securities gains, net (Note 2) 1,034,974 6,028
Other 441,885 412,860
---------------------------------
2,237,462 1,146,946
---------------------------------
Other expenses:
Salaries and employee benefits (Note 15) 1,841,126 1,950,393
Net occupancy expense and furniture and equipment expense
749,481 702,528
Other (Note 16) 1,596,311 1,390,352
---------------------------------
4,186,918 4,043,273
---------------------------------
Income before income taxes 2,558,139 944,815
Income tax provision (Note 8) 810,242 274,968
---------------------------------
Net income before minority interest 1,747,897 669,847
Minority interest in earnings of subsidiary 30,093 -
---------------------------------
Net income $ 1,717,804 $ 669,847
=================================
Weighted average number of common shares outstanding during the
period 128,458 128,423
=================================
Earnings per common share (Note 1) $ 13.37 $ 5.22
=================================
See accompanying notes.
</TABLE>
4
<PAGE> 116
Mid South Bancshares, Inc. and SubSIDIARIES
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
COMMON CAPITAL UNDIVIDED TREASURY
STOCK SURPLUS PROFITS STOCK TOTAL
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1991 $ 1,294,390 $ - $ 1,048,266 $ (25,558) $ 2,317,098
Net income - - 669,847 - 669,847
--------------------------------------------------------------------
Balance at December 31, 1991 1,294,390 - 1,718,113 (25,558) 2,986,945
Net income - - 1,717,804 - 1,717,804
Sale of 185 shares of treasury
stock - 14,432 - 7,600 22,032
--------------------------------------------------------------------
Balance at December 31, 1992 $ 1,294,390 $ 14,432 $ 3,435,917 $ (17,958) $ 4,726,781
====================================================================
See accompanying notes.
</TABLE>
5
<PAGE> 117
Mid South Bancshares, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1992 1991
-------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,717,804 $ 669,847
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses 185,181 300,000
Provision for losses on other real estate 145,277 52,974
Provision for depreciation 360,468 348,538
Amortization of investment security premiums and accretion of
discounts (166,799) 3,882
Write-offs on other repossessed assets 74,996 -
Deferred income taxes 15,353 (67,335)
Realized investment security gains (1,034,974) (6,028)
Trading account securities gains - (1,592)
Proceeds from sales of trading account securities - 20,834
Purchases of trading account securities - (20,834)
Loans originated or acquired and held for resale (7,768,200) (4,127,694)
Principal collected on loans held for resale 7,411,150 3,789,700
Decrease in accrued interest receivable and other assets 1,066,166 653,067
Decrease in accrued interest payable, income taxes payable and
other liabilities (752,885) (36,025)
-------------------------------------
Net cash provided by operating activities 1,253,537 1,579,334
INVESTING ACTIVITIES
Proceeds from maturities of investment securities 4,321,517 3,939,766
Proceeds from sales of investment securities 26,135,061 2,071,902
Purchases of investment securities (30,172,063) (6,324,024)
Net (increase) decrease in interest bearing deposits with other
banks 6,987,849 (7,124,589)
Net increase in loans (2,449,460) (6,860,001)
Purchases of premises and equipment (497,621) (385,793)
Proceeds from sales of premises and equipment 156,006 90,612
-------------------------------------
Net cash provided by (used in) investing activities 4,481,289 (14,592,127)
FINANCING ACTIVITIES
Net increase (decrease) in deposits (207,784) 10,974,787
Proceeds from other borrowed funds 435,000 510,000
Principal payments on note payable - (734,383)
Principal payments on subordinated and capital notes (305,000) (290,000)
Sale of treasury stock 22,032 -
-------------------------------------
Net cash provided by (used in) financing activities (55,752) 10,460,404
-------------------------------------
Increase (decrease) in cash and cash equivalents 5,679,074 (2,552,389)
Cash and cash equivalents at beginning of year 5,230,258 7,782,647
-------------------------------------
Cash and cash equivalents at end of year $ 10,909,332 $ 5,230,258
=====================================
See accompanying notes.
</TABLE>
6
<PAGE> 118
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of Mid South
Bancshares, Inc. (the "Company") and its wholly owned subsidiary Security Bank
("Paragould") and Paragould's wholly owned subsidiaries, Security Real Estate,
Inc. and Security Investment Services, Inc. They also include the accounts of
the Company's majority owned subsidiary (96.3%) Far-Mer Bancshares, Inc., and
its majority owned subsidiary (95.1%) Farmers and Merchants Bank ("Reyno") and
its wholly owned subsidiary F&M Development Corp. All significant intercompany
accounts and transactions have been eliminated in consolidation.
INVESTMENTS
Investments are stated at cost, adjusted for amortization of premiums and
accretion of discounts. Amortization and accretion are calculated using methods
approximating the yield method. The adjusted cost of the specific security is
used to compute gains and losses on sales of securities.
Management determines the appropriate classification of investments at the time
of purchase. Management has the intent and the Company has the ability to hold
investments to maturity or on a long-term basis. As such, these investments are
carried at amortized historical costs. If investments are acquired with the
intent of holding for an indefinite period or for sale prior to maturity, the
investments would be carried at the lower of cost or market.
TRADING ACCOUNT SECURITIES
In 1991, trading account securities were carried at estimated market value.
Unrealized gains and losses were recognized in other income. In April 1992, the
trading account was closed and the securities were placed in the investment
portfolio.
7
<PAGE> 119
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
FIRST MORTGAGE REAL ESTATE LOANS HELD FOR RESALE
First mortgage real estate loans held for resale ($734,700 and $412,894 at
December 31, 1992 and 1991, respectively) are classified with real estate
mortgage loans and are carried at the lower of cost or fair market value on a
net aggregate basis. To manage the off-balance sheet market risk exposure
related to these real estate loans, the Company presells these loans to third
parties.
REVENUE RECOGNITION
Interest on loans is credited to operations generally based upon the principal
amount outstanding. The accrual of interest on loans is discontinued when, in
the opinion of management, there is doubt about the ability of the borrower to
pay interest or principal when due. When interest accruals are discontinued,
interest credited to income in the current year is reversed, and interest
accrued in the prior year is charged to the allowance for loan losses. If the
ultimate collectability of principal is in doubt, any payment received on a
loan on which the accrual of interest has been suspended, is applied to reduce
principal to the extent necessary to eliminate such doubt.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less allowances for depreciation.
Provisions for depreciation are computed generally by the straight-line method
based upon the estimated useful lives of the assets.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level management believes is
adequate to absorb potential losses in the loan portfolio. Management's
determination of the adequacy of the allowance is based on an evaluation of
past loan loss experience, current economic conditions, volume, growth and
composition of the loan portfolio and other relevant factors. The allowance is
increased by the provision for loan losses.
8
<PAGE> 120
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
OTHER REAL ESTATE AND OTHER REPOSSESSED ASSETS
Other real estate and other repossessed assets consists of properties and other
assets acquired through a foreclosure proceedings, acceptance of a deed in lieu
of foreclosure or through in-substance foreclosures. These properties and other
assets are carried at the lower of cost or fair market value based on appraised
value at the date acquired. Fair value is the estimated sales price based on
appraisal values less estimated selling expenses. Loan losses arising from the
acquisition of such properties and other assets are charged against the
allowance for loan losses. Subsequent valuation adjustments, if any, are
charged to operating expenses. Other real estate included in other assets at
December 31, 1992 and 1991 totaled $1,058,415 and $1,195,628, respectively.
Other repossessed assets included in other assets at December 31, 1992 and 1991
totaled $249,482 and $269,120, respectively. Loans transferred to other real
estate and other repossessed assets during 1992 and 1991 totaled $399,447 and
$654,089, respectively.
INCOME TAXES
The Company and its subsidiaries file a consolidated income tax return. It is
the Company's practice to have its subsidiaries pay to or receive from the
Company amounts based on the taxable income (or loss) of the subsidiary.
Certain items, primarily additions to the allowance for loan losses, are
recognized as income or expense in different periods for financial and for
income tax reporting purposes. Deferred taxes are provided for such timing
differences.
In February 1992, the Financial Accounting Standards Board issued the final
standard on accounting for income taxes. The new standard--FASB Statement No.
109, "Accounting for Income Taxes"--supersedes both FASB No. 96 and APB Opinion
No. 11. The adoption of this standard, which was required in the first quarter
of 1993, did not have a material impact on the consolidated financial position
of the Company.
9
<PAGE> 121
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
EARNINGS PER COMMON SHARE
Earnings per common share is calculated by dividing net income by the weighted
average number of common shares outstanding.
FUTURE APPLICATION OF ACCOUNTING STANDARDS
In December 1990, the Financial Accounting Standards Board issued new rules
that require that the projected future cost of providing postretirement
benefits, such as health care and life insurance, be recognized as an expense
as employees render service instead of when the benefits are paid. Companies
can elect to record the cumulative effect of the accounting change as a charge
against income in the year the rules are adopted, or alternatively, on a
prospective basis as a part of the future annual benefit cost. The Company will
be required to comply with the new rules beginning in 1993. Currently, the
Company does not provide any postretirement benefits for employees; therefore,
these new rules are not expected to have a significant impact on the Company's
financial statements.
In May 1993 the Financial Accounting Standards Board ("FASB") issued Statement
on Financial Accounting Standard No. 115, "Accounting for Certain Investments
in Debt and Equity Securities". Statement 115 will be adopted by the Company on
January 1, 1994 and requires that investments in debt and equity securities be
classified as held to maturity, trading, or available for sale. Investments in
debt securities classified as held to maturity are to be reported at amortized
cost. Investments in debt and equity securities classified as trading are to be
reported at fair value with related unrealized gains and losses included in net
income. Investments in debt and equity securities classified as available for
sale are to be reported at fair value with related unrealized gains and losses
excluded from earnings and reported as a separate component of shareholders'
equity.
10
<PAGE> 122
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Management plans to classify its municipal securities and a majority of the
remainder of its investment securities as investments held to maturity with
only those securities that are outside of the Company's investment strategy as
available for sale. At January 1, 1994, adoption of Statement 115 would have
increased shareholders' equity by approximately $17,000 and have no impact on
the Company's net income for 1994.
Statement of Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan" requires that impaired loans that are within the
scope of the Statement be measured based on the present value of expected
future cash flows discounted at the loan's effective rate, or, as a practical
expedient, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. The Company will be required
to adopt Statement 114 in 1995. Management has not evaluated the impact of this
new standard on the Company's financial position or results of operations.
CASH EQUIVALENTS
Cash equivalents include amounts due from banks and federal funds sold.
Generally, federal funds are purchased and sold for one-day periods.
11
<PAGE> 123
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
2. INVESTMENTS
The amortized cost and estimated market values of investments in debt
securities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1992
---------------------------------------------------------
AMORTIZED GROSS GROSS
COST UNREALIZED UNREALIZED ESTIMATED
GAINS LOSSES MARKET VALUE
---------------------------------------------------------
<S> <C> <C> <C> <C>
United States Treasury Securities $ 21,339,623 $ 8,038 $ 35,937 $ 21,311,724
Securities of United States
Government agencies and 1,289,866 31,809 3,529 1,318,146
corporations
Obligations of states and political
subdivisions 631,749 2,328 6,876 627,201
Mortgage-backed securities 533,103 20,670 12,629 541,144
Other investment securities 1,549,574 20,459 - 1,570,033
---------------------------------------------------------
$ 25,343,915 $ 83,304 $ 58,971 $ 25,368,248
=========================================================
</TABLE>
12
<PAGE> 124
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
2. Investments (continued)
<TABLE>
<CAPTION>
DECEMBER 31, 1991
---------------------------------------------------------
AMORTIZED GROSS GROSS
COST UNREALIZED UNREALIZED ESTIMATED
GAINS LOSSES MARKET VALUE
---------------------------------------------------------
<S> <C> <C> <C> <C>
United States Treasury Securities $ 17,469,016 $ 787,154 $ - $ 18,256,170
Securities of United States
Government agencies and
corporations 1,605,603 47,336 1 1,652,938
Obligations of states and political
subdivisions 768,244 3,992 6,559 765,677
Mortgage-backed securities 2,479,551 59,923 14,501 2,524,973
Other investment securities 2,004,243 5,119 11,556 1,997,806
---------------------------------------------------------
$ 24,326,657 $ 903,524 $ 32,617 $ 25,197,564
=========================================================
</TABLE>
13
<PAGE> 125
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
The amortized cost and estimated market value of debt securities at December
31, 1992, by contractual maturity, are shown below. Expected maturities may
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATE
COST MARKET VALUE
---------------------------------
<S> <C> <C>
Due in one year or less $ 12,933,085 $ 12,941,884
Due after one year through five years 10,239,168 10,224,987
Due after five years through ten years 1,261,774 1,279,570
Due after ten years 376,785 380,663
---------------------------------
24,810,812 24,827,104
Mortgage-backed securities 533,103 541,144
---------------------------------
$ 25,343,915 $ 25,368,248
=================================
</TABLE>
Investment securities with a book value of approximately $6,703,000 and
$9,341,000 were pledged to secure public deposits and for other purposes, as
required by law, at December 31, 1992 and 1991, respectively.
In April 1992, Paragould sold approximately $4,000,000 of U. S. Treasury and
Agency Bonds that represented approximately 25% of the balance of this category
of investments. The proceeds from the sale of these securities were used to
purchase shorter term U. S. Treasury and Agency Bonds. In July, the Company
sold $17,000,000 in U. S. Treasury and Agency Bonds, which included the
$4,000,000 that were purchased in April. The $17,000,000 sale represented
approximately 85% of the U. S. Treasury and Agency category of the investment
security portfolio. Again the proceeds from this second sale were used to
purchase shorter term U. S. Treasury and Agency Bonds. These transactions
represented a restructuring of the investment portfolio and were approved by
the Board of Directors after the completion of extensive research on historical
yield curves. The decision to restructure the investment portfolio was based
upon current economic conditions, increasing loan demand, inflation and
expectation on movements in interest rates. As the new investments were
purchased as a restructuring, management has the
14
<PAGE> 126
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
intent to hold these new investments until maturity, and for this reason they
are carried at amortized cost. The transactions described above have been
accounted for in accordance with the American Institute of Certified Public
Accountants Industry Audit Guide, "Audits of Banks", as FASB No. 115 had not
been issued as of December 31, 1992.
3. ALLOWANCE FOR LOAN LOSSES
Summarized below are the transactions in the allowance for loan losses:
<TABLE>
<CAPTION>
1992 1991
-------------------------------
<S> <C> <C>
Balance at January 1 $ 827,430 $ 789,282
Provision for loan losses 185,181 300,000
Net charge-offs:
Charge-offs (deduction) (269,777) (296,468)
Recoveries 72,245 34,616
-------------------------------
(197,532) (261,852)
-------------------------------
Balance at December 31 $ 815,079 $ 827,430
===============================
</TABLE>
15
<PAGE> 127
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
4. PREMISES AND EQUIPMENT
A summary of premises and equipment is as follows:
<TABLE>
<CAPTION>
1992 1991
-------------------------------
<S> <C> <C>
Land $ 948,313 $ 785,702
Buildings and improvements 4,565,067 4,402,084
Furniture, fixtures and equipment 1,587,336 1,650,509
Accumulated depreciation and amortization
(deduction) (2,483,768) (2,204,894)
-------------------------------
$ 4,616,948 $ 4,633,401
===============================
</TABLE>
5. NOTE PAYABLE
Note payable consist of the following at December 31:
<TABLE>
<CAPTION>
1992 1991
-----------------------------
<S> <C> <C>
Note payable to an unrelated financial institution, due on February
8, 1993 at the prime interest rate plus 1% of an unrelated
financial institution (7.5% at December 31, 1992 and 10% at
December 31, 1991) $ 2,852,943 $ 2,852,943
</TABLE>
The note payable is collateralized by substantially all of the common stock of
the Company's subsidiaries. The related loan agreement provides, among other
things, for the maintenance of a 7% primary capital to asset ratio for each
subsidiary bank and for limitations on the payment of dividends. The dividend
limitations are no more restrictive than those required by the bank regulators
(see Note 11).
16
<PAGE> 128
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
6. TRANSACTIONS WITH RELATED PARTIES
The Company has had, and expects to have in the future, banking transactions in
the ordinary course of business with its officers, directors and employees.
Except as discussed below, such transactions have been on similar terms,
including interest rates and collateral on loans, as those prevailing at the
time for comparable transactions with others, and have involved no more than
normal risk or other potential unfavorable aspects. Loans made to such
borrowers (including companies in which they are principal owners) amounted to
approximately $5,335,676 and $4,738,771 at December 31, 1992 and 1991,
respectively. Transactions during 1992 included new loans amounting to
$2,979,660 and repayments amounting to $2,382,755.
All nonexecutive officers and employees are entitled to a reduced loan rate (1%
less than prevailing rates) on certain types of loans.
The two major shareholders of the Company are employed in executive capacities
with an unrelated financial institution. The Company purchased, on a
nonrecourse basis, participation interests in certain loans originated by the
unrelated financial institution which aggregated approximately $1.9 million and
$1.5 million at December 31,1992 and 1991, respectively.
At December 31, 1992 and 1991, the Company had outstanding loans in the amounts
of $2,379,181 and $1,537,808 to two shareholders of the Company, the majority
of which were unsecured.
In June 1991, the Company entered into a lease agreement with Art, Incorporated
which is owned by two directors of the Company. The term of the lease was for
ten years. Lease payments made to Art, Incorporated in 1992 and 1991 totaled
$9,400 each year. Subsequent to December 31, 1992, Mid South Bancshares, Inc.
and Subsidiaries purchased the leased art for $56,500 from this company.
During 1992, the Company paid $24,000 and $34,600, respectively, in consulting
fees to two shareholders of the Company.
17
<PAGE> 129
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
7. DEPOSITS
The following summarizes information on deposits as of December 31:
<TABLE>
<CAPTION>
1992 1991
----------------------------------
<S> <C> <C>
Demand, noninterest bearing $ 15,278,134 $ 14,035,658
Demand, interest bearing: NOW and money market accounts 26,756,881 23,750,394
Savings 12,598,160 9,761,790
Certificates of deposit 57,549,769 64,842,886
----------------------------------
$ 112,182,944 $ 112,390,728
==================================
Certificates of deposit of $100,000 or more $ 2,918,674 $ 4,318,775
==================================
</TABLE>
8. INCOME TAXES
The income tax provision (benefit) consists of the following at December 31:
<TABLE>
<CAPTION>
1992 1991
---------------------------
<S> <C> <C>
Current $ 794,889 $ 342,303
Deferred 15,353 (67,335)
---------------------------
$ 810,242 $ 274,968
===========================
</TABLE>
18
<PAGE> 130
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
8. INCOME TAXES (Continued)
The sources of timing differences resulting in deferred income taxes (benefit)
and the approximate income tax effect of each at December 31, are as follows:
<TABLE>
<CAPTION>
1992 1991
---------------------------
<S> <C> <C>
Discounts on investment securities $ 78,199 $ (30,981)
Write downs of other real estate properties, net of gains from
sales (33,172) (9,939)
Provision for loan losses 18,935 (19,821)
Depreciation (41,657) (11,527)
Other (6,952) 4,933
---------------------------
$ 15,353 $ (67,335)
===========================
</TABLE>
The reasons for the difference between the effective income tax rates and the
statutory federal income tax rate at December 31, are as follows:
<TABLE>
<CAPTION>
1992 1991
----------------------
<S> <C> <C>
Federal income tax rate 34.0% 34.0%
Nontaxable interest income (.9) (4.4)
Nondeductible expenses .3 .9
Other (1.7) (1.4)
----------------------
Effective income tax rate 31.7% 29.1%
======================
</TABLE>
19
<PAGE> 131
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
8. INCOME TAXES (Continued)
During 1992 and 1991, the Company made income tax payments of $796,312 and
$531,205, respectively. The provision for income taxes includes income taxes
applicable to investment security gains of $351,891 and $2,050 in 1992 and
1991, respectively.
At December 31, 1992, one of the Company's subsidiaries had a net operating
loss carryover of $327,343. This net operating loss was incurred prior to
affiliation with the Company; therefore, its utilization is limited to the
separate income generated by the subsidiary.
9. OTHER BORROWED FUNDS
Other borrowed funds consisted of the following at December 31:
<TABLE>
<CAPTION>
1992 1991
--------------------------
<S> <C> <C>
Payable to Federal Home Loan Bank, 6.48%, due July 15, 1992 $ - $ 160,000
Payable to Federal Home Loan Bank, 6.02%, due April 23, 1993 350,000 350,000
Payable to Federal Home Loan 595,000 -
Bank, 5.85%, due April 13, 1995
--------------------------
$ 945,000 $ 510,000
==========================
</TABLE>
First residential mortgage loans are pledged to collateralize these borrowings.
No specific loans have been assigned as collateral. It is the Company's option
what loans secure this indebtedness.
20
<PAGE> 132
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
10. SUBORDINATED AND CAPITAL NOTES
The subordinated and capital notes consist of the following unsecured
obligations at December 31:
<TABLE>
<CAPTION>
1992 1991
-----------------------------
<S> <C> <C>
Variable rate capital notes (6.5% at December 31, 1992 and 8% at
December 31, 1991), interest paid quarterly and principal paid
annually with final maturity on January 1, 1998 $ 1,395,000 $ 1,600,000
Fixed rate subordinated note, 9.75%, interest paid semi-annually
and principal paid annually with final
maturity on June 30, 1998 600,000 700,000
-----------------------------
$ 1,995,000 $ 2,300,000
=============================
</TABLE>
Principal payments on the Subordinated Notes from 1993 through 1997 are
$330,000, $350,000, $375,000, $405,000 an $435,000, respectively.
11. DIVIDEND RESTRICTIONS
Subsidiary banks are restricted by regulatory agencies for the payment of
dividends in excess of fifty percent of net income unless prior approval is
obtained from those agencies. At December 31, 1992, approximately $680,000 was
available for payments of dividends by the Company's subsidiary banks without
prior regulatory approval.
12. SUPPLEMENTAL CASH FLOWS INFORMATION
The Company paid interest on deposits and other borrowings of $4,876,942 and
$5,756,768 during 1992 and 1991, respectively.
21
<PAGE> 133
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
13. COMMITMENTS
In the normal course of business there are various commitments outstanding and
contingent liabilities, such as commitments to extend credit, including standby
letters of credit to assure performance or to support debt obligations, which
are not reflected in the accompanying consolidated financial statements. Loan
commitments are made to accommodate the financial needs of the Company's
customers. Standby letters of credit commit the Company to make payments on
behalf of customers when certain specified future events occur. They are
primarily issued to support notes payable and debentures.
Both arrangements have credit risk essentially the same as that involved in
extending loans to customers and are subject to the Company's normal credit
policies. The Company's maximum exposure to credit loss for loan commitments
(unfunded loans and unused lines of credit) at December 31, 1992 and 1991 was
approximately $5,411,000 and $4,146,000, respectively. The Company's
outstanding commitments under standby letters of credit amounted to
approximately $633,000 and $571,400 at December 31, 1992 and 1991,
respectively.
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. 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
Company evaluates each customer's creditworthiness on a case-by-case basis.
Collateral is obtained based on management's credit assessment of the customer.
Collateral held varies but may include accounts receivable, inventory,
property, plant and equipment and income-producing commercial properties.
22
<PAGE> 134
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
14. CONCENTRATION OF CREDIT RISK
Most of the Company's subsidiary banks' lending activity is with customers
located within Greene County, Arkansas. The loan portfolio contains a
concentration (18%) of agricultural related loans. These loans include
agricultural production loans and real estate loans secured by farm land and
are generally dependent on crop and commodity prices. The loan portfolio also
contains a concentration (49%) of nonfarm real estate loans which are generally
dependent on the local economy.
15. EMPLOYEE BENEFIT PLAN
The Company's employee stock ownership plan was established to enable
participating employees to acquire stock ownership interest in the Company. In
general, eligible participating employees are those who have completed one year
of eligibility service and are at least 18 years of age. The plan, which is
noncontributory on the part of the participating employees, is a stock bonus
plan intended to qualify under Section 401(a) of the Internal Revenue Code (the
"Code"). It is designed to invest primarily in Company stock and is an employee
stock ownership plan as defined in Section 4975(e)(7) of the Code. Annual
contributions are to be at amounts, if any, as determined by the Board of
Directors. The Company contributed approximately $20,000 to the plan in both
1992 and 1991.
16. SUPPLEMENTARY INCOME STATEMENT INFORMATION
Amounts included in other expenses which exceed one percent of total revenue
are as follows: Professional fees--$194,659 in 1992 and $158,012 in 1991; loan
and collection expense--$139,590 in 1992 and $95,297 in 1991 and regulatory
assessment fees--$329,395 in 1992 and $281,734 in 1991.
23
<PAGE> 135
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
17. PARENT COMPANY FINANCIAL INFORMATION
Presented below are the condensed balance sheets, and statements of income and
cash flows for the parent company, Mid South Bancshares, Inc.:
<TABLE>
<CAPTION>
BALANCE SHEETS DECEMBER 31
-------------- 1992 1991
------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 4,162 $ 437,955
Investment in bank subsidiaries 8,877,598 7,320,793
Other assets from subsidiaries 340,501 12,905
------------------------------
$ 9,222,261 $ 7,771,653
==============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Long-term debt $ 4,247,943 $ 4,452,943
Other liabilities 247,537 331,765
Common shareholders' equity 4,726,781 2,986,945
------------------------------
$ 9,222,261 $ 7,771,653
==============================
</TABLE>
24
<PAGE> 136
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
17. PARENT COMPANY FINANCIAL (Continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
STATEMENTS OF INCOME 1992 1991
-------------------- ------------------------------
<S> <C> <C>
Income:
Dividends from bank subsidiaries $ 1,214,472 $ 540,000
Interest from subsidiaries 2,020 16,164
Other income 1,404 39,486
------------------------------
Total income 1,217,896 595,650
Expenses:
Interest 309,713 469,520
Other expenses 151,056 233,283
------------------------------
Total expenses 460,769 702,803
------------------------------
Income (loss) from operations 757,127 (107,153)
Income tax benefit 223,279 220,032
Equity in undistributed earnings of bank subsidiaries 737,398 556,968
------------------------------
Net income $ 1,717,804 $ 669,847
==============================
</TABLE>
25
<PAGE> 137
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
17. PARENT COMPANY FINANCIAL INFORMATION (Continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
STATEMENTS OF CASH FLOWS 1992 1991
------------------------ -------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,717,804 $ 669,847
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Undistributed earnings of subsidiaries (737,398) (556,968)
Noncash dividend (1) (904,472) -
Increase (decrease) in taxes payable 786,950 (247,038)
Decrease in interest payable (871,178) (80,933)
Decrease (increase) in other assets (242,531) 586,214
-------------------------------
Net cash provided by (used in) operating activities (250,825) 371,122
FINANCING ACTIVITIES
Repayment of subordinated note (205,000) (190,000)
Repayment of notes payable - (734,393)
Sale of treasury stock 22,032 -
Net cash used in financing activities (182,968) (924,383)
-------------------------------
Net decrease in cash and cash equivalents (433,793) (553,261)
Cash and cash equivalents at beginning of year 437,955 991,216
-------------------------------
Cash and cash equivalents at end of year $ 4,162 $ 437,955
===============================
</TABLE>
26
<PAGE> 138
Mid South Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1992
17. PARENT COMPANY FINANCIAL INFORMATION (Continued)
(1) In December 1987, Paragould acquired a 96.3% interest in the common
stock of Far-Mer Bancshares, Inc. through foreclosure on a loan. Far-Mer
Bancshares owned 95.1% of the outstanding common stock of Farmers and Merchants
Bank located in Reyno, Arkansas. Paragould's Board of Directors transferred the
bank's investment in Far-Mer Bancshares to the Company by means of a noncash
dividend in March 1992. The investment in Far-Mer Bancshares was transferred to
the Company at Paragould's book value in the investment, which included the
fair value as of the acquisition date increased by capital contributed and
adjustment for income (loss) from the acquisition date.
27
<PAGE> 139
APPENDIX A-3
MID SOUTH BANCSHARES, INC.
and Subsidiaries
Unaudited Consolidated Financial Statements as of June 30, 1994 and
for the six months ended June 30, 1994 and 1993
<PAGE> 140
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
JUNE 30, 1994
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<S> <C>
ASSETS
- ------
Cash and due from banks $ 5,593
Federal funds sold 755
Interest-bearing deposits at other financial institutions 4,042
Investment securities
Available-for-sale 1,733
Held-to-maturity 29,420
Loans 80,097
Less: Allowance for loan losses (1,003)
Net loans 79,094
Premises and equipment, net 4,749
Accrued interest receivable 1,244
Other real estate 298
Deferred income taxes 226
Other assets 504
-----------
Total assets $ 127,658
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits
Noninterest-bearing $ 16,942
Certificates of deposit of $100,000 and over 4,414
Other interest-bearing, including NOW accounts of $16,946 93,188
-----------
Total deposits 114,544
Accrued interest payable 475
Other borrowings 6,168
Other liabilities 299
-----------
Total liabilities 121,486
-----------
Stockholders' Equity
Common stock, $10 par value; 200,000 shares
authorized, 129,439 shares issued and 129,022 outstanding 1,294
Additional paid-in capital 18
Retained earnings 4,886
Treasury stock, 417 shares held, at cost (10)
Net unrealized loss on available-for-sale investment securities (16)
-----------
Total stockholders' equity 6,172
-----------
Total liabilities and stockholders' equity $ 127,658
===========
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
1
<PAGE> 141
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
INTEREST INCOME
Loans, including fees and discounts $ 3,064 $ 3,089
Investment securities:
Taxable 672 525
Nontaxable 27 26
Federal funds sold 11 11
Interest-bearing deposits at other financial institutions 139 216
-------- --------
Total interest income 3,913 3,867
-------- --------
INTEREST EXPENSE
Deposits 1,345 1,468
Other borrowings 189 193
Total interest expense 1,534 1,661
-------- --------
Net interest income 2,379 2,206
Provision for loan losses 25 12
-------- --------
Net interest income after provision for loan losses 2,354 2,194
-------- --------
NONINTEREST INCOME
Service charges on deposit accounts 313 368
Investment securities gains (losses), net 2 (1)
Other 213 231
-------- --------
Total noninterest income 528 598
-------- --------
NONINTEREST EXPENSE
Salaries, wages and benefits 1,032 926
Occupancy and equipment 380 383
Other 736 667
-------- --------
Total noninterest expense 2,148 1,976
-------- --------
INCOME BEFORE INCOME TAXES AND ACCOUNTING CHANGE 734 816
Provision for income taxes 257 291
-------- --------
INCOME BEFORE ACCOUNTING CHANGE 477 525
-------- --------
Cumulative effect of change in accounting for income taxes - 83
-------- --------
NET INCOME $ 477 $ 608
======== ========
EARNINGS PER SHARE
Income per share before accounting change $ 3.70 $ 4.07
Cumulative effect of change in accounting for income taxes - .64
-------- --------
Net income per share $ 3.70 $ 4.71
======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 129,021 128,914
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
2
<PAGE> 142
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NET
UNREALIZED GAIN
(LOSS) ON
AVAILABLE-
ADDITIONAL FOR-SALE
COMMON PAID-IN RETAINED TREASURY INVESTMENT
STOCK CAPITAL EARNINGS STOCK SECURITIES TOTAL
----- ------- -------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1993 $ 1,294 $ 18 $ 4,409 $ (10) $ - $ 5,711
Cumulative effect of
change in accounting
for investment
securities - net
unrealized gains on
available-for-sale
investment securities - - - - 17 17
Net income for period - - 477 - - 477
Change in net unrealized gain (loss)
on available-for-sale
investment securities - - - - (33) (33)
--------- -------- ------- ----- ------- -------
Balance at
June 30, 1994 $ 1,294 $ 18 $ 4,886 $ (10) $ (16) $ 6,172
========= ======== ======= ===== ======= =======
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
3
<PAGE> 143
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 477 $ 608
Adjustments to reconcile net income to net cash provided
by (used in) operating activities
Provision for loan losses 25 12
Depreciation 176 183
Cumulative effect of change in accounting for income taxes - (83)
(Gain)/loss on sales of other real estate (9) 14
Net amortization (accretion) of investment securities 66 (116)
Investment securities (gains) losses, net (2) 1
Provision for losses on other real estate 63 24
Change in assets and liabilities
Decrease (increase) in accrued interest receivable,
other real estate and other assets 10 (90)
(Decrease) in accrued interest payable
and other liabilities (335) (587)
-------- ---------
Net cash provided by (used in) operating activities 471 (34)
-------- ---------
INVESTING ACTIVITIES
Purchases of premises and equipment (387) (87)
Proceeds from sales of other real estate 317 237
Purchases of investment securities (6,448) (13,822)
Proceeds from maturities and repayment
of investment securities 3,277 11,472
Proceeds from sales of investment securities - 1,535
Proceeds from sales of available-for-sale
investment securities 527 -
Proceeds from sale of premises and equipment 11 -
Net decrease in interest-bearing deposits at
other financial institutions 2,720 194
Net increase in loans (2,320) (1,460)
-------- ---------
Net cash used in investing activities (2,303) (1,931)
-------- ---------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 2,454 (3,429)
Net increase (decrease) in federal funds purchased (925) 450
Principal repayments of other borrowed funds (545) (450)
Proceeds from other borrowings 1,600 -
Issuance of treasury stock - 9
-------- ---------
Net cash provided by (used in) financing activities 2,584 (3,420)
-------- ---------
Net increase (decrease) in cash and cash equivalents 752 (5,385)
Cash and cash equivalents at beginning of period 5,596 10,909
-------- ---------
Cash and cash equivalents at end of period $ 6,348 $ 5,524
======== =========
SUPPLEMENTAL DISCLOSURES
Cash paid for interest $ 1,672 $ 1,837
======== =========
Cash paid for income taxes $ 427 $ 295
======== =========
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
4
<PAGE> 144
MID SOUTH BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1994
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles. The foregoing financial statements
are unaudited; however, in the opinion of management, all adjustments,
including normal recurring adjustments, necessary for a fair presentation of
the consolidated financial statements have been included. The accounting
policies followed by Mid South Bancshares, Inc. (the "Corporation") and its
subsidiaries for interim financial reporting are consistent with the accounting
policies followed for annual financial reporting, except as noted below. The
financial statements and notes included herein should be read in conjunction
with the notes to the consolidated financial statements for the year ended
December 31, 1993.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted in accordance with the rules of the Securities and Exchange
Commission.
Effective January 1, 1994, the Corporation adopted Statement of Financial
Accounting Standards No. 115 "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115"). The new standard addresses the accounting for
investments in equity securities that have readily determinable fair values and
for all investments in debt securities. The investment securities covered by
this standard are to be classified in one of three categories: (i) debt
securities for which the institution has a positive intent and ability to hold
to maturity are classified as "held- to-maturity" securities and are reported
at amortized cost; (ii) debt and equity securities that are bought and held
principally for the purpose of selling them in the near term are classified as
"trading securities" and reported at fair value, with the unrealized gains and
losses included in earnings; and (iii) debt and equity securities not
classified as either held-to-maturity or trading securities are classified as
"available-for-sale" securities and reported at the fair value with unrealized
gains and losses excluded from earnings and reported as a separate component of
stockholders' equity. In connection with the adoption of this statement, $3.45
million of securities were transferred to the available-for-sale category, with
a net unrealized gain of approximately $17,000, net of applicable deferred
income taxes, reflected as a separate component of stockholders' equity.
NOTE 2 - PENDING MERGER
In July 1994, the Board of Directors of the Corporation approved an Agreement
and Plan of Reorganization with another bank holding company whereby the two
parties intend to effectuate a merger of the Corporation with and into a
subsidiary of the other bank holding company. The merger, which is to be
accounted for as a pooling of interests, is dependent upon the approval of the
stockholders of the Corporation and various regulatory agencies. Additionally,
the Corporation is restricted from certain activities prior to the consummation
of the transaction.
5
<PAGE> 145
APPENDIX B
AGREEMENT AND PLAN OF REORGANIZATION,
ALONG WITH THE PLAN OF MERGER ANNEXED THERETO
AS EXHIBIT A
<PAGE> 146
AGREEMENT AND PLAN OF REORGANIZATION
DATED as of July 8, 1994
Between
UNION PLANTERS CORPORATION and
MSB ACQUISITION COMPANY, INC.
and
MID SOUTH BANCSHARES, INC.
Joined in by
SECURITY BANK and
FARMERS AND MERCHANTS BANK
<PAGE> 147
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
AGREEMENT AND PLAN OF REORGANIZATION . . . . . . . . . . . 1
AGREEMENT . . . . . . . . . . . . . . . . . . 2
ARTICLE 1
DEFINITIONS . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2
TERMS OF THE MERGER . . . . . . . . . . . . . . . 9
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Articles of Incorporation, Bylaws, Directors,
Officers and Name of the Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) Articles of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(b) Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(d) Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Due Diligence Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.5 UPC's Right to Revise the Structure of the Transaction . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Holding Period of UPC Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.7 MSB Stock Options and Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 3
DESCRIPTION OF TRANSACTION . . . . . . . . . . . . . 12
3.1 Terms of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(a) Satisfaction of Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(c) Conversion of Shares of INTERIM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(d) Conversion and Cancellation of Shares of MSB . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(e) Conversion and Exchange of MSB Shares; Exchange Ratio . . . . . . . . . . . . . . . . . . . . . 13
(f) Mechanics of Payment of the Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(g) Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(h) Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(i) Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(j) Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(k) Dissenting Shareholders' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(l) MSB Stock Options and Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.2 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
i
<PAGE> 148
<TABLE>
<S> <C> <C>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF UPC . . . . . . . . . . . 18
4.1 Organization and Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.2 Authorization, Execution and Delivery;
Reorganization Agreement Not in Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.3 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.4 Government Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.5 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.6 UPC Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.7 Exchange Act and Listing Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.8 The UPC Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.10 Labor and Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.11 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.12 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF MSB, SECURITY AND FARMERS . . . . . 24
5.1 Organization and Qualification of MSB and
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.2 Authorization, Execution and Delivery;
Reorganization Agreement Not in Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.3 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.4 Government and Other Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.5 Compliance With Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.6 Charter Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.7 MSB Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.8 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.9 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.10 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.11 MSB Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.12 Condition of Fixed Assets and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.13 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.14 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.15 Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.17 Labor and Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.18 Records and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.19 Capitalization of MSB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.20 Sole Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.21 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.22 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.23 Allowance for Possible Loan or ORE Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.24 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.25 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.26 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.27 Material Contract Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.28 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.29 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
ii
<PAGE> 149
<TABLE>
<S> <C> <C>
ARTICLE 6
COVENANTS OF UPC . . . . . . . . . . . . . . . . 44
6.1 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.2 Conduct of Business -- Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.3 Registration of UPC Common Stock under the Securities Laws . . . . . . . . . . . . . . . . . . . . . . . 45
6.4 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 7
COVENANTS OF MSB, SECURITY AND FARMERS . . . . . . . . . . 46
7.1 Proxy Statement; MSB Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.2 Conduct of Business -- Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.3 Conduct of Business -- Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 8
CONDITIONS TO CLOSING . . . . . . . . . . . . . . . 52
8.1 Conditions to the Obligations of MSB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(a) Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(b) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(c) Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(d) Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(e) Opinion of UPC's and INTERIM' Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(f) Inspections Permitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(g) No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.2 Conditions to the Obligations of UPC and INTERIM . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(a) Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(b) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(c) Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(d) Destruction of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
(e) Inspections Permitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
(f) No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
(g) Opinion of MSB's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
(h) Other Business Combinations, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
(i) Maintenance of Certain Covenants, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
(j) Non-Compete Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
(k) Pooling of Interests Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
(l) Receipt of Affiliate Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.3 Conditions to Obligations of All Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(a) No Pending or Threatened Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(b) Governmental Approvals and Acquiescence Obtained . . . . . . . . . . . . . . . . . . . . . . . . 59
(c) Effective Registration Statement and No Stop Orders . . . . . . . . . . . . . . . . . . . . . . 59
(d) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
iii
<PAGE> 150
<TABLE>
<S> <C> <C> <C>
ARTICLE 9
TERMINATION . . . . . . . . . . . . . . . . . 60
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE 10
GENERAL PROVISIONS . . . . . . . . . . . . . . . 63
10.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10.2 Assignability and Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.5 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.6 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.9 Modifications, Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.10 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.11 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.13 Equitable Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.14 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.15 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.16 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
10.17 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
</TABLE>
iv
<PAGE> 151
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Reorganization
Agreement") dated as of the 8th day of July, 1994, by and between UNION
PLANTERS CORPORATION ("UPC"), a corporation chartered and existing under the
laws of the State of Tennessee which is registered both as a bank holding
company and a savings and loan holding company and whose principal offices are
located at 7130 Goodlett Farms Parkway, Memphis, Shelby County, Tennessee
38018; MSB ACQUISITION COMPANY, INC. ("INTERIM"), a corporation chartered and
existing under the laws of the State of Arkansas whose principal place of
business is located at 300 South Church Street, Jonesboro, Craighead County,
Arkansas 72403 and a wholly- owned subsidiary of UPC; and MID SOUTH BANCSHARES,
INC. ("MSB"), a corporation chartered and existing under the laws of the State
of Arkansas which is a registered bank holding company and whose principal
offices are located at Court and Pruett Streets (P. O. Box 670), Paragould,
Greene County, Arkansas 72451; and joined in by SECURITY BANK ("SECURITY"), a
state bank chartered and existing under the laws of the State of Arkansas,
having its principal place of business at Court and Pruett Streets (P. O. Box
670), Paragould, Greene County, Arkansas 72451 and a wholly-owned subsidiary of
MSB; and FARMERS AND MERCHANTS BANK ("FARMERS"), a state bank chartered and
existing under the laws of the State of Arkansas, having its principal place of
business at 108 Main Street (P. O. Box 108), Reyno, Randolph County, Arkansas
72462 and a wholly-owned subsidiary of MSB.
SECURITY and FARMERS, for a valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each of them, has each joined in
this Reorganization Agreement for the sole purpose of making certain warranties
and representations set forth in Article 5 and binding itself to perform
certain covenants set forth in Article 7 as provided hereinafter. UPC,
INTERIM, MSB, SECURITY and FARMERS are sometimes referred to herein as the
"Parties."
RECITALS
A. MSB is the beneficial owner and holder of record of 120,000
shares of the common stock of SECURITY which constitute all of the shares of
common stock of SECURITY issued and outstanding (the "SECURITY Common Stock")
and 49,584 shares of the common stock of FARMERS which constitute all of the
shares of common stock of FARMERS issued and outstanding (the "FARMERS Common
Stock"), and desires to have itself, SECURITY and FARMERS acquired by UPC on
the terms and subject to the conditions set
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 1
<PAGE> 152
forth in this Reorganization Agreement and the accompanying Plan of Merger
(attached hereto as Exhibit A) (the "Plan of Merger").
B. The Boards of Directors of MSB, SECURITY and FARMERS deem it
desirable and in the best interests of MSB, SECURITY and FARMERS and the
shareholders of MSB (the "MSB Shareholders") that INTERIM be merged with and
into MSB (which would survive the merger) on the terms and subject to the
conditions set forth in this Reorganization Agreement and in the manner
provided in this Reorganization Agreement and the Plan of Merger.
C. The Boards of Directors of UPC and INTERIM deem it desirable
and in the best interests of UPC, INTERIM and the shareholders of UPC and
INTERIM that INTERIM be merged with and into MSB on the terms and subject to
the conditions set forth in this Reorganization Agreement and in the manner
provided in this Reorganization Agreement and Plan of Merger.
D. The respective Boards of Directors of UPC, INTERIM, MSB,
SECURITY and FARMERS have each adopted (or will each adopt) resolutions setting
forth and adopting this Reorganization Agreement and Plan of Merger, and have
directed that this Reorganization Agreement and Plan of Merger and all
resolutions adopted by said Boards of Directors and by the MSB Shareholders
related to this Reorganization Agreement, be submitted with appropriate
applications to, and filed with the Board of Governors of the Federal Reserve
System (the "Federal Reserve"), the Arkansas State Bank Department (the "ASBD")
and such other regulatory agencies or authorities as may be necessary in order
to obtain all governmental authorizations required to consummate the proposed
Merger (as defined herein) in accordance with this Reorganization Agreement,
the Plan of Merger and applicable law.
NOW THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants and agreements herein contained
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Parties agree as follows:
AGREEMENT
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Reorganization
Agreement, the following terms have the definitions indicated:
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 2
<PAGE> 153
"AFFILIATE" of a party means any person, partnership,
corporation, association or other legal entity directly or indirectly
controlling, controlled by or under common Control, as that term is defined
herein, with that party.
"APPLICABLE ENVIRONMENTAL LAWS" shall have the meaning
assigned to such term in Section 5.15(a) of this Reorganization Agreement.
"ASBD" shall mean the Arkansas State Bank Department.
"ARKANSAS CODE" means the Arkansas Code Annotated, as amended.
"ARKANSAS COMMISSIONER" shall mean the Commissioner of the
Arkansas State Bank Department.
"BALANCE SHEET DATE" shall have the meaning assigned to such
term in Section 5.8 of this Reorganization Agreement.
"BHCA" shall mean the Bank Holding Company Act of 1956, as
amended.
"BUSINESS DAY" shall mean any Monday, Tuesday, Wednesday,
Thursday or Friday that is not a federal or state holiday generally recognized
by banks in Tennessee or Arkansas.
"CERCLA" shall have the meaning set forth in Section 5.15(a)
of this Reorganization Agreement.
"CLOSING" shall have the meaning assigned to such term in
Section 3.1(a) of this Reorganization Agreement.
"CLOSING DATE" shall have the meaning assigned to such term in
Section 3.2 of this Reorganization Agreement.
"CONSIDERATION" shall mean the value to be received by the MSB
Record Holders in exchange for their MSB Common Stock, such value to be
determined as provided in Article 3, Section 3.1(e), of this Reorganization
Agreement.
"CONTROL" shall have the meaning assigned to such term in
Section 2(a)(2) of the Bank Holding Company Act of 1956, as amended.
"CURRENT MARKET PRICE PER SHARE" shall have the meaning set
forth in Section 3.1(e)(i) of this Reorganization Agreement.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 3
<PAGE> 154
"DEPOSITS" shall mean all deposits (including, but not limited
to, certificates of deposit, savings accounts, NOW accounts and checking
accounts) of SECURITY and FARMERS.
"EFFECTIVE DATE" shall mean that date on which the Effective
Time of the Merger shall have occurred.
"EFFECTIVE TIME OF THE MERGER" shall have the meaning assigned
in Section 3.3 of the Plan of Merger and Section 3.1(b) of this Reorganization
Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"EXCHANGE AGENT" shall mean Union Planters National Bank,
Memphis, Tennessee, acting through its Corporate Trust Department.
"EXCHANGE RATIO" shall have the meaning assigned to such term
in Section 3.1(e) of this Reorganization Agreement.
"FARMERS " means Farmers and Merchants Bank, a state bank
chartered and existing under the laws of the State of Arkansas and a
wholly-owned Subsidiary of MSB, having its principal place of business at 108
Main Street (P. O. Box 108), Reyno, Randolph County, Arkansas 72462.
"FARMERS COMMON STOCK" shall have the meaning assigned to such
term in Recital A of this Reorganization Agreement.
"FDIC" means the Federal Deposit Insurance Corporation.
"FEDERAL RESERVE" shall mean the Board of Governors of the
Federal Reserve System and shall include the Federal Reserve Bank of St. Louis
acting under delegated authority.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"GOVERNMENTAL APPROVALS" shall have the meaning assigned to
such term in Section 4.4 of this Reorganization Agreement.
"HAZARDOUS SUBSTANCES" shall have the meaning set forth in
Section 5.15(a) of this Reorganization Agreement.
"INTERIM" shall mean MSB Acquisition Company, Inc., an
Arkansas-chartered corporation having its principal place of business in
Jonesboro, Craighead County, Arkansas, and a wholly-owned Subsidiary of UPC.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 4
<PAGE> 155
"INTERIM COMMON STOCK" shall have the meaning assigned to such
term in Section 3.1(c) of this Reorganization Agreement.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code
of 1986, as amended.
"MERGER" shall, as described in Section 2.1 of this
Reorganization Agreement, mean the merger of INTERIM with and into MSB, which
shall survive the Merger as the Surviving Corporation.
"MSB" means Mid South Bancshares, Inc., an Arkansas-chartered
corporation registered as a bank holding company and headquartered at Court and
Pruett Streets (P. O. Box 670) Paragould, Greene County, Arkansas 72451.
"MSB COMMON STOCK" has the meaning assigned to such term in
Section 3.1(d) of this Reorganization Agreement.
"MSB COMPANIES" shall mean MSB and all of its Subsidiaries,
including SECURITY and FARMERS and their Subsidiaries.
"MSB EMPLOYEE PLANS" shall mean any pension plans, profit
sharing plans, deferred compensation plans, stock option plans, cafeteria
plans, and any other such or related benefit plans or arrangements offered or
funded by MSB or any MSB Subsidiary, including, but not limited to, SECURITY
and FARMERS, to or for the benefit of the officers, directors or employees of
MSB or any MSB Subsidiary.
"MSB RECORD HOLDERS" means the holders of record of all of the
issued and outstanding shares of MSB Common Stock immediately prior to the
Effective Time of the Merger.
"MSB SHAREHOLDERS" shall have the meaning assigned to such
term in Recital B of this Reorganization Agreement.
"MSB STOCK OPTIONS" shall have the meaning assigned to such
term in Section 3.1(l) of this Reorganization Agreement.
"NYSE" shall mean the New York Stock Exchange, or its
successor, upon which shares of the UPC Common Stock are listed for trading.
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 5
<PAGE> 156
"OFFICER" shall have the meaning set forth in Section 5.8(k)
of this Reorganization Agreement.
"PARTIES" shall mean MSB, SECURITY, FARMERS, UPC, and INTERIM
collectively; MSB, SECURITY and FARMERS on the one hand, or UPC and INTERIM on
the other hand, may sometimes be referred to as a "PARTY."
"PENSION PLAN" shall mean any employee pension benefit plan as
such term is defined in Section 3(2) of ERISA which is maintained by the
referenced Party.
"PERSON" shall mean any natural person, fiduciary,
corporation, partnership, joint venture, association, business trust or any
other entity of any kind.
"PLAN OF MERGER" shall mean the Plan of Merger substantially
in the form of Exhibit A hereto to be executed by authorized representatives of
MSB, UPC and INTERIM and filed with the Arkansas Secretary of State along with
the Articles of Merger in accordance with Section 4-26-1004 of the Arkansas
Code and providing for the Merger of INTERIM with and into FARMERS as
contemplated by Section 2.1 of this Reorganization Agreement.
"PROPERTY" shall have the meaning assigned to such term in
Section 5.15(a) of this Reorganization Agreement.
"PROXY STATEMENT" shall mean the proxy statement to be used by
MSB to solicit proxies with a view to securing the approval of the MSB
Shareholders of this Reorganization Agreement and the Plan of Merger.
"REALTY" means the real property of SECURITY, FARMERS or MSB
owned or leased by SECURITY, FARMERS or MSB or any Subsidiary of SECURITY,
FARMERS or MSB.
"RECORDS" means all available records, original instruments
and other documentation, pertaining to MSB, MSB's assets (including plans and
specifications relating to the Realty), MSB's liabilities, the MSB Common
Stock, the Deposits and the Loans, and all other business and financial records
which are necessary or customary for use in the conduct of MSB's, SECURITY's or
FARMERS's business by UPC and MSB on and after the Effective Time of the Merger
as it was conducted prior to the Closing Date.
"REGULATORY AUTHORITIES" shall mean, collectively, the Federal
Reserve, the ASBD, the FDIC, the SEC, or any other state or federal
governmental or quasi-governmental entity which has,
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 6
<PAGE> 157
or may hereafter have, jurisdiction over any of the transactions described in
this Reorganization Agreement.
"RELEASE" shall have the meaning assigned to such term in
Section 5.15(b)(i) of this Reorganization Agreement.
"REORGANIZATION AGREEMENT" means this Agreement and Plan of
Reorganization together with the Plan of Merger (Exhibit A), and all Exhibits
and Schedules annexed to, and incorporated by specific reference as a part of,
this Reorganization Agreement.
"SEC" shall mean the Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all reports, proxy statements and
registration statements filed, or required to be filed, by a Party or any of
its Subsidiaries pursuant to the Securities Laws, whether filed, or required to
be filed, with the SEC, the Comptroller, the FDIC or with any other Regulatory
Authority pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the rules
and regulations of the SEC promulgated thereunder, as well as the similar state
securities laws and any similar rules and regulations promulgated by the
applicable federal bank Regulatory Authorities.
"SECURITY" means Security Bank, a state bank chartered and
existing under the laws of the State of Arkansas and a wholly-owned Subsidiary
of MSB, having its principal place of business at Court and Pruett Streets (P.
O. Box 670), Paragould, Greene County, Arkansas 72451.
"SECURITY COMMON STOCK" shall have the meaning assigned to
such term in Recital A of this Reorganization Agreement.
"SHAREHOLDERS MEETING" shall mean the meeting of the MSB
Shareholders to be held pursuant to Section 7.1 of this Reorganization
Agreement, including any adjournment or adjournments thereof.
"SUBSIDIARIES" shall mean all of those corporations, banks,
associations or other entities of which the entity in question owns or controls
5% or more of the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 5% or more of the outstanding
equity securities is owned directly or indirectly by its parent;
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 7
<PAGE> 158
provided, however, that there shall not be included any such entity acquired
through foreclosure or in satisfaction of a debt previously contracted in good
faith, any such entity that owns or operates an automatic teller machine
interchange network, any such entity that is a joint venture of the parent or
of a Subsidiary of the parent, or any such entity the equity securities of
which are owned or controlled in a fiduciary capacity or through a small
business investment corporation.
"SURVIVING CORPORATION" shall mean MSB as the corporation
resulting from the consummation of the Merger as set forth in Section 2.1 of
this Reorganization Agreement.
"UNAUDITED FINANCIAL STATEMENTS OF MSB" shall have the meaning
assigned to such term in Section 5.7 of this Reorganization Agreement.
"UPC" shall mean Union Planters Corporation, a
Tennessee-chartered bank holding company which is also registered as a savings
and loan holding company having its principal place of business in Memphis,
Shelby County, Tennessee.
"UPC COMMON STOCK" shall have the meaning set forth in Section
4.5 of this Reorganization Agreement.
"UPC FINANCIAL STATEMENTS" shall mean (i) the audited
consolidated balance sheets and related consolidated statements of earnings, of
changes in shareholders' equity, and of cash flows (including related notes) of
UPC and its Subsidiaries as of December 31, 1992 and 1993 and each subsequent
December 31 prior to the Effective Time of the Merger, and (ii) the related
unaudited consolidated balance sheets and related consolidated statements of
earnings, of changes in shareholders' equity, and of cash flows (including
related notes) of UPC and its Subsidiaries for each of the quarters ended or
ending after January 1, 1994, as filed by UPC in SEC Documents.
"UPC PREFERRED STOCK" shall have the meaning assigned to such
term in Section 4.5 of this Reorganization Agreement.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 8
<PAGE> 159
ARTICLE 2
TERMS OF THE MERGER
2.1 The Merger.
Subject to the satisfaction (or lawful waiver) of all of the
conditions to the obligations of each of the Parties to this Reorganization
Agreement, at the Effective Time of the Merger, INTERIM shall be merged with
and into MSB (the "Merger"), which latter corporation (the "Surviving
Corporation") shall survive the Merger.
2.2 Articles of Incorporation, Bylaws, Directors,
Officers and Name of the Surviving Corporation.
(a) Articles of Incorporation. Immediately after
the Effective Time of the Merger, the Articles of Incorporation of MSB, as in
effect immediately prior to the Effective Time of the Merger, shall continue to
constitute the Articles of Incorporation of MSB as the Surviving Corporation,
unless and until the same shall be amended thereafter as provided by law and
the terms of such Articles of Incorporation.
(b) Bylaws. At the Effective Time of the Merger,
the Bylaws of MSB, as in effect immediately prior to the Effective Time of the
Merger, shall continue to be the Bylaws of MSB as the Surviving Corporation,
unless and until amended or repealed as provided by law, its Articles of
Incorporation and such Bylaws.
(c) Directors and Officers. The directors and
officers of INTERIM in office immediately prior to the Effective Time of the
Merger shall become the directors and officers of the Surviving Corporation, to
hold office as provided in the Articles of Incorporation and Bylaws of the
Surviving Corporation, unless and until their successors shall have been
elected or appointed and shall have qualified or until they shall have been
removed in the manner provided therein.
(d) Name. The name of MSB as the Surviving
Corporation following the Merger shall remain unchanged and continue to be:
MID SOUTH BANCSHARES, INC.
2.3 Due Diligence Review. Each Party shall be entitled
to continue to conduct its due diligence review of the books, records and
operations of the other Party, including, but not limited to, a review of the
Party's loan portfolios, ORE and
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 9
<PAGE> 160
classified assets, investment portfolios and properties, to verify the
reasonableness of the Party's earnings projections, growth projections and
sustained earnings prospects after consummation of the Merger at reasonable
growth rates.
2.4 Availability of Information. Promptly after the
execution by the Parties of this Reorganization Agreement, each Party shall
provide to the other Party, its Officers, employees, agents, and
representatives access, on reasonable notice and during customary business
hours, to all of the books, records, properties and facilities of the Party and
shall use its best efforts to cause its Officers, employees, agents and
representatives to cooperate with any of the reviewing Party's reasonable
requests for information which would be customary in order to conduct the
review provided for in Section 2.3 of this Reorganization Agreement. Except as
expressly permitted by the disclosing Party, the receiving Party shall keep
confidential all non-public information received by the disclosing Party in
connection with the provisions of this Section 2.4 and as further provided for
in that certain Confidentiality Agreement dated December 17, 1993.
2.5 UPC's Right to Revise the Structure of the
Transaction. UPC shall have the right with the consent of the Board of
Directors of MSB, which consent shall not be unreasonably withheld, to revise
the structure of the transaction to achieve tax benefits or for any other
reason which UPC may deem advisable; provided, however, that UPC shall not have
the right, without the approval of the Board of Directors of MSB, to make any
revision to the structure of the transaction (i) which changes the amount of
the Consideration which the MSB Record Holders are entitled to receive
(determined in the manner provided in Section 3.1(e) of this Reorganization
Agreement), (ii) changes the intended tax-free effects of the transaction to
UPC or MSB or the stockholders thereof, (iii) which would permit UPC to pay the
Consideration other than by delivery of shares of UPC Common Stock registered
with the SEC (in the manner described in Section 6.2 of this Reorganization
Agreement) or (iv) which might otherwise adversely financially impact the
interests of MSB, or the MSB Record Holders. UPC may exercise this right of
revision by giving written Notice to MSB, SECURITY and FARMERS in the manner
provided in Section 10.1 of this Reorganization Agreement which Notice shall be
in the form of an amendment to this Reorganization Agreement or in the form of
an Amended and Restated Agreement and Plan of Reorganization.
2.6 Holding Period of UPC Common Stock. MSB, SECURITY
and FARMERS hereby acknowledge and agree that, in order to qualify the Merger
under the Internal Revenue Code as a tax-free reorganization and for accounting
purposes as a pooling of
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 10
<PAGE> 161
interests under the rules and regulations promulgated by the SEC, Accounting
Principles Board Opinion No. 16 and GAAP, any MSB Record Holder who would be
deemed an Affiliate of MSB at the time of Closing under the Securities Laws and
who accepts shares of UPC Common Stock as Consideration for the cancellation,
exchange and conversion of his shares of MSB Common Stock pursuant to the terms
and conditions of this Reorganization Agreement, shall not pledge on a
non-recourse basis, assign, sell, transfer, devise, otherwise alienate or take
any action which would eliminate or diminish the risk of owning or holding the
shares of UPC Common Stock to be received by such MSB Record Holder upon
consummation of the Merger, nor enter into any formal or informal agreement to
pledge on a non-recourse basis, assign, sell or transfer, devise, or otherwise
alienate his right, title and interests in any of the shares of UPC Common
Stock to be delivered by UPC to such MSB Record Holder pursuant to the terms
and conditions of this Reorganization Agreement until such time as UPC shall
have publicly released a statement of UPC's consolidated earnings reflecting
the combined financial results of operations of UPC and MSB for a period of not
less than thirty (30) days subsequent to the Effective Time of the Merger. MSB
further acknowledges and agrees that any UPC Common Stock Certificates issued
in connection with the Merger to MSB Record Holders who would be deemed
Affiliates of MSB or UPC at the time of Closing under the Securities Laws shall
be subject to and bear a restrictive legend substantially in the form as
follows:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE HELD SUBJECT
TO ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND THE RULES AND REGULATIONS PROMULGATED BY
THE SECURITIES AND EXCHANGE COMMISSION ("SEC") THEREUNDER. NO SALES,
TRANSFERS OR OTHER DISPOSITION OF THESE SHARES MAY BE MADE EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT (OTHER THAN A REGISTRATION STATEMENT ON SEC FORM S-4) OR IN
ACCORDANCE WITH THE REQUIREMENTS OF SEC RULES 144 AND 145 OR IS
OTHERWISE EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT. NO SALE,
TRANSFER, OR OTHER DISPOSITION OF THESE SHARES MAY BE MADE UNTIL AFTER
THE PUBLICATION OF FINANCIAL RESULTS COVERING AT LEAST 30 DAYS OF POST
MERGER COMBINED OPERATIONS OF UPC AND MID SOUTH BANCSHARES, INC. NO
AGREEMENT MAY BE ENTERED INTO BY THE HOLDER OF THIS CERTIFICATE WHICH
WOULD ALLOW OR REQUIRE THE SALE, TRANSFER, OR OTHER DISPOSITION OF
THESE SHARES DURING THE TIME PERIOD MENTIONED ABOVE OR WHICH WOULD
OTHERWISE REDUCE THE RISK BORNE BY THE SHAREHOLDER NAMED ON THE
REVERSE SIDE OF THIS CERTIFICATE SUBSEQUENT TO THE CONSUMMATION OF THE
MERGER.
2.7 MSB Stock Options and Treasury Stock. As of the date
of this Reorganization Agreement, except as set forth on
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 11
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Schedule 2.7 hereto, there are no validly issued and outstanding options to
purchase shares of MSB Common Stock; and no other options, rights, warrants,
scrip or similar rights to purchase shares of MSB Common Stock (collectively,
the "MSB Stock Options") are (or have been) issued and outstanding by MSB.
Except as set forth on Schedule 2.7 hereto, at the Effective Time of the
Merger, there will be no issued and outstanding MSB Stock Options. Except as
set forth on Schedule 2.7 hereto, as of the date of this Reorganization
Agreement, MSB has not repurchased any shares of its capital stock. Except as
set forth on Schedule 2.7 hereto, as of the date of this Reorganization
Agreement, there are no shares of MSB Common Stock held by MSB as Treasury
Stock, nor will there be any such shares at the Effective Time of the Merger.
ARTICLE 3
DESCRIPTION OF TRANSACTION
3.1 Terms of the Merger.
(a) Satisfaction of Conditions to Closing. After
the transactions contemplated herein have been approved by the shareholders of
MSB and INTERIM, and each other condition to the obligations of the Parties
hereto has been satisfied or, if lawfully permitted, waived by the Party or
Parties entitled to the benefits thereof, other than those conditions which are
to be satisfied by delivery of documents by any Party to any other Party, a
closing (the "Closing") will be held on the date (the "Closing Date") and at
the time of day and place referred to in Section 3.2 of this Reorganization
Agreement. At the Closing the Parties shall use their respective best efforts
to deliver the certificates, letters and opinions which constitute conditions
to the Merger and each Party will provide the other Parties with such proof or
indication of satisfaction of the conditions of such other Parties to
consummate the Merger as such other Parties may reasonably require. If all
conditions to the obligations of each of the Parties have been satisfied or
lawfully waived by the Party entitled to the benefits thereof, the Parties
shall, at the Closing, duly execute Articles of Merger for filing with the
Secretary of State of the State of Arkansas and immediately thereafter UPC
shall file or cause to be filed such Articles of Merger with the Secretary of
State of the State of Arkansas, and INTERIM and MSB shall take all steps
necessary or desirable to consummate the Merger in accordance with all
applicable laws, rules and regulations and the Plan of Merger which is attached
hereto as Exhibit A and incorporated by reference as part of this
Reorganization Agreement. The Parties shall thereupon take such other and
further actions as UPC shall reasonably direct or as
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 12
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may be required by law or this Reorganization Agreement to consummate the
transactions contemplated herein.
(b) Effective Time of the Merger. Upon the
satisfaction of all conditions to Closing, the Merger shall become effective on
the date and at the time of filing of Articles of Merger with the Secretary of
State of the State of Arkansas or at such later date and/or time as may be
agreed upon by the Parties and set forth in the Articles of Merger so filed
(the "Effective Time of the Merger").
(c) Conversion of Shares of INTERIM. At the
Effective Time of the Merger, each share of $1.00 par value common stock of
INTERIM (the "INTERIM Common Stock") issued and outstanding immediately prior
to the Effective Time of the Merger shall, by virtue of the Merger becoming
effective and without any further action on the part of anyone, be converted
into and become one share of the issued and outstanding common stock of the
Surviving Corporation.
(d) Conversion and Cancellation of Shares of MSB.
At the Effective Time of the Merger, each share of $10.00 par value common
stock of MSB (the "MSB Common Stock") validly issued and outstanding
immediately prior to the Effective Time of the Merger shall, by virtue of the
Merger becoming effective and without any further action on the part of anyone,
be converted, exchanged and cancelled as provided in Section 3.1(e) hereof,
except with respect to such shares of MSB Common Stock as to which dissenters'
rights have been perfected and should remain perfected at the Effective Time of
the Merger.
(e) Conversion and Exchange of MSB Shares;
Exchange Ratio. At the Effective Time of the Merger, the outstanding shares of
MSB Common Stock held by the MSB Record Holders immediately prior to the
Effective Time of the Merger shall, without any further action on the part of
anyone, cease to represent any interest (equity, shareholder or otherwise) in
MSB and shall, except for those shares of MSB Common Stock held and registered
in the name of any MSB Record Holder who shall have perfected his dissenters'
rights and shall have continued such dissenting status through the Effective
Time of the Merger, automatically be converted exclusively into, and constitute
only the right of the MSB Record Holders to receive in exchange for their
shares of MSB Common Stock, whole shares of UPC Common Stock and a cash payment
in settlement of any remaining fractional share of UPC Common Stock in
accordance with the terms and conditions of this Section 3.1(e). The shares of
UPC Common Stock and the cash settlement of any remaining fractional share of
UPC Common Stock deliverable by UPC to the MSB Record Holders
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 13
<PAGE> 164
pursuant to the terms of this Reorganization Agreement are sometimes
collectively referred to herein as the "Consideration."
The number of shares of UPC Common Stock to be exchanged for each share of MSB
Common Stock issued and outstanding immediately prior to the Effective Time of
the Merger (based on there being no more than 129,366 shares of MSB Common
Stock issued and outstanding immediately prior to the Effective Time of the
Merger) shall be based on an exchange ratio (the "Exchange Ratio") as
determined and set forth in this Section 3.1(e). The Exchange Ratio shall be
determined as follows:
(i) In the event the Current Market Price
Per Share of UPC Common Stock should be greater than or equal to
$24.00 per share of UPC Common Stock but less than or equal to $28.00
per share of UPC Common Stock (the "Primary Collar"), the Exchange
Ratio shall be fixed at 4.054 shares of UPC Common Stock for each
share of MSB Common Stock issued and outstanding at the Effective Time
of the Merger;
(ii) In the event the Current Market Price
Per Share of UPC Common Stock should be greater than $28.00 per share
of UPC Common Stock but less than or equal to $30.00 per share of UPC
Common Stock (the "Upper Secondary Collar"),the Exchange Ratio shall
be based on (a) a fixed price of $113.51 per share of MSB Common Stock
divided by (b) the Current Market Price Per Share of UPC Common Stock
for each share of MSB Common Stock validly issued and outstanding at
the Effective Time of the Merger;
(iii) In the event the Current Market Price
Per Share of UPC Common Stock should be greater than $30.00 per share
of UPC Common Stock (the "Ceiling"), the Exchange Ratio shall be fixed
at 3.7837 shares of UPC Common Stock for each share or MSB Common
Stock;provided, however, UPC would have the right to either deliver
the fixed Exchange Ratio of 3.7837 or to terminate the transaction
contemplated in this Reorganization Agreement; provided, however,
should UPC elect to terminate the transaction under this provision,
MSB would have the unilateral right to reinstate the transaction by
accepting in exchange for each share of MSB Common Stock issued and
outstanding that number of shares of UPC Common Stock at the Current
Market Price Per Share sufficient to equal $113.51 per share of MSB
Common Stock;
(iv) In the event the Current Market Price
Per Share of UPC Common Stock should be greater than or equal to
$22.00 per share of UPC Common Stock but less than $24.00 per share of
UPC Common Stock (the "Lower Secondary
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 14
<PAGE> 165
Collar"), the Exchange Ratio shall be based on (a) a fixed price of
$97.30 per share of MSB Common Stock divided by (b) the Current Market
Price Per Share of UPC Common Stock for each share of MSB Common Stock
validly issued and outstanding at the Effective Time of the Merger;
and
(v) In the event the Current Market Price
Per Share of UPC Common Stock should be less than $22.00 per share of
UPC Common Stock (the "Floor"), the Exchange Ratio shall be fixed at
4.4227 shares of UPC Common Stock for each share of MSB Common Stock;
provided, however, MSB shall have the right to either accept the fixed
Exchange Ratio of 4.4227 or to terminate the transaction contemplated
in this Reorganization Agreement; provided, however, should MSB elect
to terminate the transaction under this provision, UPC would have the
unilateral right to reinstate the transaction by delivering in
exchange for each share of MSB Common Stock issued and outstanding
that number of shares of UPC Common Stock at the Current Market Price
Per Share sufficient to equal $97.30 per share of MSB Common Stock.
The Exchange Ratio shall be based on an aggregate of no more than 129,366
shares of MSB Common Stock issued and outstanding immediately prior to the
Effective Time of the Merger; provided, however, that no fractional shares of
UPC Common Stock shall be issued and if, after aggregating all of the shares of
UPC Common Stock to which a MSB Record Holder would be entitled based upon the
Exchange Ratio, there were a fractional share of UPC Common Stock remaining,
such fractional share shall be settled by a cash payment therefor based upon
the Current Market Price Per Share of one (1) full share of UPC Common Stock.
(1) DEFINITION OF "CURRENT MARKET PRICE
PER SHARE." The "Current Market Price Per Share" shall be the average
closing price per share of the "last" real time trades (i.e., closing
price) of the UPC Common Stock on the NYSE (as published in The Wall
Street Journal) for each of the ten (10) NYSE general market trading
days next preceding the Closing Date on which the NYSE was open for
business (the "Pricing Period"). In the event the UPC Common Stock
does not trade on one or more of the trading days during the Pricing
Period (a "No Trade Date"), any such No Trade Date shall be
disregarded in computing the average closing price per share of UPC
Common Stock and the average shall be based upon the "last" real time
trades and number of days on which the UPC Common Stock actually
traded during the Pricing Period.
(2) EFFECTS OF DISSENTERS' RIGHTS ON THE
EXCHANGE RATIO. Should MSB Record Holders representing at
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 15
<PAGE> 166
least seven percent (7%) of the shares of MSB Common Stock issued and
outstanding at the time of Closing perfect such MSB Record Holder's
dissenters' rights pursuant to the Arkansas Code and maintain the
perfected status of such dissenters' rights through the Closing Date,
UPC and INTERIM shall have the right, exercisable in their sole
discretion, to terminate this Reorganization Agreement, or with the
approval of the Board of Directors of MSB reduce the number of shares
of UPC Common Stock to be delivered by UPC hereunder by an amount
sufficient to off-set against the Consideration any amounts paid, or
to be paid, by UPC in satisfaction of such dissenters' rights.
(3) EFFECT OF STOCK SPLITS, REVERSE
STOCK SPLITS, STOCK DIVIDENDS AND SIMILAR CHANGES IN THE CAPITAL OF
UPC OR MSB. Should either UPC or MSB effect any stock splits, reverse
stock splits, stock dividends or similar changes in their respective
capital accounts subsequent to the date of this Reorganization
Agreement but prior to the Effective Time of the Merger, the Exchange
Ratio shall be adjusted proportionately in such a manner as the Board
of Directors of UPC and the Board of Directors of MSB shall agree in
good faith to be fair and reasonable in order to give effect to such
changes.
(f) Mechanics of Payment of the Consideration.
At the Closing and upon receipt of the proper submission of the certificate(s)
formerly representing and evidencing ownership of the shares of MSB Common
Stock, the Exchange Agent shall, deliver to the former MSB Shareholders in
exchange for the certificate(s) surrendered by them, the Consideration to be
paid for each such MSB Shareholder's shares of MSB Common Stock evidenced by
the certificate or certificates which were cancelled and converted exclusively
into the right to receive the Consideration upon the Merger becoming effective.
After the Effective Time of the Merger and until properly surrendered to the
Exchange Agent, each outstanding certificate or certificates which formerly
evidenced and represented the shares of MSB Common Stock of an MSB Record
Holder, subject to the provisions of this Section, shall be deemed for all
corporate purposes to represent and evidence only the right to receive the
Consideration into which such MSB Record Holder's shares of MSB Common Stock
were converted and aggregated at the Effective Time of the Merger. Unless and
until the outstanding certificate or certificates, which immediately prior to
the Effective Time of the Merger evidenced and represented the MSB Record
Holder's MSB Common Stock shall have been surrendered as provided above, the
Consideration payable to the MSB Record Holder(s) of the cancelled shares as of
any time after the Effective Date shall not be paid to the MSB Record Holder(s)
of such certificate(s) until such certificates shall have been
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 16
<PAGE> 167
surrendered in the manner required. Each MSB Shareholder will be responsible
for all federal, state and local taxes which may be incurred by him on account
of his receipt of the Consideration to be paid in the Merger. The MSB Record
Holder(s) of any certificate(s) which shall have been lost or destroyed may
nevertheless, subject to the provisions of this Section, receive the
Consideration to which each such MSB Record Holder is entitled, provided that
each such MSB Record Holder shall deliver to UPC and to the Exchange Agent: (i)
a sworn statement certifying such loss or destruction and specifying the
circumstances thereof and (ii) a lost instrument bond in form satisfactory to
UPC and the Exchange Agent which has been duly executed by a corporate surety
satisfactory to UPC and the Exchange Agent, indemnifying the Surviving
Corporation, UPC, the Exchange Agent (and their respective successors) to their
satisfaction against any loss or expense which any of them may incur as a
result of such lost or destroyed certificates being thereafter presented. Any
costs or expenses which may arise from such replacement procedure, including
the premium on the lost instrument bond, shall be for the account of the MSB
Shareholder.
(g) Stock Transfer Books. At the Effective Time
of the Merger, the stock transfer books of MSB shall be closed and no transfer
of shares of MSB Common Stock shall be made thereafter.
(h) Effects of the Merger. As of the Effective
Time of the Merger, the separate existence of INTERIM shall cease, and INTERIM
shall be merged with and into MSB which, as the Surviving Corporation, shall
thereupon and thereafter possess all of the assets, rights, privileges,
appointments, powers, licenses, permits and franchises of the two merged
corporations, whether of a public or a private nature, and shall be subject to
all of the liabilities, restrictions, disabilities and duties of both MSB and
INTERIM.
(i) Transfer of Assets. At the Effective Time of
the Merger, all rights, assets, licenses, permits, franchises and interests of
MSB and INTERIM in and to every type of property, whether real, personal, or
mixed, whether tangible or intangible, and to choses in action shall be deemed
to be vested in MSB as the Surviving Corporation by virtue of the Merger
becoming effective and without any deed or other instrument or act of transfer
whatsoever.
(j) Assumption of Liabilities. At the Effective
Time of the Merger, the Surviving Corporation shall become and be liable for
all debts, liabilities, obligations and contracts of MSB as well as those of
INTERIM, whether the same shall be matured or unmatured; whether accrued,
absolute, contingent or
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 17
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otherwise; and whether or not reflected or reserved against in the balance
sheets, other financial statements, books of account or records of MSB or
INTERIM.
(k) Dissenting Shareholders' Rights. Any MSB
Record Holder of shares of MSB Common Stock who shall comply strictly with the
provisions of Section 4-27-1302 et seq. of the Arkansas Code, shall be entitled
to dissent from the Merger and to seek those appraisal remedies afforded by the
Arkansas Code. Such an MSB Shareholder is referred to herein as an "MSB
Dissenting Shareholder." However, UPC and INTERIM shall not be obligated to
consummate the Merger if MSB Record Holders holding or controlling more than
seven percent (7%) of the shares of the MSB Common Stock issued and outstanding
immediately prior to the Effective Time of the Merger shall have perfected and
maintained in perfected status their dissenters' rights in accordance with the
Arkansas Code and the perfected status of said dissenters' rights shall have
continued to the time of Closing.
(l) MSB Stock Options and Treasury Stock. As of
the date of this Reorganization Agreement, except as set forth on Schedule 2.7
hereto, there are no options, rights, warrants, scrip or similar rights issued
and outstanding by MSB to purchase shares of MSB Common Stock (the "MSB Stock
Options"). Therefore, except as set forth on Schedule 2.7 hereto, at the
Effective Time of the Merger there will be no issued or outstanding MSB Stock
Options. As of the date of this Reorganization Agreement, except as set forth
on Schedule 2.7 hereto, there are no shares of MSB Common Stock held by MSB as
Treasury Stock.
3.2 Time and Place of Closing. The Closing shall take
place at 10:00 a.m. on the Business Day next preceding the date on which the
Effective Time of the Merger is expected to occur, or at such other time as the
Parties, acting through their chief executive officers, presidents or chief
financial officers, may mutually agree (the "Closing Date"). The place of
Closing shall be at Union Planters Corporation, Administrative Center,
Executive Offices (Fourth Floor), 7130 Goodlett Farms Parkway, Memphis, Shelby
County, Tennessee 38018. The Closing may be held at such other time and place
as may be mutually agreed upon by the Parties.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF UPC
As of the date hereof and as of the Effective Time of the
Merger, UPC and INTERIM represent and warrant to MSB as follows:
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 18
<PAGE> 169
4.1 Organization and Corporate Authority. UPC and
INTERIM are corporations duly organized, validly existing and in good standing
under the laws of the State of Tennessee and the State of Arkansas,
respectively, and (i) have, in all material respects, all requisite corporate
power and authority to own, operate and lease their material properties and
carry on their businesses as they are currently being conducted; (ii) are in
good standing and are duly qualified to do business in each jurisdiction where
the character of their properties owned or held under lease or the nature of
their business makes such qualification necessary; and (iii) have in effect all
federal, state, local and foreign governmental authorizations, permits and
licenses necessary for them to own or lease their properties and assets and to
carry on their businesses as they are currently being conducted. Neither UPC
nor INTERIM has received notice of any proceeding for the suspension or
revocation of any such license, franchise, permit or authorization, and no such
proceeding is pending or has been threatened by any government authority. The
corporate Charters and Bylaws of UPC and INTERIM, as amended to date, are in
full force and effect as of the date of this Reorganization Agreement.
4.2 Authorization, Execution and Delivery; Reorganization
Agreement Not in Breach.
(a) UPC and INTERIM have all requisite corporate
power and authority to execute and deliver this Reorganization Agreement and
the Plan of Merger and to consummate the transactions contemplated hereby and
thereby. This Reorganization Agreement, and all other agreements contemplated
to be executed in connection herewith by UPC and/or INTERIM, have been (or upon
execution will have been) duly executed and delivered by UPC and/or INTERIM,
have been (or upon execution will have been) effectively authorized by all
necessary action, corporate or otherwise, and, other than the approval of UPC
as sole shareholder of INTERIM and UPC's Board of Directors, no other corporate
proceedings on the part of UPC or INTERIM are (or will be) necessary to
authorize such execution and delivery, and constitute (or upon execution will
constitute) legal, valid and enforceable obligations of UPC and INTERIM,
subject, as to enforceability, to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally, and to the application of equitable principles and
judicial discretion.
(b) The execution and delivery of this
Reorganization Agreement and the Plan of Merger, the consummation of the
transactions contemplated hereby and thereby and the fulfillment of the terms
hereof and thereof will not result in a breach of any of the terms or
provisions of, or constitute a
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 19
<PAGE> 170
default under (or an event which, with the passage of time or the giving of
notice or both, would constitute a default under), or conflict with, or permit
the acceleration of any obligation under, any material mortgage, lease,
covenant, agreement, indenture or other instrument to which UPC or INTERIM is a
party or by which they or their property or any of their assets are bound; the
corporate Charters or Bylaws of UPC or INTERIM; or any material judgment,
decree, order, regulatory letter of understanding or award of any court,
governmental body, authority or arbitrator by which UPC or INTERIM is bound; or
any material permit, concession, grant, franchise, license, law, statute,
ordinance, rule or regulation applicable to UPC or INTERIM or their properties;
or result in the creation of any lien, claim, security interest, encumbrance,
charge, restriction or right of any third party of any kind whatsoever upon the
property or assets of UPC or INTERIM, except that the Government Approvals
shall be required in order for UPC or INTERIM to consummate the Merger.
4.3 No Legal Bar. Neither UPC nor INTERIM is a party to,
subject to or bound by any agreement, judgment, order, writ, letter of
understanding, prohibition, injunction or decree of any court or other
governmental body of competent jurisdiction or any law which would prevent the
execution of this Reorganization Agreement or the Plan of Merger by UPC or
INTERIM, its delivery to MSB, SECURITY and FARMERS or the consummation of the
transactions contemplated hereby and thereby, and no action or proceeding is
pending against UPC or INTERIM in which the validity of this Reorganization
Agreement, any of the transactions contemplated hereby or any action which has
been taken by any of the Parties in connection herewith or in connection with
any of the transactions contemplated hereby is at issue.
4.4 Government Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state or local governmental authority is required to be made or obtained by UPC
or INTERIM in connection with the execution and delivery of this Reorganization
Agreement or the consummation of the transactions contemplated hereby by UPC or
INTERIM, except for: (a) the prior approval of the Board of Governors of the
Federal Reserve System (the "Federal Reserve") of the Merger under the Bank
Holding Company Act of 1956, as amended; and (b) the prior approval of the
Arkansas State Bank Department ("ASBD") under Section 23-32-1801 et seq of the
Arkansas Code and the regulations promulgated by the ASBD thereunder
(collectively, the "Government Approvals").
4.5 Capitalization. (a) The authorized capital stock of
UPC consists of 10,000,000 shares of preferred stock having no
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 20
<PAGE> 171
par value (the "UPC Preferred Stock"), and 50,000,000 shares of common stock
having a par value of $5.00 per share (the "UPC Common Stock"). As of June 30,
1994, UPC had issued and outstanding: 44,000 shares of $8.00 Nonredeemable
Cumulative Convertible Preferred Stock, Series B; 690,000 shares of 10-3/8%
Increasing Rate, Redeemable, Cumulative Preferred Stock, Series C; 253,655
shares of 9.5% Redeemable, Cumulative Preferred Stock, Series D; and 3,107,922
shares of 8% Cumulative, Convertible Preferred Stock, Series E. In addition,
250,000 shares of UPC Preferred Stock have been reserved for issuance as Series
A Preferred Stock pursuant to the UPC Share Purchase Rights Agreement dated
January 19, 1989, between UPC and Union Planters National Bank as Rights Agent
(the "UPC Share Purchase Rights Agreement"). As of June 30, 1994, 21,814,022
shares of UPC Common Stock were validly issued and outstanding.
Except as described in Schedule 4.5 hereto, UPC is the holder,
directly or indirectly, of all of the outstanding capital stock of its
Subsidiaries, except for director qualifying shares.
(b) The authorized capital stock of INTERIM consists
of 1,000 shares of common stock having a par value of $1.00 per share (the
"INTERIM Common Stock") and no preferred stock. As of the date hereof, INTERIM
had issued all 1,000 shares of the authorized INTERIM Common Stock to UPC.
Therefore, UPC is the record holder and beneficial owner of all of the INTERIM
Common Stock outstanding.
4.6 UPC Financial Statements. UPC has delivered and, to
the extent reference is made to financial statements not yet available or
capable of development, will deliver to MSB true and complete copies of: (i)
UPC's audited Consolidated Financial Statements for the calendar years ended
December 31, 1992 and 1993 (as originally issued, but without giving effect to
subsequently effected business combinations accounted for as poolings of
interests); (ii) UPC's unaudited consolidated financial statements for each of
the calendar quarters ending in calendar year 1994 and thereafter, ending prior
to the Closing Date; and (iii) upon issuance thereof, UPC's audited
Consolidated Financial Statements for the calendar year ending December 31,
1994. Such financial statements and the notes thereto present fairly, or will
present fairly when issued, in all material respects, the consolidated
financial position of UPC at the respective dates thereof and the consolidated
results of operations and consolidated cash flow of UPC for the periods
indicated, and in each case in conformity with GAAP consistently applied and
maintained. Since the date of the most recent SEC Document filed by UPC, UPC
has not suffered a material adverse change on its business, operations or
financial condition taken as a whole.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 21
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4.7 Exchange Act and Listing Filings.
(a) The outstanding shares of UPC Common Stock are registered with
the SEC pursuant to the 1934 Act and UPC has filed with the SEC all material
forms and reports required by law to be filed by UPC with the SEC, which forms
and reports, taken as a whole, are true and correct in all material respects,
and do not misstate a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
(b) The outstanding shares of UPC Common Stock are listed for
trading on the NYSE (under the symbol "UPC") pursuant to the listing rules of
the NYSE and UPC has filed with the NYSE all material forms and reports
required by the NYSE to be filed by UPC with the NYSE, which forms and reports,
taken as a whole, are true and correct in all material respects, and do not
misstate a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
4.8 The UPC Common Stock. All shares of UPC Common Stock
to be issued by UPC and delivered to the MSB Record Holders in exchange for all
of the MSB Common Stock will be duly authorized, validly issued, fully paid and
non-assessable, and none of such shares of UPC Common Stock will have been
issued in violation of any preemptive rights of any UPC shareholders. The
shares of UPC Common Stock to be delivered in payment of the Consideration
shall have in all material respects such distinguishing characteristics as
those of the shares of UPC Common Stock outstanding immediately prior to the
Effective Time of the Merger. Specifically, such shares shall be issued to MSB
Record Holders pursuant to an effective registration statement of appropriate
form, and will be listed for trading on the NYSE.
4.9 Litigation. Except as set forth in Schedule 4.9
hereto, there is no action, suit or proceeding pending against UPC or any UPC
Subsidiary, or to the best knowledge of UPC or any UPC Subsidiary threatened
against or affecting UPC, any UPC Subsidiary or any of their assets, before any
court or arbitrator or any governmental body, agency or official that (i)
would, if decided against UPC or the UPC Subsidiary, have a material adverse
impact on the business, properties, assets, liabilities, condition (financial
or other) or prospects of UPC or any UPC Subsidiary and that are not reflected
in the UPC Financial Statements or (ii) has been brought by or on behalf of any
employee employed or formerly employed by UPC or any UPC
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Subsidiary that would have a material adverse impact on UPC or any UPC
Subsidiary.
4.10 Labor and Employment Matters. Except as reflected in
Schedule 4.10 hereto, there is no (i) collective bargaining agreement or other
labor agreement to which UPC or any UPC Subsidiary is a party or by which any
of them is bound; (ii) employment, profit sharing, deferred compensation,
bonus, stock option, purchase, retainer, consulting, retirement, welfare or
incentive plan or contract to which UPC or any UPC Subsidiary is a party or by
which it is bound; or (iii) plan or agreement under which "fringe benefits"
(including, but not limited to, vacation plans or programs, sick leave plans or
programs and related benefits) are afforded any of the employees of UPC or any
UPC Subsidiary. No party to any such agreement, plan or contract is in default
with respect to any material term or condition thereof, nor has any event
occurred which, through the passage of time or the giving of notice, or both,
would constitute a default thereunder or would cause the acceleration of any
obligation of any party thereto. Neither UPC nor any UPC Subsidiary has
received notice from any governmental agency of any alleged violation of
applicable laws that remains unresolved respecting employment and employment
practices, terms and conditions of employment and wages and hours. UPC and
each UPC Subsidiary have complied in all material respects with all applicable
laws, rules and regulations relating to the employment of labor, including
those related to its employment practices, employee disabilities, wages, hours,
collective bargaining and the payment and withholding of taxes and other sums
as required by the appropriate governmental authorities, and UPC and each UPC
Subsidiary have withheld and paid to the appropriate governmental authorities
or are holding for payment not yet due to such authorities, all amounts
required to be withheld from the employees of UPC and each UPC Subsidiary and
are not liable for any arrears of wages, taxes, penalties or other sums for
failure to comply with any of the foregoing. Except as set forth in Schedule
4.10, there is no: unfair labor practice complaint against UPC or any UPC
Subsidiary pending before the National Labor Relations Board or any state or
local agency; pending labor strike or other labor trouble affecting UPC or any
UPC Subsidiary; labor grievance pending against UPC or any UPC Subsidiary;
pending representation question respecting the employees of UPC or any UPC
Subsidiary; pending arbitration proceedings arising out of or under any
collective bargaining agreement to which UPC or any UPC Subsidiary is a party,
or to the best knowledge of UPC, any basis for which a claim may be made under
any collective bargaining agreement to which UPC or any UPC Subsidiary is a
party.
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4.11 Absence of Undisclosed Liabilities. Except as
described in Schedule 4.11 hereto, neither UPC nor any UPC Subsidiary has any
obligation or liability (contingent or otherwise) that is material to the
financial condition or operations of UPC or any UPC Subsidiary, or that, when
combined with all similar obligations or liabilities, would be material to the
financial condition or operations of UPC or any UPC Subsidiary (i) except as
disclosed in the UPC Financial Statements delivered to MSB prior to the date of
this Reorganization Agreement, or (ii) except obligations or liabilities
incurred in the ordinary course of its business consistent with past practices,
or (iii) except as contemplated under this Reorganization Agreement. Except as
described in Schedule 4.11 hereto, since December 31, 1992, neither UPC nor any
UPC Subsidiary has incurred or paid any obligation or liability which would be
material to the financial condition or operations of UPC or such UPC
Subsidiary, except for obligations paid in connection with transactions made by
it in the ordinary course of its business consistent with past practices, laws
and regulations applicable to UPC or any UPC Subsidiary.
4.12 Disclosure. The information concerning, and the
representations or warranties made by UPC and INTERIM as set forth in this
Reorganization Agreement, or in any document, statement, certificate or other
writing furnished or to be furnished by UPC and INTERIM to MSB pursuant hereto,
do not and will not contain any untrue statement of a material fact or omit and
will not omit to state a material fact required to be stated herein or therein
which is necessary to make the statements and facts contained herein or
therein, in light of the circumstances under which they were or are made, not
false or misleading. Copies of all documents heretofore or hereafter delivered
or made available to MSB by UPC and INTERIM pursuant hereto were or will be
complete and accurate copies of such documents.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF MSB, SECURITY AND FARMERS
Both as of the date hereof and as of the Effective Time of the Merger,
SECURITY, FARMERS and MSB represent and warrant to UPC and INTERIM as follows:
5.1 Organization and Qualification of MSB and
Subsidiaries. MSB is a corporation duly organized, validly existing and in
good standing under the laws of the State of Arkansas and (a) has all requisite
corporate power and authority to own, operate and lease its properties and to
carry on its business as it is currently being conducted; (b) is in good
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standing and is duly qualified to do business in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
business makes such qualification necessary; and (c) is a registered bank
holding company with the Federal Reserve. Each MSB Subsidiary is duly
chartered, validly existing and in good standing under the laws of the state or
jurisdiction of its incorporation and (a) has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its business
as it is currently being conducted and (b) is in good standing and is duly
qualified to do business in each jurisdiction where the character of its
properties owned or held under lease or the nature of its business makes such
qualification necessary. MSB and each of its Subsidiaries have in effect all
federal, state, local and foreign governmental authorizations, permits and
licenses necessary for them to own or lease their respective properties and
assets and to carry on their business as it is currently being conducted.
SECURITY and FARMERS are state banks duly organized, validly existing and are
in good standing under the laws of the State of Arkansas and engage only in
activities (and hold properties only of the types) permitted by the Arkansas
Code and the rules and regulations promulgated by the ASBD thereunder or the
FDIC for state banks. SECURITY's and FARMERS' deposit accounts are insured by
the FDIC to the fullest extent permitted under applicable law.
5.2 Authorization, Execution and Delivery; Reorganization
Agreement Not in Breach.
(a) MSB, SECURITY and FARMERS have all requisite
power and authority to execute and deliver this Reorganization Agreement and
the Plan of Merger and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Reorganization Agreement and the
Plan of Merger and the consummation of the proposed transaction have been duly
authorized by majorities of the entire Boards of Directors of both MSB,
SECURITY and FARMERS and, except for the approval of the MSB Shareholders, no
other corporate proceedings on the part of MSB are necessary to authorize the
execution and delivery of this Reorganization Agreement and the Plan of Merger
and the consummation of the transactions contemplated hereby and thereby. This
Reorganization Agreement and all other agreements and instruments herein
contemplated to be executed by SECURITY, FARMERS and MSB have been (or upon
execution will have been) duly executed and delivered by SECURITY, FARMERS and
MSB and constitute (or upon execution will constitute) legal, valid and
enforceable obligations of SECURITY, FARMERS and MSB, subject, as to
enforceability, to applicable bankruptcy, insolvency, receivership,
conservatorship, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 25
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generally and to the application of equitable principles and judicial
discretion.
(b) The execution and delivery of this
Reorganization Agreement and the Plan of Merger, the consummation of the
transaction contemplated hereby and thereby, and the fulfillment of the terms
hereof and thereof will not result in a violation or breach of any of the terms
or provisions of, or constitute a default under (or an event which, with the
passage of time or the giving of notice, or both, would constitute a default
under), or conflict with, or permit the acceleration of, any obligation under
any material mortgage, lease, covenant, agreement, indenture or other
instrument to which MSB or any MSB Subsidiary is a party or by which MSB or any
MSB Subsidiary is bound; the Articles of Incorporation or Bylaws of SECURITY,
FARMERS or MSB; or any material judgment, decree, order, regulatory letter of
understanding or award of any court, governmental body, authority or arbitrator
by which MSB or any MSB Subsidiary is bound; or any material permit,
concession, grant, franchise, license, law, statute, ordinance, rule or
regulation applicable to MSB or any MSB Subsidiary or the properties of any of
them; or result in the creation of any lien, claim, security interest,
encumbrance, charge, restriction or right of any third party of any kind
whatsoever upon the properties or assets of MSB or any MSB Subsidiary, except
that the Governmental Approvals shall be required in order for MSB or any MSB
Subsidiary to consummate the Merger.
5.3 No Legal Bar. Neither SECURITY, FARMERS nor MSB is
a party to, or subject to, or bound by, any agreement or judgment, order,
letter of understanding, writ, prohibition, injunction or decree of any court
or other governmental authority or body, or any law which would prevent the
execution of this Reorganization Agreement or the Plan of Merger by SECURITY,
FARMERS or MSB, the delivery thereof to UPC and INTERIM, or the consummation of
the transaction contemplated hereby and thereby, and no action or proceeding is
pending against SECURITY, FARMERS or MSB in which the validity of this
Reorganization Agreement, the transaction contemplated hereby or any action
which has been taken by any of the Parties in connection herewith or in
connection with the transaction contemplated hereby is at issue.
5.4 Government and Other Approvals. Except for the
Government Approvals described in Section 4.4, no consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state or local governmental authority is required to be made or obtained by
SECURITY, FARMERS or MSB in connection with the execution and delivery of this
Reorganization Agreement or the consummation of the transactions contemplated
by this Reorganization Agreement nor is any consent
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 26
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or approval required from any landlord, licensor or other non-governmental
party which has granted rights to SECURITY, FARMERS or MSB in order to avoid
forfeiture or impairment of such rights.
5.5 Compliance With Law. MSB and all MSB Subsidiaries
hold all licenses, franchises, permits and authorizations necessary for the
lawful conduct of their respective businesses, and MSB, SECURITY and FARMERS as
the owners of the Realty have complied in all material respects with all
applicable statutes, laws, ordinances, rules and regulations of all federal,
state and local governmental bodies, agencies and subdivisions having,
asserting or claiming jurisdiction over MSB's, SECURITY's or FARMERS'
properties or over any other part of MSB's, SECURITY's or FARMERS' assets,
liabilities or operations. The benefits of all of such licenses, franchises,
permits and authorizations are in full force and effect and may continue to be
enjoyed by MSB, SECURITY and FARMERS subsequent to the Closing of the
transactions contemplated herein without any consent or approval. Neither MSB
nor any MSB Subsidiary has received notice of any proceeding for the suspension
or revocation of any such license, franchise, permit, or authorization and no
such proceeding is pending or has been threatened by any governmental
authority.
5.6 Charter Documents. Included in Schedule 5.6 hereto
are true and correct copies of the Articles of Incorporation and Bylaws of MSB,
SECURITY and FARMERS, respectively. The Articles of Incorporation and Bylaws
of MSB, SECURITY and FARMERS, as amended to date, are in full force and effect.
5.7 MSB Financial Statements. Accompanying Schedule 5.7
hereto are true copies of the unaudited consolidated statements of condition of
MSB as of December 31, 1993, and December 31, 1992, and the related
consolidated statements of income and changes in capital funds and cash flows
of MSB, SECURITY and FARMERS for the years ended December 31, 1993, and 1992
(the "Unaudited Financial Statements of MSB") and the comparative interim (or
annual) financial statements for any subsequent quarter (or year) ending after
December 31, 1993 and prior to the Closing Date. Except as set forth in
Schedule 5.7 hereto, such financial statements (i) were prepared from the books
and records of MSB, SECURITY and FARMERS; (ii) were prepared in accordance with
generally accepted accounting principles consistently applied; (iii) accurately
present MSB's, SECURITY's and FARMERS' consolidated financial condition and the
consolidated results of their operations, changes in stockholders' equity and
cash flows as at the relevant dates thereof and for the periods covered
thereby; (iv) do contain or reflect all necessary adjustments and accruals for
an accurate presentation of MSB's, SECURITY's and FARMERS' consolidated
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 27
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financial condition and the consolidated results of MSB's, SECURITY's and
FARMERS' operations and cash flows for the periods covered by such financial
statements; (v) do contain and reflect adequate provisions for loan losses, for
ORE reserves and for all reasonably anticipatable liabilities for all taxes,
federal, state, local or foreign, with respect to the periods then ended; and
(vi) do contain and reflect adequate provisions for all reasonably anticipated
liabilities for Post Retirement Benefits Other Than Pensions ("OPEB") pursuant
to FASB 106 and 112.
5.8 Absence of Certain Changes. Except as disclosed in
Schedule 5.8 or as provided for or contemplated in this Reorganization
Agreement, since December 31, 1993 (the "Balance Sheet Date") there has not
been:
(a) any material transaction by MSB, SECURITY or
FARMERS not in the ordinary course of business and in conformity with past
practice;
(b) any material adverse change in the business,
property, assets (including loan portfolios), liabilities (whether absolute,
accrued, contingent or otherwise), prospects, operations, liquidity, income,
condition (financial or otherwise) or net worth of MSB, SECURITY or FARMERS;
(c) any damage, destruction or loss, whether or
not covered by insurance, which has had or may have a material adverse effect
on any of the properties, business or prospects of MSB, SECURITY, FARMERS or
their future use and operation by MSB, SECURITY or FARMERS;
(d) any acquisition or disposition by MSB,
SECURITY or FARMERS of any property or asset of MSB, SECURITY or FARMERS,
whether real or personal, having a fair market value, singularly or in the
aggregate, in an amount greater than Fifty Thousand Dollars ($50,000), except
in the ordinary course of business and in conformity with past practice;
(e) any mortgage, pledge or subjection to lien,
charge or encumbrance of any kind on any of the respective properties or assets
of MSB, SECURITY or FARMERS, except to secure extensions of credit in the
ordinary course of business and in conformity with past practice;
(f) any amendment, modification or termination of
any contract or agreement, relating to MSB, SECURITY or FARMERS, to which MSB,
SECURITY or FARMERS is a party which would have a material adverse effect upon
the financial condition or operations of MSB, SECURITY or FARMERS.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 28
<PAGE> 179
(g) any increase in, or commitment to increase,
the compensation payable or to become payable to any officer, director,
employee or agent of MSB, SECURITY or FARMERS, or any bonus payment or similar
arrangement made to or with any of such officers, directors, employees or
agents, other than routine increases made in the ordinary course of business
not exceeding the greater of ten percent (10%) per annum or $6,000 for any of
them individually;
(h) any incurring of, assumption of, or taking
of, by MSB, SECURITY or FARMERS, any property subject to, any liability, except
for liabilities incurred or assumed or property taken subsequent to the Balance
Sheet Date in the ordinary course of business and in conformity with past
practice;
(i) any material alteration in the manner of
keeping the books, accounts or Records of MSB, SECURITY or FARMERS, or in the
accounting policies or practices therein reflected;
(j) any release or discharge of any material
obligation or liability of any person or entity related to or arising out of
any loan made by MSB, SECURITY or FARMERS of any nature whatsoever, except in
the ordinary course of business and in conformity with past practice; or
(k) any loan (except credit card loans, passbook
loans or home loans) by MSB, SECURITY or FARMERS to any Officer, director or 2%
shareholder of MSB, SECURITY or FARMERS or any Affiliate of MSB, SECURITY or
FARMERS; or to any member of the immediate family of such Officer, director or
2% shareholder of MSB, SECURITY or FARMERS or any Affiliate of MSB; or to any
Person in which such Officer, director or 2% shareholder directly or indirectly
owns beneficially or of record ten percent (10%) or more of any class of equity
securities in the case of a corporation, or of any equity interest, in the case
of a partnership or other non-corporate entity; or to any trust or estate in
which such Officer, director or 2% shareholder has a ten percent (10%) or more
beneficial interest; or as to which such Officer, director or 2% shareholder
serves as a trustee or in a similar capacity. As used in this Section,
"Officer" shall refer to a person who holds the title of chairman, president,
executive vice president, senior vice president, controller, secretary, cashier
or treasurer or who performs the normal duties of such officer whether or not
he or she is compensated for such service or has an official title.
5.9 Deposits. To the best of the knowledge, information
and belief of the management of MSB, none of the SECURITY or FARMERS Deposits
is a "brokered" Deposit or subject
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 29
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to any encumbrance, legal restraint or other legal process. Except as set
forth in Schedule 5.9, no portion of the Deposits represents a Deposit by any
Affiliate of MSB, SECURITY or FARMERS.
5.10 Properties. Except as described in Schedule 5.10
hereto or adequately reserved against in the Unaudited Financial Statements of
MSB, MSB and each MSB Subsidiary has good and marketable title free and clear
of all material liens, encumbrances, charges, defaults, or equities of whatever
character to all of the material properties and assets, tangible or intangible,
reflected in the Unaudited Financial Statements of MSB as being owned by MSB or
any MSB Subsidiary as of the dates thereof. All buildings, and all fixtures,
equipment, and other property and assets that are material to the business of
MSB and its Subsidiaries on a consolidated basis, held under leases or
subleases by MSB or any MSB Subsidiary, are held under valid instruments
enforceable in accordance with their respective terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws affecting the enforcement of creditors' rights
generally, and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceedings may be pending). The policies of fire, theft,
liability, and other insurance maintained with respect to the properties,
assets or businesses of the MSB Companies provide adequate coverage against
loss, and the fidelity bonds in effect as to which any of the MSB Companies is
a named insured are believed to be sufficient.
5.11 MSB Subsidiaries. Schedule 5.11 hereto lists all of
the active and inactive MSB Subsidiaries (including any SECURITY or FARMERS
Subsidiary) as of the date of this Reorganization Agreement and describes
generally the business activities conducted, or permitted to be conducted, by
each MSB Subsidiary. No equity securities of any of the MSB Subsidiaries are
or may become required to be issued (other than to MSB, SECURITY or FARMERS) by
reason of any options, warrants, scrip, rights to subscribe to, calls, or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of the capital stock of any MSB
Subsidiary, and there are no contracts, commitments, understandings, or
arrangements by which any MSB Subsidiary is bound to issue (other than to MSB)
any additional shares of its capital stock or options, warrants, or rights to
purchase or acquire any additional shares of its capital stock. All of the
shares of capital stock of each MSB Subsidiary held by MSB or by any MSB
Subsidiary are fully paid and nonassessable and are owned by MSB or such MSB
Subsidiary free and clear of any claim, lien,
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 30
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or encumbrance of any nature whatsoever, whether perfected or not.
5.12 Condition of Fixed Assets and Equipment. Except as
disclosed in Schedule 5.12 hereto, each item of MSB's, SECURITY or FARMERS's
fixed assets and equipment having a net book value in excess of Twenty-Five
Thousand Dollars ($25,000) included in the Fixed Assets is in sufficient
operating condition and repair, normal wear and tear excepted.
5.13 Tax Matters. Except as described in Schedule 5.13
hereto:
(a) all federal, state, local, and foreign tax
returns required to be filed by or on behalf of MSB and each MSB Subsidiary
have been timely filed or requests for extensions have been timely filed,
granted, and have not expired for periods ended on or before the date of this
Reorganization Agreement, and all returns filed are, and the information
contained therein is, complete and accurate. All tax obligations reflected in
such returns have been paid. As of the date of this Reorganization Agreement,
there is no audit examination, deficiency, or refund litigation or matter in
controversy with respect to any taxes that might reasonably expected to result
in a determination materially adverse to MSB or any MSB Subsidiary except as
fully reserved for in the Unaudited Financial Statements of MSB. All taxes,
interest, additions, and penalties due with respect to completed and settled
examinations or concluded litigation have been paid.
(b) Neither MSB nor any MSB Subsidiary has
executed an extension or waiver of any statute of limitations on the assessment
or collection of any tax due that is currently in effect.
(c) Adequate provision for any federal, state,
local, or foreign taxes due or to become due for MSB and all MSB Subsidiaries
for all periods through and including December 31, 1993, has been made and is
reflected on the December 31, 1993 financial statements included in the
Unaudited Financial Statements of MSB, and have been made with respect to
periods ending after December 31, 1993.
(d) Deferred taxes of MSB and each MSB Subsidiary
have been provided for in accordance with GAAP.
(e) To the best knowledge of MSB, SECURITY and
FARMERS, neither the Internal Revenue Service nor any foreign, state, local or
other taxing authority is now asserting or threatening to assert against MSB or
any MSB Subsidiary any
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 31
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deficiency or claim for additional taxes, or interest thereon or penalties in
connection therewith. All material income, payroll, withholding, property,
excise, sales, use, franchise and transfer taxes, and all other taxes, charges,
fees, levies or other assessments, imposed upon MSB by the United States or by
any state, municipality, subdivision or instrumentality of the United States or
by any other taxing authority, including all interest, penalties or additions
attributable thereto, which are due and payable by MSB or any MSB Subsidiary,
either have been paid in full, or have been properly accrued and reflected in
the Unaudited Financial Statements of MSB referred to in Section 5.7 of this
Reorganization Agreement.
5.14 Litigation. Except as set forth in Schedule 5.14
hereto, there is no action, suit or proceeding pending against MSB or any MSB
Subsidiary, or to the best knowledge of MSB or SECURITY, FARMERS threatened
against or affecting MSB, any MSB Subsidiary or any of their assets, before any
court or arbitrator or any governmental body, agency or official that (i) would
be reasonably expected to, if decided against MSB or the MSB Subsidiary, have a
material adverse impact on the business, properties, assets, liabilities,
condition (financial or other) or prospects of MSB or SECURITY, FARMERS and
that are not reflected in the Financial Statements or (ii) has been brought by
or on behalf of any employee employed or formerly employed by MSB or any MSB
Subsidiary that would have a material adverse impact on MSB or any MSB
Subsidary.
5.15 Hazardous Materials. To the best of the knowledge,
information and belief of the management of MSB:
(a) MSB and all MSB Subsidiaries have obtained
all permits, licenses and other authorizations which are required to be
obtained by MSB or its Subsidiaries with respect to the Property (as defined
herein) under all Applicable Environmental Laws (as defined herein). All
Property controlled, directly or indirectly, by MSB or any MSB Subsidiary is in
compliance with the terms and conditions of all of such permits, licenses and
authorizations, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any Applicable Environmental Laws or in
any regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder, except as
described in detail in Schedule 5.15(a) hereto. For purposes hereof, the
following terms shall have the following meanings:
"APPLICABLE ENVIRONMENTAL LAWS" shall mean all federal, state,
local and municipal environmental laws, rules or
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 32
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regulations to the extent applicable to the Property, including, but not
limited to, (a) the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601 et seq. ("CERCLA"); (b) the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. "RCRA"; (c) the
Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.; (d) the
Clean Air Act, 42 U.S.C. Section 7401 et seq.; (e) the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1471 et seq.; (f) the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq.; (g) the Emergency Planning and
Community Right-to-Know Act, 42 U.S.C. Section 11001 et seq.; (h) the National
Environmental Policy Act, 42 U.S.C. Section 4321 et seq.; (i) the Rivers and
Harbours Act of 1899, 33 U.S.C. Section 401 et seq.; (j) the Occupational
Safety and Health Act, 29 U.S.C. Section 651 et seq.; (k) the Safe Drinking
Water Act, 42 U.S.C. Section 300(f) et seq.; (l) the Oil Pollution Act of 1990,
33 U.S.C. Section 2701 et seq.; (m) the Arkansas Water and Air Pollution
Control Act, Section 8-4-101 et seq. of the Arkansas Code of 1987 Annotated;
(n) the Arkansas Solid Waste Management Act, Section 8-6-201 et seq. of the
Arkansas Code of 1987 Annotated; (o) the Hazardous Waste Management Act of
1979, Section 8-7-301 et seq. of the Arkansas Code of 1987 Annotated; (p) the
Arkansas Resource Reclamation Act of 1979, Section 8-7-301 et seq. of the
Arkansas Code of 1987 Annotated; (q) the Emergency Response Fund Act, Section
8-7-401 et seq. of the Arkansas Code of 1987 Annotated; (r) Remedial Act Trust
Fund Act, Section 8-7-501 et seq. of the Arkansas Code of 1987 Annotated; (s)
the Arkansas statute dealing with Regulated Substance Storage Tanks, 8-7-801 et
seq. of the Arkansas Code of 1987 Annotated; (t) the Petroleum Storage Tank
Trust Fund Act, Sections 8-7-901 et seq. of the Arkansas Code of 1987
Annotated; (u) any amendments to the foregoing Acts as adopted from time to
time on or before the Closing; and (v) any rule, regulation, order, injunction,
judgment, declaration or decree implementing or interpreting any of the
foregoing Acts, as amended.
"HAZARDOUS SUBSTANCES" shall mean any substance, material,
waste, or pollutant that is now (or prior to the Closing) listed, defined,
characterized or regulated as hazardous, toxic or dangerous under or pursuant
to any statute, law, ordinance, rule or regulation of any federal, state,
regional, county or local governmental authority having jurisdiction over the
Property of MSB or any MSB Subsidiary or its use or operation, including,
without limitation, (a) any substance, material, element, compound, mixture,
solution, waste, chemical or pollutant listed, defined, characterized or
regulated as hazardous, toxic or dangerous under any Applicable Environmental
Laws, (b) petroleum, petroleum derivatives or by-products, and other
hydrocarbons, (c) polychlorinated
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 33
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biphenyls (PCBs), asbestos and urea formaldehyde, and (d) radioactive
substances, materials or waste.
"PROPERTY" shall be deemed to include, but shall not be
limited to, all real property owned, controlled, leased or held by MSB or a MSB
Subsidiary, in whole or in part, solely or in a joint venture or other business
arrangement, either for operational or investment purposes, and whether
assigned, purchased, or obtained through foreclosure (or similar action) or in
satisfaction of debts previously contracted.
(b) In addition, except as set forth in Schedule
5.15(b) hereto:
(i) No notice, notification, demand,
request for information, citation, summons or order has been issued,
no complaint has been filed, no penalty has been assessed and no
investigation or review is pending by any governmental or other entity
with respect to any alleged failure by MSB or any MSB Subsidiary to
have any permit, license or authorization required in connection with
the conduct of the business of MSB or any MSB Subsidiary or with
respect to any generation, treatment, storage, recycling,
transportation, release or disposal, or any release as defined in 42
U.S.C. Section 9601(22) ("Release"), of any Hazardous Substances
generated by MSB or any Affiliate of MSB at the Property;
(ii) None of the Property has received
or held any Hazardous Substances in such amount and in such manner as
to constitute a violation of the Applicable Environmental Laws, and no
Hazardous Substances have been Released or disposed of on, in or under
any of the Property during MSB's or any MSB Subsidiary's occupancy
thereof, or during the occupancy thereof by any assignee or sublessee
of MSB or any MSB Subsidiary, except in compliance with all Applicable
Environmental Laws;
(iii) There are no Hazardous Substances
being stored at any Property or located in, on or upon, any Property
(including the subsurface thereof) or installed or affixed to
structures or equipment on the Property; and there are no underground
storage tanks for Hazardous Substances, active or abandoned, at any
Property; and
(iv) No Hazardous Substances have been
Released in a reportable quantity, where such a quantity has been
established by statute, ordinance, rule, regulation or order, at, on
or under any Property.
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(c) Neither MSB nor any Affiliate of MSB has
transported or arranged for the transportation of any Hazardous Substances to
any location which is listed on the National Priorities List under CERCLA,
listed for possible inclusion on the National Priorities List by the
Environmental Protection Agency in the CERCLA Information System ("CERCLIS") or
on any similar state list or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims against
the owner of the Property for cleanup costs, remedial work, damages to natural
resources or for personal injury claims, including, but not limited to, claims
under CERCLA.
(d) Except as set forth in Schedule 5.15(d), no
Hazardous Substances have been generated, recycled, treated, stored, disposed
of or Released by, MSB or any Affiliate of MSB in violation of Applicable
Environmental Laws.
(e) No oral or written notification of a Release
of Hazardous Substances has been filed by or on behalf of MSB or any Affiliate
of MSB relating to the Property and no Property is listed or proposed for
listing on the National Priority List promulgated pursuant to CERCLA, on
CERCLIS or on any similar state list of sites requiring investigation or
clean-up.
(f) There are no liens arising under or pursuant
to any Applicable Environmental Laws on any Property, and no government actions
have been taken or, to the best knowledge of MSB, threatened, or are in process
which could subject any of such properties to such liens and none of the
Property would be required to place any notice or restriction relating to the
presence of Hazardous Substances at any Property in any deed to such Property.
(g) Except as described in Schedule 5.15(g)
hereto, there have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by or which are in the possession of
MSB or any Affiliate of MSB in relation to any Property, which have not been
made available to UPC.
(h) Neither MSB nor SECURITY, FARMERS is aware of
any facts which might suggest that MSB or any MSB Subsidiary has engaged in any
management practice with respect to any of its past or existing borrowers which
could reasonably be expected to subject MSB or any MSB Subsidiary or the
Property to any liability, either directly or indirectly, under the principles
of law as set forth in United States v. Fleet Factors Corp., 901 F.2d 1550
(11th Cir. 1990).
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 35
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5.16 Insurance. MSB, SECURITY and FARMERS have paid all
material amounts due and payable under any insurance policies and guaranties
applicable to MSB, SECURITY and FARMERS and MSB's or SECURITY, FARMERS's assets
and operations; all such insurance policies and guaranties are in full force
and effect; and MSB, SECURITY and FARMERS and all of MSB's , SECURITY and
FARMERS's material Realty and other material properties are insured against
fire, casualty, theft, loss, and such other events against which it is
customary to insure, all such insurance policies being in amounts that are
adequate and consistent with past practice and experience.
5.17 Labor and Employment Matters. To the best of the
knowledge, information and belief of the management of MSB, except as reflected
in Schedule 5.17 hereto, there is no (i) collective bargaining agreement or
other labor agreement to which MSB or any MSB Subsidiary is a party or by which
any of them is bound; (ii) employment, profit sharing, deferred compensation,
bonus, stock option, purchase, retainer, consulting, retirement, welfare or
incentive plan or contract to which MSB or any MSB Subsidiary is a party or by
which it is bound; or (iii) plan or agreement under which "fringe benefits"
(including, but not limited to, vacation plans or programs, sick leave plans or
programs and related benefits) are afforded any of the employees of MSB or any
MSB Subsidiary. No party to any such agreement, plan or contract is in default
with respect to any material term or condition thereof, nor has any event
occurred which, through the passage of time or the giving of notice, or both,
would constitute a default thereunder or would cause the acceleration of any
obligation of any party thereto. Neither MSB nor any MSB Subsidiary has
received notice from any governmental agency of any alleged violation of
applicable laws that remains unresolved respecting employment and employment
practices, terms and conditions of employment and wages and hours. MSB and
each MSB Subsidiary have complied in all material respects with all applicable
laws, rules and regulations relating to the employment of labor, including
those related to its employment practices, employee disabilities, wages, hours,
collective bargaining and the payment and withholding of taxes and other sums
as required by the appropriate governmental authorities, and MSB and each MSB
Subsidiary have withheld and paid to the appropriate governmental authorities
or are holding for payment not yet due to such authorities, all amounts
required to be withheld from the employees of MSB and each MSB Subsidiary and
are not liable for any arrears of wages, taxes, penalties or other sums for
failure to comply with any of the foregoing. There are no unfair labor practice
complaint against MSB or any MSB Subsidiary pending before the National Labor
Relations Board or any state or local agency; pending labor strike or other
labor trouble affecting MSB or any MSB Subsidiary; labor grievance pending
against MSB or any
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 36
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MSB Subsidiary; pending representation question respecting the employees of MSB
or any MSB Subsidiary; pending arbitration proceedings arising out of or under
any collective bargaining agreement to which MSB or any MSB Subsidiary is a
party; or to the best knowledge of MSB, any basis for which a claim may be made
under any collective bargaining agreement to which MSB or any MSB Subsidiary is
a party.
5.18 Records and Documents. The Records of SECURITY and
FARMERS are and will be sufficient to enable SECURITY and FARMERS to continue
conducting their businesses as Arkansas state banks under similar standards as
SECURITY and FARMERS have heretofore conducted such business.
5.19 Capitalization of MSB. The authorized capital stock
of MSB consists of 200,000 shares of common stock having a par value of $10.00
per share (the "MSB Common Stock") and no shares of preferred stock or any
other class of equity security. As of the date of this Reorganization
Agreement, 129,022 shares of MSB Common Stock were issued and outstanding and
417 shares of MSB Common Stock were held by MSB as treasury stock. All of the
outstanding MSB Common Stock is validly issued, fully-paid and nonassessable
and has not been issued in violation of any preemptive rights of any MSB
Shareholder. Except as described in Section 3.1(l) of this Reorganization
Agreement or as described on Schedule 5.19 hereto, as of the date hereof, there
are no outstanding securities or other obligations which are convertible into
MSB Common Stock or into any other equity or debt security of MSB, and there
are no outstanding options, warrants, rights, scrip, rights to subscribe to,
calls or other commitments of any nature which would entitle the holder, upon
exercise thereof, to be issued MSB Common Stock or any other equity or debt
security of MSB. Accordingly, immediately prior to the Effective Time of the
Merger, there will be not more than 129,366 shares of MSB Common Stock issued
and outstanding. Except as set forth in Schedule 5.19 hereto, MSB owns and is
the beneficial record holder of, and has good and freely transferable title to,
all of the 120,000 shares of SECURITY Common Stock outstanding, recorded on the
books and Records of SECURITY as being held in its name, free and clear of all
liens, charges or encumbrances, and such stock is not subject to any voting
trusts, agreements or similar arrangements or other claims which could effect
the ability of MSB to freely vote such stock in support of the transactions
contemplated herein and all of the 49,584 shares of FARMERS Common Stock
outstanding and all of the 50,000 shares of Farmers Preferred Stock, recorded
on the books and Records of FARMERS as being held in its name, free and clear
of all liens, charges or encumbrances, and such stock is not subject to any
voting trusts, agreements or similar arrangements or other claims which could
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 37
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effect the ability of MSB to freely vote such stock in support of the
transactions contemplated herein.
5.20 Sole Agreement. With the exception of this
Reorganization Agreement, neither MSB, SECURITY nor FARMERS, nor any Subsidiary
of either has been or is a party to any letter of intent or agreement to merge,
to consolidate, to sell or purchase assets (other than in the normal course of
its business) or to any other agreement which contemplates the involvement of
MSB, SECURITY or FARMERS or any Subsidiary of either (or any of their assets)
in any business combination of any kind; or any agreement obligating MSB,
SECURITY or FARMERS to issue or sell or authorize the sale or transfer of MSB
Common Stock or the capital stock of SECURITY or FARMERS. Except as described
in Schedule 5.20 hereto, there are no shares of capital stock or other equity
securities of MSB outstanding, except for shares of MSB Common Stock presently
issued and outstanding, and there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of the capital stock of MSB, SECURITY or FARMERS, or contracts,
commitments, understandings, or arrangements by which MSB, SECURITY or FARMERS
is or may be bound to issue additional shares of their capital stock or
options, warrants, or rights to purchase or acquire any additional shares of
their capital stock. There are no contracts, commitments, understandings, or
arrangements by which MSB or any MSB Subsidiary is or may be bound to transfer
or issue to any third party any shares of the capital stock of any MSB
Subsidiary, and there are no contracts, agreements, understandings or
commitments relating to the right of MSB to vote or to dispose of any such
shares.
5.21 Disclosure. The information concerning, and
representations and warranties made by, MSB, SECURITY and FARMERS set forth in
this Reorganization Agreement, or in the Schedules of Exceptions of MSB hereto,
or in any document, statement, certificate or other writing furnished or to be
furnished by MSB, SECURITY or FARMERS to UPC and INTERIM pursuant hereto, does
not and will not contain any untrue statement of a material fact or omit and
will not omit to state a material fact required to be stated herein or therein
necessary to make the statements and facts contained herein or therein, in
light of the circumstances in which they were or are made, not false or
misleading. Copies of all documents heretofore or hereafter delivered or made
available to UPC by MSB, SECURITY or FARMERS pursuant hereto were complete and
accurate copies of such documents.
5.22 Absence of Undisclosed Liabilities. Except as
described in Schedule 5.22 hereto, neither MSB nor any MSB Subsidiary has any
obligation or liability (contingent or
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 38
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otherwise) that is material to the financial condition or operations of MSB or
any MSB Subsidiary, or that, when combined with all similar obligations or
liabilities, would be material to the financial condition or operations of MSB
or any MSB Subsidiary (i) except as disclosed in the MSB Financial Statements
delivered to UPC prior to the date of this Reorganization Agreement or (ii)
except obligations or liabilities incurred in the ordinary course of its
business consistent with past practices or (iii) except as contemplated under
this Reorganization Agreement. Since December 31, 1992, neither MSB nor any
MSB Subsidiary has incurred or paid any obligation or liability which would be
material to the financial condition or operations of MSB or such MSB
Subsidiary, except for obligations paid in connection with transactions made by
it in the ordinary course of its business consistent with past practices, laws
and regulations applicable to MSB or any MSB Subsidiary.
5.23 Allowance for Possible Loan or ORE Losses. The
allowance for possible loan losses shown on the consolidated Unaudited
Financial Statements of MSB is adequate in all material respects to provide for
anticipated losses with respect to Loans outstanding or for commitments to
extend credit or similar off-balance-sheet items (including accrued interest
receivable) as of the dates thereof. Except as disclosed in Schedule 5.23
hereto, as of the date thereof, neither MSB, SECURITY nor FARMERS has any Loan
which has been criticized or classified by its bank examiners or by its
independent auditors in reports provided to the management of MSB by such
reviewing parties as "Other Assets Especially Mentioned," "Substandard,"
"Doubtful" or "Loss" or as a "Potential Problem Loan."
The allowance for possible losses on other real estate ("ORE") shown
on the consolidated Unaudited Financial Statements of MSB is (with respect to
periods ended on or before December 31, 1993) or will be (with respect to
periods ending subsequent to December 31, 1993) adequate in all material
respects to provide for anticipated losses in ORE owned or held by MSB or any
MSB Subsidiary and the net book value of ORE on the Balance Sheet of Unaudited
Financial Statements of MSB is the net realizable value of the ORE in
accordance with Statement of Position 92- 3.
5.24 Compliance with Laws. To the best of MSB's
knowledge, information and belief, except as described in Schedule 5.24 hereto,
MSB and each MSB Subsidiary:
(a) Is in compliance with all laws, rules,
regulations, reporting and licensing requirements, and orders applicable to its
business or employees conducting its business (including, but not limited to,
those relating to consumer
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 39
<PAGE> 190
disclosure and currency transaction reporting) the breach or violation of which
would or could reasonably be expected to have a material adverse effect on the
financial condition or operations of MSB or any MSB Subsidiary, or which would
or could reasonably be expected to subject MSB or any MSB Subsidiary or any of
its directors or officers to civil money penalties; and
(b) Has received no notification or communication
from any agency or department of federal, state, or local government or any of
the Regulatory Authorities, or the staff thereof (i) asserting that MSB or any
MSB Subsidiary is not in compliance with any of the statutes, rules,
regulations, or ordinances which such governmental authority or Regulatory
Authority enforces, which, as a result of such noncompliance, would result in a
material adverse impact on MSB or any MSB Subsidiary, (ii) threatening to
revoke any license, franchise, permit, or governmental authorization which is
material to the financial condition or operations of MSB or any MSB Subsidiary,
or (iii) requiring MSB or any MSB Subsidiary to enter into a cease and desist
order, consent, agreement, or memorandum of understanding.
5.25 Employee Benefit Plans. (a) MSB has previously
provided to UPC true and complete copies of each "employee benefit plan," as
defined in ERISA, which, to the best of its knowledge, is subject to any
provision of ERISA and covers any employee, whether active or retired, of MSB
or any MSB Subsidiary, together with the most recent annual report (Form 5500
including, if applicable, Schedule B thereto) prepared in connection with any
such plan. Such plans are hereinafter referred to collectively as the
"Employee Plans", and each such Employee Plan is listed in Schedule 5.25(a)
hereto. Each Employee Plan which is intended to be qualified under Section
401(a) of the Internal Revenue Code, is so qualified. Except as disclosed in
Schedule 5.25(a) hereto, all Employee Plans were in effect for substantially
all of calendar year 1992 and there has been no material amendment thereof
(other than amendments required to comply with applicable law) or material
increase in the cost thereof or benefits thereunder on or after January 1,
1994.
(b) MSB has furnished to UPC true and complete
copies and descriptions of each plan or arrangement maintained or otherwise
contributed to by MSB or any MSB Subsidiary which is not an Employee Plan and
which (exclusive of base salary and base wages) provides for any form of
current or deferred compensation, bonus, stock option, profit sharing, benefit,
retirement, incentive, group health or insurance, welfare plan (including, but
not limited to, "employee welfare benefit plans" as that term is defined in
ERISA), or similar plan or arrangement for the
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 40
<PAGE> 191
benefit of any employee or class of employees, whether active or retired, of
MSB or any MSB Subsidiary (such plans and arrangements being collectively
referred to herein as "Benefit Arrangements" and all such Benefit Arrangements
of MSB and MSB's Subsidiaries are listed on Schedule 5.25(b) hereto). Except
as disclosed in Schedule 5.25(b) hereto, there are no other Benefit
Arrangements of the MSB Companies and all Benefit Arrangements which are in
effect were in effect for substantially all of calendar year 1993. Except as
disclosed in Schedule 5.25(b) hereto or as was required by applicable law,
there has been with respect to Benefit Arrangements no material amendment
thereof or material increase in the cost thereof or benefits payable thereunder
on or after January 1, 1994, and no material increase in the base salary and
wage levels of MSB or any MSB Subsidiary and except in the ordinary course of
business, no change in the terms or conditions of employment (including
severance benefits) compared, in each case, to those prevailing for
substantially all of calendar year 1992. Except as disclosed in Schedule
5.25(b) hereto, there has been no material increase in the compensation of or
benefits payable to any senior executive employee of MSB or any MSB Subsidiary
since January 1, 1994, nor any employment, severance or similar contract
entered into with any such employee, nor any amendment to any such contract,
since January 1, 1994. Except as disclosed in Schedule 5.25(b) hereto, there
is no contract, agreement or Benefit Arrangement covering any employee of MSB
or any MSB Subsidiary which individually or collectively could give rise to the
payment of any amount which would constitute an "excess parachute payment," as
such term is defined in Section 280(G) of the Internal Revenue Code.
(c) With respect to all Employee Plans and
Benefit Arrangements, MSB and each MSB Subsidiary are in substantial compliance
with the requirements prescribed by any and all statutes, governmental or court
orders, or rules or regulations currently in effect, including but not limited
to ERISA and the Internal Revenue Code, applicable to such Employee Plans or
Benefit Arrangements. No condition exists that could constitute grounds for
the termination of any Employee Plan under Section 4042 of ERISA; no
"prohibited transaction," as defined in Section 406 of ERISA and Section 4975
of the Internal Revenue Code, has occurred with respect to any Employee Plan,
or any other employee benefit plan maintained by MSB or any MSB Subsidiary
which is covered by Title I of ERISA, which could subject any person (other
than a person for whom neither MSB nor any MSB Subsidiary is directly or
indirectly responsible) to liability under Title I of ERISA or to the
imposition of any tax under Section 4975 of the Internal Revenue Code which
could have an adverse effect on the business, assets, financial condition,
results of operations or prospects of any MSB Company; no Employee Plan subject
to Part III of Subtitle B of Title I of
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 41
<PAGE> 192
ERISA or Section 412 of the Internal Revenue Code, or both, has incurred any
"accumulated funding deficiency," as defined in Section 412 of the Code,
whether or not waived; neither MSB nor any MSB Subsidiary has failed to make
any contribution or pay any amount due and owing as required by the terms of
any Employee Plan or Benefit Arrangement; no Benefit Arrangement has incurred,
nor does any Benefit Arrangement have, any unfunded plan liabilities, whether
or not waived; neither MSB nor any MSB Subsidiary has incurred or expects to
incur, directly or indirectly, any liability under Title IV of ERISA arising in
connection with the termination of, or a complete or partial withdrawal from,
any plan covered or previously covered by Title IV of ERISA which could
constitute a liability of UPC or any of its Affiliates (including MSB or any
MSB Subsidiary) at or after the Effective Time of the Merger. Except as
disclosed in Schedule 5.25(c) hereto, to the best knowledge, information and
belief of MSB, no condition exists that could subject any person (other than a
person for whom neither MSB nor any MSB Subsidiary is directly or indirectly
responsible) to liabilities, damages, losses, taxes or sanctions that arise
under Sections 106(b), 162(i) and 4980B of the Internal Revenue Code or
Sections 601 through 608 of ERISA for failure to comply with the continuation
health care coverage requirements of Sections 162(k) and 4980B of the Internal
Revenue Code with respect to any current or former employee, including their
beneficiaries, of MSB or any MSB Subsidiary.
(d) Except as described in Schedule 5.25(d)
hereto, each Employee Plan or Benefit Arrangement and each personal services
contract, fringe benefit, consulting contract or similar arrangement with or
for the benefit of any officer, director, employee or other person can be
terminated by SECURITY, FARMERS (or by INTERIM as the Surviving Corporation)
within a period of 30 days following the Effective Time of the Merger, without
payment of any amount as a penalty, bonus, premium, severance pay or other
compensation for such termination. Any amounts representing or attributable to
overfunding for a MSB defined benefit plan may be returned to MSB or any MSB
Subsidiary in accordance with the respective plan's arrangements as described
in the respective plan's organic documents.
5.26 Material Contracts. Except as reflected in the MSB
Financial Statements, or as described in Schedule 5.26 hereto, neither MSB nor
any MSB Subsidiary, nor any of their respective assets, businesses, or
operations, is as of the date of this Reorganization Agreement a party to, or
is bound or affected by, or receives benefits under any contract or agreement
or amendment thereto that in each case would (assuming that MSB were a
reporting company under the 1934 Act, whether or not it is so registered) be
required to be filed as an exhibit to an Annual
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 42
<PAGE> 193
Report on Form 10-K filed by MSB as of the date of this Reorganization
Agreement.
5.27 Material Contract Defaults. To the best of the
knowledge, information and belief of the management of MSB, neither MSB nor any
MSB Subsidiary is in default in any respect under any material contract,
agreement, commitment, arrangement, lease, insurance policy, or other
instrument to which it is a party or by which its respective assets, business,
or operations may be bound or affected or under which it or its respective
assets, business, or operations receives benefits, and which default is
reasonably expected to have either individually or in the aggregate a material
adverse effect on MSB or any MSB Subsidiary, and there has not occurred any
event that, with the lapse of time or the giving of notice or both, would
constitute such a default.
5.28 Reports. Since January 1, 1989, MSB, SECURITY and
FARMERS have filed all reports and statements, together with any amendments
required to be made with respect thereto, that it was required to file with (i)
the ASBD; (ii) the FDIC; (iii) the Federal Reserve, including, but not limited
to, Annual Reports on Form F.R. Y-6, Quarterly Reports on Form F.R. Y-9SP and
Reports on Forms F.R. 2900 and FFIEC 034 and proxy statements; and (iv) any
other applicable federal or state securities or banking authorities (except, in
the case of federal or state securities authorities, filings that are not
material). As of their respective dates, each of such reports and documents,
including the financial statements, exhibits, and schedules thereto, complied
in all material respects with all of the requirements of their respective forms
and all of the statutes, rules, and regulations enforced or promulgated by the
Regulatory Authority with which they were filed. All such reports were true
and complete in all material respects and did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. MSB has previously
provided to UPC true and correct copies of all such reports filed by MSB,
SECURITY and FARMERS after January 1, 1989.
5.29 Statements True and Correct. None of the information
prepared by, or on behalf of, MSB or any MSB Subsidiary regarding MSB,
SECURITY, FARMERS or any other MSB Subsidiary included or to be included in the
Proxy Statement to be mailed to MSB's shareholders in connection with the
Shareholders Meeting, and any other documents to be filed with the SEC, or any
other Regulatory Authority in connection with the transaction contemplated
herein, will, at the respective times such documents are filed, and, with
respect to the Proxy
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 43
<PAGE> 194
Statement, when first mailed to the shareholders of MSB, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or, in the case of the Proxy Statement or any
amendment thereof or supplement thereto, at the time of the Shareholders
Meeting, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the
Shareholders Meeting. All documents which MSB or any MSB Subsidiary is
responsible for filing with the SEC or any other Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable law, including
applicable provisions of the Securities Laws and the rules and regulations
issued thereunder.
ARTICLE 6
COVENANTS OF UPC
6.1 Regulatory Approvals. Within a reasonable time after
execution of this Reorganization Agreement (but not more than thirty (30)
days), UPC shall file any and all applications with the appropriate government
Regulatory Authorities in order to obtain the Government Approvals and shall
take such other actions as may be reasonably required to consummate the
transactions contemplated in this Reorganization Agreement and the Plan of
Merger with reasonable promptness. UPC shall pay all fees and expenses arising
in connection with such applications for regulatory approval. UPC agrees to
provide the appropriate Regulatory Authorities with the information required by
such authorities in connection with UPC's applications for regulatory approval
and UPC agrees to use its best efforts to obtain such regulatory approvals, and
any other approvals and consents as may be required for the Closing, as
promptly as practicable; provided, however, that nothing in this Section 6.1
shall be construed to obligate UPC to take any action to meet any condition
required to obtain prior regulatory approval if UPC shall, in UPC's sole
discretion, deem such condition to be unreasonable or to constitute a
significant impediment upon UPC's ability to carry on its business or
acquisition programs or to require UPC to increase UPC's capital ratios to
amounts in excess of the Federal Reserve's minimum capital ratio guidelines
which may be in effect from time to time.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 44
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6.2 Conduct of Business -- Affirmative Covenants. Unless
the prior written consent of MSB shall have been obtained and, except as
otherwise contemplated herein:
(a) UPC and INTERIM, at their own cost and
expense, shall use their reasonable best efforts to secure all necessary
consents and all consents and releases, if any, required of UPC, INTERIM or
third parties and shall comply with all applicable laws, regulations and
rulings in connection with this Reorganization Agreement and the consummation
of the transactions contemplated hereby; and
(b) At all times to and including, and as of, the
Closing, UPC and INTERIM shall inform UPC in writing of any and all facts
necessary to amend or supplement the representations and warranties made herein
and the Schedules attached hereto as necessary so that the information
contained herein and therein will accurately reflect the current status of UPC
and INTERIM in all material respects; provided, however, that any such updates
to Schedules shall be required prior to the Closing only with respect to
matters which represent material changes to the Schedules and the information
contained therein.
6.3 Registration of UPC Common Stock under the Securities
Laws. UPC shall cooperate with MSB in the preparation of the MSB Proxy
Statement to be used at the Shareholders Meeting (and which shall serve also as
UPC's prospectus with respect to UPC's issuance of shares of the UPC Common
Stock) and shall cause a registration statement on the appropriate form of the
SEC to be prepared and filed so as to cause any shares of UPC Common Stock
which may be delivered to the MSB Record Holders in payment of the
Consideration to be registered under the 1933 Act and to be duly qualified
under appropriate state securities laws. UPC shall also list for trading on
the NYSE the UPC Common Stock. Such registration, qualification and listing
shall be effective at Closing and on the Effective Date.
6.4 Employee Benefits. Following the consummation of the
transactions contemplated herein, UPC shall not be obligated to make further
contributions to any of the Employee Plans or Benefit Arrangements of MSB or
the MSB Subsidiaries and all employees of MSB and the MSB Subsidiaries
immediately prior to the Effective Time of the Merger who shall continue as
employees of MSB as the Surviving Corporation, SECURITY, FARMERS or as
employees of any other UPC Subsidiary will be afforded the opportunity to
participate in any employee benefit plans maintained by UPC or UPC's
Subsidiaries, including but not limited to any "employee benefit plan," as that
term is defined in ERISA, on an equal basis with employees of UPC or any UPC
Subsidiaries with comparable positions, compensation, and tenure.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 45
<PAGE> 196
Service with MSB or with any MSB Subsidiary prior to the Effective Time of the
Merger by such former MSB Company employees will be deemed service with UPC for
purposes of determining eligibility for participation and vesting in such
employee benefit plans of UPC and UPC's Subsidiaries. In its sole
discretion, UPC may elect to postpone until the first day of January next
following the Effective Time of the Merger the participation of the employees
of MSB and MSB's Subsidiaries in the employee benefit plans maintained by UPC
or UPC's Subsidiaries; provided, however, during any such postponement period,
The MSB Employee Plans and all related employee benefit plans shall continue in
full force and effect, except as expressly modified or amended by the terms of
this Reorganization Agreement, or until such time as the plan is replaced by a
benefit plan maintained by UPC.
ARTICLE 7
COVENANTS OF MSB, SECURITY AND FARMERS
7.1 Proxy Statement; MSB Shareholder Approval. MSB shall
call the Shareholders Meeting to be held as soon as reasonably practicable
after the date of this Reorganization Agreement and shall use its best efforts
to ensure that such meeting is held not later than September 30, 1994, for the
purpose of (i) approving this Reorganization Agreement and the Plan of Merger,
and (ii) such other related matters as it deems appropriate. In connection
with the Shareholders Meeting, (i) MSB shall, with UPC's assistance, prepare a
Proxy Statement to be filed with the SEC as part of UPC's registration
statement and with any other appropriate Regulatory Authority; shall mail or
cause to be mailed such Proxy Statement to its shareholders and shall provide
UPC the opportunity to review and comment on the Proxy Statement at least five
(5) business days prior to the filing of the Proxy Statement with the
Regulatory Authorities for prior review and at least five (5) business days
prior to the mailing of the Proxy Statement to the MSB Shareholders; (ii) the
Parties shall furnish to each other all information concerning them that the
other Party may reasonably request in connection with the preparation of such
Proxy Statement; (iii) the Board of Directors of MSB shall recommend (subject
to compliance with their legal and fiduciary duties as advised by counsel) to
MSB Shareholders the approval of this Reorganization Agreement and the Plan of
Merger; and (iv) MSB shall use its best efforts, subject to compliance with its
legal and fiduciary duty as advised by counsel, to obtain such MSB
Shareholders' approvals.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 46
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7.2 Conduct of Business -- Affirmative Covenants. Unless
the prior written consent of UPC shall have been obtained and, except as
otherwise contemplated herein:
(a) MSB, SECURITY and FARMERS shall, and shall
cause each MSB Subsidiary to:
(i) Operate its business only in the
usual, regular, and ordinary course;
(ii) Preserve intact its business
organizations and assets and to maintain its rights and franchises;
(iii) Take no action, unless otherwise
required by law, rules or regulation, that would (A) adversely affect
the ability of any of them or UPC to obtain any necessary approvals of
Regulatory Authorities required to consummate the transactions
contemplated by this Reorganization Agreement, or (B) adversely affect
the ability of such Party to perform its covenants and agreements
under this Reorganization Agreement;
(iv) Except as they may terminate in
accordance with their terms, keep in full force and effect, and not
default in any of their obligations under, all material contracts;
(v) Use its reasonable best efforts to
keep in full force and effect insurance coverage with responsible
insurance carriers which is reasonably adequate in coverage and amount
for companies the size of MSB or such MSB Subsidiary and for the
businesses and properties owned by each and in which each is engaged,
to the extent that such insurance is reasonably available;
(vi) Use its reasonable best efforts to
retain SECURITY and FARMERS's present customer base and to facilitate
the retention of such customers by SECURITY, FARMERS and its branches
after the Effective Time of the Merger; and
(vii) Use its reasonable best efforts to
maintain, renew, keep in full force and effect, and preserve its
business organization and material rights and franchises, permits and
licenses, and to use its best efforts to maintain positive relations
with its present employees so that such employees will continue to
perform effectively and will be available to MSB, SECURITY, FARMERS or
UPC and UPC's Subsidiaries at and after the Effective
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 47
<PAGE> 198
Time of the Merger, and to use its best efforts to maintain its
existing, or substantially equivalent, credit arrangements with banks
and other financial institutions and to assure the continuance of
SECURITY's and FARMERS' customer relationships;
(b) MSB, SECURITY and FARMERS agree to use their
reasonable best efforts to assist UPC in obtaining the Government Approvals
necessary to complete the transactions contemplated hereby and do not know of
any reason that such Government Approvals can not be obtained, and MSB,
SECURITY and FARMERS shall provide to UPC or to the appropriate governmental
authorities all information reasonably required to be submitted in connection
with obtaining such approvals;
(c) MSB, SECURITY and FARMERS, at their own cost
and expense, shall use their reasonable best efforts to secure all necessary
consents and all consents and releases, if any, required of MSB, SECURITY,
FARMERS or third parties and shall comply with all applicable laws, regulations
and rulings in connection with this Reorganization Agreement and the
consummation of the transactions contemplated hereby;
(d) At all times to and including, and as of, the
Closing, MSB, SECURITY and FARMERS shall inform UPC in writing of any and all
facts necessary to amend or supplement the representations and warranties made
herein and the Schedules attached hereto as necessary so that the information
contained herein and therein will accurately reflect the current status of MSB,
SECURITY and FARMERS in all material respects; provided, however, that any such
updates to Schedules shall be required prior to the Closing only with respect
to matters which represent material changes to the Schedules and the
information contained therein;
(e) On and after the Closing Date, MSB, SECURITY
and FARMERS shall give such further assistance to UPC and shall execute,
acknowledge and deliver all such documents and instruments as UPC may
reasonably request and take such further action as may be necessary or
appropriate effectively to consummate the transaction contemplated by this
Reorganization Agreement;
(f) Between the date of this Reorganization
Agreement and the Closing Date, MSB, SECURITY and FARMERS shall afford UPC and
its authorized agents and representatives reasonable access during normal
business hours to the properties, operations, books, records, contracts,
documents, loan files and other information of, or relating to MSB, SECURITY
and FARMERS. MSB, SECURITY and FARMERS shall provide reasonable assistance to
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 48
<PAGE> 199
UPC in its investigation of matters relating to MSB, SECURITY and FARMERS; and
(g) Subject to the terms and conditions of this
Reorganization Agreement, MSB, SECURITY and FARMERS agree to use all reasonable
efforts and to take, or to cause to be taken, all actions, and to do, or to
cause to be done, all things necessary, proper, or advisable under applicable
laws and regulations to consummate and make effective, with reasonable
promptness after the date of this Reorganization Agreement, the transaction
contemplated by this Reorganization Agreement, including, without limitation,
using reasonable efforts to lift or rescind any injunction or restraining or
other order adversely affecting the ability of the Parties to consummate the
transaction contemplated by this Reorganization Agreement. MSB shall use, and
shall cause each of its Subsidiaries to use, its best efforts to obtain
consents of all third parties and Regulatory Authorities necessary or desirable
for the consummation of each of the transactions contemplated by this
Reorganization Agreement.
7.3 Conduct of Business -- Negative Covenants. From the
date of this Reorganization Agreement until the earlier of the Effective Time
of the Merger or the termination of this Reorganization Agreement, MSB,
SECURITY and FARMERS covenant and agree that they will neither do, nor agree or
commit to do, nor permit any MSB Subsidiary to do or commit or agree to do,
except for existing commitments or agreements which have previously been
disclosed to UPC, any of the following without the prior written consent of the
chief executive officer, president, or chief financial officer of UPC, which
consent will not be unreasonably withheld:
(a) Except as expressly contemplated by this
Reorganization Agreement or the Plan of Merger, amend its Articles of
Incorporation or Bylaws; or
(b) Impose, or suffer the imposition, on any
share of capital stock held by it or by any of its Subsidiaries of any lien,
charge, or encumbrance, or permit any such lien, charge, or encumbrance to
exist; or
(c) (i) Repurchase, redeem, or otherwise acquire
or exchange, directly or indirectly, any shares of its capital stock or other
equity securities or any securities or instruments convertible into any shares
of its capital stock, or any rights or options to acquire any shares of its
capital stock or other equity securities except as expressly permitted by this
Reorganization Agreement or the Plan of Merger; or (ii) split or otherwise
subdivide its capital stock; or (iii) recapitalize in any way; or (iv) declare
a stock dividend on the MSB Common
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 49
<PAGE> 200
Stock; or (v) declare or pay any cash or in kind dividend on the MSB Common
Stock; or
(d) Except as expressly permitted by this
Reorganization Agreement, acquire direct or indirect control over any
corporation, association, firm, organization or other entity, other than in
connection with (i) mergers, acquisitions, or other transactions approved in
writing by UPC, (ii) internal reorganizations or consolidations involving
existing Subsidiaries, (iii) foreclosures in the ordinary course of business
and not knowingly exposing it to liability by reason of Hazardous Substances,
(iv) acquisitions of control in its fiduciary capacity, or (v) the creation of
new subsidiaries organized to conduct or continue activities otherwise
permitted by this Reorganization Agreement; or
(e) Except as expressly permitted by this
Reorganization Agreement or the Plan of Merger, to (i) issue, sell, agree to
sell, or otherwise dispose of or otherwise permit to become outstanding any
additional shares of MSB Common Stock, or any other capital stock of MSB or of
any MSB Subsidiary, or any stock appreciation rights, or any option, warrant,
conversion, call, scrip, or other right to acquire any such stock, or any
security convertible into any such stock, unless any such shares of such stock
are sold or otherwise transferred to MSB or any MSB Subsidiary, or (ii) sell,
agree to sell, or otherwise dispose of any substantial part of the assets or
earning power of MSB or of any MSB Subsidiary; or (iii) sell, agree to sell, or
otherwise dispose of any asset of MSB or any MSB Subsidiary other than in the
ordinary course of business for reasonable and adequate consideration; or (iv)
buy, agree to buy or otherwise acquire a substantial part of the assets or
earning power of any other Person or entity; or
(f) Incur, or permit any MSB Subsidiary to incur,
any additional debt obligation or other obligation for borrowed money [other
than (i) in replacement of existing short-term debt with other short-term debt
of an equal or lesser amount, (ii) financing of banking related activities
consistent with past practices, or (iii) indebtedness of MSB or any MSB
Subsidiary to MSB or another MSB Subsidiary] in excess of an aggregate of
$50,000 (for MSB and its Subsidiaries on a consolidated basis) except in the
ordinary course of the business of MSB or such MSB Subsidiary consistent with
past practices (and such ordinary course of business shall include, but shall
not be limited to, creation of deposit liabilities, entry into repurchase
agreements or reverse repurchase agreements, purchases or sales of federal
funds, Federal Reserve advances, and sales of certificates of deposit); or
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 50
<PAGE> 201
(g) Except for existing commitments set forth on
Schedule 7.3(g) hereto, grant any increase in compensation or benefits to any
of its employees or officers, except in accordance with past practices or as
required by law; pay any bonus except in accordance with past practices; enter
into any severance agreements with any of its officers or employees; grant any
material increase in fees or other increases in compensation or other benefits
to any director of MSB or of any MSB Subsidiary; or effect any change in
retirement benefits for any class of its employees or officers, unless such
change is required by applicable law; or
(h) Amend any existing employment contract
between it and any person having a salary thereunder in excess of $30,000 per
year (unless such amendment is required by law) to increase the compensation or
benefits payable thereunder; or to enter into any new employment contract with
any person having an annual salary thereunder in excess of $30,000 that MSB,
SECURITY or FARMERS (or their respective successors) do not have the
unconditional right to terminate without liability (other than liability for
services already rendered), at any time on or after the Effective Time of the
Merger; or
(i) Adopt any new employee benefit plan or
terminate or make any material change in or to any existing employee benefit
plan other than any change that is required by law or that, in the opinion of
counsel, is necessary or advisable to maintain the tax- qualified status of any
such plan; or
(j) Enter into any new service contracts,
purchase contracts or lease agreements that are material to MSB or any MSB
Subsidiary; or
(k) Make any capital expenditure in excess of
$25,000, except for ordinary purchases, repairs, renewals or replacements; or
(l) Enter into any transactions other than in the
ordinary course of business; or
(m) Except in the ordinary course of business and
consistent with past practices, grant or commit to grant any new extension of
credit to any officer, director or holder of 2% or more of the outstanding MSB
Common Stock, or to any corporation, partnership, trust or other entity
controlled by any such person, if such extension of credit, together with all
other credits then outstanding to the same borrower and all affiliated persons
of such borrower, would exceed two percent (2%) of the capital of MSB or amend
the terms of any such credit outstanding on the date hereof.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 51
<PAGE> 202
ARTICLE 8
CONDITIONS TO CLOSING
8.1 Conditions to the Obligations of MSB. Unless waived
in writing by MSB, the obligation of MSB to consummate the transaction
contemplated by this Reorganization Agreement is subject to the satisfaction at
or prior to the Closing Date of the following conditions:
(a) Performance. Each of the material acts and
undertakings of UPC and INTERIM to be performed at or prior to the Closing Date
pursuant to this Reorganization Agreement shall have been duly performed;
(b) Representations and Warranties. The
representations and warranties of UPC and INTERIM contained in Article 4 of
this Reorganization Agreement shall be true and complete, in all material
respects, on and as of the Effective Time of the Merger with the same effect as
though made on and as of the Effective Time of the Merger;
(c) Documents. In addition to the other
deliveries of UPC or INTERIM described elsewhere in this Reorganization
Agreement, MSB shall have received the following documents and instruments:
(i) a certificate signed by the
Secretary or an assistant secretary of UPC and INTERIM dated as of the
Closing Date certifying that:
(A) UPC's and INTERIM' respective
Boards of Directors have duly adopted resolutions (copies of
which shall be attached to such certificate) approving the
substantive terms of this Reorganization Agreement (including
the Plan of Merger) and authorizing the consummation of the
transactions contemplated by this Reorganization Agreement and
certifying that such resolutions have not been amended or
modified and remain in full force and effect;
(B) each person executing this
Reorganization Agreement on behalf of UPC or INTERIM is an
officer of UPC or INTERIM, as the case may be, holding the
office or offices specified therein and that the signature of
each person set forth on such certificate is his or her
genuine signature;
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 52
<PAGE> 203
(C) the charter documents of UPC
and INTERIM attached to such certificate remain in full force
and effect; and
(D) UPC and INTERIM are in good
standing under their respective corporate charters; and
(ii) a certificate signed respectively by
duly authorized officers of UPC or INTERIM stating that the conditions
set forth in Section 8.1(a) and Section 8.1(b) of this Reorganization
Agreement have been fulfilled;
(d) Consideration. MSB shall have received a
certificate executed by an authorized officer of the Exchange Agent to the
effect that the Exchange Agent has received and holds in its possession in
escrow certificates evidencing and representing that number of shares of UPC
Common Stock and cash funds sufficient to meet the obligations of UPC to the
MSB Record Holders to deliver the Consideration at the Closing under this
Reorganization Agreement and the Plan of Merger;
(e) Opinion of UPC's and INTERIM' Counsel. MSB
shall have been furnished with an opinion of counsel to UPC and INTERIM, dated
as of the Closing Date, addressed to and in form and substance satisfactory to
MSB, to the effect that:
(i) UPC is a Tennessee corporation duly
organized, validly existing, and in good standing under the laws of
the State of Tennessee; and INTERIM is an Arkansas corporation duly
organized, validly existing, and in good standing under the laws of
the State of Arkansas;
(ii) this Reorganization Agreement has
been duly and validly authorized, executed and delivered by UPC and
INTERIM and (assuming this Reorganization Agreement is a binding
obligation of MSB, SECURITY and FARMERS) constitutes a valid and
binding obligation of UPC and INTERIM enforceable in accordance with
its terms, subject as to enforceability to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and to the application of
equitable principles and judicial discretion;
(iii) neither the execution and delivery
by UPC or INTERIM of this Reorganization Agreement nor any of the
documents to be executed and delivered by UPC or INTERIM in connection
herewith violates or conflicts with UPC's or INTERIM' corporate
charters or bylaws or, to the best of the knowledge, information and
belief (without making special
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 53
<PAGE> 204
inquiry) of such counsel, any material contracts, agreements or other
commitments of UPC or INTERIM;
(iv) to the knowledge of such counsel
after due inquiry, no consent or approval by any Governmental
Authority which has not already been obtained is required for
execution and delivery by UPC and INTERIM of this Reorganization
Agreement or any of the documents to be executed and delivered by UPC
or INTERIM in connection herewith; and
(v) the shares of UPC Common Stock to be
issued in the names of the MSB Record Holders and delivered in
exchange for their MSB Common Stock will be duly authorized, validly
issued, fully paid and non-assessable.
Such opinion may (i) expressly rely as to matters of fact upon certificates
furnished by appropriate officers of UPC or INTERIM or appropriate government
officials; (ii) in the case of matters of law governed by the laws of the
states in which they are not licensed, reasonably rely upon the opinions of
legal counsel duly licensed in such states and may be limited, in any event, to
Federal Law and the State of Tennessee; and (iii) incorporate, be guided by,
and be interpreted in accordance with, the Legal Opinion Accord of the ABA
Section of Business Law (1991);
(f) Inspections Permitted. Between the date of
this Reorganization Agreement and the Closing Date, UPC and INTERIM shall have
afforded MSB and its authorized agents and representatives reasonable access
during normal business hours to the properties, operations, books, records,
contracts, documents, loan files and other information of or relating to UPC
and INTERIM, and UPC and INTERIM shall have caused all UPC and INTERIM
personnel to provide reasonable assistance to MSB in its investigation of
matters relating to UPC and INTERIM; and
(g) No Material Adverse Change. No material
adverse change in the business, property, assets (including loan portfolios),
liabilities (whether absolute, contingent or otherwise), prospects, operations,
liquidity, income, or condition (financial or otherwise) of UPC or INTERIM
taken as a whole shall have occurred since the date of this Reorganization
Agreement. In the event of such a material adverse change with respect to UPC
or INTERIM, MSB may elect either (i) to close the contemplated transaction in
accordance with the terms of this Reorganization Agreement or (ii) to terminate
this Reorganization Agreement without penalty.
8.2 Conditions to the Obligations of UPC and INTERIM.
Unless waived in writing by UPC and INTERIM, the obligation of
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 54
<PAGE> 205
UPC and INTERIM to consummate the transactions contemplated by this
Reorganization Agreement is subject to the satisfaction at or prior to the
Closing Date of the following conditions:
(a) Performance. Each of the material acts and
undertakings of MSB and/or SECURITY and/or FARMERS to be performed at or before
the Closing Date pursuant to this Reorganization Agreement shall have been duly
performed;
(b) Representations and Warranties. The
representations and warranties of MSB and/or SECURITY and/or FARMERS contained
in Article 5 of this Reorganization Agreement shall be true and correct, in all
material respects, on and as of the Closing Date with the same effect as though
made on and as of the Closing Date;
(c) Documents. In addition to the documents
described elsewhere in this Reorganization Agreement, UPC shall have received
the following documents and instruments:
(i) a certificate signed by the
Secretary or an assistant secretary of MSB, SECURITY and FARMERS dated
as of the Closing Date certifying that:
(A) MSB's, SECURITY's and FARMERS'
respective Boards of Directors have duly adopted resolutions
(copies of which shall be attached to such certificate)
approving the substantive terms of this Reorganization
Agreement (including the Plan of Merger) and authorizing the
consummation of the transactions contemplated by this
Reorganization Agreement and certifying that such resolutions
have not been amended or modified and remain in full force and
effect;
(B) each person executing this
Reorganization Agreement on behalf of MSB, SECURITY or FARMERS
is an officer of MSB, SECURITY or FARMERS, as the case may be,
holding the office or offices specified therein and that the
signature of each person set forth on such certificate is his
or her genuine signature;
(C) the charter documents of MSB,
SECURITY and FARMERS attached to such certificate remain in
full force and effect; and
(D) MSB, SECURITY and FARMERS are
in good standing under their respective corporate charters;
and
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 55
<PAGE> 206
(ii) a certificate signed by the
respective Chief Executive Officers or an Executive Vice President of
each of MSB, SECURITY and FARMERS stating that the conditions set
forth in Section 8.2(a), Section 8.2(b) and 8.2(f) this Reorganization
Agreement have been satisfied;
(d) Destruction of Property. Between the date of
this Reorganization Agreement and the Closing Date, there shall have been no
damage to or destruction of real property, improvements or personal property of
MSB, SECURITY and FARMERS which materially reduces the market value of such
property, and no zoning or other order, limitation or restriction imposed
against the same that might have a material adverse impact upon the operations,
business or prospects of MSB, SECURITY or FARMERS; provided, however, that the
availability of insurance coverage shall be taken into account in determining
whether there has been such a material adverse impact or material reduction in
market value. In the event of such damage, destruction, order, limitation or
restriction, UPC or INTERIM may elect either (i) to close the contemplated
transaction in accordance with the terms of this Reorganization Agreement or
(ii) to terminate this Reorganization Agreement without penalty;
(e) Inspections Permitted. Between the date of
this Reorganization Agreement and the Closing Date, MSB, SECURITY and FARMERS
shall have afforded UPC and its authorized agents and representatives
reasonable access during normal business hours to the properties, operations,
books, records, contracts, documents, loan files and other information of or
relating to MSB, SECURITY and FARMERS. MSB, SECURITY and FARMERS shall have
caused all MSB, SECURITY and FARMERS personnel to provide reasonable assistance
to UPC in its investigation of matters relating to MSB, SECURITY and FARMERS;
(f) No Material Adverse Change. No material
adverse change in the business, property, assets (including loan portfolios),
liabilities (whether absolute, contingent or otherwise), prospects, operations,
liquidity, income, or condition (financial or otherwise) of MSB, SECURITY or
FARMERS taken as a whole shall have occurred since the date of this
Reorganization Agreement. In the event of such a material adverse change with
respect to MSB, SECURITY or FARMERS, UPC may elect either (i) to close the
contemplated transaction in accordance with the terms of this Reorganization
Agreement or (ii) to terminate this Reorganization Agreement without penalty;
(g) Opinion of MSB's Counsel. UPC shall have
been furnished with an opinion of counsel to MSB, SECURITY and FARMERS, dated
the Closing Date, addressed to and in form and substance satisfactory to UPC,
to the effect that:
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 56
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(i) MSB is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Arkansas;
(ii) SECURITY and FARMERS are each state
banks duly organized, validly existing, and in good standing under the
laws of the State of Arkansas;
(iii) this Reorganization Agreement has
been duly and validly authorized, executed and delivered by MSB,
SECURITY and FARMERS and (assuming that this Reorganization Agreement
is a binding obligation of UPC and INTERIM and the Plan of Merger is a
binding obligation of UPC and INTERIM) constitutes a valid and binding
obligation of MSB, SECURITY and FARMERS enforceable in accordance with
its terms, subject as to enforceability to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and to the application of
equitable principles and judicial discretion; and
(iv) to the knowledge of such counsel
after due inquiry, no consent or approval, which has not already been
obtained, by any governmental authority is required for execution and
delivery by MSB, SECURITY and FARMERS of this Reorganization Agreement
or any of the documents to be executed and delivered by MSB, SECURITY
and FARMERS in connection herewith.
Such opinion may (i) expressly rely as to matters of fact upon certificates
furnished by appropriate officers of MSB, SECURITY and FARMERS or appropriate
government officials; (ii) in the case of matters of law governed by the laws
of the states in which they are not licensed, reasonably rely upon the opinions
of legal counsel duly licensed in such states and may be limited, in any event,
to Federal Law and the State of Arkansas; and (iii) incorporate, be guided by,
and be interpreted in accordance with, the Legal Opinion Accord of the ABA
Section of Business Law (1991); and
(h) Other Business Combinations, Etc. Neither
MSB, SECURITY nor FARMERS shall have entered into any agreement, letter of
intent, understanding or other arrangement pursuant to which MSB, SECURITY or
FARMERS would merge; consolidate with; effect a business combination with; sell
any substantial part of MSB's, SECURITY's or FARMERS' assets; acquire a
significant part of the shares or assets of any other Person or entity
(financial or otherwise); adopt any "poison pill" or other type of
anti-takeover arrangement, any shareholder rights provision, any "golden
parachute" or similar program which would have the effect
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 57
<PAGE> 208
of materially decreasing the value of MSB, SECURITY or FARMERS or the benefits
of acquiring the MSB Common Stock; and
(i) Maintenance of Certain Covenants, Etc. At
the time of Closing (i) the total consolidated assets of MSB shall be not
less than $125,000,000 at Closing, (ii) the tangible equity capital of MSB's
subsidiary banks shall have been no less than $9,200,000 as of March 31, 1994,
and shall have increased since that time through normal earnings, (iii) MSB
shall have no more than 129,366 shares of common stock outstanding at closing,
being its only class of stock issued and outstanding, (iv) there shall have
been no extraordinary sales of assets or investment portfolio restructuring
since March 31, 1994, and (v) there shall have been no dividend declaration by
MSB since March 31, 1994. The criteria and calculations set forth above shall
be determined in accordance with GAAP assuming that MSB, SECURITY and FARMERS
shall have been operated consistently in the normal course of their business;
provided, however, that the effects of any balance sheet expansion through
abnormal, unusual or out of the ordinary borrowings or by the realization of
extraordinary gains or other income from the disposition of assets or
liabilities or through similar transactions shall be eliminated from the
calculations;
(j) Non-Compete Agreements. Each member of the
Board of Directors of MSB set forth on Schedule 8.2(j) hereto shall have
entered into a non-compete agreement with UPC and/or MSB substantially in the
form of UPC's standard form of non-compete agreement as attached hereto as part
of 8.2(j), providing for a term of not less than two (2) years and covering
Greene County, Arkansas, and Randolph County, Arkansas, the counties in which
MSB, SECURITY and FARMERS currently operate and do business in and have a
present intention to do business in;
(k) Pooling of Interests Accounting Treatment.
UPC shall have received (i) from Price Waterhouse, or other independent
accountants acceptable to UPC, a letter dated within five (5) days prior to the
Closing Date, in form and substance acceptable to UPC, stating the accountants'
opinion that, based upon the information furnished to them, the Reorganization
and Merger should be accounted for by UPC as a "pooling of interests" for
financial statement purposes and that such accounting treatment is in
accordance with generally accepted accounting principles and (ii) from MSB's
regularly retained independent accountants or other independent accountants
acceptable to UPC, a letter dated within five (5) days prior to the Closing
Date stating that, upon a review of MSB's books and records, the accountants
are aware of no reason why a business combination, such as the one contemplated
in this Reorganization Agreement, to
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 58
<PAGE> 209
which MSB is a party should not be accounted for as a "pooling of interests"
under generally accepted accounting principles; and
(l) Receipt of Affiliate Letters. Pursuant to
the provisions of Section 2.6 of this Reorganization Agreement, UPC shall have
received a written commitment in form and substance satisfactory to UPC and its
counsel (an "Affiliate Letter") from each MSB Record Holder who would be deemed
an Affiliate of MSB at the time of Closing under the Securities Laws and who
accepts shares of UPC Common Stock as Consideration for the cancellation,
exchange and conversion of his shares of MSB Common Stock pursuant to the terms
and conditions of this Reorganization Agreement, committing to UPC that such
MSB Record Holder shall not pledge, assign, sell, transfer, devise, otherwise
alienate or take any action which would eliminate or diminish the risk of
owning or holding the shares of UPC Common Stock to be received by such MSB
Record Holder upon consummation of the Merger, nor enter into any formal or
informal agreement to pledge, assign, sell or transfer, devise, or otherwise
alienate his right, title and interests in any of the shares of UPC Common
Stock to be delivered by UPC to such MSB Record Holder pursuant to the terms
and conditions of this Reorganization Agreement until such time as UPC shall
have publicly released a statement of UPC's consolidated earnings reflecting
the combined financial results of operations of UPC and MSB for a period of not
less than thirty (30) days subsequent to the Effective Time of the Merger.
8.3 Conditions to Obligations of All Parties. The
obligation of each party to effect the transactions contemplated hereby shall
be subject to the fulfillment, at or prior to the Closing, of the following
conditions:
(a) No Pending or Threatened Claims. That no
claim, action, suit, investigation or other proceeding shall be pending or
threatened before any court or governmental agency which presents a substantial
risk of the restraint or prohibition of the transactions contemplated by this
Reorganization Agreement or the obtaining of material damages or other relief
in connection therewith;
(b) Governmental Approvals and Acquiescence
Obtained. The Parties hereto shall have received all applicable Governmental
Approvals for the consummation of the transactions contemplated herein and all
waiting periods incidental to such approvals or notices given shall have
expired;
(c) Effective Registration Statement and No Stop
Orders. An S-4 Registration Statement encompassing the Proxy
Statement-Prospectus shall have been filed with the SEC, such
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 59
<PAGE> 210
registration statement shall have become effective and no stop order shall have
been issued or in effect by the SEC with respect to such registration statement
or the shares of UPC Common Stock to be issued pursuant thereto; and
(d) Tax Opinion. UPC and MSB shall have received
a written opinion from counsel to UPC to the effect that the transactions
contemplated by this Reorganization Agreement and the Plan of Merger will
constitute one or more tax-free reorganizations under Section 368 of the
Internal Revenue Code and that the MSB Record Holders will not recognize any
gain or loss to the extent that such MSB Record Holders exchange shares of MSB
Common Stock for shares of UPC Common Stock as contemplated by this
Reorganization Agreement and the Plan of Merger assuming that the shares of MSB
Common Stock so exchanged by such MSB Record Holders are held by them as
capital assets at the time of such exchange.
ARTICLE 9
TERMINATION
9.1 Termination. This Reorganization Agreement and the
Plan of Merger may be terminated at any time prior to the Closing, as follows:
(a) By mutual consent in writing of the Parties;
(b) By UPC or INTERIM, should MSB or any MSB
Subsidiary fail to conduct its business pursuant to MSB's, SECURITY's and
FARMERS' Covenants made in Article 7; or by MSB, should UPC or any UPC
Subsidiary fail to conduct its business pursuant to UPC's and INTERIM's
Covenants made in Article 6;
(c) By UPC, INTERIM or MSB in the event the
Closing shall not have occurred by December 31, 1994 (the "Target Date"),
unless the failure of the Closing to occur shall be due to the failure of the
Party seeking to terminate this Agreement to perform its obligations hereunder
in a timely manner; provided, however, if UPC shall have filed any and all
applications to obtain the requisite Government Approvals within thirty (30)
days of the date hereof, and if the Closing shall not have occurred solely
because of a delay caused by a government regulatory agency or authority in its
review of the application before it, then MSB, SECURITY and FARMERS shall, upon
UPC's written request, extend the Closing Date for a reasonable time in order
for UPC to obtain all Government Approvals and for the expiration of any
stipulated waiting periods, but in any event not later than March 31, 1995;
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 60
<PAGE> 211
(d) By either UPC, INTERIM or MSB, upon written
notice to the other Party, upon denial of any Governmental Approval necessary
for the consummation of the Merger (or should such approval be conditioned upon
a substantial deviation from the transaction contemplated); provided, however,
that either UPC or MSB may, upon written notice to the other, extend the term
of this Reorganization Agreement for only one sixty (60) day period to
prosecute diligently and overturn such denial, provided that such denial has
been appealed within ten (10) business days of the receipt thereof;
(e) By UPC or INTERIM if the conditions set forth
in Sections 8.2 or 8.3 are not satisfied in all material respects as of the
Closing Date, or by MSB if the conditions set forth in Section 8.1 or 8.3 are
not satisfied in all material respects as of the Closing Date, and such failure
has not been waived prior to the Closing;
(f) By UPC or INTERIM in the event that there
shall have been, in UPC's good faith opinion, a material adverse change in the
business, property, assets (including loan portfolios), liabilities (whether
absolute, accrued, contingent or otherwise), prospects, operations, liquidity,
income, condition (financial or otherwise) or net worth of MSB, SECURITY or
FARMERS taken as a whole or upon the occurrence of any event or circumstance
which may have the effect of limiting or restricting UPC's voting power or
other rights normally enjoyed by the registered holders of the MSB Common Stock
which are the subject of the instant transaction; or by MSB in the event that
there shall have been, in MSB's good faith opinion, a material adverse change
in the business, property, assets (including loan portfolios), liabilities
(whether absolute, accrued, contingent or otherwise), prospects, operations,
liquidity, income, condition (financial or otherwise) or net worth of UPC or
INTERIM taken as a whole;
(g) By UPC, INTERIM or MSB in the event that
there shall have been a material breach of any obligation of the other Party
hereunder and such breach shall not have been remedied within thirty (30) days
after receipt by the breaching Party of written notice from the other Party
specifying the nature of such breach and requesting that it be remedied;
(h) By UPC or INTERIM should MSB or any MSB
Subsidiary enter into any letter of intent or agreement with a view to being
acquired by or effecting a business combination with any other Person; or any
agreement to merge, to consolidate, to combine or to sell a material portion of
its assets or to be acquired in any other manner by any other Person or to
acquire a material amount of assets or a material equity position in any
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 61
<PAGE> 212
other Person, whether financial or otherwise; or by MSB should UPC enter into
any letter of intent or agreement with a view to being acquired by or effecting
a business combination with any other Person; or any agreement to merge, to
consolidate, to combine or to sell a material portion of its assets or to be
acquired in any other manner by any other Person;
(i) By UPC or INTERIM should MSB, SECURITY or
FARMERS or any MSB Subsidiary enter into any formal agreement, letter of
understanding, memorandum or other similar arrangement with any bank regulatory
authority establishing a formal capital plan requiring MSB, SECURITY or FARMERS
to raise additional capital or to sell a substantial portion of its assets; or
by MSB UPC or any UPC Subsidiary enter into any formal agreement, letter of
understanding, memorandum or other similar arrangement with any bank regulatory
authority establishing a formal capital plan requiring UPC to raise additional
capital or to sell a substantial portion of its assets; or
(j) By either Party, within thirty (30) days from
the date of this Reorganization Agreement, in the event such Party, based on
the Party's opportunity to conduct a preliminary due diligence review of the
books, records and operations of the other Party as provided for in Section 2.3
of this Reorganization Agreement, in good faith determines in it sole
discretion that the results of the review conducted by such Party or its agents
do not support and reinforce the reviewing Party's preliminary expectations as
to the sustained growth and earnings prospects of the reviewed Party.
If a Party should elect to terminate this Reorganization Agreement pursuant to
subsections (b), (c), (d), (e), (f), (g), (h), (i) or (j) of this Section 9.1,
it shall give notice to the other Party, in writing, of its election in the
manner prescribed in Section 10.1 ("Notices") of this Reorganization Agreement.
9.2 Effect of Termination. In the event that this
Reorganization Agreement should be terminated pursuant to Section 9.1 hereof,
all further obligations of the Parties under this Reorganization Agreement
shall terminate without further liability of any Party to another; provided,
however, that a termination under Section 9.1 hereof shall not relieve any
Party of any liability for a breach of this Reorganization Agreement or for any
misstatement or misrepresentation made hereunder prior to such termination, or
be deemed to constitute a waiver of any available remedy for any such breach,
misstatement or misrepresentation.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 62
<PAGE> 213
ARTICLE 10
GENERAL PROVISIONS
10.1 Notices. Any notice, request, demand and other
communication which either Party hereto may desire or may be required hereunder
to give shall be in writing and shall be deemed to be duly given if delivered
personally or mailed by certified or registered mail (postage prepaid, return
receipt requested), air courier or facsimile transmission, addressed or
transmitted to such other Party as follows:
If to MSB, SECURITY or FARMERS:
Mid South Bancshares, Inc.
Court and Pruett Streets (P.O. Box 670)
Paragould, Arkansas 72451
Fax: (501) 239-3194
Attn: Steve Gramling, Chairman
With a copy to: Richard N. Massey, Esq.
Rose Law Firm
120 East Fourth Street
Little Rock, Arkansas 72201
Fax: (501) 375-1309
If to UPC or INTERIM:
Union Planters Corporation
P.O. Box 387 (mailing address)
Memphis, Tennessee 38147
or 7130 Goodlett Farms Parkway (deliveries)
Memphis, Tennessee 38088
Fax: (901) 383-2832
Attn: Jackson W. Moore, President
Gary A. Simanson, Associate General Counsel
or to such other address as any Party hereto may hereafter designate to the
other Parties in writing. Notice shall be deemed to have been given on the
date reflected in the proof or evidence of delivery, or if none, on the date
actually received.
10.2 Assignability and Parties in Interest. This
Reorganization Agreement shall not be assignable by any of the Parties hereto;
provided, however, that UPC may assign, set over and transfer all, or any part
of its rights and obligations under this Reorganization Agreement to any one or
more of its present or future Affiliates; provided, however, such assignment
shall not change the form or nature of Consideration to be received by
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 63
<PAGE> 214
the MSB Record Holders. This Reorganization Agreement shall inure to the
benefit of, and be binding only upon the Parties hereto and their respective
successors and permitted assigns and no other Persons.
10.3 Governing Law. This Reorganization Agreement shall
be governed by, and construed and enforced in accordance with, the internal
laws, and not the laws pertaining to choice or conflicts of laws, of the State
of Tennessee, unless and to the extent that federal law controls. Any dispute
arising between the Parties in connection with the transactions which are the
subject of this Reorganization Agreement shall be heard in a court of competent
jurisdiction located in Shelby County, Tennessee.
10.4 Counterparts. This Reorganization Agreement may be
executed simultaneously in one or more counterparts, each of which shall be
deemed an original, but all of which shall constitute but one and the same
instrument.
10.5 Best Efforts. MSB, SECURITY, FARMERS, UPC and
INTERIM each agrees to use its best efforts to complete the transactions
contemplated by this Reorganization Agreement; provided, however, that the use
of best efforts by UPC or MSB shall not obligate UPC or MSB to obtain or to
provide MSB or UPC additional capital in an amount, to divest any Subsidiary or
branch, or to meet any other condition which may be imposed by any Regulatory
Authority as a condition to approval which UPC or MSB shall deem, in good
faith, to be unreasonable in the circumstances.
10.6 Publicity. The Parties agree that press releases and
other public announcements to be made by any of them with respect to the
transactions contemplated hereby shall be subject to mutual agreement.
10.7 Entire Agreement. This Reorganization Agreement,
together with the Plan of Merger which is Exhibit A hereto, the Schedules,
Annexes, Exhibits and certificates required to be delivered hereunder and any
amendments or addenda hereafter executed and delivered in accordance with
Section 10.9 hereof constitute the entire agreement of the Parties hereto
pertaining to the transaction contemplated hereby and supersede all prior
written and oral (and all contemporaneous oral) agreements and understandings
of the Parties hereto concerning the subject matter hereof. The Schedules,
Annexes, Exhibits and certificates attached hereto or furnished pursuant to
this Reorganization Agreement are hereby incorporated as integral parts of this
Reorganization Agreement. Except as provided herein, by specific language and
not by mere implication, this
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 64
<PAGE> 215
Reorganization Agreement is not intended to confer upon any other person not a
Party to this Reorganization Agreement any rights or remedies hereunder.
10.8 Severability. If any portion or provision of this
Reorganization Agreement should be determined by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any jurisdiction, such
portion or provision shall be ineffective as to that jurisdiction to the extent
of such invalidity, illegality or unenforceability, without affecting in any
way the validity or enforceability of the remaining portions or provisions
hereof in such jurisdiction or rendering that or any other portions or
provisions of this Reorganization Agreement invalid, illegal or unenforceable
in any other jurisdiction.
10.9 Modifications, Amendments and Waivers. At any time
prior to the Closing or termination of this Reorganization Agreement, the
Parties may, to the extent permitted by law, solely by written agreement
executed by their duly authorized officers:
(a) extend the time for the performance of any of
the obligations or other acts of the other Party hereto;
(b) waive any inaccuracies in the representations
and warranties made by the other Party contained in this Reorganization
Agreement or in the Annexes, Schedules or Exhibits hereto or any other document
delivered pursuant to this Reorganization Agreement;
(c) waive compliance with any of the covenants or
agreements of the other Party contained in this Reorganization Agreement; and
(d) amend or add to any provision of this
Reorganization Agreement or the Plan of Merger; provided, however, that no
provision of this Reorganization Agreement may be amended or added to except by
an agreement in writing signed by the Parties hereto or their respective
successors in interest and expressly stating that it is an amendment to this
Reorganization Agreement.
10.10 Interpretation. The headings contained in this
Reorganization Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Reorganization Agreement.
10.11 Payment of Expenses. Except as set forth herein, UPC
and MSB shall each pay its own fees and expenses
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 65
<PAGE> 216
(including, without limitation, legal fees and expenses) incurred by it in
connection with the transactions contemplated hereunder.
10.12 Finders and Brokers. UPC, INTERIM, SECURITY, FARMERS
and MSB represent and warrant to each other that, except for the engagement by
MSB of Stephens, Inc. as its financial advisor, they have employed no broker or
finder in connection with the transactions described in this Reorganization
Agreement under an arrangement pursuant to which a fee is, or may be due to
such broker or finder as a result of the execution of this Reorganization
Agreement or the closing of the transaction contemplated herein. This section
shall survive the termination of this Reorganization Agreement.
10.13 Equitable Remedies. The Parties hereto agree that,
in the event of a breach of this Reorganization Agreement by MSB, SECURITY,
FARMERS, UPC and INTERIM will be without an adequate remedy at law by reason of
the unique nature of MSB, SECURITY and FARMERS. In recognition thereof, in
addition to (and not in lieu of) any remedies at law which may be available to
UPC and INTERIM, UPC and INTERIM shall be entitled to obtain equitable relief,
including the remedies of specific performance and injunction, in the event of
a breach of this Reorganization Agreement by MSB, SECURITY or FARMERS, and no
attempt on the part of UPC or INTERIM to obtain such equitable relief shall be
deemed to constitute an election of remedies by UPC or INTERIM which would
preclude UPC or INTERIM from obtaining any remedies at law to which it would
otherwise be entitled. MSB, SECURITY and FARMERS covenant that they shall not
contend in any such proceeding that UPC or INTERIM is not entitled to a decree
of specific performance by reason of having an adequate remedy at law.
10.14 Attorneys' Fees. If any Party hereto shall bring an
action at law or in equity to enforce its rights under this Reorganization
Agreement (including an action based upon a misrepresentation or the breach of
any warranty, covenant, agreement or obligation contained herein), the
prevailing Party in such action shall be entitled to recover from the other
Party its reasonable costs and expenses necessarily incurred in connection with
such action (including fees, disbursements and expenses of attorneys and costs
of investigation).
10.15 Survival of Representations and Warranties. All
representations and warranties made by the Parties hereto or in any instrument
or document furnished in connection herewith, shall survive the Closing and any
investigation at any time made by or on behalf of the Parties hereto and shall
expire at the Effective Time of the Merger except as to any matter which is
based upon willful fraud with respect to which the
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 66
<PAGE> 217
representations and warranties set forth in this Reorganization Agreement shall
expire only upon expiration of the applicable statutes of limitation. Nothing
in this Section 10.15 shall limit MSB's, SECURITY's, FARMERS', UPC's or
INTERIM' rights or remedies for misrepresentations, breaches of this
Reorganization Agreement or any other improper action or inaction by the other
Party hereto prior to its termination.
10.16 No Waiver. No failure, delay or omission of or by
any Party in exercising any right, power or remedy upon any breach or default
of any other Party shall impair any such rights, powers or remedies of the
Party not in breach or default, nor shall it be construed to be a waiver of any
such right, power or remedy, or an acquiescence in any similar breach or
default; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
Party of any provisions of this Reorganization Agreement must be in writing and
must be executed by the Parties to this Reorganization Agreement and shall be
effective only to the extent specifically set forth in such writing.
10.17 Remedies Cumulative. All remedies provided in this
Reorganization Agreement, by law or otherwise, shall be cumulative and not
alternative.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 67
<PAGE> 218
IN WITNESS WHEREOF, each of the Parties hereto has duly
executed and delivered this Reorganization Agreement or has caused this
Reorganization Agreement to be executed and delivered in its name and on its
behalf by its representative thereunto duly authorized, all as of the date
first written above.
MID SOUTH BANCSHARES, INC.
By: /s/
--------------------------
Steve Gramling
Its: Chairman of the Board
ATTEST:
/s/
- ----------------------------
Secretary
SECURITY BANK
By: /s/
--------------------------
Steve Gramling
Its: Chairman of the Board
ATTEST:
/s/
- ---------------------------
Secretary
FARMERS AND MERCHANTS BANK
By: /s/
--------------------------
Its: Chairman of the Board
ATTEST:
/s/
- ---------------------------
Secretary
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 68
<PAGE> 219
UNION PLANTERS CORPORATION
By: /s/
--------------------------
Jackson W. Moore
Its: President
ATTEST:
/s/
- -----------------------------
Secretary
MSB ACQUISITION COMPANY, INC.
By: /s/
--------------------------
Jackson W. Moore
Its: President
ATTEST:
/s/
- -----------------------------
Secretary
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 69
<PAGE> 220
EXHIBIT A
PLAN OF MERGER
SETTING FORTH THE PLAN OF MERGER
OF
MSB ACQUISITION COMPANY, INC.
(AN ARKANSAS CORPORATION)
WITH AND INTO
MID SOUTH BANCSHARES, INC.
(AN ARKANSAS CORPORATION)
THIS PLAN OF MERGER ("Plan of Merger") is made and entered into as of
the 8th day of July, 1994, by and between MID SOUTH BANCSHARES, INC. ("MSB"), a
corporation organized and existing under the laws of the State of Arkansas
having its principal office at Court & Pruett, Paragould, Greene County,
Arkansas 72451 and which is a registered bank holding company under the Bank
Holding Company Act; UNION PLANTERS CORPORATION ("UPC"), a corporation
organized and existing under the laws of the State of Tennessee having its
principal office at 7130 Goodlett Farms Parkway, Memphis, Shelby County,
Tennessee 38018 and which is registered as a bank holding company under the
Bank Holding Company Act; and MSB ACQUISITION COMPANY, INC. ("INTERIM"), a
corporation organized and existing under the laws of the State of Arkansas
having its principal office at 300 South Church Street, Jonesboro, Craighead
County, Arkansas 72403. All of the authorized, issued and outstanding shares
of capital stock of INTERIM are owned and held of record by UPC.
PREAMBLE
WHEREAS, UPC, INTERIM and MSB have entered into an Agreement and Plan
of Reorganization dated as of the 8th day of July, 1994 ("Reorganization
Agreement") to which this Plan of Merger is Exhibit A and is incorporated by
reference as a part thereof providing for the merger of INTERIM with and into
MSB (which would be the Surviving Corporation) and the acquisition of all of
the MSB Common Stock outstanding immediately prior to the Effective Time of the
Merger by UPC for the Consideration set forth in the Reorganization Agreement;
and
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
PAGE 70
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WHEREAS, As provided in the Reorganization Agreement, UPC has caused
INTERIM to join in this Plan of Merger by executing and delivering same; and
WHEREAS, The Boards of Directors of UPC, INTERIM and MSB are each of
the opinion that the interests of their respective corporations and their
corporations' respective shareholders would best be served if INTERIM were to
be merged with and into MSB, which would survive the Merger, on the terms and
conditions provided in the Reorganization Agreement and in this Plan of Merger,
and as a result of such Merger becoming effective, the Surviving Corporation
would become a wholly-owned subsidiary of UPC.
NOW, THEREFORE, in consideration of the covenants and agreements of
the Parties contained herein, MSB, UPC, and INTERIM hereby make, adopt and
approve this Plan of Merger in order to set forth the terms and conditions for
the merger of MSB with and into INTERIM (the "Merger").
ARTICLE
DEFINITIONS
1.1 As used in this Plan of Merger and in any amendments hereto,
all capitalized terms herein shall have the meanings assigned to such terms in
the Reorganization Agreement unless otherwise defined herein.
ARTICLE 2
CAPITALIZATION
2.1 MSB ACQUISITION COMPANY, INC., INC.. The authorized capital
stock of INTERIM consists of 1,000 shares of common stock having a par value of
$1.00 per share (the "INTERIM Common Stock") and no shares of preferred stock.
As of the date of this Plan of Merger, 1,000 shares of INTERIM Common Stock are
issued and outstanding, and no shares of INTERIM Common Stock are held by it as
treasury stock. All such issued and outstanding shares of INTERIM Common Stock
are owned beneficially and of record by UPC.
2.2 UNION PLANTERS CORPORATION. The authorized capital stock of
UPC consists of 10,000,000 shares of preferred stock having no par value (the
"UPC Preferred Stock"), and 50,000,000 shares of common stock having a par
value of $5.00 per share (the "UPC Common Stock"). As of June 30, 1994, UPC
had issued and outstanding: 44,000 shares of $8.00 Nonredeemable Cumulative
Convertible Preferred Stock, Series B; 690,000 shares of 10-3/8%
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
PAGE 71
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Increasing Rate, Redeemable, Cumulative Preferred Stock, Series C; 253,655
shares of 9.5% Redeemable, Cumulative Preferred Stock, Series D; and 3,107,922
shares of 8% Cumulative, Convertible Preferred Stock, Series E. In addition,
250,000 shares of UPC Preferred Stock have been reserved for issuance as Series
A Preferred Stock pursuant to the UPC Share Purchase Rights Agreement dated
January 19, 1989, between UPC and Union Planters National Bank as Rights Agent
(the "UPC Share Purchase Rights Agreement"). As of June 30, 1994, 21,814,022
shares of UPC Common Stock were validly issued and outstanding.
2.3 MID SOUTH BANCSHARES, INC. The authorized capital stock of
MSB consists of 200,000 shares of common stock having a par value of $10.00 per
share (the "MSB Common Stock") and no shares of preferred stock. As of the
date hereof, 129,022 shares of MSB Common Stock were issued and outstanding,
and 417 shares of MSB Common Stock were held by it as MSB Treasury Stock.
ARTICLE 3
PLAN OF MERGER
3.1 Constituent Corporations. The name of each constituent
corporation to the Merger is:
MSB ACQUISITION COMPANY, INC.
and
MID SOUTH BANCSHARES, INC.
3.2 Surviving Corporation. The Surviving Corporation shall be:
MID SOUTH BANCSHARES, INC.
which as of the Effective Time of the Merger shall continue to be named:
MID SOUTH BANCSHARES, INC.
3.3 Terms and Conditions of Merger. The Merger shall be
consummated only pursuant to, and in accordance with this Plan of Merger and
the Reorganization Agreement. Conditioned upon the satisfaction or lawful
waiver (by the Party or Parties entitled to the benefit thereof) of all
conditions precedent to consummation of the Merger, the Merger will become
effective on the date and at the time (the "Effective Time of the Merger") of
the filing of Articles of Merger with the Secretary of State of the State of
Arkansas, or at such later time and/or date as may be agreed upon by the
parties and set forth in the Articles of Merger. At the Effective Time of the
Merger, INTERIM shall be merged with and into MSB which will survive the
Merger, and the separate existence of INTERIM shall cease thereupon, and
without
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
PAGE 72
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further action, MSB shall thereafter possess all of the assets, rights,
privileges, appointments, powers, licenses, permits and franchises of both
INTERIM and MSB, whether of a public or private nature, and shall be subject to
all of the liabilities, restrictions, disabilities, and duties of both INTERIM
and MSB.
3.4 Articles of Incorporation. At the Effective Time of the
Merger, the Articles of Incorporation of MSB, as in effect immediately prior to
the Effective Time of the Merger, shall continue to constitute the Articles of
Incorporation of MSB as the Surviving Corporation, unless and until the same
shall be amended as provided by law and the terms of such Articles of
Incorporation.
3.5 Bylaws. At the Effective Time of the Merger, the Bylaws of
MSB, as in effect immediately prior to the Effective Time, shall continue to be
its Bylaws as the Surviving Corporation, unless and until amended or repealed
as provided by law, its Articles of Incorporation and such Bylaws.
3.6 Directors and Officers. The directors and officers of INTERIM
in office immediately prior to the Effective Time of the Merger shall be the
directors and officers of the Surviving Corporation, to hold office as provided
in the Articles of Incorporation and Bylaws of the Surviving Corporation,
unless and until their successors shall have been elected or appointed and
shall have qualified or they shall be removed as provided therein.
3.7 Name. The name of MSB as the Surviving Corporation following
the Merger, shall be:
MID SOUTH BANCSHARES, INC.
ARTICLE 4
DESCRIPTION OF THE TRANSACTION
4.1 Conversion of Shares of INTERIM. At the Effective Time of the
Merger, each share of $1.00 par value common stock of INTERIM (the "INTERIM
Common Stock") issued and outstanding immediately prior to the Effective Time
of the Merger shall, by virtue of the Merger becoming effective and without
any further action on the part of anyone, be converted into and become one
share of the issued and outstanding common stock of the Surviving Corporation.
4.2 Conversion and Cancellation of Shares of MSB. At the
Effective Time of the Merger, each share of $10.00 par value common stock of
MSB issued and outstanding immediately prior to
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
PAGE 73
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the Effective Time of the Merger shall, by virtue of the Merger becoming
effective and without any further action on the part of anyone, be converted,
exchanged and cancelled as provided in Section 4.3 hereof.
4.3 Exchange of MSB Shares; Exchange Ratio. At the Effective Time
of the Merger, the outstanding shares of MSB Common Stock held by the MSB
Record Holders immediately prior to the Effective Time of the Merger shall,
without any further action on the part of anyone, cease to represent any
interest (equity, shareholder or otherwise) in MSB and shall, except for those
shares of MSB Common Stock held and registered in the name of any MSB Record
Holder who shall have perfected his dissenters' rights and shall have continued
such dissenting status through the Effective Time of the Merger, automatically
be converted exclusively into, and constitute only the right of the MSB Record
Holders to receive in exchange for their shares of MSB Common Stock, whole
shares of UPC Common Stock and a cash payment in settlement of any remaining
fractional share of UPC Common Stock in accordance with the terms and
conditions of this Section 4.3. The shares of UPC Common Stock and the cash
settlement of any remaining fractional share of UPC Common Stock deliverable by
UPC to the MSB Record Holders pursuant to the terms of the Reorganization
Agreement are sometimes collectively referred to herein as the "Consideration."
The number of shares of UPC Common Stock to be exchanged for each share of MSB
Common Stock issued and outstanding immediately prior to the Effective Time of
the Merger (based on there being no more than 129,366 shares of MSB Common
Stock issued and outstanding immediately prior to the Effective Time of the
Merger) shall be based on an exchange ratio (the "Exchange Ratio") as
determined and set forth in this Section 4.3. The Exchange Ratio shall be
determined as follows:
(i) In the event the Current Market Price
Per Share of UPC Common Stock should be greater than or equal to
$24.00 per share of UPC Common Stock but less than or equal to $28.00
per share of UPC Common Stock (the "Primary Collar"), the Exchange
Ratio shall be fixed at 4.054 shares of UPC Common Stock for each
share of MSB Common Stock issued and outstanding at the Effective Time
of the Merger;
(ii) In the event the Current Market Price
Per Share of UPC Common Stock should be greater than $28.00 per share
of UPC Common Stock but less than or equal to $30.00 per share of UPC
Common Stock (the "Upper Secondary Collar"),the Exchange Ratio shall
be based on (a) a fixed price of $113.51 per share of MSB Common Stock
divided by
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(b) the Current Market Price Per Share of UPC Common Stock for each
share of MSB Common Stock validly issued and outstanding at the
Effective Time of the Merger;
(iii) In the event the Current Market Price
Per Share of UPC Common Stock should be greater than $30.00 per share
of UPC Common Stock (the "Ceiling"), the Exchange Ratio shall be fixed
at 3.7837 shares of UPC Common Stock for each share or MSB Common
Stock;provided, however, UPC would have the right to either deliver
the fixed Exchange Ratio of 3.7837 or to terminate the transaction
contemplated in the Reorganization Agreement; provided, however,
should UPC elect to terminate the transaction under this provision,
MSB would have the unilateral right to reinstate the transaction by
accepting in exchange for each share of MSB Common Stock issued and
outstanding that number of shares of UPC Common Stock at the Current
Market Price Per Share sufficient to equal $113.51 per share of MSB
Common Stock;
(iv) In the event the Current Market Price
Per Share of UPC Common Stock should be greater than or equal to
$22.00 per share of UPC Common Stock but less than $24.00 per share of
UPC Common Stock (the "Lower Secondary Collar"), the Exchange Ratio
shall be based on (a) a fixed price of $97.30 per share of MSB Common
Stockdivided by (b) the Current Market Price Per Share of UPC Common
Stock for each share of MSB Common Stock validly issued and
outstanding at the Effective Time of the Merger; and
(v) In the event the Current Market Price
Per Share of UPC Common Stock should be less than $22.00 per share of
UPC Common Stock (the "Floor"), the Exchange Ratio shall be fixed at
4.4227 shares of UPC Common Stock for each share of MSB Common Stock;
provided, however, MSB shall have the right to either accept the fixed
Exchange Ratio of 4.4227 or to terminate the transaction contemplated
in the Reorganization Agreement;provided, however, should MSB elect to
terminate the transaction under this provision, UPC would have the
unilateral right to reinstate the transaction by delivering in
exchange for each share of MSB Common Stock issued and outstanding
that number of shares of UPC Common Stock at the Current Market Price
Per Share sufficient to equal $97.30 per share of MSB Common Stock.
The Exchange Ratio shall be based on an aggregate of no more than 129,366
shares of MSB Common Stock issued and outstanding immediately prior to the
Effective Time of the Merger; provided, however, that no fractional shares of
UPC Common Stock shall be issued and if, after aggregating all of the shares of
UPC Common Stock to which a MSB Record Holder would be entitled based upon
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
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the Exchange Ratio, there were a fractional share of UPC Common Stock
remaining, such fractional share shall be settled by a cash payment therefor
based upon the Current Market Price Per Share of one (1) full share of UPC
Common Stock.
(1) DEFINITION OF "CURRENT MARKET PRICE
PER SHARE." The "Current Market Price Per Share" shall be the average
closing price per share of the "last" real time trades (i.e., closing
price) of the UPC Common Stock on the NYSE (as published in The Wall
Street Journal) for each of the ten (10) NYSE general market trading
days next preceding the Closing Date on which the NYSE was open for
business (the "Pricing Period"). In the event the UPC Common Stock
does not trade on one or more of the trading days during the Pricing
Period (a "No Trade Date"), any such No Trade Date shall be
disregarded in computing the average closing price per share of UPC
Common Stock and the average shall be based upon the "last" real time
trades and number of days on which the UPC Common Stock actually
traded during the Pricing Period.
(2) EFFECTS OF DISSENTERS' RIGHTS ON THE
EXCHANGE RATIO. Should MSB Record Holders representing at least seven
percent (7%) of the shares of MSB Common Stock issued and outstanding
at the time of Closing perfect such MSB Record Holder's dissenters'
rights pursuant to the Arkansas Code and maintain the perfected status
of such dissenters' rights through the Closing Date, UPC and INTERIM
shall have the right, exercisable in their sole discretion, to
terminate the Reorganization Agreement, or with the approval of the
Board of Directors of MSB reduce the number of shares of UPC Common
Stock to be delivered by UPC hereunder by an amount sufficient to
off-set against the Consideration any amounts paid, or to be paid, by
UPC in satisfaction of such dissenters' rights.
(3) EFFECT OF STOCK SPLITS, REVERSE STOCK
SPLITS, STOCK DIVIDENDS AND SIMILAR CHANGES IN THE CAPITAL OF UPC OR
MSB. Should either UPC or MSB effect any stock splits, reverse stock
splits, stock dividends or similar changes in their respective capital
accounts subsequent to the date of the Reorganization Agreement but
prior to the Effective Time of the Merger, the Exchange Ratio shall be
adjusted proportionately in such a manner as the Board of Directors of
UPC and the Board of Directors of MSB shall agree in good faith to be
fair and reasonable in order to give effect to such changes.
4.4 Mechanics of Payment of the Consideration. Upon receipt of
the proper submission of the certificate(s) formerly
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
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representing and evidencing ownership of the shares of MSB Common Stock, the
Exchange Agent shall deliver to the MSB Shareholders in exchange for the
certificate(s) surrendered by them, the Consideration to be paid for each such
MSB Shareholder's shares of MSB Common Stock evidenced by the certificate or
certificates which were cancelled and converted exclusively into the right to
receive the Consideration upon the Merger becoming effective. After the
Effective Time of the Merger and until properly surrendered to the Exchange
Agent, each outstanding certificate or certificates which formerly evidenced
and represented the shares of MSB Common Stock of an MSB Record Holder, subject
to the provisions of this Section, shall be deemed for all corporate purposes
to represent and evidence only the right to receive the Consideration into
which such MSB Record Holder's shares of MSB Common Stock were converted and
aggregated at the Effective Time of the Merger. Unless and until the
outstanding certificate or certificates, which immediately prior to the
Effective Time of the Merger evidenced and represented the MSB Record Holder's
MSB Common Stock shall have been surrendered as provided above, the
Consideration payable to the MSB Record Holder(s) of the cancelled shares as of
any time after the Effective Date shall not be paid to the MSB Record Holder(s)
of such certificate(s) until such certificates shall have been surrendered in
the manner required. Each MSB Shareholder will be responsible for all federal,
state and local taxes which may be incurred by him on account of his receipt of
the Consideration to be paid in the Merger. The MSB Record Holder(s) of any
certificate(s) which shall have been lost or destroyed may nevertheless,
subject to the provisions of this Section, receive the Consideration to which
each such MSB Record Holder is entitled, provided that each such MSB Record
Holder shall deliver to UPC and to the Exchange Agent: (i) a sworn statement
certifying such loss or destruction and specifying the circumstances thereof
and (ii) a lost instrument bond in form satisfactory to UPC and the Exchange
Agent which has been duly executed by a corporate surety satisfactory to UPC
and the Exchange Agent, indemnifying the Surviving Corporation, UPC, the
Exchange Agent (and their respective successors) to their satisfaction against
any loss or expense which any of them may incur as a result of such lost or
destroyed certificates being thereafter presented. Any costs or expenses which
may arise from such replacement procedure, including the premium on the lost
instrument bond, shall be for the account of the MSB Shareholder.
4.5 Stock Transfer Books. At the Effective Time of the Merger,
the stock transfer books of MSB shall be closed and no transfer of shares of
MSB Common Stock shall be made thereafter.
4.6 Effects of the Merger. As of the Effective Time of the
Merger, the separate existence of INTERIM shall cease, and
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
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INTERIM shall be merged with and into MSB which, as the Surviving Corporation,
shall thereupon and thereafter possess all of the assets, rights, privileges,
appointments, powers, licenses, permits and franchises of the two merged
corporations, whether of a public or a private nature, and shall be subject to
all of the liabilities, restrictions, disabilities and duties of both MSB and
INTERIM.
4.7 Transfer of Assets. At the Effective Time of the Merger, all
rights, assets, licenses, permits, franchises and interests of MSB and INTERIM
in and to every type of property, whether real, personal, or mixed, whether
tangible or intangible, and to choses in action shall be deemed to be vested in
MSB as the Surviving Corporation by virtue of the Merger and without any deed
or other instrument or act of transfer whatsoever.
4.8 Assumption of Liabilities. At the Effective Time of the
Merger, the Surviving Corporation shall become and be liable for all debts,
liabilities, obligations and contracts of INTERIM as well as those of the
Surviving Corporation, whether the same shall be matured or unmatured; whether
accrued, absolute, contingent or otherwise; and whether or not reflected or
reserved against in the balance sheets, other financial statements, books of
account or records of INTERIM or the Surviving Corporation.
4.9 Dissenting Shareholders' Rights. Any MSB Record Holder of
shares of MSB Common Stock who shall comply strictly with the provisions of
Section 4-27-1302 et seq. of the Arkansas Code Annotated (the "Arkansas Code"),
shall be entitled to dissent from the Merger and to seek those appraisal
remedies afforded by the Arkansas Code. Such an MSB Shareholder is referred to
herein as an "MSB Dissenting Shareholder." However, UPC and INTERIM shall not
be obligated to consummate the Merger if MSB Record Holders holding or
controlling more than seven percent (7%) of the shares of the MSB Common Stock
issued and outstanding immediately prior to the Effective Time of the Merger
shall have perfected their dissenters' rights in accordance with the Arkansas
Code and the perfected status of said dissenters' rights shall have continued
to the time of Closing.
4.10 Approvals of Shareholders of MSB and INTERIM. In order to
become effective, the Merger must be approved by the respective shareholders of
MSB and of INTERIM at meetings to be called for that purpose by their
respective Boards of Directors, or by their unanimous action by written consent
complying fully with the laws of Arkansas.
4.11 MSB Treasury Stock. At the Effective Time of the Merger, any
shares of MSB Common Stock held by MSB as Treasury
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Stock shall be cancelled automatically without further action on the part of
anyone and shall be of no further effect.
ARTICLE 5
AMENDMENTS AND WAIVERS
5.1 AMENDMENTS. To the extent permitted by law, this Plan of
Merger may be amended unilaterally by UPC and INTERIM as set forth in Section
10.9(d) of the Reorganization Agreement; provided, however, that the provisions
of Section 4.3 of this Plan of Merger relating to the manner or basis upon
which shares of MSB Common Stock will be converted into the exclusive right to
receive the Consideration from UPC shall not be amended in such a manner as to
reduce the amount of the Consideration payable to the MSB Record Holders
determined as provided in Section 4.3 of the Reorganization Agreement nor shall
this Plan of Merger be amended to permit UPC to utilize assets other than its
UPC Common Stock or cash to make payment of the Consideration as provided in
Section 3.1(e) of the Reorganization Agreement at any time after the
Shareholders' Meeting without the requisite approval of the MSB Record Holders
of the shares of MSB Common Stock outstanding, and that no amendment to this
Plan of Merger shall modify the requirements of regulatory approval as set
forth in Section 8.3(b) of the Reorganization Agreement.
5.2 AUTHORITY FOR AMENDMENTS AND WAIVERS. Prior to the
Effective Time of the Merger, UPC and INTERIM, acting through their respective
Boards of Directors or chief executive officers or presidents or other
authorized officers, shall have the right to amend this Plan of Merger to
postpone the Effective Time of the Merger to a date and time subsequent to the
time of filing of the Plan of Merger with the Tennessee Secretary of State, to
waive any default in the performance of any term of this Plan of Merger by MSB,
to waive or extend the time for the compliance or fulfillment by MSB of any and
all of its obligations under this Plan of Merger, and to waive any or all of
the conditions precedent to the obligations of UPC and INTERIM under this Plan
of Merger, except any condition that, if not satisfied, would result in the
violation of any law or applicable governmental regulation. Prior to the
Effective Time of the Merger, MSB, acting through its Board of Directors or
chief executive officer or president or other authorized officer, shall have
the right to amend this Plan of Merger to postpone the Effective Time of the
Merger to a date and time subsequent to the time of filing of the Plan of
Merger with the Arkansas Secretary of State, to waive any default in the
performance of any term of this Plan of Merger by UPC or INTERIM, to waive or
extend the time for the compliance or fulfillment by UPC or INTERIM of any and
all of their obligations under this Plan of Merger, and to waive any or all of
the
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
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conditions precedent to the obligations of MSB under this Plan of Merger except
any condition that, if not satisfied, would result in the violation of any law
or applicable governmental regulation.
ARTICLE 6
MISCELLANEOUS
6.1 NOTICES. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
by hand, by facsimile transmission, or by registered or certified mail, postage
pre-paid to the persons at the addresses set forth below (or at such other
addresses or facsimile numbers as may hereafter be designated as provided
below), and shall be deemed to have been delivered as of the date received by
the Party to which, or to whom it is addressed:
UPC and INTERIM: Union Planters Corporation
P.O. Box 387 (mailing)
Memphis, Tennessee 38147
7130 Goodlett Farms Parkway
(deliveries)
Memphis, Tennessee 38018
Telecopy Number: (901) 578-2832
Attn: Mr. Jackson W. Moore, President
Gary A. Simanson
Associate General Counsel
MSB: Mid South Bancshares, Inc.
Court and Pruett Streets (P.O. Box
670) Paragould, Arkansas 72451
Telecopy Number: (501) 239-3194
Attn: Mr. Steve Gramling, Chairman
With a copy to: Richard N. Massey, Esq.
Rose Law Firm
120 East Fourth Street
Little Rock, Arkansas 72201
Fax: (501) 375-1309
or at such other address as shall be furnished in writing by any of the Parties
to the others by notice given as provided in this section 6.1.
6.2 GOVERNING LAW. Except to the extent federal law shall be
controlling, this Plan of Merger shall be governed by and construed and
enforced in accordance with the laws of the State of Arkansas with respect to
those provisions of this Plan of Merger expressly required by Arkansas law to
be included in this Plan of Merger disregarding, however, the Arkansas
conflicts
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
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of laws rules. In all other instances, this Plan of Merger shall be governed
by and construed and enforced in accordance with the laws of the State of
Tennessee disregarding, however, the Tennessee conflicts of laws rules.
6.3 CAPTIONS. The Captions heading the Sections in this Plan
of Merger are for convenience only and shall not affect the construction or
interpretation of this Plan of Merger.
6.4 COUNTERPARTS. This Plan of Merger may be executed in two
or more counterparts, each of which shall be deemed an original instrument, but
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the Parties has caused this Plan of Merger
to be duly executed and delivered by its duly authorized officers as of the
date first above written.
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ATTEST: UNION PLANTERS CORPORATION
/s/_______________________ By: /s/_______________________
James F. Springfield Jackson W. Moore
Its: Secretary Its: President
ATTEST: MSB ACQUISITION COMPANY, INC.
/s/_______________________ By: /s/_______________________
Jackson W. Moore
Its: Secretary Its: President
ATTEST: MID SOUTH BANCSHARES, INC.
/s/_______________________ By: /s/_______________________
Steve Gramling
Its: Secretary Its: Chairman of the Board
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
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APPENDIX C
ARKANSAS BUSINESS CORPORATION ACT -- DISSENTERS' RIGHTS
<PAGE> 234
EXCERPT FROM ARKANSAS BUSINESS CORPORATION ACT OF 1965
4-26-1007 RIGHTS OF DISSENTING SHAREHOLDERS. -- (a) If a shareholder of a
corporation which is a party to a merger or consolidation files with the
corporation, prior to or at the meeting of shareholders at which the plan of
merger or consolidation is submitted to a vote, a written objection to the plan
of merger or consolidation and does not vote in favor thereof, and the
shareholder within ten (10) days after the date on which the vote was taken
makes written demand on the surviving or new domestic or foreign corporation for
payment of the fair value of his shares as of the day prior to the date on which
the vote was taken approving the merger or consolidation, then, if the merger or
consolidation is effected, the surviving or new corporation shall pay to the
shareholder, upon surrender of his certificate or certificates representing the
shares, the fair value thereof.
(b) The demand shall state the number and class of the shares owned by the
dissenting shareholder.
(c) Any shareholder failing to make demand within the ten-day period shall
be bound by the terms of the merger or consolidation.
(d) Within ten (10) days after the merger or consolidation is effected, the
surviving or new corporation, as the case may be, shall give notice to each
dissenting shareholder who has made demand as herein provided for the payment of
the fair value of his shares.
(e)(1) If within thirty (30) days after the date on which the merger or
consolidation was effected the value of such shares is agreed upon between the
dissenting shareholder and the surviving or new corporation, payment shall be
made within ninety (90) days after the date on which such merger or
consolidation was effected, upon the surrender of his certificate or
certificates representing those shares.
(2) Upon payment of the agreed value, the dissenting shareholder shall
cease to have any interest in those shares or in the corporation.
(f)(1) If within the period of thirty (30) days the shareholder and the
surviving or new corporation do not so agree, then the dissenting shareholder,
within sixty (60) days after the expiration of the thirty-day period, may file a
petition in the circuit court of the county in which the registered office of
the surviving corporation is located, if the surviving corporation is a domestic
corporation or in the Pulaski County Circuit Court if the surviving corporation
is a foreign corporation, asking for a finding and determination of the fair
value of the shares and shall be entitled to judgment against the surviving or
new corporation for the amount of the fair value as of the day prior to the date
on which the vote was taken approving such merger or consolidation, together
with interest thereon to the date of the judgment.
(2) The judgment shall be payable only upon and simultaneously with the
surrender to the surviving or new corporation of the certificate or certificates
representing the shares.
(3) Upon payment of the judgment, the dissenting shareholder shall cease to
have any interest in the shares or in the surviving or new corporation.
(4) Unless the dissenting shareholder files the petition within the time
herein limited, the shareholder and all persons claiming under him shall be
bound by the terms of the merger or consolidation.
(g) Shares acquired by the surviving or new corporation pursuant to the
payment of the agreed value thereof or to payment of the judgment entered, as in
this section provided, may be held and disposed of by the corporation as in the
case of other treasury shares.
(h) The provisions of this section shall not apply to a merger if, on the
date of the filing of the articles of merger, the surviving corporation is the
owner of all the outstanding shares of the other domestic or foreign
corporations that are parties to the merger.
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<PAGE> 235
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Charter of the Registrant provides as follows:
TWELFTH: INDEMNIFICATION OF CERTAIN PERSONS:
To the fullest extent permitted by Tennessee law, the
Corporation may indemnify or purchase and maintain insurance to
indemnify any of its directors, officers, employees or agents and any
persons who may serve at the request of the Corporation as directors,
officers, employees, trustees or agents of any other corporation,
firm, association, national banking association, state-chartered bank,
trust company, business trust, organization or any other type of
entity whether or not the Corporation shall have any ownership
interest in such entity. Such indemnification(s) may be provided for
in the Bylaws, or by resolution of the Board of Directors or by
appropriate contract with the person involved.
Article V, INDEMNIFICATION, of the Registrant's Bylaws provides as
follows:
The Corporation does hereby indemnify its directors and
officers to the fullest extent permitted by the laws of the State of
Tennessee and by ARTICLE TWELFTH of its Charter. The Corporation may
indemnify any other person to the extent permitted by the Charter and
by applicable law.
Indemnification of corporate directors and officers is governed by
Sections 48-18-501 through 48-18-509 of the Tennessee Business Corporation Act
(the "Act"). Under the Act, a person may be indemnified by a corporation
against judgments, fines, amounts paid in settlement and reasonable expenses
(including attorneys' fees) actually and necessarily incurred by him in
connection with any threatened or pending suit or proceeding or any appeal
thereof (other than an action by or in the right of the corporation), whether
civil or criminal, by reason of the fact that he is or was a director or
officer of the corporation or is or was serving at the request of the
corporation as a director or officer, employee or agent of another corporation
of any type or kind, domestic or foreign, if such director or officer acted in
good faith for a purpose which he reasonably believed to be in the best
interest of the corporation and, in criminal actions or proceedings only, in
addition, had no reasonable cause to believe that his conduct was unlawful. A
Tennessee corporation may indemnify a director or officer thereof in a suit by
or in the right of the corporation against amounts paid in settlement and
reasonable expenses, including attorneys' fees, actually and necessarily
incurred as a result of such suit unless such director or officer did not act
in good faith or with the degree of diligence, care and skill which ordinarily
prudent men exercise under similar circumstances and in like positions.
<PAGE> 236
A person who has been wholly successful, on the merits or otherwise, in the
defense of any of the foregoing types of suits or proceedings is entitled to
indemnification for the foregoing amounts. A person who has not been wholly
successful in any such suit or proceeding may be indemnified only upon the
order of a court or a finding that the director or officer met the required
statutory standard of conduct by (i) a majority vote of a disinterested quorum
of the board of Directors, (ii) the Board of Directors based upon the written
opinion of independent legal counsel to such effect, or (iii) a vote of the
shareholders.
ITEM 21. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
2 -- Agreement and Plan of Reorganization, dated July 8, 1994, by and between Union Planters Corporation, MSB
Acquisition Company, Inc., Mid South Bancshares, Inc., Security Bank and Farmers and Merchants Bank along
with the Plan of Merger annexed thereto as Exhibit A (included as Appendix B to the Prospectus).
5 -- Opinion of Gary A. Simanson, Associate General Counsel to Union Planters Corporation, regarding legality
of Common Stock, $5.00 par value per share, of Union Planters Corporation.
23(a) -- Consent of Gary A. Simanson, Esq. (included in Exhibit 5).
23(b) -- Consent of Price Waterhouse LLP
23(c) -- Consent of Price Waterhouse LLP
23(d) -- Consent of Ernst & Young LLP
23(e) -- Consent of KPMG Peat Marwick LLP
23(f) -- Consent of Deloitte & Touche LLP
24 -- Power of Attorney (included in signature pages).
</TABLE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-1
<PAGE> 237
(2) That for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as a part of a registration in reliance upon Rule 430A
and contained in the form of prospectus filed by the Registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was
declared effective.
(3) That for purposes of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(4) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel, the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction,
the question whether such indemnification by its is public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
(5) To respond to requests for information that is
incorporated by reference into the prospectus pursuant to Items 4,
10(b), 11, or 13 of this Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail
or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(6) To supply by means of a post-effective amendment all
information concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-2
<PAGE> 238
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Memphis,
State of Tennessee, on the 29th day of September, 1994.
DATE: September 29, 1994
UNION PLANTERS CORPORATION
By: /s/ Benjamin W. Rawlins, Jr.
-----------------------------
Benjamin W. Rawlins, Jr.
Chairman of the Board
We, the undersigned directors and officers of Union Planters Corporation do
hereby constitute and appoint J. F. Springfield and M. Kirk Walters, and each
of them, our true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for us and in our name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, and we do
hereby ratify and confirm all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
Name Capacity Date
- ---- -------- ----
<S> <C> <C>
/s/ Benjamin W. Rawlins, Jr. Chairman of the Board, September 29, 1994
- ---------------------------- Chief Executive Officer,
Benjamin W. Rawlins, Jr. Director (Principal
Executive Officer)
/s/ John W. Parker Executive Vice President September 29, 1994
- ---------------------------- and Chief Financial
John W. Parker Officer (Principal
Financial Officer)
/s/ M. Kirk Walters Senior Vice President, September 29, 1994
- ---------------------------- Treasurer and Chief
M. Kirk Walters Accounting Officer
Director September __, 1994
- ----------------------------
Albert M. Austin
Director September __, 1994
- ----------------------------
Marvin E. Bruce
</TABLE>
II-3
<PAGE> 239
<TABLE>
<S> <C> <
Director September __, 1994
- -----------------------------
George W. Bryan
/s/ Robert B. Colbert, Jr. Director September 29, 1994
- -----------------------------
Robert B. Colbert, Jr.
/s/ C. J. Lowrance, III Director September 29, 1994
- -----------------------------
C. J. Lowrance, III
/s/ Jackson W. Moore President and Director September 29, 1994
- -----------------------------
Jackson W. Moore
/s/ Stanley D. Overton Director September 29, 1994
- -----------------------------
Stanley D. Overton
/s/ V. Lane Rawlins Director September 29, 1994
- -----------------------------
V. Lane Rawlins
/s/ Mike P. Sturdivant Director September 29, 1994
- -----------------------------
Mike P. Sturdivant
/s/ Richard A. Trippeer, Jr. Director September 29, 1994
- -----------------------------
Richard A. Trippeer, Jr.
</TABLE>
II-4
<PAGE> 240
PROXY
MID SOUTH BANCSHARES, INC.
No. of Shares _______
WEST COURT AND PRUETT STREETS
PARAGOULD, ARKANSAS 72450
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Steve Gramling and Dora Graham or either of
them acting alone as proxies, each with the power to appoint such person's
substitute, and hereby authorizes them to vote, as designated below, all the
shares of common stock of Mid South Bancshares, Inc. held of record by the
undersigned on October 4, 1994, at the Special Meeting of Shareholders to be
held on November 18, 1994 or any adjournments or postponements thereof.
1. APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION BY AND BETWEEN MID SOUTH
BANCSHARES, INC., SECURITY BANK, FARMERS AND MERCHANTS BANK, UNION
PLANTERS CORPORATION AND MSB ACQUISITION COMPANY, INC., DATED AS OF JULY
8, 1994, ALONG WITH THE PLAN OF MERGER ANNEXED THERETO AS EXHIBIT A.
FOR APPROVAL OF REORGANIZATION AGREEMENT AND THE _____
PLAN OF MERGER ANNEXED THERETO AS EXHIBIT A
AGAINST APPROVAL OF REORGANIZATION AGREEMENT AND _____
THE PLAN OF MERGER ANNEXED THERETO AS EXHIBIT A
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued on other side)
<PAGE> 241
(Continued from other side)
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. If no direction is made, this
proxy will be voted FOR approval of the Reorganization Agreement and the Plan
of Merger annexed thereto as Exhibit A.
Dated: ______________ __, 1994
Signature __________________
Signature __________________
(if held jointly)
Please sign exactly as name appears to
left. When shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign full corporate
name by President or other authorized
officer. If a partnership, please sign
in partnership name by authorized
person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 1
EXHIBIT 5
LEGAL OPINION OF GARY A. SIMANSON
AS TO VALIDITY OF SHARES OF UPC COMMON STOCK
<PAGE> 2
LOGO
UNION PLANTERS CORPORATION
September 22, 1994
Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38088
Re: 570,625 shares of the Common Stock, $5.00 par value per share, of
Union Planters Corporation ("UPC")
Gentlemen:
The undersigned has participated in the preparation of a registration statement
on Form S-4 (the "Registration Statement") for filing with the Securities and
Exchange Commission in respect to not more than 570,625 shares of UPC's Common
Stock, (the "Shares") which may be issued by UPC pursuant to an Agreement and
Plan of Reorganization dated as of July 8, 1994, by and between UPC, MSB
Acquisition Company, Inc., Mid South Bancshares, Inc., Security Bank and
Farmers and Merchants Bank (the "Agreement").
For purposes of rendering the opinion expressed herein, the undersigned has
examined UPC's corporate charter and all amendments thereto; UPC's by-laws and
amendments thereto; the Agreement and such of UPC's corporate records as the
undersigned has deemed necessary and material to rendering the undersigned's
opinion. The undersigned has relied upon certificates of public officials and
representations of UPC officials, and has assumed that all documents examined
by the undersigned as originals are authentic, that all documents submitted to
the undersigned as photocopies are exact duplicates of original documents, and
that all signatures on all documents are genuine.
Further, the undersigned is familiar with and has supervised all corporate
action taken in connection with the authorization of the sale of the subject
securities.
Based upon and subject to the foregoing and subsequent assumptions,
qualifications and exceptions, it is the undersigned's opinion that:
1. UPC is a duly organized and validly existing corporation in good standing
under the laws of the State of Tennessee and has all requisite power and
authority to issue, sell and deliver the subject securities, and to carry on
its business and own its property; and
2. The Shares have been duly authorized and when issued by UPC in accordance
with the Agreement, the Shares will be fully paid and nonassessable.
<PAGE> 3
Union Planters Corporation
September 22, 1994
Page 2
The opinion expressed above is limited by the following assumptions,
qualifications and exceptions.
(a) The undersigned is licensed to practice law only in the State of
Tennessee and the State of New York, and expresses no opinion with respect to
the effect of any laws other than those of the State of Tennessee and the
United States of America.
(b) The opinion stated herein is based upon statutes, regulations, rules,
court decisions and other authorities existing and effective as of the date of
this opinion, and the undersigned undertakes no responsibility to update or
supplement said opinion in the event of or in response to any subsequent
changes in the law or said authorities, or upon the occurrence after the date
hereof of events or circumstances that, if occurring prior to the date hereof,
might have resulted in a different opinion.
(c) This opinion has been rendered solely for the benefit of Union Planters
Corporation and no other person or entity shall be entitled to rely hereon
without the express written consent of the undersigned.
(d) This opinion is limited to the legal matters expressly set forth
herein, and no opinion is to be implied or inferred beyond the legal matters
expressly so addressed.
The undersigned hereby consents to the undersigned being named as a party
rendering a legal opinion under the caption "Validity of UPC Common Stock" in
the Prospectus constituting part of the Registration Statement and to the
filing of this opinion with the Securities and Exchange Commission as well as
all state regulatory bodies and jurisdictions where qualification is sought for
the sale of the subject securities.
The undersigned is an officer of and receives compensation from UPC and is
therefore not independent from UPC.
Very truly yours,
UNION PLANTERS CORPORATION
By: /s/ Gary A. Simanson
--------------------
Gary A. Simanson
Associate General Counsel
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Union Planters Corporation of our report
dated September 9, 1994 relating to the financial statements of Mid South
Bancshares, Inc. as of and for the year ended December 31, 1993, which appears
in such Prospectus. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
Price Waterhouse LLP
Memphis, Tennessee
September 29, 1994
<PAGE> 1
EXHIBIT 23(c)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Union Planters
Corporation of our report dated January 20, 1994, except as to Note 2 which is
as of March 1, 1994, which appears on page 34 of Union Planters Corporation's
1993 Annual Report to Shareholders, which is incorporated by reference in its
Annual Report on Form 10-K for the year ended December 31, 1993, and to the use
of our report dated September 8, 1994, which appears on page 40 of Union
Planters Corporation's Form 8-K dated September 19, 1994. We also consent to
the reference to us under the heading "Experts" in such Prospectus.
Price Waterhouse LLP
Memphis, Tennessee
September 29, 1994
<PAGE> 1
EXHIBIT 23(d)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated August 29, 1994, with respect to the consolidated
financial statements of Mid South Bancshares, Inc. and Subsidiaries for the
years ended December 31, 1992 and 1991 included in the Registration Statement
(Form S-4, No. 33-00000) and related Prospectus of Union Planters Corporation
for the registration of 570,625 shares of its common stock.
Ernst & Young LLP
Little Rock, Arkansas
September 29, 1994
<PAGE> 1
EXHIBIT 23(e)
CONSENT OF INDEPENDENT ACCOUNTS
The Board of Directors
Grenada Sunburst System Corporation:
We consent to incorporation by reference in the registration statement
(No._________) on Form S-4 of Union Planters Corporation of our report dated
January 28, 1994, to the consolidated balance sheets of Grenada Sunburst System
Corporation and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1993, which
report appears in the Current Report on Form 8-K dated July 26, 1994, of Union
Planters Corporation and to the reference to our firm under the heading of
"Experts" in the Prospectus.
KPMG Peat Marwick LLP
Memphis, Tennessee
September 29, 1994
<PAGE> 1
EXHIBIT 23(f)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
Union Planters Corporation on Form S-4 of our report dated October 28, 1993,
incorporated by reference in the Annual Report on Form 10-K of BNF BANCORP,
INC., formerly BANCFIRST Corporation, for the year ended September 30, 1993 and
in the report on Form 8-K of Union Planters Corporation dated February 8, 1994
and to the reference to us under the heading "Experts" in the Prospectus, which
is part of this Registration Statement.
Deloitte & Touche LLP
Birmingham, Alabama
September 29, 1994
