<PAGE> 1
[BNF BANCORP, INC. LETTERHEAD]
Filed Pursuant to Rule 424(b)(1)
Registration No. 33-53961
July 29, 1994
Dear Stockholder:
We invite you to attend the Special Meeting of Stockholders ("Special
Meeting") of BNF BANCORP, INC. ("BNF") to be held at BNF's main office, 255
Grant Street, S.E., Decatur, Alabama, on Monday, August 29, 1994 at 1:00 p.m.,
Central Daylight Time.
At the meeting, you will have the opportunity to consider and vote upon
the Agreement and Plan of Reorganization dated as of January 27, 1994 between
Union Planters Corporation ("UPC"), BFC Acquisition Company, Inc. (a
wholly-owned subsidiary of UPC, "Interim"), BNF and its subsidiary, BANKFIRST,
a federal savings bank ("BANKFIRST"), including the Plan of Merger and a
related letter agreement annexed thereto as Exhibits A and B, respectively
(collectively, the "Reorganization Agreement"), and the acquisition by UPC of
sole ownership and control of BNF pursuant thereto (the "Reorganization"). Upon
the consummation of the Reorganization, each outstanding share of BNF Common
Stock would be converted exclusively into the right to receive in exchange
therefor (i) a number of whole shares of UPC Common Stock based on the average
closing price per share of UPC Common Stock on the New York Stock Exchange for
the 10 trading days immediately preceding the closing date of the
Reorganization ("Current Market Price") and (ii) a cash payment in settlement
of any remaining fractional share of UPC Common Stock. If the Current Market
Price of UPC Common Stock is greater than or equal to $24.00, the exchange
ratio (i.e., the number of shares of UPC Common Stock to be received in
exchange for each share of BNF Common Stock) will be 1.078. If the Current
Market Price is less than $24.00, then BNF will have the right to either: (i)
consummate the Reorganization at the same exchange ratio of 1.078 or (ii)
terminate the Reorganization Agreement; provided, however, that in the event
BNF should so terminate the Reorganization Agreement, UPC will have the right
to reinstate the Reorganization Agreement and the Reorganization by increasing
the exchange ratio to $25.87 divided by the Current Market Price. If the
Reorganization had been closed on July 22, 1994, the Current Market Price
would have been $24.33 per share, such that the value of the UPC Common Stock
entitled to be received in exchange for each outstanding share of BNF Common
Stock would have been approximately equal to $26.23. Following the
Reorganization, UPC would own all of the outstanding shares of BNF Common
Stock. Consummation of the Reorganization is conditioned upon, among other
things, stockholder approval of the Reorganization Agreement and the
Reorganization.
The consideration to be received by BNF's stockholders pursuant to the
Reorganization Agreement was negotiated by your Board of Directors in light of
various factors, including BNF's recent operating results, current financial
condition and perceived future prospects. RP Financial Inc., BNF's financial
advisor, has advised your Board of Directors that in its opinion the
<PAGE> 2
consideration to be received by BNF's stockholders in the Reorganization is
fair to the stockholders of BNF from a financial point of view.
At the Special Meeting, the stockholders of BNF may be asked to approve
the adjournment of the Special Meeting in the event there are not sufficient
votes cast in person or by proxy at the Special Meeting to approve the
Reorganization Agreement. Your Board of Directors has approved the
Reorganization Agreement and believes that the Reorganization is in the best
interest of BNF and its stockholders. Accordingly, your Board of Directors
unanimously recommends that you VOTE "FOR" APPROVAL of the Reorganization
Agreement and the Reorganization and adjournment of the Special Meeting, if
necessary.
If any other matters are properly brought before the Special Meeting,
the persons named in the accompanying Proxy Card will vote the shares
represented by such proxy upon such matters as determined by a majority of
BNF's Board of Directors. You are urged to read the accompanying Proxy
Statement/Prospectus, which provides detailed information concerning the
Reorganization and related matters.
ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO SIGN, DATE AND
RETURN THE ACCOMPANYING PROXY CARD AS SOON AS POSSIBLE EVEN IF YOU CURRENTLY
PLAN TO ATTEND THE SPECIAL MEETING. Your vote is important, regardless of the
number of shares you own. This will not prevent you from voting in person but
will assure that your vote is counted if you are unable to attend the Special
Meeting.
Sincerely,
[SIGNATURE]
William D. Powell
President and Chief Executive Officer
PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES AT THIS TIME
<PAGE> 3
BNF BANCORP, INC.
255 GRANT STREET, S.E.
P.O. BOX 1429
DECATUR, ALABAMA 35602
(205) 353-2530
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 29, 1994
NOTICE IS HEREBY GIVEN THAT the Special Meeting of Stockholders
("Special Meeting") of BNF BANCORP, INC. ("BNF") will be held at the main
office of BNF, 255 Grant Street, S.E., Decatur, Alabama, on Monday, August 29,
1994 at 1:00 p.m., Central Daylight Time. A Proxy Card and a Proxy
Statement/Prospectus accompany this Notice.
The Special Meeting is for the purpose of considering and acting upon:
1. The approval of the Agreement and Plan of
Reorganization dated as of January 27, 1994 between
Union Planters Corporation ("UPC"), BFC Acquisition
Company, Inc., BNF and its subsidiary, BANKFIRST, a
federal savings bank, including the Plan of Merger
and a related letter agreement annexed thereto as
Exhibits A and B, respectively (collectively, the
"Reorganization Agreement"), and the acquisition by
UPC of sole ownership and control of BNF pursuant
thereto (the "Reorganization"); and
2. The transaction of such other matters as may properly
come before the Special Meeting or any adjournments
thereof, including the adjournment of the Special
Meeting, if necessary, to solicit additional proxies
in the event sufficient votes have not been cast to
approve the various proposals.
The Board of Directors of BNF is not aware of any other business to
come before the Special Meeting.
Any action may be taken on any one of the foregoing proposals at the
Special Meeting on the date specified above or on any date or dates to which,
by original or later adjournment, the Special Meeting may be adjourned.
Stockholders of record at the close of business on July 11, 1994 are the
stockholders entitled to notice of and to vote at the Special Meeting and any
adjournments thereof. Stockholders of BNF are not entitled to dissenter's or
appraisal rights under the Delaware Code.
You are requested to complete and sign the accompanying Proxy Card
which is solicited by the Board of Directors and to mail it promptly in the
accompanying envelope. The proxy will not be used if you attend and vote at
the Special Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
[SIGNATURE]
Miles A. Wright
Secretary
Decatur, Alabama
July 29, 1994
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE BNF THE EXPENSE OF FURTHER
REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-ADDRESSED ENVELOPE
ACCOMPANIES THESE MATERIALS FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF
MAILED IN THE UNITED STATES.
PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES AT THIS TIME
<PAGE> 4
PROXY STATEMENT/PROSPECTUS
BNF BANCORP, INC.
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
AUGUST 29, 1994
UNION PLANTERS CORPORATION
PROSPECTUS
UP TO 2,240,906 SHARES OF COMMON STOCK
PAR VALUE $5.00 PER SHARE
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Directors of BNF BANCORP, INC. ("BNF")
to be used at the Special Meeting of Stockholders of BNF ("Special Meeting")
which will be held at the main office of BNF, 255 Grant Street, S.E., Decatur,
Alabama, on Monday, August 29, 1994 at 1:00 p.m., Central Daylight Time. This
Proxy Statement/Prospectus and the accompanying Notice of the Special Meeting
of Stockholders and Proxy Card are first being mailed to stockholders of BNF on
or about July 29, 1994.
At the Special Meeting, holders of record of the common stock of BNF
("BNF Common Stock") as of the close of business on July 11, 1994 (the
"voting record date") will consider and vote upon (i) the approval of the
Agreement and Plan of Reorganization dated as of January 27, 1994 between Union
Planters Corporation ("UPC"), BFC Acquisition Company, Inc. ("Interim"), BNF
and BANKFIRST, a federal savings bank ("BANKFIRST"), including the Plan of
Merger and a related letter agreement annexed thereto as Exhibits A and B,
respectively (collectively, the "Reorganization Agreement"), and the
acquisition by UPC of sole ownership and control of BNF pursuant thereto (the
"Reorganization"); and (ii) such other matters as may properly come before the
Special Meeting or any adjournments thereof.
Pursuant to the Reorganization Agreement, upon the consummation of the
Reorganization, each outstanding share of BNF Common Stock would be converted
exclusively into the right to receive in exchange therefor (i) a number of
whole shares of the common stock of UPC ("UPC Common Stock") based on the
average closing price per share of UPC Common Stock on the New York Stock
Exchange ("NYSE") for the 10 trading days immediately preceding the closing
date of the Reorganization ("Current Market Price") and (ii) a cash payment in
settlement of any remaining fractional share of UPC Common Stock. If the
Current Market Price is greater than or equal to $24.00, the exchange ratio
(i.e., the number of shares of UPC Common Stock to be received in exchange for
each share of BNF Common Stock) will be 1.078. If the Current Market Price of
UPC Common Stock is less than $24.00, then BNF will have the right to either:
(i) consummate the Reorganization at the same exchange ratio of 1.078 or (ii)
terminate the Reorganization Agreement; provided, however, that in the event
BNF should so terminate the Reorganization Agreement, UPC will have the right
to reinstate the Reorganization Agreement and the Reorganization by increasing
the exchange ratio to $25.87 divided by the Current Market Price. If the
Reorganization had been closed on July 22, 1994, the Current Market Price would
have been $24.33 per share, such that the value of the UPC Common Stock
entitled to be received in exchange for each outstanding share of BNF Common
Stock would have been approximately equal to $26.23. Following the
Reorganization, UPC would own all of the outstanding shares of BNF Common
Stock. Consummation of the Reorganization is conditioned upon, among other
things, the approval of the Reorganization Agreement at the Special Meeting.
The consideration to be received by BNF's stockholders pursuant to the
Reorganization Agreement was negotiated by your Board of Directors in light of
various factors, including BNF's recent operating results, current financial
condition and perceived future prospects. RP Financial, Inc. ("RP Financial"),
BNF's financial advisor, has advised your Board of Directors that in its
opinion the consideration to be received by BNF's stockholders in the
Reorganization is fair to the stockholders of BNF from a financial point of
view. THE BOARD OF DIRECTORS OF BNF BELIEVES THAT THE REORGANIZATION IS IN THE
BEST INTEREST OF BNF'S STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT BNF'S
STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE REORGANIZATION AGREEMENT AND THE
REORGANIZATION.
<PAGE> 5
UPC has filed a Registration Statement with the Securities and Exchange
Commission ("Commission") with respect to the shares of its Common Stock, par
value $5.00 per share, to be issued pursuant to the Reorganization Agreement.
See "Available Information." This Proxy Statement/Prospectus also constitutes
a prospectus of UPC with respect to the offering of shares of UPC Common Stock
pursuant to the Reorganization Agreement.
Shares of the outstanding UPC Common Stock are now, and the UPC Common
Stock to be issued in connection with the Reorganization will be, listed for
trading on the NYSE under the symbol "UPC." The last reported sale price of UPC
Common Stock on the NYSE on July 22, 1994, was $24.88 per share. Shares of the
outstanding BNF Common Stock are listed for trading on the American Stock
Exchange ("AMEX") under the symbol "BNF." The last reported sale price of BNF
Common Stock on the AMEX on July 22, 1994, was $25.50 per share.
BNF's principal executive office is located at 255 Grant Street, S.E.,
Decatur, Alabama 35601, and its telephone number is (205) 353-2530. UPC's
principal executive office is located at 7130 Goodlett Farms Parkway, Memphis,
Tennessee 38018, and its telephone number is (901) 383-6000.
This Proxy Statement/Prospectus does not cover any resales of the UPC
Common Stock offered hereby to be received by any stockholders deemed to be
affiliates of BNF or UPC upon the consummation of the Reorganization. No
person is authorized to make use of this Proxy Statement/Prospectus in
connection with such resales, although such stock may be traded without the use
of this Proxy Statement/Prospectus by former stockholders of BNF who are not
deemed to be affiliates of BNF or UPC.
All information contained in this Proxy Statement/Prospectus pertaining
to UPC and its subsidiaries has been supplied by UPC, and all information
pertaining to BNF or BANKFIRST has been supplied by BNF.
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.
THE SHARES OF UPC COMMON STOCK OFFERED HEREBY HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT
SUPERVISION, THE OFFICE OF THE COMPTROLLER OF THE CURRENCY, THE BOARD OF
GOVERNORS OF THE FEDERAL RESERVE SYSTEM OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION,
THE OFFICE OF THE COMPTROLLER OF THE CURRENCY, THE BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS JULY 29, 1994
<PAGE> 6
AVAILABLE INFORMATION
UPC and BNF are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information 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 materials 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
NYSE, 20 Broad Street, New York, New York 10005. Reports, proxy statements and
other information concerning BNF can be inspected at the offices of the AMEX,
86 Trinity Place, New York, New York 10006. UPC has filed with the Commission
a Registration Statement (No. 33-53961) 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 Proxy
Statement/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 Proxy Statement/Prospectus, reference is made to the complete
Registration Statement, including all amendments thereto and the schedules and
exhibits and other documents filed or deemed 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 any copy of the applicable document filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
UPC. The following documents previously filed by UPC with the
Commission (Commission File No. 0-6919) pursuant to the Exchange Act are hereby
incorporated by reference in this Proxy Statement/Prospectus:
1. UPC's Annual Report on Form 10-K for the year ended
December 31, 1993;
2. UPC's Quarterly Report on Form 10-Q for the three
months ended March 31, 1994;
3. 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;
4. UPC's Current Reports on Form 8-K dated February 8,
1994, April 14, 1994, April 15, 1994, April 28, 1994,
May 18, 1994, May 19, 1994, as amended, July 1, 1994,
July 21, 1994 and July 26, 1994; and
5. The description of 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 (the "UPC Annual Report to Shareholders"), but does
not incorporate other portions of the UPC Annual Report to Shareholders. The
portion of the UPC Annual Report to Shareholders captioned "Letter to
Shareholders" and other portions of the UPC Annual Report to Shareholders not
specifically incorporated into UPC's 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
Proxy Statement/Prospectus and prior to the termination of the offering of the
shares of UPC Common Stock offered hereby shall 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 Proxy
Statement/Prospectus
ii
<PAGE> 7
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 Proxy Statement/Prospectus.
ON THE WRITTEN OR ORAL REQUEST OF EACH PERSON TO WHOM THIS PROXY
STATEMENT/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.
BNF. The following documents previously filed by BNF with the
Commission (Commission File No. 1-10743) pursuant to the Exchange Act are
hereby incorporated by reference in this Proxy Statement/Prospectus:
1. BNF's Annual Report on Form 10-K for the year ended
September 30, 1993;
2. BNF's Quarterly Reports on Form 10-Q for the
quarterly periods ended December 31, 1993 and March
31, 1994; and
3. The information furnished in BNF's 1993 Annual Report
to Shareholders with respect to its (i) industry
segments, classes of products and services,
operations and revenues; (ii) the market price of and
dividends on BNF's common equity and related
stockholder matters; (iii) its selected financial
data and any supplementary financial information;
(iv) BNF's management's discussion and analysis of
financial condition and results of operations.
COPIES OF BNF'S ANNUAL REPORT ON FORM 10-K (INCLUDING ITS ANNUAL REPORT
TO STOCKHOLDERS) FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1993 AND ITS QUARTERLY
REPORT ON FORM 10-Q FOR THE THREE- AND SIX-MONTH PERIODS ENDED MARCH 31, 1994
INCORPORATED HEREIN BY REFERENCE WITH RESPECT TO BNF ARE INCLUDED IN THIS PROXY
STATEMENT/PROSPECTUS AS APPENDIX "A". UPON WRITTEN OR ORAL REQUEST OF EACH
PERSON TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, BNF WILL PROVIDE
WITHOUT CHARGE, A COPY OF ANY AND ALL OTHER 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 MILES A. WRIGHT, SECRETARY, BNF BANCORP,
INC., 255 GRANT STREET, S.E., P.O. BOX 1429, DECATUR, ALABAMA 35602,
(205)353-2530.
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 BNF SINCE THE DATE
HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
iii
<PAGE> 8
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
Available Information ii
Incorporation of Certain Documents by Reference ii
Summary 1
The Special Meeting 1
Parties to the Reorganization 1
The Reorganization 3
Market Prices of Common Stock; Dividends 6
Selected Consolidated Financial Data 7
Recent Developments Affecting UPC 11
Recent Developments Affecting BNF 15
Equivalent and Pro Forma Per Share Data 15
Pro Forma Consolidated Financial Information 17
The Special Meeting 23
General 23
Votes Required 23
Stockholders' Appraisal Rights 24
Recommendation 24
Other Matters 24
Miscellaneous 24
Transactions with Management 24
Approval of the Reorganization 26
Background of the Reorganization 26
Reasons for the Reorganization and Recommendations of the Boards of Directors of BNF and UPC 27
Fairness Opinion of RP Financial, Inc. 28
Terms of the Reorganization 31
Effective Date and Effective Time of the Reorganization 32
Surrender of Certificates 32
Conditions to Consummation of the Reorganization 33
Regulatory Approvals 35
Conduct of Business Pending the Reorganization 35
Payment of Dividends 36
Waiver and Amendment; Termination 36
Limitation on Negotiations 37
Management After the Reorganization 37
Executive Compensation 38
Voting Securities and Principal Holders Thereof 39
Interests of Certain Persons in the Reorganization 40
Comparison of Stockholder Rights 41
Certain Regulatory Considerations 43
Certain Federal Income Tax Consequences 47
Accounting Treatment 48
Expenses 48
Resales of UPC Common Stock 48
Description of UPC Common and Preferred Stock 48
UPC Common Stock 49
Preferred Stock of UPC 49
Certain Provisions That May Have an Anti-Takeover Effect 50
Validity of UPC Common Stock 52
Experts 52
Forms 10-K and 10-Q 52
</TABLE>
iv
<PAGE> 9
<TABLE>
<CAPTION>
Index to Appendices
<S> <C> <C>
Appendix A A-1
A - 1 -- Annual Report on Form 10-K of BNF BANCORP, INC. for the year ended
September 30, 1993
A - 2 -- Quarterly Report on Form 10-Q of BNF BANCORP, INC. for the period
ended March 31, 1994
Appendix B -- Agreement and Plan of Reorganization, along with the Plan of Merger
and a related letter agreement annexed thereto as Exhibits A and B, respectively B-1
Appendix C -- Fairness Opinion of RP Financial, Inc. C-1
</TABLE>
v
<PAGE> 10
SUMMARY
The following summary is not intended to be a complete description of
all material facts regarding UPC, BNF 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 Proxy Statement/Prospectus, the
Appendices hereto and the documents referred to herein.
THE SPECIAL MEETING
General. The Special Meeting will be held on August 29, 1994 at 1:00
p.m., Central Daylight Time, at the main office of BNF, 255 Grant Street, S.E.,
Decatur, Alabama. At the Special Meeting, holders of record of BNF Common
Stock as of the close of business on the voting record date, July 11, 1994, will
consider and vote upon (i) the approval of the Reorganization Agreement and the
Reorganization; and (ii) and such other matters as may properly come before the
Special Meeting or any adjournments thereof. Stockholders of record at the
close of business on the voting record date will be entitled to one vote for
each share then so held. The presence, in person or by proxy, of a majority of
the total number of outstanding shares of BNF Common Stock entitled to vote at
the Special Meeting is necessary to constitute a quorum at the Special Meeting.
For additional information, see "The Special Meeting."
Vote Required. The affirmative votes of the holders of at least a
majority of the outstanding shares of BNF Common Stock entitled to vote at the
Special Meeting are required for BNF's stockholders to approve the
Reorganization Agreement and the Reorganization. Each share of BNF Common
Stock outstanding at the close of business on the voting record date and
entitled to vote at the Special Meeting is entitled to one vote on each matter
to be considered at the Special Meeting. BNF's directors and executive
officers, and their affiliates, are expected to vote substantially all of the
180,747 shares, or 9.59%, of the outstanding BNF Common Stock beneficially
owned by them as of the voting record date and entitled to vote at the Special
Meeting "FOR" approval of the Reorganization Agreement and the Reorganization.
As of the voting record date, 1,797,730 shares of BNF Common Stock were
outstanding and entitled to vote.
PARTIES TO THE REORGANIZATION
UPC. Union Planters Corporation ("UPC") is a multi-state bank holding
company and savings and loan holding company headquartered in Memphis,
Tennessee. At March 31, 1994, UPC had total consolidated assets of
approximately $6.7 billion, deposits of approximately $5.6 billion and
shareholders' equity of approximately $513 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 March 31, 1994, UPC's ratio of nonperforming loans to total loans
was .79% and nonperforming assets to loans and foreclosed property was .93%.
UPC's allowance for losses on loans to total loans at such date was 2.82% and
UPC's allowance for losses on loans to nonperforming loans was 358.26%. Also at
such date, UPC's Tier 1 risk-based capital, total risk-based capital and
leverage ratios were 14.91%, 18.48% and 7.22%, respectively.
UPC conducts its business activities through its lead bank subsidiary,
Union Planters National Bank ("UPNB"), four Tennessee regional bank
subsidiaries (the "Regional Banks") and through 35 community banks and three
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 March 31, 1994, UPNB had total consolidated
assets of approximately $3.4 billion. 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.
1
<PAGE> 11
In addition to UPNB and the Regional Banks, UPC, through the Community
Banks, operates 144 branches and had at March 31, 1994, total combined assets
of approximately $3.3 billion ($2.2 billion in Tennessee, $497 million in
Mississippi, $458 million in Arkansas, $121 million in Kentucky, and $27
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 38 Community Banks, 21 have the largest deposit
share and eight 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.
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. 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 Proxy Statement/Prospectus. See "Incorporation of Certain
Documents by Reference."
BNF. BNF BANCORP, INC., formerly BANCFIRST Corporation ("BNF"), was
formed in November 1990 as a Delaware corporation at the direction of
BANKFIRST, a federal savings bank ("BANKFIRST") for the purpose of becoming a
holding company for BANKFIRST. BANKFIRST was chartered by the State of
Alabama in 1912 as North Alabama Building and Loan Association and converted
to a federal savings and loan charter in 1940. In 1985 BANKFIRST converted to
a federal mutual savings bank and on December 29, 1986, BANKFIRST converted to
a federal stock savings bank. BANKFIRST conducts its business through six
full service offices located in Decatur, Athens, Hartselle and Moulton, Alabama.
BNF, through BANKFIRST, is primarily engaged in the business of
obtaining funds in the form of savings deposits and investing such funds in
residential mortgage loans and various types of commercial real estate,
consumer and other loans, and investment securities.
BNF's corporate office is located at 255 Grant Street, S.E., Decatur,
Alabama 35601, and its telephone number is (205) 353-2530.
Additional information about BNF is included in documents incorporated
by reference in this Proxy Statement/ Prospectus and attached hereto as
collective Appendix A. See "Incorporation of Certain Documents by Reference."
Interim. BFC Acquisition Company, Inc. ("Interim") was organized by UPC
solely to effectuate the Reorganization. At the Effective Time of the
Reorganization (as defined below), Interim will, pursuant to the terms
2
<PAGE> 12
of the Reorganization Agreement, merge with and into BNF, with BNF surviving
the Reorganization as a wholly-owned subsidiary of UPC and continuing to
operate under the name BNF BANCORP, INC.
THE REORGANIZATION
Reasons for the Reorganization and Recommendation of the Board of
Directors of BNF. The Board of Directors of BNF considered the Reorganization
and the terms of the Reorganization Agreement, including the consideration to
be received by BNF's stockholders in the Reorganization, in light of economic,
financial, legal and market factors and concluded that the Reorganization would
be in the best interests of BNF and its stockholders. The terms of the
Reorganization Agreement are the result of arms' length negotiations between
BNF and UPC, as well as consultations between BNF and its financial advisor and
special legal counsel. Among the factors considered by BNF's Board of
Directors were the historical operating results, current financial condition,
business and management and future financial and other prospects of BNF and UPC
and the advice of RP Financial as to the fairness to BNF's stockholders, from a
financial point of view, of the consideration to be received by the
stockholders of BNF in the Reorganization. Also considered were the relative
size and geographic market areas of BNF and UPC. BNF's Board of Directors
believes that the Reorganization will afford BNF's stockholders the benefit of
UPC's larger market capitalization and the more liquid market for UPC Common
Stock and will offer enhanced opportunities for BANKFIRST to meet the needs of
banking customers and other members of the North Central Alabama communities
served by BANKFIRST. BNF's Board of Directors also believes that BANKFIRST
will be in an enhanced competitive position with respect to other financial
institutions in its market area after the Reorganization.
THE BOARD OF DIRECTORS OF BNF UNANIMOUSLY RECOMMENDS THAT THE HOLDERS
OF BNF COMMON STOCK VOTE "FOR" APPROVAL OF THE REORGANIZATION AGREEMENT AND THE
REORGANIZATION.
Fairness Opinion of RP Financial. BNF has retained RP Financial as its
financial advisor in connection with the Reorganization and requested that RP
Financial render its opinion with respect to the fairness to BNF stockholders
of the consideration to be received by them in the Reorganization. RP Financial
rendered written opinions to BNF's Board of Directors to the effect that, as of
January 27, 1994 and July 29, 1994, the consideration to be received by BNF's
stockholders in the Reorganization was fair, from a financial point of view, to
such stockholders. The fairness opinion sets forth a description of
assumptions made and matters considered by RP Financial, and contains certain
limitations and qualifications. A copy of the updated fairness opinion is
attached as Appendix C hereto, and the description set forth herein is
qualified in its entirety by reference to the opinion.
For additional information, see "Approval of The Reorganization --
Fairness Opinion of RP Financial, Inc." herein and the fairness opinion of RP
Financial attached as Appendix C hereto.
Terms of the Reorganization. Pursuant to the Reorganization Agreement,
upon the consummation of the Reorganization, each outstanding share of BNF
Common Stock would be converted exclusively into the right to receive in
exchange therefor (i) a number of whole shares of UPC Common Stock based upon
the Current Market Price (the average closing price per share of UPC Common
Stock on the NYSE for the 10 trading days next preceding the closing date of
the Reorganization) and (ii) a cash payment in settlement of any fractional
share of UPC Common Stock remaining after aggregating all of the shares and
fractional shares to which the BNF stockholder is entitled, and each
outstanding option to purchase BNF Common Stock under BNF's stock option plan
would continue outstanding as an option to purchase, in place of each share of
BNF Common Stock, the number of shares (after aggregation, rounded to the
nearest whole share) of UPC Common Stock that would have been received by the
option holder in connection with the Reorganization assuming the option had
been exercised immediately before the Effective Time of the Reorganization, on
the same terms and conditions except for appropriate pro rata adjustments to
the option price per share, such that the aggregate option price would remain
the same. If the Current Market Price of UPC Common Stock is greater than or
equal to $24.00, the exchange ratio (i.e., the number of shares of UPC Common
Stock to be received in exchange for each share of BNF Common Stock) will be
1.078. If the Current Market Price is less than $24.00, BNF will have the right
to either (i) consummate the Reorganization at the same exchange ratio of 1.078
or (ii) terminate the Reorganization Agreement; provided, however, that in the
event BNF should so terminate the Reorganization Agreement, UPC shall have the
right to reinstate the Reorganization Agreement and the Reorganization by
increasing the exchange ratio to $25.87 divided by the Current Market Price. If
the Reorganization had been closed on July 22, 1994, the Current Market Price
of UPC Common Stock would have been $24.33 per share, such that the value of the
UPC Common Stock
3
<PAGE> 13
entitled to be received in exchange for each outstanding share of BNF Common
Stock would have been approximately equal to $26.23.
Effective Time. The Reorganization will become effective at the time a
Certificate of Merger along with the executed Plan of Merger are filed with the
Delaware Secretary of State in accordance with the Delaware General Corporation
Law, as amended (the "DGCL"), or on such later date and at such later time as
the Plan of Merger may specify (the "Effective Time of the Reorganization").
Assuming the expiration of all statutory waiting periods and the satisfaction
or waiver of all conditions to closing in the Reorganization Agreement, it is
intended by the parties to the Reorganization Agreement that the Certificate
of Merger along with the Plan of Merger will be filed so as to become
effective during the third quarter of 1994. The effective date of the
Reorganization will be the day on which the Effective Time of the
Reorganization occurs (the "Effective Date of the Reorganization"). The
parties to the Reorganization Agreement intend to close the transactions
contemplated therein approximately one day prior to the effectiveness of the
Reorganization (the "Closing Date"). Holders of record of BNF Common Stock
immediately prior to the Effective Time of the Reorganization will be entitled
to receive the consideration for the Reorganization pursuant to the
Reorganization Agreement.
Conditions; Regulatory Approvals. Consummation of the Reorganization
is subject to various conditions, including receipt of the approval of BNF's
stockholders, receipt of all necessary regulatory approvals and satisfaction of
customary contractual closing conditions.
The regulatory approvals and consents necessary to consummate the
transactions contemplated by the Reorganization Agreement include the prior
approvals of the Board of Governors of the Federal Reserve System (the "Federal
Reserve"), the Office of Thrift Supervision (the "OTS") and the Alabama State
Banking Department (the "Alabama Department"). Applications for such approvals
have been submitted to each of the respective regulatory agencies. Approval
was received from the Federal Reserve on April 21, 1994, the Alabama Department
on June 10, 1994 and the OTS on July 20, 1994. See "Approval of the
Reorganization -- Conditions to Consummation of the Reorganization," "--
Regulatory Approvals," "- - Conduct of Business Pending the Reorganization" and
"-- Certain Regulatory Considerations."
Waiver and Amendment; Termination. Prior to the Effective Date of the
Reorganization, any condition to consummation of the Reorganization (to the
extent permitted by law) may be amended, modified or waived by the party
benefitted by the provision by an agreement in writing which is approved by the
Boards of Directors of UPC and BNF; provided, however, that no such amendment
may be effected after approval by the BNF stockholders of the Reorganization
Agreement without such stockholders' approval if the effect of such amendment
would be to change the amount or type of consideration to be paid in the
Reorganization to the holders of record of BNF Common Stock immediately prior
to the Effective Time of the Reorganization (the "BNF Record Holders").
The Reorganization Agreement is subject to termination by UPC and/or
BNF at any time prior to the Effective Date of the Reorganization upon the
occurrence of certain events. See "Approval of the Reorganization --Waiver and
Amendment; Termination."
Limitation on Negotiations. BNF and BANKFIRST are prohibited from
instituting, soliciting or knowingly encouraging certain individuals or
entities concerning any "Acquisition Proposal" (defined generally as any
agreement or proposal pursuant to which any entity other than UPC would
acquire, directly or indirectly, BNF ownership or the right to vote 10% of the
outstanding BNF Common Stock, or a significant portion of the assets or earning
power of BNF). In the event BNF were to enter into a letter of intent or
agreement with respect to an Acquisition Proposal not solicited by BNF's Board
of Directors, or in the event such Acquisition Proposal were the result of a
hostile takeover of BNF, BNF or the acquiror would be required to pay
liquidated damages to UPC upon consummation of the transaction contemplated by
such Acquisition Proposal in the amount of $3,500,000. Such sum would be
payable immediately in the event that BNF were to enter into a letter of intent
or agreement with respect to an Acquisition Proposal solicited by the BNF
Board. The limitation will remain in effect until October 1, 1994 unless
before that date either the Reorganization is consummated or the Reorganization
Agreement is terminated, or the Reorganization is not consummated under
specified circumstances. See "Approval of the Reorganization -- Limitation on
Negotiations."
Management After the Reorganization. At the Effective Time of the
Reorganization, the persons who are serving as directors and officers of BNF
immediately prior thereto shall continue to be the directors and officers of
4
<PAGE> 14
BNF as the surviving corporation and will hold office as provided in the
charter and bylaws of BNF unless and until their successors shall have been
duly elected or appointed and qualified. See "Approval of the Reorganization
- -- Management After the Reorganization."
Interests of Certain Persons in the Reorganization. In connection with
the Reorganization, Messrs. William D. Powell, President and Chief Executive
Officer, and C. Raymond Duncan, Senior Vice President and Treasurer, of BNF and
BANKFIRST will receive payments of $389,774 and $230,765, respectively, in
settlement of the terms of their current employment agreements with BNF and
BANKFIRST. Upon the consummation of the Reorganization, Messrs. Powell and
Duncan will enter into new employments agreements with BNF, BANKFIRST, and UPC.
Further, in consideration of the anticipated termination of the BANKFIRST
Pension Plan following the consummation of the Reorganization, Messrs. Powell
and Duncan will enter into supplemental retirement income agreements with BNF
and BANKFIRST to provide for the restoration of benefits otherwise payable
under the Pension Plan if the plan were continued until each individual
attained age 65. The Reorganization Agreement also provides that, for a period
of six years following the consummation of the Reorganization, UPC will
indemnify the current directors, officers, and employees of BNF and BANKFIRST
against claims arising out of certain acts or omissions occurring prior to the
Effective Time of the Reorganization. See "Approval of the Reorganization - -
Interests of Certain Persons in the Reorganization."
Comparison of Stockholder Rights. Upon consummation of the
Reorganization, holders of BNF's Common Stock, whose rights are presently
governed by Delaware corporate law and BNF's Certificate of Incorporation and
Bylaws, and indirectly by applicable OTS regulations and BANKFIRST's
Certificate of Incorporation and Bylaws, will become shareholders of UPC, a
Tennessee corporation. Accordingly, their rights will be governed by Tennessee
corporate law and the Charter and Bylaws of UPC, and indirectly by the
regulations of the Federal Reserve and other federal banking regulatory
agencies. Certain differences arise from differences between the Charter and
Bylaws of UPC and BNF. See "Approval of the Reorganization -- Comparison of
Stockholder Rights."
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. See "Description of UPC Common and Preferred Stock
- -- Certain Provisions That May Have an Anti-Takeover Effect."
Certain Federal Income Tax Consequences. It is intended that for
federal income tax purposes the Reorganization will be treated as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code"), and accordingly, for
federal income tax purposes, BNF stockholders will not recognize gain or loss
(if any) upon the receipt of UPC Common Stock in the Reorganization in exchange
for their shares of BNF Common Stock. BNF stockholders may recognize gain or
loss by reason of receiving cash in lieu of a fractional share. See "Approval
of the Reorganization -- Certain Federal Income Tax Consequences."
Accounting Treatment. The Reorganization is expected to 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.
5
<PAGE> 15
MARKET PRICES OF COMMON STOCK; DIVIDENDS
UPC Common Stock. The UPC Common Stock is listed and traded on the
NYSE (symbol: UPC). The following table sets forth for the calendar year
periods indicated the high and low closing sale prices of the UPC Common Stock
on the NYSE and the cash dividends declared per share for the periods
indicated:
<TABLE>
<CAPTION>
Price Range Cash 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 July 22, 1994 25.00 23.50 --
----
Total $.42
====
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>
The last reported sale price of UPC Common Stock on the NYSE as of
July 22, 1994, which was the last practicable date prior to the mailing of this
Proxy Statement/Prospectus, was $24.88 per share.
BNF Common Stock. The BNF Common Stock is listed and traded on the
AMEX (symbol: BNF). The following table sets forth for the fiscal year periods
indicated the high and low closing prices of the BNF Common Stock on the AMEX
and the cash dividends declared per share for the periods indicated:
<TABLE>
<CAPTION>
PRICE RANGE CASH DIVIDENDS
--------------------------------- DECLARED
HIGH LOW PER SHARE
-------- ------- ------------------
<S> <C> <C> <C>
1994
First Quarter $20.88 $17.38 $.16
Second Quarter 25.88 17.50 .16
Third Quarter 29.75 25.25 .17
Fourth Quarter through July 22, 1994 26.00 25.13 --
----
Total $.49
====
1993
First Quarter $15.63 $13.00 $.15
Second Quarter 19.25 15.00 .15
Third Quarter 19.00 16.25 .16
Fourth Quarter 21.38 17.75 .16
----
Total $ 62
====
1992
First Quarter $10.63 $ 9.50 $.13
Second Quarter 12.88 10.63 .13
Third Quarter 14.63 12.00 .15
Fourth Quarter 15.50 12.63 .15
----
Total $.56
====
</TABLE>
6
<PAGE> 16
The last reported sale price of BNF Common Stock on the AMEX as of July
22, 1994, which was the last practicable date prior to the mailing of this Proxy
Statement/Prospectus, was $25.50 per share.
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables present for UPC and BNF, on an historical basis,
selected consolidated financial data. The information for BNF has been derived
from the consolidated financial statements of BNF, including the financial
statements of BNF incorporated by reference in this Proxy Statement/Prospectus
(including those appearing in Appendix A to this Proxy Statement/Prospectus),
and should be read in conjunction therewith and with the notes thereto. See
"Appendix A -- Annual Report on Form 10-K of BNF BANCORP, INC. for the year
ended September 30, 1993" for BNF BANCORP, INC. and Subsidiary Consolidated
Financial Statements." The information for UPC has been derived from the
financial statements of UPC, including the financial statements of UPC
incorporated by reference in this Proxy Statement/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 UPC and BNF, all adjustments necessary to arrive at a fair
statement of results of operations of the respective companies have been
included.
UPC SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
(Unaudited) 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 $58,893 $57,581 $232,667 $189,453 $152,015 $133,018 $121,995
Provision for losses on loans -- 2,823 9,689 18,557 24,835 19,166 49,229
Profits and commissions from
trading activities 1,489 1,633 8,720 10,168 14,707 24,268 36,700
Investment securities gains (losses) 100 880 4,581 13,246 3,344 (341) (1,294)
Other noninterest income 18,325 17,273 73,436 61,543 53,099 47,375 43,281
Noninterest expense 54,234 54,637 224,480 199,218 164,771 160,805 177,833
Earnings (loss) before income taxes,
extraordinary item, and accounting
changes 24,573 19,907 85,235 56,635 33,559 24,349 (26,380)
Applicable income taxes (benefit) 7,233 6,413 23,967 15,196 6,051 1,639 (4,111)
Earnings (loss) before extraordinary
item and accounting changes 17,340 13,494 61,268 41,439 27,508 22,710 (22,269)
Extraordinary item-defeasance of debt,
net of taxes -- -- (3,206) -- -- -- --
Accounting changes, net of taxes -- 5,001 5,001 -- -- -- --
Net earnings (loss) 17,340 18,495 63,063 41,439 27,508 22,710 (22,269)
PER COMMON SHARE DATA
Primary
Earnings (loss) before extraordinary
item and accounting changes $ 0.70 $ 0.60 $ 2.69 $ 2.10 $ 1.59 $ 1.20 $ (1.19)
Extraordinary item-defeasance of debt,
net of taxes -- -- (0.16) -- -- -- --
Accounting changes, net of taxes -- 0.25 0.25 -- -- -- --
Net earnings (loss) 0.70 0.85 2.78 2.10 1.59 1.20 (1.19)
Fully diluted
Earnings (loss) before extraordinary
item and accounting changes 0.65 0.57 2.49 2.02 1.58 1.20 (1.19)
Extraordinary item-defeasance of debt,
net of taxes -- -- (0.13) -- -- -- --
Accounting changes, net of taxes -- 0.21 0.21 -- -- -- --
Net earnings (loss) 0.65 0.78 2.57 2.02 1.58 1.20 (1.19)
Cash dividends 0.21 0.18 0.72 0.60 0.48 0.48 0.48
Book value 19.00 17.28 18.96 16.34 14.99 13.61 12.46
Book value assuming conversion of
convertible preferred stock 19.08 17.63 19.06 16.84 14.95 13.60 12.46
</TABLE>
(continued on the following page)
7
<PAGE> 17
<TABLE>
<CAPTION>
UPC SELECTED CONSOLIDATED FINANCIAL DATA (CONTINUED)
THREE MONTHS ENDED
MARCH 31,
(Unaudited) YEARS ENDED DECEMBER 31,
----------------------- -------------------------------------
1994 1993 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END)
Total assets $6,724,780 $6,212,882 $6,318,186 $5,262,184 $3,786,839
Loans, net of unearned income 3,092,638 2,750,538 2,935,215 2,231,839 1,912,914
Allowance for losses on loans 87,099 79,674 80,442 64,290 47,934
Investment securities 2,807,917 2,722,881 2,617,053 2,198,103 1,147,803
Deposits 5,611,897 5,332,991 5,251,366 4,450,176 3,211,261
Long-term debt
Parent Company 114,750 74,292 114,729 74,292 38,163
Subsidiary Banks 171,821 12,111 160,501 2,864 3,922
Total shareholders' equity 513,414 427,215 477,300 356,211 269,446
Average assets 6,710,244 6,060,439 6,249,339 4,742,832 3,839,744
Average shareholders' equity 511,791 411,264 446,994 329,492 247,859
Average shares outstanding (in thousands)
Primary 21,636 19,198 19,622 16,765 16,632
Fully diluted 26,117 23,009 23,852 19,609 16,986
PROFITABILITY AND CAPITAL RATIOS (4)
Before extraordinary item and accounting
changes
Return on average assets 1.05% 0.90% 0.98% 0.87% 0.72%
Return on average common equity 15.44 14.61 15.18 13.65 11.18
Net earnings
Return on average assets 1.05% 1.24% 1.01% 0.87% 0.72%
Return on average common equity 15.44 20.93 15.70 13.65 11.18
Net interest income (taxable-equivalent)
to average earning assets 4.13 4.42 4.30 4.57 4.59
Loans/deposits 55.11 51.58 55.89 50.15 59.57
Equity/assets (period end) 7.63 6.88 7.55 6.77 7.12
Average shareholders' equity/
average total assets 7.63 6.79 7.15 6.95 6.46
Tier 1 capital to risk-weighted assets(1) 14.91 13.33 14.85 13.81 12.19
Total capital to risk-weighted assets(1) 18.48 15.65 18.59 16.33 14.93
Leverage ratio(1) 7.22 6.72 7.10 6.85 6.94
ASSET QUALITY RATIOS (4)
Allowance/period end loans 2.82% 2.90% 2.74% 2.88% 2.51%
Nonperforming loans/total loans(2) 0.79 1.51 0.76 1.70 1.37
Allowance/nonperforming loans 358.26 191.48 362.83 168.97 182.98
Nonperforming assets/loans and foreclosed
properties(3) 0.93 1.82 0.92 1.99 1.90
Provision/average loans NM 0.43 0.35 0.86 1.23
Net charge-offs/average loans (0.14) 0.42 0.37 0.83 1.38
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1990 1989
-------- -------
<S> <C> <C>
BALANCE SHEET DATA (AT PERIOD END)
Total assets $4,004,710 $4,002,614
Loans, net of unearned income 2,129,083 1,995,383
Allowance for losses on loans 50,921 46,871
Investment securities 1,155,266 1,019,759
Deposits 3,341,840 3,129,567
Long-term debt
Parent Company 44,662 34,500
Subsidiary Banks 4,103 39,021
Total shareholders' equity 237,035 240,591
Average assets 4,053,820 3,988,348
Average shareholders' equity 243,783 265,233
Average shares outstanding (in thousands)
Primary 18,641 18,761
Fully diluted 18,981 18,761
PROFITABILITY AND CAPITAL RATIOS (4)
Before extraordinary item and accounting
changes
Return on average assets 0.56% NM%
Return on average common equity 9.34 NM
Net earnings
Return on average assets 0.56% NM%
Return on average common equity 9.34 NM
Net interest income (taxable-equivalent)
to average earning assets 3.97 3.77
Loans/deposits 63.71 63.76
Equity/assets (period end) 5.92 6.01
Average shareholders' equity/
average total assets 6.01 6.65
Tier 1 capital to risk-weighted assets(1) 9.57 NA
Total capital to risk-weighted assets(1) 12.17 NA
Leverage ratio(1) 5.71 5.76
ASSET QUALITY RATIOS (4)
Allowance/period end loans 2.39% 2.35%
Nonperforming loans/total loans(2) 0.98 0.88
Allowance/nonperforming loans 244.77 267.65
Nonperforming assets/loans and foreclosed
properties(3) 1.62 1.26
Provision/average loans 0.93 2.50
Net charge-offs/average loans 1.10 2.25
</TABLE>
(1) 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%.
(2) Nonperforming loans include loans on nonaccrual status and restructured
loans.
(3) Nonperforming assets include nonperforming loans and foreclosed
properties.
(4) Interim period ratios have been annualized where applicable.
NA- Not Available NM- Not Meaningful
8
<PAGE> 18
<TABLE>
<CAPTION>
BNF SELECTED CONSOLIDATED FINANCIAL DATA
AS OF OR FOR THE
SIX MONTHS ENDED AS OF OR FOR THE
MARCH 31, YEARS ENDED SEPTEMBER 30,
------------------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- ------- -------- --------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Loans and mortgage-backed securities
outstanding $ 244,545 $ 225,490 $ 228,607 $ 225,983 $ 208,125 $ 181,260 $ 178,825
Cash and investments (including interest-
bearing deposits) 26,005 28,807 25,243 26,122 23,333 33,454 48,867
Assets 278,962 261,890 267,110 260,171 239,776 221,709 235,349
Deposits 225,935 215,419 217,771 213,828 213,495 197,277 210,151
Stockholders' equity 30,646 28,309 29,892 26,798 24,283 22,551 22,311
NUMBER OF:
Real estate loans outstanding 2,179 2,174 2,517 2,353 2,519 2,760 2,910
Savings accounts 25,501 25,179 25,304 25,176 25,787 26,316 27,500
Total customer service facilities 6 6 6 6 6 7 8
Full-service facilities 6 6 6 6 6 7 7
OPERATING DATA:
Interest income $ 9,465 $ 10,139 $ 19,991 $ 21,245 $ 21,318 $ 21,092 $ 21,500
Interest expense 4,332 4,412 8,688 10,937 13,522 14,747 15,750
Net interest income 5,133 5,727 11,303 10,308 7,796 6,345 5,750
Provision for loan losses -- 118 150 608 426 58 47
Noninterest income 741 655 1,261 1,319 1,045 928 1,185
Noninterest expense 3,021 2,929 5,860 5,396 4,753 4,607 4,514
Income before income tax expense and
extraordinary item 2,853 3,335 6,554 5,623 3,662 2,608 2,374
Income tax expense 1,046 1,292 2,467 2,240 1,276 902 858
Net income 1,807 2,043 4,087 3,383 2,386 1,706 1,516
PER COMMON SHARE DATA:
Shares outstanding 1,784,193 1,773,718 1,784,193 1,773,718 1,752,726 1,749,576 1,749,576
Earnings per share $ 0.97 $ 1.12 $ 2.23 $ 1.88 $ 1.34$ 0.95$ 0.83
Dividends per share 0.32 0.30 0.62 0.567 0.467 0.833 --
OTHER DATA (1):
Return on assets 1.31% 1.56% 1.54% 1.34% 1.04% .75% .64%
Return on equity 11.68 14.67 14.16 13.08 10.02 7.62 6.97
Average equity to average assets 11.19 10.65 10.90 10.22 10.36 9.81 9.24
Dividend payout ratio 31.60 26.05 26.96 29.65 34.24 85.46 --
Interest rate spread 3.56 4.22 4.12 3.86 2.98 2.32 2.00
Net yield on interest-earning assets 3.87 4.55 4.44 4.24 3.52 2.82 2.53
</TABLE>
- -----------------------
(1) Interim period ratios have been annualized.
9
<PAGE> 19
<TABLE>
<CAPTION>
UNION PLANTERS CORPORATION
PRO FORMA SELECTED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
MARCH 31,1994
-------------------------
EARNINGS
MARCH 31, 1994 (LOSS)
--------------------------------------------------- BEFORE
UPC SHARES EXTRAORDINARY
OUTSTANDING TOTAL ITEMS AND
OR TO BE TOTAL TOTAL SHAREHOLDERS' TOTAL ACCOUNTING
ISSUED ASSETS DEPOSITS EQUITY REVENUES(1) CHANGES
----------- ------ -------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C> <C>
UPC 21,522,749 $6,724,780 $5,611,897 $513,414 $ 78,807 $17,340
Consummated acquisitions 1,441,192 317,328 280,042 25,386 3,389 542
---------- ---------- ---------- -------- -------- -------
Pro forma total 22,963,941 7,042,108 5,891,939 538,800 82,196 17,882
BNF(2) 2,054,000 278,962 225,935 30,646 2,844 782
---------- ---------- ---------- -------- -------- -------
Pro forma total 25,017,941 7,321,070 6,117,874 569,446 85,040 18,664
GSSC 13,485,720 2,463,202 2,216,014 178,011 33,185 6,022
Other pending acquisitions 1,058,280 199,879 173,439 17,745 2,339 469
---------- ---------- ---------- -------- -------- -------
Pro forma Consolidated 39,561,941 $9,984,151 $8,507,327 $765,202 $120,564 $25,155
========== ========== ========== ======== ======== =======
<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(1) CHANGES REVENUES(1) CHANGES
---------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
UPC $319,404 $61,268 274,410 $41,439
Consummated acquisitions 33,891 750 -- --
------- ------ ------- ------
Pro forma total 353,295 62,018 274,410 41,439
BNF(2) 12,355 4,096 12,256 3,584
------- ------ ------- ------
Pro forma total 365,650 66,114 286,666 45,023
GSSC 131,876 24,612 107,091 18,227
Other pending acquisitions 10,307 2,255 -- --
------- ------ ------- ------
Pro forma Consolidated $507,833 $92,981 $393,757 $63,250
======= ====== ======= ======
1991
----------------------------------
EARNINGS
(LOSS)
BEFORE
EXTRAORDINARY
ITEMS AND
TOTAL ACCOUNTING
REVENUES(1) CHANGES
----------- ---------------
<S> <C> <C>
UPC $223,165 $27,508
Consummated acquisitions -- --
------- ------
Pro forma total 223,165 27,508
BNF(2) 9,389 2,626
------- ------
Pro forma total 232,554 30,134
GSSC 94,557 12,762
Other pending acquisitions -- --
------- ------
Pro forma Consolidated $327,111 $42,896
======= ======
</TABLE>
(1) Total revenues include net interest income plus noninterest income.
(2) Financial information for BNF has been converted to a calendar year
basis.
10
<PAGE> 20
RECENT DEVELOPMENTS AFFECTING UPC.
1994 Second Quarter UPC Operating Results. The following table
presents certain information for the three and six months ended June 30, 1994
and 1993. Reference is made to UPC's press release dated July 21, 1994, which
is included in UPC's Current Report on Form 8-K dated July 21, 1994. For
additional information, see "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, (1) JUNE 30, (1)
-------------------------- ------------------------
1994 1993 1994 1993
------------ ------------ ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income $62,797 $59,203 $ 122,225 $116,784
Provision for losses on loans -- 4,667 -- 7,490
Investment securities gains 1 2,545 101 3,425
Other noninterest income 19,326 21,115 39,214 40,021
Noninterest expense 56,079 56,589 110,661 111,226
Earnings before accounting changes 18,386 14,555 35,885 28,049
Accounting changes, net of taxes -- -- -- 5,001
Net earnings 18,386 14,555 35,885 33,050
PER COMMON SHARE DATA
Earnings before accounting changes
- primary $ .74 $ .63 $ 1.44 $ 1.23
- fully diluted .68 .59 1.33 1.16
Net earnings - primary .74 .63 1.44 1.49
- fully diluted .68 .59 1.33 1.37
Cash dividends .21 .18 .42 .36
Book value 18.90 18.01
Book value - assuming
conversion of convertible
preferred stock 19.00 18.29
PROFITABILITY RATIOS
Return on average assets
Earnings before accounting changes 1.06% .92% 1.06% .91%
Net earnings 1.06 .92 1.06 1.08
Return on average common equity (3)
Earnings before accounting changes 15.51 14.46 15.40 14.53
Net earnings 15.51 14.46 15.40 17.56
Net interest income (tax-equivalent)
as a percentage of
average earnings assets 4.17 4.32 4.15 4.37
</TABLE>
11
<PAGE> 21
<TABLE>
<CAPTION>
June 30,
-------------------------------------------------------
1994 1993
---------------------------- -------------------------
(Dollars in thousands)
<S> <C> <C>
Asset Quality Data
Allowance for losses on loans $ 85,640 $ 81,017
Nonperforming loans 18,213 26,003
Nonperforming assets 21,765 33,947
Loans 90 days or more 3,784 4,551
past due
Allowance for losses on loans to loans 2.57% 2.90%
Nonperforming loans to loans .55 .93
Nonperforming assets to loans .65 1.21
Allowance/nonperforming loans 470.21 311.57
Balance Sheet Data (At Period End)
Total Assets $6,966,854 $6,316,019
Loans, net of unearned income 3,330,825 2,792,878
Investment securities
Amortized cost 2,908,418 2,661,874
Fair value 2,894,512 2,732,115
Total Deposits 5,578,850 5,370,077
Long-term debt (2) 284,189 197,059
Total shareholders' equity 516,909 456,661
Capital Ratios
Equity/assets 7.42% 7.23%
Leverage (3) 7.18 6.68
</TABLE>
- ---------------------------------
(1) Interim period ratios are annualized
(2) Includes subsidiary banks' long-term debt (primarily Federal Home Loan
Bank advances) of $169.4 million and $122.8 million at June 30, 1994 and
1993, respectively.
(3) Excludes the impact of the fair value adjustment for available for sale
securities.
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, N.A. ("Knoxville"), Union Planters Bank of Middle
Tennessee, N.A. ("Nashville"), Union Planters Bank of Chattanooga, N.A.
("Chattanooga") and Union Planters Bank of Jackson, N.A. ("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 will 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 pending acquisitions and reorganizations,
including the reorganization of UPNB, UPC anticipates that possible significant
expenses (e.g., elimination of duplicate facilities, staff reductions,
elimination of duplicate functions, write-off of impaired assets, etc.) may be
incurred in the third and fourth quarters of 1994 upon completion of ongoing
financial, due diligence, and strategic reviews and assessments of the
post-merger operating environment of UPC. It is preliminarily estimated that
at least $2 million will be incurred in the third quarter. Any additional
charges which may be incurred in either the third or forth quarter as a result
of the completion of the studies cannot be estimated at this time.
Additionally, management of UPC expects significant future cost savings from
the combined operations of UPC and Grenada Sunburst System Corporation ("GSSC")
once that acquisition is consummated. See "-- Pending Acquisitions" and "--
Grenada Sunburst Acquisition." Preliminary studies indicate that there are
significant savings opportunities and management expects that they will be
realized once the recommendations are implemented; however, the final savings
which may actually be realized cannot be estimated at this time.
12
<PAGE> 22
Recently Completed Acquisitions. Since March 31, 1994, UPC has
completed the acquisitions of the following institutions (collectively, the
"Recently Completed Acquisitions"):
<TABLE>
<CAPTION>
METHOD OF
INSTITUTION ASSET SIZE CONSIDERATION ACCOUNTING
- ----------- ---------- ------------- ----------
(In Millions)
<S> <C> <C> <C>
Clin-Ark Bankshares, Inc.
and its subsidiary,
First National Bank, 217,768 shares Pooling of
Clinton, Van Buren County, Arkansas $ 53 UPC Common Stock Interests
Tennessee Bancorp, Inc.
and its subsidiary, Tennessee National
Bank, Columbia, Maury County,
Tennessee (1) 93 $13.5 Million Cash Purchase
Liberty Bancshares, Inc.
and its subsidiary Liberty
Federal Savings Bank, 1,223,353 shares Pooling of interests
Paris, Henry County, Tennessee 170 UPC Common Stock
-----
Total $316
====
</TABLE>
- ---------------------------
(1) Merged into UPNB.
Pending Acquisitions. Consistent with UPC's acquisition strategy, UPC
has entered into definitive agreements to acquire the following financial
institutions in addition to BNF (collectively, the "Pending Acquisitions") which
management considers probable of consummation and which are expected to be
closed by year end 1994:
<TABLE>
<CAPTION>
CONSIDERATION
-------------
INSTITUTION ASSET SIZE VALUE TYPE
- ----------- ---------- ----- ----
(In Millions)
<S> <C> <C> <C>
Earle Bankshares, Inc.
and its subsidiary
First Southern Bank, UPC Common Stock
Earle, Crittenden County, Arkansas (1) $ 43 $ 9 (Approximately 320,000 shares)
Mid South Bancshares, Inc.
and its subsidiaries, Security
Bank, Paragould, Greene County
and Farmers & Merchants Bank, Reyno UPC Common Stock
Randolph County, Arkansas 128 13 (Approximately 523,000 shares)
Commercial Bancorp, Inc.
and its subsidiary, The
Commercial Bank, Obion UPC Common Stock
Obion County, Tennessee 29 5 (Approximately 185,000 shares)
Grenada Sunburst System Corporation
and its subsidiaries Sunburst Bank,
Mississippi, Grenada, Grenada County,
Mississippi and Sunburst Bank, UPC Common Stock
Baton Rouge, Louisiana (2) 2,463 361 (Approximately 13,500,000 shares)
------ ----
Totals $2,663 $389
====== ====
</TABLE>
- ---------------------------
(1) It is anticipated that the closing of this acquisition will occur on or
about July 29, 1994 and become effective as of August 1, 1994.
(2) 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.
13
<PAGE> 23
If the Reorganization, the Pending Acquisitions and the Recently
Completed Acquisitions had been consummated at March 31, 1994, UPC's
consolidated total assets would have increased by approximately $3.3 billion to
approximately $10.0 billion, and UPC's consolidated total deposits would have
increased by approximately $2.9 billion to approximately $8.5 billion, based
upon March 31, 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 May 19, 1994, as amended,
and the historical financial information included in UPC's 1993 Annual Report
on Form 10-K and its Quarterly Report on Form 10-Q, for the period ended March
31, 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 Corproation ("GSSC") in a tax-free
exchange of shares of UPC Common Stock (the "Grenada Sunburst Acquisition") in
a transaction to be accounted for as a pooling of interests. The Grenada
Sunburst Acquisition will result in the issuance of approximately 13.5 million
shares of UPC Common Stock with 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. It is the third largest financial institution headquartered in
Mississippi. As of March 31, 1994, GSSC had total assets of approximately $2.5
billion, total loans of $1.5 billion, total deposits of $2.2 billion, and
shareholders' equity of $178 million. GSSC was organized under the laws of the
State of Delaware on May 20, 1986. GGSC has two major subsidiaries: Sunburst
Bank, Mississippi, and Sunburst Bank, Louisiana. Sunburst Bank, Mississippi,
organized in 1890, and Sunburst Bank, Louisiana, acquired by GSSC in May 1988
(collectively the "Banks"), had approximately $1,962 million and $505 million,
respectively, in total assets as of March 31 1994.
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
transactions 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 March 31, 1994, GSSC had 1,707 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, Louisana 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 its 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 acquistion is expected to be consummated by year-end 1994. For additional
information regarding GSSC, see UPC's Current Reports on Form 8-K dated May 19,
1994, as amended, July 1, 1994 and July 26, 1994.
14
<PAGE> 24
RECENT DEVELOPMENTS AFFECTING BNF
1994 Third Quarter BNF Financial Highlights. The following table
presents certain information for the three and nine months ended June 30, 1994
and 1993. Reference is made to BNF's press release dated July 13, 1994.
<TABLE>
<CAPTION>
AT JUNE 30,
----------------------------------------------------
1994 1993
----------------------- ---------------------------
(Dollars in thousands)
<S> <C> <C>
BALANCE SHEET AND OTHER DATA
Total assets $278,344 $271,232
Mortgage loans, net 116,701 106,300
Mortgage backed securities, net 80,750 82,571
Consumer loans, net 48,013 41,371
Deposits 227,425 217,765
FHLB advances 17,000 22,000
Stockholders' equity 31,441 29,121
Stockholders' equity as a percent of total assets 11.30% 10.74%
Book value per share $ 17.49 $ 16.37
Nonperforming assets 162 276
Nonperforming assets as a
percent of total assets 0.06% 0.10%
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- ------------------------------
1994 1993 1994 1993
----------- ------------- ------------- ------------
(Dollars in thousands, except per share data)
OPERATING DATA
Total interest income $ 4,750 $ 4,947 $ 14,215 $ 15,086
Total interest expense 2,178 2,144 6,511 6,556
Net interest income after provision
for loan losses 2,572 2,771 7,704 8,380
Net income 835 1,038 2,642 3,081
Net income per share 0.45 0.57 1.42 1.68
Cash dividends per share $ 0.17 $ 0.16 $ 0.49 $ 0.46
Weighted average shares and
equivalent shares outstanding 1,866,214 1,836,171 1,858,490 1,831,194
Return on average assets (1) 1.20% 1.56% 1.27% 1.56%
Return on average equity (1) 10.74% 14.33% 11.37% 14.55%
Net interest margin 3.53% 4.07% 3.55% 4.18%
Net yield as a percent of
interest earning assets 3.85% 4.37% 3.86% 4.50%
- ---------------------------
(1) Interim period ratios are annualized.
</TABLE>
Branch Acquisition. BANKFIRST is currently in the process of
purchasing a Kroger Superstore branch office from BANKALABAMA, Huntsville,
Alabama. This Kroger Superstore is located at the intersections of Alabama
Highway 67 and U.S. Highway 31 in Decatur, Alabama. This transaction will
consist of BANKFIRST acquiring approximately $600,000 in deposit liabilities
for approximately 1.67% of the deposit base, and purchasing approximately
$107,000 in fixed assets and approximately $200,000 in consumer loans. The
transaction was approved by the OTS Regional Office in Atlanta, Georgia
on June 17, 1994 and will not require BNF stockholder approval. The
consummation of this transaction is scheduled for August 1, 1994.
EQUIVALENT AND PRO FORMA PER SHARE DATA
The following table presents selected comparative unaudited per share
data for (i) UPC Common Stock and BNF Common Stock on an historical basis; (ii)
UPC Common Stock on a pro forma basis for the Reorganization only and for the
Reorganization, all Recently Completed Acquisitions and the Pending
Acquisitions; and (iii) BNF
15
<PAGE> 25
Common Stock on an equivalent pro forma basis for the Reorganization only and
for the Reorganization, 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 Reorganization been consummated
January 1, 1993. The information is derived from, and should be read in
conjunction with the consolidated historical financial statements of UPC
(including related notes thereto) which are incorporated by reference, the
consolidated historical financial statements of BNF incorporated by reference
and the unaudited pro forma consolidated financial statements and related notes
in UPC's Current Report on Form 8-K dated April 15, 1994, incorporated by
reference. See "Incorporation of Certain Documents by Reference" and Appendix
A.
<TABLE>
<CAPTION>
AS OF AND FOR
THE TWELVE
THREE MONTHS ENDED
MONTHS ENDED DECEMBER 31,
MARCH 31, ------------------------------------------------------
1994(1) 1993(1) 1992 1991
-------------------------- ------------------ ------------ ----------------
<S> <C> <C> <C> <C>
BOOK VALUE PER COMMON SHARE
UPC $19.00 $18.96 $16.34 $14.99
UPC pro forma (BNF only) 18.64 18.61 16.02 14.67
UPC pro forma (all Recently Completed
and Pending Acquisitions) 16.70 16.29 13.85 12.61
BNF 17.18 17.56 15.53 14.19
BNF equivalent pro forma (BNF only) 20.09 20.06 17.27 15.81
BNF equivalent pro forma (all Recently
Completed and Pending Acquisitions)(2) 18.00 17.56 14.93 13.59
CASH DIVIDENDS PER COMMON SHARE
UPC .21 .72 .60 .48
UPC pro forma .21 .72 .60 .48
BNF .16 .62 .57 .47
BNF equivalent pro forma .23 .78 .65 .52
EARNINGS BEFORE EXTRAORDINARY ITEMS AND
ACCOUNTING CHANGES
UPC
Primary .70 2.69 2.10 1.59
Fully diluted .65 2.49 2.02 1.58
UPC pro forma (BNF only)
Primary .67 2.62 2.06 1.56
Fully diluted .63 2.45 2.00 1.55
UPC pro forma (all Recently Completed and
Pending Acquisitions)(2)
Primary .58 2.12 1.77 1.30
Fully diluted .56 2.06 1.30 1.30
BNF
Primary .42 2.23 1.99 1.47
Fully diluted .42 2.23 1.99 1.47
BNF equivalent pro forma (BNF only)
Primary .72 2.82 2.22 1.68
Fully diluted .68 2.64 2.16 1.67
BNF equivalent pro forma (all Recently
Completed and Pending Acquisitions)(2)
Primary .63 2.29 1.91 1.40
Fully diluted .60 2.22 1.40 1.40
</TABLE>
- --------------------------
(1) The equivalent pro forma per share data for BNF are computed by
multiplying UPC's pro forma share information by 1.078.
(2) See also, "-- Recent Developments Affecting UPC -- Recently Completed
Acquisitions" and "-- Pending Acquisitions."
NA--Not Applicable
16
<PAGE> 26
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following tables contain unaudited, consolidated, pro forma,
condensed financial information showing a statement of earnings for the three
months ended March 31, 1994 and for the years ended December 31, 1993, 1992, and
1991, and a balance sheet at March 31, 1994, for (i) UPC; (ii) UPC, Recently
Completed Acquisitions and the Reorganization; and (iii) UPC, Recently Completed
Acquisitions, the Pending Acquisitions and the Reorganization. The unaudited
pro forma financial information reflects each transaction using either the
pooling of interests or purchase methods 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
historical financial statements of UPC and BNF and in conjunction with the
information presented in UPC's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994 and UPC's Current Reports on Form 8-K dated February 8,
1994, April 14, 1994, May 18, 1994 and May 19, 1994 and BNF's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1994. Pro forma results are not
necessarily indicative of future operating results. See "Incorporation of
Certain Documents by Reference."
17
<PAGE> 27
<TABLE>
<CAPTION>
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
MARCH 31, 1994
-------------------------------------------------------------
UPC, Recently
Completed
UPC, Recently Acquisitions,
Completed Acquisitions All Pending
UPC and BNF Acquisitions and BNF
--------------- --------------------- --------------------
<S> <C> <C> <C>
Assets
Cash and due from banks $ 278,116 $ 290,024 $ 437,988
Interest-bearing deposits at financial
institutions 9,898 11,021 17,576
Federal funds sold and securities
purchased under agreements to resell 105,818 110,373 158,848
Trading account securities, at market 157,171 157,171 157,171
Loans held for resale 20,223 21,382 63,150
Investment securities
Available for sale 2,259,419 2,398,025 2,538,172
Held to maturity 548,498 589,253 1,094,137
Loans, net of unearned income 3,092,638 3,468,211 5,162,395
Less:
Allowance for losses on loans (87,099) (90,828) (125,238)
---------- ---------- ----------
Net loans 3,005,539 3,377,383 5,037,157
Premises and equipment 145,528 157,210 212,060
Accrued interest receivable 55,093 59,415 77,262
Goodwill and other intangibles 40,341 48,971 56,475
Other assets 99,136 100,842 134,155
---------- ---------- ----------
Total assets $6,724,780 $7,321,070 $9,984,151
========== ========== ==========
Liabilities and shareholders' equity
Deposits
Noninterest-bearing $ 815,335 $ 824,265 $1,258,152
Other interest-bearing 4,796,562 5,293,609 7,249,175
---------- ---------- ----------
Total Deposits 5,611,897 6,117,874 8,507,327
Short-term borrowings 234,235 234,567 263,849
Federal Home Loan Bank advances 169,410 199,595 215,299
Long-term debt 117,161 117,161 121,936
Accrued interest, expenses, and taxes 50,591 53,522 62,679
Other Liabilities 28,072 28,905 47,859
---------- ---------- ----------
Total liabilities 6,211,366 6,751,624 9,218,949
---------- ---------- ----------
Shareholders' equity
Preferred stock
Convertible 87,298 87,298 87,298
Nonconvertible 17,250 17,250 17,250
Common stock 107,614 125,092 197,812
Additional paid-in capital 85,560 86,762 133,041
Net unrealized gain (loss) - available for
sale securities 103 90 (143)
Retained earnings 215,589 252,954 329,944
---------- ---------- ----------
Total shareholders' equity 513,414 569,446 765,202
---------- ---------- ----------
Total liabilities and $6,724,780 $7,321,070 $9,984,151
shareholders' equity ========== ========== ==========
</TABLE>
18
<PAGE> 28
<TABLE>
<CAPTION>
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF EARNINGS
(Dollars In Thousands Except Per Share Data)
Three Months Ended March 31, 1994
------------------------------------------------------
UPC, Recently
UPC, Recently Completed
Completed Acquisitions,
Acquisitions and All Pending Aquisitions
UPC BNF and BNF
----------- ------------------ -----------------------
<S> <C> <C> <C>
Interest income
Interest and fees on loans $ 63,792 $ 71,566 $ 105,551
Interest on investment securities 33,923 36,568 44,861
Interest on deposits at financial 122 127 219
institutions
Interest on federal funds sold and
securities 861 739 1,035
purchased under agreements to resell
Interest on trading account securities 1,759 1,759 1,759
Interest on loans held for resale 581 581 1,525
------- ------- -------
Total interest income 101,038 111,340 154,950
------- ------- -------
Interest expense
Interest on deposits 36,622 41,065 56,418
Interest on short-term borrowings 1,884 1,892 2,112
Interest on Federal Home Loan Bank
advances and long-term debt 3,639 3,996 4,336
------- -------- -------
Total interest expense 42,145 46,953 62,866
------- ------- -------
Net interest income 58,893 64,387 92,084
Provision for losses on loans -- 187 1,002
------- ------- -------
Net interest income after provision
for losses on loans 58,893 64,200 91,082
------- ------- -------
Noninterest income
Service charges on deposit accounts 7,515 7,927 12,419
Profits and commissions from trading 1,489 1,489 1,489
activities
Investment securities gains 100 148 65
Other income 10,810 11,089 14,507
------- ------- -------
Total noninterest income 19,914 20,653 28,480
------- ------- -------
Noninterest expense
Salaries and employee benefits 24,521 26,318 39,982
Net occupancy expense 4,298 4,736 6,717
Equipment expense 4,339 4,427 6,340
Other expense 21,076 22,601 30,224
------- -------- -------
Total noninterest expense 54,234 58,082 83,263
------- -------- -------
Earnings before income taxes,
extraordinary item, and accounting changes 24,573 26,771 36,299
Applicable income taxes 7,233 8,107 11,144
------- -------- -------
Earnings before extraordinary item
and accounting changes $ 17,340 $ 18,664 $ 25,155
======== ======== =======
Earnings per common share
Primary $ 0.70 $ 0.58 $ 0.58
Fully diluted 0.65 0.57 0.56
Average common shares outstanding (in
thousands)
Primary 21,636 27,185 39,675
Fully diluted 26,117 31,767 44,257
</TABLE>
19
<PAGE> 29
<TABLE>
<CAPTION>
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF EARNINGS
(Dollars In Thousands Except Per Share Data)
Year Ended December 31, 1993
-------------------------------------------------------
UPC, Recently
Completed
UPC, Recently Acquisitions,
Completed All Pending
Acquisitions and Acquisitions
UPC BNF(1) BNF(1)
------- ------ ------
<S> <C> <C> <C>
Interest income
Interest and fees on loans $241,072 $293,969 $426,593
Interest on investment securities 140,473 160,924 197,984
Interest on deposits at financial 1,634 1,802 2,288
institutions
Interest on federal funds sold and
securities purchased under agreements to resell 4,602 4,977 5,730
Interest on trading account securities 6,194 6,194 6,194
Interest on loans held for resale 3,239 3,239 7,335
------- -------- --------
Total interest income 397,214 471,105 646,124
------- ------- -------
Interest expense
Interest on deposits 146,800 179,337 242,640
Interest on short-term borrowings 6,287 6,571 7,520
Interest on Federal Home Loan Bank
advances and long-term debt 11,460 12,491 13,771
------- ------- --------
Total interest expense 164,547 198,399 263,931
------- ------- -------
Net interest income 232,667 272,706 382,193
Provision for losses on loans 9,689 14,405 21,262
------- -------- --------
Net interest income after provision
for losses on loans 222,978 258,301 360,931
------- ------- -------
Noninterest income
Service charges on deposit accounts 28,721 32,002 50,401
Profits and commissions from trading 8,720 8,771 8,771
activities
Investment securities gains (losses) 4,581 5,089 4,892
Other income 44,715 47,082 61,576
------- -------- --------
Total noninterest income 86,737 92,944 125,640
------- -------- --------
Noninterest expense
Salaries and employee benefits 98,920 112,935 164,915
Net occupancy expense 15,909 19,473 27,583
Equipment expense 15,735 16,365 23,672
Other expense 93,916 107,667 136,489
------- ------- -------
Total noninterest expense 224,480 256,440 352,659
------- ------- -------
Earnings before income taxes,
extraordinary item, and accounting changes 85,235 94,805 133,912
Applicable income taxes 23,967 28,691 40,931
------- -------- --------
Earnings before extraordinary item
and accounting changes $ 61,268 $ 66,114 $ 92,981
======= ======== ========
Earnings per common share
Primary $ 2.69 $2.11 $2.12
Fully diluted 2.49 2.03 2.06
Average common shares outstanding (in
thousands)
Primary 19,622 27,140 39,630
Fully diluted 23,852 31,738 44,228
</TABLE>
- ---------------------
(1) Financial information with respect to BNF has been converted to a calendar
year basis.
20
<PAGE> 30
<TABLE>
<CAPTION>
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF EARNINGS
(Dollars In Thousands Except Per Share Data)
Year Ended December 31, 1992
-----------------------------------------------------------
UPC, GSSC
UPC UPC AND BNF(1) and BNF(1)
---------- -------------- ----------
<S> <C> <C> <C>
Interest Income
Interest and fees on loans $198,197 $213,909 $315,976
Interest on investment securities 122,287 129,508 165,005
Interest on deposits at financial 3,999 3,999 4,915
institutions
Interest on federal funds sold and
securities purchased under agreements to resell 4,280 4,280 5,250
Interest on trading account securities 6,648 6,648 6,648
Interest on loans held for resale 3,457 3,457 7,146
------- ------- -------
Total interest income 338,868 361,801 504,940
------- ------- -------
Interest expense
Interest on deposits 137,605 147,132 209,035
Interest on short-term borrowings 6,942 6,942 8,040
Interest on Federal Home Loan Bank
advances and long-term debt 4,868 5,489 5,555
-------- -------- -------
Total interest expense 149,415 159,563 222,630
------- ------- -------
Net interest income 189,453 202,238 282,310
Provision for losses on loans 18,557 19,194 27,182
-------- -------- --------
Net interest income after
provision for losses on loans 170,896 183,044 255,128
------- ------- --------
Noninterest income
Service charges on deposit accounts 20,843 21,335 35,590
Profits and commissions from trading 10,168 10,168 10,168
activities
Investment securities gains 13,246 13,363 14,019
Other income 40,700 39,562 51,670
------- ------- --------
Total noninterest income 84,957 84,428 111,447
------- ------- --------
Noninterest expense
Salaries and employee benefits 74,772 77,245 116,764
Net occupancy expense 13,136 14,097 19,989
Equipment expense 12,225 12,225 18,186
Other expense 99,085 101,271 124,525
------- ------- --------
Total noninterest expense 199,218 204,838 279,464
------- ------- --------
Earnings before income taxes,
extraordinary item, and accounting changes 56,635 62,634 87,111
Applicable income taxes 15,196 17,611 23,861
------- -------- --------
Earnings before extraordinary
items and accounting changes $ 41,439 $ 45,023 $ 63,250
======== ======== ========
Earnings per common share
Primary $ 2.10 $ 2.06 $ 1.77
Fully diluted 2.02 2.00 1.75
Average common shares outstanding (in
thousands)
Primary 16,765 18,819 32,305
Fully diluted 19,609 21,663 35,149
</TABLE>
- --------------------------
(1) Financial information with respect to BNF has been converted to a calendar
year basis.
21
<PAGE> 31
<TABLE>
<CAPTION>
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF EARNINGS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
Year Ended December 31, 1991
-----------------------------------------------------
UPC, GSSC
UPC UPC AND BNF(1) and BNF(1)
--------- -------------- ----------
<S> <C> <C> <C>
Interest Income
Interest and fees on loans $213,222 $229,207 $341,936
Interest on investment securities 92,607 99,693 141,925
Interest on deposits at financial 7,525 7,525 9,898
institutions
Interest on federal funds sold and
securities purchased under agreements to resell 6,606 6,606 8,791
Interest on trading account securities 5,419 5,419 5,419
Interest on loans held for resale 4,671 4,671 6,150
-------- -------- -------
Total interest income 330,050 353,121 514,119
------- ------- -------
Interest expense
Interest on deposits 160,252 173,295 259,518
Interest on short-term borrowings 12,809 12,809 14,383
Interest on Federal Home Loan Bank
advances and long-term debt 4,974 5,004 5,196
-------- -------- -------
Total interest expense 178,035 191,108 279,097
------- ------- -------
Net interest income 152,015 162,013 235,022
Provision for losses on loans 24,835 25,281 34,203
-------- -------- -------
Net interest income after
provision for losses on loans 127,180 136,732 200,819
------- ------- -------
Noninterest income
Service charges on deposit accounts 19,394 19,868 33,626
Profits and commissions from trading 14,707 14,707 14,707
activities
Investment securities gains 3,344 3,391 2,624
Other income 33,705 32,575 41,132
-------- -------- -------
Total noninterest income 71,150 70,541 92,089
-------- -------- -------
Noninterest expense
Salaries and employee benefits 69,756 71,953 108,490
Net occupancy expense 10,556 11,543 17,414
Equipment expense 10,627 10,627 16,077
Other expense 73,832 75,478 96,494
-------- -------- -------
Total noninterest expense 164,771 169,601 238,475
------- ------- -------
Earnings before income taxes,
extraordinary item, and accounting changes 33,559 37,672 54,433
Applicable income taxes 6,051 7,538 11,537
-------- -------- --------
Earnings before extraordinary
items and accounting changes $ 27,508 $ 30,134 $ 42,896
========= ========= ========
Earnings per common share
Primary $ 1.59 $ 1.56 $ 1.30
Fully diluted 1.58 1.55 1.30
Average common shares outstanding (in
thousands)
Primary 16,632 18,686 32,172
Fully diluted 16,986 19,040 32,526
</TABLE>
- --------------------------
(1) Financial information with respect to BNF has been converted to a
calendar year basis.
22
<PAGE> 32
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Directors of BNF to be used at the
Special Meeting which will be held at the main office of BNF, 255 Grant Street,
S.E., Decatur, Alabama 35601, on August 29, 1994 at 1:00 p.m., Central Daylight
Time. This Proxy Statement/Prospectus and the accompanying Notice and Proxy
Card are being first mailed to stockholders of BNF on or about July 29, 1994.
At the Special Meeting, holders of record of BNF Common Stock as of the close
of business on July 11, 1994, the voting record date, will consider and vote
upon (i) the approval of the Reorganization Agreement and the Reorganization;
and (ii) such other matters as may properly come before the Special Meeting or
any adjournments thereof.
HOLDERS OF BNF COMMON STOCK ARE REQUESTED TO COMPLETE, DATE AND SIGN THE
ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY TO BNF IN THE ENCLOSED,
POSTAGE-PAID ENVELOPE. FAILURE TO RETURN YOUR PROPERLY EXECUTED PROXY CARD OR
FAILURE TO VOTE AT THE SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE
AGAINST THE REORGANIZATION AGREEMENT AND THE PLAN OF MERGER. BNF STOCKHOLDERS
SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
Any holder of BNF Common Stock who has delivered a proxy 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 bearing a later date to BNF, 255 Grant Street, S.E.,
Post Office Box 1429, Decatur, Alabama 35602, Attention: Corporate Secretary,
provided such notice or proxy is actually received by BNF before the vote of
stockholders. A proxy will not be revoked by death or supervening incapacity of
the stockholder executing the proxy 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 BNF. The shares of BNF
Common Stock represented by properly executed proxies received will be voted
"FOR" (or "AGAINST," if so indicated) approval of the Reorganization Agreement
and the Plan of Merger and related letter agreement annexed thereto as Exhibits
A and B, respectively. If any other matters are properly presented at the
Special Meeting for consideration, the persons named in the BNF proxy card
enclosed herewith will vote on such matters in accordance with the determination
of a majority of the Board of Directors of BNF. BNF is not aware of any matter
to be presented at the Special Meeting other than the proposal to approve the
Reorganization Agreement and the Plan of Merger and related letter agreement
annexed thereto as Exhibits A and B, respectively. Proxies marked as
abstentions will not be counted as votes cast. In addition, shares held in
street name which have been designated by brokers on proxy cards as not voted
will not be counted as votes cast. Proxies marked as abstentions or as broker
non-votes, however, will be treated as shares present for purposes of
determining whether a quorum is present.
VOTES REQUIRED
The presence, in person or by proxy, of at least a majority of the total
number of shares of BNF Common Stock outstanding and entitled to vote will be
necessary to constitute a quorum at the Special Meeting. Proxies marked as
abstentions will not be counted as votes cast. In addition, shares held in
street name which have been designated by brokers on proxy cards as not voted
will not be counted as votes cast. Proxies marked as abstentions or as broker
non-votes, however, will be treated as shares present for purposes of
determining whether a quorum is present.
The affirmative votes of the holders of a majority of the outstanding
shares of BNF Common Stock entitled to vote at the Special Meeting are required
in order to approve the Reorganization Agreement and the Plan of Merger and
related letter agreement annexed thereto as Exhibits A and B, respectively.
Therefore, a failure to return a properly executed proxy or alternatively to
vote in person at the Special Meeting in favor of approval will have the same
effect as a vote against the Reorganization Agreement and the Plan of Merger and
related letter agreement annexed thereto as Exhibits A and B, respectively. As
of the voting record date, there were 1,797,730 shares of BNF Common Stock
outstanding and entitled to vote at the Special Meeting, with each share
entitled to one vote.
23
<PAGE> 33
As of the voting record date, management and the directors of BNF and
BANKFIRST beneficially owned and held of record a total of 180,747 shares or
approximately 9.59% of the issued and outstanding shares of BNF Common Stock.
ALL OF THE MEMBERS OF MANAGEMENT OF BNF HAVE ADVISED BNF OF THEIR INTENTION TO
VOTE THEIR SHARES IN FAVOR OF THE REORGANIZATION AGREEMENT AND THE PLAN OF
MERGER AND RELATED LETTER AGREEMENT ANNEXED THERETO AS EXHIBITS A AND B,
RESPECTIVELY.
STOCKHOLDERS' APPRAISAL RIGHTS
No appraisal rights will be available to the stockholders of BNF Common
Stock entitled to receive notice of and to vote at the Special Meeting, since
the BNF Common Stock is listed on the AMEX and the consideration to be received
in the Reorganization will consist solely of (i) shares of UPC Common Stock
which at the Effective Time of the Reorganization will be listed on the NYSE and
(ii) cash in lieu of any fractional share remaining after aggregation of all
whole and fractional shares of UPC Common Stock to which a BNF Record Holder is
entitled.
RECOMMENDATION
For the reasons described below, BNF's Board of Directors has approved
and adopted the Reorganization Agreement, including the Plan of Merger and the
related letter agreement and recommends that the stockholders of BNF vote "FOR"
approval of the Reorganization Agreement and the Plan of Merger and the related
letter agreement.
OTHER MATTERS
The Board of Directors of BNF is not aware of any business to come
before the Special Meeting other than the matters described in this Proxy
Statement/Prospectus. However, if any other matters should properly come before
the Special Meeting, it is intended that proxies properly submitted in the
accompanying form will be voted in respect thereof in accordance with the
determination of a majority of the Board of Directors of BNF.
MISCELLANEOUS
The cost of soliciting proxies will be borne by BNF. BNF will reimburse
brokerage firms and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in sending proxy materials to the beneficial owners of
BNF Common Stock. In addition to solicitations by mail, directors, officers and
regular employees of BNF may solicit proxies personally or by telegraph or
telephone for which they would receive no additional compensation.
TRANSACTIONS WITH MANAGEMENT
BANKFIRST has a policy of offering loans to its officers, directors and
employees for the financing and improvement of their personal residences as well
as consumer and commercial loans. All such loans are approved under loan
policies established by BNF's Board of Directors. Pursuant to the requirements
of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, all
loans made to officers and directors are made at prevailing market rates in the
ordinary course of business, on the same terms and collateral as those of
comparable transactions in effect at the time with unrelated parties and do not
involve more than the normal risk of collectibility or contain other unfavorable
features.
24
<PAGE> 34
Set forth below is certain information relating to loans made to
executive officers and directors and their affiliates whose total aggregate loan
balances exceeded $60,000 at any time during the fiscal year ended September 30,
1993.
<TABLE>
<CAPTION>
Origination
Name Type Date
- ---- ---- ----
<S> <C> <C>
Ernest M. Smith, Jr. Mortgage-primary 12/15/86
Director residence
<CAPTION>
Highest
Unpaid
Balance
Outstanding
Prevailing During
Current Rate Fiscal Year
Opening Interest at Time Ended Balance
Balance Rate of the Loan 09/30/93 09/30/93
------- ---- ----------- -------- --------
<C> <C> <C> <C> <C>
$182,000 9.5%(1) 8.25%(2) $168,159 $162,270
</TABLE>
(1) On March 29, 1991, this mortgage was modified to a fixed-rate loan for a
term of 15 years.
(2) Adjustable mortgage loan.
25
<PAGE> 35
APPROVAL OF THE REORGANIZATION
The following description of the Reorganization is not intended to be a
complete description of all material facts regarding the Reorganization and is
qualified in all respects by reference to the Reorganization Agreement and the
fairness opinion attached as Appendices B and C, respectively, hereto.
BACKGROUND OF THE REORGANIZATION
During the period since BNF BANCORP, INC. ("BNF") became a publicly held
company in December, 1986, a number of institutions have approached management
and/or various BNF individual Directors and have suggested that they would be
interested in discussing the acquisition of BNF. In October 1988, one of these
inquiries resulted in BNF executing a letter of intent for First American
Federal Savings and Loan Association, Huntsville, Alabama, a subsidiary of First
AmFed Corporation, to acquire BNF. This proposed acquisition was to be a cash
purchase of BNF stock in an amount equal to $20.83 per share. The consummation
of this transaction was subject to the execution of a definitive agreement and
BNF stockholder approval, as well as approval from the OTS. In December 1989,
the OTS denied the application based on safety and soundness concerns arising
out of the proposed transaction. Thereafter, a determination was made by
management and the Board of Directors of BNF (the "BNF Board") to continue as a
independent company while improving the financial condition and operating
results of BNF.
As part of its ongoing strategy, Union Planters Corporation ("UPC") has
sought to increase the number of community banks it owns in Tennessee and
contiguous states. UPC considers north central Alabama, where BNF is
headquartered, to be an especially attractive market because this region is
experiencing significant growth and is located along the Interstate 65
north-south corridor which runs through Nashville, Tennessee, a major
metropolitan market of UPC. After considering several communities and
institutions, UPC identified BNF as a possible acquisition candidate and
initiated discussions with BNF. On August 5, 1992, Mr. Stanley D. Overton,
Regional President of Union Planters National Bank in Nashville, Tennessee,
contacted Mr. William D. Powell, President of BNF, to have informal discussions
concerning UPC's possible interest in BNF. On August 19, 1992, Mr. Benjamin W.
Rawlins, Jr., Chairman of the Board of Directors of UPC, and Mr. Overton, paid a
visit to Mr. Powell at BNF's headquarters in Decatur, Alabama, to discuss this
matter. On August 20, 1992, at a regularly scheduled Board meeting of BNF, Mr.
Powell and the BNF Board agreed that BNF would entertain further discussions
with UPC.
On September 8, 1992, Mr. Rawlins and Mr. Overton met with the directors
of BNF and made a presentation about UPC. Mr. Rawlins indicated that UPC was
interested in expanding into north central Alabama and upon request from Mr.
Rawlins, Mr. Powell mailed various annual reports, press releases and other
publicly available information to UPC.
From September 8, 1992 to September 18, 1992, there were several
telephone conversations between Mr. Powell and Mr. Rawlins, and on September
18, 1992, Mr. Powell advised Mr. Rawlins that at this time, the BNF Board was
not interested in pursuing a proposed acquisition by UPC. There were further
contacts made, however, and on October 29, 1992, Mr. J.E. Horton, Jr., Chairman
of the BNF Board and Mr. Powell met with representatives of UPC in Memphis,
Tennessee. UPC expressed continued interest in BNF; however, there was no
material change in the position of BNF relating to a possible acquisition until
January 1993. On January 19, 1993, there was a special BNF Board meeting to
discuss the merits of the continued interest indicated by UPC. Although BNF was
not soliciting offers for the sale of BNF, the BNF Board decided to pursue the
expression of interest by UPC because of UPC's financial stability, the
continuing consolidation in the financial services industry, the apparent value
to BNF stockholders based on the expression of interest and the value of the
expression of interest relative to other methods available to BNF to maximize
stockholder value relative to the value obtained by other financial institutions
in similar transactions and the increased liquidity which would be available to
BNF stockholders, as a result of the acquisition. The UPC expression of
interest in acquiring BNF was not solicited by BNF or any of its
representatives. On January 25, 1993, a confidentiality agreement was executed
between representatives of BNF and UPC.
General meetings, telephone conversations, exchanges of information, due
diligence and general negotiations occurred between January, 1993 and January,
1994. On January 27, 1994, BNF's Board reviewed the Reorganization Agreement
together with its exhibits and received a presentation by RP Financial, Inc.
("RP Financial") in which RP Financial described the materials it reviewed and
the evaluation techniques it employed in reaching its opinion
26
<PAGE> 36
regarding the fairness of the consideration to be delivered to the stockholders
of BNF in the Reorganization from a financial point of view. RP Financial and
BNF's special legal counsel, Breyer & Aguggia, reviewed with the BNF Board the
contents of the Reorganization Agreement. After a discussion of the potential
benefits of the transaction, financial and valuation analyses of the
transaction and the terms of the proposed agreement, and questions and
answers, RP Financial rendered its opinion that, as of such date, the
consideration to be paid in the Reorganization was fair to holders of BNF
Common Stock from a financial point of view. Thereafter, the BNF Board
unanimously approved the Reorganization Agreement.
REASONS FOR THE REORGANIZATION AND RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
OF BNF AND UPC
Reasons and Recommendation of Board of Directors of BNF. In light of
the foregoing, the BNF Board has voted to recommend the approval of the
Reorganization Agreement by the BNF shareholders for the following reasons:
(i) The trend in the banking industry is toward
consolidation, and the opportunity for BNF to consolidate with UPC
would provide the resources for BNF to compete more successfully in
the future.
(ii) Given the trend in the banking industry as
discussed above and the highly competitive environment in which BNF
would be expected to compete in the future, the proper time to effect
a merger with a larger institution is at the beginning of the trend
and before increased outside competition has been successful in
locating in BNF's market area.
(iii) As one of UPC's Community Banks, BNF and its
staff would be able to significantly benefit from UPC's larger
organization, larger capital base, operations and regulatory
expertise.
(iv) UPC's philosophy is to provide its Community
Banks with a substantial amount of operating autonomy, generally
leaving existing management in place to manage the institution
consistent with a past management philosophy, so long as such
philosophy is not inconsistent with UPC's policies, and produces
results consistent with results achieved while the institution was
independent.
The BNF Board also gave weight to a variety of additional factors in
reaching its decision. The BNF Board considered, among other things: the
consideration to be received in the Reorganization in relation to the book
value, assets, and earnings per share, and projected earnings per share of BNF
Common Stock; information concerning the financial condition, results of
operations and prospects of BNF, including the return on assets and return on
equity of BNF; the financial terms of other recent business combinations in the
thrift and banking industries; the liquidity of the UPC Common Stock and the
opinion of its financial advisor as to the fairness of the consideration to be
received in the Reorganization to BNF's stockholders from a financial point of
view.
The BNF Board did not assign any specific or relative weight to any of
the foregoing factors in determining to recommend the Reorganization to the BNF
stockholders.
THE BNF BOARD BELIEVES THAT THE REORGANIZATION IS IN THE BEST INTERESTS
OF BNF AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT BNF'S STOCKHOLDERS
VOTE "FOR" APPROVAL OF THE REORGANIZATION AGREEMENT AND THE REORGANIZATION.
UPC Reasons. Management of UPC has recommended to the UPC Board of
Directors (the "UPC Board"), and the UPC Board has approved the Reorganization
and the Reorganization Agreement because (i) BNF is located geographically in a
state in which UPC has sought to increase its market share, and (ii) UPC
believes that by providing BNF with access to the UPC capital base and other
banking resources, BNF will be well positioned to compete in its market in the
face of enhanced competition from larger, well capitalized institutions.
27
<PAGE> 37
FAIRNESS OPINION OF RP FINANCIAL, INC.
The Board of Directors of BNF retained RP Financial in April, 1993 as
its financial advisor in connection with the Reorganization and requested RP
Financial to render its opinion with respect to the fairness of the
consideration to be delivered in the Reorganization ("Merger Consideration")
from a financial point of view to BNF's stockholders. In requesting RP
Financial's advice and opinion, the Board of Directors of BNF did not give any
special instructions to, or impose any limitations upon the scope of the
investigation which RP Financial might wish to conduct to enable it to give its
opinion. RP Financial has delivered to BNF its written opinion dated January
27, 1994, and its updated opinion as of July 29, 1994, to the effect that,
based upon and subject to the matters set forth therein, as of the date
thereof, the Merger Consideration is fair to the stockholders of BNF's Common
Stock from a financial point of view. The opinion of RP Financial is directed
toward the consideration to be received by BNF stockholders and does not
constitute a recommendation to any BNF stockholder to vote for the
Reorganization. A copy of the RP Financial opinion, as updated, is set forth
as Appendix C to this Proxy Statement/Prospectus and should be read in its
entirety by stockholders of BNF.
RP Financial was selected by BNF to act as its financial advisor because
of RP Financial's expertise in the valuation of businesses and their securities
for a variety of purposes including its expertise in connection with mergers and
acquisitions of savings and loans, savings banks and savings and loan holding
companies. RP Financial has previously acted as financial advisor to BNF in a
variety of planning and valuation matters and in connection with inquiries from
prospective acquirors. Pursuant to a letter agreement dated April 16, 1993 (the
"Engagement Letter"), RP Financial estimates that it will receive from BNF total
fees of $62,300, of which $10,000 has been paid to date, plus reimbursement of
certain out-of-pocket expenses, for its services in connection with the
Reorganization. In addition, BNF has agreed to indemnify and hold harmless RP
Financial, any affiliates of RP Financial and the respective directors,
officers, agents and employees of RP Financial who act for or on behalf of RP
Financial from and against any and all losses, claims, damages and liabilities
caused by or arising out of any untrue statement of a material fact contained in
the information supplied by BNF to RP Financial or an omission to state a
material fact in the information so provided that is required to be stated or
necessary to make the statements therein not misleading. Pursuant to its
agreement, BNF will not be required to indemnify RP Financial for any such
losses, claims, damages, and liabilities if RP Financial is determined to be
negligent or otherwise at fault, or if RP Financial is determined to have failed
to exercise such due diligence and to conduct such independent investigations as
the circumstances indicate; provided, however, that RP Financial will be
entitled to indemnification for any such losses, claims, damages and liabilities
to the extent that RP Financial reasonably relied upon information furnished by
BNF whether or not BNF is determined to have been negligent or otherwise at
fault. In addition, if RP Financial is entitled to indemnification from BNF
under the agreement and in connection therewith incurs legal expenses in
defending any legal action challenging the opinion of RP Financial where RP
Financial is not negligent or otherwise at fault or is found by a court of law
to be not negligent or otherwise at fault, BNF will indemnify RP Financial for
all reasonable expenses.
In rendering its financial advisory services, RP Financial reviewed and
analyzed the following material: (1) the Reorganization Agreement, dated as of
January 27, 1994, inclusive of its exhibits; (2) this Proxy
Statement/Prospectus; (3) the following information for BNF and/or BANKFIRST --
(a) audited financial statements for the fiscal years ended September 30, 1989
through 1993, included or incorporated in Annual Reports to Shareholders, or
Annual Reports on Form 10-K, and unaudited shareholder financial statements for
the three- and nine-month periods ended June 30, 1994, and certain internal and
regulatory reports through June 30, 1994, (b) proxy statements for the last two
years, (c) the business plan for the period from September 30, 1992 through
September 30, 1995, and (d) unaudited internal and regulatory financial reports
and analyses prepared by management and other related corporate records and
documents regarding various aspects of BNF's assets and liabilities,
particularly rates, volumes, maturities, market values, trends, credit risk,
interest rate risk and liquidity risk of BNF's assets, liabilities, off-balance
sheet assets, commitments and contingencies; (4) the following information for
UPC -- (a) audited financial statements for the calendar years ended December
31, 1988 through 1993, included or incorporated in Annual Reports to
Shareholders or Annual Reports on Form 10-K, and unaudited shareholder financial
statements for the six months ended June 30, 1994, and other recent internal
and regulatory reports, and UPC's Current Report on Form 8-K dated July 1,
1994, (b) proxy statements for the last two years, (c) 1993 and 1994 budget
reports, (d) unaudited internal and regulatory financial reports prepared by
management and other related corporate records and documents regarding various
aspects of UPC's assets and liabilities, particularly rates, volumes,
maturities, market values, trends, credit risk, interest rate risk and
liquidity risk of UPC's assets, liabilities, off-balance sheet assets,
commitments and contingencies; (5) discussions with BNF's current management
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and UPC's management regarding past and current business operations, financial
condition, and future prospects of the respective institutions; (6) UPC's
results compared to the latest publicly-available published financial
statements, operating results and market pricing of publicly-traded banks and
bank holding companies, including those with comparable characteristics; (7)
market value information and pricing ratios of UPC Common Stock, such as market
capitalization, volume, price history, price/earnings ratio, price/book ratio,
price/tangible book ratio, price/assets ratio, dividend yield and dividend
payout ratio, compared to other publicly-traded banks and bank holding
companies with comparable characteristics; (8) the trading market for the BNF
Common Stock compared to similar information for savings institutions or
savings and loan holding companies with comparable resources, financial
condition, earnings, operations and markets as well as for publicly-traded
savings institutions and savings and loan holding companies with comparable
financial condition, earnings, operations and markets; (9) BNF's financial,
operational and market area characteristics compared to similar information for
comparable savings institutions or savings and loan holding companies; (10) the
potential for growth and profitability for BNF and UPC in their respective
markets, specifically regarding competition by other banks, savings
institutions, mortgage banking companies and other financial services
companies, (11) economic projections in the local market area, and the impact
of the regulatory, legislative and economic environments on operations of the
thrift and banking industries; (12) the financial terms, financial and
operating conditions and market areas of other recent business combinations of
comparable savings institutions and savings and loan holding companies; and
(13) the potential pro forma impact of the Reorganization and other pending
acquisitions on UPC's financial condition, operating results and per share
figures.
In rendering its opinion, RP Financial relied, without independent
verification, on the accuracy and completeness of the financial and other
information concerning BNF and UPC as furnished by the respective institutions
to RP Financial for review for purposes of its opinion, as well as
publicly-available information regarding BNF and UPC and other financial
institutions and economic data. BNF and UPC did not restrict RP Financial as to
the material it was permitted to review. The budgets reviewed by RP Financial
were prepared by the managements of BNF and UPC. Neither BNF nor UPC publicly
disclosed internal management budgets of the type provided to RP Financial in
connection with the review of the Reorganization. Such budgets were not
prepared with a view towards public disclosure and were based on numerous
variables and assumptions which are inherently uncertain, including without
limitation factors related to general economic and competitive conditions.
Accordingly, actual results could vary significantly from those set forth in
such budgets. RP Financial assumed that the budgets had been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the managements of each respective institution. RP Financial did
not review individual credit files nor did RP Financial perform or obtain any
independent appraisals or evaluations of the assets, liabilities, subsidiaries
and potential and/or contingent liabilities of BNF and UPC. RP Financial also
assumed, without independent verification, that the aggregate allowances for
loan losses for BNF and UPC were adequate to cover such losses. In addition, BNF
and UPC informed RP Financial, and RP Financial assumed with BNF's consent, that
the Reorganization will be accounted for on the books and records of UPC using
the pooling of interests method of accounting. RP Financial expresses no
opinion on matters of a legal, regulatory, tax or accounting nature or the
ability of the Reorganization as set forth in the Reorganization Agreement to be
consummated. RP Financial did not address BNF's underlying business decision to
proceed with the Reorganization and did not make any recommendation to the BNF
Board with respect to any approval of the Reorganization or to the holders of
BNF Common Stock with respect to any approval of the Reorganization.
RP Financial's opinion was based solely upon the information available
to it and the economic, market and other circumstances as they existed as of
January 27, 1994, and July 29, 1994; events occurring after the most recent
date could materially affect the assumptions used in preparing the opinion.
Pursuant to the Reorganization Agreement, it is a condition to consummation of
the Reorganization that RP Financial will confirm its opinion prior to the
Effective Date of the Reorganization.
In connection with rendering its opinion, RP Financial performed a
variety of financial analyses, which are summarized below. Although the
evaluation of the fairness, from a financial point of view, of the Merger
Consideration was to some extent subjective based on the experience and judgment
of RP Financial, and not merely the result of mathematical analysis of financial
data, RP Financial principally relied on several analyses in its
determinations. The preparation of a fairness opinion is a complex process
and is not necessarily susceptible to partial analysis or summary description.
RP Financial believes its analyses must be considered as a whole and that
selecting portions of such analyses and factors considered by RP Financial
without considering all such analyses and factors could create an incomplete
view of the process underlying RP Financial's opinion. In its analyses, RP
Financial took into account its assessment of general business, market,
monetary, financial and economic conditions,
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industry performance and other matters, many of which are beyond the control of
BNF and UPC as well as RP Financial's experience in securities valuation, its
knowledge of financial institutions and its experience in similar transactions.
With respect to the comparable company financial analysis and thrift
acquisition transaction analysis summarized below, no public company utilized
as a comparison is identical to BNF or UPC and such analyses necessarily
involve complex considerations and judgments concerning the differences in
financial and operating characteristics of the companies and other factors that
could affect the acquisition or public trading values of the companies
concerned. The analyses were prepared solely for purposes of RP Financial
providing its opinion as to the fairness of the Merger Consideration (as
defined herein) to the BNF Board and do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities actually may
be sold. Any estimates contained in RP Financial's analyses are not
necessarily indicative of future results of values, which may be significantly
more or less favorable than such estimates. None of the analyses performed by
RP Financial was assigned a greater significance by RP Financial than any
other.
Comparable Acquisition Transactions. RP Financial compared the
Reorganization on the basis of stated multiples of stated book value, tangible
book value and earnings of BNF implied by the Merger Consideration to be paid to
the holders of BNF Common Stock as of the date of determination with the same
ratios in pending acquisitions and consummated acquisitions during 1992, 1993
and 1994 to date of savings and loan associations, savings banks and savings
and loan holding companies in Alabama and also those RP Financial deemed
comparable in terms of size, location, capitalization, profitability and
operating strategy and which were also publicly-traded prior to their
acquisition. Such comparable acquisitions included institutions with total
assets between $200 million and $1 billion, with a focus on institutions
operating in the southeastern region of the country in markets comparable to
BNF's. BNF's acquisition price to tangible book value of 1.50 times, as
determined by UPC's closing price for the 10 trading days ended July 22, 1994,
fell in the upper portion of the range of 21 comparable completed acquisitions
in terms of price/tangible book value and exceeded the median price/tangible
book value multiple of 1.44 times. BNF's acquisition price in relation to
earnings of 13.4 times fell in the middle of the range of the 21 comparable
completed acquisitions and was slightly below the median value of such
transactions of 13.6 times. Due to the length of time typically required
between announcement and completion of comparable transactions and to changing
dynamics of the financial institutions industry in the last two years, RP
Financial also compared BNF's proposed merger terms with selected currently
pending transactions for thrift institutions with total assets of between $200
million and $1 billion. The medians in these eleven announced transactions were
as follows: 1.71 times tangible book value and 14.8 times earnings. In
comparison, the implied pricing ratios for BNF were 1.50 times book value and
13.4 times earnings, which fell below the respective median values of the
pending transactions, respectively, and were within the range of such
transactions.
No company or transaction used in this composite analysis is identical
to BNF or the Reorganization. Accordingly, an analysis of the results of the
foregoing is not mathematical; rather, it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies involved and other factors that could affect the public trading
values of the securities of the company or companies to which they are being
compared.
Discounted Cash Flow Analysis. Using a discounted cash flow analysis,
RP Financial estimated the present value of future dividends based on BNF's
current payout ratio and assumed growth in BNF's dividend per share based on
recent historical growth of dividends per share over a five-year period under
alternative strategies and the present value of the sale-for-control value at
the end of the fifth year, reflecting a range of multiples to book value of 1.25
to 1.65 times. Five alternative strategies were analyzed reflecting a base case
scenario, a moderate growth scenario, a rapid growth scenario, a profit
improvement scenario and a high dividend scenario. The price/tangible book
multiples incorporated in RP Financial's analysis were primarily based on the
annual average price/tangible book multiple for completed acquisitions of
savings institutions which have fallen within the range of 1.1 to 1.3 times for
the last five years, and, to a lesser extent, pending acquisitions currently
averaging 1.62 times. The dividend streams and sale-of-control values were then
discounted to present values using a 12% discount rate, based on current
pricing of comparable publicly-traded savings institutions as well as a
reasonable risk premium over the risk-free interest rate. The Merger
Consideration falls in the upper end of the range of present values derived from
these various scenarios of $20.37 to $27.64.
Impact Analysis. RP Financial analyzed the effect of the proposed
acquisition of BNF by UPC, specifically the pro forma impact on UPC's earnings
per share, book value per share, tangible book value per share and dividends per
share, based on data as of or for the three months ended March 31, 1994, and
twelve months ended
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December 31, 1993 reflecting BNF only, as well as all Recently Completed
Acquisitions and Pending Acquisitions by UPC including BNF (see
"Summary--Equivalent and Pro Forma Per Share Data"). At the time performed,
this analysis indicated that the Reorganization, reflecting BNF only, was
dilutive to UPC's earnings per share for the three months ended March 31, 1994
and twelve months ended December 31, 1993, and was dilutive to UPC's earnings
per share, reflecting all Recently Completed Acquisitions and Pending
Acquisitions including BNF, for the three-month period ended March 31, 1994,
and twelve-month period ended December 31, 1993, before factoring in potential
earnings synergies. Furthermore, the Reorganization was dilutive to UPC's book
value and tangible book value per share as of March 31, 1994, reflecting the
Reorganization only, and was dilutive to UPC's book value and tangible book
value per share as of March 31, 1994 reflecting all Recently Completed
Acquisitions and Pending Acquisitions including BNF. RP Financial also took
into account UPC's listing on the NYSE, UPC's greater market capitalization and
the liquidity of UPC Common Stock relative to BNF, UPC's stock pricing
characteristics relative to BNF and to comparable publicly-traded banks and
bank holding companies, and UPC's expressed intent and resources available to
continue to build its franchise in the future through additional acquisitions.
RP Financial considered various key financial ratios of UPC on a pro forma
basis, including the asset and liability composition, level of nonperforming
assets, reserve coverage ratio, capital levels in comparison to capital
requirements, profitability and return on assets. In addition, RP Financial
considered UPC's size, markets served in several states and industry
consolidation trends and BNF's relative size, market competition and
opportunities for expansion. The impact analysis was based on data available
at the time performed and should not be construed as indicative of the actual
impact of the Reorganization upon consummation or future impact of the
Reorganization following consummation.
As described above, RP Financial's opinion and presentation to the BNF
Board was one of many factors taken into consideration by the BNF Board in
making its determination to approve the Reorganization Agreement. Although the
foregoing summary describes the material components of the analyses presented
by RP Financial to the BNF Board on January 27, 1994, and updated as of July
29, 1994, in connection with its opinion as of those dates, it does not
purport to be a complete description of all the analyses performed by RP
Financial and is qualified by reference to the written opinion of RP Financial
set forth in Appendix C hereto, which BNF's stockholders are urged to read in
its entirety.
TERMS OF THE REORGANIZATION
At the Effective Time of the Reorganization, Interim (which was formed
for the specific purpose of effecting the Reorganization) will merge with and
into BNF, with BNF surviving the Reorganization and continuing after the
Effective Time of the Reorganization to operate under the name BNF BANCORP,
INC. The surviving corporation will become a wholly owned subsidiary of UPC.
In the Reorganization, each share of BNF Common Stock outstanding immediately
prior to the Effective Time of the Reorganization, will be converted
exclusively into the right to receive shares of UPC Common Stock and all
options to purchase BNF Common Stock will be converted exclusively into
options to purchase UPC Common Stock, all as provided in the Reorganization
Agreement.
The number of shares of UPC Common Stock to be received by the BNF
Record Holders immediately prior to the Effective Time of the Reorganization
will be determined pursuant to a conversion formula described in Section 3.1(e)
of the Reorganization Agreement which is based on the Current Market Price of
the UPC Common Stock. Pursuant to the Reorganization Agreement, upon the
consummation of the Reorganization, each outstanding share of BNF Common Stock
would be converted exclusively into the right to receive in exchange therefor
(i) a number of whole shares of UPC Common Stock based on the Current Market
Price (the average closing price per share of the UPC Common Stock on the NYSE
for the 10 trading days next preceding the Closing Date of the Reorganization)
and, after aggregating all whole and fractional shares to which the BNF Record
Holder is entitled; (ii) a cash payment in settlement of any remaining
fractional share of UPC Common Stock, and each outstanding option to purchase
BNF Common Stock under BNF's stock option plan would continue outstanding as an
option to purchase, in place of each share of BNF Common Stock, the number of
shares (after aggregation, rounded to the nearest whole share) of UPC Common
Stock that would have been received by the option holder in connection with the
Reorganization assuming that the option had been exercised immediately before
the Effective Time of the Reorganization, on the same terms and conditions
except for appropriate pro rata adjustments to the option price per share so the
aggregate option price would remain the same. If the Current Market Price of
the UPC Common Stock is greater than or equal to $24.00, the exchange ratio
(i.e., the number of shares of UPC Common Stock to be received in exchange for
each share of BNF Common Stock) will be 1.078. If the Current Market Price is
less
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than $24.00, BNF will have the right to either: (i) consummate the
Reorganization at the same exchange ratio of 1.078 or (ii) terminate the
Reorganization Agreement; provided, however, that in the event BNF should elect
to so terminate the Reorganization Agreement, UPC shall have the right to
reinstate the Reorganization Agreement and the Reorganization by increasing the
exchange ratio to $25.87 divided by the Current Market Price. If the
Reorganization had been closed on July 22, 1994, the Current Market Price of
UPC Common Stock would have been $24.33 per share, such that the value of the
UPC Common Stock entitled to be received in exchange for each outstanding share
of BNF Common Stock would have been approximately equal to $26.23. No
fractional shares of UPC Common Stock will be issued in respect to BNF Common
Stock, and, after aggregation of the shares (and fractional shares) of UPC
Common Stock to which a BNF Record Holder is entitled, cash will be paid by UPC
in lieu of any remaining fractional share based on the Current Market Price.
For information regarding arrangements for the benefit of the directors,
officers and employees of BNF in the Reorganization, see "-- Interests of
Certain Persons in the Reorganization."
EFFECTIVE DATE AND EFFECTIVE TIME OF THE REORGANIZATION
A Certificate of Merger along with the executed 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 BNF. The
Effective Time of the Reorganization will be at the time the Certificate of
Merger along with the Plan of Merger are filed in the Office of the Delaware
Secretary of State pursuant to the DGCL or at such later time as the parties may
agree and specify in the Plan of Merger. The Effective Date of the
Reorganization will be the day on which the Effective Time of the Reorganization
occurs. It is presently expected that the Certificate of Merger will be filed
and will specify, by agreement of the parties, an Effective Time of the
Reorganization to occur during the third quarter of 1994. There can be no
assurance that such expectation will be achieved.
SURRENDER OF CERTIFICATES
As promptly as practicable after the Effective Time of the
Reorganization, UPNB, acting in the capacity of exchange agent (the "Exchange
Agent"), will mail to each BNF Record Holder (each person who was a holder of
record of BNF Common Stock immediately prior to the Effective Time of the
Reorganization) a form letter of transmittal, together with instructions and a
return envelope (collectively, the "Exchange Materials") to facilitate the
exchange of such holder's certificates, formerly representing shares of BNF
Common Stock, for certificates representing shares of UPC Common Stock and a
cash payment in lieu of any remaining fractional share.
Upon receipt of the Exchange Materials, BNF 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 BNF 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 Reorganization, UPC will issue, and
the Exchange Agent will mail, to the BNF 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 the cash consideration with respect to any remaining fractional share to
which the holder is entitled. No consideration will be delivered to a BNF
Record Holder unless and until such holder shall have delivered to the Exchange
Agent in accordance with the Exchange Materials provided, all certificates
formerly representing the shares of BNF Common Stock held 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 is
required by the Reorganization Agreement.
No dividend or other distribution with respect to the UPC Common Stock
will be paid or delivered to the holder of any unsurrendered BNF certificate
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 Reorganization, there will be no further
transfers on BNF's stock transfer books of shares of BNF Common Stock issued and
outstanding immediately prior to the Effective Time of the Reorganization. If
certificates representing shares of BNF Common Stock should be presented for
transfer after the
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Effective Time of the Reorganization, they will be returned to the presenter
together with a form of letter of transmittal and exchange instructions.
Neither UPC, the Exchange Agent, BNF nor any other person will be liable
to any former holder of BNF 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 BNF Common Stock has been lost,
stolen or destroyed, the Exchange Agent will deliver the consideration properly
payable with 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 and with a surety satisfactory to
UPC and the Exchange Agent as required by the Exchange Materials.
CONDITIONS TO CONSUMMATION OF THE REORGANIZATION
The respective obligations of UPC and BNF to effect the Reorganization
are subject to the satisfaction of the following conditions prior to the Closing
Date: (i) approval of the Reorganization Agreement and the transactions
contemplated thereby by the affirmative votes of the holders of a majority of
the BNF Common Stock outstanding on the voting record date and entitled to vote
at the Special Meeting; (ii) approval of the Reorganization Agreement and the
transactions contemplated thereby by the Federal Reserve, the OTS and the
Alabama 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, BNF or BANKFIRST will 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 Reorganization
or the obtaining of material damages or other relief in connection therewith;
and (vi) the Registration Statement of which this Proxy Statement/Prospectus
forms a part shall have become effective, 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.
The obligations of UPC and Interim to effect the Reorganization are
further subject to the satisfaction or waiver by UPC of, among others, the
following conditions: (i) each of the material acts and undertakings of BNF
and/or BANKFIRST to be performed at or before the Closing Date pursuant to the
Reorganization Agreement shall have been duly performed, except for breaches of
acts and undertakings which would not have, or would not be reasonably expected
to have, any material adverse effect on the business or operations of BNF and/or
BANKFIRST taken as a whole; (ii) the representations and warranties of BNF
and/or BANKFIRST contained in Article 5 of the 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 except for any such
representations and warranties made as of a specified date, which shall be true
and correct in all material respects as of such date, and for breaches of
representations and warranties which would not have, or would not reasonably be
expected to have, a material adverse effect on the business or operations of BNF
and BANKFIRST taken as a whole; (iii) UPC shall have received a certificate
signed by the Secretary or Assistant Secretary of BNF and BANKFIRST certifying
that BNF's and BANKFIRST's respective Boards of Directors have duly adopted
resolutions approving the substantive terms of the Reorganization Agreement and
authorizing the consummation of the transactions contemplated by the
Reorganization Agreement, that each person that executed the Reorganization
Agreement on behalf of BNF and BANKFIRST is who he or she claims to be, and that
BNF and BANKFIRST are in good standing under their respective corporate
charters; (iv) between January 27, 1994 and the Closing Date, there shall have
been no damage to or destruction of real property, improvements or personal
property of BNF or BANKFIRST 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 in either case a material adverse impact upon
the operations, business or prospects of BNF or BANKFIRST; (v) BNF and BANKFIRST
shall have afforded UPC and its authorized agents reasonable access to the
properties, operations, books, records, contracts, documents, loan files and
other information of or relating to BNF and BANKFIRST: (vi) no material adverse
change in the business, property, assets, liabilities, prospects, operations,
liquidity, income, or condition, or net worth of BNF or BANKFIRST taken as a
whole shall have occurred since January 27, 1994; (vii) UPC shall have
received a legal opinion, dated the date of the Closing Date, from counsel to
BNF and BANKFIRST as to the good standing of BNF and BANKFIRST, the
enforceability and due authorization of the Reorganization Agreement and the
receipt of all required approvals (subject to limitations
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as permitted in the Reorganization Agreement); (viii) neither BNF nor BANKFIRST
shall have entered into any agreement, letter of intent, understanding or other
arrangement pursuant to which BNF or BANKFIRST would merge, consolidate with,
effect a business combination with, sell any substantial part of their assets,
acquire a significant part of the shares or assets of any other person or
entity, adopt any "poison pill" or other type of anti-takeover arrangement, any
stockholder rights provision, or any "golden parachute" or similar program
which would have the effect of materially decreasing the value of BNF or
BANKFIRST or the benefits of acquiring the BNF Common Stock; (ix) satisfaction
by BNF and BANKFIRST of all of the covenants in Section 8.2(i) of the
Reorganization Agreement; (x) each member of the Board of Directors of BNF
shall have entered into a non-compete agreement with UPC and BNF; (xi) UPC
shall have received from Price Waterhouse and Deloitte & Touche letters within
five business days prior to the Closing Date stating such accountants' opinion
that the Reorganization should be accounted for by UPC as a "pooling of
interests" for financial statement purposes and that nothing has come to their
attention that would cause them to believe that BNF has taken, or failed to
take, any actions that would cause the Reorganization not to qualify for
"pooling of interest" accounting treatment insofar as they relate to accounting
matters; (xii) UPC shall have received a written opinion from counsel to the
effect that the transactions contemplated by the 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 BNF Record Holders will not
recognize any gain or loss to the extent that such BNF Record Holders exchange
shares of BNF Common Stock for shares of UPC Common Stock as contemplated by
the Reorganization Agreement and the Plan of Merger assuming that the shares of
BNF Common Stock so exchanged are held by them as capital assets at the time of
such exchange; (xiii) UPC shall have received a written commitment from each
BNF Record Holder who would be deemed an "affiliate" of BNF as of the Closing
Date and who accepts shares of UPC Common Stock, committing to UPC that such
BNF 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 BNF
Record Holder upon consummation of the Reorganization, nor enter into any
formal or informal agreement to pledge, assign, sell or transfer, devise or
otherwise alienate his or her right, title and interests in any of the shares
of UPC Common Stock to be delivered by UPC pursuant to the terms and conditions
of the 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 BNF for a period of not less than 30
days subsequent to the Effective Time of the Reorganization; and (xiv) Mr.
William D. Powell and Mr. C. Raymond Duncan shall each have entered into an
employment agreement with UPC or BNF and shall have waived all rights under any
existing employment agreements except to the extent Messrs. Powell and Duncan
are entitled to payments in satisfaction of the existing employment agreements.
The obligations of BNF and BANKFIRST to effect the Reorganization are
further subject to the satisfaction or waiver by BNF of, among other things, the
following conditions: (i) each of the material acts and undertakings of UPC
and/or Interim to be performed at or prior to the Closing Date pursuant to the
Reorganization Agreement shall have been duly performed, except for breaches of
acts and undertakings which would not have, or would not reasonably be expected
to have, any material adverse effect on the business or operations of UPC and
the UPC subsidiaries taken as a whole; (ii) the representations and warranties
of UPC and Interim contained in Article 4 of the Reorganization Agreement shall
be true and complete, in all material respects, on and as of the Effective Time
of the Reorganization, except for any such representations and warranties made
as of a specified date, which shall be true and correct in all material respects
as of such date, and for breaches of representations and warranties which would
not have, or would not reasonably be expected to have, a material adverse effect
on the business or operations of UPC and the UPC subsidiaries taken as a whole;
(iii) BNF shall have received a certificate signed by the Secretary or Assistant
Secretary of UPC and Interim dated as of the Closing Date certifying that UPC's
and Interim's respective Boards of Directors have duly adopted resolutions
approving the substantive terms of the Reorganization Agreement and authorizing
the transactions contemplated by the Reorganization Agreement, that each person
that executed the Reorganization Agreement on behalf of UPC and Interim is who
he or she claims to be, and that UPC and Interim are in good standing under
their respective corporate charters; (iv) BNF 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 certificates evidencing
and representing that number of shares of UPC Common Stock and cash funds
sufficient to meet the obligations of UPC to the BNF Record Holders to deliver
the consideration under the Reorganization Agreement; (v) BNF shall have been
furnished an opinion of counsel to UPC and Interim as of the Closing Date to the
effect that UPC and Interim are in good standing, that the Reorganization
Agreement has been duly and validly authorized, executed and delivered by UPC
and Interim, that neither the execution nor delivery by UPC or Interim of the
Reorganization Agreement violates or conflicts with either of their corporate
charters or bylaws, that all governmental approvals have been received, and that
the shares of UPC Common Stock to be issued
34
<PAGE> 44
in the names of the BNF Record Holders and delivered in exchange for their
shares of BNF Common Stock will be duly authorized, validly issued, fully paid
and non-assessable; (vi) BNF shall have received a "fairness opinion" letter
from RP Financial to the effect that, in the opinion of RP Financial, the
consideration to be received by the BNF Record Holders is fair to such holders
from a financial point of view; and (vii) BNF shall have received a written
opinion from counsel to the effect that the transactions contemplated by the
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 BNF Record Holders will not recognize any gain or loss to the extent
that such BNF Record Holders exchange such shares of BNF Common Stock for
shares of UPC Common Stock as contemplated by the Reorganization Agreement and
assuming that the shares of BNF Common Stock so exchanged are held by them as
capital assets at the time of such exchange.
No assurance can be provided as to whether all of the conditions
precedent to the Reorganization will be satisfied or waived by the party
lawfully permitted to do so.
REGULATORY APPROVALS
The Reorganization is subject to prior approval by (i) the Alabama
Department under Title 5-14A-3 et seq. of the Alabama Code and the regulations
promulgated thereunder; (ii) the OTS under the Home Owners' Loan Act ("HOLA");
and (iii) the Federal Reserve under Section 4 of the Bank Holding Company Act of
1956, as amended (the "BHCA"). The BHCA and HOLA require that the Federal
Reserve and the OTS 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 the Federal Reserve, the OTS and the Alabama
Department. The BHCA and HOLA prohibit the Federal Reserve and the OTS from
approving the Reorganization if to do so 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 and the OTS should find that the
anticompetitive effects of the Reorganization 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 and
the OTS have the authority to deny an application if they conclude that the
combined organization would have an inadequate capital position or that the
acquiring organization does not meet the requirements of the Community
Reinvestment Act of 1977.
Under the HOLA, the Reorganization may not be consummated until the 30th
day following the date of OTS approval, during which time the United States
Department of Justice has an opportunity to challenge the Reorganization on
antitrust grounds. The commencement of an antitrust action would stay the
effectiveness of the OTS's approval unless a court specifically orders
otherwise. There can be no assurance that the Department of Justice will not
challenge the Reorganization, or if such challenge is made, as to the result
thereof.
The Reorganization may not lawfully proceed in the absence of the
requisite prior regulatory approvals. Approvals of the Federal Reserve, the
Alabama Department and the OTS were obtained on April 21, 1994, June 10, 1994
and July 20, 1994, respectively. See "-- Conditions to Consummation of the
Reorganization" and "-- Waiver and Amendment; Termination."
CONDUCT OF BUSINESS PENDING THE REORGANIZATION
The Reorganization Agreement contains certain restrictions upon the
conduct of BNF's and BANKFIRST's business pending consummation of the
Reorganization. In particular, the Reorganization Agreement provides, in part,
that, except as otherwise provided in the Reorganization Agreement and/or
without the written consent of UPC, BNF and BANKFIRST, 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 BNF or any subsidiary; (iii)
repurchase or redeem 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 BNF Common Stock, or pay any cash dividends except permitted cash dividends
(see "-- Payment of Dividends"); (iv) issue or sell any BNF Common Stock or sell
or otherwise dispose of a substantial part of BNF's or BANKFIRST's assets or
earnings power; (v) dispose of, discontinue 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
35
<PAGE> 45
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 BNF or its subsidiaries may terminate same at will
without liability; (ix) adopt any new benefit plan; (x) enter into any new
service contracts, purchase or sale agreements or lease agreements having a
value in excess of $100,000 to BNF or any subsidiary; (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 known holder of two
percent or more of BNF Common Stock if such extension of credit, together with
any other outstanding extension of credit to such person, would exceed two
percent of the capital of BNF or BANKFIRST, 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 BNF's or BANKFIRST's fiduciary capacity.
Moreover, BNF and BANKFIRST, 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
Prior to the Effective Date of the Reorganization, BNF is permitted
under the Reorganization Agreement to declare and pay its customary and ordinary
quarterly cash dividend with respect to the BNF Common Stock which may be
increased by $.01 per share, provided, however, that if the Effective Date of
the Reorganization shall not have occurred on or before October 1, 1994, BNF may
increase its quarterly dividend for any quarter subsequent to such date but
prior to the Effective Date of the Reorganization to an amount not to exceed a
cash dividend having a dividend payout ratio equal to the most recent quarterly
dividend payout ratio of UPC on shares of UPC Common Stock adjusted by the
Exchange Ratio. Notwithstanding the foregoing, the Reorganization Agreement
prohibits BNF from paying a dividend if such payment would disqualify the
Reorganization from being accounted for by UPC under the pooling of interests
method of accounting. See "Description of UPC Common and Preferred Stock --
UPC Common Stock -- Dividends."
WAIVER AND AMENDMENT; TERMINATION
Prior to the Effective Date of the Reorganization, 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 BNF; provided, however, that no such amendment may be
effected after stockholder approval of the Reorganization Agreement without
approval of the BNF stockholders if the effect of such amendment would be to
change the amount or the type of consideration to be paid in the Reorganization
to the BNF Record Holders.
The Reorganization Agreement may be terminated at any time prior to the
Effective Date of the Reorganization, either before or after approval by the BNF
stockholders, as follows: (i) by the mutual consent of the parties; (ii) by UPC
or Interim if BNF or any subsidiary of BNF, respectively, should violate any
affirmative or negative covenant under Article 7 of the Reorganization Agreement
with respect to the operation of its business; (iii) by UPC, Interim or BNF if
the Closing shall not have occurred on or before October 1, 1994, unless the
failure is due to the failure of the party seeking to terminate; (iv) by UPC,
Interim or BNF if any governmental or regulatory approval is denied (or
conditioned upon a substantial deviation from the transaction contemplated) 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; (vi) by UPC or Interim if BNF or any subsidiary of BNF should enter into a
formal capital plan requiring BNF or BANKFIRST to raise capital or sell
substantial assets in cooperation with applicable banking regulators; (vii) by
BNF or BANKFIRST in the event the Current Market Price per share of UPC Common
Stock should be less than $24.00 per share; provided, however that in the event
BNF should so terminate the Reorganization Agreement, UPC shall have the right
to reinstate the Reorganization Agreement and the Reorganization by increasing
the Exchange Ratio to $25.87 divided by the Current Market Price of UPC Common
Stock; (viii) by UPC or Interim if there shall have been any material adverse
change affecting BNF, BANKFIRST or affecting the rights of holders of BNF Common
Stock; or (ix) by UPC or Interim if BNF or any subsidiary of BNF enters into any
letter of intent or agreement with a view to being acquired or effecting a
business combination.
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<PAGE> 46
In the event of the valid termination of the Reorganization Agreement by
either UPC, Interim or BNF, the Reorganization Agreement 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.
LIMITATION ON NEGOTIATIONS
The Reorganization Agreement provides that BNF and BANKFIRST will not
(and will use their best efforts to ensure that their directors, officers,
employees and advisors do not) institute, solicit or knowingly encourage any
inquiry, discussion or proposal, or participate in any discussions or
negotiations with, provide any confidential or non-public information to, any
entity or group concerning any "Acquisition Proposal" (as defined, generally,
any agreement or proposal pursuant to which any entity other than UPC would
acquire, directly or indirectly, BNF ownership or the right to vote 10% of the
outstanding BNF Common Stock or a significant portion of the assets or earning
power of BNF), except for actions reasonably considered based on the advice of
counsel to be required to fulfill the fiduciary obligations of the BNF Board.
BNF must notify UPC immediately following receipt of any Acquisition Proposal.
In the event BNF were to enter into a letter of intent or agreement with respect
to an Acquisition Proposal not solicited by the BNF Board, or in the event such
Acquisition Proposal were the result of a hostile takeover of BNF, BNF or the
acquiror would be required to pay liquidated damages upon consummation of the
transaction contemplated by such Acquisition Proposal in the amount of
$3,500,000 to UPC, which amount represents the sum of the agreed expenses
incurred by UPC in connection with the Reorganization and the agreed loss to
UPC in the event the Reorganization is not consummated. Such sum would be
payable immediately in the event that BNF were to enter into a letter of intent
or agreement with respect to an Acquisition Proposal solicited by the BNF
Board. The limitation on negotiations and provision for liquidated damages will
remain in effect until October 1, 1994, unless before that date either the
Reorganization is consummated or the Reorganization Agreement is terminated, or
the Reorganization is otherwise not consummated, under specified circumstances.
These provisions may have the effect of discouraging competing offers to acquire
or merge with BNF.
MANAGEMENT AFTER THE REORGANIZATION
Directors and Officers of UPC. The directors and officers of UPC will
not be affected by the Reorganization.
Directors and Officers of BNF. The Reorganization Agreement provides
that after the Effective Time of the Reorganization, the surviving corporation
will be managed by a board of directors consisting of the members of the Board
of Directors of BNF serving in such capacity immediately prior to the Effective
Time of the Reorganization and by officers consisting of the officers of BNF
serving in such capacity immediately prior to the Effective Time of the
Reorganization. All directors of BNF serve three-year terms but may be
re-elected or reappointed, as the case may be. UPC has agreed to reelect each
BNF director for at least one additional term following consummation of the
Reorganization and upon the expiration of their current term. For information
regarding BNF's executive officers and directors, see BNF's Annual Report on
Form 10-K incorporated herein by reference and a copy of which is included as
Appendix A to this Proxy Statement/Prospectus. See also, "Incorporation of
Certain Documents by Reference."
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<PAGE> 47
EXECUTIVE COMPENSATION
Summary Compensation Table. The following information is furnished for
the President and Chief Executive Officer of BNF and BANKFIRST. No other
executive officer of BNF or BANKFIRST received salary and bonuses in excess of
$100,000 during the fiscal year ended September 30, 1993.
<TABLE>
<CAPTION>
Summary Compensation Table*
Long-Term Compensation
Name and Annual Compensation Awards Payouts
Principal Other Annual Restricted Stock Options/ LTIP All Other
Position Year Salary Bonus Compensation Award(s) SARs(#) Payout Compensation (1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William D. Powell,
President and Chief 1993 $118,625 $28,625 -- -- -- -- $44,641(3)
Executive Officer
of 1992 113,331 20,592 -- -- 8,250(2) -- 35,991(4)
BNF and
BANKFIRST 1991 108,768 10,560 -- -- -- -- 32,719(5)
</TABLE>
*All compensation is paid by BANKFIRST.
(1) Does not include amounts payable pursuant to an employment agreement
in the event of a "change of control" of BNF. For a discussion of the
employment agreement to which Mr. Powell is a party, including the
amounts payable in the event of a "change of control," see
"--Interests of Certain Persons in the Reorganization."
(2) Adjusted for 3-for-2 stock split on June 12, 1992.
(3) Includes retirement plan employer contribution ($37,739), group term
life insurance premium payments ($2,878), automobile mileage allowance
($3,046) and 401(k) plan employer matching contribution ($978).
(4) Includes retirement plan employer contribution ($31,153), group term
life insurance premium payments ($1,935), automobile mileage allowance
($2,242) and 401(k) plan employer matching contribution ($661).
(5) Includes retirement plan employer contribution ($26,694), group term
life insurance premium payments ($1,935), automobile mileage allowance
($3,537) and 401(k) plan employer matching contribution ($553).
Pension Plan Table. The following table indicates the annual retirement
benefit that would be payable under the BNF Pension Plan upon retirement at age
65 to a participant electing to receive his or her retirement benefit in the
standard form of benefit, assuming various specified levels of Pension Plan
compensation and various specified years of credited service.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
Average Earnings Estimated Annual Pension for Representative Years of Service
15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 9,216 $12,852 $17,124 $21,600 $26,556
60,000 11,808 16,308 21,444 26,784 32,604
70,000 14,400 19,764 25,764 31,968 38,652
80,000 16,992 23,220 30,084 37,152 44,700
90,000 19,584 26,676 34,404 42,336 50,748
100,000 22,176 30,132 38,712 47,520 56,784
110,000 24,768 33,588 43,032 52,704 62,832
120,000 27,360 37,044 47,352 57,888 68,880
</TABLE>
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<PAGE> 48
Option Exercise/Value Table. The following information with respect to
options exercised during the fiscal year ended September 30, 1993 and remaining
unexercised at the end of the fiscal year, is presented for Mr. Powell.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Number of Value of
Unexercised Unexercised In-
Options at FY- the-Money Options
End(#) at FY-End ($)
Shares Acquired on
Exercise Value Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
William D. Powell -- -- 39,750/-- $522,551/$--
</TABLE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF.
As of July 11, 1994, 1,784,193 shares of BNF Common Stock were issued
and outstanding. The presence, in person or by proxy, of at least a majority
of the total number of outstanding shares of Common Stock entitled to vote is
necessary to constitute a quorum at the Meeting. Persons or groups owning in
excess of five percent of BNF's Common Stock are required to file certain
reports disclosing such ownership pursuant to the Exchange Act. Based upon
such reports the following table sets forth, as of July 11, 1994, certain
information as to the shares of Common Stock beneficially owned by all
officers, directors, and their affiliates, of BNF as a group. Management knows
of no person who owned more than five percent of BNF's outstanding shares of
Common Stock at July 11, 1994.
<TABLE>
<CAPTION>
Name and Address of Beneficial Amount and Nature of Beneficial Percent of Shares of Common
Owner Ownership (1) Stock Outstanding
----- ------------- -----------------
<S> <C> <C>
James E. Horton, Jr. 24,862 1.39 %
Newton B. Powell(2) 9,375 0.52
Ernest M. Smith, Jr. 14,625 0.82
Luther E. Roberts 14,700 0.82
William D. Powell (2) 53,235 (3) 2.92 (3)
Dr. W. David White 18,354 1.03
All Officers and Directors as a 180,747 9.59 %
Group (13 persons)
</TABLE>
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is
deemed to be the beneficial owner, for purposes of this table, of any
shares of Common Stock if he has or shares voting and/or investment
power with respect to such security, or has the right to acquire,
through the exercise of stock options or otherwise, beneficial
ownership at any time within 60 days from July 11, 1994. Unless
otherwise indicated, all shares are owned directly by the named
individuals or by the individuals indirectly through a trust,
corporation or association, or by the individuals or their spouses as
custodians or trustees for the shares of minor children. The named
individuals effectively exercise voting and investment power over such
shares.
(2) Newton B. Powell and William D. Powell are unrelated.
(3) Includes 39,750 shares underlying options exercisable within 60 days
of July 11, 1994.
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<PAGE> 49
INTERESTS OF CERTAIN PERSONS IN THE REORGANIZATION
The directors and executive officers of BNF beneficially own
approximately 9.59% of the shares of BNF Common Stock, including unexercised
stock options, and will receive in the Reorganization the consideration
described above. All directors and executive officers of BNF also are likely to
retain their positions as directors and executive officers of BNF.
The officers and employees of BANKFIRST following the Reorganization
will continue to hold their employment positions and titles held immediately
prior to the Reorganization, and will receive compensation at least equivalent
to their compensation before the Reorganization. All officers and employees of
BANKFIRST will be eligible to participate in the UPC retirement plans following
the anticipated termination of the existing BANKFIRST retirement plans. Long
term medical and health insurance will be provided to all of BNF's and
BANKFIRST's employees through the health insurance plan provided by UPC to its
employees, with any pre-existing individual condition that was insured under
BANKFIRST's medical plan to continue to be insured under UPC's plan. BANKFIRST
employees will also participate in UPC's group life and disability insurance
programs.
UPC has agreed to indemnify the current directors, officers, and
employees of BNF and BANKFIRST for a period of six years against claims arising
out of acts and omissions occurring prior to the Effective Time of the
Reorganization. Following the Effective Time of the Reorganization, BNF and
BANKFIRST directors, officers, and employees will be covered on a prospective
basis under UPC's directors' and officers' liability insurance policy. In
addition, UPC will cause BNF or any successor thereto to indemnify such persons
under applicable provisions of BNF's Certificate of Incorporation.
Under the terms of the Reorganization Agreement, Messrs. William D.
Powell, President and Chief Executive Officer, and C. Raymond Duncan, Senior
Vice President and Treasurer, of BNF and BANKFIRST will receive payments of
$389,774 and $230,765, respectively, in settlement and full satisfaction of the
terms of their employment agreements dated February 15, 1991 with BANKFIRST.
Upon the Effective Time of the Reorganization, BNF, BANKFIRST, and UPC
will enter into new employment agreements with Messrs. Powell and Duncan. The
agreement with Mr. Powell provides for an initial base salary of $150,000 with
bonuses and future salary adjustments subject to the discretion of the
management of UPC. The initial term of the agreement is three years. Upon the
expiration of the initial term, the agreement may be extended annually for an
additional year. The agreement with Mr. Duncan provides for an initial base
salary of $80,000 with bonuses and future salary adjustments subject to the
discretion of the Board of Directors of BANKFIRST. The initial term of the
agreement is three years and such term may be extended annually for an
additional year by the Board of Directors of BANKFIRST. In the event of either
Mr. Powell's or Mr. Duncan's termination following a change of control of UPC,
BNF, or BANKFIRST, the terminated party would be entitled to a severance payment
equal to 2.99 times the average of his compensation from BNF and BANKFIRST over
the five years preceding his termination and the continuation of other employee
benefits for a three-year period.
In consideration of the anticipated termination of the BANKFIRST Pension
Plan following the consummation of the Reorganization, Messrs. Powell and Duncan
will enter into supplemental retirement income agreements with BNF and BANKFIRST
to provide for the restoration of benefits otherwise payable under the Pension
Plan if the plan were continued until each individual attained age 65, the
normal retirement age under the Pension Plan. Upon the termination of
employment of Mr. Powell or Mr. Duncan, benefits will be payable by BNF and
BANKFIRST in a lump sum determined on an actuarial basis by reference to each
individual's vested accrued benefits upon termination of the BANKFIRST Pension
Plan and the projected benefits payable under the Pension Plan at age 65. If
termination of employment occurs prior to age 65, the supplemental benefit
payable will be reduced proportionately. In addition, Mr. Duncan's supplemental
benefit will be offset by amounts accumulated through tax-qualified retirement
plans of UPC during any period of service with UPC through his termination of
employment.
Under the Reorganization Agreement, if not exercised prior to the
Effective Time of the Reorganization, each option granted to officers and
employees of BANKFIRST under the BNF 1986 Stock Option and Incentive Plan and to
BNF's outside directors under the BNF 1991 Non-Incentive Stock Option Plan for
Outside Directors, will be converted into an option for the number of shares of
UPC Common Stock that would have been received by the optionholder had the BNF
stock option been exercised by the holder prior to the Effective Time of the
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<PAGE> 50
Reorganization. The exercise price per share of each option assumed in the
Reorganization will be the same price as in effect prior to the consummation of
the Reorganization. The terms and conditions of the BNF stock option plans and
any option agreement thereunder will continue to apply to BNF stock options
assumed by UPC. As of July 11, 1994, there were 121,487 options outstanding
under the two BNF stock option plans.
Under the Reorganization Agreement and subject to the terms and
conditions of UPC's 1992 Stock Incentive Plan, Messrs. Powell and Duncan and
BANKFIRST senior vice presidents Wallace Terry, Miles Wright, and Richard Gowan
will receive UPC stock options to purchase 10,000, 5,000, 1,500, 1,500, and
1,500 shares of UPC common stock, respectively.
COMPARISON OF STOCKHOLDER RIGHTS
Introduction. Upon consummation of the Reorganization, holders of BNF's
Common Stock, whose rights are presently governed by Delaware corporate law and
BNF's Certificate of Incorporation and Bylaws, and indirectly by applicable OTS
regulations and BANKFIRST's Charter and Bylaws, will become stockholders of UPC,
a Tennessee corporation. Accordingly, their rights will be governed by
Tennessee corporate law and the Charter and Bylaws of UPC, and indirectly by the
regulations of the Federal Reserve and other federal banking regulatory
agencies. Certain differences arise from differences between the Certificate of
Incorporation and Bylaws of BNF and the Charter and Bylaws of UPC. The
following discussion is not intended to be a complete statement of all
differences affecting the rights of stockholders, but summarizes material
differences and is qualified in its entirety by reference to the Charter and
Bylaws of UPC and the Certificate of Incorporation and Bylaws of BNF. See
"Available Information."
Issuance of Capital Stock. The Certificate of Incorporation of BNF
authorizes the issuance of 3,200,000 shares of common stock, par value $.01 per
share, and 400,000 shares of preferred stock, par value $.01 per share. The
Charter of UPC authorizes the issuance of 50,000,000 shares of common stock, par
value $5.00 per share, and 10,000,000 shares of serial preferred stock, no par
value. At July 1, 1994, 1,797,730 and 23,037,375 shares of common stock of
BNF and UPC, respectively, were issued and outstanding. For information
regarding the number of shares of UPC Common Stock that would have been issued
on a pro forma basis upon the consummation of the Reorganization as of March 31,
1994, see "Summary -- Pro Forma Consolidated Financial Information." Under BNF's
Certificate of Incorporation and UPC's Charter, BNF and UPC are authorized to
issue additional shares of capital stock up to the amount authorized without
stockholder approval.
Payment of Dividends. The ability of BNF to pay dividends on its common
stock is governed by Delaware corporate law. UPC's ability to pay dividends on
its Common Stock is governed by Tennessee corporate law. Under Tennessee
corporate law, dividends may be paid so long as the corporation would be able to
pay its debts as they become due in the ordinary course of business and the
corporation's total assets would not be less than the sum of its total
liabilities plus the amount that would be needed, if the corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of stockholders whose preferential rights are superior to those
receiving the distribution.
The ability of BNF and UPC to pay dividends on their common stock also
is affected by regulatory considerations and restrictions upon their receipt of
dividends from their respective subsidiaries. See "Summary -- Market Prices of
Common Stock; Dividends" and "Approval of the Reorganization -- Certain
Regulatory Considerations" for additional information regarding dividends and
restrictions on dividends.
Special Meetings of Stockholders. BNF's Bylaws provide that special
meetings of stockholders of BNF may be called for any purpose at any time by
BNF's Board of Directors or a committee appointed by BNF's Board of Directors.
UPC's Bylaws provide that special meetings of shareholders of UPC may be called
for any purpose or purposes whatsoever at any time by the Chairman of the Board,
the President, the Secretary or the holders of not less than one-tenth (1/10) of
the shares entitled to vote at such meeting.
Number and Term of Directors. BNF's Certificate of Incorporation
provides that the number of BNF's Board of Directors shall consist of between
five and 25 individuals, as is provided for in the Bylaws. BNF's Bylaws
currently provide that there shall be six directors, divided into three classes
with each class serving for a term of three years. UPC's Charter provides that
the number of directors may consist of between seven and 25 individuals,
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<PAGE> 51
as provided for from time to time in the Bylaws, provided that no amendment to
the Bylaws decreasing the number of directors will have the effect of
shortening the term of any incumbent director, and provided further that no
action may be taken by directors (whether through amendment of the Bylaws or
otherwise) to increase the number of directors as provided in the Bylaws from
time to time unless at least two-thirds of the directors then in office shall
concur in said action.
Advance Notice Requirements for Nominations of Directors and
Presentation of New Business at Special Meetings of Stockholders. BNF's
Certificate of Incorporation generally provides that any proposal of a
stockholder to be taken up at any annual or special meeting of stockholders
must be sent to the Secretary of BNF not less than 30 days nor more than 60
days prior to such meeting. UPC's Bylaws generally provide that any proposal
of a shareholder which is to be presented at any annual meeting of shareholders
must be sent so as to be received by UPC at its principal offices not less than
120 days in advance of the date of UPC's proxy statement issued in connection
with the previous year's annual meeting of shareholders.
Limitations on Acquisition of Capital Stock. BNF's Certificate of
Incorporation does not contain an effective restriction on acquisition of the
capital stock of BNF. Subsequent to BANKFIRST's mutual-to-stock conversion on
December 29, 1986 and for a period of five years thereafter, the Certificate of
Incorporation provided that no person could, directly or indirectly acquire or
acquire beneficial ownership of more than 10 percent of any class of equity
security of BANKFIRST. This restriction was carried over to the Certificate of
Incorporation of BNF as the holding company for BANKFIRST but subsequently
expired according to its terms on December 29,1991. The Charter of UPC does
not have any provision relating to the limitation on acquisition of the capital
stock of UPC. However, shareholders of UPC holding more than 10% of the shares
of UPC Common stock are subject to certain restrictions in acquiring control as
set forth below, and UPC would be, if they should so elect, subject to the
Control Share Acquisition Act under Tennessee law.
Approval of Mergers, Consolidations, Sale of Substantially All Assets
and Dissolution. BNF's Certificate of Incorporation and UPC's Charter set
forth stockholder-approval requirements for mergers and other similarly
important corporate transactions involving substantial stockholders. To
approve any business combination (including any merger or consolidation or any
sale, lease, exchange or disposition of 10% or more of the net assets of BNF to
a 10% or more stockholder), BNF's Certificate of Incorporation requires an
affirmative vote of a majority of the votes entitled to be cast by holders of
voting shares, other than a 10% of more stockholder who is, or is affiliated
with, a party to the business combination. UPC's Charter provides that the
affirmative votes of the holders of two-thirds or more of the outstanding
capital stock of UPC are required to approve any merger, sale, lease, exchange
or other disposition of all or substantially all of the assets of UPC to or
with any other corporation if such other corporation is the beneficial owner of
10% or more of the outstanding capital stock of UPC.
Amendment of Charter and Bylaws. BNF's Certificate of Incorporation
provides that BNF may amend, alter, repeal, or rescind any provision of the
Certificate of Incorporation except that certain provisions may not be modified
without an affirmative vote of holders of at least 80% of BNF's outstanding
capital stock. BNF's Certificate of Incorporation and Bylaws provide that the
Board of Directors of BNF may amend, alter, repeal, or rescind any provision of
the Bylaws or the stockholders may do so upon a vote of 80% or more of the
shares entitled to vote. The UPC Charter provides that UPC reserves the right
to amend, alter, change or repeal any provision made in the Charter in the
manner prescribed by the laws of the State of Tennessee. UPC's Bylaws provide
that they may be amended or repealed, in whole or in part, or new Bylaws may be
adopted, by the Board of Directors of UPC at any UPC Board of Directors meeting
by a vote of a majority of the entire UPC Board. The Bylaws may also be
amended or repealed, or new Bylaws may be adopted by vote of the shareholders
of UPC, at any annual or special meeting of shareholders.
Removal of Directors. BNF's Certificate of Incorporation provides that
the affirmative votes of the holders of at least 80% of the outstanding capital
stock of BNF entitled to vote in the election of directors is required to
remove a director or directors. UPC's Charter provides that the affirmative
votes of the holders of at least two-thirds of the outstanding capital stock of
UPC entitled to vote generally in the election of directors is required to
remove from office any director of UPC, whether with or without cause.
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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 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 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 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 five percent 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.
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 eight
percent. 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 three percent 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 three percent 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
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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 "-- Certain Regulatory Considerations -- Prompt Corrective Action."
At March 31, 1994, UPC's total risk based capital ratio was 18.48%, its
Tier 1 capital ratio was 14.91% and its Leverage ratio was 7.22%. 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 ("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 five percent, a Tier
1 capital ratio of at least six percent 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
capitalized if it meets all of its minimum capital requirements as described
above under "-- Certain Regulatory Considerations -- 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 two percent 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 five percent
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 should
fail to fulfill its obligations under the guarantee and files (or should have
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 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.
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Dividend Restrictions. UPC is a legal entity separate and distinct from
UPNB, 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 and the Community Banks to UPC. Each national
banking association subsidiary of UPC, including UPNB, 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 "-- Certain
Regulatory Considerations -- 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 March 31, 1994, UPNB and the
Community Banks had approximately $84.8 million available for distribution to
UPC without obtaining regulatory approval excluding acquisitions since March
31, 1994 and prior to the $98 million dividend paid by UPNB to UPC which is
described below. 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 to declare and pay a dividend of approximately $98 million on
July 1, 1994 in connection with a reorganization of UPNB. See "Summary --
Recent Developments Affecting UPC."
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 "-- Certain Regulatory Considerations --
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 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 "--
Certain Regulatory Considerations -- 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 to payment of
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
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company and its nonbank subsidiaries). The purpose of these restrictions is to
prevent misuse of the resources of teh 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 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 BHCA, 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.
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
Community Banks had at December 31,1993, the requisite capital levels
to qualify as well capitalized institutions, UPC believes the brokered
deposits regulation will have no material effect on the funding or
liquidity of UPNB or any of the Community Banks.
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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.
Regulation of BNF and BANKFIRST. For information regarding regulations
governing BNF and BANKFIRST, see "BNF BANCORP, INC. -- Business -- Regulation"
in BNF's Annual Report on Form 10-K for the year ended September 30, 1993 which
is incorporated herein by reference.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The federal income tax discussion set forth below is abbreviated in
nature and is included for general information only. BNF stockholders are urged
to consult their own tax advisers as to the specific tax consequences to them of
the Reorganization, 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
Reorganization will be treated as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code, and that, accordingly, (i) no gain
or loss will be recognized by either UPC or BNF as a result of the
Reorganization, (ii) no gain or loss will be recognized by a BNF stockholder
upon the receipt of UPC Common Stock in the Reorganization in exchange for such
stockholder's shares of BNF Common Stock (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 (including any fractional share
interest) to be received by the BNF stockholders in connection with the
Reorganization will be the same as the basis of the BNF Common Stock surrendered
in exchange therefor; and (iv) the holding period of the UPC Common Stock
(including any fractional share interest) to be received by the BNF stockholders
in connection with the Reorganization will include the holding period of the BNF
Common Stock surrendered in exchange therefor, provided that the BNF Common
Stock is held as a capital asset at the Effective Time of the Reorganization.
Consequences of Receipt of Cash in Lieu of Fractional Shares. A BNF
stockholder who is entitled to receive cash in lieu of a fractional share of UPC
Common Stock in connection with the Reorganization will recognize as of the
Effective Date of the Reorganization gain (or loss) equal to the difference
between such cash amount and the stockholder's adjusted basis in the fractional
share interest, subject to the conditions and limitations
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of Section 302 of the Internal Revenue Code. Any gain or loss recognized will
be capital gain (or loss) if the BNF Common Stock is held by such stockholder
as a capital asset at the Effective Date of the Reorganization.
Legal Opinion. UPC and BNF have received from McDonnell Boyd, outside
legal counsel to UPC, an opinion to the above effect, a copy of which is
attached as Exhibit 8 to the Registration Statement of which this Proxy
Statement/Prospectus is a part. A copy of the opinion may be obtained by
request to Gary A. Simanson, UPC's Assistant Secretary, made as provided under
"Incorporation of Certain Documents by Reference." McDonnell Boyd has rendered
legal services to UPC and its subsidiaries for many years and in that capacity
received legal fees aggregating approximately $1,146,000 in 1993. Certain
members of McDonnell Boyd are UPC shareholders.
ACCOUNTING TREATMENT
The Reorganization is intended to be treated by UPC and BNF as a
"pooling of interests" for accounting purposes. Accordingly, under generally
accepted accounting principles as described in Accounting Principles Board
Opinion No. 16 for business combinations, the assets and liabilities of BNF and
UPC will be carried on the books of UPC immediately subsequent to the Effective
Time of the Reorganization at the amounts recorded on the respective books of
each corporation immediately prior to the Effective Time of the Reorganization.
Net income of UPC subsequent to the Reorganization becoming effective will
include the net income of BNF and UPC for the entire fiscal period in which the
Reorganization occurs, which is expected by UPC and BNF to be fiscal year 1994.
Subsequent to the Reorganization becoming effective, the reported income of BNF
and UPC will be combined and restated as income of UPC. The unaudited pro forma
financial information contained in this Proxy Statement/Prospectus has been
prepared using the pooling of interests method of accounting where applicable.
EXPENSES
The Reorganization Agreement provides, in general, that UPC and BNF 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 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 except for shares
issued to any shareholder who may be deemed to be an "affiliate" of BNF 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 Effective Time of the
Reorganization. Affiliates may not sell their shares of UPC Common Stock
acquired in connection with the Reorganization except pursuant to an effective
registration statement (other than on Form S-4) under the Securities Act
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 BNF generally include individuals or entities that control, are controlled by
or are under common control with BNF and will include members of the management
group in their roles as either executive officers or directors of BNF. UPC will
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 Reorganization to any BNF
stockholder deemed an "affiliate" of BNF 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 Reorganization until such time as UPC
shall have publicly released a statement of UPC's consolidated earnings
reflecting the combined financial results of UPC and BNF for a period of not
less than 30 days subsequent to the Effective Date of the Reorganization.
Shares of UPC Common Stock delivered to any BNF stockholders deemed affiliates
will bear a legend to that effect. See "Description of UPC Common and Preferred
Stock -- UPC Common Stock -- Dividends."
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 July 1, 1994, 23,037,375 shares of UPC Common Stock were
issued and outstanding, and
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approximately 658,000 shares were subject to acquisition through the exercise
of options granted pursuant to UPC's 1992 and 1983 Stock Option Plans and
other employee, officer and director benefit 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 July 1, 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 July 1, 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 of Directors 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 the 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 of Directors.
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 Proxy
Statement/Prospectus, no such restrictions under any such borrowing arrangements
or outstanding debt instruments are in effect.
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 the 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 of Directors 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.
49
<PAGE> 59
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.
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. Subject to receiving the prior approval of the Federal
Reserve, it is UPC's present intention to redeem all of its outstanding Series C
Preferred Stock on October 31, 1994.
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 per share plus unpaid dividends
accrued thereon and, at UPC's option and with the prior approval of the Federal
Reserve, 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.
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 the 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
50
<PAGE> 60
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.
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 of Directors 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 five percent 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 to acquire 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.
51
<PAGE> 61
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 UPC and receives compensation
from UPC.
EXPERTS
The consolidated financial statements of Union Planters Corporation
incorporated in this Prospectus by reference to the Annual Report on Form 10-K
of UPC for the year ended December 31, 1993 have been so incorporated in
reliance on the report of Price Waterhouse, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
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 from BNF's Annual Report on Form 10-K
for the year ended September 30, 1993 have been audited by Deloitte & Touche,
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.
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 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, in reliance upon the
report of KPMG Peat Marwick, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
BY ORDER OF THE BOARD OF DIRECTORS
[SIGNATURE]
Miles A. Wright
Secretary
Decatur, Alabama
July 29, 1994
FORMS 10-K AND 10-Q
COPIES OF BNF'S FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1993
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (INCLUDING BNF'S 1993
ANNUAL REPORT TO SHAREHOLDERS ANNEXED THERETO AS AN EXHIBIT), AND ITS FORM 10-Q
FOR THE THREE- AND SIX-MONTH PERIODS ENDED MARCH 31, 1994 ARE INCLUDED AS
APPENDIX A TO THIS PROXY STATEMENT/PROSPECTUS.
52
<PAGE> 62
UNION PLANTERS CORPORATION
INDEX TO APPENDICES
<TABLE>
<CAPTION>
APPENDIX
NUMBER
- --------
<S> <C> <C>
A
A - 1 Annual Report on Form 10-K for the year ended September 30, 1993
A - 2 Quarterly Report on Form 10-Q for the three- and six-month
periods ended March 31, 1994
B -- Agreement and Plan of Reorganization, along with the Plan of Merger and a related letter agreement annexed
thereto as Exhibits A and B, respectively
C -- Fairness Opinion of RP Financial, Inc.
</TABLE>
<PAGE> 63
APPENDIX A
BNF BANCORP, INC.
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 1993
AND QUARTERLY REPORT ON FORM 10-Q FOR THE THREE- AND SIX-MONTH PERIODS ENDED
MARCH 31, 1994
<PAGE> 64
Appendix A-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-10743
BANCFIRST Corporation
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 63-1037987
- --------------------------------------------- --------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
255 Grant Street, S.E., Decatur, Alabama 35601
- --------------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (205) 353-2530
--------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
--------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark whether disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive proxy or
other information statements incorporated by reference in Part III of this Form
10-K or any amendments to this Form 10-K. Yes X No
----- -----
As of December 7, 1993, there were issued and outstanding 1,784,193
shares of the Registrant's Common Stock. The Registrant's voting stock is
traded and listed on the American Stock Exchange ("AMEX") under the symbol
"AFB." The aggregate market value of the voting stock held by non-affiliates
of the registrant, based on the closing sales price of the Registrant's common
stock as quoted on the AMEX on December 7, 1993 was $32,561,522 (1,784,193
shares at $18.25 per share). Directors and officers of the Registrant are not
considered affiliates for the purpose of determining the aggregate market value
of the Registrants' outstanding voting stock.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Annual Report to Stockholders for the Fiscal
Year Ended September 30, 1993 (Parts I and II).
2. Portions of the Proxy Statement for the 1994 Annual Meeting of
Stockholders. (Part III)
<PAGE> 65
ITEM 1. BUSINESS
GENERAL
BANCFIRST Corporation ("BANCFIRST" or the "Corporation") (formerly
ALAFIRST Bancshares, Inc.), a Delaware corporation, became the unitary savings
and loan holding company for BANKFIRST, a federal savings bank ("Savings Bank")
(formerly First Federal Savings Bank) effective April 25, 1991. The Savings
Bank changed its name to "BANKFIRST, a federal savings bank" from "First
Federal Savings Bank" effective September 28, 1992. All references to the
financial condition and operations of Savings Bank contained herein include
information with respect to both BANCFIRST Corporation and BANKFIRST, a federal
savings bank, as applicable. BANCFIRST Corporation has no other subsidiaries
and is currently not engaged in any other business activity other than holding
the stock of the Savings Bank. Accordingly, the information set forth in this
report, including financial statements and related data, relates primarily to
the Savings Bank and its subsidiaries.
The Savings Bank is the fifth largest thrift institution in Alabama
with approximately $267.1 million in assets as of September 30, 1993. The
Savings Bank was chartered by the State of Alabama in 1912 as North Alabama
Building and Loan Association and converted to a federal savings and loan
charter in 1940. In 1985 the Savings Bank converted to a federal mutual
savings bank and on December 29, 1986, the Savings Bank converted to a federal
stock savings bank. The Savings Bank conducts its business through six full
service offices located throughout north central Alabama.
The Savings Bank is primarily engaged in the business of obtaining
funds in the form of savings deposits and investing such funds in residential
mortgage loans and various types of commercial real estate, consumer and other
loans, and investment securities. The Savings Bank, through its subsidiary,
Sunbelt Financial Services, Inc. ("Sunbelt"), also engages in title insurance
activities. The deposits of the Savings Bank are insured by the Federal
Deposit Insurance Corporation ("FDIC") under the Savings Association Insurance
Fund ("SAIF").
The Savings Bank's earnings are largely dependent upon the difference
between the income it receives from its loan and securities investment
portfolios and its cost of funds (net interest income). In recent years, the
Savings Bank's cost of funds has become more sensitive to changes in short-term
interest rates due to a major increase in shorter term savings accounts bearing
interest rates determined by current market conditions. On the other hand, at
September 30, 1993, 34.6% of the Savings Bank's loan portfolio consisted of
long-term, fixed-rate loans and 10.4% consisted of fixed rate, long-term
mortgage-backed securities.
-1-
<PAGE> 66
The executive offices of the Corporation and Savings Bank are located
at 255 Grant Street, S.E., Decatur, Alabama and the telephone number is (205)
353-2530.
SELECTED CONSOLIDATED FINANCIAL DATA AND OTHER ITEMS
The information contained in the table captioned "Selected Financial
Data" on page 9 of the Corporation's Annual Report to Stockholders for the
fiscal year ended September 30, 1993 is incorporated herein by reference.
OPERATING STRATEGY
The Savings Bank has adopted a strategy designed to improve and
stabilize its operational results in an attempt to counter the volatile cost of
its funds . The principal objective of this strategy is to restructure its
assets to reduce the potential adverse effects of interest rate volatility on
earnings. Principal elements of this strategy include:
(1) Originating mortgage loans with adjustable interest rates and
purchasing adjustable rate mortgage-backed securities. As of
September 30, 1993, the Savings Bank had $116.6 million of mortgage
loans and mortgage-backed securities (50.1% of the total loan
portfolio) with adjustable interest rates.
(2) Increasing the origination of consumer and commercial non-real estate
loans, which typically bear higher interest rates than residential
mortgages and offer greater interest rate flexibility through shorter
maturities and adjustable interest rates. At September 30, 1993,
such loans amounted to $46.8 million or 20.1% of the total loan
portfolio.
(3) Originating long-term fixed-rate mortgage loans written to
specifications promulgated by the Federal Home Loan Mortgage
Corporation ("FHLMC") and the Federal National Mortgage Association
("FNMA") to qualify for sale in the secondary market. The Savings
Bank generally does not retain fixed-rate loans in its portfolio if
the maturity of such loans exceeds 15 years. Loans with maturities in
excess of 15 years are either sold immediately in the secondary market
or are held for longer periods when yields are attractive. Such loans
are classified as held for sale.
(4) Maintaining a significant percentage of the Savings Bank's assets in
liquid assets such as interest-bearing deposits, investment securities
and cash (i.e. 10.8% liquidity at September 30, 1993).
-2-
<PAGE> 67
These changes have offset the increased sensitivity of the Savings
Bank's cost of deposits to changing interest rates. The Savings Bank's ratio
of interest-earning assets to interest-bearing liabilities repricing within one
year was 83.1% or a negative 11.5% as a percentage of total assets at September
30, 1993. The Savings Bank may remain vulnerable to future increases in
interest rates which, if significant, may have a material adverse effect on the
Savings Bank.
GAP ANALYSIS
INTEREST RATE SENSITIVITY. In recent years the Savings Bank has
operated in a somewhat volatile interest rate environment. The term "rate
sensitivity" refers to those assets and liabilities which are "sensitive" to
fluctuations in rates and yields. Savings and loan associations and savings
banks (otherwise known as "thrift institutions") have historically operated in
a mismatched position with interest-sensitive liabilities greatly exceeding
interest-sensitive assets. The Savings Bank is attempting, through the use of
adjustable rate mortgage loans ("ARMs") (including adjustable rate
mortgage-backed securities), consumer loans, commercial loans and short-term
investments, to achieve a better match of both interest rate fluctuations and
the maturities of its assets and liabilities.
The operating strategy previously described reflects management's
strategy to reduce the Savings Bank's interest rate sensitivity gap. The
interest rate sensitivity gap is defined as the difference between
interest-bearing liabilities and interest-earnings assets that mature or
reprice prior to maturity.
-3-
<PAGE> 68
The following table sets forth the dollar amount of maturing assets
and liabilities and the difference between them for the repricing periods
indicated as of September 30, 1993.
<TABLE>
<CAPTION>
Six Over Six Over One Over Three Over Five Over Ten
Months Months Thru Year Thru Years Thru Years Thru Years Thru Over
or Less One Year Three Years Five Years Ten Years Twenty Years Twenty Years Total
------- -------- ----------- ---------- --------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans(1) . . . . . . $ 37,181 $21,307 $20,103 $10,629 $14,032 $11,112 $ 541 $114,905
Mortgage-backed
securities(2) . . . . . . . . 55,146 4,614 9,361 3,463 701 6 -- 73,291
Other loans(2) . . . . . . . . 16,718 7,659 15,154 5,450 1,758 61 -- 46,800
Cash and investment
securities . . . . . . . . . 3,241 3,010 6,023 1,000 1,297 5,208 -- 19,779
-------- ------- ------- ------- ------- ------- ------- --------
TOTAL . . . . . . . . . . 112,286 36,590 50,641 20,542 17,788 16,387 541 254,775
Interest-bearing
liabilities:
Deposits . . . . . . . . . . . 144,563 28,552 38,001 7,100 -- -- -- 218,216
FHLB advances . . . . . . . . . 3,000 3,000 8,000 3,000 -- -- -- 17,000
-------- ------- ------- ------- ------- ------- ------- --------
TOTAL . . . . . . . . . . $147,563 $31,552 $46,001 $10,100 $ -- $ -- $ -- $235,216
Cumulative difference
between interest-earning
assets and interest-bearing
liabilities . . . . . . . . . (35,277) (30,239) (25,599) (15,157) 2,631 19,018 19,559
Cumulative difference between
interest-earning assets and
interest-bearing liabilities
as a percent of total
assets . . . . . . . . . . . (13.5)% (11.5)% (9.8)% (5.8)% 1.0% 7.3% 7.5%
Cumulative rate sensitive
assets as a percent of rate
sensitive liabilities . . . . 76.1 % 83.1 % 88.6 % 93.6 % 101.1% 108.1% 108.3%
Cumulative rate sensitive
assets as a percent of
total assets . . . . . . . . . 42.8 % 56.8 % 76.1 % 84.0 % 90.8% 97.0% 97.2%
</TABLE>
- -------------
(1) Mortgage loans include standard Office of Thrift Supervision ("OTS")
prepayment assumptions.
(2) Mortgage-backed securities and other loans, which historically have
prepaid more quickly than standard OTS prepayment assumptions, include
internal prepayment assumptions.
-4-
<PAGE> 69
The following table shows the average interest-bearing balances,
interest, average rates and the spread between the combined average rates
earned on interest-earning assets and average rates paid on interest-bearing
liabilities. Average balances are determined on a monthly basis.
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------------------------
1993 1992
------------------------------- ---------------------------
Average Average Average Average
Volume Interest Rate Volume Interest Rate
------ -------- ------- ------ -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans, net . . . . . . . . . . . . . . . . . . $150,460 $13,169 8.75% $144,040 $13,907 9.66%
Mortgage-backed securities,
net . . . . . . . . . . . . . . . . . . . . . 77,406 5,006 6.47 74,036 5,551 7.50
Less allowance for
possible loan losses . . . . . . . . . . . . 1,099 737
-------- --------
Total loans, net . . . . . . . . . . . . . . . 226,767 217,339
Investments (includes
CDs) . . . . . . . . . . . . . . . . . . . . 28,042 1,816 6.48 25,852 1,787 6.91
-------- ------- ----- -------- ------- -----
Total interest-earning
assets . . . . . . . . . . . . . . . . . . . 254,809 19,991 7.85 243,191 21,245 8.74
Other assets . . . . . . . . . . . . . . . . . 9,834 9,902
-------- --------
Total assets . . . . . . . . . . . . . . . . . $264,643 $253,093
======== ========
Interest-bearing liabilities:
Borrowings and FHLB
advances . . . . . . . . . . . . . . . . . . $ 17,310 853 4.03 $ 8,993 444 4.94
Savings deposits . . . . . . . . . . . . . . 215,752 7,835 3.63 215,068 10,493 4.88
-------- ------- ----- -------- ------- -----
Total interest-bearing
liabilities . . . . . . . . . . . . . . . . 233,062 8,688 3.73 224,061 10,937 4.88
Other liabilities . . . . . . . . . . . . . . . 2,727 3,178
-------- --------
Total liabilities . . . . . . . . . . . . . . . 235,789 227,239
Total stockholders'
equity . . . . . . . . . . . . . . . . . . . . 28,854 25,854
-------- --------
Total liabilities and
stockholders' equity . . . . . . . . . . . . . $264,643 4.12 $253,093
======== ========
RATE DIFFERENTIAL . . . . . . . . . . . . . . . 3.86
NET INTEREST INCOME AND
NET YIELD AS A PERCENT
OF INTEREST-EARNING
ASSETS . . . . . . . . . . . . . . . . . . . . $11,303 4.44% $10,308 4.24%
======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------
1991
-------------------------------------
Average Average
Volume Interest Rate
------ -------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Interest-earning assets:
Loans, net . . . . . . . . . . . . . . . . . . $140,701 $14,464 10.28%
Mortgage-backed securities,
net . . . . . . . . . . . . . . . . . . . . . 55,941 4,821 8.62
Less allowance for
possible loan losses . . . . . . . . . . . . 351
--------
Total loans, net . . . . . . . . . . . . . . . 196,291
Investments (includes
CDs) . . . . . . . . . . . . . . . . . . . . 25,344 2,033 8.03
-------- -------
Total interest-earning
assets . . . . . . . . . . . . . . . . . . . 221,635 21,318 9.62
Other assets . . . . . . . . . . . . . . . . . 8,089
--------
Total assets . . . . . . . . . . . . . . . . . $229,724
========
Interest-bearing liabilities:
Borrowings and FHLB
advances . . . . . . . . . . . . . . . . . . $ --
Savings deposits . . . . . . . . . . . . . . 203,731 13,522 6.64
-------- -------
Total interest-bearing
liabilities . . . . . . . . . . . . . . . . 203,731 13,522 6.64
Other liabilities . . . . . . . . . . . . . . . 2,185
--------
Total liabilities . . . . . . . . . . . . . . . 205,916
Total stockholders'
equity . . . . . . . . . . . . . . . . . . . . 23,808
--------
Total liabilities and
stockholders' equity . . . . . . . . . . . . . $229,724
========
RATE DIFFERENTIAL . . . . . . . . . . . . . . . 2.98
NET INTEREST INCOME AND
NET YIELD AS A PERCENT
OF INTEREST-EARNING
ASSETS . . . . . . . . . . . . . . . . . . . . $ 7,796 3.52%
=======
</TABLE>
-5-
<PAGE> 70
RATE/VOLUME ANALYSIS
Changes in net interest income are attributable to three factors: a
change in volume or amount of an asset or liability, a change in interest rates
or a change caused by a combination of change in volume and interest rate. The
change in volume or amount represents the average interest rate for the prior
period multiplied by the increase (decrease) in the average balance of the
related asset or liability. The change in rate represents the increase
(decrease) in the average interest rate from the prior period multiplied by the
average balance of the related assets or liabilities for the prior period. The
rate/volume change represents the change in the average rate from the prior
period multiplied by the increase (decrease) in the average balance of the
related asset or liability from the prior period.
The table below sets forth certain information regarding changes in
interest income and interest expense of the Savings Bank for the periods
indicated. For each category of interest-earning asset and interest-bearing
liability, information is provided on changes attributable to (1) changes in
volume (changes in volume multiplied by old rate), and (2) changes in rates
(change in rate multiplied by old volume). The net change attributable to the
combined impact of volume and rate has been allocated proportionately to the
change due to volume and the change due to rate.
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------------------------------------------------------------------------
1993 vs. 1992 1992 vs. 1991 1991 vs. 1990
----------------------------- ---------------------------- ----------------------------
Increase (Decrease) Increase (Decrease) Increase (Decrease)
Due to Due to Due to
----------------------------- ---------------------------- ----------------------------
Rate/ Rate/ Rate/
Volume Rate Volume Volume Rate Volume Volume Rate Volume
------ ------ ------ ------ ------ ------ ------ ------ ------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Loan and mortgage-
backed certificates . . . . . $587 $(1,851) $(1,264) $2,005 $(1,832) $ 173 $ 1,987 $ (179) $ 1,808
Investments . . . . . . . . . 145 (135) 10 40 (286) (246) (1,492) (90) (1,582)
---- ------- ------- ------ ------- ------- ------- ------- -------
Total interest-
earning assets . . . . . . . 732 (1,986) (1,254) 2,045 (2,118) (73) 495 (269) 226
Interest expense:
Savings deposits . . . . . . . 33 (2,691) (2,658) 719 (3,748) (3,029) 71 (1,296) (1,225)
Borrowings and
Federal Home Loan
Bank advances . . . . . . . . 394 15 409 444 -- 444 -- -- --
---- ------- ------- ------ ------- ------- ------- ------- -------
Total interest-
bearing liabilities . . . . . 427 (2,676) (2,249) 1,163 (3,748) (2,585) 71 (1,296) (1,225)
---- ------- ------- ------ ------- ------- ------- ------- -------
Net interest income . . . . . . $305 $ 690 $ 995 $ 882 $ 1,630 $ 2,512 $ 424 $ 1,027 $ 1,451
==== ======= ======= ====== ======= ======= ======= ======= =======
</TABLE>
-6-
<PAGE> 71
WEIGHTED AVERAGE YIELDS EARNED AND RATES PAID
The information contained in the table captioned "Yields Earned and
Rates Paid" on page 8 of the Corporation's Annual Report to Stockholders for
the fiscal year ended September 30, 1993 is incorporated herein by reference.
LENDING ACTIVITIES
GENERAL. The principal lending activity of the Savings Bank has been
the origination of conventional, Federal Housing Administration ("FHA") and
Veterans Administration ("VA") mortgage loans for the purpose of constructing,
financing or refinancing one-to-four family residential properties. As of
September 30, 1993, 87.8% of loans before deductions (which includes loans in
process and discounts), consisted of loans secured by mortgages on one-to-four
family residential properties. To a lesser extent, the Savings Bank also makes
commercial real estate and consumer loans.
In an effort to make the yields on its loan and investment portfolio
more interest rate sensitive, the Savings Bank has implemented a number of
measures. Those measures include: (i) origination of mortgage loans with
adjustable interest rates, including adjustable rate mortgage loans on
residential properties, (ii) the purchase of adjustable rate mortgage-backed
securities, (iii) increased emphasis on consumer and non-real estate lending,
and (iv) adoption of a policy under which the Savings Bank generally originates
long-term, fixed-rate mortgage loans only when such loans qualify for sale in
the secondary market. At September 30, 1993, $129.4 (or 55.6%) of the Savings
Bank's loans receivable were comprised of loans that were other than long-term,
fixed-rate loans (which historically have been the industry's traditional area
of lending activity). This amount included $115.8 million of mortgage loans
and mortgage-backed securities with rates adjustable at periods ranging from
one to five years, $3.7 million of commercial non-real estate loans and $9.9
million of other loans with a term to maturity of less than one year. These
lending policies were adopted to shorten the term of the Savings Bank's assets
and make them less susceptible to interest rate volatility.
For the fiscal year ended September 30, 1993, under federal
regulations, the aggregate amount of loans the Savings Bank could make to any
borrower, including related entities, was with certain exceptions limited to
15% of the Savings Bank's unimpaired capital and unimpaired surplus. At
September 30, 1993, the maximum amount which the Savings Bank could have loaned
to one borrower and the borrower's related entities was approximately $3.7
million. At September 30, 1993, the Savings Bank's largest amount loaned to
any borrower and his related entities was $2.2 million. For a discussion of
these limitations on loans-to-one borrower imposed by FIRREA, see "Regulation
of the Savings Bank -- Investment Rules."
-7-
<PAGE> 72
LOAN PORTFOLIO ANALYSIS. Set forth below is selected data relating to
the composition of the Savings Bank's loan portfolio by type of loan and type
of security, including mortgage-backed securities on the dates indicated.
-8-
<PAGE> 73
<TABLE>
<CAPTION>
At September 30,
------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
-------------- --------------- ---------------- -------------- ---------------
Amount % Amount % Amount % Amount % Amount %
------ ----- ------ ----- ------- ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TYPE OF LOAN:
Conventional real estate loans:
Interim construction loans . . . . . $ 10,441 4.5 $ 8,948 4.0 $ 6,607 3.2 $ 5,997 3.3 $ 7,287 4.1
Loans on existing property(1) . . . 103,325 44.4 101,455 44.9 102,462 49.2 110,005 60.9 113,962 63.5
Insured or guaranteed real
estate loans (2) . . . . . . . . . 78,459 33.7 80,040 35.4 71,244 34.2 41,409 22.8 37,112 20.8
Consumer loans:
Savings account loans . . . . . . . 2,153 .9 2,009 .9 2,030 1.0 1,522 .8 1,787 1.0
Home improvement loans . . . . . . . 30,275 13.0 27,622 12.2 19,191 9.2 15,990 8.8 14,358 8.0
Automobile loans . . . . . . . . . . 4,539 1.9 4,024 1.8 3,355 1.6 3,560 1.9 3,971 2.2
Commercial business . . . . . . . . 3,747 1.6 2,186 1.0 2,842 1.4
Other . . . . . . . . . . . . . . . 6,086 2.6 4,698 2.0 4,339 2.1 5,392 2.9 5,162 2.9
Less:
Loans in process . . . . . . . . . . 4,702 2.0 3,662 1.6 3,225 1.6 2,161 1.2 4,097 2.3
Discounts and other . . . . . . . . 291 .1 302 .1 280 .1 230 .1 212 .1
Loan loss reserve . . . . . . . . . 1,162 .5 1,035 .5 440 .2 224 .1 235 .1
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total . . . . . . . . . . . . . . $232,870 100.0% $225,983 100.0% $208,125 100.0% $181,260 100.0% $178,824 100.0%
======== ====== ======== ====== ======== ====== ======== ====== ======== ======
TYPE OF SECURITY:
Residential:
Single family . . . . . . . . . . . $202,706 87.1 $197,057 87.2 $176,508 84.8 $148,257 81.9 $147,441 82.4
2-to-4 family . . . . . . . . . . . 1,529 .7 1,808 .8 1,917 .9 2,179 1.2 1,948 1.1
Other dwelling units . . . . . . . . 8,884 3.8 8,525 3.8 9,316 4.4 9,456 5.2 8,611 4.8
Commercial real estate . . . . . . . 9,381 4.0 10,675 4.7 11,763 5.7
Savings accounts . . . . . . . . . . 2,153 .9 2,009 .9 2,030 1.0 13,509 7.5 14,449 8.1
Automobile loans . . . . . . . . . . 4,539 1.9 4,024 1.8 3,355 1.6 1,522 .8 1,787 1.0
Commercial business . . . . . . . . . 3,747 1.6 2,186 1.0 2,842 1.4 3,560 1.9 3,971 2.2
Other . . . . . . . . . . . . . . . . 6,086 2.6 4,698 2.0 4,339 2.1 5,392 2.9 5,162 2.9
Less:
Loans in process . . . . . . . . . . 4,702 2.0 3,662 1.6 3,225 1.6 2,161 1.2 4,097 2.3
Discounts and other . . . . . . . . 291 .1 302 .1 280 .1 230 .1 212 .1
Loan loss reserves . . . . . . . . . 1,162 .5 1,035 .5 440 .2 224 .1 235 .1
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total . . . . . . . . . . . . . . $232,870 100.0% $225,983 100.0% $208,125 100.0% $181,260 100.0% $178,825 100.0%
======== ====== ======== ====== ======== ====== ======== ====== ======== ======
</TABLE>
- ---------------
(1) Includes construction loans converted to permanent loans.
(2) Includes $76.4 million, $77.8 million, $68.8 million, $38.5 million
and $35.0 million in mortgage-backed securities for the years ended
September 30, 1993, 1992, 1991, 1990 and 1989, respectively.
-9-
<PAGE> 74
The Savings Bank's lending policies generally limit the maximum
loan-to-value ratio on conventional residential mortgage loans to 95% of the
lesser of the appraised value or purchase price, with the condition that
mortgage insurance be required on any home loans with loan-to-value ratios in
excess of 80%. The loan-to-value ratio, maturity and other provisions of the
loans made by the Savings Bank have generally reflected the policy of making
less than the maximum loan permissible under applicable regulations, in
accordance with sound lending practices, market conditions, and underwriting
standards established by the Savings Bank.
RESIDENTIAL LOANS. The primary lending activity of the Savings Bank
has been the granting of conventional loans to enable borrowers to purchase
existing homes or refinance existing mortgages. Mortgage loans made by the
Savings Bank are generally long-term loans, amortized on a monthly basis, with
principal and interest due each month. The initial contractual loan payment
period for residential loans typically ranges from 15 to 30 years. The Savings
Bank's experience indicates that real estate loans remain outstanding for
significantly shorter periods than their contractual terms. Borrowers may
refinance or prepay loans at their option, subject to any prepayment penalty
provisions when included in the note. The Savings Bank requires mortgage title
insurance on all mortgage loans and hazard insurance at least in the amount
covering replacement value.
The Savings Bank's initial adjustable rate loans were known as
renegotiable rate mortgages, a type of five year adjustable rate loan and
predecessor to the fully adjustable mortgage loan. The Savings Bank currently
originates adjustable rate mortgages that have rate adjustments from one to
five years for the initial term based upon the OTS National Monthly Median Cost
of Funds or a U.S. Treasury Index. The interest rates on most of these
mortgages are adjustable once a year with limitations on upward and downward
adjustments of 2% per year and from 4% to 6% over the initial rate for the life
of the loan. These loans have ceilings that range from 9.0% to 16.5% for the
life of the loan. The initial rate offered on the majority of these adjustable
rate loans acts as the floor rate. The Savings Bank originated approximately
$25.9 million in adjustable rate mortgage loans for the year ended September
30, 1993. Adjustable rate mortgage loans, including adjustable rate
mortgage-backed securities, amounted to 50.1% of the mortgage loan portfolio at
September 30, 1993.
COMMERCIAL REAL ESTATE AND COMMERCIAL BUSINESS LOANS. The Savings
Bank makes and participates in commercial property loans, including loans
secured by multi-family apartment projects with more than four units and
commercial business loans. Commercial loans constituted approximately $22.0
million or approximately 9.5% of the Savings Bank's loan portfolio at September
30, 1993. These loans are typically secured by improved real estate located in
the
-10-
<PAGE> 75
Savings Bank's primary lending area, and also by non-real estate collateral
including accounts receivable, inventory, and chattel equipment. Permanent
commercial loans are made in amounts up to 80% of the appraised value of the
property and generally have a 10 to 25 year term with interest rates that
adjust every one, three or five years based on the one, three or five year U.S.
Treasury Index or the OTS National Monthly Median Cost of Funds Index. Some
pricing is also done using New York Prime or Base Rate as the index as quoted
in the Wall Street Journal. The majority of these loans are secured by
properties located in Alabama or Georgia and the amount of such interest in
loans is generally between $100,000 and $2.0 million. At September 30, 1993,
the Savings Bank's commercial real estate loans purchased totaled $4.8 million
or 2.1% and 1.8% of total loans receivable (net) and assets, respectively.
Commercial real estate lending entails significant additional risks,
compared to residential property lending. Commercial real estate loans
typically involve large loan balances to single borrowers or groups of related
borrowers. The payment experience of such loans is typically dependent upon
the successful operation of the real estate project. These risks can be
significantly affected by supply and demand conditions in the market for office
and retail space and for apartments, and as such may be subject, to a greater
extent, to adverse conditions in the economy. In dealing with these risks the
Savings Bank reviews the financial condition of the lending entity originating
the loan and its lending capabilities. The Savings Bank also reviews the
completed credit package submitted on behalf of the borrower by the lending
entity. Personal inspections of the property that will serve as collateral are
made to determine the accuracy of the appraisal information.
CONSUMER AND OTHER LOANS. Federal regulations permit federally
chartered thrift institutions to make secured and unsecured consumer loans up
to 35% of the institution's assets. In addition, a federal thrift institution
has lending authority above the 35% category for certain consumer loans, such
as home equity loans, property improvement loans, mobile home loans and loans
secured by savings accounts. The Savings Bank established a consumer loan
department in September 1982. The consumer loans granted by the Savings Bank
have included loans on automobiles, boats, and other consumer goods, loans
secured by savings accounts, and signature loans. The Savings Bank has also
originated consumer loans for home improvement and other purposes. These loans
generally have terms from 30 days to 15 years and rates that are determined by
the Savings Bank's base rate and the rates offered on such loans by local
competition. In addition, in fiscal 1987 the Savings Bank began originating
adjustable rate consumer loans that adjust either monthly, quarterly or
annually. The Savings Bank generally limits the loan-to-value ratios on its
secured consumer loans from 65% to 100% depending on the type of collateral
securing the loan. As of September 30, 1993, consumer loans outstanding were
approximately $43.1 million or 18.5% of the Savings Bank's
-11-
<PAGE> 76
total loan portfolio. The Savings Bank believes that the shorter term and the
normally higher interest rates available on various types of consumer loans
have been helpful in maintaining a profitable spread between the Savings Bank's
average loan yield and its cost of funds. Such loans, however, may pose a
greater risk in regard to collectibility.
On August 27, 1985, the Savings Bank entered into a participation
agreement with four other financial institutions to provide a letter of credit
for an aggregate amount of $15.9 million. The Savings Bank's 20% interest in
this letter of credit is $3.2 million. The purpose for the letter of credit
provided collateral for the Housing Authority of Fulton County, Georgia to loan
to Roswell Road Associates, Ltd., $15.5 million to construct a 236 unit
apartment complex in Atlanta, Georgia. The lead lender, AmSouth Bank of
Florida, formerly First Mutual Savings of Florida, Pensacola, Florida, has
subordinated its $7.6 million participation interest to the other participants
in the letter of credit.
-12-
<PAGE> 77
LOAN AND MORTGAGE-BACKED SECURITIES MATURITY SCHEDULE
The following table sets forth certain information at September 30,
1993 regarding the dollar amount of loans and mortgage-backed securities
maturing in the Savings Bank's portfolio based on their contractual terms to
maturity. Demand loans having no stated schedule of repayments and no stated
maturity and overdrafts are reported as due in one year or less.
<TABLE>
<CAPTION>
Due 5 Due 10
Due at September 30, Due 3 Through Through 10 Through Due 20 Years
----------------------- 5 Years After Years After 20 Years After After
1994 1995 1996 Sept. 30, 1993 Sept. 30, 1993 Sept. 30, 1993 Sept. 30, 1993 Total
---- ---- ---- -------------- -------------- -------------- -------------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate mortgage . . . . . $ 980 $ 241 $ 228 $11,479 $16,958 $31,283 $114,460 $175,629
Real estate construction . . . 10,441 -- -- -- -- -- -- 10,441
Installment . . . . . . . . . . 8,873 2,620 2,226 9,804 11,801 7,550 179 43,053
Commercial business . . . . . . 1,447 121 115 714 722 628 -- 3,747
------- ------ ------ ------- ------- ------- -------- --------
Total . . . . . . . . . . . $21,741 $2,982 $2,569 $21,997 $29,481 $39,461 $114,639 $232,870
======= ====== ====== ======= ======= ======= ======== ========
</TABLE>
-13-
<PAGE> 78
The following table sets forth the dollar amount of all loans and
mortgage-backed securities due after one year from September 30, 1993, which
have predetermined interest rates and have floating or adjustable interest
rates.
Floating or
Predetermined Rates Adjustable Rates Total
------------------- ---------------- -----
(In thousands)
Real estate mortgage . . . $58,064 $116,585 $174,649
Installment . . . . . . . . 30,403 3,777 34,180
Commercial business . . . . 1,381 919 2,300
------- -------- --------
Total . . . . . . . . . $89,848 $121,281 $211,129
======= ======== ========
LOAN SOLICITATION AND PROCESSING. The Savings Bank's primary source of
loans has historically been from walk-in customers and more recently from local
builders. Loan underwriting has historically been centralized at the Savings
Bank's main office. In more recent times the Savings Bank has established
individual loan approval limits for consumer loan officers located in its six
full service offices. Upon receipt of a loan application from a prospective
borrower, a credit report and verifications are ordered to verify specific
information relating to the loan applicant's employment, income and credit
standing. An appraisal of the real estate intended to secure the proposed loan
is undertaken by an independent fee appraiser or the Savings Bank's staff
appraiser, except for some consumer mortgage loans which may be performed by
staff personnel.
Real estate loans are processed and presented for underwriting prior to
being presented to the Loan Committee. Loans secured by real estate may be
approved by any one member of the Management Loan Committee up to and including
$100,000. Real estate loans in excess of $100,000 and up to and including
$300,000 require the approval of two members of the Management Loan Committee.
Loans in excess of $300,000 and up to and including $1.5 million are presented
to the Loan Committee, plus two Board members. Loans larger than $1.5 million
must be approved by the Board of Directors. All loans approved by management
are reviewed by a loan committee comprised of at least two non-employee members
of the Board of Directors.
Loan applicants are promptly notified of the decision of the Savings
Bank by a letter setting forth the terms and conditions of the decision. If
approved, these terms and conditions include the amount of the loan, interest
rate basis, amortization term, a brief description of the real estate to be
mortgaged to the Savings Bank, and the notice of requirement of insurance
coverage to be maintained to protect the Savings Bank's interest. Prior to
closing any long term loan, the borrower must provide proof of fire
-14-
<PAGE> 79
and casualty insurance on the property serving as collateral and it must be
maintained during the full term of the loan. In addition, all real estate
loans originated require title insurance policies.
LOAN PURCHASES AND SALES. The Savings Bank has engaged in selling in
the secondary market certain loans it has originated. Such loans sold are
generally fixed-rate, long-term mortgage loans and are sold without recourse.
These sales, one of which was with recourse to the Savings Bank (FHA/VA loans),
have been made to FHLMC, FNMA and to mortgage bankers who purchase residential
mortgage loans from federally insured financial institutions and certain other
lenders. During the year ended September 30, 1993, the Savings Bank sold $8.9
million of mortgage loans, all without recourse.
The sale of loans in the secondary mortgage market reduces the Savings
Bank's risk that the interest rates it pays on deposits will escalate while
holding long-term, fixed-rate loans in its portfolio and allows the Savings Bank
to continue to make loans during periods when savings flows decline or funds are
not otherwise available for lending purposes. In connection with such sales,
the Savings Bank attempts to retain the servicing of the loans (i.e., collection
of principal and interest payments), for which it generally receives a fee
payable monthly of 1/4% to 1/2% per annum of the unpaid balance of each loan.
In fiscal 1993, the Savings Bank was successful in retaining the servicing on
approximately $5.9 million of loans sold in the secondary market. As of
September 30, 1993, the Savings Bank was servicing loans for others aggregating
approximately $20.3 million.
In addition to originating loans, the Savings Bank has purchased real
estate loans in the secondary market. The Savings Bank's purchases in the
secondary market are dependent upon the demand for mortgage credit in the local
market area and the inflow of funds from traditional sources. Purchases of
loans enable the Savings Bank to utilize available funds more quickly,
particularly where sufficient loan demand for products such as ARMs is not
obtainable locally. The Savings Bank did not purchase any loans in the
secondary market during the year ended September 30, 1993.
-15-
<PAGE> 80
The following table sets forth the Savings Bank's loan origination,
purchase and sales activity for the periods indicated.
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------------------
1993 1992 1991
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Loans originated:
Real estate loans:
Conventional:
Construction . . . . . . . . . $12,330 $13,587 $ 8,638
Loans for purchase of
existing property . . . . . . 17,467 10,091 6,000
Loans refinanced . . . . . . . 21,822 12,631 5,227
Other . . . . . . . . . . . . . . 627 521 --
------- ------- -------
Total real estate loans
Originated . . . . . . . . . . 52,246 36,830 19,865
Other originations (consumer
and commercial) . . . . . . . . 27,854 31,448 21,078
------- ------- -------
Total loan originations . . . . . 80,100 68,278 40,943
------- ------- -------
Loans and mortgage-backed
securities purchased:
Loans purchased net
of premiums (discount) . . . . -- -- --
Mortgage-backed securities
purchased net of
premiums (discount) . . . . . 26,964 35,834 41,236
------- ------- -------
Loans sold:
Loans sold net of
premiums (discount) . . . . . 8,954 4,119 4,990
Mortgage-backed securities
sold, net of premiums
(discount) . . . . . . . . . 4,330 9,305 2,876
Loan repayments . . . . . . . . 62,806 54,654 38,462
Mortgage-backed securities
repayments . . . . . . . . . . 23,937 17,568 8,560
Provision for loan losses . . . . 150 608 426
------- ------- -------
Increase in loan
portfolio . . . . . . . . . . . $ 6,887 $17,858 $26,865
======= ======= =======
</TABLE>
LOAN ORIGINATION COMMITMENTS. Upon approval, short term reservation of
funds is made for 45 days, except for FHA and VA loans, for which the period is
60 days. As of September 30, 1993, the Savings Bank had approximately $14.1
million of commitments to originate loans, outstanding letters of credit and
loans in process, which were issued by the Savings Bank in the normal course of
business. Of this total $5.2 million is for obligations to originate fixed rate
loans and $8.9 million is for obligations to originate variable rate loans.
LOAN ORIGINATION AND OTHER FEES. In addition to interest earned on
loans, the Savings Bank receives loan origination fees or "points" for
originating loans. Loan points are a percentage of the principal amount of the
mortgage loan which are charged to the borrower for creation of the loan and are
recorded as an adjustment
-16-
<PAGE> 81
to yield pursuant to Statement of Financial Accounting Standards ("SFAS") No.
91. See Note 1 to Notes to Consolidated Financial Statements.
The Savings Bank also receives other fees and charges relating to
existing loans, which include late charges and fees collected in connection with
a change in borrower or other loan modifications. These fees and charges have
not constituted a material source of income.
PROBLEM ASSETS AND ASSET CLASSIFICATION. Loans are reviewed on a
regular basis and are placed on a non-accrual status when, in the opinion of
management, the collection of additional interest is doubtful. Consumer loans
generally are repossessed or charged off when the loan becomes over 120 days
delinquent. Interest accrued and unpaid at the time a loan is placed on
non-accrual status is charged against interest income. Subsequent payments are
either applied to the outstanding principal balance or recorded as interest
income, depending on the assessment of the ultimate collectibility of the loan.
Real estate acquired by the Savings Bank as a result of foreclosure or
by deed-in-lieu of foreclosure is classified as real estate owned until such
time as it is sold. When such property is acquired, it is recorded at the lower
of the unpaid principal balance of the related loan or its fair value. Any
writedown of the property is charged to the allowance for losses.
The following table sets forth information with respect to the Savings
Bank's non-performing assets for the period indicated. During the periods
shown, the Savings Bank had no restructured loans within the meaning of SFAS No.
15.
-17-
<PAGE> 82
At September 30,
------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(Dollars in thousands)
Non-accrual loans (1) . . . . $ -- $ -- $ -- $ -- $ --
---- ---- ---- ---- ----
Accruing loans which
are contractually past
due 90 days or more:
Real estate:
Residential . . . . . . . 13 219 254 173 83
Commercial . . . . . . . -- -- -- -- --
Consumer . . . . . . . . 7 10 -- -- 13
---- ---- ---- ---- ----
20 229 254 173 96
---- ---- ---- ---- ----
Total non-accrual loans
and accruing loans
contractually past due
90 days or more . . . . . . $ 20 $229 $254 $173 $ 96
==== ==== ==== ==== ====
Percentage of total loans . . .01% .10% .12% .10% .05%
==== ==== ==== ==== ====
Other non-performing
assets (2) . . . . . . . . . $ -- $407 $981 $137 $236
==== ==== ==== ==== ====
____________
(1) Non-accrual status denotes loans on which, in the opinion of
management, the collection of additional interest is unlikely, or
loans that meet non-accrual criteria as established by regulatory
authorities. Payments received on a non-accrual loan are applied to
the outstanding principal balance or recorded as interest income,
depending on the assessment of the collectibility of the loan. The
Savings Bank did not have any interest that was not recognized in
interest income for non-accrual loans during fiscal year 1993.
(2) Other non-performing assets represent property acquired by the Savings
Bank through foreclosure or repossession. This property is carried at
the lower of its fair value or the principal balance of the related
loan.
COMPOSITION OF GENERAL VALUATION ALLOWANCE
The following table sets forth the breakdown of the general valuation
allowances by loan category for the periods indicated. Management believes
that the allowance can be allocated by category only on an approximate basis.
The allocation of the allowance to each category is not necessarily indicative
of further losses and does not restrict the use of the allowance to absorb
losses in any category.
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<PAGE> 83
At September 30,
------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(Dollars in thousands)
Classified assets:
Special mention . . . . . . $ 35 $ 2 $ 24 $ -- $ --
Substandard . . . . . . . . -- 98 119 -- --
Doubtful . . . . . . . . . . -- -- -- -- --
Loss . . . . . . . . . . . . -- -- -- -- --
Real estate loans:
Construction . . . . . . . . 137 124 49 46 69
Commercial real estate . . . 322 234 46 54 50
Commercial business . . . . . 56 33 28 6 6
Consumer . . . . . . . . . . 612 544 174 118 110
------ ------ ---- ---- ----
Total general valuation
allowances . . . . . . . $1,162 $1,035 $440 $224 $235
====== ====== ==== ==== ====
There were no loans at September 30, 1993 which are not currently
classified as non-accrual, 90 days past due or restructured but which may be so
classified in the near future because management has concerns as to the ability
of the borrowers to comply with repayment terms.
The following table sets forth an analysis of the Savings Bank's
general valuation allowances for the periods indicated.
Year Ended September 30,
------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(Dollars in thousands)
Balance at beginning of
period . . . . . . . . . . . $1,035 $ 440 $224 $235 $212
------ ------ ---- ---- ----
Loans charged-off, net:
Mortgage . . . . . . . . . . 20 -- 157 5 --
Commercial business . . . . -- -- -- -- --
Consumer . . . . . . . . . . 3 13 53 64 24
------ ------ ---- ---- ----
Total charge-offs . . . . . . 23 13 210 69 24
------ ------ ---- ---- ----
Net loans charged-off . . . . 23 13 210 69 24
------ ------ ---- ---- ----
Provision for possible
loan losses . . . . . . . . 150 608 426 58 47
------ ------ ---- ---- ----
Balance at end of period . . $1,162 $1,035 $440 $224 $235
====== ====== ==== ==== ====
Ratio of net charge-offs to
average loans outstanding
during the period . . . . . .010% .006% .107% .039% .013%
==== ==== ==== ==== ====
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<PAGE> 84
GENERAL VALUATION ALLOWANCES ON LOANS AND REAL ESTATE
In making loans, the Savings Bank recognizes the fact that credit
losses will be experienced and that the risk of loss will vary with, among
other things, the type of loan being made, the creditworthiness of the borrower
over the term of the loan and, in the case of a secured loan, the quality of
the security for the loan.
It is management's policy to maintain adequate reserves for estimated
losses on specifically identified loans and real estate. Generally, the
reserves are based on, among other things, estimates of the historical loan
loss experience, evaluation of economic conditions in general and in various
sectors of the Savings Bank's customer base, and periodic reviews of loan
portfolio quality by the Savings Bank personnel. Specific reserves are
provided for individual loans where the ultimate collection is considered
questionable by management after reviewing the current status of loans which
are contractually past due and considering the net realizable value of the
security of the loan or guarantees, if applicable. The reserve for loss on
real estate is provided for specific investments in real estate or real estate
acquired in settlement of loans where the Savings Bank's records reflect a
value for the real estate greater than the estimated net realizable value,
which is established by reviewing projected sale and costs to complete and sell
the property. The Savings Bank has established a general valuation allowance
based on the following percentage of the unpaid balance of such loans
outstanding:
Percentage of
Outstanding
Loan Type Balance
- --------- -------------
Commercial real estate loans . . . . . . . . . 1.00%
Construction loans . . . . . . . . . . . . . . 1.00%
Consumer loans . . . . . . . . . . . . . . . . 1.50%
Commercial business loans . . . . . . . . . . . 1.50%
In addition, the Savings Bank has established a policy of reserving on
the outstanding balance of certain classified assets. In general, classified
assets are defined as any asset as to where there are doubts as to the ability
of the borrower to repay or where there is a decline in the market value in the
collateral supporting a loan. The following percentages apply to the Savings
Bank's classified assets.
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<PAGE> 85
Percentage of
Outstanding
Classification Balance
- -------------- ------------
Special mention . . . . . . . . . . . . . 2.50%
Substandard . . . . . . . . . . . . . . . 5.00%
Doubtful . . . . . . . . . . . . . . . . 50.00%
Loss . . . . . . . . . . . . . . . . . . 100.00%
At September 30, 1993, the general reserves related to such loans and
classified assets was $1.2 million.
The Savings Bank has also established specific reserves on foreclosed
properties and properties subject to redemption. The Savings Bank establishes
this allowance based upon the appraised value of the property. See Note 1 to
Notes to Consolidated Financial Statements.
The Savings Bank had a 50% participation in first mortgage
loans-to-one borrower that had an original aggregate amount of $6.1 million on
111 single family condominium units, which is a portion of a 218 unit
condominium project located in Huntsville, Alabama. The participation was
entered into on February 24, 1984 and, until December 31, 1990, the loans had
paid down to approximately $2.5 million on 48 units. The loans became
delinquent at the end of January 1991 and were brought to the Savings Bank's
attention the first of February 1991, at which time the loans were classified
as non-performing due to the borrower's inability to service the debt. From
January 1991 until the Savings Bank received title to the property, two units
were sold. On May 14, 1991, the lenders accepted deeds-in-lieu of foreclosure
on each unit, after efforts to restructure the debt with the borrower failed.
The deeds-in-lieu of foreclosure represented 48 units with an outstanding
balance of approximately $2.5 million. At that time, the Savings Bank recorded
an addition to real estate owned in the amount of $1.2 million (50% of the
remaining balance). During fiscal 1993, the remaining units were sold and the
Savings Bank recorded a net gain on sale of approximately $82,000 on the 48
units.
As a result of the declines in real estate market values and the
significant losses experienced by many financial institutions there has been a
greater level of scrutiny by regulatory authorities of the loan portfolios of
financial institutions, undertaken as a part of the examinations of the
institutions by the FDIC, the OTS and other federal and state regulators.
Results of recent examinations of depository institutions indicate that these
regulators may be applying more conservative criteria in evaluating real estate
market values. While the Savings Bank believes it has established its existing
allowance for loan losses in accordance with generally accepted accounting
principles ("GAAP") at September 30, 1993, there can be no assurance that
regulators, when reviewing the Savings Bank's portfolio in the future, will not
request the
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<PAGE> 86
Savings Bank to increase its allowance for loan losses, thereby possibly
adversely affecting the Savings Bank's financial condition and earnings.
INVESTMENT ACTIVITIES
The Savings Bank is required under federal regulations to maintain a
minimum amount of liquid assets and is also permitted to invest in certain
other securities. See "Regulation of the Savings Bank -- Federal Home Loan
Bank System." The balance of the Savings Bank's investments in short-term
securities in excess of regulatory requirements reflects management's response
to the significantly increasing percentage of deposits with short-term
maturities in order to enable the Savings Bank to match more closely the
interest rate sensitivities of its assets and liabilities. However, during
periods when market interest rates are declining, the yield on such short-term
securities also declines. Investment decisions are made by authorized officers
of the Savings Bank within policies established by the Board of Directors. At
September 30, 1993, the Savings Bank's securities investment portfolio had a
book value and a market value of approximately $22.8 million and $23.9 million,
respectively, and consisted of U.S. Government obligations, federal agency
obligations and municipal bonds. In addition, in fiscal 1993, the Savings Bank
began classifying a portion of its investment portfolio as held for sale. See
Notes 2 and 3 to Consolidated Financial Statements.
At September 30,
------------------------------
1993 1992 1991
---- ---- ----
(In thousands)
Investment securities:
U.S. Government and
agency securities . . . . . . . . . $ 17,572 $ 22,635 $19,978
State, county and municipal
obligations . . . . . . . . . . . . 5,208 -- --
Common stock . . . . . . . . . . . . 1 1 1
-------- -------- -------
Total investment
securities . . . . . . . . . . . $ 22,781 $ 22,636 $19,979
Interest-bearing deposits . . . . . . 144 384 1,292
Federal Home Loan Bank
stock . . . . . . . . . . . . . . . 1,696 1,696 1,583
Mortgage-backed
securities . . . . . . . . . . . . . 76,297 77,600 68,639
-------- -------- -------
Total investments . . . . . . . . $100,918 $102,316 $91,493
======== ======== =======
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<PAGE> 87
The following table represents maturities and weighted average interest
rates on the Savings Bank's investment portfolio as of September 30, 1993.
<TABLE>
<CAPTION>
U.S. Treasury and
Other U.S. Govern-
ment Agencies Other Total
------------------- -------------------- ------------------
Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
0-1 year . . . . . . . . . . . . . . . . . . $ 4,160 6.76% $ -- --% $ 4,160 6.76%
1-5 years . . . . . . . . . . . . . . . . . . 33,942 6.71 -- -- 33,942 6.71
5-10 years . . . . . . . . . . . . . . . . . 14,058 7.40 -- -- 14,058 7.40
Over 10 years . . . . . . . . . . . . . . . . 41,709 6.05 5,208 5.50 46,917 5.99
Indefinite
maturities . . . . . . . . . . . . . . . . . 1 -- 1,840 5.15 1,841 5.15
------- ---- ------ ---- -------- ----
Total . . . . . . . . . . . . . . . . . . . $93,870 6.52% $7,048 5.41% $100,918 6.44%
======= ==== ====== ==== ======== ====
</TABLE>
SOURCES OF FUNDS
GENERAL. Deposits are the major source of the Savings Bank's funds
for lending and other investment purposes. In addition to deposits, the
Savings Bank derives funds from loan principal repayments, payments on
mortgage-backed securities, sales of loans and mortgage-backed securities and,
from time to time, advances from the FHLB of Atlanta. Loan repayments are a
relatively stable source of funds, while deposit inflows are significantly
influenced by general interest rates and money market conditions. Borrowings
may be used to compensate for reductions in the availability of funds from
other sources. They may also be used on a longer term basis for general
business purposes.
DEPOSITS. Deposits are attracted principally from within the Savings
Bank's primary market area, the Morgan, Limestone and Lawrence Counties of
North Alabama. The Savings Bank offers a broad selection of deposit
instruments including NOW accounts, money market deposit accounts, regular
passbook savings accounts, term certificate accounts, and retirement savings
plans. Deposit account terms vary, the principal differences being the minimum
balance required, the time period that the funds must remain on deposit, and
the interest rate. To date, the Savings Bank has not obtained any funds
through brokered deposits.
In recent years, the Savings Bank emphasized newly authorized types of
short-term accounts and other savings alternatives that are more responsive to
changes in market rates of interest than passbook accounts and the longer
maturity fixed-rate, fixed-term certificates that were the Savings Bank's
principal source of deposits prior to 1978. The deregulation of insured
deposits has allowed the Savings Bank to be more competitive in obtaining funds
and has given it more flexibility to meet the threat of net deposit outflows.
While the deregulation of rates on deposits has allowed
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<PAGE> 88
the Savings Bank to be competitive in the acquisition and retention of funds,
it has also resulted in a more volatile cost of funds.
Fixed-term, fixed-rate certificates are still a significant source of
new deposits for the Savings Bank, and at September 30, 1993 represented 66.2%
of the Savings Bank's savings accounts. At September 30, 1993, the Savings
Bank's deposit base contained $33.9 million in six month money market
certificates, which are the most popular of the Savings Bank's savings
certificates and which represent 15.6% of total deposits at that date.
The Savings Bank's strategy in obtaining savings deposits is to stay
competitive with commercial banks in the Savings Bank's market area. The
Savings Bank sets its deposit rates to encourage shorter maturities during
fluctuating market conditions. The Savings Bank utilizes direct mail,
television, radio, incentive programs, and newspaper advertising to help
increase deposits.
The following table sets forth the savings activities of the Savings
Bank for the periods indicated.
Year Ended September 30,
--------------------------
1993 1992 1991
---- ---- ----
(In thousands)
Deposits . . . . . . . . . . . . . . . . . . $375,116 $332,655 $286,795
Withdrawals . . . . . . . . . . . . . . . . . 377,327 340,573 281,705
-------- -------- --------
Net increase
(decrease) before
interest credited . . . . . . . . . . . . . (2,211) (7,918) 5,090
Interest credited . . . . . . . . . . . . . . 6,154 8,251 11,128
-------- -------- --------
Net increase
(decrease) before $ 3,943 $ 333 $ 16,218
interest credited . . . . . . . . . . . . . ======== ======== ========
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<PAGE> 89
Deposits in the Savings Bank as of September 30, 1993 were represented
by various types of savings programs described below.
<TABLE>
<CAPTION>
Percentage
Interest Minimum of Total
Rate* Term Category Amount Balances Savings
- ------- ---- -------- ------ -------- ----------
(In thousands, except minimum amount)
<S> <C> <C> <C> <C> <C>
1.51% None NOW Accounts $ 100 25,029 11.5%
2.79 None Passbook Accounts 100 36,939 17.0
2.88 None Money Market Accounts 1,000 11,691 5.4
3.00 90 days 90-day Passbook N/A 4 --
3.54 12 months Fixed Term, Fixed Rate 500 27,562 12.7
4.51 24 months Fixed Term, Fixed Rate N/A 2,304 1.0
4.90 30 months Fixed Term, Fixed Rate N/A 61 --
5.33 36 months Fixed Term, Fixed Rate 500 28,170 12.9
7.25 48 months Fixed Term, Fixed Rate N/A 507 .2
6.21 60 months Fixed Term, Fixed Rate 500 7,973 3.7
7.75 72 months Fixed Term, Fixed Rate N/A 17 --
8.00 96 months Fixed Term, Fixed Rate N/A 975 .4
3.99 18 months 18 Month IRA Accounts 50/500 16,098 7.4
4.09 18 months Fixed Term, Fixed Rate 500 8,402 3.9
3.24 182 days 6-month Money Market 2,500 33,936 15.6
2.72 91 days 3-month Money Market 2,500 2,051 .9
3.27 273 days 9-month Money Market 2,500 4,278 2.0
4.05 14 days Negotiated Jumbo 100,000 11,774 5.4
-------- -----
Total $217,771 100.0%
======== =====
</TABLE>
- --------------
* Represented weighted average interest rate.
N/A - not currently being offered.
Over the years, the Savings Bank has used premium campaigns using
various small houseware items to attract deposits. The campaigns were very
successful and the Savings Bank's management would consider the use of premiums
in the future as deemed appropriate by business demand.
The following table sets forth the certificates of deposit in the
Savings Bank classified by rates as of the dates indicated:
At September 30,
-------------------------------
Rate 1993 1992 1991
---- ---- ---- ----
(In thousands)
4.00% or less . . . . . . . . . . . . . . $ 91,391 $ 63,247 $ --
4.01% - 6.00% . . . . . . . . . . . . . . 43,965 63,399 76,822
6.01% - 8.00% . . . . . . . . . . . . . . 7,603 15,113 77,345
8.01% - 10.00% . . . . . . . . . . . . . 1,153 1,932 4,175
-------- -------- --------
$144,112 $143,691 $158,342
======== ======== ========
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<PAGE> 90
The following table sets forth the amount and maturities of
certificates of deposit in the Savings Bank at September 30, 1993 (in
thousands).
Less than one year $ 99,012
One year to two years 13,600
Two years to three years 24,401
After three years 7,099
---------
Total $ 144,112
=========
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<PAGE> 91
DEPOSIT FLOW. The following table sets forth the change in dollar
amount of savings deposits in the various types of savings accounts offered by
the Savings Bank between the dates indicated. It reflects the movement of
savings from traditional savings instruments, such as passbook accounts, into
accounts yielding money market rates.
<TABLE>
<CAPTION>
Balance at Balance at Balance at
September 30, % Increase September 30, % Increase September 30, %
1993 Deposit (Decrease) 1992 Deposit (Decrease) 1991 Deposit
------------- ------- ---------- ------------- ------- ---------- ------------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NOW checking
accounts . . . . . . . . $ 25,029 11.5% $ 2,517 $ 22,512 10.6% $ 3,557 $ 18,955 8.9%
Jumbo certifi-
cates . . . . . . . . . 11,774 5.4 (7,762) 19,536 9.1 (2,460) 21,996 10.3
Super NOW checking
accounts . . . . . . . . -- -- (15) 15 -- -- 15 --
Passbook and regular
savings . . . . . . . . 36,939 17.0 1,737 35,202 16.5 12,105 23,097 10.8
Money market deposit
accounts . . . . . . . . 11,691 5.4 (717) 12,408 5.8 (678) 13,086 6.1
Six month money mar-
ket certificates . . . . 33,936 15.6 (6,663) 40,599 19.0 (2,802) 43,401 20.3
Nine month money market
CDs . . . . . . . . . . 4,278 2.0 (439) 4,717 2.2 (1,017) 5,734 2.7
18, 30 and 48 month
small savers
certificates . . . . . . 8,463 3.9 (2,281) 10,744 5.0 (4,628) 15,372 7.2
Three year certif-
cates . . . . . . . . . 28,170 12.9 20,102 8,068 3.7 2,171 5,897 2.8
One year certifi-
cates . . . . . . . . . 27,562 12.7 (7,767) 35,329 16.5 (7,025) 42,354 19.8
Individual retire-
ment ("IRA")
accounts . . . . . . . . 16,098 7.4 (124) 16,222 7.6 684 15,538 7.3
Other . . . . . . . . . . 13,831 6.2 5,355 8,476 4.0 426 8,050 3.8
-------- ----- ------ -------- ----- -------- -------- -----
TOTAL . . . . . . . . . $217,771 100.0% $3,943 $213,828 100.0% $ 333 $213,495 100.0%
======== ===== ====== ======== ===== ======== ======== =====
</TABLE>
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<PAGE> 92
BORROWINGS. Savings deposits are the primary source of funds for the
Savings Bank's lending and investment activities and for its general business
purposes. The Savings Bank has also relied, from time to time, on advances
from the FHLB of Atlanta to supplement its supply of lendable funds and to meet
deposit withdrawal requirements. The FHLB has served as the Savings Bank's
primary borrowing source. Advances from the FHLB are typically secured by the
Savings Bank's stock in the FHLB and other assets of the Savings Bank. At
September 30, 1993, the Savings Bank had $17.0 million outstanding in FHLB
advances with maturities between 1993 and 1998, the proceeds of which were used
to fund the purchase of mortgage-backed securities with similar maturities to
the borrowed funds, with a positive spread to the Savings Bank of approximately
1.5%.
The FHLB of Atlanta serves as a source of credit for thrift
institutions. As a member, the Savings Bank is required to own capital stock
in the FHLB and is authorized to apply for advances on the security of such
stock and certain of its home mortgages and other assets (principally,
securities which are obligations of, or guaranteed by, the U.S.) provided
certain standards related to creditworthiness have been met. Advances are made
pursuant to several different programs. Each credit program has its own
interest rate and range of maturities. Depending on the program, limitations
on the amount of advances are based either on a fixed percentage of an
institution's net worth or on the FHLB's assessment of the institution's
creditworthiness.
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<PAGE> 93
The following table sets forth certain information regarding
short-term borrowings by the Savings Bank at the end of and during the periods
indicated.
Year Ended September 30,
----------------------------------
1993 1992 1991
---- ---- ----
(Dollars in thousands)
Maximum amount of borrowings
outstanding at any month end:
Repurchase agreements . . . . . . . $ -- $ -- $ --
Other borrowings . . . . . . . . . 22,000 18,500 --
Year Ended September 30,
-------------------------------------
1993 1992 1991
---- ---- ----
(Dollars in thousands)
Approximate average short-term
borrowings outstanding with
respect to:
Federal funds purchased and
securities sold under agree-
ments to repurchase . . . . . . $ -- $ -- $ --
Other borrowings . . . . . . . . . 3,276 8,992 --
Approximate weighted average
rate paid on:(1)
Federal funds purchased and
securities sold under agree-
ments to repurchase . . . . . . . --% --% --%
Other borrowings . . . . . . . . . 4.93 4.94 --
- ---------------
(1) Weighted average rate was computed by dividing year-to-date expense by
year-to-date average balance.
SUBSIDIARIES
The Savings Bank is permitted to invest an amount equal to 2% of its
assets in its service corporations, with an additional investment of 1% of
assets where such investment serves primarily community, inner-city and
community development purposes. Under such limitations, at September 30, 1993,
the Savings Bank was authorized to invest up to approximately $7.9 million in
the stock of, or loans to, service corporations (based upon the 3% limitation).
In addition, federal institutions meeting regulatory net worth requirements and
certain scheduled items tests may invest up to 50% of their capital in
conforming first mortgage loans to service corporations. As of September 30,
1993, the net book value of the Savings Bank's investment in its service
corporation was approximately $192,000.
Sunbelt Financial Services, Inc. ("Sunbelt"), the Savings Bank's
wholly-owned service corporation subsidiary, was incorporated on July 6, 1981
under the laws of the State of Alabama. Sunbelt was incorporated with the
purpose of taking advantage of federal regulations which permit service
corporations
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<PAGE> 94
of thrift institutions to undertake a variety of activities not permitted to
their parent thrift institutions.
In 1981, Sunbelt purchased $15,000 of common stock of the Savings and
Loan Data Corporation, Cincinnati, Ohio ("SLDC") so that SLDC could supply data
processing services for the Savings Bank. In September 1983 Sunbelt also
entered into an agreement with the Lawyers Title Insurance Corporation ("LTIC")
to provide title insurance services whereby Sunbelt would become an agent and
could write title insurance and receive the commissions on insurance premiums
paid on insured policies. Employees of Sunbelt and the Savings Bank are
authorized to countersign title insurance binders, policies and endorsements on
behalf of Sunbelt, and Sunbelt retains 60% of the commission paid as
compensation for its services to LTIC.
Sunbelt has not been involved in any joint ventures.
COMPETITION
The Savings Bank faces strong competition in the attraction of savings
deposits (its primary source of lendable funds) and in the origination of real
estate and consumer loans. Its most direct competition for savings deposits
and loans has historically come from other thrift institutions and from
commercial banks located in its primary market area in Morgan, Limestone and
Lawrence counties of the State of Alabama. Based upon total assets, at
September 30, 1993, the Savings Bank was the fifth largest thrift institution
in Alabama, out of approximately 27 FDIC-insured savings and loan associations
and savings banks located throughout the state. The Savings Bank has six
branch offices located in Morgan, Limestone and Lawrence counties in Alabama.
The Savings Bank considers all of its branch locations to be successful, with
its main office particularly enjoying a reputation as the "Hometown Savings
Bank" in the Savings Bank's market area.
The Savings Bank competes for loans primarily through the interest
rates and loan fees it charges, and the prompt, efficient, and quality service
it provides to its borrowers, real estate brokers, and home builders. During
the past three years, the Savings Bank has greatly improved its lending
capabilities and facilities. The Savings Bank has become active in the
secondary market, developed a successful consumer loan operation and added a
limited commercial loan operation. Primary competition for loans are from
other thrift institutions, commercial banks, mortgage banking companies,
insurance companies, and credit unions.
The Savings Bank, in response to increased competition, strives to be
aware and react to the needs of its customer base. This philosophy has
contributed to the Savings Bank implementing such services as credit cards
(Visa and MasterCard), travelers checks, money orders, overdraft protection and
notary service. In
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<PAGE> 95
addition, the Savings Bank has joined the Alert Network, which offers customers
statewide automatic teller machine ("ATM") availability. The Savings Bank has
also installed a "state of the art" ATM at one of its locations.
PERSONNEL
As of September 30, 1993 the Savings Bank had 92 full-time employees
and nine part-time employees. The employees are not represented by a
collective bargaining agreement. The Savings Bank believes its relationship
with its employees to be good.
REGULATION OF THE SAVINGS BANK
FEDERAL REGULATION OF SAVINGS BANKS
The OTS has extensive authority over the operations of all insured
savings associations. As part of this authority, the Savings Bank is required
to file periodic reports with the OTS District Director and is subject to
periodic examinations by the OTS and the FDIC. When these examinations are
conducted by the OTS or the FDIC, the examiners may require the Savings Bank to
provide for higher general or specific loan loss reserves. Financial
institutions in various regions of the United States have been called upon by
examiners to write down assets and to establish increased levels of reserves,
primarily as a result of perceived weaknesses in real estate values and a more
restrictive regulatory climate.
The OTS has established a schedule for the assessment of fees upon all
savings associations to fund the operations of the OTS. A schedule of fees has
also been established for the various types of applications and filings made by
savings associations with the OTS. The general assessment, to be paid on a
semi-annual basis, is computed upon the savings association's total assets,
including consolidated subsidiaries, as reported in the association's latest
quarterly thrift financial report. Savings associations that (unlike the
Savings Bank) are classified as "troubled" (i.e., having a supervisory rating
of "4" or "5" or subject to a conservatorship) are required to pay a 50%
premium over the standard assessment. The Savings Bank's assessment under the
semi-annual assessment procedure is approximately $35,000.
In addition, the investment and lending authority of the Savings Bank
is prescribed by federal laws and regulations, and the Savings Bank is
prohibited from engaging in any activities not permitted by such laws and
regulations. For instance, no savings institution may invest in corporate debt
securities not rated in one of the four highest rating categories by a
nationally recognized rating organization.
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The OTS also has extensive enforcement authority over all savings
institutions and their holding companies including the Savings Bank and the
Holding Company and their affiliated parties such as directors, officers,
employees, agents and certain other persons providing services to the
institution or holding company. This enforcement authority includes, among
other things, the ability to assess civil money penalties, to issue
cease-and-desist or removal orders and to initiate injunctive actions against
savings institutions that engage in unsound practices. Other actions or
inactions may provide the basis for enforcement action, including misleading or
untimely reports filed with the OTS. Except under certain circumstances,
public disclosure of final enforcement actions by the OTS is required. The
District Director has similar enforcement authority over the Savings Bank and
the Holding Company.
As a result of FIRREA, the Savings Bank's permissible lending limit
for loans-to-one borrower under federal law was substantially reduced from 100%
of capital to the greater of $500,000, or 15% of unimpaired capital and surplus
(except for loans fully secured by certain readily marketable collateral, in
which case this limit is increased to 25% of unimpaired capital and surplus).
At September 30, 1993, the Savings Bank's lending limit under this restriction
was $3.7 million. A broader limitation (the lesser of $30 million, or 30% of
unimpaired capital and surplus), is provided, under certain circumstances and
subject to OTS approval, for loans to develop domestic residential housing
units. In addition, the Savings Bank may provide purchase money financing for
the sale of any asset without regard to the loans-to-one borrower limitation so
long as no new funds are advanced and the Savings Bank is not placed in a more
detrimental position than if it had held the asset.
THE EFFECTS OF FIRREA
On August 9, 1989, FIRREA became law. This comprehensive law revamped
the insurance, supervisory and regulatory structure of the savings and loan
industry. Its key provisions replaced the FHLBB with the OTS, abolished the
FSLIC and vested the prior insurance responsibilities of the FSLIC in the FDIC,
removed the FHLB System from the FHLBB's jurisdiction and placed the FHLBs
under the jurisdiction of the Federal Housing Finance Board ("FHFB").
Prior to the enactment of FIRREA, the Savings Bank was regulated by
the FHLBB and the qualifying deposit accounts of the Savings Bank were insured
by the FSLIC. Pursuant to FIRREA, the Savings Bank is now regulated by the
OTS--the successor to the FHLBB--and its eligible deposit accounts (as
explained more fully below under "-- Federal Deposit Insurance Corporation")
are insured by the SAIF, a separate fund for savings associations, which is
administered and managed by the FDIC. the Savings Bank's deposits are insured
up to $100,000 per insured account (as defined by law)
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by the SAIF. This insurance is backed by the full faith and credit of the U.S.
government.
OFFICE OF THRIFT SUPERVISION
The OTS is an office in the Department of the Treasury subject to the
general oversight of the Secretary of the Treasury. Except as modified by
FIRREA, the OTS possesses the supervisory and regulatory duties and
responsibilities formerly vested in the FHLBB. Among other functions, the OTS
issues and enforces regulations affecting federally-insured savings
associations and regularly examines these institutions.
FEDERAL DEPOSIT INSURANCE CORPORATION
The FDIC is an independent federal agency established originally to
insure the deposits, up to prescribed statutory limits, of federally insured
banks and to preserve the safety and soundness of the banking industry. Upon
the enactment of FIRREA on August 9, 1989, the FDIC also became the insurer, up
to the prescribed limits, of the deposit accounts held at federally insured
savings associations and established two separate funds that are maintained and
administered by the FDIC: the Bank Insurance Fund ("BIF") and the SAIF. As
such, the FDIC has examination, supervisory and enforcement authority over all
savings associations.
FEDERAL HOME LOAN BANK SYSTEM
The FHLB System, consisting of 12 FHLBs, now is under the jurisdiction
of the FHFB. The designated duties of the FHFB are to: supervise the FHLBs;
ensure that the FHLBs carry out their housing finance mission; ensure that the
FHLBs remain adequately capitalized and able to raise funds in the capital
market; and ensure that the FHLBs operate in a safe and sound manner.
The Savings Bank, as a member of the FHLB-Atlanta, is required to
acquire and hold shares of capital stock in the FHLB- Atlanta in an amount
equal to the greater of (i) 1.0% of the aggregate outstanding principal amount
of residential mortgage loans, home purchase contracts and similar obligations
at the beginning of each year, or (ii) 1/20 of its advances (borrowings) from
the FHLB-Atlanta. the Savings Bank is in compliance with this requirement with
an investment in FHLB-Atlanta stock of $1.7 million at September 30, 1993.
Among other benefits, the FHLB provides a central credit facility
primarily for member institutions. It is funded primarily from proceeds
derived from the sale of consolidated obligations of the FHLB System. It makes
advances to members in accordance with policies and procedures established by
the FHFB and the Board of Directors of the FHLB-Atlanta. At September 30,
1993, the Savings
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Bank had $17.0 million in advances from the FHLB-Atlanta. See "BUSINESS OF THE
SAVINGS BANK -- Deposit Activities and Other Sources of Funds" and "--
Borrowings."
Under OTS regulations, a member thrift institution is required to
maintain an average daily balance of liquid assets (cash, certain time deposits
and savings accounts, bankers' acceptances, and specified U.S. government,
state or federal agency obligations and certain other investments) equal to a
monthly average of not less than a specified percentage of its net withdrawable
accounts plus short-term borrowings. This liquidity requirement, which is
currently 5.0% may be changed from time to time by the OTS depending upon
economic conditions and the deposit flows of member associations. Existing OTS
regulations also require each member institution to maintain an average daily
balance of short-term liquid assets at a specified percentage (currently 1.0%)
of the total of its net withdrawable savings accounts and borrowings payable in
one year or less. Monetary penalties may be imposed for failure to meet
liquidity requirements. The short-term and long-term liquidity ratios of the
Savings Bank at September 30, 1993 were 2.8% and 10.8%, respectively.
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), enacted in December 1991, addresses the safety and soundness of
deposit insurance funds, supervision, and other regulatory actions. The goal
of FDICIA is to reduce the overall risks within the thrift and banking system
and financial markets. Key areas relating to risk-based deposit insurance
premiums, recapitalization of SAIF, supervisory and accounting reforms, and
prompt regulatory action are summarized below. In addition, FDICIA amended the
qualified thrift lender ("QTL") test.
RECAPITALIZATION OF SAIF; INCREASED INSURANCE PREMIUMS; RISK-BASED
INSURANCE ASSESSMENT. FDICIA required the FDIC to develop a system of
risk-based insurance assessments and to maintain a designated reserve ratio for
the SAIF. The FDIC is required to establish a schedule to increase the reserve
ratio of the SAIF to 1.25% of insured deposits over a 15 year period, and must
impose higher deposit insurance premiums on SAIF members, if necessary, to
achieve that ratio. Through December 31, 1993, the assessment rate for a
SAIF-insured institution may not be less than 0.23% of the institution's
average assessment base and from January 1, 1994 through December 31, 1997, the
assessment rate for a SAIF-insured institution may not be less than 0.18% of
its average assessment base. In each case, the assessment rate may be
increased by the FDIC if the FDIC deems a higher rate to be appropriate.
FDICIA also authorized the FDIC to implement a risk-based deposit
insurance assessment system. Regulations implementing the risk-based
assessment system were adopted in June 1993 and are
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effective October 1, 1993 for the assessment period commencing January 1, 1994.
The assessment system currently in effect and which was amended by the
implementation of the final rule in June 1993, is the "transitional" risk-based
system adopted by the FDIC in September 1992 for the two semi-annual assessment
periods of 1993. The final rule made limited revisions to the transitional
system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums, ranging from .23% to .31% of
deposits, based upon their level of capital and supervisory evaluation.
Institutions classified as well capitalized (as defined below) and considered
healthy would pay the lowest premium while institutions that are less than
adequately capitalized (as defined below) and considered of substantial
supervisory concern would pay the highest premium. Risk classification of all
insured institutions will be made by the FDIC for each semi-annual assessment
period. Under the final rule, the use of "experiencing factors" will be
eliminated beginning with the assessment period commencing January 1, 1995, and
certain technical changes will be made, as necessary, by further amendments.
The financing corporations created by FIRREA and the Competitive
Equality Banking Act of 1987 ("CEBA") are also empowered to assess premiums on
savings associations to help fund the liquidation or sale of troubled savings
associations. Such premiums cannot, however, exceed the amount of SAIF
assessments and are paid in lieu thereof.
IMPROVED EXAMINATIONS AND AUDITS. In addition, FDICIA: (i) imposes
annual on-site examinations on all depository institutions except those
well-capitalized institutions with assets less than $100 million; (ii) requires
annual audits by independent public accountants for all insured institutions
with assets in excess of $500 million; (iii) requires the formation of
independent audit committees of the boards of directors of insured depository
institutions (with respect to fiscal years beginning after December 31, 1992);
(iv) imposes annual reporting obligations on management of depository
institutions that concern the preparation of financial reports and the
establishment of internal compliance procedures; (v) sets forth accounting
objectives, standards and requirements to be implemented through regulations;
(vi) requires the FDIC to establish a risk-related deposit insurance system
which would charge higher rates to those institutions which pose the greatest
risk to the insurance funds; and (vii) restricts the receipt of "brokered
deposits" and the rates of interest which may be paid on any deposits by
institutions which are not "well capitalized" (even if they meet minimum
regulatory capital requirements).
PROMPT REGULATORY ACTION. To reduce the risk of loss to the SAIF,
FDICIA provides the OTS, effective December 19, 1992, with the authority to
take prompt corrective action to resolve the
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problems of undercapitalized institutions. The extent of the OTS' authority is
based on which category, out of five specific categories, the institution falls
within. These five categories are:
"Well capitalized" - an institution that significantly exceeds the
required minimum level for each relevant capital measure (risk-based capital
ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or greater,
and a Tier 1 leverage capital ratio or 5% or greater and is not subject to a
regulatory order, agreement or directive to meet and maintain a specific
capital level for any capital measure).
"Adequately capitalized" - an institution that meets the required
minimum level for each relevant capital measure (total risk-based capital ratio
of 8% or greater, Tier 1 risk-based capital ratio of 4% or greater and a
leverage capital ratio of 3% or greater if the institution's composite rating
is 1, and absent such rating, leverage ratio of 4% or more).
"Undercapitalized" - an institution that fails to meet the required
minimum level for any relevant capital measure (total risk-based capital ratio
of less than 8% or Tier 1 risk-based capital ratio of less than 4% or leverage
ratio of less than 3% if the institution's composite rating is 1, and absent
such rating, leverage ratio of less than 4%.
"Significantly undercapitalized" - an institution that is
significantly below the required minimum level for any relevant capital measure
(total risk-based capital ratio of less than 6% or Tier 1 risk-based capital
ratio of less than 3% or leverage ratio of less than 3%).
"Critically undercapitalized" - an institution that has a ratio of
tangible equity to total assets of 2% or less, or otherwise fails to meet the
critical capital level established under section 38(c)(3)(A) of the Federal
Deposit Insurance Act ("FDIA").
Subject to limited exceptions, insured institutions in any of the
undercapitalized categories are prohibited from declaring dividends, making any
other capital distribution or paying a management fee to a controlling person.
These undercapitalized institutions are subject to certain mandatory
supervisory actions, including increased monitoring, required capital
restoration planning, and growth and acquisition restrictions. Significantly
undercapitalized institutions face even more severe restrictions such as
requiring the institution to raise additional capital; restricting transactions
between the institution and its affiliates; restricting interest rates paid on
deposits; requiring the institution to accept an offer to be acquired by
another institution or company; and requiring the institution to terminate,
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reduce or alter any activity posing excessive risk to the institution. The OTS
may require a significantly undercapitalized institution or an undercapitalized
institution that has failed to submit or implement an acceptable capital
restoration plan to comply with restrictions on activities imposed on
critically undercapitalized institutions.
In most cases, critically undercapitalized institutions must be placed
in receivership. Even where such an institution is not placed in receivership,
its activities will be severely restricted. These institutions may not enter
into any material transaction such as investment, expansion or sale of assets
without notice to the OTS; extend credit for any highly leveraged transaction;
amend its charter or bylaws; make any material change in its accounting
methods; or pay excessive compensation or bonuses. These restrictions may be
removed if the institution submits a capital restoration plan which is accepted
by the OTS and the institution fully complies with such plan.
Most significantly, regulators will generally be required to appoint a
conservator or receiver for a depository institution which is "critically
undercapitalized" (a term defined to include institutions which still have a
positive net worth).
At September 30, 1993, the Savings Bank's capital levels would result
in a determination of "well capitalized" under the prompt corrective action
regulations of FDICIA.
BROKERED DEPOSITS; INTEREST RATE LIMITATIONS. FDICIA mandates changes
in the acceptance of brokered deposits which have been proposed for
implementation by the FDIC. In general, an "undercapitalized" institution may
not accept, renew or roll over any brokered deposits. "Adequately capitalized"
institutions may request a waiver from the FDIC to do so while "well
capitalized" institutions may accept, renew or roll over such deposits without
restriction. The rule also requires registration of deposit brokers and
imposes certain recordkeeping requirements.
Institutions that are not "well capitalized" (even if meeting minimum
capital requirements) are subject to limits on rates of interest they may pay
on brokered and other deposits.
QUALIFIED THRIFT LENDER TEST. FDICIA effects certain changes to the
QTL test imposed on savings institutions. See "-- Qualified Thrift Lender
Test."
EFFECT OF FDICIA ON OPERATIONS AND FINANCIAL CONDITION OF THE SAVINGS
BANK. Since the various regulatory agencies are in the process of developing
final regulations to implement FDICIA, management of the Savings Bank cannot
predict the impact of the statute upon the financial condition and operations
of the Savings Bank. Management believes that FDICIA may subject the Savings
Bank
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to significantly increased operational costs (through higher deposit insurance
premiums and compliance costs) and, if the capital ratios of the Savings Bank
should decline significantly (an event not currently foreseen), the Savings
Bank may become subject to more severe regulatory action than was likely under
prior law and regulation.
RTC RESTRUCTURING ACT
EXTENSION OF THE RTC. The Resolution Trust Corporation's ("RTC")
ability to be appointed receiver for insolvent thrifts is extended from August
9, 1992 under current law to September 30, 1993. Furthermore, the RTC
Restructuring Act restructures the RTC and provides up to an additional $25
billion from the Secretary of the Treasury to carry out the purposes of the
RTC.
RISK-WEIGHING OF HOUSING LOANS FOR THE PURPOSES OF CAPITAL
REQUIREMENTS. The RTC Restructuring Act clarifies that certain qualifying
loans made for construction of a residence consisting of one- to four-dwelling
units and certain qualifying loans made for the purchase of multi-family rental
and homeowner properties secured by a first lien on a residence consisting of
more than four dwelling units are to be included in the 50% risk-weighted
category in calculating an institution's compliance with its risk-based capital
requirements. See "-- Capital Requirements."
OTHER. The RTC Restructuring Act also sets forth guidelines for
providing affordable housing and the use of minorities, women and small
businesses in the sale of RTC assets.
BRANCHING BY FEDERALLY CHARTERED SAVINGS BANKS
On April 2, 1992, the OTS amended its rules on branching by federally
chartered savings associations to permit nationwide branching to the extent
allowed by federal statute. This action, which became effective May 2, 1992,
permits associations with interstate networks to diversify their loan
portfolios and lines of business. OTS authority preempts any state law
purporting to regulate branching by federal savings associations.
The limitations that remain are statutory. An association may not
establish or operate a branch outside the state in which the association has
its home office if such branch would violate section 5(r) of the Home Owners'
Loan Act of 1933 ("HOLA"). This section permits a federal savings association
to branch outside its home state if (i) the association meets the domestic
building and loan test of the Code, section 7701(a)(19) or the asset
composition test of subparagraph (c) of that section, and (ii) each branch
outside of its home state also satisfies the domestic building and loan test.
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The second limitation prohibits branching that would result in the
formation of a multiple savings and loan holding company controlling savings
associations in more than one state in violation of HOLA section 10(e)(3).
There are three safe harbors for permissible multiple holding company
operations. First, a holding company may acquire an association or operate
branches in additional states pursuant to a supervisory acquisition under
section 13(k) of the FDIA. Second, holding companies that, as of March 5,
1987, controlled an association subsidiary that operated an office in an
additional state are permitted to acquire another association or branch in that
state. The third exception permits interstate holding company operations if
the law of the additional state specifically authorizes acquisition of its
federally chartered associations by federally chartered associations or their
holding companies in the state where the acquiring association or holding
company is located.
To obtain supervisory clearance for branching, an applicant's
regulatory capital must meet or exceed the minimum requirements established by
law and by OTS regulations. Section 38(e)(4) of the FDIA prohibits any
"undercapitalized" insured association from acquiring or establishing
additional branches, unless the OTS has accepted the institution's capital
restoration plan required by the law, the association is implementing the plan,
and the OTS determines that the proposed action is consistent with such plan,
or the FDIC Board of Directors determines that the proposed action will further
the purposes of the law. In addition, the institution must have a satisfactory
record under the Community Reinvestment Act.
QUALIFIED THRIFT LENDER TEST
The QTL test, as originally imposed by CEBA and OTS regulations,
required that a savings association maintain at least 60% of its total tangible
assets in "qualified thrift investments" on an average basis in three out of
every four quarters and two out of every three years. FIRREA amended the QTL
test by requiring a savings association's qualified thrift investments equal or
exceed 70% of the savings association's portfolio assets on a weekly average
for each two-year period beginning July 1, 1991. With the enactment of the
FDICIA, the QTL test has been liberalized, reducing the required investment
percentage from 70% to 65% and providing that the test be measured on a monthly
average basis in nine out of every 12 months.
For purposes of the test, portfolio assets are defined as the total
assets of the savings association minus: goodwill and other intangible assets;
the value of property used by the association to conduct its business; and
liquid assets not to exceed a certain percentage (20% under the FDICIA) of the
association's total assets.
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Under the QTL statutory and regulatory provisions, all forms of home
mortgages, home improvement loans, home equity loans and loans on the security
of other residential real estate and mobile homes as well as a designated
percentage of consumer loans are "qualified thrift investments," as are shares
of stock of a FHLB, investments or deposits in other insured institutions,
securities issued by the Federal National Mortgage Association ("FNMA"),
Federal Home Loan Mortgage Corporation ("FHLMC"), Government National Mortgage
Association or the FSLIC Financing Corporation and other mortgage-related
securities. Investments in non-subsidiary corporations or partnerships whose
activities include servicing mortgages or real estate development are also
considered qualified thrift investments in proportion to the amount of primary
revenue such entities derive from housing-related activities. Also included in
qualified thrift investments are mortgage servicing rights, whether such rights
are purchased by the insured institution or created when the institution sells
loans and retains the right to service such loans.
A savings institution that fails to become or remain a qualified
thrift lender shall either become a national bank or be subject to restrictions
specified in FIRREA. A savings institution that converts to a bank must pay
SAIF insurance assessments until December 31, 1993 and the applicable exit and
entrance fees involved in converting from one insurance fund to another. A
savings institution that fails to meet the QTL test and does not convert to a
national bank will be: (1) prohibited from making any new investment or
engaging in activities that would not be permissible for national banks; (2)
prohibited from establishing any new branch office where a national bank
located in the savings institution's home state would not be able to establish
a branch office; (3) ineligible to obtain new advances from any FHLB; and (4)
subject to limitations on the payment of dividends comparable to the statutory
and regulatory dividend restrictions applicable to national banks. Also,
beginning three years after the date on which the savings institution ceases to
be a qualified thrift lender, the savings institution would be prohibited from
retaining any investment or engaging in any activity not permissible for a
national bank and would be required to repay any outstanding advances to any
FHLB. A savings institution may requalify as a qualified thrift lender if it
thereafter complies with the QTL test.
As of September 30, 1993, the Savings Bank was in compliance with the
current QTL requirement.
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CAPITAL REQUIREMENTS
Under FIRREA and OTS regulations a savings association must satisfy
three minimum capital requirements: core capital, tangible capital and
risk-based capital. Savings associations must meet all of the standards in
order to comply with the capital requirements. The Holding Company is not
subject to any minimum capital requirements.
Core capital is defined to include common stockholders' equity,
non-cumulative perpetual preferred stock and any related surplus, and minority
interests in equity accounts of consolidated subsidiaries, less (i) any
unidentifiable intangible assets (other than limited amounts of purchased
mortgage servicing rights, supervisory goodwill and other intangibles that meet
certain salability and market valuation tests); and (ii) equity and debt
investments in subsidiaries that are not "includable subsidiaries," which is
defined as subsidiaries engaged solely in activities not impermissible for a
national bank, engaged in activities impermissible for a national bank but only
as an agent for its customers, or engaged solely in mortgage-banking
activities. With respect to investments in nonincludable subsidiaries that
were engaged in impermissible activities before April 12, 1989, 100% of the
institution's investments in and extensions of credit to the subsidiary as of
April 12, 1989 or the date of calculation, whichever is less, may be included
in capital prior to July 1, 1990; thereafter the amount that may be included is
reduced each year until July 1, 1994 when none of such investments or
extensions of credit may be included. At September 30, 1993, the Savings Bank
had no intangible assets subject to these limitations.
In calculating adjusted total assets, adjustments are made to total
assets to give effect to the exclusion of certain assets from capital and to
appropriately account for the investments in and assets of both includable and
nonincludable subsidiaries.
On September 21, 1990, the OCC issued a final rule amending the core
capital requirements applicable to national banks. Under the rule, effective
December 31, 1990, all national banks must maintain "core" or "Tier 1" capital
of at least 3% of total assets. The rule further provides that a national bank
operating at or near the 3% capital level is expected to have well-diversified
risks, including no undue interest rate risk exposure, excellent control
systems, good earnings, high asset quality, high liquidity and well managed on-
and off-balance sheet activities, and, in general, be considered a strong
banking organization with a composite 1 rating under the CAMEL rating system
for banks. For all but the most highly rated banks meeting the above
conditions, the minimum core capital ratio will be increased to up to 5% of
total assets. Pursuant to FIRREA, the OTS is required to issue capital
standards that are no less stringent than those applicable to national banks,
and in April 1991, the OTS issued a proposal to amend the
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regulatory capital regulation by revising the core capital ratio requirement.
Similar to the OCC's rule, the OTS proposal would establish a 3% core capital
ratio (defined as the ratio of core capital to adjusted total assets) for
institutions in the strongest financial and managerial condition, with a 1
MACRO rating (the OTS' rating system for savings associations). For all other
institutions, the minimum core capital ratio would be 3% plus at least an
additional 100 to 200 basis points. In determining the amount of additional
capital under the proposal, the OTS would assess both the quality of risk
management systems and the level of overall risk in each individual institution
through the supervisory process on a case-by-case basis. Institutions that
fail to meet the new core capital requirement would be required to file with
the OTS a capital plan that details the steps they will take to reach
compliance. If enacted in final form as proposed, management does not believe
that the proposed regulations will have a material impact on the Savings Bank.
Savings associations may include supervisory goodwill in capital with
the approval of the OTS, but are required to phase- out supervisory goodwill
from capital by January 1, 1995, in accordance with a phase-out schedule
included in the OTS regulations. Supervisory goodwill is defined as goodwill
resulting from the acquisition, merger, consolidation, purchase of assets or
other business combination transacted on or before April 12, 1989, of: (1) a
savings association where fair market value of assets was less than the fair
market value of liabilities at the acquisition date, or (2) a "problem
institution," as defined in the regulation. By January 1, 1995, all savings
associations must satisfy the core capital requirement without including any
supervisory goodwill. At September 30, 1993, the Savings Bank did not have any
supervisory goodwill.
Savings associations also must maintain "tangible capital" not less
than 1.5% of the Savings Bank's adjusted total assets. "Tangible capital" is
defined, generally, as core capital minus any "intangible assets."
Each savings institution must maintain total capital equal to at least
8% of risk-weighted assets. Total capital consists of the sum of core and
supplementary capital, provided that supplementary capital cannot exceed core
capital, as previously defined.
Supplementary capital includes (i) permanent capital instruments such
as cumulative perpetual preferred stock, perpetual subordinated debt, and
mandatory convertible subordinated debt, (ii) maturing capital instruments such
as subordinated debt, intermediate-term preferred stock and mandatory
redeemable preferred stock, subject to an amortization schedule, and (iii)
general valuation loan and lease loss allowances up to 1.25% of risk-weighted
assets.
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In computing both assets and total capital for purposes of the
risk-based capital ratio, the portion of land loans and nonresidential
construction loans in excess of an 80% loan-to-value ratio and equity
investments are each deducted over a phase-out period beginning July 1, 1990
through July 1, 1994, when all of such amounts must be deducted.
The risk-based capital regulation assigns each balance sheet asset
held by a savings institution to one of four risk categories based on the
amount of credit risk associated with that particular class of assets. Assets
not included for purposes of calculating capital are not included in
calculating risk-weighted assets. The categories range from 0% for cash and
securities that are backed by the full faith and credit of the U.S. government
to 100% for repossessed assets or assets more than 90 days past due.
Qualifying residential mortgage loans (including multi-family mortgage loans)
are assigned a 50% risk weight. Consumer, commercial, home equity and
residential construction loans are assigned a 100% risk weight, as are
nonqualifying residential mortgage loans and that portion of land loans and
nonresidential construction loans which do not exceed an 80% loan-to-value
ratio. In January 1993, the OTS amended its risk-weighing classifications to
remove the 200% risk weight category and reassign the items formerly in that
category to the 100% risk-weight category. This amendment was made in
connection with the Statement of Position 92-3, "Accounting for Foreclosed
Assets," issued by the American Institute of Certified Public Accountants which
mandates the use of fair value for foreclosed assets.
The book value of assets in each category is multiplied by the
weighing factor (from 0% to 100%) assigned of that category. These products
are then totalled to arrive at total risk-weighted assets. Off-balance sheet
items are included in risk-weighted assets by converting them to an approximate
balance sheet "credit equivalent amount" based on a conversion schedule. These
credit equivalent amounts are then assigned to risk categories in the same
manner as balance sheet assets and included risk-weighted assets.
Institutions that fail to meet the new capital requirements will be
required to submit a capital plan with the OTS and adhere to other capital
directives issued by their office in order to reach compliance. Management
does not believe that the current regulations will have a material impact on
the Savings Bank.
The OTS issued a final rule in August 1993 that incorporates an
interest rate risk component into the OTS's risk-based capital rule. The rule
requires that an institution with an "above normal" level of interest rate risk
(as defined in the rule) hold additional capital against interest rate
exposure. This additional capital for interest rate risk exposure would be in
excess of the 8% risk-based capital requirement. The interest rate risk
component is a dollar amount that is deducted from total capital
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for the purpose of calculating an institution's risk-based capital requirement.
The interest rate risk component is equal to one- half of the difference
between an institution's "measured exposure" and a "normal" level of exposure.
An institution's interest rate risk exposure will be measured in terms of the
sensitivity of its net portfolio value to changes in interest rates. The OTS
will calculate change in an institution's net portfolio value based on
financial submitted by the institution in its Thrift Financial Report. An
institution's "Measured Interest Rate Risk" will be expressed as the change
that occurs in its net portfolio value as a result of a 200 basis point
increase or decrease in interest rates divided by the estimated economic value
of its assets. An institution with a normal level of interest rate risk is
defined as one whose measured interest rate risk is less than 2%. Only
institutions whose measured interest rate risk exceeds 2% will be required to
maintain an interest rate risk component. The interest rate risk component
will be computed on a quarterly basis. The capital requirement for interest
rate risk purposes will have a lag period of two quarters.
The following table presents the Savings Bank's capital levels as of
September 30, 1993.
At September 30, 1993
---------------------------------
Percent of
Amount Assets
------ ----------
(Dollars in thousands)
Core capital . . . . . . . . . . $ 24,480 9.34%
Minimum required core
capital . . . . . . . . . . . . 7,863 3.00
-------- -----
Excess (short fall) . . . . . . . $ 16,617 6.34%
=====
Tangible capital . . . . . . . . $ 24,480 9.34%
Minimum required tangible
capital . . . . . . . . . . . . 3,932 1.50
-------- -----
Excess (shortfall) . . . . . . . $ 20,548 7.84%
======== =====
Risk-based capital . . . . . . . $ 25,642 18.47%
Minimum risk-based capital
requirement(1) . . . . . . . . . 11,105 8.00
-------- -----
Excess (short fall) . . . . . . . $ 14,537 10.47%
- -------------- ======== =====
(1) Risk-based capital requirement calculated by computing 8.0% of
risk-adjusted assets of $138.8 million at September 30, 1993.
DIVIDEND LIMITATIONS
OTS regulations require the Savings Bank to give the OTS 30 days'
advance notice of any proposed declaration of dividends to the Corporation, and
the OTS has the authority under its
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supervisory powers to prohibit the payment of dividends to the Corporation.
OTS regulations impose uniform limitations on the ability of all
savings associations to engage in various distributions of capital such as
dividends, stock repurchases and cash-out mergers. The regulation utilizes a
three-tiered approach which permits various levels of distributions based
primarily upon a savings association's capital level.
A Tier 1 savings association generally has capital in excess of its
fully phased-in capital requirement (both before and after the proposed capital
distribution) and has not been notified by the OTS that it is in need of more
than normal supervision. A Tier 1 savings association may make (without
application but upon prior notice to, and no objection made by, the OTS)
capital distributions during a calendar year up to 100% of its net income to
date during the calendar year plus one-half its surplus capital ratio (i.e.,
the amount of capital in excess of its fully phased-in requirement) at the
beginning of the calendar year. Capital distributions in excess of such amount
require advance approval from the OTS.
A savings association with either (i) capital equal to or in excess of
its minimum capital requirement but below its fully phased-in capital
requirement (both before and after the proposed capital distribution), or (ii)
capital in excess of its fully phased-in capital requirement (both before and
after the proposed capital distribution) but which has been notified by the OTS
that it is in need of more than normal supervision may be designated by the OTS
as a Tier 2 association. Such an association may make (without application)
capital distributions up to an amount equal to 75% of its net income during the
previous four quarters depending on how close the association is to meeting its
fully phased-in capital requirement. Capital distributions exceeding this
amount require prior OTS approval.
Tier 3 associations include savings associations with either (i)
capital below the minimum capital requirement (either before or after the
proposed capital distribution), or (ii) capital in excess of the fully
phased-in capital requirement but which has been notified by the OTS that it
shall be treated as a Tier 3 association because it is in need of more than
normal supervision. Tier 3 associations may not make any capital distributions
without prior approval from the OTS.
The Savings Bank is currently meeting the criteria to be designated a
Tier 1 association and, consequently, could at its option (after prior notice
to, and no objection made by, the OTS) distribute up to 100% of its net income
during the calendar year plus 50% of its surplus capital ratio at the beginning
of the calendar year less any distributions previously paid during the year.
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INVESTMENT RULES
Under FIRREA, the permissible amount of loans-to-one borrower now
follows the national bank standard for all loans made by savings institutions,
as compared to the pre-FIRREA rule that applied that standard only to
commercial loans made by federal savings institutions. The national bank
standard generally does not permit loans-to-one borrower to exceed 15% of
unimpaired capital and surplus. Loans in an amount equal to an additional 10%
of unimpaired capital and surplus also may be made to a borrower if the loans
are fully secured by readily marketable securities. Subsequent to December 31,
1991, all loans and extensions of credit to one borrower may not exceed 15% of
unimpaired capital and surplus, unless fully secured by readily marketable
securities. The Savings Bank believes that these provisions will not have any
material adverse effect on its lending activities.
Savings institutions and their subsidiaries may not acquire or retain
investments in corporate debt securities that at the time of acquisition were
not rated in one of the four highest rating categories by at least one
nationally recognized rating organization. Investments in a savings
institution's portfolio not meeting this requirement must be divested as
quickly as can be done on a prudent basis, but not later than July 1, 1994.
Pursuant to regulatory accounting rules, securities subject to divestment are
not to be treated as "held for sale;" however, GAAP may still require
mark-to-market accounting by virtue of the divestment requirement. The Savings
Bank does not hold any investments that must be divested under this provision.
In addition, the permissible amount of commercial real estate loans for
federal associations is reduced from the pre-FIRREA standard of 40% of assets
to an amount equal to four times capital. This limitation is not expected to
have a material adverse effect on the Savings Bank.
At September 30, 1993, the largest loans by the Savings Bank
outstanding to any one borrower, including related entities, was $2.2 million
that was secured by multi-family housing units located in the Savings Bank's
market area. These loans are performing in accordance with their terms.
ASSESSMENTS
FDIC. FIRREA amended the FDIA by establishing revised insurance
assessment rates and related FDIC procedures. The FDIC must set the annual
assessment rate for BIF members independently from the rate for SAIF members on
a semi-annual basis. SAIF assessment rates are currently .23% of domestic
deposits.
The FDIC may increase assessment rates above the scheduled levels for
either insurance fund if necessary to restore a fund's
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ratio of reserves to insured deposits to its target level within a reasonable
time. In addition, under FDICIA, the FDIC may impose special assessments on
SAIF members to repay amounts borrowed from the U.S. Treasury or for any other
reason deemed necessary by the FDIC. The FDICIA also authorized the FDIC to
implement a risk-based deposit insurance assessment system as discussed under
"-- Capital Requirements" above. Regulations implementing the risk-based
assessment system were adopted in June 1993 and become effective on October 1,
1993 for the assessment period commencing January 1, 1994. It is not
anticipated that an FDIC increase in deposit assessments would have a
materially adverse effect upon the Savings Bank.
OTS. In August 1990, the OTS issued final regulations which, among
other things, provide for the funding of the expenses of the OTS, costs of
examinations of institutions under OTS jurisdiction and the costs of processing
various applications and filings. The regulation provides for a sliding scale
asset-based assessment differentiating between troubled and non-troubled
savings associations. For the purposes of the regulation, "troubled savings
associations" are defined generally as those operating under the jurisdiction
of the RTC or with a MACRO rating of 4 or 5.
The assessments are based on a savings association's assets as reported
on its most recent consolidated Thrift Financial Report. Since 1992 the
assessments have been paid semi-annually beginning with the first assessment
based on an association's assets reported in its most recent quarterly Thrift
Financial Report. Based on the current assessment rates published by the OTS
and the Savings Bank' total assets of approximately $262.1 million at September
30, 1993, the Savings Bank will be required to pay a semi-annual assessments of
approximately $35,000 for the second half of calendar year 1993.
ACTIVITIES OF SAVINGS BANKS AND THEIR SUBSIDIARIES
FIRREA provides that, when a savings association establishes or
acquires a subsidiary or elects to conduct any new activity through a
subsidiary that the association controls, the savings association shall notify
the FDIC and the OTS 30 days in advance and provide the information each agency
may, by regulation, require. Savings associations also must conduct the
activities of subsidiaries in accordance with existing regulations and orders.
The OTS may determine that the continuation by a savings association of
its ownership control of, or its relationship to, the subsidiary constitutes a
serious risk to the safety, soundness or stability of the association or is
inconsistent with sound banking practices or with the purposes of the FDIA.
Based upon that determination, the FDIC or the OTS has the authority to order
the savings association to divest itself of control of the subsidiary. The
FDIC also may determine by regulation or order
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that any specific activity poses a serious threat to the SAIF. If so, it may
require that no SAIF member engage in that activity directly.
BROKERED DEPOSITS
FDIC regulations promulgated under FDICIA govern the acceptance of
brokered deposits by insured depository institutions. The capital position of
an institution determines whether and with what limitations an institution may
accept brokered deposits. A well capitalized institution (one that
significantly exceeds specified risk-weighted capital ratios) may accept
brokered deposits without restriction. Undercapitalized institutions (those
that fail to meet minimum regulatory capital requirements) may not accept
brokered deposits and adequately capitalized institutions (those that are not
well capitalized or undercapitalized) may only accept such deposits with the
consent of the FDIC. Adequately capitalized institutions may apply for a
waiver by letter to the FDIC.
An institution that is not "well capitalized," even if meeting minimum
capital requirements, may not solicit deposits by offering interest rates that
are significantly higher than the relevant local or national rate as determined
under the regulations.
At September 30, 1993, the Savings Bank had no brokered deposits.
ACCOUNTING AND REGULATORY STANDARDS
Under FIRREA, the OTS must prescribe uniform accounting and disclosure
standards for savings associations. The uniform accounting standards must
incorporate GAAP to the same degree that they are used to determine compliance
with federal banking agency regulations, with an exception for the phased-in
capital requirements described above. No allowance for a deviation from full
compliance with such standards may be permitted after December 31, 1993. All
regulations and policies of the OTS governing the safe-and-sound operation of
savings associations, including regulations and policies governing asset
classification and appraisals, must be no less stringent than those established
for national banks. Prior to 1994, the OTS must require full compliance by
savings associations with the accounting standards in effect under applicable
OTS regulations.
INVESTMENT PORTFOLIO POLICY
OTS supervisory policy requires that securities owned by thrift
institutions must be classified and reported in accordance with GAAP consistent
with the institution's intent to trade, hold for sale or hold for investment.
Securities "held for investment" are reported at amortized cost provided the
institution has both
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the ability and intent to hold the assets for the long term. Securities
purchased to take advantage of short-term price movements, usually a high
volume of purchases and sales, are designated as "held for trading" and are
reported at market value with unrealized gains and losses recognized in current
income. Securities holdings that do not meet the reporting criteria for either
investment or trading are classified as "held for sale" and reported at the
lower of cost or market value. The Savings Bank has adopted a reporting policy
that complies with these OTS requirements.
TRANSACTIONS WITH AFFILIATES
Pursuant to FIRREA, savings associations must comply with Sections 23A
and 23B of the Federal Reserve Act ("Sections 23A and 23B") relative to
transactions with affiliates in the same manner and to the same extent as if
the savings association were a Federal Reserve member bank. Generally,
Sections 23A and 23B: (i) limit the extent to which the insured association or
its subsidiaries may engage in certain covered transactions with an affiliate
to an amount equal to 10% of such institution's capital and surplus and place
an aggregate limit on all such transactions with affiliates to an amount equal
to 20% of such capital and surplus, and (ii) require that all such transactions
be on terms substantially the same, or at least as favorable to the institution
or subsidiary, as those provided to a non-affiliate. The term "covered
transaction" includes the making of loans, purchase of assets, issuance of a
guaranty and similar other types of transactions.
Three additional rules apply to savings associations under FIRREA: (i)
a savings association may not make any loan or other extension of credit to an
affiliate unless that affiliate is engaged only in activities permissible for
bank holding companies; (ii) a savings association may not purchase or invest
in securities issued by an affiliate (other than securities of a subsidiary);
and (iii) the OTS may, for reasons of safety and soundness, impose more
stringent restrictions on savings associations but may not exempt transactions
from or otherwise abridge Section 23A or 23B. Exemptions from Section 23A or
23B may be granted only by the Federal Reserve Board, as is currently the case
with respect to all FDIC-insured banks. The Savings Bank has not been
significantly affected by the rules regarding transactions with affiliates.
REGULATORY AND CRIMINAL ENFORCEMENT PROVISIONS
FIRREA contains several changes to existing regulatory and criminal
enforcement provisions. The major applicable provisions: expand the reach of
the depository institution regulatory agencies' civil enforcement authority to
include -- in addition to directors, officers, employees and agents -- any
"institution-affiliated party" of a depository institution; clarify and enhance
the authority of the agencies to order restitution or reimbursement in
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a cease-and-desist order; unify removal provisions by the regulators and allow
the agencies to proceed with a removal or prohibition action when an
institution has been harmed without requiring the agencies to quantify the harm
or prejudice; authorize the agencies to take enforcement actions against
culpable institution-affiliated parties who depart from an institution, within
six years of the departure date; increase the maximum amount for civil money
penalties ("CMPs") and expand the grounds for imposing them; increase the
criminal penalty up to $1 million and five years' imprisonment for violations
of a removal order; impose a three-tier level of CMPs for both failure to file
or the late filing of call reports and other information and filing any false
or misleading report or information; permit the FDIC to take particular
enforcement actions against savings associations if, after the FDIC notifies
the OTS, the OTS does not itself take such action; require publication of
formal enforcement orders issued by the agencies; shorten the period from 120
days to 30 days for agency notice for termination of deposit insurance; and
increase to 20 years the maximum prison term for the banking-related offenses
in the Federal Criminal Code.
RESERVE REQUIREMENT
In 1980, Congress enacted legislation which imposed Federal Reserve
Board reserve requirements (under "Regulation D") on all depository
institutions, including savings banks and savings and loan associations, that
maintain transaction accounts or non- personal time deposits. Checking
accounts, NOW accounts, and certain other types of accounts that permit
payments or transfers to third parties fall within the definition of
transaction accounts and are subject to Regulation D reserve requirements, as
are any non-personal time deposits (including certain money market deposit
accounts) at a savings institution. Under recent amendments to Regulation D,
an institution must maintain average daily reserves equal to 3% on the first
$43 million of transaction accounts (less a $3.8 million exclusion), plus 10%
on any amounts exceeding $43 million. These percentages are subject to
adjustment by the Federal Reserve Board. As of September 30, 1993, the Savings
Bank met its reserve requirements.
Thrift institutions also have authority to borrow from the Federal
Reserve Bank "discount window," but Federal Reserve Board policy generally
requires thrift institutions to exhaust all FHLB sources before borrowing from
the Federal Reserve System. The Savings Bank had no discount window borrowings
as of September 30, 1993.
REGULATION OF THE CORPORATION
The Corporation is a savings and loan holding company within the
meaning of the HOLA. As such, the Corporation is registered with the OTS and
subject to OTS regulations, examinations,
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supervision and reporting requirements. The Corporation is required to file
certain reports with, and otherwise comply with the regulations of, the OTS and
the Securities and Exchange Commission. As subsidiary of a savings and loan
holding company, the Savings Bank is subject to certain restrictions in its
dealings with the Corporation and with other companies affiliated with the
Corporation and also are subject to regulatory requirements and provisions as
federal institutions.
CORPORATION ACQUISITIONS
The HOLA and OTS regulations issued thereunder generally prohibit a
savings and loan holding company, without prior OTS approval, from acquiring
any other savings association or savings and loan holding company or
controlling the assets thereof. They also prohibit, among other things, any
director or officer of a savings and loan holding company, or any individual
who owns or controls more than 25% of the voting shares of such holding
company, from acquiring control of any savings association not a subsidiary of
such savings and loan holding company, unless the acquisition is approved by
the OTS.
CORPORATION ACTIVITIES
As a unitary savings and loan holding company, the Corporation
generally is not subject to activity restrictions. If the Corporation acquires
control of another savings association as a separate subsidiary, it would
become a multiple savings and loan holding company. There generally are more
restrictions on the activities of a multiple savings and loan holding company
than a unitary savings and loan holding company. Specifically, if either
federally insured subsidiary savings association fails to meet the QTL test,
the activities of the Corporation and any of its subsidiaries (other than the
Savings Bank or other federally insured subsidiary savings associations) would
thereafter be subject to further restrictions. The HOLA provides that, among
other things, no multiple savings and loan holding company or subsidiary
thereof which is not an insured association shall commence or continue for more
than two years after becoming a multiple savings and loan association holding
company or subsidiary thereof, any business activity other than: (i)
furnishing or performing management services for a subsidiary insured
institution, (ii) conducting an insurance agency or escrow business, (iii)
holding, managing, or liquidating assets owned by or acquired from a subsidiary
insured institution, (iv) holding or managing properties used or occupied by a
subsidiary insured institution, (v) acting as trustee under deeds of trust,
(vi) those activities previously directly authorized by regulation as of March
5, 1987 to be engaged in by multiple holding companies or (vii) those
activities authorized by the Federal Reserve Board as permissible for bank
holding companies, unless the OTS by regulation, prohibits or limits such
activities for savings and
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loan holding companies. Those activities described in (vii) above also must be
approved by the OTS prior to being engaged in by a multiple holding company.
AFFILIATE RESTRICTIONS
The affiliate restrictions contained in Sections 23A and 23B of the
Federal Reserve Act apply to all federally insured savings associations and any
such "affiliate." A savings and loan holding company, its subsidiaries and any
other company under common control are considered affiliates of the subsidiary
savings association under the HOLA. Generally, Sections 23A and 23B: (i) limit
the extent to which the insured association or its subsidiaries may engage in
certain covered transactions with an affiliate to an amount equal to 10% of
such institution's capital and surplus, and contain an aggregate limit on all
such transactions with all affiliates to an amount equal to 20% of such capital
and surplus, and (ii) require that all such transactions be on terms
substantially the same, or at least as favorable to the institution or
subsidiary, as those provided to a non-affiliate. The term "covered
transaction" includes the making of loans, purchase of assets, issuance of a
guarantee and similar other types of transactions. Also, a savings association
may not make any loan to an affiliate unless the affiliate is engaged only in
activities permissible for bank holding companies. Only the Federal Reserve
may grant exemptions from the restrictions of Sections 23A and 23B. The OTS,
however, may impose more stringent restrictions on savings associations for
reasons of safety and soundness.
QUALIFIED THRIFT LENDER TEST
The HOLA requires any savings and loan holding company that controls a
savings association that fails the QTL test, as explained under "Regulation of
the Savings Bank -- Qualified Thrift Lender Test," must, within one year after
the date on which the association ceases to be a QTL, register as and be deemed
a bank holding company subject to all applicable laws and regulations.
FEDERAL AND STATE TAXATION
FEDERAL TAXATION. Thrift institutions are subject to provisions of the
Code, in the same general manner as other corporations. However, institutions
such as the Savings Bank which meet certain definitional tests and other
conditions prescribed by the Code may benefit from certain favorable provisions
regarding their deductions from taxable income for annual additions to their
bad debt reserve. For purposes of the bad debt reserve deduction, loans are
separated into "qualifying real property loans," which generally are loans
secured by certain interests in real property, and "nonqualifying loans," which
are all other loans. The bad debt reserve deduction with respect to qualifying
real property loans
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may be based upon (a) actual loss experience, or (b) a percentage of taxable
income before such deduction.
The Savings Bank, which files its federal income tax returns on a
fiscal year basis, has generally elected to use the method which results in the
greatest deduction for federal income tax purposes. The Savings Bank has
historically elected to use the percentage of taxable income method.
The amount of the bad debt deduction that a thrift institution may
claim with respect to additions to its reserve for bad debts is subject to
certain limitations. First, the full deduction is available only if at least
60% of the institution's assets fall within certain designated categories.
Second, under the percentage of taxable income method the bad debt deduction
attributable to "qualifying real property loans" cannot exceed the greater of
(i) the amount deductible under the experience method or (ii) the amount which,
when added to the bad debt deduction for non-qualifying loans, equals the
amount by which 12% of the sum of the total deposits and the advance payments
by borrowers for taxes and insurance at the end of the taxable year exceeds the
sum of the surplus, undivided profits, and reserves at the beginning of the
taxable year. Third, the amount of the bad debt deduction attributable to
qualifying real property loans computed using the percentage of taxable income
method is permitted only to the extent that the institution's reserve for
losses on qualifying real property loans at the close of the taxable year does
not exceed 6% of such loans outstanding at such time. These limitations are
not expected to restrict the Savings Bank from making the maximum addition to
its bad debt reserve.
Earnings appropriated to the Savings Bank's bad debt reserve and
claimed as a tax deduction will not be allowable for the payment of cash
dividends or for distribution to shareholders (including distributions made on
dissolution or liquidation), without payment of federal income taxes on such
dividends or distributions by the Savings Bank at the then current tax rates on
the amount deemed removed. The Savings Bank would include not only the amount
actually distributed, but would also be increased (subject to certain
limitations) by the amount of the tax payable by reason of such distribution.
In February 1992, SFAS No. 109 on accounting for income taxes was
issued. SFAS No. 109 retains the comprehensive allocation objective of its
predecessors, Accounting Principles Board Opinion No. 11 and SFAS No. 96, which
is recognition of the tax consequences of a transaction or event in the period
the transaction or event is recognized in the financial statements. In
addition, as in SFAS No. 96, the measurement of deferred tax assets and
liabilities is largely determined by reference to the tax law and changes to
it; however, unlike SFAS No. 96, SFAS No. 109 requires consideration of future
events to assess the likelihood
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that tax benefits will be realized in future tax returns. SFAS No. 109 was
adopted by the Savings Bank in fiscal year 1993. Its adoption did not have a
material effect on the Savings Bank's financial statements.
STATE INCOME TAXATION. The State of Alabama imposes a 6% excise tax on
the earnings of financial institutions such as the Savings Bank. This tax is
deductible in determining federal taxable income.
The Savings Bank's federal income tax returns have been audited through
September 30, 1986. As of September 30, 1993,The Internal Revenue Service is
auditing the tax return for the year ended September 30, 1990. Management of
the Savings Bank does not anticipate any material adverse action as a result of
this audit. The Savings Bank's state excise tax returns have not been audited
by the State of Alabama over the past five fiscal years. For information
regarding federal income taxes payable by the Savings Bank, see Note 10 of the
Notes to the Consolidated Financial Statements.
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers of the Corporation as of September 30, 1993, each of whom
also holds the same positions with the Savings Bank.
Name Age(a) Position
- ---- ------ --------
William D. Powell 60 President and Chief
Executive Officer
C. Raymond Duncan 47 Senior Vice President
and Treasurer
Miles A. Wright 43 Senior Vice President and
Corporate Secretary
- -----------------
(a) As of September 30, 1993.
In addition to the above individuals, the following table sets forth
certain information with respect to the executive officers of the Savings Bank
as of September 30, 1993.
Name Age(a) Position
- ---- ------ --------
Richard E. Gowan 35 Senior Vice President
Claude Wallace
Terry, Jr. 42 Senior Vice President
Barbara A. Smothers 34 Vice President
- -----------------
(a) As of September 30, 1993.
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WILLIAM D. POWELL joined the Savings Bank in 1975, has served in
several executive positions and since July 1, 1976, and has served as the
Savings Bank's President and Chief Executive Officer. In that capacity, he is
responsible for the daily operation of the Savings Bank pursuant to the
policies and procedures established by the Board of Directors. Mr. Powell has
been elected to the Board of Directors of the FHLB of Atlanta for a two-year
term, effective January 1, 1994, to represent member institutions from the
State of Alabama. Mr. Powell was appointed by the Governor of Alabama on
August 17, 1990 to serve as a member of the state savings and loan board. Mr.
Powell served as a trustee and a member of the executive committee of the
Foundation for Savings Institutions, Inc., Washington, D.C. and served as a
Director of the Savings and Loan Data Corporation, Cincinnati, Ohio. He is
active in numerous other professional and civic organizations. Mr. Powell is a
former President of the Chamber of Commerce of Decatur and the Alabama League
of Savings Institutions.
C. RAYMOND DUNCAN serves as the Savings Bank's Senior Vice President
and Treasurer, in which capacity he is the manager of the Finance and
Accounting Division. Mr. Duncan has been employed with the Savings Bank since
1972. He is a member of the Civitan Club and several other professional and
athletic organizations.
MILES A. WRIGHT serves as Senior Vice President and Corporate
Secretary and is the Savings Bank's Compliance Officer. He has been employed
with the Savings Bank since 1974. Mr. Wright is a member of the Decatur
Chamber of Commerce, the Decatur Kiwanis Club, and serves as a Board member, a
Board member of the Morgan County Chapter of the American Red Cross and a past
President of the Mental Health Association of Morgan County.
RICHARD E. GOWAN is Senior Vice President in charge of the Consumer
Loan Department and has been with the Savings Bank since 1984. From 1979 to
1984 he was employed by ITT Financial Services as Branch Manager. Mr. Gowan is
a member of the Exchange Club of Decatur.
CLAUDE WALLACE TERRY, JR. serves as Senior Vice President and Mortgage
Loan Manager. He has been with the Savings Bank since 1979, except for one
year, 1985, when he was employed by another financial institution to start a
mortgage loan department. Mr. Terry is a member of the Decatur Lions Club and
is a deacon and treasurer of First Presbyterian Church. He is active in
various other civic organizations.
BARBARA A. SMOTHERS serves as Vice President in charge of the Banking
Operations. She has been employed with the Savings Bank since 1970, and is
active in the United Way of Morgan County. She is a resident of Moulton,
Alabama.
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ITEM 2. PROPERTIES
The following table sets forth the location of the Savings Bank's
offices and other facilities as well as certain additional information relating
to these offices and facilities as of September 30, 1993.
Total Net Book Owned/
Location Investment Value Leased
- -------- ---------- ------- ------
(Dollars in thousands)
Home Office: $4,515 $2,839 Owned
255 Grant Street, S.E.
Decatur, Alabama 35601
Athens: 799 383 Owned
520 South Jefferson Street
Athens, Alabama 35611
Sixth Avenue: 656 237 Owned
1737 Sixth Avenue, S.E.
Decatur, Alabama 35601
Hartselle: 370 128 Owned
301 U.S. Highway
Hartselle, Alabama 35640
Moulton: 717 557 Owned
Alabama Highway 24 East
Moulton, Alabama 35601
Beltline: 511 265 Owned
1825 Beltline Road, S.W.
Decatur, Alabama 35601
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In fiscal 1993, the Savings Bank remodeled its Grant Street and
Moulton locations at a cost of approximately $1.3 million and $400,000,
respectively.
In January 1993, the Savings Bank sold its loan agency office located
at 306 Fourth Avenue, S.E., Decatur, Alabama 35601 with a resulting loss on
sale of approximately $19,000.
The Savings Bank purchased a 2.15 acre tract on Highway 67 in Decatur,
Alabama in 1978 which had a net book value of $57,000 at September 30, 1993.
At the time this property was purchased, the Savings Bank had plans to build a
branch office at that location; however, this area has not developed as
expected and plans for a branch office have been discontinued at this time.
The Savings Bank uses an outside data processing firm to process
mortgage loans, consumer loans, certificates of deposit, savings accounts and
checking accounts.
The net book value of the Savings Bank's investment in premises and
equipment less accumulated depreciation and amortization totaled approximately
$4.5 million at September 30, 1993.
ITEM 3. LEGAL PROCEEDINGS
Although the Savings Bank is, from time to time, involved in various
legal proceedings in the normal course of business, there are no material
pending legal proceedings to which the Savings Bank or any subsidiary is a
party, or to which any of their property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended September 30, 1993.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information contained under the caption "Capital Stock" in the
Corporation's Annual Report to Stockholders for the year ended September 30,
1993 ("Annual Report") is incorporated herein by reference.
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ITEM 6. SELECTED FINANCIAL DATA
The information contained in the section captioned "Selected Financial
and Other Data" in the Corporation's Annual Report is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
the Annual Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements contained in the Annual Report which are
listed under Item 14 herein are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No disagreement with the Corporation's independent accountants on
accounting and financial disclosure has occurred during the past 24 months.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained under the section captioned "Proposal I --
Election of Directors" in the Corporation's definitive proxy statement for the
Corporation's 1994 Annual Meeting of Stockholders ("Proxy Statement") is
incorporated herein by reference. Information concerning the executive
officers of the Corporation is included under separate caption in Part I of
this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the section captioned "Proposal I --
Election of Directors" in the Proxy Statement is incorporated herein by
reference.
-58-
<PAGE> 123
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
Information required by this item is incorporated herein by
reference to the section captioned "Voting Securities and
Principal Holders Thereof" of the Proxy Statement.
(b) Security Ownership of Management
Information required by this item is incorporated herein by
reference to the sections captioned "Proposal I -- Election of
Directors" and "Voting Securities and Principal Holders
Thereof" of the Proxy Statement.
(c) Changes in Control
The Corporation is not aware of any arrangements, including
any pledge by any person of securities of the Corporation, the
operation of which may at a subsequent date result in a change
in control of the Corporation.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by
reference to the section captioned "Proposal I -- Election of Directors" of the
Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The Consolidated Financial Statements and Auditors' Report,
listed below, are included in the Annual Report and incorporated herein by
reference.
1. Auditors' Report.
2. Consolidated Statements of Financial Condition at
September 30, 1993 and 1992.
3. Consolidated Statement of Income for the Years Ended
September 30, 1993, 1992 and 1991.
4. Consolidated Statements of Stockholders' Equity for the
Years Ended September 30, 1993, 1992 and 1991.
5. Consolidated Statements of Cash Flows for the Years
Ended September 30, 1993, 1992 and 1991.
-59-
<PAGE> 124
6. Notes to Consolidated Financial Statements.
(a)(2) All schedules have been omitted as the required information is
either inapplicable or included in the Notes to Consolidated Financial
Statements.
(a)(3) The following exhibits are either filed or attached as part of
this report or are incorporated herein by reference.
Exhibit No. 13 - 1993 Annual Report to Stockholders.
Exhibit No. 22 - Subsidiaries of the Registrant.
(b) No Reports on Form 8-K have been filed during the last quarter
of the fiscal year covered by this report.
(c) Exhibits to this Form 10-K are attached or incorporated by
reference as stated above.
(d) None.
-60-
<PAGE> 125
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
13 1993 Annual Report to Stockholders
22 Subsidiaries of the Registrant
<PAGE> 126
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
BANCFIRST CORPORATION
Date: December 29, 1993 By: /s/ William D. Powell
-------------------------------
William D. Powell
President, Chief Executive
Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
/s/ William D. Powell /s/ Newton B. Powell
- ---------------------------- ---------------------------
William D. Powell Newton B. Powell
President, Chief Executive Director
Officer and Director
(Principal Executive Officer) Date: December 29, 1993
Date: December 29, 1993
/s/ Luther E. Roberts
----------------------------
/s/ C. Raymond Duncan Luther E. Roberts
- ---------------------------- Director
C. Raymond Duncan
Senior Vice President and Date: December 29, 1993
Treasurer
(Principal Financial and
Accounting Officer)
/s/ Ernest M. Smith, Jr.
Date: December 29, 1993 ----------------------------
Ernest M. Smith, Jr.
Director
/s/ James E. Horton, Jr. Date: December 29, 1993
- ----------------------------
James E. Horton, Jr.
Chairman of the Board
/s/ Dr. W. David White
Date: December 29, 1993 ----------------------------
Dr. W. David White
Director
Date: December 29, 1993
<PAGE> 127
EXHIBIT NO. 13
1993 ANNUAL REPORT TO STOCKHOLDERS
<PAGE> 128
1993 ANNUAL REPORT
BANCFIRST
CORPORATION
BNF
<PAGE> 129
BANCFIRST CORPORATION is a holding company, the principal subsidiary of which
is BANKFIRST, a federal savings bank. BANCFIRST was formed in 1991. The
Company's stock is traded on the American Stock Exchange under the symbol BNF.
The Company will changes its corporate name to BNF BANCORP, INC. effective
February 28, 1994.
BANKFIRST is a federally chartered savings bank and was founded in 1912. It is
the fifth largest thrift in Alabama with assets of $267.1 million at September
30, 1993.
BANKFIRST provides customers with many banking services. These include
checking and savings accounts, certificates of deposit, and commercial and
consumer loans, while emphasizing its traditional strength in making first
mortgage loans secured by one- to four-family residential properties through
its six full-service offices located throughout north-central Alabama.
TABLE OF CONTENTS
Shareholders' Letter . . . . . . . . . . . . 1
Management's Discussion & Analysis of
Financial Condition & Results of
Operations . . . . . . . . . . . . . . . . . 2
Selected Financial Data . . . . . . . . . . . 9
Consolidated Financial Statements . . . . . . 10
Notes to Consolidated Financial Statements . 15
Independent Auditors' Report . . . . . . . . 24
Directors and Officers . . . . . . . . . . . 25
Corporate Data . . . . . . . . . . . . . . . 25
<PAGE> 130
We are pleased to report that 1993 was BANCFIRST's most profitable year
of operations since our founding in 1912. Our excellent results were due to
higher net interest income, excellent asset quality and the continued hard work
from out entire employee team at BANCFIRST.
RECORD OPERATING RESULTS
Bancfirst reported record net interest income and net income in fiscal
1993. Net interest income after provision for loan losses increased 15% to
$11.2 million, and net income rose almost 21% to $4.1 million, or $2.23 per
share, compared with fiscal 1992.
Our record earnings benefited from an increase in our net interest
margin to 4.12%, up from 3.86% last year. This contributed to our record 14.16%
return on average equity and 1.54% return on average assets for fiscal 1993.
We believe our results compare very favorably with the top performing banks in
our region.
Our improved earnings performance permitted our Board of Directors to
raise our quarterly cash dividend to $0.16 per share during fiscal 1993. We
are pleased that the continuation of strong earnings at BANCFIRST has allowed
us to increase our cash dividend in each of the last four years.
STRONG ASSET QUALITY
Our asset quality remained very strong in fiscal 1993 as evidenced by
our non-performing assets totaling less than 0.01% of assets at year end.
Non-performing loans declined 97% to only $20,000 at September 30, 1993. We
increased our reserve for loan losses by 12% to $1.2 million in fiscal 1993,
providing additional protection for our asset base. BANCFIRST's conservative
lending practices and our strong local economy were primary factors in our low
loan losses.
CHANGING OUR NAME TO BNF BANCORP, INC.
We plan to change our corporate name to BNF Bancorp, Inc. in February
1994, pending shareholder approval. We decided to change our name to avoid any
possible confusion with another financial institution with the same name
located in a different state. This change will not affect the name of our
savings bank, BANKFIRST, nor will it affect our American Stock Exchange symbol
"BNF."
NEW PRODUCT DELIVERY SYSTEM
We undertook a major review of our operations in fiscal 1993 to
identify areas for possible improvement. At year end, we implemented new
accounting and data processing systems that are expected to be more efficient
and increase our capacity to handle more business in the future. We anticipate
these new systems will improve our product delivery systems, a key component in
making BANCFIRST a leader in providing quality financial services.
<PAGE> 131
OUTLOOK FOR THE FUTURE
We are pleased with our record performance in fiscal 1993. Our Board
of Directors and employees are dedicated to building long-term value in your
Company. To accomplish this goal, we will continue to focus on improving
earnings, maintaining asset quality and managing non-interest expenses.
We appreciate your interest and investment in BANCFIRST, and we look
forward to reporting our progress in fiscal 1994.
William D. Powell
President and Chief Financial Officer
<PAGE> 132
GENERAL
BANCFIRST Corporation ("BANCFIRST") is a savings and loan holding
company which owns 100% of the outstanding shares of common stock of BANKFIRST,
a federal savings bank ("BANKFIRST"). Other than it's investment in BANKFIRST,
at September 30, 1993, BANCFIRST had approximately $5.4 million in total assets
consisting principally of investments and mortgage-backed securities. The
consolidated operations of BANCFIRST and BANKFIRST are collectively referred to
herein as "the Bank".
The Bank's net income for the year ended September 30, 1993 increased
to $4,087,000 from the $3,383,000 reported for fiscal 1992. The Bank's
operating results are affected by the different components of its income. The
primary component of the Bank's income is net interest income which is the
difference between interest earned on loans and investments, and interest paid
on deposits and other borrowings. Interest earned on loans and investments is
a function of the average balance of loans and investments during the period
and the average rates earned. The cost of funds is a function of the average
balance of deposits and other borrowings outstanding during the period and the
average rates paid on these balances. The interest rate spread (difference
between weighted average yield on interest-earning assets and interest-bearing
liabilities) was 4.12% for fiscal 1993, 3.86% for fiscal 1992 and 2.98% for
fiscal 1991.
INTEREST RATE SENSITIVITY
The yield earned on the Bank's assets generally adjusts more slowly to
changes in interest rates than the cost of deposits and other borrowings, which
are more short-term in nature. Therefore, the Bank has developed a formal
interest rate risk management policy in response to the problems the Bank and
the entire industry have encountered with regard to this mismatch in maturities
and the volatility of interest rates. The Bank now makes primarily adjustable
rate mortgage ("ARM") loans, 15-year fixed rate loans, and short-term consumer
and commercial loans. These ARM loans have rate limitations, generally capped
at 4-6% above the initial rate. The Bank continues to make some 30-year fixed
rate loans; however, these loans are either sold immediately in the secondary
market or are held for longer periods when yields are considered attractive.
Such loans are classified as held for sale. Loans and mortgage-backed
securities which were other than long-term, fixed rate were $129.4 million at
the end of fiscal 1993 compared to $111.2 million at the end of fiscal 1992 and
$119.5 million at the end of fiscal 1991.
The Bank has maintained a relatively conservative posture and has not
participated in the purchase of deposits from brokers. The Bank was not
willing to pay the high rates on deposits some institutions were paying when
rates were higher, and recently has not been willing to pay the higher rates
necessary to retain some jumbo certificates. The Bank's generally conservative
pricing strategy has allowed the Bank to avoid having a large number of costly
deposits that cannot be safely and profitably invested. This has been a key
factor in the Bank's ability to maintain and improve profitability. In
addition, the Bank's conservative lending policy has enabled the Bank to avoid
having significant amounts of real estate owned and repossessed assets.
<PAGE> 133
Management of the Bank knows of no trends or uncertainties that would
have a significant adverse effect on the financial condition of the Bank.
ASSET QUALITY
As of September 30, 1993, the Bank had an allowance for possible loan
losses of $1,162,000. Actual loan charge-offs against the allowance were
$23,000 for fiscal 1993, $13,000 for fiscal 1992 and $210,000 for fiscal 1991.
Management of the Bank believes that the existing allowance will be adequate to
cover possible loan losses which may result from loans held as of September 30,
1993 upon which management has serious doubts as to collectibility. As of
September 30, 1993, the Bank had no real estate owned or repossessed assets.
INVESTMENTS AND MORTGAGE-BACKED SECURITIES
Certain investment and mortgage-backed securities that Management has
both the ability and intent to hold to maturity are carried at cost, including
accretion of discounts and amortization of premiums. Other investments and
mortgage-backed securities that may be held for indefinite periods of time,
including securities that will be used as a part of Management's
asset/liability management strategy or those securities that may be sold in
response to changing interest rates, pre-payment risks, or other similar
economic factors, are classified as "held for sale". These securities are
carried at lower of cost or market. Any sales of such securities would be
recognized based on the specific identification method. The Bank has no
trading account securities and has not engaged in such short-term transactions.
Included in the carrying value of mortgage-backed securities held for
investment at September 30, 1993 was $8,000 of unearned discounts and $60,000
of unamortized premiums. Included in the carrying value of mortgage-backed
securities held for sale at September 30, 1993 was $77,000 of unearned
discounts and $1,176,000 of unamortized premiums. Gross unrealized gains and
gross unrealized losses on mortgage-backed securities held for investment were
$178,000 and $37,000, respectively at September 30, 1993. Gross unrealized
gains and gross unrealized losses on mortgage-backed securities held for sale
were $1,352,000 and $13,000, respectively at September 30, 1993. Gross
unrealized gains and gross unrealized losses on investment securities held for
investment were $346,000 and $-0-, respectively at September 30, 1993. Gross
unrealized gains and gross unrealized losses on investment securities held for
sale were $736,000 and $10,000, respectively at September 30, 1993.
For the years ended September 30, 1993, 1992 and 1991, proceeds from
sales of mortgage-backed securities were $4.4 million, $9.4 million and $2.9
million, respectively, resulting in realized gains of $86,000, $87,000 and
$6,000, respectively and realized losses of $86,000, $8,000 and -0-,
respectively. For the years ended September 30, 1993, 1992 and 1991, proceeds
from sales of investment securities were $7.0 million, $8.6 million and $18.3
million, respectively, resulting in realized gains of $28,000, $55,000 and
$43,000, respectively, and realized losses of -0-, -0-, and $40,000,
respectively.
<PAGE> 134
LIQUIDITY AND CAPITAL RESOURCES
BANKFIRST is required under applicable federal regulations to maintain
specified levels of cash and "liquid" investments in qualifying types of United
States Treasury and Federal Agency securities, and other investments generally
having maturities of five years or less. Such investments serve as a source of
funds upon which BANKFIRST may rely to meet deposit withdrawals and for other
short-term needs. The required level of such investments is calculated on a
"liquidity base", consisting of net withdrawable accounts plus borrowings
payable on demand or with maturities of one year or less. Management's
objective continues to include maintaining short-term liquidity and total
liquidity substantially in excess of the required regulatory amounts of 1% and
5%, respectively, of net deposits and short-term borrowings in order to provide
greater flexibility and to better match maturities of BANKFIRST's liabilities.
At September 30, 1993, BANKFIRST's short-term liquid assets represented 2.8% of
its liquidity base and total liquid assets represented 10.8% of its liquidity
base.
The Bank's principal sources of funds for lending and other purposes
are deposits, FHLB advances, and principal and interest payments on loans,
mortgage-backed securities and investments. The Bank's new deposits amounted
to $375.1 million, $332.7 million, and $286.8 million for fiscal 1993, 1992 and
1991, respectively. Repayments and maturities of loans and mortgage-backed
securities approximated $86.7 million, $72.0 million, and $47.0 million in
fiscal 1993, 1992, and 1991, respectively. Sales of loans and mortgage-backed
securities amounted to $13.3 million, $13.5 million, and $7.9 million for
fiscal 1993, 1992, and 1991, respectively. Sales and maturities of investments
amounted to $7.2 million, $8.6 million, and $18.3 million for fiscal 1993, 1992
and 1991, respectively.
The principal uses of the Bank's funds are the origination of mortgage
and other loans, the purchase of loans and mortgage-backed securities, the
purchase of investments, the payment of interest and dividends, withdrawals
from savings deposits, and the payment of operating expenses. During fiscal
1993, the Bank originated $80.1 million in loans compared with $68.3 million in
fiscal 1992, and $40.9 million in fiscal 1991. Loans and mortgage-backed
securities purchased were $26.9 million, $35.8 million, and $41.2 million for
the years ended September 30, 1993, 1992, and 1991, respectively. Purchases of
investments amounted to $7.4 million, $11.4 million and $9.9 million for fiscal
1993, 1992, and 1991. During fiscal 1993, the Bank paid dividends totaling
$1.1 million, or $.62 per share. Withdrawals of deposits from the Bank
amounted to $377.0 million, $340.6 million and $281.7 million for fiscal 1993,
1992, and 1991.
At September 30, 1993, Management believes that the Bank's liquidity
and other sources of funds are sufficient to fund outstanding loan and letter
of credit commitments of $14.1 million.
NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In May, 1993, SFAS No. 114, Accounting by Creditors for Impairment of a
Loan, was issued. SFAS No. 114 provides guidance on recognition of impairment
of a loan as well as methods for measurement of impairment. The Bank will be
required to adopt SFAS No. 114 for the fiscal year beginning October 1, 1995.
The impact of this adoption on the Bank's consolidated financial statements is
not presently determinable.
<PAGE> 135
Also in May, 1993, SFAS No. 115, Accounting for Certain Investments in
Debt and Equity Securities, was issued. SFAS No. 115 requires Management to
classify its investment portfolio into three categories: (i) held-to-maturity,
(ii) available-for-sale and (iii) trading securities, and sets forth specific
criteria for making these classifications. Under SFAS No. 115 unrealized
holding gains and losses for trading securities are included in earnings while
unrealized holding gains and losses for available-for sale securities are
reported as a separate component of stockholders' equity, net of tax effects,
until realized. Held-to-maturity securities continue to be recorded at their
amortized cost. Portfolio additions beyond the date of adoption of this
statement are to be classified into the appropriate category when purchased.
The Bank will be required to adopt SFAS No. 115 for the fiscal year beginning
October 1, 1994. Early adoption is permitted and Management is evaluating that
option. The impact of adoption is not presently determinable due to the
potential for changes in the market values of the affected securities.
CAPITAL REQUIREMENTS
During fiscal 1989, the Financial Institutions Reform, Recovery, and
Enforcement Act ("FIRREA") was enacted. FIRREA creates various new
requirements and regulations for financial institutions, including capital
requirements. FIRREA is discussed in Notes 4 and 11 to the consolidated
financial statements. As discussed therein, BANKFIRST's core capital, tangible
capital, and risk-based capital are all substantially in excess of
requirements, and Management believes that, under current regulations,
BANKFIRST will continue to exceed its minimum capital requirements in the
coming year.
RESULTS OF OPERATIONS
The Bank's profitability continues to be above industry averages. The
Bank's net income, net interest income, earnings per share, interest rate
spread and cumulative gap position all improved in fiscal 1993. The various
factors affecting this improvement are shown and discussed in the comparisons
of operating results below.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED SEPTEMBER 30, 1993 (FISCAL
1993) AND SEPTEMBER 30, 1992 (FISCAL 1992)
NET INCOME
Net income increased from $3,383,000 for fiscal 1992 to $4,087,000 for
fiscal 1993, a 20.8% increase. Earnings per share increased from $1.88 to
$2.23 per share. The interest rate margin increased from 3.86% to 4.12%. This
increase is primarily attributable to a decrease in the Bank's cost of funds,
which is due in part to the fact that interest rates in general declined during
fiscal 1993.
INTEREST INCOME
Interest on loans decreased $719,000 or 5.2% due to a decrease in the
average yield from 9.68% to 8.75% and is offset by an increase in the average
size of the loan portfolio. Interest
<PAGE> 136
on mortgage-backed securities decreased $545,000 or 9.8% due to a decrease in
average yield from 7.50% to 6.47% and is offset by a 4.6% increase in average
volume. Interest and dividends on investments and other interest-earning
assets increased $10,000 or 0.6% due to an increase in average volume of 8.7%
and is offset by a 6.4% decrease in average rate.
INTEREST EXPENSE
Interest expense on deposits decreased $2,658,000 or 25.3% due almost
entirely to a decrease in the average rate paid on deposits from 4.88% to
3.63%. Interest expense on borrowed funds increased $409,000 due to increased
use of advances from the Federal Home Loan Bank.
PROVISION FOR LOAN LOSSES
Based on Management's evaluation, which included a review of all loans
where full collectibility may be questionable and in consideration of the
estimated market value of the underlying collateral, an allowance for loan
losses has been established. The provision for loan losses added during fiscal
1993 was $150,000, compared to a provision of $608,000 in fiscal 1992. The
increased provision is due primarily to Management's desire, considering the
uncertain economy, to build its reserves to a more conservative level, thereby
reducing significantly the risk of having to record loan losses in the future
on existing loans for which no reserve had been provided. At September 30,
1993, the allowance for loan losses amounted to $1,162,000.
OTHER INCOME
Total other income decreased $58,000 or 4.4%. This decrease is due
primarily to the fact that there were no net gains on the sale of loans in
fiscal 1993 compared to $79,000 in fiscal 1992.
OTHER EXPENSES
Total other expenses increased $464,000 or 8.6%. Salaries and employee
benefits increased $198,000 or 8.2% due to merit salary increases which
averaged 5% and an increase in the number of employees due to the increased
volume of business at the Bank. Data processing expenses increased $150,000 in
fiscal 1993 as a result of additional expenses incurred to implement the Bank's
computer system conversion.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED SEPTEMBER 30, 1992 (FISCAL
1992) AND SEPTEMBER 30, 1991 (FISCAL 1991)
NET INCOME
Net income increased from $2,386,000 for fiscal 1991 to $3,383,000 for
fiscal 1992, a 41.8% increase. Earnings per share increased from $1.34 to
$1.88 per share. The interest rate margin increased from 2.98% to 3.86%. This
increase is primarily attributable to a decrease in
<PAGE> 137
the Bank's cost of funds, which is due in part to the fact that interest rates
in general declined during fiscal 1992.
INTEREST INCOME
Interest on loans decreased $557,000 or 3.9% due to a decrease in the
average yield from 10.30% to 9.68% and is offset by an increase in the average
size of the loan portfolio. Interest on mortgage-backed securities increased
$730,000 or 15.1% due to a 28.1% increase in average volume and is offset by a
decrease in average yield from 8.62% to 7.50%. Interest and dividends on
investments and other interest-earning assets decreased $246,000 or 12.1% due
almost entirely to a decrease in average yield from 8.06% to 7.03%.
INTEREST EXPENSE
Interest expense on deposits decreased $3,029,000 or 22.4%. This
decrease is due to a decrease in the average rate paid on deposits from 6.64%
to 4.88% and is partially offset by a 4.1% increase in average volume of
deposits. Interest expense on borrowed funds increased $444,000 due to the
utilization of advances from the Federal Home Loan Bank, while there were no
such advances in the previous year.
PROVISION FOR LOAN LOSSES
The provision for loan losses added during fiscal 1992 was $608,000,
compared to a provision of $426,000 in fiscal 1992. The reason for the
increased provision for 1992 is discussed in the previous comparison. At
September 30, 1992, the allowance for loan losses amounted to $1,035,000.
OTHER INCOME
Total other income increased $274,000 or 26.2%. This increase is due
almost entirely to the fact that the Bank has increased its fees and service
charges on deposits and existing loans.
OTHER EXPENSES
Total other expenses increased $643,000 or 13.5%. Salaries and
employee benefits increased $308,000 or 14.5% due to merit salary increases
which averaged 5% and an increase in the number of employees due to the
increased volume of business at the Bank. Marketing and public relations
expenses increased $194,000 in fiscal 1992 in efforts to continue to promote a
positive image of the Bank. Professional fees increased $153,000 due primarily
to increased use of consultants by the Bank for various projects.
<PAGE> 138
YIELDS EARNED AND RATES PAID
The following table sets forth for the periods and at the dates
indicated, the weighted average yields earned on the Bank's assets, the
weighted average interest rates paid on the Bank's liabilities, together with
the interest rate spread and net yield on interest-earning assets.
<TABLE>
<CAPTION>
At September 30, Years ended September 30,
---------------- --------------------------------
1993 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average yield on:
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 8.53% 8.75% 9.68% 10.30%
Mortgage-backed securities . . . . . . . . . . . . . . . 5.58 6.47 7.50 8.62
Investment securities . . . . . . . . . . . . . . . . . . 6.46 6.52 7.03 8.06
Other interest-earning assets . . . . . . . . . . . . . . 6.28 5.95 6.98 7.61
All interest-earning assets . . . . . . . . . . . . . . . 7.45 7.85 8.74 9.62
Weighted average rate paid on:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . 3.44 3.63 4.88 6.64
FHLB advances . . . . . . . . . . . . . . . . . . . . . . 5.49 4.93 4.94 --
All interest-bearing liabilities . . . . . . . . . . . . 3.60 3.73 4.88 6.64
Interest rate spread (spread between
weighted average yield on all
interest-earning assets and all
interest-bearing liabilities) . . . . . . . . . . . . . . 3.85 4.12 3.86 2.98
Net yield (net interest income as
a percentage of average
interest-earning assets) . . . . . . . . . . . . . . . . 4.17 4.44 4.24 3.52
</TABLE>
<PAGE> 139
RATE/VOLUME ANALYSIS
The table below sets forth certain information regarding changes in
interest income and interest expense of BANCFIRST for the periods indicated.
For each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to 1) changes in volume
(changes in volume multiplied by old rate), and 2) changes in rates (changes in
rate multiplied by old volume). The net change attributable to the combined
impact of volume and rate has been allocated proportionately to the change due
to volume and the change due to rate. Dollars are in thousands.
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------------------------------------------------------------------------
1993 vs. 1992 1992 vs. 1991
Increase (Decrease) Increase (Decrease)
Due To Due to
---------------------------------------------------------------------------------------------
Volume Rate Total Volume Rate Total
------ ---- ----- ------ ---- -----
Total
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans and mortgage-backed
securities . . . . . . . . . $587 $ (1,851) $ (1,264) $2,005 $ (1,832) $ 173
Investments and other . . . . . 145 (135) 10 40 (286) (246)
--- ------- ------- ----- ------- -----
Total interest-earning assets 732 (1,986) (1,254) 2,045 (2,118) (73)
--- ------- ------- ----- ------- -----
INTEREST EXPENSE:
Deposits . . . . . . . . . . . 33 (2,691) (2,658) 719 (3,748) (3,029)
Borrowed funds . . . . . . . . 394 15 409 444 -- 444
--- ------- ------- ----- ------- -------
Total interest-bearing
liabilities . . . . . . . . 427 (2,676) (2,249) 1,163 (3,748) (2,585)
--- ------- ------- ----- ------- -------
Net interest income . . . . . . $305 $ 690 $ 995 $ 882 $ 1,630 $ 2,512
==== ======== ======== ====== ======== ========
<CAPTION> Year Ended September 30,
----------------------------------------------------
1991 vs. 1990
Increase (Decrease)
Due To
---------------------------------------------------
Volume Rate Total
------ ---- -----
Total
<S> <C> <C> <C>
INTEREST INCOME:
Loans and mortgage-backed $ 1,987 $ (179) $ 1,808
securities . . . . . . . . . (1,492) (90) (1,582)
Investments and other . . . . . ------- ----- -------
495 (269) 226
Total interest-earning assets ------- ----- -------
INTEREST EXPENSE:
71 (1,296) (1,225)
Deposits . . . . . . . . . . . -- -- --
Borrowed funds . . . . . . . . ------- ------- -------
Total interest-bearing 71 (1,296) (1,225)
liabilities . . . . . . . . ------- ------- -------
$ 424 $ 1,027 $ 1,451
Net interest income . . . . . . ======= ======== ========
</TABLE>
<PAGE> 140
BANCFIRST CORPORATION AND SUBSIDIARY
Consolidated Statements Of Financial Condition
as of September 30, 1993 and 1992 and Consolidated
Statements of Income, Stockholders' Equity and Cash
Flows for Each of the Three Years Ended September 30,
1993 and Independent Auditors' Report
<PAGE> 141
<TABLE>
<CAPTION>
BANCFIRST CORPORATION AND SUBSIDIARY
TABLE OF CONTENTS
- -------------------------------------------------------------------------------------------
PAGE
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
CONSOLIDATED STATEMENTS OF:
Financial Condition as of September 30, 1993 and 1992 2-3
Income for the Years Ended September 30, 1993, 1992 and 1991 4-5
Stockholders' Equity for the Years Ended September 30, 1993, 1992 and 1991 6
Cash Flows for the Years Ended September 30, 1993, 1992 and 1991 7-8
Notes to Consolidated Financial Statements 9-25
</TABLE>
<PAGE> 142
INDEPENDENT AUDITORS' REPORT
Board of Directors of BANCFIRST Corporation
Decatur, Alabama
We have audited the accompanying consolidated statements of financial condition
of BANCFIRST Corporation and its wholly-owned subsidiary, BANKFIRST, a federal
savings bank, as of September 30, 1993 and 1992 and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years ended September 30, 1993. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of BANCFIRST Corporation and
subsidiary as of September 30, 1993 and 1992 and the results of their
operations and their cash flows for each of the three years ended September 30,
1993 in conformity with generally accepted accounting principles.
Deloitte & Touche
Birmingham, Alabama
October 28, 1993
-1-
<PAGE> 143
<TABLE>
<CAPTION>
BANCFIRST CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 1993 AND 1992 (DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------
1993 1992
<S> <C> <C>
ASSETS
Cash and cash equivalents (including
interest-bearing deposits of $144 and
$384, respectively) $ 2,462 $ 3,486
Investment securities (Notes 2 and 16):
Held for investment (estimated market
values of $5,553 and $23,670,
respectively) 5,208 22,636
Held for sale (estimated market value of
$18,299) 17,573 -
Mortgage-backed securities (Notes 3 and 16):
Held for investment (estimated market
values of $3,163 and $79,625, respectively) 3,022 77,600
Held for sale (estimated market value of
$74,615) 73,275 -
Loans receivable, net (net of allowance for
possible loan losses of $1,162 and $1,035,
respectively) (Notes 4 and 16) 152,310 148,383
Mortgage loans held for sale 4,263 -
Accrued interest receivable:
Investment securities 410 331
Mortgage-backed securities 552 691
Loans receivable 1,221 1,223
Real estate owned and repossessed assets 407
Premises and equipment, net (Note 5) 4,466 3,013
Stock in Federal Home Loan Bank ("FHLB"),
at cost (Note 6) 1,696 1,696
Prepaid expenses and other assets (Note 8) 652 705
-------- --------
TOTAL ASSETS $267,110 $260,171
======== ========
</TABLE>
- 2 -
<PAGE> 144
<TABLE>
<CAPTION>
BANCFIRST CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 1993 AND 1992 (DOLLARS IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1993 1992
<S> <C> <C>
LIABILITIES:
Deposits (Notes 7 and 16) $217,771 $213,828
Borrowed funds (Notes 12 and 16) 17,000 17,000
Advances by borrowers for taxes and insurance 888 866
Accrued interest payable 133 147
Income taxes (Note 10):
Current 316 365
Deferred 401 242
Other liabilities 709 925
-------- --------
Total liabilities 237,218 233,373
-------- --------
COMMITMENTS (Note 13)
STOCKHOLDERS' EQUITY (Notes 10 and 11):
Serial preferred stock - $.01 par value,
400,000 shares authorized - none issued
Capital stock - $.01 par value, 2,600,000
shares authorized, 1,784,193 and 1,773,718
shares issued and outstanding, respectively 18 18
Additional paid-in capital 11,184 11,075
Retained income, substantially restricted 18,690 15,705
-------- --------
Total stockholder's equity 29,892 27,798
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $267,110 $260,171
======== ========
See notes to consolidated financial statements.
</TABLE>
- 3 -
<PAGE> 145
<TABLE>
<CAPTION>
BANCFIRST CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 1993, 1992 AND 1991
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- ----------------------------------------------------------------------------------------------------------------
1993 1992 1991
<S> <C> <C> <C>
INTEREST INCOME:
Mortgage loans $ 9,028 $10,170 $11,143
Consumer and other loans 4,160 3,737 3,321
Mortgage-backed securities 5,006 5,551 4,821
Investment securities 1,699 1,677 1,919
Other 98 110 114
------- ------- -------
Total interest income 19,991 21,245 21,318
------- ------- -------
INTEREST EXPENSE:
Deposits (Note 7) 7,835 10,493 13,522
Borrowed funds (Note 12) 853 444
------- ------- -------
Total interest expense 8,688 10,937 13,522
------- ------- -------
NET INTEREST INCOME 11,303 10,308 7,796
PROVISION FOR LOAN LOSSES (Note 4) 150 608 426
------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 11,153 9,700 7,370
------- ------- -------
NONINTEREST INCOME:
Fees and charges on loans 102 94 99
Service fee income on loans sold 73 80 92
Fees and service charges on deposit
accounts 540 496 449
Insurance commissions 76 68 81
Net gain on sale of:
Investment securities (Note 2) 28 55 3
Mortgage-backed securities (Note 3) 79 6
Other 442 447 315
------- ------- -------
Total noninterest income 1,261 1,319 1,045
------- ------- -------
NONINTEREST EXPENSE:
Salaries and employee benefits 2,626 2,428 2,120
Net occupancy expense 629 538 589
Data processing expense 572 422 410
Insurance premiums 471 542 499
Marketing and public relations 449 473 279
Professional fees 383 348 195
Printing and office supplies expense 166 113 90
Other (Note 8) 564 532 571
------- ------- -------
Total noninterest expense 5,860 5,396 4,753
------- ------- -------
</TABLE>
- 4 -
<PAGE> 146
<TABLE>
<CAPTION>
BANCFIRST CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 1993, 1992 AND 1991
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
INCOME BEFORE INCOME TAX EXPENSE $ 6,554 $ 5,623 $ 3,662
INCOME TAX EXPENSE (Note 10) 2,467 2,240 1,276
--------- --------- ---------
NET INCOME $ 4,087 $ 3,383 $ 2,386
========= ========= =========
AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 1,836,365 1,802,141 1,783,388
========= ========= =========
EARNINGS PER SHARE $ 2.23 $ 1.88 $ 1.34
========= ========= =========
CASH DIVIDENDS PER SHARE $ 0.62 $ 0.57 $ 0.47
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
- 5 -
<PAGE> 147
<TABLE>
<CAPTION>
BANCFIRST CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1993, 1992 AND 1991
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- ----------------------------------------------------------------------------------------------------------------------------------
NET UNREALIZED
DEPRECIATION
RETAINED ON CERTAIN
ADDITIONAL INCOME MARKETABLE TOTAL
CAPITAL PAID-IN SUBSTANTIALLY EQUITY STOCKHOLDERS'
STOCK CAPITAL RESTRICTED SECURITIES EQUITY
----- ------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, October 1, 1990 $ 18 $10,920 $11,756 $(143) $22,551
Net income 2,386 2,386
Change in net unrealized
depreciation on certain
marketable equity securities 143 143
Cash dividends - $.47 per share (817) (817)
Proceeds from issuance of
capital stock upon exercise
of options 20 20
--- ------- ------- ----- -------
BALANCE, September 30, 1991 18 10,940 13,325 $ 0 24,283
=====
Net income 3,383 3,383
Cash dividends - $.57 per share (1,003) (1,003)
Proceeds from issuance of
capital stock upon exercise
of options 135 135
--- ------- ------- -------
BALANCE, September 30, 1992 18 11,075 15,705 26,798
Net income 4,087 4,087
Cash dividends - $.62 per share (1,102) (1,102)
Proceeds from issuance of
capital stock upon exercise
of options 109 109
--- ------- ------- -------
BALANCE, at September 30, 1993 $18 $11,184 $18,690 $29,892
=== ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
- 6 -
<PAGE> 148
<TABLE>
<CAPTION>
BANCFIRST CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1993, 1992 AND 1991
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,087 $ 3,383 $ 2,386
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 150 608 426
Provision for depreciation 297 280 345
Provision for deferred income taxes 159 66 (66)
Accretion of discounts (57) (51) (62)
Amortization of premiums 400 329 133
Gain on sale of investment securities (28) (55) (3)
Loans originated for resale (13,194) (4,118) (4,990)
Proceeds from sale of loans 8,931 4,118 4,990
Gain on sale of mortgage-backed securities (79) (6)
Loss on sale of premises and equipment 41
(Increase) decrease in real estate owned 407 574 (844)
(Increase) decrease in other assets 97 65 (418)
Increase (decrease) in other liabilities (240) 481 183
-------- -------- --------
Net cash provided by operating activities 1,050 5,601 2,074
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities
(Note 2) 7,029 8,585 18,319
Proceeds from maturities of investment
securities 150 150
Purchases of investment securities (7,370) (11,388) (9,931)
Loan originations (66,906) (64,160) (35,953)
Mortgage-backed securities purchased (26,964) (35,834) (41,236)
Proceeds from sale of mortgage-backed
securities (Note 3) 4,351 9,384 2,876
Principal collections on loans 62,808 54,655 38,335
Principal collections on mortgage-backed
securities 23,668 17,341 8,560
Purchases of premises and equipment (1,952) (667) (406)
Proceeds from sale of premises and equipment 161
-------- -------- --------
Net cash used in investing activities (5,025) (21,934) (19,436)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 3,944 333 16,218
Advances from the FHLB 17,000
Cash dividends paid (1,102) (1,003) (817)
Proceeds from issuance of capital stock 109 135 20
-------- -------- --------
Net cash provided by financing
activities 2,951 16,465 15,421
-------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ (1,024) $ 132 $ (1,941)
CASH AND CASH EQUIVALENTS:
BEGINNING OF YEAR 3,486 3,354 5,295
-------- -------- --------
END OF YEAR $ 2,462 $ 3,486 $ 3,354
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
- 7 -
<PAGE> 149
<TABLE>
<CAPTION>
BANCFIRST CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1993, 1992 AND 1991
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for:
Interest $ 8,702 $ 10,898 $ 13,552
======== ======== ========
Income taxes $ 2,354 $ 1,759 $ 1,122
======== ======== ========
Transfers to held for sale:
Investment securities $ 17,573
========
Mortgage-backed securities $ 73,275
========
</TABLE>
See notes to consolidated financial statements.
- 8 -
<PAGE> 150
BANCFIRST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Holding Company Formation and Principles of Consolidation - On January 24,
---------------------------------------------------------
1991, stockholders of BANKFIRST approved the formation of a holding
company. On April 25, 1991, BANKFIRST became the wholly-owned subsidiary
of this holding company, BANCFIRST Corporation (formerly ALAFIRST
Bancshares, Inc.), a Delaware Corporation. Each outstanding share of
BANKFIRST's common stock was converted into one share of common stock of
BANCFIRST Corporation.
The accompanying consolidated financial statements include the accounts of
BANCFIRST Corporation and BANKFIRST. BANKFIRST's accounts include its
wholly-owned subsidiary, Sunbelt Financial Services, Inc., which was
incorporated in July, 1981. Balances and activity reflected in the
accompanying consolidated financial statements for the period prior to the
formation of BANCFIRST Corporation (through April 24, 1991 of fiscal year
1991) are those of BANKFIRST only. The operations of BANCFIRST Corporation
and BANKFIRST are collectively referred to herein as "the Bank." All
intercompany balances and transactions have been eliminated in the
accompanying consolidated financial statements.
See Note 17 for separate condensed financial information for BANCFIRST
Corporation only.
Basis of Financial Statements Presentation - The Bank's consolidated
------------------------------------------
financial statements have been prepared in accordance with generally
accepted accounting principles and with general practice within the savings
institutions industry. In preparing such financial statements, Management
is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the balance sheet and
revenues and expenses for the period. Actual results could differ from
those estimates. Material estimates that are particularly susceptible to
significant change relate to the determination of the allowance for loan
losses and the valuation of real estate acquired in connection with
foreclosures or in satisfaction of loans. In connection with the
determination of the allowance for loan losses and the valuation of real
estate owned, Management obtains independent appraisals for significant
properties.
Cash and Cash Equivalents - Cash and cash equivalents are cash on hand,
-------------------------
cash in banks and due from banks, and overnight deposits in the FHLB.
Investments and Mortgage-Backed Securities - Certain investments and
------------------------------------------
mortgage-backed securities that Management has both the ability and intent
to hold to maturity are carried at cost, adjusted for amortization of
premiums and accretion of discounts, which are recognized as interest
income using a method which approximates the interest method over the period
to maturity. Other investments and mortgage-backed securities that may be
held for indefinite periods of time, including securities that will be used
as a part of Management's asset/liability management strategy or those
securities that may be sold in response to changing interest rates,
prepayment risks, or similar economic factors, are classified as held for
sale. Such securities classified as "held for sale" are carried at lower of
cost or market. Sales of such securities are recognized based on the
specific identification method. Maturities of mortgage-backed securities
are determined by contract life.
- 9 -
<PAGE> 151
During fiscal 1993, the Bank transferred a significant portion of its
investment and mortgage-backed securities to the held for sale category.
These transfers were the result of criteria set forth in Statement of
Financial Accounting Standards ("SFAS") No. 115 Accounting for Investments
--------------------------
in Certain Debt and Equity Securities issued in May 1993 (discussed later
-------------------------------------
in Note 1) and a change in the Bank's intent with regard to holding certain
securities because of the anticipated adoption of this statement.
Mortgage Loans Held for Sale - The Bank classifies its current originations
----------------------------
of 30-year, fixed-rate mortgage loans as held for sale. These loans are
carried at lower of cost or market.
Allowance for Possible Loan Losses - The allowance for loan losses is
----------------------------------
increased by charges to income and decreased by charge- offs (net of
recoveries). Management's periodic evaluation of the adequacy of the
allowance is based on the Bank's past loan loss experience, known and
inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay, the estimated value of any underlying
collateral, and current economic conditions.
Non-Accrual Loans - Loans are reviewed by Management on a regular basis and
-----------------
are placed on non-accrual status generally when contractually more than 90
days past due or when, in the opinion of Management, the collection of
additional interest is doubtful.
Real Estate Owned - Real estate owned acquired through, or in lieu of, loan
-----------------
foreclosure is initially recorded at fair value at the date of foreclosure.
Costs relating to development and improvement are capitalized, whereas
costs relating to the holding of property are expensed. Valuations are
periodically performed by management, and an allowance for losses is
established by a charge to net income if the carrying value of a property
exceeds its net realizable value.
Premises and Equipment - Office properties and equipment are carried at
----------------------
cost less accumulated depreciation. Depreciation is provided by the
straight-line method at rates intended to distribute the cost of buildings
and equipment over their estimated service lives of five to forty years and
three to ten years, respectively.
Loan Origination Fees and Related Costs - Loan fees are accounted for in
---------------------------------------
accordance with SFAS No. 91, Accounting for Nonrefundable Fees and Costs
-------------------------------------------
Associated with Originating or Acquiring Loans and Initial Direct Costs of
--------------------------------------------------------------------------
Leases. Loan fees and certain direct loan origination costs are deferred,
------
and the net fee or cost is recognized as an adjustment to interest income
using a method which approximates the interest method over the contractual
life of the loans, adjusted for estimated prepayments based on the Bank's
historical prepayment experience.
Income Taxes - Deferred income taxes are provided on elements of income
------------
that are recognized for financial accounting purposes in periods different
than such items are recognized for income tax purposes. The principal
elements of deferred income taxes are provisions relating to different
accounting and tax treatment of accrued income and expenses (see Note 10).
In February 1992, SFAS No. 109, Accounting for Income Taxes, was issued.
---------------------------
The principal changes required by SFAS 109 are the adoption of the
liability method of accounting for deferred taxes and revision of the
criteria for recognition and measurement of deferred tax assets. The Bank
adopted this standard for the fiscal year beginning October 1, 1992.
Because the effect on the consolidated financial statements was immaterial,
the cumulative effect of applying the new accounting method was reflected
as of October 1, 1992 as a charge to income tax expense of approximately
$32,000, and is included in the accompanying 1993 consolidated statement of
income.
- 10 -
<PAGE> 152
Earnings Per Share - Earnings per share is based on the weighted average
------------------
number of shares plus equivalent shares outstanding. The dilutive effect
of shares issuable under stock options is immaterial.
Reclassifications - Reclassifications of certain prior period amounts were
-----------------
made for comparative purposes.
New Accounting Pronouncements Not Yet Adopted - In May, 1993, SFAS No. 114,
---------------------------------------------
Accounting by Creditors for Impairment of a Loan, was issued. SFAS No. 114
------------------------------------------------
provides guidance on recognition of impairment of a loan as well as methods
for measurement of impairment. The Bank will be required to adopt SFAS No.
114 for the fiscal year beginning October 1, 1995. The impact of this
adoption on the Bank's consolidated financial statements is not presently
determinable.
Also in May, 1993, SFAS No. 115, Accounting for Certain Investments in Debt
------------------------------------------
and Equity Securities, was issued. SFAS No. 115 requires management to
---------------------
classify its investment portfolio into three categories: (i)
held-to-maturity, (ii) available-for-sale and (iii) trading securities, and
sets forth specific criteria for making these classifications. Under SFAS
No. 115 unrealized holding gains and losses for trading securities are
included in earnings while unrealized holding gains and losses for
available-for-sale securities are reported as a separate component of
stockholders' equity, net of tax effects, until realized. Held-to-maturity
securities continue to be recorded at their amortized cost. Portfolio
additions beyond the date of adoption of this statement are to be
classified into the appropriate category when purchased. The Bank will be
required to adopt SFAS No. 115 for the fiscal year beginning October 1,
1994. Early adoption is permitted and Management is evaluating that
option. The impact of adoption is not presently determinable due to the
potential for changes in the market values of the affected securities.
2. INVESTMENT SECURITIES
The Bank's investment securities held for investment are summarized as
follows (In thousands):
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
----------------
1993 1992
----------------------- -------------------------
ESTIMATED ESTIMATED
CARRYING MARKET CARRYING MARKET
VALUE VALUE VALUE VALUE
----- ----- ----- -----
<S> <C> <C> <C> <C>
Maturing within one year -
U.S. Government and agency
obligations $ 6,152 $ 6,355
Maturing between one and five years-
U.S. Government and agency
obligations 16,484 17,315
Maturing between ten and twenty
years
Municipal obligations $5,208 $5,553
------ ------ ------- -------
Total $5,208 $5,553 $22,636 $23,670
====== ====== ======= =======
</TABLE>
Gross unrealized gains and gross unrealized losses on securities held for
investment were $346,000 and $-0-, respectively at September 30, 1993, and
$1,034,000 and $-0-, respectively at September 30, 1992.
- 11 -
<PAGE> 153
- 12 -
<PAGE> 154
The Bank's investment securities held for sale are summarized as follows
(In thousands):
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1993
---------------------
ESTIMATED
CARRYING MARKET
VALUE VALUE
----- -----
<S> <C> <C>
Maturing within one year -
U.S. Government and agency obligations $ 3,161 $ 3,237
Maturing between one and five years -
U.S. Government and agency obligations 14,412 15,062
------- -------
Total $17,573 $18,299
======= =======
</TABLE>
Gross unrealized gains and gross unrealized losses on securities held for
sale were $736,000 and $10,000, respectively, at September 30, 1993.
For the years ended September 30, 1993, 1992 and 1991, proceeds from sales
of investment securities were $7,029,000, $8,585,000 and $18,319,000,
respectively, resulting in realized gains of $28,000, $55,000 and $43,000,
respectively, and realized losses of $-0-, $-0-, and $40,000, respectively.
The weighted average yield for all investment securities was 6.52% and
7.03% for the years ended September 30, 1993 and 1992, respectively.
Certain U.S. Government securities totaling approximately $1,074,000 and
$4,270,000 at September 30, 1993 and 1992, respectively, were pledged for
various purposes as required or permitted by law.
3. MORTGAGE-BACKED SECURITIES
Mortgage-backed securities held for investment are summarized as follows
(In thousands):
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
----------------
1993 1992
----------------------- -------------------------
ESTIMATED ESTIMATED
CARRYING MARKET CARRYING MARKET
VALUE VALUE VALUE VALUE
----- ----- ----- -----
<S> <C> <C> <C> <C>
FNMA Certificates $ 68 $ 77 $40,482 $42,142
FHLMC Certificates 2,902 3,086 36,039 37,483
Add unamortized premium on purchased
certificates 60 1,229
Deduct discount on purchased
certificates (8) (150)
------ ------ ------- -------
Total mortgage-backed securities, net $3,022 $3,163 $77,600 $79,625
====== ====== ======= =======
</TABLE>
- 12 -
<PAGE> 155
Gross unrealized gains and gross unrealized losses on mortgage-backed
securities held for investment were $178,000 and $37,000, respectively at
September 30, 1993, and $2,025,000 and $-0-, respectively at September 30,
1992.
Mortgage-backed securities held for sale are summarized as follows (In
thousands):
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1993
---------------------
ESTIMATED
CARRYING MARKET
VALUE VALUE
----- -----
<S> <C> <C>
FNMA Certificates $49,427 $51,017
FHLMC Certificates 22,750 23,598
Add unamortized premium on purchased
certificates 1,175
Deduct discount on purchased certificates (77)
------- -------
Total mortgage-backed securities, net $73,275 $74,615
======= =======
</TABLE>
Gross unrealized gains and gross unrealized losses on mortgage-backed
securities held for sale were $1,352,000 and $13,000, respectively at
September 30, 1993.
For the years ended September 30, 1993, 1992 and 1991, proceeds from sales
of mortgage-backed securities were $4,351,000, $9,384,000 and $2,876,000,
respectively, resulting in realized gains of $86,000, $87,000 and $6,000,
respectively and realized losses of $86,000, $8,000 and $-0-, respectively.
The weighted average yield for all mortgage-backed securities was 6.47% and
7.50% for the years ended September 30, 1993 and 1992, respectively.
Certain mortgage-backed securities totaling approximately $5,805,000 and
$4,511,000 at September 30, 1993 and 1992, respectively, were pledged for
various purposes as required or permitted by law.
The Bank holds both adjustable and fixed interest rate mortgage-backed
securities for investment. At September 30, 1993, the composition of
mortgage-backed securities was as follows (In thousands):
<TABLE>
<CAPTION>
TERM TERM TO RATE
TO CONTRACTUAL MATURITY CARRYING VALUE ADJUSTMENT CARRYING VALUE
----------------------- -------------- ---------- --------------
<S> <C> <C> <C>
1 yr. - 5 yrs. $10,871 1 mo. - 1 yr. $48,967
5 yrs. - 10 yrs. 13,996
10 yrs. - 20 yrs. 2,463
After 20 years
------- -------
Total fixed $27,330 Total adjustable $48,967
======= =======
</TABLE>
- 13 -
<PAGE> 156
4. LOANS RECEIVABLE
Loans receivable are summarized as follows (In thousands):
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
----------------
1993 1992
---- ----
<S> <C> <C>
First mortgage loans (secured primarily
by 1-4 family residential property) $100,936 $103,530
Commercial loans 3,747 2,186
Construction loans 10,441 8,948
Savings account loans 2,153 2,009
Home improvement loans 18 38
Consumer loans 40,882 36,306
Other 202 232
-------- --------
Total 158,379 153,249
-------- --------
Deduct:
Allowance for possible loan losses 1,162 1,035
Undisbursed portion of loans in process 4,702 3,662
Unamortized deferred loan fees 205 169
-------- --------
Total deductions 6,069 4,866
-------- --------
Total loans receivable $152,310 $148,383
======== ========
Loans serviced for others $ 20,269 $ 20,175
======== ========
</TABLE>
The weighted average yield for all loans was 8.75% and 9.68% for the years
ended September 30, 1993 and 1992, respectively.
Periodically, the Bank originates or purchases commercial and construction
loans and commercial real estate mortgage loans, which totaled $32,916,000
at September 30, 1993. These loans are of somewhat greater risk of
uncollectibility due to the dependency on income production or future
development of the real estate. Of these loans, $18,625,000 are
collateralized by single and multi-family residential property, $9,381,000
by offices and commercial buildings, $1,163,000 by land, and $3,747,000 in
commercial business loans.
Under the Financial Institution Reform, Recovery, and Enforcement Act of
1989 ("FIRREA"), a Federally-chartered savings bank's aggregate commercial
mortgage loans may not exceed 400% of its capital as determined under the
capital standards provisions of FIRREA. BANKFIRST is subject to this
limitation. Further, BANKFIRST is subject to regulations limiting its
maximum loans outstanding to one borrower. As of September 30, 1993,
BANKFIRST is well within each of these limitations.
- 14 -
<PAGE> 157
The Bank originates both adjustable and fixed interest rate loans. At
September 30, 1993, the composition of loans receivable and held for sale
was as follows (In thousands):
<TABLE>
<CAPTION>
TERM TERM TO RATE
TO MATURITY CARRYING VALUE ADJUSTMENT CARRYING VALUE
----------- -------------- ---------- --------------
<S> <C> <C> <C>
1 mo. - 1 yr. $11,300 1 mo. - 1 yr. $49,845
1 yr. - 3yrs. 5,551 1 yr. - 3 yrs. 11,514
3 yrs. - 5 yrs. 11,126 3 yrs. - 5 yrs. 5,431
5 yrs. - 10 yrs. 18,492 After 5 years 828
10 yrs. - 20 yrs. 36,997
After 20 yrs. 11,558
------- -------
Total fixed $95,024 Total adjustable $67,618
======= =======
</TABLE>
The adjustable rate loans have interest rate adjustment limitations and
are generally indexed to U.S. Treasury Obligations or the cost of funds as
furnished by the Office of Thrift Supervision ("OTS"). The correlation of
the interest rates on adjustable loans with the rates the Bank pays on
short-term deposits may be affected by future market factors.
Activity in the allowance for possible loan losses was as follows (In
thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
-------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $1,035 $ 440 $ 224
Provision for loan losses 150 608 426
Charge-offs, net of recoveries (23) (13) (210)
------ ------ -----
Balance, end of year $1,162 $1,035 $ 440
====== ====== =====
</TABLE>
5. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows (In thousands):
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
----------------
1993 1992
---- ----
<S> <C> <C>
Major Classifications
Land $ 620 $ 667
Buildings and improvements 5,090 3,694
Furniture, fixtures and equipment 1,916 2,479
------ ------
Total 7,626 6,840
Less accumulated depreciation 3,160 3,827
------ ------
Premises and equipment, net $4,466 $3,013
====== ======
</TABLE>
- 15 -
<PAGE> 158
6. STOCK IN THE FHLB
BANKFIRST is a member of the FHLB System. As a member of this system, it
is required to maintain an investment in capital stock of the FHLB of
Atlanta. The investment is stated at cost. The Bank's investment in such
stock amounted to $1,696,000 at September 30, 1993 and 1992.
7. DEPOSITS
Deposits are summarized as follows (In thousands):
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
-----------------------------------------
1993 1992
---------------- ---------------
RATE AMOUNT % AMOUNT %
---- ------ - ------ -
<S> <C> <C> <C> <C> <C>
NOW 1.51% $ 25,029 12% $ 22,527 11 %
Money market deposit 2.88 11,691 5 12,408 6
Passbook 2.79 36,939 17 35,202 16
Certificates:
2.51 - 3.00% 3,333 2%
3.01 - 4.00 88,058 40 $ 63,247 30%
4.01 - 5.00 31,420 14 47,659 22
5.01 - 6.00 12,545 6 15,740 7
6.01 - 7.00 2,101 1 7,655 4
7.01 - 8.00 5,502 2 7,458 3
Above 8.00 1,153 1 1,932 1
-------- --- -------- ---
144,112 66 143,691 67
-------- --- -------- ---
Total $217,771 100% $213,828 100 %
======== === ======== ===
Weighted average cost
of deposits 3.63% 4.88%
==== ====
</TABLE>
Scheduled maturities of certificate accounts are as follows (In thousands):
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
----------------
1993 1992
---- ----
<S> <C> <C>
Less than one year $ 99,012 $118,699
One year to two years 13,600 15,914
Two years to three years 24,401 4,864
Thereafter 7,099 4,214
-------- -------
Total $144,112 $143,691
======== ========
</TABLE>
The aggregate amount of short-term jumbo certificates of deposit with a
minimum denomination of $100,000 was $11,774,000 and $19,536,000 at
September 30, 1993 and 1992, respectively.
- 16 -
<PAGE> 159
An analysis of interest expense on deposits is as follows (In thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
-------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
NOW accounts $ 438 $ 488 $ 606
Money market accounts 358 495 656
Passbook accounts 1,055 1,148 1,110
Certificate accounts 5,984 8,362 11,150
------ ------- -------
Total $7,835 $10,493 $13,522
====== ======= =======
</TABLE>
8. RETIREMENT PLAN
The Bank has a noncontributory defined-benefit retirement plan covering
substantially all of its employees. Benefits are generally based upon the
employee's highest average compensation for a consecutive three year
period during the last ten years preceding retirement. It is the Bank's
policy to make contributions to the Plan sufficient to meet minimum
funding requirements of applicable laws and regulations. Plan assets
consist of certificates of deposit and a savings deposit with BANKFIRST.
The following table sets forth the plan's funded status and amounts
recognized in the Bank's consolidated statements of financial condition:
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
----------------
1993 1992
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation
Vested $666 $603
Nonvested 14 10
---- ----
680 613
Effect of projected future compensation 284 191
---- ----
Projected benefit obligation for service rendered to date 964 804
Plan assets at fair value 968 818
---- ----
Excess of Plan assets in relation to projected benefit
obligation 4 14
Unrecognized net (gain) loss from past experience
different from that assumed and effects of changes
in assumptions 41 (28)
Unrecognized net transition obligation (from adoption
of SFAS No.87) 71 77
---- ----
Prepaid pension cost (included in other assets) $116 $ 63
==== ====
</TABLE>
- 17 -
<PAGE> 160
The components of net pension expense are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
-------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 71 $ 69 $ 63
Interest cost on projected benefit obligation 63 56 56
Actual return on plan assets (61) (64) (52)
Net amortization and deferral (2) 7 5
---- ---- ----
Net pension expense (included in other noninterest
expense) $ 71 $ 68 $ 72
==== ==== ====
Assumptions used to develop the net periodic pension
costs were:
Discount rate 8.00% 8.00% 8.00%
Expected long-term rate of return on assets 8.00 8.00 7.50
Rate of increase in compensation levels 3.00 3.00 3.00
</TABLE>
9. STOCK OPTION PLANS
The Bank has in effect a stock option plan for the benefit of officers and
other employees under two separate grants. The option exercise prices for
these two grants are $6.35 and $11.79, respectively. In addition, during
fiscal 1992, the Bank ratified a new stock option plan for the benefit of
its directors, with an option exercise price of $9.67.
The following table sets forth number of shares granted, option exercise
prices, and current year activity for these plans:
<TABLE>
<CAPTION>
STOCK OPTIONS
-------------
EMPLOYEE DIRECTOR TOTAL
-------- -------- -----
<S> <C> <C> <C> <C>
Option exercise price $ 6.35 $ 11.79 $ 9.67
======= ======= ========
Options outstanding,
September 30, 1991 68,513 0 68,513
Granted during fiscal 1992 53,137 31,500 84,637
Exercised during fiscal 1992 (20,663) (525) (21,188)
-------- ------- ------- --------
Options outstanding,
September 30, 1992 47,850 53,137 30,975 131,962
Granted during fiscal 1993
Exercised during fiscal
1993 (1,000) (4,750) (4,725) (10,475)
-------- ------- ------- --------
Options outstanding,
September 30, 1993 46,850 48,387 26,250 121,487
====== ====== ====== =======
Authorized for future grants
at September 30, 1993 49,146 21,000 70,146
====== ====== ======
</TABLE>
- 18 -
<PAGE> 161
10. INCOME TAXES
Income tax expense is summarized as follows (In thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
-------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Federal:
Current $2,078 $1,961 $1,219
Deferred 121 70 (80)
------ ------ ------
Total 2,199 2,031 1,139
------ ------ ------
State:
Current $ 230 $ 213 $ 123
Deferred 38 (4) 14
------ ------ ------
Total 268 209 137
------ ------ ------
Total income tax expense $2,467 $2,240 $1,276
====== ====== ======
</TABLE>
Deferred income tax expense (benefit) results from differences in the
recognition of income and expense for tax and financial reporting
purposes. The sources of the differences and the related tax effects are
as follows (In thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
-------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Income and expenses recognized in the
financial statements on the accrual basis
but on the cash basis for tax purposes $(38) $56 $(112)
Effect of allowable federal tax bad debt
deduction applied to above 125 (5) 7
Effects of adoption of SFAS No. 109
(Note 1) 32
Other 40 15 39
---- --- -----
Total $159 $66 $ (66)
==== === =====
</TABLE>
The provision for income tax differs from that computed at the statutory
federal corporate tax rate of 34% as follows (In thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
SEPTEMBER 30,
-------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Tax at statutory rate $2,228 $1,912 $1,245
Bad debt deduction for book purposes
in excess of amount for tax purposes 48 41
State excise tax, net 165 135 97
Tax exempt interest (56) (4) (8)
Other 130 149 (99)
------ ----- -----
Total $2,467 $2,240 $1,276
====== ====== ======
</TABLE>
- 19 -
<PAGE> 162
Retained income at September 30, 1993 and 1992 includes approximately
$4,900,000, and $6,200,000, respectively, representing bad debt deductions
for which no deferred taxes have been provided. These amounts represent
an allocation of income to bad- debt deductions for tax purposes only.
Reduction of amounts so allocated for purposes other than tax bad-debt
losses or adjustments arising from carryback of net operating losses would
create income for tax purposes only, which would be subject to the then
current corporate income tax rate. The unrecorded deferred income tax
liability on these amounts was approximately $1,800,000 and $2,275,000 at
September 30, 1993 and 1992, respectively.
11. CAPITAL REQUIREMENTS
BANKFIRST may not declare or pay a cash dividend on, or repurchase, any of
its common stock if the effect thereof would cause the net worth of
BANKFIRST to be reduced below either the amount required for its
liquidation account or the net worth requirements imposed by the OTS. As
of September 30, 1993, BANKFIRST was in compliance with these
requirements.
The following table sets forth, as of September 30, 1993, BANKFIRST's
capital under generally accepted accounting principles (GAAP), regulatory
capital, ratios and comparisons to required regulatory capital amounts
under FIRREA (In thousands):
<TABLE>
<CAPTION>
REGULATORY
------------------------------------
GAAP TANGIBLE CORE RISK-BASED
CAPITAL CAPITAL CAPITAL CAPITAL
------- ------- ------- -------
<S> <C> <C> <C> <C>
GAAP capital, per consolidated
financial statements $24,502 $24,502 $24,502 $24,502
=======
Nonallowable Assets:
Purchased-servicing assets (22) (22) (220)
Other
Additional Capital Items -
General Valuation Allowance 1,162
------- ------- -------
Regulatory capital-actual 24,480 24,480 25,642
Minimum capital required 3,932 7,863 11,105
------- ------- -------
Regulatory capital-excess $20,548 $16,617 $14,537
======= ======= =======
Actual regulatory capital as a
percentage of total assets
or risk-adjusted assets 9.34% 9.34% 18.47%
Minimum capital percentage 1.50 3.00 8.00
---- ---- -----
required
Actual regulatory capital as a
percentage in excess of requirement 7.84% 6.34% 10.47%
==== ==== =====
</TABLE>
- 20 -
<PAGE> 163
12. BORROWED FUNDS
Borrowed funds consist entirely of advances from the FHLB and amounted to
$17,000,000 at September 30, 1993 and 1992. Pursuant to collateral
agreements with the FHLB, advances are collateralized by qualifying first
mortgage loans. Advances at September 30, 1993 have maturity dates as
follows (In thousands):
<TABLE>
<S> <C>
Less than one year $ 6,000
One year to two years 6,000
Two years to three years 2,000
Thereafter 3,000
-------
Total $17,000
=======
</TABLE>
For the years ended September 30, 1993 and 1992, the average balance of
such advances was $17,310,000 and $8,992,000, respectively, and the
maximum balance outstanding was $22,000,000 and $18,500,000, respectively.
Interest expense incurred on such advances during 1993, 1992 and 1991 was
$853,000, $444,000 and $-0-, respectively. The weighted average cost of
these advances was 4.93% and 4.94% at September 30, 1993 and 1992,
respectively.
13. COMMITMENTS, FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
AND CONCENTRATIONS OF CREDIT RISK
At September 30, 1993 and 1992, financial instruments with off-balance
sheet risk to the Bank consisted of loan commitments and a letter of
credit issued as collateral for a bond issuance. Management does not
expect to incur any loss in connection with this letter of credit
commitment. Information related to these commitments is summarized as
follows (In thousands):
<TABLE>
<CAPTION>
1993 1992
----------------------- ----------------------
AMOUNT RATE AMOUNT RATE
------ ---- ------ ----
<S> <C> <C> <C> <C>
Fixed $ 5,179 6.50-9.50% $ 7,294 7.00-9.50%
Variable 8,916 4.25-7.80% 7,051 5.875-8.50%
------- -------
Total $14,095 $14,345
======= =======
Commitments consist of:
Loan originations $10,833 $11,167
Letter of credit 3,262 3,178
------- -------
Total $14,095 $14,345
======= =======
</TABLE>
The loans to which these commitments apply are fully collateralized by
single-family residences and other real property. The letter of credit is
collateralized by a multi-family property in Atlanta, Georgia.
The Bank originates the majority of its loans in Morgan, Limestone and
Lawrence counties in Alabama.
- 21 -
<PAGE> 164
14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Summarized quarterly financial information for the years ended September
30, 1993 and 1992 is as follows (In thousands, except per share amounts):
<TABLE>
<CAPTION>
QUARTER
----------------------------------------------
FIRST SECOND THIRD FOURTH
----- ------ ----- ------
1993:
<S> <C> <C> <C> <C>
Interest income $ 5,194 $ 4,945 $ 4,947 $ 4,905
Interest expense 2,279 2,133 2,144 2,132
------- ------- ------- -------
Net interest income 2,915 2,812 2,803 2,773
Provision for loan losses (96) (22) (32)
Noninterest income 324 331 268 338
Noninterest expense (1,434) (1,496) (1,403) (1,527)
------- ------- ------- -------
Income before income taxes 1,709 1,625 1,636 1,584
Income tax expense (694) (597) (598) (578)
------- ------- ------- -------
Net income $ 1,015 $ 1,028 $ 1,038 $ 1,006
======= ======= ======= =======
Earnings per share $ 0.56 $ 0.56 $ 0.57 $ 0.54
======= ======= ======= =======
Cash dividends per share $ 0.15 $ 0.15 $ 0.16 $ 0.16
======= ======= ======= =======
Market price per share:
Low 13 15 16 1/4 17 3/4
== == ====== ======
High 15 5/8 19 1/4 19 21 3/8
====== ====== == ======
1992:
Interest income $ 5,365 $ 5,262 $ 5,274 $ 5,344
Interest expense 3,068 2,784 2,639 2,446
------- ------- ------- -------
Net interest income 2,297 2,478 2,635 2,898
Provision for loan losses (67) (178) (183) (180)
Noninterest income 313 433 284 289
Noninterest expense (1,210) (1,296) (1,329) (1,561)
------- ------- ------- -------
Income before income taxes 1,333 1,437 1,407 1,446
Income tax expense (519) (611) (573) (537)
------- ------- ------- -------
Net income $ 814 $ 826 $ 834 $ 909
======= ======= ======= =======
Earnings per share $ 0.45 $ 0.46 $ 0.46 $ 0.51
======= ======= ======= =======
Cash dividends per share $ 0.133 $ 0.133 $ 0.15 $ 0.15
======= ======= ======= =======
Market price per share:
Low 9 1/2 10 5/8 12 12 5/8
===== ====== == ======
High 10 5/8 12 7/8 14 5/8 15 1/2
====== ====== ====== ======
</TABLE>
- 22 -
<PAGE> 165
15. INTEREST RATE RISK
The Bank is engaged principally in providing first mortgage loans to
individuals and commercial enterprises. At September 30, 1993, the Bank's
assets consist partly of assets that earned interest at fixed interest
rates. Those assets were funded primarily with short-term liabilities
that have interest rates that vary with market rates over time. The
shorter duration of the interest-sensitive liabilities indicates that the
Bank is exposed to interest rate risk because, in a rising rate
environment, liabilities will be repricing faster at higher interest
rates, thereby reducing the market value of long-term assets and net
interest income. Conversely,in a decreasing rate environment, the Bank's
asset value and net interest income will show improvement.
16. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of the Bank's financial instruments:
Cash and Cash Equivalents - For these short-term instruments, the carrying
amount is a reasonable estimate of fair value.
Investment Securities and Mortgage-Backed Securities - Fair values of
these securities are based on quoted market prices or dealer quotes.
Loans - The fair value of loans is estimated by discounting the future
cash flows using the current rates at which similar loans would be made to
borrowers for the same remaining maturities.
Deposits - The fair value of NOW accounts, money market deposits and
passbook savings is the amount payable on demand at the reporting date.
The fair value of fixed maturity certificates of deposit is estimated by
discounting future cash flows using the rates currently offered for
deposits of similar maturities.
Borrowed Funds - The fair value of borrowed funds is estimated by
discounting future cash flows using the rates currently available when
obtaining such funds.
The estimated fair values of the Bank's financial instruments at September
30, 1993 are as follows (In thousands):
<TABLE>
<CAPTION>
CARRYING FAIR
VALUE VALUE
----- -----
<S> <C> <C>
Assets:
Cash and cash equivalents $ 2,462 $ 2,462
Investment securities held for investment 5,208 5,553
Investment securities held for sale 17,573 18,299
Mortgage-backed securities held for
investment 3,022 3,163
Mortgage-backed securities held for sale 73,275 74,615
Loans receivable, net 152,310 156,866
-------- --------
Total assets $253,850 $260,958
======== ========
Liabilities:
Deposits $217,771 $219,516
Borrowed funds 17,000 17,110
-------- --------
Total liabilities $234,771 $236,626
======== ========
</TABLE>
- 23 -
<PAGE> 166
17. PARENT COMPANY ONLY FINANCIAL STATEMENTS
Separate condensed financial statements of BANCFIRST Corporation are as
follows (In thousands):
STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 1993 AND 1992
<TABLE>
<CAPTION>
ASSETS 1993 1992
---- ----
<S> <C> <C>
Cash and cash equivalents $ 419 $ 167
Investment securities:
Held for investment (estimated market value
of $2,079) 1,989
Held for sale (estimated market value of
$3,125) 2,996
Mortgage-backed securities:
Held for investment (estimated market values
of $832 and $3,102, respectively) 782 2,959
Held for sale (estimated market value of
$1,108) 1,074
Investment in BANKFIRST 24,502 21,522
Other assets 145 181
------- -------
TOTAL ASSETS $29,918 $26,818
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Taxes payable $ 2 $ 4
Other 24 16
------- -------
Total liabilities 26 20
------- -------
Stockholders' Equity:
Common stock 18 18
Additional paid-in capital 11,184 11,075
Retained income 18,690 15,705
------- -------
Total stockholders' equity 29,892 26,798
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $29,918 $26,818
======= =======
</TABLE>
- 24 -
<PAGE> 167
STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 1993 AND 1992
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
INCOME:
Interest on investment securities $ 144 $ 70
Interest on mortgage-backed securities 191 309 $ 177
Dividends from BANKFIRST 1,102 1,005 5,467
------- ------- -------
Total income 1,437 1,384 5,644
------- ------- -------
EXPENSES:
Taxes (3) 28 47
Investor relations 122 125 34
Other 211 177 26
------- ------- -------
Total expenses 330 330 107
------- ------- -------
Income before undistributed earnings
from BANKFIRST 1,107 1,054 5,537
Undistributed earnings from BANKFIRST 2,980 2,329 540
------- ------- -------
NET INCOME $ 4,087 $ 3,383 $ 6,077
======= ======= =======
</TABLE>
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1993 AND 1992
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,087 $ 3,383 $ 6,077
Adjustments to reconcile net income to
cash provided by operating activities:
Mortgage-backed securities transferred
to holding company as dividend (4,645)
Equity in undistributed earnings of
BANKFIRST (2,980) (2,329) (540)
Accretion of discounts (3) (3)
Amortization of premiums 5
Increase (decrease) in other assets 37 (15) (166)
Increase (decrease) in taxes payable (2) (26) 30
Increase in other liabilities 8 7 8
------- ------- -------
Net cash provided by operating
activities 1,147 1,022 764
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of mortgaged-backed securities (490) (493)
Purchases of investment securities (1,004) (1,989)
Principal collections on mortgage-backed
securities 1,592 1,842 336
------- ------- -------
Net cash provided by (used in)
investing activities 98 (640) 336
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (1,102) (1,003) (467)
Proceeds from exercise of stock options 109 135 20
------- ------- -------
Net cash used in financing
activities (993) (868) (447)
------- ------- -------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 252 (486) 653
CASH AND CASH EQUIVALENTS:
BEGINNING OF YEAR 167 653
------- ------- -------
END OF YEAR $ 419 $ 167 $ 653
======= ====== ======
</TABLE>
- 25 -
<PAGE> 168
CORPORATE DATA
CORPORATE OFFICE
255 Grant Street, Southeast
Post Office Box 1429
Decatur, Alabama 35602-1429
(205) 353-2530
PRINCIPAL SUBSIDIARY
BANKFIRST, a federal savings bank
Decatur, Alabama
STOCK INFORMATION
The common stock of BANCFIRST Corporation is traded on the American Stock
Exchange under the symbol BNF.
REGISTRAR AND TRANSFER AGENT
First Union National Bank
Two First Union Center
Charlotte, North Carolina 28288
Inquiries regarding stock transfers, lost certificates or address changes
should be directed to the Stock Transfer Department at the above address.
INDEPENDENT AUDITORS
Deloitte & Touche
Birmingham, Alabama
LEGAL COUNSEL
Breyer & Aguggia
Washington, D.C.
STOCKHOLDER INQUIRIES AND AVAILABILITY OF 10-K REPORT
A copy of BANCFIRST's annual report on Form 10-K for the year ended September
30, 1993, has been filed with the Securities & Exchange Commission and is
available to stockholders free of charge from the following:
C. Raymond Duncan
Senior Vice President and Treasurer
BANCFIRST Corporation
255 Grant Street, Southeast
Post Office Box 1429
Decatur, Alabama 35602-1429
DIRECTORS OF BANCFIRST CORPORATION AND BANKFIRST
James E. Horton, Jr.
Chairman of the Board
Self-Employed Farmer and Cattleman
Greenbrier, Alabama
William D. Powell
President and Chief Executive Officer
Decatur, Alabama
Newton B. Powell
Retired Circuit Judge, 8th Judicial Circuit of Alabama
Decatur, Alabama
Luther E. Roberts
Retired Vice-President of BANKFIRST's
Hartselle Office
Hartselle, Alabama
Ernest M. Smith, Jr.
Majority Owner
MCP Industries, Inc.
(a medical and industrial supply company)
Decatur, Alabama
Dr. W. David White
Dentist
Decatur, Alabama
Virginia S. Calvin
Retired City President of BANKFIRST's
Athens Office
Athens, Alabama
(BANKFIRST Director)
OFFICERS OF BANCFIRST CORPORATION
William D. Powell
President and Chief Executive Officer
C. Raymond Duncan
Senior Vice President and Treasurer
Miles A. Wright
Senior Vice President and Corporate Secretary
EXECUTIVE OFFICERS OF BANKFIRST
William D. Powell
President and Chief Executive Officer
C. Raymond Duncan
Senior Vice President and Treasurer
Miles A. Wright
Senior Vice President and corporate Secretary
Richard E. Gowan
Senior Vice President
C. Wallace Terry, Jr.
Senior Vice President
Barbara A. Smothers
Vice President
BANK OFFICERS OF BANKFIRST
John J. Howell
City President - Hartselle
E. Wayne Nix
City President - Moulton
M. Alan Riddle
City President - Athens
Brenda D. Johnson
Vice President, Manager Sixth Avenue Office
Cheryl W. McCorkle
Vice President, Manager Human Resources
<PAGE> 169
BANCFIRST CORPORATION
Wholly Owned Subsidiary
BANKFIRST
a federal savings bank
255 Grant Street, S.E.
Post Office Box 1429
Decatur, Alabama 35602-1429
<PAGE> 170
EXHIBIT NO. 22
Subsidiaries of the Registrant
<PAGE> 171
Subsidiaries of the Registrant
Percentage State or Jurisdiction
Name Owned of Incorporation
- ---- ---------- ---------------------
BANKFIRST, a federal
savings bank (1) 100% United States
Sunbelt Financial
Services, Inc. (2) 100% Alabama
- --------------------------------------------
(1) Wholly-owned by the Registrant
(2) Wholly-owned by the Savings Bank.
<PAGE> 172
APPENDIX A-2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994 OR
- --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 1-10743
BNF BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 63-1037987
- --------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
255 Grant Street, S.E.
Decatur, Alabama 35601
- --------------------------------- -------------------
(Address of Principal (Zip Code)
Executive Offices)
(205) 353-2530
- ---------------------------------
Registrant's Telephone Number
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 (the Act) during the preceding twelve months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Registrant became subject to the filing requirements of the Act on December 29,
1986.
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding for the issuer's classes of common stock as of the close of the
period covered by this report.
$.01 par value of common stock 1,784,193 shares
------------------------------ ----------------
(Class) (Outstanding)
<PAGE> 173
BNF BANCORP, INC.
INDEX FORM 10-Q
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION PAGE
Consolidated Statements of Financial Condition
as of March 31, 1994 and September 30, 1993 2
Consolidated Statements of Income for the Quarters and
Six Month Periods Ended March 31, 1994 and 1993 3
Consolidated Statements of Stockholders' Equity for the Six
Month Periods Ended March 31, 1994 and 1993 5
Consolidated Statements of Cash Flows for the Six Month
Periods Ended March 31, 1994 and 1993 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II - OTHER INFORMATION 15
SIGNATURES 16
</TABLE>
SCHEDULES OMITTED
All schedules other than those indicated above are omitted because of the
absence of the conditions under which they are required or because the
information is included in the financial statements and related notes.
<PAGE> 174
<TABLE>
BNF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
MARCH 31, 1994 AND SEPTEMBER 30, 1993 (Dollars in Thousands)
- ------------------------------------------------------------------------------------------------
<CAPTION>
March 31, September 30,
1994 1993
(Unaudited) *
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 3,606 $ 2,462
Investment securities (Note 4):
Held to maturity (estimated market values of $5,238
and $5,553, respectively) 5,202 5,208
Available for sale (estimated market value of $18,299
at September 30, 1993) 17,197 17,573
Mortgage-backed securities (Note 4):
Held to maturity (estimated market values of $2,366
and $3,163, respectively) 2,317 3,022
Available for sale (estimated market value of $74,615
at September 30, 1993) 78,243 73,275
Loans receivable (net of allowance for possible loan losses
of $1,161 at March 31, 1994 and September 30, 1993) 161,665 152,310
Mortgage loans held for sale 1,159 4,263
Accrued interest receivable:
Investment securities 318 410
Mortgage-backed securities 532 552
Loans receivable 1,127 1,221
Premises and equipment, net 4,887 4,466
Stock in Federal Home Loan Bank ("FHLB"), at cost 1,739 1,696
Real estate owned and repossessed assets 55
Prepaid expenses and other assets 915 652
-------- --------
TOTAL ASSETS $278,962 $267,110
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $225,935 $217,771
Borrowed funds 20,000 17,000
Advances by borrowers for taxes and insurance 700 888
Accrued interest payable 137 133
Income taxes 1,001 717
Other liabilities 543 709
-------- --------
Total liabilities 248,316 237,218
-------- --------
Stockholders' equity:
Serial preferred stock - $.01 par value, authorized
400,000 shares - none issued
Capitalized stock - $.01 par value, 3,200,000 shares
authorized, 1,784,193 shares issued and outstanding $ 18 $ 18
Additional paid-in capital 11,184 11,184
Retained income, substantially restricted 19,925 18,690
Net unrealized depreciation on securities available for sale
(Note 4) (481)
-------- --------
Total stockholders' equity 30,646 29,892
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $278,962 $267,110
======== ========
*Balances derived from audited financial statements.
See notes to consolidated financial statements.
</TABLE>
-2-
<PAGE> 175
<TABLE>
BNF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
QUARTERS AND SIX MONTH PERIODS ENDED MARCH 31, 1994 AND 1993
(Dollars in Thousands, Except Per Share Amounts)
- ----------------------------------------------------------------------------------------------------
<CAPTION>
For the For the Six Month
Quarters Ended Periods Ended
March 31, March 31,
--------------- ------------------
1994 1993 1994 1993
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Mortgage loans $2,101 $2,268 $4,262 $4,726
Consumer and other loans 1,107 979 2,218 1,973
Mortgage-backed securities 1,096 1,229 2,200 2,544
Investment securities 355 442 741 846
Other 23 27 44 50
------ ------ ------ ------
Total interest income 4,682 4,945 9,465 10,139
------ ------ ------ ------
INTEREST EXPENSE:
Deposits 1,917 1,938 3,840 4,010
Borrowed funds 240 195 492 402
------ ------ ------ ------
Total interest expense 2,157 2,133 4,332 4,412
------ ------ ------ ------
NET INTEREST INCOME 2,525 2,812 5,133 5,727
PROVISION FOR LOAN LOSSES 22 118
------ ------ ------ ------
NET INTEREST INCOME
AFTER PROVISION
FOR LOAN LOSSES 2,525 2,790 5,133 5,609
------ ------ ------ ------
NONINTEREST INCOME:
Fees and charges on loans 26 25 60 56
Service fee income on loans sold 17 21 34 37
Fees and service charges on
deposit accounts 142 122 286 253
Net gain (loss) on sale of:
Investment securities (4) 10 21 25
Mortgage loans 22 136
Other 116 153 204 284
------ ------ ------ ------
Total noninterest income 319 331 741 655
------ ------ ------ ------
NONINTEREST EXPENSE:
Salaries and employee benefits 752 658 1,482 1,284
Net occupancy expense 197 154 378 289
Data processing expense 112 110 150 213
Insurance premimums 145 92 292 235
Marketing and public relations 95 172 158 291
Other 308 310 561 617
------ ------ ------ ------
Total noninterest expense 1,609 1,496 3,021 2,929
------ ------ ------ ------
</TABLE>
-3-
<PAGE> 176
<TABLE>
BNF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
QUARTERS AND SIX MONTH PERIODS ENDED MARCH 31, 1994 AND 1993
(Dollars in Thousands, Except Per Share Amounts)
- ------------------------------------------------------------------------------
<CAPTION>
For the For the Six Month
Quarters Ended Periods Ended
March 31, March 31,
---------------------- ----------------------
1994 1993 1994 1993
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INCOME BEFORE INCOME
TAX EXPENSE $ 1,235 $ 1,625 $ 2,853 $ 3,335
INCOME TAX EXPENSE 453 597 1,046 1,292
---------- ---------- ---------- ----------
NET INCOME $ 782 $ 1,028 $ 1,807 $ 2,043
========== ========== ========== ==========
AVERAGE COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING 1,859,835 1,834,548 1,853,405 1,828,524
========== ========== ========== ==========
EARNINGS PER SHARE
(Note 3) $ 0.42 $ 0.56 $ 0.97 $ 1.12
========== ========== ========== ==========
CASH DIVIDENDS PER SHARE $ 0.16 $ 0.15 $ 0.32 $ 0.30
========== ========== ========== ==========
See notes to consolidated financial statements.
</TABLE>
-4-
<PAGE> 177
<TABLE>
BNF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTH PERIODS ENDED MARCH 31, 1994 AND 1993
(Dollars in Thousands)
- ----------------------------------------------------------------------------------------------------------------------
Net Unrealized
Appreciation
Retained (Depreciation)
Additional Income- on Securities Total
Capital Paid-in Substantially Available Stockholders'
Stock Capital Restricted for Sale Equity
<S> <C> <C> <C> <C> <C>
For the Six Month Period
Ended March 31, 1994
(Unaudited):
Balance at September 30, 1993 $ 18 $11,184 $18,690 $29,892
Impact at October 31, 1993 of
adoption of Statement of
Financial Accounting Standards
No. 115 (Note 4) $ 2,066 2,066
Change in unrealized appreciation
(depreciation) on securities available
for sale, net of related income
tax effect (2,547) (2,547)
Cash dividends (572) (572)
Net income for the six month period
ended March 31, 1994 1,807 1,807
---- ------- ------- ------- -------
Balance at March 31, 1994 $ 18 $11,184 $19,925 $ (481) $30,646
==== ======= ======= ======= =======
For the Six Month Period
Ended March 31, 1993
(Unaudited):
Balance at September 30, 1992 $ 18 $11,075 $15,705 $26,798
Cash dividends (532) (532)
Net income for the six month period
ended March 31, 1993 2,043 2,043
---- ------- ------- -------
Balance at March 31, 1993 $ 18 $11,075 $17,216 $28,309
==== ======= ======= =======
See notes to consolidated financial statements.
</TABLE>
-5-
<PAGE> 178
<TABLE>
BNF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTH PERIODS ENDED MARCH 31, 1994 AND 1993
(Dollars in Thousands)
- ---------------------------------------------------------------------------------------------------
<CAPTION>
1994 1993
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,807 $ 2,043
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 118
Provision for depreciation 211 139
Accretion of discounts (29) (27)
Amortization of premiums 285 181
Net unrealized loss on loans held for sale 39
Gain on sale of investment securities (24) (25)
Loans originated for resale (3,830) (8,256)
Proceeds from sale of loans originated for resale 3,830 8,256
Gain on sale of loans (179) (21)
(Increase) decrease in real estate owned (55) 299
(Increase) decrease in other assets (99) 36
Decrease in other liabilities (66) (383)
-------- --------
Net cash provided by operating activities 1,890 2,360
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities 2,472 2,175
Proceeds from maturities of investment securities 1,000
Purchase of investment securities (2,000) (6,720)
Loan originations (39,102) (29,558)
Mortgage-backed securities purchased (23,692) (15,860)
Proceeds from sale of mortgage-backed securities 5,496 4,351
Principal collections on loans 32,665 31,950
Principal collections on mortgage-backed securities 13,455 10,539
Purchases of premises and equipment (632) (1,146)
-------- --------
Net cash used in investing activities (11,338) (3,269)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 8,164 1,591
Cash dividends paid (572) (532)
Proceeds from (payments on) FHLB advances 3,000 (1,000)
------- -------
Net cash provided by financing activities 10,592 59
------- -------
</TABLE>
-6-
<PAGE> 179
<TABLE>
BNF BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTH PERIODS ENDED MARCH 31, 1994 AND 1993
(Dollars in Thousands)
- -----------------------------------------------------------------------------------------
<CAPTION>
1994 1993
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH $ 1,144 $ (850)
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 2,462 3,486
------- -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 3,606 $ 2,636
======= =======
SUPPLEMENTAL INFORMATION FOR CASH FLOW:
Cash payments of interest $ 4,328 $ 4,429
======= =======
Cash payments of income taxes $ 751 $ 1,200
======= =======
Unrealized depreciation on securities available for sale,
net of related income tax effect $ 481
=======
See notes to consolidated financial statements.
</TABLE>
-7-
<PAGE> 180
BNF BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. The preceding consolidated financial statements include the accounts
of BNF BANCORP, INC. ("BNF"), formerly BANCFIRST Corporation, and
its wholly-owned subsidiary, BANKFIRST, a federal savings bank,
(collectively "the Bank").
2. The preceding consolidated financial statements at March 31, 1994
and for the quarters and six month periods ended March 31, 1994 and
1993 have been prepared in accordance with instructions pursuant to
Form 10-Q Quarterly Report. The consolidated financial statements
are unaudited but, in the opinion of Management, reflect all
accruals and adjustments necessary for a fair presentation of the
Bank's financial position and results of its operations and its cash
flows at the dates and for the periods indicated. All such
adjustments are of a normal recurring nature. The results of
operations for the quarter and six month period ended March 31, 1994
are not necessarily indicative of results to be expected for the
entire fiscal year of 1994.
3. Earnings per share is based on the weighted average number of shares
plus equivalent shares outstanding. The dilutive effect of shares
issuable under stock options is immaterial.
4. Statement of Financial Accounting Standards ("SFAS") Number 114,
Accounting by Creditors for Impairment of a Loan and SFAS Number
115, Accounting for Certain Investment in Debt and Equity
Securities, were issued in May, 1993. SFAS No. 114 addresses the
accounting by creditors for impairment of certain loans and applies
to all loans that are restructured in a troubled debt restructuring.
It requires that impaired loans be measured based on the present
value of expected cash flows discounted at the loan's effective
interest rate. This Statement applies to financial statements for
fiscal years beginning after December 15, 1994. The Bank has not
yet decided if it will elect early adoption of this Statement, and
Management cannot estimate the effects of adoption on the financial
statements. SFAS No. 115 addresses the accounting and reporting for
investments in equity securities that have readily determinable fair
values and for all investments in debt securities. Those
investments are to be classified in three categories with each
having a specified accounting method as to carrying value and
recognition of unrealized gains and losses. The Bank adopted this
Statement for fiscal year beginning October 1, 1993. As a result of
this adoption, certain investment securities and mortgage-backed
securities classified as available for sale are carried at market
value, and $481,000 of unrealized depreciation, net of related
income tax effect, on securities available for sale is shown as a
component of stockholders' equity at March 31, 1994. Prior to this
adoption, at September 30, 1993, certain investment securities and
mortgage-backed securities classified as held for sale were stated
at the lower of cost or market.
5. On January 28, 1994, BNF and Union Planters Corporation ("UPC"),
Memphis, Tennessee, announced the signing of a definitive agreement
for UPC to acquire BNF with an exchange of 1.078 shares of UPC
common stock for each share of BNF common stock. The transaction is
subject to regulatory approval and the approval of BNF shareholders.
6. On April 18, 1994, the Bank and BANKALABAMA, Huntsville, Alabama,
announced the signing of an agreement for the Bank to acquire
BANKALABAMA's Beltline Road, Decatur, Alabama branch which consists
of approximately $600,000 in deposits and approximately $200,000 in
loans receivable as well as approximately $107,000 in fixed assets.
This transaction is subject to regulatory approval.
-8-
<PAGE> 181
BNF BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE QUARTERS AND SIX MONTH PERIODS ENDED
MARCH 31, 1994 AND 1993
GENERAL
BNF BANCORP, INC. ("BNF"), formerly BANCFIRST Corporation, is a savings and
loan holding company which owns 100% of BANKFIRST, a federal savings bank
("BANKFIRST"). Other than it's investment in BANKFIRST at March 31, 1994, BNF
had approximately $5.4 million in total assets consisting principally of
mortgage-backed securities and U.S. Treasury securities. Total earnings on
these investments approximated $151,000 for the six month period ended March
31, 1994. The consolidated operations of BNF and BANKFIRST are collectively
referred to herein as "the Bank".
During the six month period ended March 31, 1994, the Bank originated
approximately $25.5 million in mortgage loans, 39.1% of which were adjustable
rate or short-term loans. Additionally, there were $17.5 million in
originations for installment loans and commercial loans. The Bank has
classified as held for sale a portion of its fixed rate loans with terms to
maturity of greater than 15 years. This action is consistent with the Bank's
policy to reduce its vulnerability to interest rate risk.
At March 31, 1994, $144.8 million or 59.5% of the Bank's loans receivable
(including mortgage-backed securities) were comprised of loans that were other
than long-term, fixed rate loans. This amount includes $129.5 million of
mortgage loans with rates adjustable at periods ranging from six months to five
years, $5.3 million of commercial non-real estate loans and $10.0 million of
other loans with a term to maturity of less than one year. At September 30,
1993, the Bank had $129.4 million in loans and mortgage backed securities which
were other than long-term, fixed rate, or 56.6% of the total portfolio. At
March 31, 1994, $80.6 million or 33.3% of the total portfolio consisted of
mortgage-backed securities compared to $76.3 million or 32.1% at September 30,
1993.
LIQUIDITY AND CAPITAL RESOURCES
BANKFIRST had an average liquidity ratio of 10.1% for the current quarter as
compared to 14.3% for the comparable period in the prior year. Management's
objectives continue to include maintaining liquidity substantially in excess of
the required regulatory amount of 5% of net deposits and short-term borrowings
in order to provide greater flexibility and better match maturities of
BANKFIRST's liabilities.
At March 31, 1994, the Bank had outstanding loan commitments, loans in process
and letters of credit commitments totaling $15.3 million. Of this amount, $8.8
million is expected to be funded during the current quarter.
Scheduled repayments and maturities of mortgage and other loans, which
represent a substantial source of cash to the Bank, amounted to $32.7 million
and $31.9 million in the six month periods ended March 31, 1994 and 1993,
respectively. Sales and maturities of investment securities provided $2.5
million of cash to the Bank during the six month period ended March 31, 1994
compared to $3.2 million in the same period of the prior year. Another source
of cash for the Bank is interest credited to customers' certificate accounts
and remaining on deposit, which amounted to $3.0 million and $3.2 million for
the six months ended March 31, 1994 and 1993, respectively.
-9-
<PAGE> 182
In order to take advantage of favorable rates and improve its gap position, the
Bank utilized an additional $5 million in borrowings from the Federal Home Loan
Bank in the first six months of fiscal 1994. These funds have been used
primarily to fund the purchases of adjustable rate and short-term
mortgage-backed securities. During the six month period ended March 31, 1994
the Bank repaid $2.0 million of these borrowings. Management will continue to
utilize these borrowings if rates and the effect on the Bank's gap position
remain favorable.
The Bank's deposits before interest credited increased $1.1 million for the
current six month period compared to a decrease of $1.6 million for the prior
period. If the current rate scenario continues, Management does not expect to
see significant growth in interest-sensitive deposits in the near future.
The principal uses of the Bank's cash are the origination of mortgage and other
loans and purchases of investments including mortgage-backed securities.
During the six month period ended March 31, 1994, the Bank originated $42.9
million in loans compared to $37.8 million in the comparable period ended March
31, 1993. Loan demand is improved and Management expects total originations
for fiscal 1994 to show an increase over fiscal 1993. Purchases of investments
amounted to $2.0 and $6.7 million in the six month periods ended March 31, 1994
and 1993, respectively, while purchases of mortgage-backed securities were
$23.7 million and $15.9 million for the same periods, respectively.
During the current six month period, the Bank paid cash dividends of $.32 per
share, compared to $.30 per share paid during the prior year period.
CAPITAL REQUIREMENTS
As shown in the table below, BANKFIRST's core capital, tangible capital and
risk-based capital are all substantially in excess of requirements, and
Management believes that, under current regulations, BANKFIRST will continue to
exceed its minimum capital requirements in the foreseeable future.
The following table presents BANKFIRST's capital levels at March 31, 1994:
<TABLE>
<CAPTION>
Regulatory
--------------------------------
GAAP Tangible Core Risk-Base
Capital Capital Capital Capital
<S> <C> <C> <C> <C>
GAAP capital $25,263 $ 25,263 $25,263 $25,263
=======
Nonallowable assets -
Purchased-servicing assets (20) (20) (20)
Additional capital items -
General valuation allowance 1,161
-------- ------- -------
Regulatory capital-computed 25,243 25,243 26,404
Minimum capital required 4,110 8,221 11,606
-------- ------- -------
Regulatory capital-excess $ 21,133 $17,022 $14,798
======== ======= =======
Actual regulatory capital as a
percentage of total assets
or risk-adjusted assets 9.21% 9.21% 18.20%
Minimum capital percentage required 1.50 3.00 8.00
-------- ------- -------
Actual regulatory capital as a
percentage in excess of requirement 7.71% 6.21% 10.20%
======== ======= =======
</TABLE>
-10-
<PAGE> 183
INTEREST RATE SENSITIVITY
The Bank is engaged principally in providing first mortgage loans to
individuals and commercial enterprises. At March 31, 1994, the Bank's assets
consist partly of assets that earned interest at fixed interest rates. Those
assets were funded primarily with short-term liabilities that have interest
rates that vary with market rates over time. The shorter duration of the
interest-sensitive liabilities indicates that the Bank is exposed to interest
rate risk because, in a rising rate environment, liabilities will be repricing
faster at higher interest rates, thereby reducing the market value of long-term
assets and net interest income. Conversely, in a decreasing rate environment,
the Bank's asset value and net interest income will improve.
The Bank's net interest margin has declined as a result of lower yields on rate
sensitive assets combined with a more stable cost of rate sensitive
liabilities; however, in recent months interest rates in general have risen.
If this market scenario continues, Management believes the Bank's net interest
margin should show improvement during the remainder of fiscal 1994.
ASSET QUALITY
As of March 31, 1994, the Bank had an allowance for possible loan losses of
$1,161,000. There has been no provision added to the allowance for the six
months ended March 31, 1994 because Management believes that the existing
allowance is adequate to cover possible loan losses which may result from loans
held as of March 31, 1994 upon which Management has doubts as to
collectibility.
As of March 31, 1994, the Bank had a balance of $55,000 in real estate owned
and repossessed assets. It is Management's intention to dispose of these as
quickly as possible through the use of real estate brokers and other means.
In the past, the industry has experienced a decline in the value of commercial
real estate; however, the Bank's portfolio of commercial loans consists
primarily of seasoned loans, and its ratio of commercial loans to total loans
outstanding is relatively small. Management does not expect any deterioration
in its portfolio of commercial real estate loans.
Management of the Bank maintains strong control procedures over asset quality
and constantly reviews the performance of the portfolio. Based on these
procedures, Management does not foresee any substantial deterioration in the
Bank's asset quality in the near future.
INVESTMENTS AND MORTGAGED-BACKED SECURITIES
The Bank's investment securities consist primarily of U.S. government and
agency obligations. Investments classified as held to maturity are carried at
cost. The Bank has adequate liquidity and capital resources and it is
Management's intention to hold such securities to maturity. Those securities
that may be held for indefinite periods of time, including securities that will
be used as a part of Management's asset/liability management strategy or those
securities that may be sold in response to changing interest rates, pre-payment
risks, or other similar economic factors are classified as available for sale.
These securities are recorded at market with unrealized holding gains and
losses recorded net of income taxes as a separate component of stockholders'
equity. Sales of such securities are accounted for using the specific
identification method. Management does not anticipate any substantial change
in its investment strategy.
Statement of Financial Accounting Standards ("SFAS") Number 115 addresses the
accounting and reporting for investments in equity securities that have readily
determinable fair values and for all investments in debt securities. Those
investments are to be classified in three categories with each having a
specified accounting method as to carrying value and recognition of unrealized
gains and losses. The Bank has adopted this
-11-
<PAGE> 184
Statement for fiscal year beginning October 1, 1993. As a result of this
adoption, certain investment securities and mortgage-backed securities
classified as available for sale are carried at market value, and net
unrealized depreciation on securities available for sale of $481,000 is shown
as a component of stockholders' equity at March 31, 1994. Prior to this
adoption, at September 30, 1993, certain investment securities and
mortgage-backed securities classified as held for sale were stated at the lower
of cost or market.
RESULTS OF OPERATIONS
Comparison of the Quarters Ended March 31,1994 and 1993
Net income for the quarter ended March 31, 1994 was $782,000 compared to
$1,028,000 for the quarter ended March 31, 1993, a 23.9% decrease. Net
interest income for the current quarter was $2,525,000 compared to $2,812,000
for the prior year quarter, while the interest rate spread decreased from 4.24%
to 3.45% for the same periods. Earnings per share decreased from $.56 for the
quarter ended March 31, 1993, to $.42 for the same quarter in 1994.
Total interest income decreased from $4,945,000 to $4,682,000, or 5.3%. This
is due to a decrease in average yield on interest-earning assets from 7.95% to
6.98%, and is partially offset by a 3.1% increase in average volume of
interest-earning assets.
Total interest expense increased from $2,133,000 to $2,157,000, or 1.1%. This
increase resulted from a 3.28% increase in average volume of deposits and
borrowings, and is partially offset by a decrease in average rate paid on
interest-sensitive liabilities from 3.72% to 3.53%.
Total noninterest income decreased slightly from $331,000 to $319,000. Total
noninterest expenses increased from $1,496,000 to $1,609,000. Salaries and
employee benefits increased 14.3% due to an increase in staffing and merit
increases in pay. Insurance premiums increased 57.6% due to the issuance of a
credit by the FDIC for premiums paid in the quarter ended March 31, 1993, with
no similar credit issued during the current quarter. Net occupancy expense
increased 27.9% due to increased depreciation associated with building
renovations and newly installed computer equipment. The increase in
noninterest expense is partially offset by a 44.8% decrease in marketing and
public relations expense due to increased efforts in this area during the
quarter ended March 31, 1993.
Comparison of the Six Month Periods
Ended March 31, 1994 and 1993
Net income decreased to $1,807,000 for the six months ended March 31, 1994 from
$2,043,000 for the same period in the prior year. Net interest income
decreased from $5,727,000 to $5,133,000 and the interest rate spread decreased
from 4.22% to 3.56%. Earnings per share for these same periods decreased from
$1.12 to $.97.
Total interest income decreased 6.6% from $10,139,000 to $9,465,000 as a result
of a decrease in average rate earned from 8.05% to 7.13% and was offset by a
4.8% increase in average volume of interest-earning assets.
Total interest expense decreased from $4,412,000 to $4,332,000 or 1.8%. This
decrease is due to a decrease in average rate paid on interest-sensitive
liabilities from 3.84% to 3.57% and was partially offset by a 5.2% increase in
average volume of deposits and borrowings.
-12-
<PAGE> 185
Total other income increased from $655,000 to $741,000 due to the Bank having
realized gains on the sale of loans during the six month period ended March 31,
1994 while no such gains were realized during the same period in the prior
year. Total other expense increased from $2,929,000 to $3,021,000 or 3.1%.
Salaries and employee benefits increased 15.4%, net occupancy expense increased
30.8% and insurance premiums increased 24.3% while marketing and public
relations expense decreased 45.7%. These fluctuations resulted for the same
reasons discussed in the quarter comparison. Also, data processing expense
decreased 29.6% due to a waiver of fees by the Bank's computer system servicer
during the period of system conversion in the first quarter of fiscal 1994.
-13-
<PAGE> 186
BNF BANCORP, INC. AND SUBSIDIARY
PART II - OTHER INFORMATION
ITEM 1, LEGAL PROCEEDINGS
The Bank is not a party to any material legal proceedings at this time. It is
involved in various claims and legal actions arising in the ordinary course of
business.
ITEM 2, CHANGES IN SECURITIES
Not applicable.
ITEM 3, DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4, SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5, OTHER INFORMATION
Not applicable.
ITEM 6, EXHIBITS AND REPORT ON FORM 8-K
None.
-14-
<PAGE> 187
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BNF BANCORP, INC.
Date: May 10, 1994 By: /s/ William D. Powell
------------------ -----------------------------------
William D. Powell
President & Chief Executive Officer
Date: May 10, 1994 By: /s/ C. Raymond Duncan
------------------ -----------------------------------
C. Raymond Duncan
Senior Vice President &
Chief Financial Officer
-15-
<PAGE> 188
APPENDIX B
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF
JANUARY 27, 1994
BY AND BETWEEN
UNION PLANTERS CORPORATION, BFC ACQUISITION COMPANY, INC.,
BNF BANCORP, INC. (FORMERLY BANCFIRST CORPORATION)
AND BANKFIRST, A FEDERAL SAVINGS BANK,
ALONG WITH THE PLAN OF MERGER
AND A RELATED LETTER AGREEMENT ANNEXED THERETO AS EXHIBITS A
AND B, RESPECTIVELY
<PAGE> 189
AGREEMENT AND PLAN OF REORGANIZATION
DATED as of January 27, 1994
Between
UNION PLANTERS CORPORATION and
BFC ACQUISITION COMPANY, INC.
and
BANCFIRST CORPORATION and
BANKFIRST, A FEDERAL SAVINGS BANK
<PAGE> 190
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
AGREEMENT AND PLAN OF REORGANIZATION
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-----------
ARTICLE 2
TERMS OF THE REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
----------
2.2 Certificate of Incorporation, Bylaws, Directors, Officers and Name of the Surviving Corporation . . . . . . . . 9
-----------------------------------------------------------------------------------------------
(a) Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
----------------------------
(b) Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
------
(c) Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
----------------------
(d) Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
----
2.3 Due Diligence Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--------------------
2.4 Availability and Confidentiality of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-----------------------------------------------
2.5 UPC's Right to Revise the Structure of the Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
------------------------------------------------------
2.6 Holding Period of UPC Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
----------------------------------
2.7 BFC Stock Options and Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
------------------------------------
ARTICLE 3
DESCRIPTION OF TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Terms of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-------------------
(a) Satisfaction of Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-------------------------------------
(b) Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
----------------------------
(c) Conversion of Shares of INTERIM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
-------------------------------
(d) Conversion and Cancellation of Shares of BFC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
--------------------------------------------
(e) Conversion and Exchange of BFC Shares; Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 14
-----------------------------------------------------
(f) Mechanics of Payment of Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-------------------------------------
(g) Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
--------------------
(h) Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
---------------------
(i) Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
------------------
(j) Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-------------------------
(k) Appraisal Rights of BFC Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-------------------------------------
3.2 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-------------------------
</TABLE>
i
<PAGE> 191
<TABLE>
<S> <C> <C>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF UPC AND INTERIM . . . . . . . . . . . . . . . . . . 19
4.1 Organization and Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
------------------------------------
4.2 Authorization, Execution and Delivery; Reorganization Agreement Not in Breach . . . . . . . . . . . . . . . . . 20
-----------------------------------------------------------------------------
4.3 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
------------
4.4 Government Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
--------------------
4.5 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
--------------
4.6 UPC Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
------------------------
4.7 Exchange Act and Listing Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
--------------------------------
4.8 The UPC Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
--------------------
4.9 Licenses, Franchise, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
------------------------
4.10 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
--------------------------
4.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
-----------
4.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
----------
4.13 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
----------------------------------
4.14 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
--------------------
4.15 Material Contract Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
--------------------------
4.16 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
---------------------------
4.17 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
----------
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BFC AND BFSB . . . . . . . . . . . . . . . . . . . 27
5.1 Organization and Qualification of BFC and Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
------------------------------------------------------
5.2 Authorization, Execution and Delivery; Reorganization Agreement Not in Breach . . . . . . . . . . . . . . . . . 28
-----------------------------------------------------------------------------
5.3 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
------------
5.4 Government and Other Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
------------------------------
5.5 Compliance With Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
-------------------
5.6 Charter Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
-----------------
5.7 BFC Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
------------------------
5.8 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
--------------------------
5.9 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
--------
5.10 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
----------
5.11 BFC Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
----------------
5.12 Condition of Fixed Assets and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
---------------------------------------
5.13 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-----------
5.14 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
----------
5.15 Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
-------------------
5.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
---------
5.17 Labor and Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
----------------------------
5.18 Records and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
---------------------
5.19 Capitalization of BFC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
---------------------
5.20 Sole Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
--------------
5.21 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
----------
5.22 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
----------------------------------
5.23 Allowance for Possible Loan or ORE Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
-----------------------------------------
5.24 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
--------------------
</TABLE>
ii
<PAGE> 192
<TABLE>
<S> <C> <C>
5.25 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
----------------------
5.26 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
------------------
5.27 Material Contract Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
--------------------------
5.28 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
-------
5.29 Exchange Act and Listing Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
--------------------------------
5.30 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
---------------------------
ARTICLE 6
COVENANTS OF UPC . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.1 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
--------------------
6.2 Reservation, Listing and Registration of UPC Common Stock under the Securities Laws . . . . . . . . . . . . . . 53
-----------------------------------------------------------------------------------
6.3 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
-----------------
6.4 Conduct of Business; Notice of Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
---------------------------------------------
ARTICLE 7
COVENANTS OF BFC AND BFSB . . . . . . . . . . . . . . . . . . . . . . . . 54
7.1 Proxy Statement; BFC Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
-----------------------------------------
7.2 Conduct of Business -- Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
--------------------------------------------
7.3 Conduct of Business -- Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
-----------------------------------------
7.4 Conduct of Business -- Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
--------------------------------------
ARTICLE 8
CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.1 Conditions to the Obligations of BFC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
------------------------------------
(a) Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
-----------
(b) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
------------------------------
(c) Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
---------
(d) Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
-------------
(e) Opinion of UPC's and INTERIM's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
--------------------------------------
(f) Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
----------------
(g) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
-----------
8.2 Conditions to the Obligations of UPC and INTERIM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
------------------------------------------------
(a) Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
-----------
(b) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
------------------------------
(c) Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
---------
(d) Destruction of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
-----------------------
(e) Inspections Permitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
---------------------
(f) No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
--------------------------
(g) Opinion of BFC's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
------------------------
(h) Other Business Combinations, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
--------------------------------
(i) Maintenance of Certain Covenants, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
-------------------------------------
(j) Non-Compete Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
----------------------
(k) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
-----------
(l) Pooling of Interests Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
-----------------------------------------
(m) Receipt of Affiliate Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
----------------------------
(n) Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
---------------------
(o) Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
----------------
</TABLE>
iii
<PAGE> 193
<TABLE>
<S> <C> <C>
8.3 Conditions to Obligations of All Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
----------------------------------------
(a) No Pending or Threatened Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
-------------------------------
(b) Governmental Approvals and Acquiescence Obtained . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
------------------------------------------------
(c) Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
----------------------
(d) Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
--------------------
ARTICLE 9
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
-----------
9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
---------------------
ARTICLE 10
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
-------
10.2 Assignability and Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
-------------------------------------
10.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
-------------
10.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
------------
10.5 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
------------
10.6 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
---------
10.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
----------------
10.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
------------
10.9 Modifications, Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
-------------------------------------
10.10 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
--------------
10.11 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
-------------------
10.12 Finders and Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
-------------------
10.13 Equitable Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
------------------
10.14 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
---------------
10.15 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
------------------------------------------
10.16 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
---------
10.17 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
-------------------
</TABLE>
iv
<PAGE> 194
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Reorganization
Agreement") dated as of the 27th day of January, 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; BFC ACQUISITION COMPANY, INC. ("INTERIM"), a corporation chartered and
existing under the laws of the State of Delaware, whose principal place of
business is located at 7130 Goodlett Farms Parkway, Memphis, Shelby County,
Tennessee 38018, and which is a wholly-owned subsidiary of UPC; BANCFIRST
CORPORATION ("BFC" or "Surviving Corporation" as the context may require), a
corporation chartered and existing under the laws of the State of Delaware
which is a registered savings and loan holding company and whose principal
offices are located at 255 Grant Street, S.E., Decatur, Morgan County, Alabama
35601; and BANKFIRST, a federal savings bank ("BFSB"), a federal savings bank,
chartered and existing under the laws of the United States of America, having
its main office at 255 Grant Street, S.E., Decatur, Morgan County, Alabama
35601, and which is a wholly-owned subsidiary of BFC.
UPC, INTERIM, BFC, and BFSB are sometimes referred to herein as the
"Parties."
RECITALS
A. BFC is the beneficial owner and holder of record of 1,000
shares of the common stock, $.01 par value per share, of BFSB which constitute
all of the shares of common stock of BFSB issued and outstanding (the "BFSB
Common Stock"), and desires to have itself and BFSB acquired by UPC on the
terms and subject to the conditions set forth in this Reorganization Agreement
and the accompanying Plan of Merger (attached hereto as Exhibit A) (the "Plan
of Merger").
B. UPC is the beneficial owner and holder of record of 1,000
shares of the common stock, $.01 par value per share, of INTERIM which
constitute all of the shares of common stock of INTERIM issued and outstanding
(the "INTERIM Common Stock"), and desires to acquire BFC and BFSB on the terms
and subject to the conditions set forth in this Reorganization Agreement and
the accompanying Plan of Merger.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 1
<PAGE> 195
C. The Boards of Directors of BFC and BFSB deem it desirable and
in the best interests of the shareholders of BFC (the "BFC Shareholders") that
INTERIM be merged with and into BFC (which would survive the merger as the
Surviving Corporation, as defined herein) 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 (the
"Merger").
D. The Boards of Directors of UPC and INTERIM deem it desirable
and in the best interests of UPC and INTERIM and the shareholders of UPC that
(i) INTERIM be merged with and into BFC 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.
E. The respective Boards of Directors of UPC, INTERIM, BFC and
BFSB have each adopted (or will each adopt) resolutions setting forth and
adopting this Reorganization Agreement and the Plan of Merger, and have
directed that this Reorganization Agreement and the Plan of Merger and all
resolutions adopted by said Boards of Directors and by the BFC 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 Alabama State Banking Department (the
"ASBD"), the Office of Thrift Supervision (the "OTS") and such other
regulatory agencies or authorities as may be necessary in order to obtain all
governmental authorizations required to consummate the proposed Merger and the
transactions contemplated in this Reorganization Agreement 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> 196
"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.
"ALABAMA CODE" shall mean the Alabama Code of 1975 Annotated,
as amended.
"ALABAMA SUPERINTENDENT" shall mean the Superintendent of
Banks of the State of Alabama.
"AMEX" shall mean the American Stock Exchange, or its
successor, upon which shares of the BFC Common Stock are listed for trading.
"APPLICABLE ENVIRONMENTAL LAWS" shall have the meaning
assigned to such term in Section 5.15(a) of this Reorganization Agreement.
"ASBD" shall mean the Alabama State Banking Department.
"AUDITED FINANCIAL STATEMENTS OF BFC" shall have the meaning
assigned to such term in Section 5.7 of this Reorganization Agreement.
"BALANCE SHEET DATE" shall have the meaning assigned to such
term in Section 5.8 of this Reorganization Agreement.
"BFC" means BANCFIRST Corporation, a corporation chartered and
existing under the laws of the State of Delaware which is a registered savings
and loan holding company and whose principal offices are located at 255 Grant
Street, S.E., Decatur, Morgan County, Alabama 35601.
"BFC COMMON STOCK" has the meaning assigned to such term in
Section 3.1(d) of this Reorganization Agreement.
"BFC COMPANIES" shall mean BFC and all of its Subsidiaries,
including BFSB and all BFSB Subsidiaries.
"BFC 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 BFC or any BFC Subsidiary, including, but not limited to, BFSB, to or
for the benefit of the officers, directors or employees of BFC or any BFC
Subsidiary.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 3
<PAGE> 197
"BFC RECORD HOLDERS" means the holders of record of all of the
issued and outstanding shares of BFC Common Stock immediately prior to the
Effective Time of the Merger.
"BFC SHAREHOLDERS" shall have the meaning assigned to such
term in Recital D of this Reorganization Agreement.
"BFC STOCK OPTIONS" shall have the meaning assigned to such
term in Section 2.7 of this Reorganization Agreement.
"BFSB" means BANKFIRST, a federal savings bank, a federal
savings bank, chartered and existing under the laws of the United States of
America, having its main office at 255 Grant Street, S.E., Decatur, Morgan
County, Alabama 35601, and which is a wholly-owned subsidiary of BFC.
"BFSB COMMON STOCK" shall have the meaning assigned to such
term in Recital A of this Reorganization Agreement.
"BHCA" shall mean the Bank Holding Company Act of 1956, as
amended.
"BROKERED DEPOSITS" shall mean all Deposits of BFSB for which
BFSB has paid a commission or an interest rate substantially above that paid by
BFSB to the general depositors of BFSB.
"BUSINESS DAY" shall mean any Monday, Tuesday, Wednesday,
Thursday or Friday that is not a federal or state holiday generally recognized
by banks in either Alabama or Tennessee.
"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.
"COMPTROLLER" shall mean the Office of the Comptroller of the
Currency, or any successor thereto.
"CONSIDERATION" shall mean the value to be received by the BFC
Record Holders in exchange for their BFC Common Stock, such value to be
determined as provided in Article 3, Section 3.1(e), of this Reorganization
Agreement.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 4
<PAGE> 198
"CONTROL" shall have the meaning assigned to such term in
Section 2(a)(2) of the Bank Holding Company Act of 1956, as amended.
"DELAWARE CODE" shall mean the Delaware Code (1974 Revision),
as amended.
"DEPOSITS" shall mean all deposits (including, but not limited
to, certificates of deposit, savings accounts, NOW accounts and checking
accounts) of BFSB.
"EFFECTIVE DATE OF THE MERGER" 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.
"FDIC" means the Federal Deposit Insurance Corporation, or any
successor thereto.
"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.
"FIXED ASSETS" shall mean the furniture, fixtures and
equipment of the referenced Party.
"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.
"HOLA" shall mean the Home Owners' Loan Act of 1933, as
amended and recodified.
"HAZARDOUS SUBSTANCES" shall have the meaning set forth in
Section 5.15(a) of this Reorganization Agreement.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 5
<PAGE> 199
"INTERIM" shall mean BFC Acquisition Company, Inc., a
corporation chartered and existing under the laws of the State of Delaware,
whose principal place of business is located at 7130 Goodlett Farms Parkway,
Memphis, Shelby County, Tennessee 38018, and which is a wholly-owned subsidiary
of UPC formed solely to effect the Merger.
"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 BFC, which
shall survive the Merger as the Surviving Corporation.
"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.
"OFFICER" shall have the meaning set forth in Section 5.8(k)
of this Reorganization Agreement.
"OTS" shall mean the Office of Thrift Supervision, or any
successor thereto.
"PARTIES" shall mean BFC, BFSB, UPC and INTERIM collectively;
BFC and BFSB 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
BFC, UPC and INTERIM and filed with the Delaware Secretary of State along with
the Certificate of
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 6
<PAGE> 200
Merger in accordance with Title 8-Chapter 485-Section 251 of the Delaware Code
and providing for the Merger of INTERIM with and into BFC 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
BFC to solicit proxies with a view to securing the approval of the BFC
Shareholders of this Reorganization Agreement and the Plan of Merger.
"REALTY" means the real property of BFC or BFSB owned or
leased by BFC or BFSB or any Subsidiary of BFC or BFSB.
"RECORDS" means all available records, minutes of meetings of
the Board of Directors, committees and shareholders of BFC or BFSB, original
instruments and other documentation, pertaining to BFC, BFC's assets (including
plans and specifications relating to the Realty), BFC's liabilities, the BFC
Common Stock, the BFSB 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 BFC's or BFSB's business by UPC and BFC 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 OTS, the SEC, or any other state or federal governmental
or quasi-governmental entity which has, 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" shall mean the Merger (as described in
Section 2.1(a) of this Reorganization Agreement) and the transactions
contemplated in this Reorganization Agreement and the Plan of Merger annexed
hereto as Exhibit A.
"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, or
any successor thereto.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 7
<PAGE> 201
"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 OTS, the Comptroller, the FDIC, the Federal Reserve
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 any similar state
securities laws and any similar rules and regulations promulgated by the
applicable federal bank Regulatory Authorities.
"SHAREHOLDERS MEETING" shall mean the meeting of the BFC
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 voting 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;
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 BFC as the corporation
resulting from the consummation of the Merger as set forth in Section 2.1(a) of
this Reorganization Agreement and which shall continue to be the sole
shareholder of BFSB subsequent to the Merger.
"TENNESSEE CODE" shall mean the Tennessee Code Annotated, as
amended.
"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.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 8
<PAGE> 202
"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, 1991 and 1992 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, 1993, 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.
ARTICLE 2
TERMS OF THE REORGANIZATION
2.1 The Merger. Subject to the satisfaction (or 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 BFC (the "Merger"), which latter corporation (the
"Surviving Corporation") shall survive the Merger and continue to be the sole
shareholder of BFSB.
2.2 Certificate of Incorporation, Bylaws, Directors,
-----------------------------------------------
Officers and Name of the Surviving Corporation.
- ----------------------------------------------
(a) Certificate of Incorporation. At the
----------------------------
Effective Time of the Merger, the Certificate of Incorporation of BFC, as in
effect immediately prior to the Effective Time of the Merger, shall continue to
be the Certificate of Incorporation of BFC as the Surviving Corporation, unless
and until the same shall be amended thereafter as provided by law and the terms
of such Certificate of Incorporation.
(b) Bylaws. At the Effective Time of the Merger,
-------
the Bylaws of BFC, as in effect immediately prior to the Effective Time of the
Merger, shall continue to be the Bylaws of BFC as the Surviving Corporation,
unless and until amended or repealed as provided by law, its Certificate of
Incorporation and such Bylaws.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 9
<PAGE> 203
(c) Directors and Officers. The directors and
----------------------
officers of BFC in office immediately prior to the Effective Time of the Merger
shall continue to be the directors and officers of the Surviving Corporation,
to hold office as provided in the Certificate 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 BFC as the Surviving
----
Corporation following the Merger shall remain unchanged and continue to be:
BANCFIRST CORPORATION
or such corporate name as BFC shall elect to adopt.
2.3 Due Diligence Review. Prior to the execution by the
--------------------
Parties of this Reorganization Agreement, each Party has had an opportunity to
conduct a 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 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 and Confidentiality of Information.
-----------------------------------------------
Each Party shall continue to 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 revise or update the information obtained through the reviewing Party's due
diligence undertaken in accordance with Section 2.3 of this Reorganization
Agreement. Each party shall keep all non-public information obtained by the
other Party with respect to the transactions contemplated in this
Reorganization Agreement confidential and shall not disclose or use such
information in any manner without the prior written consent of the other Party.
2.5 UPC's Right to Revise the Structure of the
------------------------------------------
Transaction. UPC shall have the unilateral right to revise the structure of
- -----------
the corporate Reorganization contemplated by this Reorganization Agreement in
order 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
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 10
<PAGE> 204
Board of Directors of BFC, to make any revision to the structure of the
Reorganization which (i) changes the amount of Consideration which the BFC
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 Merger to UPC, INTERIM, BFC or BFSB; (iii) 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) would adversely affect the employee
benefits, fringe benefits or the organizational structure contemplated by this
Reorganization Agreement. UPC may exercise this right of revision by giving
written Notice to BFC and BFSB 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. BFC and BFSB 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 interests under the rules and regulations promulgated by the SEC,
Accounting Principles Board Opinion No. 16 and GAAP, any BFC Record Holder who
would be deemed an Affiliate of BFC 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 BFC Common Stock in
connection with the Merger, 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
BFC 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 BFC Common
Stock held prior to the Merger or UPC Common Stock to be delivered by UPC to
such BFC Record Holder in connection with the Merger for a period of thirty
(30) days prior to Closing and until such time as UPC shall have publicly
released a statement of UPC's earnings reflecting the combined financial
results of operations of UPC and BFC for a period of not less than thirty (30)
days subsequent to the Effective Time of the Merger. BFC further acknowledges
and agrees that any UPC Common Stock Certificates issued in connection with the
Merger to BFC Record Holders who would be deemed Affiliates of BFC 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
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 11
<PAGE> 205
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 UPON THE PRIOR DELIVERY TO UNION
PLANTERS CORPORATION ("UPC") OF AN OPINION FROM LEGAL COUNSEL,
SATISFACTORY TO UPC, IN FORM AND SUBSTANCE SATISFACTORY TO UPC AND ITS
LEGAL COUNSEL, STATING THAT SUCH SALE OR OTHER DISPOSITION IS BEING
MADE PURSUANT TO AND IN ACCORDANCE WITH THE REQUIREMENTS OF SEC RULES
144 AND 145 OR IS OTHERWISE EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT, AND THAT SUCH SALE OR OTHER DISPOSITION WILL NOT
AFFECT THE "POOLING OF INTERESTS" ACCOUNTING TREATMENT OF THE MERGER
WHICH RESULTED IN THESE SHARES BEING ISSUED. 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 BANCFIRST CORPORATION. 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 BFC Stock Options and Treasury Stock. Except as
------------------------------------
described in Schedule 2.7 hereto, as of the date of this Reorganization
Agreement, there are 121,487 validly issued and outstanding options to purchase
shares of BFC Common Stock, 95,237 of which were issued by BFC to certain
officers of BFC in connection with BFC's 1986 Stock Option and Incentive Plan
and 26,250 of which were issued by BFC to outside directors of BFC in
connection with the BFC Non-Incentive Stock Option Plan for Outside Directors;
and no other options, rights, warrants, scrip or similar rights to purchase
shares of BFC Common Stock (collectively, the "BFC Stock Options") are (or have
been) issued and outstanding by BFC. It is contemplated by the Parties hereto
that all validly issued and outstanding BFC Stock Options outstanding
immediately prior to the Closing would be automatically converted at the
Effective Time of the Merger into options to purchase shares of UPC Common
Stock based on the Exchange Ratio. Therefore, in the event and to the extent
that there are any BFC Stock Options validly issued and outstanding at the time
of Closing, such BFC Stock Options shall at the Effective Time of the Merger
automatically and without further action on the part of anyone be converted
into options to purchase shares of UPC Common Stock on the same terms and
conditions attributable to the BFC Stock Options to purchase
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 12
<PAGE> 206
shares of BFC Common Stock in effect as of the date of this Reorganization
Agreement adjusted in all respects by and in accordance with the Exchange Ratio
(i.e. if an existing BFC Stock Option for the purchase of 1,000 shares of BFC
Common Stock were exercisable at $6.35 per share of BFC Common Stock and the
Exchange Ratio were 1.078, then at the Effective Time of the Merger such
unexercised BFC Stock Option would automatically convert into an option to
purchase 1,078 shares of UPC Common Stock at an exercise price of $6.35 per
share). As of the date of this Reorganization Agreement, BFC has not
repurchased or accelerated the purchase rights of any BFC Stock Options, nor
will it repurchase or accelerate the purchase rights of any BFC Stock Options,
and BFC has not repurchased any shares of its capital stock. Therefore, as of
the date of this Reorganization Agreement, there are no shares of BFC Common
Stock held by BFC 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
BFC and INTERIM, and each other condition to the obligations of the Parties
hereto, other than those conditions which are to be satisfied by delivery of
documents by any Party to any other Party, has been satisfied or, if lawfully
permitted, waived by the Party or Parties entitled to the benefits thereof, 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 effecting the Merger and each Party will provide the other Parties with such
proof or indication of satisfaction of the conditions to the obligations 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 shall have been satisfied or lawfully waived by the Party entitled to
the benefits thereof, the Parties shall, at the Closing, duly execute a
Certificate of Merger for filing with the Secretary of State of the State of
Delaware and promptly thereafter BFC and INTERIM 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
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 13
<PAGE> 207
Reorganization Agreement. The Parties shall thereupon take such other and
further actions as UPC shall direct or as 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 (except those conditions waived by
the Parties), the Merger shall become effective on the date and at the time of
filing of a Certificate of Merger with the Secretary of State of the State of
Delaware or at such later date and/or time as may be agreed upon by the Parties
and set forth in the Certificate 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 $.01 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 BFC.
--------------------------------------------
At the Effective Time of the Merger, each share of $.01 par value common stock
of BFC (the "BFC 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.
(e) Conversion and Exchange of BFC Shares;
-------------------------------------
Exchange Ratio. At the Effective Time of the Merger, the outstanding shares of
- --------------
BFC Common Stock held by the BFC 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
BFC and shall automatically be converted exclusively into, and constitute only
the right of the BFC Record Holders to receive in exchange for their shares of
BFC 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 BFC Record Holders pursuant to the terms of
this Reorganization Agreement are sometimes collectively referred to herein as
the "Consideration."
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 14
<PAGE> 208
The number of shares of UPC Common Stock to be exchanged for each share of BFC
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:
(A) 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, the Exchange Ratio shall be
based on a fixed Exchange Ratio of 1.078 shares of UPC Common Stock
for each share of BFC Common validly issued and outstanding
immediately prior to the Effective Time of the Merger; and
(B) In the event the Current Market Price
Per Share of UPC Common Stock should be less than $24.00 per share of
UPC Common Stock, the Exchange Ratio shall be fixed at 1.078 shares of
UPC Common Stock for each share or BFC Common Stock; provided, however,
-------- -------
BFC shall have the right to either accept the fixed Exchange Ratio of
1.078 or terminate the transaction in accordance with the terms and
provisions of this Reorganization Agreement, provided, further, in the
-------- -------
event BFC should elect to terminate this Reorganization Agreement in
accordance with this Section 3.1(e)(B), UPC may, in its sole
discretion, reinstate this Reorganization Agreement and the
transactions contemplated herein by increasing the number of shares of
UPC Common Stock to be delivered by UPC to the BFC Record Holders
hereunder (i.e. the Exchange Ratio) based on a fixed price of $25.87
per share of BFC Common Stock divided by the Current Market Price Per
------- --
Share of UPC Common Stock.
The Exchange Ratio as determined in this Section 3.1(e) shall be based on an
aggregate of no more than 1,905,680 shares of BFC Common Stock validly issued
and outstanding immediately prior to the Effective Time of the Merger and, for
purposes of this paragraph, counting all unexercised BFC Stock Options issued
and outstanding immediately prior to the Effective Time of the Merger as shares
of BFC Common Stock so converted and exchanged; 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 BFC Record Holder is entitled
based upon the Exchange Ratio, there shall be a fractional share of UPC Common
Stock remaining, such fractional share shall be settled by a cash payment
therefor pursuant to the Mechanics of Payment of the Purchase Price set forth
in Section 3.1(f) hereof, which shall be calculated based upon the Current
Market Price Per Share of one (1) full share of UPC Common Stock.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 15
<PAGE> 209
(i) 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.
(ii) EFFECTS OF APPRAISAL RIGHTS ON THE
EXCHANGE RATIO. The Exchange Ratio shall be unaffected by Appraisal
Rights as granted under Delaware law because the BFC Common Stock is
listed for trading on the AMEX, which is a "national securities
exchange" as defined in rules promulgated by the SEC pursuant to the
1934 Act, and therefore, pursuant to Delaware Code Section 8-503-262,
no BFC Record Holder may assert Appraisal Rights in connection with
the Merger or the transactions contemplated in this Reorganization
Agreement.
(iii) EFFECT OF STOCK SPLITS, REVERSE STOCK
SPLITS, STOCK DIVIDENDS AND SIMILAR CHANGES IN THE CAPITAL OF BFC.
Should BFC effect any stock splits, reverse stock splits, stock
dividends or similar changes in its 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
in such a manner as the Board of Directors of UPC shall deem in good
faith to be fair and reasonable in order to give effect to such
changes subject to BFC Board of Directors approval.
(f) Mechanics of Payment of Consideration. As
-------------------------------------
soon as reasonably practicable, but in any event no more than five (5) Business
Days after the Effective Time of the Merger, the Corporate Trust Department of
Union Planters National Bank, Memphis, Tennessee (the "Exchange Agent") shall
deliver to each of the BFC Record Holders such materials and information deemed
necessary by the Exchange Agent to advise the BFC Record Holders of the
procedures required for proper surrender of their certificates evidencing and
representing shares of the BFC Common Stock in order for the BFC Record Holders
to receive the Consideration. Such materials shall include, without
limitation, a Letter of Transmittal, an Instruction Sheet, and a return
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 16
<PAGE> 210
mailing envelope addressed to the Exchange Agent (collectively the "Shareholder
Materials"). All Shareholder Materials shall be sent by United States mail to
the BFC Record Holders at the addresses set forth on a certified shareholder
list to be delivered by BFC to UPC at the Closing (the "Shareholder List") and
shall also be made available at the Corporate Trust Department offices of the
Exchange Agent. As soon as reasonably practicable thereafter, the BFC Record
Holders of all of the outstanding shares of BFC Common Stock, shall deliver, or
cause to be delivered, by United States Postal Service, hand delivery or any
other means of delivery selected by such BFC Record Holders, to the Exchange
Agent, pursuant to the Shareholder Materials, the certificates formerly
evidencing and representing all of the shares of BFC Common Stock which were
validly issued and outstanding immediately prior to the Effective Time of the
Merger, and the Exchange Agent shall take prompt action to process such
certificates formerly evidencing and representing shares of BFC Common Stock
received by it (including the prompt return of any defective submissions with
instructions as to those actions which may be necessary to remedy any defects).
Upon receipt of the proper submission of the certificate(s) formerly
representing and evidencing ownership of the shares of BFC Common Stock, the
Exchange Agent shall, on or prior to the 30th day after the Effective Time of
the Merger, mail to the former BFC Record Holders in exchange for the
certificate(s) surrendered by them, the Consideration to be paid for each such
BFC Record Holder's shares of BFC 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 BFC Common Stock of a BFC 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 BFC Record Holder's shares of BFC 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 BFC Record Holder's
BFC Common Stock shall have been properly surrendered as provided above, the
Consideration payable to the BFC Record Holder(s) of the cancelled shares as of
any time after the Effective Date shall not be paid to the BFC Record Holder(s)
of such certificate(s) until such certificates shall have been surrendered in
the manner required. Each BFC Record Holder 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 BFC Record
Holder(s) of any certificate(s) which shall have been lost or destroyed may
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 17
<PAGE> 211
nevertheless, subject to the provisions of this Section, receive the
Consideration to which each such BFC Record Holder is entitled, provided that
each such BFC 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 BFC
Record Holder.
(g) Stock Transfer Books. At the Effective Time
--------------------
of the Merger, the stock transfer books of BFC shall be closed and no transfer
of shares of BFC Common Stock shall be made thereafter.
(h) Effects of the Merger. At the Effective Time
---------------------
of the Merger, the separate existence of INTERIM shall cease, and INTERIM shall
be merged with and into BFC 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 BFC and
INTERIM.
(i) Transfer of Assets. At the Effective Time of
------------------
the Merger, all rights, assets, licenses, permits, franchises and interests of
BFC 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 BFC 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 BFC as well as those of
INTERIM, 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 BFC or INTERIM.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 18
<PAGE> 212
(k) Appraisal Rights of BFC Shareholders.
------------------------------------
Pursuant to the provisions of Section 8-503-262 of the Delaware Code, BFC
Shareholders shall not be entitled to assert Appraisal Rights in connection
with the Merger or to seek those appraisal remedies afforded by the Delaware
Code because the BFC Common Stock is listed for trading on the AMEX, which is a
"national securities exchange" as defined in rules promulgated by the SEC
pursuant to the 1934 Act, and therefore, pursuant to Delaware Code Section
8-503-262, no BFC Record Holder may assert Appraisal Rights in connection with
the Merger or the transactions contemplated in this Reorganization Agreement.
(l) Reservation, Registration and Listing of
----------------------------------------
shares of UPC Common Stock. UPC shall reserve for issuance, register under the
- --------------------------
Securities Laws and apply for listing for trading on the NYSE a sufficient
number of shares of UPC Common Stock for the purpose of issuing shares of UPC
Common Stock to the BFC Record Holders in accordance with the terms and
conditions of this Section 3.1.
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 Administrative Center, Union Planters
Corporation 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 AND INTERIM
As of the date hereof and as of the Effective Time of the
Merger, UPC and INTERIM represent and warrant to BFC as follows:
4.1 Organization and Corporate Authority. UPC is a
------------------------------------
corporation duly organized, validly existing and in good standing under the
laws of the State of Tennessee. INTERIM is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
UPC and INTERIM (i) have the 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
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 19
<PAGE> 213
the character of their properties owned or held under lease or the nature of
their business makes such qualification necessary and where the failure to so
qualify would individually or in the aggregate have a material adverse affect
on the condition (financial or otherwise), affairs, business, assets or
prospects of UPC and all UPC Subsidiaries, taken as a whole; 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.
The corporate Charter and Bylaws of UPC and the Certificate of Incorporation
and Bylaws of 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 INTERIM, have been (or upon
execution will have been) duly executed and delivered by UPC and 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, the consummation of the transactions contemplated
hereby and the fulfillment of the terms hereof will not result in a 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 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 Charter and Bylaws of
UPC or the Certificate of Incorporation and Bylaws of INTERIM; or any judgment,
decree, order or award of any court, governmental body or arbitrator by
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 20
<PAGE> 214
which UPC or INTERIM is bound; or any 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 and 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, prohibition,
injunction or decree of any court or other governmental body of competent
jurisdiction which would prevent the execution of this Reorganization Agreement
by UPC or INTERIM, its delivery to BFC and BFSB or the consummation of the
transactions contemplated hereby, 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; (b) the prior approval of the Alabama
State Banking Department ("ASBD") under Title 5-14A-3 et seq of the Alabama
-- ---
Code and the regulations promulgated by the ASBD thereunder; and (c) the prior
approval of the Office of Thrift Supervision under the HOLA (collectively, the
"Government Approvals"). Neither UPC nor INTERIM are aware of any facts,
circumstances or reasons why such Government Approvals should not be forth
coming or which would prevent or hinder such approvals from being obtained.
4.5 Capitalization. (a) 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 December 31, 1993,
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
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 21
<PAGE> 215
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 December 31, 1993, 19,656,924 shares of UPC Common Stock
were validly issued and outstanding.
As of the date hereof, UPC is the holder, directly or indirectly, of
all of the outstanding capital stock of its Subsidiaries, except for director
qualifying shares of UPNB.
(b) The authorized capital stock of INTERIM consists
of 1,000 shares of common stock having a par value of $.01 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. INTERIM was formed by UPC solely to effect the
Merger and has not incurred any debts or liabilities.
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 BFC true and complete copies of: (i)
UPC's audited Consolidated Financial Statements for the calendar years ended
December 31, 1991 and 1992 (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 1993 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,
1993. Such financial statements and the notes thereto present fairly, or will
present fairly when issued, 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.
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 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
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 22
<PAGE> 216
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 law
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 BFC Record Holders in exchange for all
of the BFC 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.
4.9 Licenses, Franchise, Etc. UPC and all UPC
------------------------
Subsidiaries hold all licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses. The benefits
of all of such licenses, franchises, permits and authorizations are in full
force and effect and may continue to be enjoyed by UPC and all UPC Subsidiaries
subsequent to the Closing of the transactions contemplated herein without any
consent or approval. Neither UPC nor any UPC 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.
4.10 Absence of Certain Changes. Except as disclosed in
--------------------------
Schedule 4.10 or as provided for or contemplated in this Reorganization
Agreement, since December 31, 1992 (the "Balance Sheet Date") there has not
been 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 UPC or INTERIM.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 23
<PAGE> 217
4.11 Tax Matters. Except as described in Schedule 4.11
-----------
hereto:
(a) all federal, state, local, and foreign tax
returns required to be filed by or on behalf of UPC and each UPC 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 result in a determination
materially adverse to UPC or any UPC Subsidiary except as fully reserved for in
the UPC Financial Statements. All taxes, interest, additions, and penalties
due with respect to completed and settled examinations or concluded litigation
have been paid.
(b) Neither UPC nor any UPC 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 UPC and all UPC Subsidiaries
for all periods through and including December 31, 1992, has been made and is
reflected on the December 31, 1992 financial statements included in the UPC
Financial Statements, and have been and will continue to be made with respect
to periods ending after December 31, 1992.
(d) Deferred taxes of BFC and each UPC Subsidiary
have been and will be provided for in accordance with GAAP.
(e) To the best knowledge of UPC and INTERIM,
neither the Internal Revenue Service nor any foreign, state, local or other
taxing authority is now asserting or threatening to assert against UPC or any
UPC Subsidiary any 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 UPC
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 UPC or any UPC Subsidiary, either have been paid in full, or
have been properly accrued and reflected in UPC's
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 24
<PAGE> 218
Financial Statements referred to in Section 4.6 of this Reorganization
Agreement.
4.12 Litigation. Except as set forth in Schedule 4.12
----------
hereto, there is no action, suit or proceeding pending against UPC or any UPC
Subsidiary, or to the best knowledge of UPC or INTERIM 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 INTERIM 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 Subsidiary.
4.13 Absence of Undisclosed Liabilities. Except as
----------------------------------
described Schedule 4.13 hereto, neither UPC nor any UPC Subsidiary has any
obligation 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 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 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.
4.14 Compliance with Laws. UPC and each UPC 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 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 UPC or any
UPC Subsidiary, or which would or could reasonably be expected to subject UPC
or any UPC Subsidiary or any of its directors or officers to civil money
penalties; and
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 25
<PAGE> 219
(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 UPC or any
UPC 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 UPC or any UPC Subsidiary, (ii) threatening to
revoke any license, franchise, permit, or governmental authorization which is
material to the financial condition or operations of UPC or any UPC Subsidiary,
or (iii) requiring UPC or any UPC Subsidiary to enter into a cease and desist
order, consent, agreement, or memorandum of understanding.
4.15 Material Contract Defaults. Neither UPC nor any UPC
--------------------------
Subsidiary is in default in any respect under any 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 UPC or any
UPC 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.
4.16 Statements True and Correct. None of the information
---------------------------
prepared by, or on behalf of, UPC or any UPC Subsidiary regarding UPC, INTERIM
or any other UPC Subsidiary included or to be included in the Proxy Statement
to be mailed to BFC's shareholders in connection with the BFC's 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 Statement, when first mailed to the shareholders of BFC, 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
BFC's 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
BFC's Shareholders Meeting. All documents which UPC or any UPC 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
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 26
<PAGE> 220
applicable law, including applicable provisions of the Securities Laws and the
rules and regulations issued thereunder.
4.17 Disclosure. The information concerning, and the
----------
representations or warranties made by UPC and/or 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/or INTERIM to BFC and BFSB
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 BFC and BFSB by UPC and/or INTERIM pursuant
hereto were or will be complete and accurate copies of such documents.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BFC AND BFSB
As of the date hereof and as of the Effective Time of the Merger, BFC
and BFSB represent and warrant to UPC and INTERIM as follows:
5.1 Organization and Qualification of BFC and Subsidiaries.
------------------------------------------------------
BFC is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and (a) has all requisite corporate
power and authority to own, operate and lease its material properties
and to carry on its business as it is currently being conducted; (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 and where the failure to so qualify
would individually or in the aggregate have a material adverse affect on the
condition (financial or otherwise), affairs, business, assets or prospects of
BFC and all BFC Subsidiaries, taken as a whole; and (c) is a registered savings
and loan holding company with the OTS. Each BFC 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 material 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 and where the failure
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 27
<PAGE> 221
to so qualify would individually or in the aggregate have a material adverse
affect on the condition (financial or otherwise), affairs, business, assets or
prospects of BFC and all BFC Subsidiaries, taken as a whole. BFC 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. BFSB is a federal stock chartered savings
bank, duly organized, validly existing and in good standing under the laws of
the United States of America and engages only in activities (and holds
properties only of the types) permitted by the HOLA and the rules and
regulations promulgated by the OTS thereunder or the FDIC for insured
depository institutions. BFSB's deposit accounts are insured by the Savings
Association Insurance Fund (the "SAIF") as administered by the FDIC to the
fullest extent permitted under applicable law.
5.2 Authorization, Execution and Delivery; Reorganization
-----------------------------------------------------
Agreement Not in Breach.
- -----------------------
(a) BFC and BFSB 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 BFC and BFSB and, except
for the approval of the BFC Shareholders, no other corporate proceedings on the
part of BFC 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
BFC and BFSB have been (or upon execution will have been) duly executed and
delivered by BFC and BFSB and (subject to any requisite shareholder approval
hereof) constitute (or upon execution will constitute) legal, valid and
enforceable obligations of BFC and BFSB, subject, as to enforceability, to
applicable bankruptcy, insolvency, receivership, conservatorship,
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
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
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 28
<PAGE> 222
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 mortgage, lease,
covenant, agreement, indenture or other instrument to which BFC or any BFC
Subsidiary is a party or by which BFC or any BFC Subsidiary is bound; the
Certificate of Incorporation and Bylaws of BFC or the Federal Stock Charter and
Bylaws of BFSB; or any judgment, decree, order, regulatory letter of
understanding or award of any court, governmental body, authority or arbitrator
by which BFC or any BFC Subsidiary is bound; or (subject to the receipt of the
Government Approvals) any permit, concession, grant, franchise, license, law,
statute, ordinance, rule or regulation applicable to BFC or any BFC 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 BFC or any BFC
Subsidiary where any such violation, conflict, breach, default, lien,
termination, acceleration or creation described in this Section 5.2 would have,
individually or in the aggregate, a material adverse effect on the condition
(financial or other), affairs, business, assets, or prospects of BFC and all
BFC Subsidiaries, taken as a whole.
5.3 No Legal Bar. Neither BFC nor BFSB 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 BFC or BFSB, 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
BFC or BFSB 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 BFC
or BFSB 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 or approval of this Reorganization
Agreement required from any landlord, licensor or other non-governmental party
which has granted rights to BFC or BFSB in order to avoid forfeiture or
impairment of such rights. Neither BFC nor BFSB are aware of any facts,
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 29
<PAGE> 223
circumstances or reasons why such Government Approvals should not be forth
coming or which would prevent or hinder such approvals from being obtained.
5.5 Compliance With Law. BFC and all BFC Subsidiaries
-------------------
hold all licenses, franchises, permits and authorizations necessary for the
lawful conduct of their respective businesses, and BFC and BFSB 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 BFC's or BFSB's properties or over any other part of
BFC's or BFSB's assets, liabilities or operations, the breach or violation of
which would have, individually or in the aggregate, a material adverse effect
on the condition (financial or other), affairs, business, assets, or prospects
of BFC or any BFC Subsidiary, taken as a whole. The benefits of all of such
licenses, franchises, permits and authorizations are in full force and effect
and may continue to be enjoyed by BFC and BFSB subsequent to the Closing of the
transactions contemplated herein without any consent or approval. Neither BFC
nor any BFC 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 Certificate of Incorporation and Bylaws of
BFC and the Federal Stock Charter and Bylaws of BFSB, respectively. The
Certificate of Incorporation and Bylaws of BFC and the Federal Stock Charter
and Bylaws of BFSB, as amended to date, are in full force and effect.
5.7 BFC Financial Statements. Accompanying Schedule 5.7
------------------------
hereto are true copies of the audited consolidated balance sheets of BFC as of
September 30, 1993, the audited consolidated balance sheets of BFC as of
September 30, 1992, and selected financial data for BFC as of September 30,
1991, 1990 and 1989, and the related consolidated statements of income and
changes in stockholders' equity and cash flows of BFC and BFSB for the years
ended September 30, 1993, 1992 and 1991 (the "Audited Financial Statements of
BFC") and the comparative interim (or annual) financial statements for any
subsequent quarter (or year) ending after September 30, 1993 and prior to the
Closing Date. Such financial statements (i) were (or will be) prepared from
the books and records of BFC and BFSB; (ii) were (or will be) prepared in
accordance with generally accepted accounting principles consistently applied;
(iii) accurately present (or will present) BFC's and BFSB's consolidated
financial condition and the consolidated results of their operations, changes
in
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 30
<PAGE> 224
stockholders' equity and cash flows at the relevant dates thereof and for the
periods covered thereby; (iv) in the opinion of BFC's management do contain or
reflect (or will contain and reflect) all necessary adjustments and accruals
for an accurate presentation of BFC's and BFSB's consolidated financial
condition and the consolidated results of BFC's and BFSB's operations and cash
flows as stated including any amendments thereto for the periods covered by
such financial statements; (v) in the opinion of BFC's management do contain
and reflect (or will 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) in the opinion of BFC's management do contain and reflect (or
will 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 September 30, 1993 (the "Balance Sheet Date") there has not
been:
(a) any transaction having a value in excess of
One Hundred Thousand Dollars ($100,000) by BFC or BFSB 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 BFC or BFSB;
(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 BFC or BFSB or their future
use and operation by BFC or BFSB;
(d) any acquisition or disposition by BFC or BFSB
of any property or asset of BFC or BFSB, 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 or with respect to the disposition of
repossessed or foreclosed assets at fair value;
(e) any mortgage, pledge or subjection to lien,
charge or encumbrance of any kind on any of the respective properties or assets
of BFC or BFSB, except to secure extensions
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 31
<PAGE> 225
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 BFC or BFSB, to which BFC or BFSB is a
party which would have a material adverse effect upon the financial condition
or operations of BFC or BFSB.
(g) any increase in, or commitment to increase,
the compensation payable or to become payable to any officer, director,
employee or agent of BFC or BFSB, 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 BFC or BFSB, 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 BFC or BFSB, or in the accounting
policies or practices therein reflected, except as may be required by GAAP or
the OTS;
(j) any release or discharge of any obligation or
liability of any person or entity related to or arising out of any loan made by
BFC or BFSB of any nature whatsoever, except in the ordinary course of business
and in conformity with past practice; or
(k) to the best of BFC's and BFSB's knowledge,
information and belief any loan (except credit card loans, passbook loans or
home loans) by BFC or BFSB to any Officer, director or known 2% shareholder of
BFC or BFSB or any Affiliate of BFC or BFSB; or to any member of the immediate
family of such Officer, director or 2% shareholder of BFC or BFSB or any
Affiliate of BFC; 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 5.8, "Officer" shall refer to a person
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 32
<PAGE> 226
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. None of the BFSB Deposits is a Brokered
--------
Deposit or subject 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 BFC or BFSB.
5.10 Properties. Except as described in Schedule 5.10 hereto
----------
or in the opinion of management of BFC and BFSB adequately reserved against in
the Audited Financial Statements of BFC, BFC and each BFC 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 Audited
Financial Statements of BFC as being owned by BFC or any BFC Subsidiary as of
the dates thereof. All buildings, and all fixtures, equipment, and other
property and assets that are material to the business of BFC and its
Subsidiaries on a consolidated basis, held under leases or subleases by BFC or
any BFC 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).
5.11 BFC Subsidiaries. Schedule 5.11 hereto lists all of the
----------------
active and inactive BFC Subsidiaries (including any BFSB Subsidiary) as of the
date of this Reorganization Agreement and describes generally the business
activities conducted, or permitted to be conducted, by each BFC Subsidiary. No
equity securities of any of the BFC Subsidiaries are or may become required to
be issued (other than to BFC or BFSB) 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 BFC Subsidiary, and there
are no contracts, commitments, understandings, or arrangements by which any BFC
Subsidiary is bound to issue (other than to BFC) 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 BFC Subsidiary held by BFC or by any BFC Subsidiary are fully paid
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 33
<PAGE> 227
and nonassessable and are owned by BFC or such BFC Subsidiary free and clear of
any claim, lien, 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 BFC's or BFSB's fixed assets
and equipment having a net book value in excess of Twenty Thousand Dollars
($20,000) included in the Fixed Assets is in good 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 BFC and each BFC 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 in all material respects. 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 result
in a determination materially adverse to BFC or any BFC Subsidiary except as
fully reserved for in the Audited Financial Statements of BFC. All taxes,
interest, additions, and penalties due with respect to completed and settled
examinations or concluded litigation have been paid.
(b) Neither BFC nor any BFC 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) To the best of the knowledge, information and
belief of the management of BFC and BFSB, adequate provision for any federal,
state, local, or foreign taxes due or to become due for BFC and all BFC
Subsidiaries for all periods through and including September 30, 1993, has been
made and is reflected on the September 30, 1993 financial statements included
in the Audited Financial Statements of BFC, and have been and will continue to
be made with respect to periods ending after September 30, 1993.
(d) Deferred taxes of BFC and each BFC Subsidiary
have been and will be provided for in accordance with GAAP.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 34
<PAGE> 228
(e) To the best knowledge of BFC and BFSB, neither
the Internal Revenue Service nor any foreign, state, local or other taxing
authority is now asserting or threatening to assert against BFC or any BFC
Subsidiary any 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 BFC 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 BFC
or any BFC Subsidiary, either have been paid in full, or have been properly
accrued and reflected in the Audited Financial Statements of BFC referred to in
Section 5.7 of this Reorganization Agreement.
5.14 Litigation. Except as set forth in Schedule 5.14
----------
hereto or otherwise reflected in the Audited Financial Statements of BFC, there
is no action, suit or proceeding pending against BFC or any BFC Subsidiary, or
to the best knowledge of BFC or BFSB threatened against or affecting BFC, any
BFC Subsidiary or any of their assets, before any court or arbitrator or any
governmental body, agency or official that (i) would, if decided against BFC or
the BFC Subsidiary, have a material adverse impact on the business, properties,
assets, liabilities, condition (financial or other) or prospects of BFC or BFSB
taken as a whole and that are not reflected in the Audited Financial Statements
of BFC or (ii) has been brought by or on behalf of any employee employed or
formerly employed by BFC or any BFC Subsidiary.
5.15 Hazardous Materials. All statements made by BFC and any
-------------------
BFC Subsidiaries in this Section 5.15 are made to the best of the knowledge,
information and belief of BFC and such BFC Subsidiaries. For purposes of this
Section 5.15, the term "knowledge, information and belief" means that of the
directors and officers of BFC and all BFC Subsidiaries and includes their
actual knowledge as well as that which could have been obtained by a reasonably
prudent person in exercise of reasonable inquiry; provided, however, such
-------- -------
inquiry shall not be construed to require a Phase I environmental survey,
unless under the specific facts and circumstances a reasonably prudent person
would do so.
(a) BFC and all BFC Subsidiaries have obtained
all permits, licenses and other authorizations which are required to be
obtained by BFC or its Subsidiaries with respect to the Property (as defined
herein) under all Applicable Environmental Laws (as defined herein) except to
the extent that failure to have such permits, licenses, or authorizations would
not have a material adverse effect on the consolidated financial condition,
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 35
<PAGE> 229
operations, business or prospects of BFC or any BFC Subsidiary. All Property
controlled, directly or indirectly, by BFC or any BFC 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 hereto and except to the extent that
failure to have such permits, licenses, or authorizations would not have a
material adverse effect on the consolidated financial condition, operations,
business or prospects of BFC or any BFC Subsidiary. 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 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 Hazardous Waste Management Act of 1977, Sections 68-46-101 et seq. of the
-- ---
Tennessee Code; (n) the Hazardous Waste Management Act of 1983, Sections
68-46-201 et seq. of the Tennessee Code; (o) the Hazardous Waste Reduction Act
-- ---
of 1990, Sections 68-46-301 et seq. of the Tennessee Code; (p) the Petroleum
-- ---
Underground Storage Tank Act, Sections 68-58-101 et seq. of the Tennessee Code;
-- ---
(q) any amendments to the foregoing Acts as adopted from time to time on or
before the Closing; (r) all Alabama laws comparable to the laws set forth
above; and (s) any rule, regulation, order, injunction, judgment, declaration
or decree implementing or interpreting any of the foregoing Acts or laws, 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
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 36
<PAGE> 230
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 BFC or any BFC
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
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 BFC or a BFC
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 BFC or any BFC Subsidiary to
have any permit, license or authorization required in connection with
the conduct of the business of BFC or any BFC 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 BFC or any Affiliate of BFC 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 or prior to BFC's or any BFC Subsidiary's
occupancy thereof, or during or prior to the occupancy thereof by any
assignee or sublessee of BFC or any BFC 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
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 37
<PAGE> 231
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.
(c) Neither BFC nor any Affiliate of BFC 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, BFC or any Affiliate of BFC 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 BFC or any Affiliate
of BFC 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 BFC, 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
BFC or any Affiliate of BFC in relation to any Property, which have not been
made available to UPC.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 38
<PAGE> 232
(h) Neither BFC nor BFSB is aware of any facts
which might suggest that BFC or any BFC Subsidiary has engaged in any
management practice with respect to any of its past or existing borrowers which
could reasonably be expected to subject BFC or any BFC 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), as modified by 40 C.F.R. Part 300.
5.16 Insurance. BFC and BFSB have paid all material
---------
amounts due and payable under any insurance policies and guaranties applicable
to BFC and BFSB and BFC's or BFSB's assets and operations; all such insurance
policies and guaranties are in full force and effect; BFC and BFSB and all of
BFC's and BFSB's material assets, businesses, Realty and other material
properties are insured against fire, casualty, theft, liability, loss,
interruption, title 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; and the fidelity bonds in effect
as to which BFC or BFSB is a named insured are believed by BFC to be
sufficient.
5.17 Labor and Employment Matters. Except as reflected
----------------------------
in Schedule 5.17 hereto, there is no (i) collective bargaining agreement or
other labor agreement to which BFC or any BFC 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 BFC or any BFC 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 BFC or any
BFC 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 BFC nor any BFC 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. BFC and
each BFC 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, except for failures to
comply with such laws which would not have a material adverse
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 39
<PAGE> 233
effect on the business or operations of BFC and the BFC Subsidiaries taken as a
whole, and BFC and each BFC 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 BFC
and each BFC 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 5.17, there is no: unfair labor practice
complaint against BFC or any BFC Subsidiary pending before the National Labor
Relations Board or any state or local agency; pending labor strike or other
labor trouble affecting BFC or any BFC Subsidiary; labor grievance pending
against BFC or any BFC Subsidiary; pending representation question respecting
the employees of BFC or any BFC Subsidiary; pending arbitration proceedings
arising out of or under any collective bargaining agreement to which BFC or any
BFC Subsidiary is a party, or to the best knowledge of BFC, any basis for which
a claim may be made under any collective bargaining agreement to which BFC or
any BFC Subsidiary is a party.
5.18 Records and Documents. The Records of BFSB are and will
---------------------
be sufficient to enable BFSB to continue conducting its business as a Federal
savings bank under similar standards as BFSB has heretofore conducted such
business.
5.19 Capitalization of BFC. The authorized capital stock
---------------------
of BFC consists of 3,200,000 shares of common stock having a par value of $.01
per share (the "BFC Common Stock"), 400,000 shares of preferred stock having a
par value of $.01 per share (the "BFC Preferred Stock") and no other class of
equity security. As of the date of this Reorganization Agreement, a total of
1,784,193 shares of BFC Common Stock were issued and outstanding, no shares of
BFC Common Stock were held by BFC as treasury stock and no shares of BFC
Preferred Stock were issued and outstanding. All of the outstanding BFC Common
Stock is validly issued, fully-paid and nonassessable and has not been issued
in violation of any preemptive rights of any BFC Shareholder. Except as
described in Section 2.7 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 BFC Common Stock or
into any other equity or debt security of BFC, 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 BFC Common Stock or any other equity or debt security of
BFC. Accordingly, immediately prior to the Effective Time of the Merger, there
will be not more than 1,905,680 shares of BFC Common Stock issued and
outstanding. Except as set forth in Schedule 5.19 hereto, BFC
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 40
<PAGE> 234
owns and is the beneficial record holder of, and has good and freely
transferable title to, all of the 1,000 shares of BFSB Common Stock
outstanding, and recorded on the books and Records of BFSB 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 BFC to freely vote such stock in
support of the transactions contemplated herein.
5.20 Sole Agreement. Except as described in Schedule 5.20
--------------
hereto, with the exception of this Reorganization Agreement, neither BFC, nor
BFSB, 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 BFC or BFSB or any Subsidiary of either (or any
of their assets) in any business combination of any kind; or any agreement
obligating BFC or BFSB to issue or sell or authorize the sale or transfer of
BFC Common Stock or the capital stock of BFSB. Except as described in Schedule
5.20 hereto, there are no (nor will there be at the Effective Time of the
Merger any) shares of capital stock or other equity securities of BFC
outstanding, except for shares of BFC Common Stock presently issued and
outstanding, and there are no (nor will there be at the Effective Time of the
Merger any) 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 BFC or
BFSB, or contracts, commitments, understandings, or arrangements by which BFC
or BFSB 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 (nor will there be at the Effective Time of
the Merger any) contracts, commitments, understandings, or arrangements by
which BFC or any BFC Subsidiary is or may be bound to transfer or issue to any
third party any shares of the capital stock of any BFC Subsidiary, and there
are no (nor will there be at the Effective Time of the Merger any) contracts,
agreements, understandings or commitments relating to the right of BFC to vote
or to dispose of any such shares.
5.21 Disclosure. The information concerning, and
----------
representations and warranties made by, BFC and BFSB set forth in this
Reorganization Agreement, or in the Schedules of Exceptions of BFC hereto, or
in any document, statement, certificate or other writing furnished or to be
furnished by BFC or BFSB to UPC and INTERIM pursuant hereto, does 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
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 41
<PAGE> 235
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 or
INTERIM by BFC or BFSB pursuant hereto were or will be complete and accurate
copies of such documents.
5.22 Absence of Undisclosed Liabilities. Except as described
----------------------------------
in Schedule 5.22 hereto, to the best of the knowledge, information and belief
of BFC and BFSB neither BFC nor any BFC Subsidiary has any obligation or
liability (contingent or otherwise) that is material to the financial condition
or operations of BFC or any BFC Subsidiary, or that, when combined with all
similar obligations or liabilities, would be material to the financial
condition or operations of BFC or any BFC Subsidiary (i) except as disclosed in
the Audited Financial Statements of BFC 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
September 30, 1993, neither BFC nor any BFC Subsidiary has incurred or paid any
obligation or liability which would be material to the financial condition or
operations of BFC or such BFC Subsidiary, except for obligations paid by BFC or
BFSB under the terms of this Reorganization Agreement (all such obligations or
payments are fully described by BFC in Schedule 5.22 hereto) or in connection
with transactions made by it in the ordinary course of its business consistent
with past practices, laws and regulations applicable to BFC or any BFC
Subsidiary.
5.23 Allowance for Possible Loan or ORE Losses. To the best
-----------------------------------------
of the knowledge, information and belief of BFC and BFSB, the allowance for
possible loan losses shown on the Audited Financial Statements of BFC is (with
respect to periods ended on or before September 30, 1993) or will be (with
respect to periods ending subsequent to September 30, 1993) adequate in all
respects to provide for anticipated losses inherent in 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 BFC nor BFSB has any Loan
which has been criticized or classified by bank examiners representing any
Regulatory Authority or by its independent auditors 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 Audited Financial Statements of BFC is (with
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 42
<PAGE> 236
respect to periods ended on or before September 30, 1993) or will be (with
respect to periods ending subsequent to September 30, 1993) adequate in all
respects to provide for anticipated losses inherent in ORE owned or held by BFC
or any BFC Subsidiary and the net book value of ORE on the Balance Sheet of the
Audited Financial Statements of BFC is the fair value of the ORE in accordance
with Statement of Position 92-3.
5.24 Compliance with Laws. BFC and each BFC Subsidiary:
--------------------
(a) To the best of the knowledge, information and
belief of the management of BFC and each BFC Subsidiary, 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 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 BFC or any BFC Subsidiary, or which would or could reasonably be
expected to subject BFC or any BFC 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 BFC or any
BFC 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 BFC or any BFC Subsidiary, (ii) threatening to
revoke any license, franchise, permit, or governmental authorization which is
material to the financial condition or operations of BFC or any BFC Subsidiary,
or (iii) requiring BFC or any BFC Subsidiary to enter into a cease and desist
order, consent, agreement, or memorandum of understanding.
5.25 Employee Benefit Plans.
----------------------
(a) BFC has previously provided to UPC true and
complete copies of each "employee pension benefit plan," as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA") which, to
the best of its knowledge, is subject to any provision of ERISA and covers any
employee, whether active or retired, of BFC or any BFC Subsidiary or any other
entity which is a member of a controlled group or is under common control with
BFC or its Subsidiaries in the manner defined and further described in Section
414(b), (c), or (m) of the Internal Revenue Code of 1986 (the "Code"). Such
plans are
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 43
<PAGE> 237
hereinafter referred to collectively as the "Employee Pension Benefit Plans",
and each such Employee Pension Benefit Plan is listed in Schedule 5.25(a)
hereto. BFC has also provided to UPC true and complete copies of all trust
agreements, collective bargaining agreements, and insurance contracts related
to such Employee Pension Benefit Plans.
To the best knowledge of BFC and its Subsidiaries,
each Employee Pension Benefit Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and each trust forming a part
thereof is exempt from tax pursuant to Section 501(a) of the Code. Copies of
the latest determination letters concerning the qualified status of each
Employee Pension Benefit Plan which is intended to be qualified under Section
401(a) of the Code have been provided to UPC. Requests for determination
letters relating to amendments required to cause such Employee Pension Benefit
Plans to be in compliance with the Tax Equity and Fiscal Responsibility Act of
1982, the Deficit Reduction Act of 1984 and the Retirement Equity Act of 1984
were timely filed and have been received by BFC and its Subsidiaries. Requests
for determination letters relating to any subsequent amendments to such plans
which are currently pending have been provided to UPC. All such requests were
timely and properly filed and appropriate notice of any such filing was timely
and properly provided to affected plan participants and beneficiaries.
To the best of the knowledge, information and belief
of BFC and BFSB, each of the Employee Pension Benefit Plans has been operated
in substantial conformity with the written provisions of the applicable plan
documents which have been delivered to UPC and in compliance with the
requirements prescribed by all statutes, orders, rules, and regulations
including, but not limited to, ERISA and the Code, which are applicable to such
Employee Pension Benefit Plans. To the extent that the operation of an
Employee Pension Benefit Plan has deviated from the written provisions of the
plan, such operational deviations have been disclosed in Schedule 5.25(a)
hereto. All such deviations have been made in conformity with applicable laws,
including ERISA and the Code.
With respect to Employee Pension Benefit Plans which
are subject to the annual report requirement of ERISA Section 103 or to the
annual return requirement of Code Section 6047, all required annual reports and
annual returns, or such other documents as may have been required as
alternative means of compliance with the annual report requirement, have been
timely filed. Copies of all such annual returns/reports, including all
attachments and Schedules, for the three (3) plan years immediately preceding
the current date have been delivered
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 44
<PAGE> 238
to UPC. With respect to Employee Pension Benefit Plans which complied with the
annual return requirement by satisfaction of an alternate compliance method,
any documents required to be filed with the Department of Labor in satisfaction
of such requirements have been provided to UPC.
With respect to all Employee Pension Benefit Plans
which are subject to the summary plan description requirement of ERISA Section
102, all such summary plan descriptions as were required to be filed with the
Department of Labor and distributed to participants and beneficiaries have been
timely filed and distributed. Copies of all such summary plan descriptions
have been delivered to UPC. No Employee Pension Benefit Plan constitutes a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA.
No Employee Pension Benefit Plan subject to Part III
of Subtitle B of ERISA or Section 412 of the Code, or both, has incurred an
"accumulated funding deficiency" within the meaning of Code Section 412,
whether or not waived. All required contributions to all Employee Pension
Benefit Plans have been timely made. Any penalties or taxes which have been
incurred by BFC or its subsidiaries or by any Employee Pension Benefit Plan
with respect to the timing or amount of payment of any contribution to an
Employee Pension Benefit Plan have been timely paid. The limitations of Code
Section 415 have not been exceeded with respect to any Employee Pension Benefit
Plan or combination of such plans to which such limitations apply.
No "reportable event" (as described in Section
4043(b) of ERISA) has occurred with respect to any Employee Pension Benefit
Plan. No Employee Pension Benefit Plan or any trust created thereunder, nor
any "disqualified person" with respect to the plan (as defined in Section 4975
of the Code), has engaged in a "prohibited transaction", as such term is
defined in Section 4975 of the Code, which could subject such Employee Pension
Benefit Plan, any such trust or any such disqualified person (other than a
person for whom neither BFC nor any BFC 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 Code.
No condition exists with regard to any Employee
Pension Benefit Plan which constitutes grounds for the termination of such plan
pursuant to Section 4042 of ERISA.
The fair market value of the assets of any Employee
Pension Benefit Plan which is subject to Title IV of ERISA (excluding for these
purposes any accrued but unpaid contributions) exceeded the present value of
all benefits accrued
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 45
<PAGE> 239
under any such plan, determined on a termination basis using the assumptions
established by the Pension Benefit Guaranty Corporation as in effect on such
date. Neither BFC nor its Subsidiaries have incurred any liability under Title
IV of ERISA arising in connection with the termination of, or complete or
partial withdrawal from, any plan covered or previously covered by Title IV of
ERISA. The termination of any Code Section 401(a) qualified Employee Pension
Benefit Plan previously terminated by BFC or any BFC Subsidiary did not
adversely affect the qualification of such Employee Pension Benefit Plan. The
distribution of the assets of any such Employee Pension Benefit Plan was made
or is currently being made in conformity with the requirements of that Employee
Pension Benefit Plan and of applicable legal requirements and has not resulted
in, will not result in, and is reasonably not anticipated to result in the
assessment of any tax, penalty, or excise tax against such pension plan, its
related trusts, the fiduciary and administrators of the Employee Pension
Benefit Plan, BFC or its Subsidiaries, or any disqualified person (as defined
in Code Section 4975) with respect to the Employee Pension Benefit Plan.
Except as disclosed in Schedule 5.25(a) hereto, all
Employee Pension Benefit Plans were in effect for substantially all of calendar
year 1992. There has been no material amendment of any such plans (other than
amendments required to comply with applicable law) or material increase in the
cost of maintaining such plans or providing benefits thereunder on or after the
last day of the plan year which ended in calendar year 1992 for each such
Employee Pension Benefit Plan.
BFC has provided to UPC copies of the annual
actuarial valuation or allocation report for each Employee Pension Benefit Plan
for the three (3) plan years for such plan immediately preceding the current
date. With regard to Employee Pension Benefit Plans which are not intended to
be qualified under Section 401(a) of the Code, copies of financial statements
or reports containing information regarding the expense of maintaining any such
Employee Pension Benefit Plan for the three (3) plan years preceding the
current date have been delivered to UPC.
(b) BFC has furnished to UPC true and complete copies of
each "Employee Welfare Benefit Plan" as defined in Section 3(1) of ERISA,
which, to the best of its knowledge, is subject to any provision of ERISA and
covers any employee, whether active or retired, of BFC or any BFC Subsidiary or
members of a controlled group or entities under common control with BFC or its
Subsidiaries in the manner defined and further described in Section 414(b),
(c), or (m) of the Code. Such plans
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 46
<PAGE> 240
are hereinafter referred to collectively as the "Employee Welfare Benefit
Plans", and each such Employee Welfare Benefit Plan is listed in Schedule
5.25(b) hereto.
BFC has also provided to UPC true and complete copies
of documents establishing all funding instruments for such Employee Welfare
Benefit Plans, including but not limited to, trust agreements, cafeteria plans
(pursuant to Code Section 125), and voluntary employee beneficiary associations
(pursuant to Code Section 501(c)(9)). Each of the Employee Welfare Benefit
Plans has been operated in substantial conformity with the written provisions
of the plan documents which have been delivered to UPC and in compliance with
the requirements prescribed by all statutes, orders, rules, and regulations
including, but not limited to, ERISA and the Code, which are applicable to such
Employee Welfare Benefit Plans. Any deviation in the operation of such plans
from the requirements of the plan documents or of applicable laws have been
listed in Schedule 5.25(b) hereto. BFC has provided any notification required
by law to any participant covered under any Employee Welfare Benefit Plan which
has failed to comply with the requirements of any Code section which results in
the imposition of a tax on benefits provided to such participants under such
plan.
With respect to all Employee Welfare Benefit Plans
which are subject to the annual report requirement of ERISA Section 103 or to
the annual return requirement of Code Section 6039D, all annual reports and
annual returns as were required to be filed pursuant to such sections have been
timely filed. Copies of all such annual returns/reports, including all
attachments and Schedules, for the three (3) plan years immediately preceding
the current date for all plans subject to such requirements have been delivered
to UPC. With respect to all Employee Welfare Benefit Plans which are subject
to the summary plan description requirement of ERISA Section 102, all such
summary plan descriptions as were required to be filed with the Department of
Labor and distributed to participants and beneficiaries have been timely filed
and distributed. Copies of all such summary plan descriptions have been
delivered to UPC.
Except as disclosed in Schedule 5.25(b) hereto, all
Employee Welfare Benefit Plans which are in effect were in effect for
substantially all of calendar year 1992. Except as disclosed in Schedule
5.25(b) hereto, there has been with respect to such Employee Welfare Benefit
Plans no material amendment thereof or material increase in the cost thereof or
benefits payable thereunder on or after January 1, 1993.
To the best of the knowledge, information and belief
of BFC and BFSB, no Employee Welfare Benefit Plan or any
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 47
<PAGE> 241
trust created thereunder, nor any "party in interest" with respect to the plan
(as defined in Section 3(14) of ERISA), has engaged in a "prohibited
transaction", as such term is defined in Section 406 of ERISA, which could
subject such Employee Welfare Benefit Plan, any such trust, or any party in
interest (other than a person for whom neither BFC nor any BFC Subsidiary is
directly or indirectly responsible) to the imposition of a penalty for such
prohibited transaction under Section 502(i) of ERISA. The Department of Labor
has not assessed any such penalty or served notice to BFC or any of its
Subsidiaries that such a penalty may be imposed upon any Employee Welfare
Benefit Plan.
Neither BFC nor any BFC Subsidiary has failed to make
any contribution to, or pay any amount due and owing by BFC or an BFC
Subsidiary under the terms of, an Employee Welfare Benefit Plan. Except as
disclosed in Section 5.25(b) hereto, no claims have been incurred with respect
to any Employee Welfare Benefit Plan which may, to the best knowledge,
information and belief of BFC, constitute a liability for BFC or any BFC
Subsidiary after the application of any insurance, trust or other funds which
are applicable to the payment of such claims.
Except as disclosed in Schedule 5.25(b) hereto, to
the best knowledge, information and belief of BFC, no condition exists that
could subject any Employee Welfare Benefit Plan or any person (other than a
person for whom neither BFC or any BFC Subsidiary is directly or indirectly
responsible) to liabilities, damages, losses, taxes, or sanctions that arise
under Section 4980B of the Code or Sections 601 through 608 of ERISA for
failure to comply with the continuation health care coverage requirements of
ERISA Sections 601 through 608 and Code Section 4980B with respect to any
current or former employee of BFC or any BFC Subsidiary, or the beneficiaries
of such employee.
(c) BFC has furnished to UPC true and complete copies
and/or descriptions of each plan or arrangement maintained or otherwise
contributed to by BFC or any BFC Subsidiary which is not an Employee Pension
Benefit Plan and is not an Employee Welfare Benefit Plan and which (exclusive
of base salary and base wages) provides for any form of current or deferred
compensation, bonus, stock option, profit sharing, retirement, group health or
insurance, welfare benefits, fringe benefits, or similar plan or arrangement
for the benefit of any employee or class of employees, whether active or
retired, or independent contractors of BFC or any BFC subsidiary. Such plans
and arrangements shall collectively be referred to herein as "Benefit
Arrangements" and all such Benefit Arrangements of BFC and BFC's Subsidiaries
are listed on Schedule 5.25(c) hereto. Except as disclosed in Schedule 5.25(c)
hereto, there are no other benefit arrangements of the BFC companies and all
Benefit Arrangements which are in
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 48
<PAGE> 242
effect were in effect for substantially all of calendar year 1992. Except as
disclosed in Schedule 5.25(c) hereto, 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, 1993. There has
been no material increase in the base salary and wage levels of BFC or any BFC
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(c) hereto, there has been no material
increase in the compensation of, or benefits payable to, any senior executive
employee of BFC or any BFC subsidiary on or after January 1, 1993, nor has any
employment, severance, or similar contract been entered into with any such
employee, nor has any amendment to any such contract been made on or after
January 1, 1993.
With respect to all Benefit Arrangements which are
subject to the annual return requirement of Code Section 6039D, all annual
returns as were required to be filed have been timely filed. Copies of all
such annual returns for the three (3) plan years immediately preceding the
current date have been delivered to UPC.
(d) Listed on Schedule 5.25(d) hereto are all Employee
Pension Benefit Plans, Employee Welfare Benefit Plans, and Benefit Arrangements
which provide compensation or benefits which become effective upon a change in
control of BFC or any BFC Subsidiary, including, but not limited to, additional
compensation or benefits, or acceleration in the amount or timing of payment of
compensation or benefits which had become effective prior to the date of such
acceleration. Except as disclosed in Schedule 5.25(d) hereto, there is no
Employee Pension Benefit Plan, Employee Welfare Benefit Plan, or Benefit
Arrangement covering any employee of BFC or any BFC 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 280G of the Code and Regulations proposed pursuant to that section.
(e) Except as described in Schedule 5.25(e) hereto, each
Employee Pension Benefit Plan, Employee Welfare Benefit 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 may be terminated by BFC (or by BFC as the
Surviving Corporation) within a period of no more than thirty (30) days
following the effective time of the merger, without payment of any amount as a
penalty, bonus, premium, severance pay, or other
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 49
<PAGE> 243
compensation for such termination. No limitation on the right to terminate any
such plan has been communicated by BFC or its Subsidiaries to employees, former
employees, or retirees who are or may be participants in or beneficiaries of
such plans or arrangements. Each Employee Pension Benefit Plan which is
qualified under Section 401(a) of the Code as a qualified defined benefit
pension plan permits the reversion of excess assets to the employer maintaining
the plan or its successors or assigns upon a plan termination and such
provision has been included in the Employee Pension Benefit Plan for the period
required under ERISA Section 4044(d).
(f) Except as disclosed in Schedule 5.25(f) hereto,
neither BFC nor any BFC Subsidiary has received notice from any governmental
agency of any alleged violation of applicable laws or of any prospective audit
or other investigation for the purpose of reviewing compliance with applicable
laws with respect to any Employee Pension Benefit Plan, Employee Welfare
Benefit Plan or Benefit Arrangement.
Except as disclosed in Schedule 5.25(f) hereto, no
suits, actions, or claims have been filed in any court of law or with any
governmental agency regarding the operation of any Employee Pension Benefit
Plan, Employee Welfare Benefit Plan, or Benefit Arrangement and no such
additional suits, actions, or claims are, to the best information, knowledge
and belief of BFC, anticipated to be filed.
5.26 Material Contracts. Except as reflected in the Audited
------------------
Financial Statements of BFC, or as described in Schedule 5.26 hereto, neither
BFC nor any BFC 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 obligated by, or receives benefits under any contract or agreement
or amendment thereto that in each case would (assuming that each 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 Report on Form 10-K filed by
BFC as of the date of this Reorganization Agreement that has not already been
filed as an exhibit to BFC's Form 10-K filed for the fiscal year ended
September 30, 1993, or in any other SEC Document filed prior to the date of
this Reorganization Agreement.
5.27 Material Contract Defaults. To the best of the
--------------------------
knowledge, information and belief of BFC and BFSB, neither BFC nor any BFC
Subsidiary is in default in any respect under any contract, agreement,
commitment, arrangement, lease, insurance policy, or other instrument to which
it is a party or by which its respective assets, business, or
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 50
<PAGE> 244
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 BFC or any BFC Subsidiary on a consolidated basis, 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 September 30, 1989, or in the case of
-------
BFC the date of the organization of BFC as a savings and loan holding company,
BFC and BFSB 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 OTS; (iii) the Federal Reserve, (iv) the FDIC,
(v) the SEC, including, but not limited to, Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Reports on Forms 2900 and FFIEC 034 and
proxy statements; and (vi) 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 as stated including any amendments
thereto 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. BFC has previously
provided to UPC true and correct copies of all such reports filed by BFC or
BFSB after September 30, 1989.
5.29 Exchange Act and Listing Filings.
--------------------------------
(a) The outstanding shares of BFC Common Stock are registered with
the SEC pursuant to the 1934 Act and BFC has filed with the SEC all material
forms and reports required by law to be filed by BFC 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 BFC Common Stock are listed for trading
on the AMEX (under the symbol "BNF") pursuant to the listing rules of the AMEX
and BFC has filed with the AMEX all material forms and reports required by law
to be filed by BFC with the AMEX, which forms and reports, taken as a whole,
are
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 51
<PAGE> 245
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.
5.30 Statements True and Correct. None of the information
---------------------------
prepared by, or on behalf of, BFC or any BFC Subsidiary regarding BFC, BFSB or
any other BFC Subsidiary included or to be included in the Proxy Statement to
be mailed to BFC'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, at the
respective times such documents are filed, and, with respect to the Proxy
Statement, when first mailed to the shareholders of BFC, 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 BFC or any BFC 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 sixty (60) days after
--------------------
execution of this Reorganization Agreement, 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
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 52
<PAGE> 246
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 reasonable judgement,
deem such condition to be unreasonable or inconsistent with previous regulatory
approvals received by UPC in transactions of this type and 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. UPC shall not knowingly take any
action, or omit to take any action during the term of this Reorganization
Agreement which would adversely affect the receipt by UPC of the Government
Approvals or adversely affect the ability of UPC to perform its obligations
under this Reorganization Agreement. Subject to the terms and conditions of
this Reorganization Agreement, UPC and INTERIM 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. UPC 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.
6.2 Reservation, Listing and Registration of UPC Common Stock
----------------------------------------------------------
under the Securities Laws. UPC shall reserve for issuance that number of
- -------------------------
shares of UPC Common Stock necessary to satisfy the Consideration to be paid to
the BFC Record Holders at the Effective Time of the Merger. UPC shall
cooperate with BFC in the preparation of the BFC 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 BFC 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 shares of UPC Common Stock so
delivered. Such reservation, registration, qualification and listing shall be
effected prior to the Closing.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 53
<PAGE> 247
6.3 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 BFC or
the BFC Subsidiaries and all employees of BFC and the BFC Subsidiaries
immediately prior to the Effective Time of the Merger who shall continue as
employees of BFC as the Surviving Corporation 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. Service with BFC or with any BFC
Subsidiary prior to the Effective Time of the Merger by such former BFC 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 BFC and BFC's Subsidiaries in the
employee benefit plans maintained by UPC or UPC's Subsidiaries; provided,
--------
however, during any such postponement period, the BFC Employee Plans and all
- -------
related employee benefit plans shall continue in full force and effect,
(including the continued receipt of all customary corporate contributions in
accordance with the past practice of BFC and BFSB for the period prior to the
termination of the plans), except as expressly modified or amended by the terms
of this Reorganization Agreement, or until such time as the plans are replaced
by benefit plans maintained by UPC.
6.4 Conduct of Business; Notice of Adverse Change. UPC shall
---------------------------------------------
not knowingly engage in any activity which in the opinion of the management of
UPC would prohibit UPC or INTERIM from delivering the Consideration to the
Exchange Agent at Closing or consummating the transactions contemplated in this
Reorganization Agreement. UPC shall notify BFC in writing immediately upon
becoming aware of any material adverse change in the financial condition or
prospects of UPC or any event which would prohibit UPC's performance under the
terms of this Reorganization Agreement.
ARTICLE 7
COVENANTS OF BFC AND BFSB
7.1 Proxy Statement; BFC Shareholder Approval. BFC shall
-----------------------------------------
call the Shareholders Meeting to be held as soon as reasonably practicable
after the date of this Reorganization
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 54
<PAGE> 248
Agreement and shall use its best efforts to ensure that such meeting is held
not later than April 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) BFC 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 the BFC 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 BFC 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 BFC shall recommend (subject to compliance with their legal and
fiduciary duties as advised by counsel) to BFC Shareholders the approval of
this Reorganization Agreement and the Plan of Merger; and (iv) BFC shall use
its best efforts, subject to compliance with its legal and fiduciary duty as
advised by counsel, to obtain such BFC Shareholders' approvals.
7.2 Conduct of Business -- Affirmative Covenants. Unless the
--------------------------------------------
prior written consent of UPC shall have been obtained, which consent will not
be unreasonably withheld by UPC and shall be forthcoming by UPC within five (5)
Business Days from the submission of a written request by BFC therefor and,
except as otherwise contemplated herein:
(a) Except as may be required by statute, rule or
regulation, BFC and BFSB shall, and shall cause each BFC 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;
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 55
<PAGE> 249
(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) 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 BFC or such
BFC 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 best efforts to retain BFSB's
present customer base and to facilitate the retention of such
customers by BFSB and its branches after the Effective Time of the
Merger; and
(vii) 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 BFC, BFSB or UPC and UPC's Subsidiaries at and after the Effective
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
BFSB's customer relationships;
(viii) Prior to the Effective Time of the
Merger, BFC or BFSB shall make payment to William D. Powell and C.
Raymond Duncan of $389,774 and $230,765, respectively, in full
satisfaction of the rights of Mr. Powell and Mr. Duncan under their
respective Employment Agreements with BFSB dated February 15, 1991.
(b) BFC and BFSB agree to use their 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 BFC and BFSB shall provide to UPC
or to the appropriate governmental authorities all information reasonably
required to be submitted in connection with obtaining such approvals;
(c) BFC and BFSB, at their own cost and expense,
shall use their best efforts to secure all necessary consents and all consents
and releases, if any, required of BFC, BFSB 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;
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 56
<PAGE> 250
(d) At all times to and including, and as of, the
Closing, BFC and BFSB 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 BFC
and BFSB; 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; and
provided further, that before such amendment, supplement or update may be
- -------- -------
deemed to be a part of this Reorganization Agreement, UPC shall have agreed in
writing to each amendment, supplement or update to the Schedules made
subsequent to the date of this Reorganization Agreement as an amendment to this
Reorganization Agreement;
(e) On and after the Closing Date, BFC and BFSB
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 transactions contemplated by this Reorganization Agreement;
(f) Between the date of this Reorganization
Agreement and the Closing Date, BFC and BFSB 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 BFC and BFSB. BFC and BFSB
shall provide reasonable assistance to UPC in its investigation of matters
relating to BFC and BFSB; and
(g) Subject to the terms and conditions of this
Reorganization Agreement, BFC and BFSB 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 transactions 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. BFC 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.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 57
<PAGE> 251
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, BFC and BFSB
covenant and agree that they will neither do, nor agree or commit to do, nor
permit any BFC Subsidiary to do or commit or agree to do, 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, or as expressly permitted by this Reorganization Agreement:
(a) Except as expressly contemplated by this
Reorganization Agreement or the Plan of Merger, amend its Certificate 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 in satisfaction of any
exercised BFC Stock Options or 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 BFC Common Stock; or (v) pay or declare a cash dividend or make
or declare any other type of distribution on the BFC Common Stock except as
expressly permitted by Section 8.2(i)(vi) of this Reorganization Agreement or
the Plan of Merger; 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,
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 58
<PAGE> 252
sell, agree to sell, or otherwise dispose of or otherwise permit to become
outstanding any additional shares of BFC Common Stock (except in satisfaction
of any exercised BFC Stock Options), or any other capital stock of BFC or of
any BFC 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 directly sold or otherwise directly transferred to BFC or any BFC
Subsidiary, or are issued in connection with any of the above-described
securities encompassed in the BFC Option Plans, or (ii) sell, agree to sell, or
otherwise dispose of any substantial part of the assets or earning power of BFC
or of any BFC Subsidiary; or (iii) sell, agree to sell, or otherwise dispose of
any asset of BFC or any BFC 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 BFC 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 BFC or any BFC
Subsidiary to BFSB or another BFC Subsidiary] in excess of an aggregate of
$50,000 (for BFC and its Subsidiaries on a consolidated basis) except in the
ordinary course of the business of BFC or such BFC 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, FHLB advances, and sales of certificates of
deposit); or
(g) Except as expressly required by the terms of
this Reorganization Agreement, 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 BFC or of any BFC 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) Except as expressly required by the terms of
this Reorganization Agreement, amend any existing employment contract between
it and any person having a salary thereunder in
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 59
<PAGE> 253
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 BFC or BFSB (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) Except as expressly required by the terms of
this Reorganization Agreement, 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
or sale agreements or lease agreements having a value in excess of One Hundred
Thousand Dollars ($100,000) to BFC or any BFC Subsidiary; or
(k) Make any capital expenditure except for ordinary
purchases, repairs, renewals or replacements; or
(l) Enter into any transactions other than in the
ordinary course of business; or
(m) Grant or commit to grant any new extension of
credit to any officer, director or known holder of 2% or more of the
outstanding BFC 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 BFC or amend the terms of any such credit outstanding on the date
hereof.
7.4 Conduct of Business -- Certain Actions.
--------------------------------------
(a) Except to the extent necessary to consummate the
transactions specifically contemplated by this Reorganization Agreement, BFC
and BFSB shall not, and shall use their respective best efforts to ensure that
their respective directors, officers, employees, and advisors do not, directly
or indirectly, institute, solicit, or knowingly encourage (including by way of
furnishing any information not legally required to be furnished) any inquiry,
discussion, or proposal, or participate in any discussions or negotiations
with, or provide any confidential or non-public information to, any corporate,
partnership, person or
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 60
<PAGE> 254
other entity or group (other than to UPC or any UPC Subsidiary) concerning any
"Acquisition Proposal" (as defined below), except for actions reasonably
considered by the Board of Directors of BFC, based upon the advice of outside
legal counsel, to be required in order to fulfill its fiduciary obligations.
BFC shall notify UPC immediately if any Acquisition Proposal has been or should
hereafter be received by BFC or BFSB, such notice to contain, at a minimum, the
identity of such persons, and, subject to disclosure being consistent with the
fiduciary obligations of BFC's Board of Directors, a copy of any written
inquiry, the terms of any proposal or inquiry, any information requested or
discussions sought to be initiated, and the status of any reports, negotiations
or expressions of interest. For purposes of this Section, "Acquisition
Proposal" means any tender offer, agreement, understanding or other proposal
pursuant to which any corporation, partnership, person or other entity or
group, other than UPC or any UPC Subsidiary, would directly or indirectly (i)
acquire or participate in a merger, share exchange, consolidation or any other
business combination involving BFC or BFSB; (ii) acquire the right to vote ten
percent (10%) or more of the BFC Common Stock or BFSB Common Stock; (iii)
acquire a significant portion of the assets or earning power of BFC or of BFSB;
or (iv) acquire in excess of ten percent (10%) of the outstanding BFC Common
Stock or BFSB Common Stock.
(b) As a condition of and as an inducement to UPC's
entering into this Reorganization Agreement, BFC and BFSB covenant,
acknowledge, and agree that it shall be a specific, absolute, and
unconditionally binding condition precedent to either BFC's or BFSB's entering
into a letter of intent, agreement in principle, or definitive agreement
(whether or not considered binding, non-binding, conditional or unconditional)
with any third-party with respect to an Acquisition Proposal, or supporting or
indicating an intent to support an Acquisition Proposal, other than this
Reorganization Agreement and the transactions contemplated in this
Reorganization Agreement, regardless of whether BFC or BFSB has otherwise
complied with the provisions of Section 7.4(a) hereof, that BFC or such
third-party which is a party to any Acquisition Proposal shall have paid UPC
the sum of Three Million Five Hundred Thousand and No/100 Dollars ($3,500,000),
which sum represents the (i) direct costs and expenses (including, but not
limited to, fees and expenses incurred by UPC's financial or other consultants,
printing costs, investment bankers, accountants, and counsel) incurred by or on
behalf of UPC in negotiating and undertaking to carry out the transactions
contemplated by this
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 61
<PAGE> 255
Reorganization Agreement; (ii) indirect costs and expenses of UPC in connection
with the transactions contemplated by this Reorganization Agreement, including
UPC's management time devoted to negotiation and preparation for the
transactions contemplated by this Reorganization Agreement; and (iii) UPC's
loss as a result of the transactions contemplated by this Reorganization
Agreement not being consummated. Accordingly, BFC and BFSB hereby jointly and
severally stipulate and covenant that prior to BFC's or BFSB's entering into a
letter of intent, agreement in principle, or definitive agreement, (whether
binding or non-binding, conditional or unconditional) with any third-party with
respect to an Acquisition Proposal or supporting or indicating an intent to
support an Acquisition Proposal, either BFC or such third-party shall have paid
to UPC the amount set forth above in immediately available funds to satisfy the
specific, absolute, and unconditionally binding condition precedent imposed by
this Section 7.4. Notwithstanding anything in this Section 7.4(b) to the
contrary, in the event such Acquisition Proposal should be the result of an
unsolicited offer or takeover of BFC or BFSB, any sums due UPC by BFC pursuant
to the terms of this Section 7.4 shall be paid by BFC to UPC at the closing of
the transactions set forth in such Acquisition Proposal and all obligations of
UPC to hold the Closing by the Target Date shall be tolled until such time as
the transactions set forth in any such Acquisition Proposal shall have been
consummated or until such time as the Acquisition Proposal shall have expired
plus such reasonable time as UPC shall require. UPC and INTERIM each
acknowledges that under no circumstances shall any officer or director of BFC
or BFSB (unless such officer or director shall have an interest in a potential
acquiring party in any Acquisition Proposal) be held personally liable to UPC
or INTERIM for any amount of the foregoing payment. On payment of such amount
to UPC, UPC and INTERIM shall have no cause of action or claim (either in law
or equity) whatsoever against BFC or BFSB, or any officer or director of BFC or
BFSB, with respect to or in connection with such Acquisition Proposal, this
Reorganization Agreement or the Plan of Merger.
(c) The requirements, conditions, and obligations
imposed by this Section 7.4 shall continue in full force and effect from the
date of this Reorganization Agreement until October 1, 1994, unless and until
the earlier of any of the following events shall occur, in which event,
thereafter neither BFC nor BFSB shall be obligated to pay the amount required
by this Section 7.4 as a condition precedent to such transaction:
(1) This Reorganization Agreement shall have been terminated (i)
mutually by the Parties pursuant to Section 9.1(a) of this
Reorganization Agreement; (ii) by UPC and INTERIM pursuant to
Section 9.1(b) of this Reorganization Agreement; (iii) by UPC
and INTERIM or BFC and BFSB pursuant to Section 9.1(c) of this
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 62
<PAGE> 256
Reorganization Agreement; (iv) by UPC and INTERIM or BFC and
BFSB pursuant to Section 9.1(d) of this Reorganization
Agreement; (v) by UPC and INTERIM or BFC and BFSB pursuant to
Section 9.1(e) of this Reorganization Agreement, and in the
case of termination pursuant to Section 9.1(e), only on the
basis of the failure to satisfy the conditions enumerated in
subparagraph (2) below; (vi) by UPC and INTERIM pursuant to
Section 9.1(f) of this Reorganization Agreement; (vii) by UPC
and INTERIM or BFC and BFSB pursuant to Section 9.1(g) of this
Reorganization Agreement; (viii) by UPC and INTERIM pursuant
to Section 9.1(h) of this Reorganization Agreement; (ix) by
UPC and INTERIM pursuant to Section 9.1(i) of this
Reorganization Agreement; and (x) by UPC and INTERIM or BFC
and BFSB pursuant to Section 9.1(j) of this Reorganization
Agreement; or
(2) In the event the Merger should not be consummated as a result
of the failure to satisfy any of the following conditions:
(i) Material inaccuracy (without waiver thereof) of
representations and warranties of UPC as contemplated
by the provisions of Section 8.1(b) of this
Reorganization Agreement;
(ii) Noncompliance by UPC or INTERIM with their
respective obligations as required by the provisions
of Section 8.1(a) of this Reorganization Agreement;
(iii) The failure by UPC or INTERIM to effect all
corporate action necessary on their respective parts
as required by the provisions of Section 8.1 of this
Reorganization Agreement or to satisfy the conditions
set forth in Sections 8.1(d) or 8.1(g) of this
Reorganization Agreement;
(iv) The failure to receive the requisite approvals
as required by the provisions of Section 8.3(b) of
this Reorganization Agreement other than any such
failure arising out of any action or inaction on the
part of BFC or BFSB;
(v) The occurrence of material legal proceedings as
contemplated by the provisions of Section 8.3(a) of
this Reorganization Agreement;
(vi) The failure on the part of the appropriate
officers of UPC to deliver the certificates set forth
in Section 8.1(c) of this Reorganization
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 63
<PAGE> 257
Agreement, or the failure on the part of counsel to
UPC to deliver the requisite opinion required by the
provisions of Section 8.1(e) of this Reorganization
Agreement; or
(vii) UPC shall have determined not to consummate the
Merger pursuant to Sections 8.2(d), 8.2(f), 8.2(i),
8.2(k) or 8.2(l).
ARTICLE 8
CONDITIONS TO CLOSING
8.1 Conditions to the Obligations of BFC. Unless waived
------------------------------------
in writing by BFC, the obligation of BFC 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,
except for breaches of acts and undertakings which would not have, or would not
reasonably be expected to have, any material adverse effect on the business or
operations of UPC and the UPC Subsidiaries taken as a whole;
(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, except (i) for any
such representations and warranties made as of a specified date, which shall be
true and correct in all material respects as of such date and (ii) for breaches
or representations and warranties which would not have, or would not reasonably
be expected to have, a material adverse effect on the business or operations of
UPC and the UPC Subsidiaries taken as a whole;
(c) Documents. In addition to the other
---------
deliveries of UPC or INTERIM described elsewhere in this Reorganization
Agreement, BFC 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:
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 64
<PAGE> 258
(A) UPC's and INTERIM's 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, with full power and
authority to execute this Reorganization Agreement and any and
all other documents in connection with the Merger, and that
the signature of each person set forth on such certificate is
his or her genuine signature;
(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 and 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. BFC 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 proper
authorization to issue certificates evidencing shares of UPC Common Stock and
cash or other good funds sufficient to meet the obligations of UPC to the BFC
Record Holders to deliver the Consideration under this Reorganization Agreement
and the Plan of Merger;
(e) Opinion of UPC's and INTERIM's Counsel. BFC
--------------------------------------
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
BFC, 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 a Delaware
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 65
<PAGE> 259
corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware;
(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 BFC and BFSB) 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's corporate
charters or bylaws or, to the best of the knowledge, information and
belief (without making special 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 BFC Record Holders and delivered in
exchange for their BFC 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) Fairness Opinion. BFC shall have received a
----------------
"fairness opinion" letter from its independent financial adviser to the effect
that, in the opinion of such adviser the Consideration to be received by the
BFC Record Holders is fair to
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 66
<PAGE> 260
the shareholders of BFC from a financial point of view, and such "fairness
opinion" shall not have been withdrawn prior to the Closing Date, and BFC shall
have received an updated "fairness opinion" letter from such advisers within
five (5) days prior to the Closing Date reinforcing the opinions provided in
the initial "fairness opinion" letter; and
(g) Tax Opinion. BFC shall have received a
-----------
written opinion from counsel 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 BFC Record Holders will not recognize any gain or loss to the
extent that such BFC Record Holders exchange shares of BFC Common Stock for
shares of UPC Common Stock as contemplated by this Reorganization Agreement and
the Plan of Merger assuming that the shares of BFC Common Stock so exchanged by
such BFC Record Holders are held by them as capital assets at the time of such
exchange.
8.2 Conditions to the Obligations of UPC and INTERIM.
------------------------------------------------
Unless waived in writing by UPC and INTERIM, the obligation of 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 BFC and BFSB to be performed at or before the Closing Date
pursuant to this Reorganization Agreement shall have been duly performed,
except for breaches of acts and undertakings which would not have, or would not
reasonably be expected to have, any material adverse effect on the business or
operations of BFC and the BFC Subsidiaries taken as a whole;
(b) Representations and Warranties. The
------------------------------
representations and warranties of BFC and BFSB 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, except (i) for any such representations and warranties made
as of a specified date, which shall be true and correct in all material
respects as of such date and (ii) for breaches or representations and
warranties which would not have, or would not reasonably be expected to have, a
material adverse effect on the business or operations of BFC and the BFC
Subsidiaries taken as a whole;
(c) Documents. In addition to the documents
---------
described elsewhere in this Reorganization Agreement, UPC shall have received
the following documents and instruments:
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 67
<PAGE> 261
(i) a certificate signed by the
Secretary or an assistant secretary of BFC and BFSB dated as of the
Closing Date certifying that:
(A) BFC's and BFSB'S respective
Boards of Directors and shareholders 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 BFC or BFSB, is an
officer of BFC or BFSB, as the case may be, holding the office
or offices specified therein, with full power and authority to
execute this Reorganization Agreement and any and all other
documents in connection with the Merger, and that the
signature of each person set forth on such certificate is his
or her genuine signature;
(C) the charter documents of BFC
and BFSB attached to such certificate remain in full force and
effect; and
(D) BFC and BFSB are in good
standing under their respective corporate charters; and
(ii) a certificate signed by the
respective President, Chief Executive Officer or an Executive Vice
President of each of BFC and BFSB 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
BFC or BFSB 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 BFC or BFSB; 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 and INTERIM may
elect either (i) to close the contemplated
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 68
<PAGE> 262
transactions 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, BFC and BFSB 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 BFC
and BFSB. BFC and BFSB shall have caused all BFC or BFSB personnel to provide
reasonable assistance to UPC in its investigation of matters relating to BFC
and BFSB;
(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 BFC and BFSB 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 BFC or BFSB, UPC
may elect either (i) to close the contemplated transactions in accordance with
the terms of this Reorganization Agreement or (ii) to terminate this
Reorganization Agreement without penalty;
(g) Opinion of BFC's Counsel. UPC shall have
------------------------
been furnished with an opinion of legal counsel to BFC and BFSB, dated the
Closing Date, addressed to and in form and substance satisfactory to UPC, to
the effect that:
(i) BFC is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware;
(ii) BFSB is a federal stock savings
bank, duly organized, validly existing, and in good standing under the
laws of the United States of America;
(iii) this Reorganization Agreement has
been duly and validly authorized, executed and delivered by BFC
and BFSB 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 BFC and BFSB 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
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 69
<PAGE> 263
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 BFC or BFSB of this Reorganization Agreement or any of the
documents to be executed and delivered by BFC and BFSB in connection
herewith.
Such opinion may (i) expressly rely as to matters of fact upon certificates
furnished by appropriate officers of BFC or BFSB 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 Delaware and (iii) incorporate, be guided by, and
be interpreted in accordance with, the Legal Opinion Accord of the ABA Section
of Business Law (1991);
(h) Other Business Combinations, Etc. Neither BFC
--------------------------------
nor BFSB shall have entered into any agreement, letter of intent, understanding
or other arrangement pursuant to which BFC or BFSB would merge; consolidate
with; effect a business combination with; sell any substantial part of BFC's or
BFSB's 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 of materially
decreasing the value of BFC or BFSB or the benefits of acquiring the BFC Common
Stock;
(i) Maintenance of Certain Covenants, Etc. At
-------------------------------------
the time of Closing (i) the total assets of BFC shall be not less than
$250,000,000; (ii) the consolidated tangible equity capital of BFC shall have
been not less than $29,000,000 as of September 30, 1993, and shall have
increased since that time through normal earnings growth; (iii) the tangible
equity capital of BFSB shall have been not less than $24,500,000 as of
September 30, 1993, and shall have increased since that time through normal
earnings growth; (iv) neither BFC nor BFSB shall have issued or repurchased
from the date hereof any additional equity or debt securities, or any rights to
purchase or repurchase such securities, except as set forth in this Agreement
(therefore, there shall be not more than 1,905,680 shares of BFC Common Stock
validly issued and outstanding at the Effective Time of the Merger); (iv) from
September 30, 1993, there shall have been no extraordinary sale of assets, nor
any investment portfolio restructuring by either BFC or BFSB; (v) neither BFC
nor BFSB
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 70
<PAGE> 264
shall have issued or granted since September 30, 1993, through the Closing Date
any additional BFC Stock Options, and all validly issued and outstanding BFC
Stock Options shall have been fully exercised prior to the Closing or tendered
to BFC for conversion into options to purchase shares of UPC Common Stock as
contemplated in Section 2.7 of this Reorganization Agreement and none shall
have been repurchased by BFC or BFSB prior to the Closing; (vi) from the date
hereof, BFC shall not have declared or paid any cash dividends except its
customary and historical quarterly cash dividend (which may be increased by One
Cent ($.01) per share) prior to Closing; provided, however, in the event the
-------- -------
Closing shall not have occurred by October 1, 1994 (the "Target Date"), BFC may
increase its quarterly cash dividend for any quarter subsequent to the Target
Date and prior to Closing to an amount not to exceed the cash dividend ratio
paid by UPC on shares of UPC Common Stock adjusted by the Exchange Ratio; and
(vii) the Merger can be accounted for as a "pooling of interests" on the
financial statements of UPC. The criteria and calculations set forth above
shall be determined in accordance with GAAP assuming that BFC and BFSB 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, nonrecurring or out of the ordinary borrowings or by the
realization of extraordinary or nonrecurring 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 BFC shall have entered into a non-compete agreement with
UPC and BFC substantially in the form of UPC's standard form of non-compete
agreement, a copy which is annexed hereto as Exhibit 8.2(j), providing for a
term of not less than two (2) years and covering the general geographic
region(s) in which BFC and BFSB currently operate and do business in or have a
present intention to do business in;
(k) Tax Opinion. UPC shall have received a
-----------
written opinion from counsel 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 BFC Record Holders will not recognize any gain or loss to the
extent that such BFC Record Holders exchange shares of BFC Common Stock for
shares of UPC Common Stock as contemplated by this Reorganization Agreement and
the Plan of Merger assuming that the shares of BFC Common Stock so exchanged by
such BFC Record Holders are held by them as capital assets at the time of such
exchange;
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 71
<PAGE> 265
(l) 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 BFC'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 BFC'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 which BFC is a party should not be
accounted for as a "pooling of interests" under generally accepted accounting
principles;
(m) Receipt of Affiliate Letters. Pursuant to
----------------------------
the provisions of Section 6.2 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 BFC Record Holder who would be deemed
an Affiliate of BFC 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 BFC Common Stock pursuant to the terms
and conditions of this Reorganization Agreement, committing to UPC that such
BFC 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 BFC
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 BFC 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 BFC for a period of not
less than thirty (30) days subsequent to the Effective Time of the Merger;
(n) Employment Agreements. Mr. William D.
---------------------
Powell, President and Chief Executive Officer of BFC, and Mr. C. Raymond
Duncan, Senior Vice-President and Treasurer of BFC, shall each have entered
into an Employment Agreement with UPC or BFC substantially in the form of the
Employment Agreement annexed hereto as Exhibit 8.2(n), and in consideration for
entering into such Employment Agreements each shall have waived all rights
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 72
<PAGE> 266
under any existing employment agreements with BFC or BFSB except as provided in
Certain Post Merger Agreements; and
(o) Fairness Opinion. UPC shall have received a
----------------
"fairness opinion" letter from its independent financial adviser to the effect
that, in the opinion of such adviser the Consideration to be received by the
BFC Record Holders is fair to the shareholders of UPC from a financial point of
view, and such "fairness opinion" shall not have been withdrawn prior to the
Closing Date, and UPC shall have received an updated "fairness opinion" letter
from such advisers within five (5) days prior to the Closing Date reinforcing
the opinions provided in the initial "fairness opinion" letter.
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) Registration Statement. The registration
----------------------
statement shall have been declared effective and shall not be subject to a stop
order of the SEC and, if the offer and sale of UPC Common Stock in the Merger
pursuant to this Reorganization Agreement is subject to the Blue Sky laws of
any state, shall not be subject to a stop order of any state securities
commission; and
(d) Shareholder Approval. This Reorganization
--------------------
Agreement and the Plan of Merger shall have been approved by the BFC
Shareholders by vote of at least the number of BFC Shareholders as required by
applicable law and the Certificate of Incorporation of BFC.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 73
<PAGE> 267
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 BFC or any BFC
Subsidiary fail to conduct its business pursuant to BFC's and BFSB's Covenants
made in Article 7;
(c) By UPC, INTERIM or BFC in the event the Closing
shall not have occurred by October 1, 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. If UPC shall have filed any and all applications to obtain the
requisite Government Approvals within sixty (60) 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 BFC and BFSB shall, upon UPC's written request, extend the
Closing Date until such time as all Government Approvals have been obtained and
any stipulated waiting periods have expired;
(d) By either UPC, INTERIM or BFC, 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 transactions contemplated); provided, however,
-------- -------
that either UPC or BFC 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 in the event 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 BFC 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
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 74
<PAGE> 268
or otherwise), prospects, operations, liquidity, income, condition (financial
or otherwise) or net worth of BFC or BFSB 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 BFC Common Stock which are the subject of the instant
transaction;
(g) By UPC, INTERIM or BFC 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 BFC or any BFC
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 other
Person, whether financial or otherwise;
(i) By UPC or INTERIM should BFC or BFSB or any BFC
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 BFC or BFSB to raise additional capital or to
sell a substantial portion of its assets; or
(j) By BFC or BFSB in the event the Current Market
Price Per Share of the UPC Common Stock should be less than $24.00 per share of
UPC Common Stock.
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
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 75
<PAGE> 269
available remedy for any such breach, misstatement or misrepresentation.
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:
<TABLE>
<S> <C>
If to BFC or BFSB:
BANCFIRST Corporation.
255 Grant Street, S.E.
Post Office Box 1429
Decatur, Alabama 35062
Fax: (205) 351-4307
Attn: William D. Powell, President and
Chief Executive Officer
With a copy to: Breyer & Aguggia
601 13th Street, N.W.
Washington, D.C. 20005
Fax: (202) 737-7979
Attn: John F. Breyer, Jr., Esq.
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 38018
Fax: (901) 383-2877
Attn: Jackson W. Moore, President
Gary A. Simanson, Associate General Counsel
</TABLE>
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.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 76
<PAGE> 270
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. 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. BFC, BFSB, UPC and INTERIM each
------------
agrees to use its best efforts to complete the transactions contemplated by
this Reorganization Agreement in accordance with the terms and provisions of
this Reorganization Agreement.
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.
Notwithstanding the foregoing, each of the Parties hereto may respond to
inquiries relating to this Reorganization Agreement and the transactions
contemplated hereby by the press, employees or customers without any notice or
further consent of the other Parties. Nothing in this Reorganization Agreement
shall be construed to prohibit BFC or the Board of Directors of BFC from making
any disclosure to the shareholders of BFC which in the judgement of the Board
of Directors of BFC (as advised by counsel) may be required in connection with
this Reorganization Agreement. BFC shall promptly notify UPC in writing of any
such disclosure is made.
10.7 Entire Agreement. This Reorganization Agreement,
----------------
together with the Plan of Merger which is Exhibit A hereto, Certain Post Merger
Agreements, the Schedules, Annexes, Exhibits and certificates required to be
delivered hereunder and any amendments or addenda hereafter executed and
delivered in
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 77
<PAGE> 271
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 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, 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.
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 78
<PAGE> 272
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 BFC shall each pay its own fees and expenses (including, without
limitation, legal fees and expenses) incurred by it in connection with the
transactions contemplated hereunder.
10.12 Finders and Brokers. UPC, INTERIM, BFC and BFSB
-------------------
represent and warrant to each other that 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 transactions 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 BFC or BFSB, UPC and
INTERIM will be without an adequate remedy at law by reason of the unique
nature of BFC and BFSB. 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 BFC or BFSB, 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. BFC and
BFSB 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,
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 79
<PAGE> 273
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 representations and warranties set forth in this Reorganization
Agreement shall expire on the earlier of six months from the Effective Time of
the Merger or the expiration of the applicable statutes of limitation. Nothing
in this Section 10.15 shall limit BFC's, BFSB's, UPC's or INTERIM's rights or
remedies for misrepresentations, breaches of this Reorganization Agreement or
any other improper action or inaction by the other Party hereto prior to the
its termination. All obligations, agreements, covenants and undertakings of
the Parties hereto or to the Certain Post Merger Agreements to be performed
either in whole or in part after the Effective Time of the Merger shall survive
the Closing and shall not expire at the Effective Time of the Merger.
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 80
<PAGE> 274
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.
<TABLE>
<S> <C>
BANCFIRST CORPORATION
By: /s/ William D. Powell
-------------------------------
William D. Powell
Its: President and Chief
Executive Officer
ATTEST:
/s/ Miles A. Wright
- ------------------------------
Miles A. Wright, Secretary
BANKFIRST, a federal savings bank
By: /s/ William D. Powell
-------------------------------
William D. Powell
Its: President and Chief
Executive Officer
ATTEST:
/s/ Miles A. Wright
- ------------------------------
Miles A. Wright, Secretary
</TABLE>
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 81
<PAGE> 275
<TABLE>
<S> <C>
UNION PLANTERS CORPORATION
By: /s/ Jackson W. Moore
-------------------------------
Jackson W. Moore
Its: President
ATTEST:
/s/ J. F. Springfield
- ------------------------------
J. F. Springfield, Secretary
BFC ACQUISITION COMPANY, INC.
By: /s/ Jackson W. Moore
-------------------------------
Jackson W. Moore
Its: President
ATTEST:
/s/ J. F. Springfield
- ------------------------------
J. F. Springfield, Secretary
</TABLE>
AGREEMENT AND PLAN OF REORGANIZATION - PAGE 82
<PAGE> 276
PLAN OF MERGER EXHIBIT A
SETTING FORTH THE PLAN OF MERGER
OF
BFC ACQUISITION COMPANY, INC.
(A DELAWARE CORPORATION)
WITH AND INTO
BANCFIRST CORPORATION
(A DELAWARE CORPORATION)
THIS PLAN OF MERGER ("Plan of Merger") is made and entered into as of
the 27th day of January, 1994, by and between BANCFIRST CORPORATION ("BFC"), a
corporation chartered and existing under the laws of the State of Delaware
which is a registered savings and loan holding company and whose principal
offices are located at 255 Grant Street, S.E. (Post Office Box 1429), Decatur,
Morgan County, Alabama 35602; 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 BFC ACQUISITION COMPANY, INC. ("INTERIM"), a
corporation chartered and existing under the laws of the State of Delaware,
whose principal place of business is located at 7130 Goodlett Farms Parkway,
Memphis, Shelby County, Tennessee 38018, and which is a wholly-owned subsidiary
of UPC. 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 BFC have entered into an Agreement and Plan
of Reorganization dated as of the 27th day of January, 1994 ("Reorganization
Agreement") to which this Plan of Merger is Exhibit A and is incorporated by
reference as an integral part thereof providing for the merger of INTERIM with
and into BFC (which would be the Surviving Corporation) and the acquisition of
all of the BFC Common Stock outstanding immediately prior to the Effective Time
of the Merger by UPC for the Consideration set forth in the Reorganization
Agreement and this Plan of Merger; and
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
PAGE 83
<PAGE> 277
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 BFC 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 BFC, 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, BFC, 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 INTERIM with and into BFC (the "Merger").
ARTICLE I.
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 BFC ACQUISITION COMPANY, INC.. The authorized capital stock
------------------------------
of INTERIM consists of 1,000 shares of common stock having a par value of $.01
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 BANCFIRST CORPORATION The authorized capital stock of BFC
---------------------
consists of 3,200,000 shares of common stock having a par value of $.01 per
share (the "BFC Common Stock") and 400,000 shares of preferred stock having a
par value of $.01 per share (the "BFC Preferred Stock). As of the date hereof,
1,784,193 shares of BFC Common Stock were issued and outstanding, no shares of
BFC Common Stock were held by BFC as BFC Treasury Stock and no shares of BFC
Preferred Stock were issued and outstanding.
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN REORGANIZATION
PAGE 84
<PAGE> 278
ARTICLE 3
PLAN OF MERGER
3.1 Constituent Corporations. The name of each constituent
------------------------
corporation to the Merger is:
BFC ACQUISITION COMPANY, INC.
and
BANCFIRST CORPORATION
3.2 Surviving Corporation. The Surviving Corporation shall be:
----------------------
BANCFIRST CORPORATION
which as of the Effective Time of the Merger shall continue to be named:
BANCFIRST CORPORATION
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 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
a Certificate of Merger with the Secretary of State of the State of Delaware,
or at such later time and/or date as may be agreed upon by the parties and set
forth in the Certificate of Merger. At the Effective Time of the Merger,
INTERIM shall be merged with and into BFC which will survive the Merger, and
the separate existence of INTERIM shall cease thereupon, and without further
action, BFC shall thereafter possess all of the assets, rights, privileges,
appointments, powers, licenses, permits and franchises of both BFC and
INTERIM, whether of a public or private nature, and shall be subject to all
of the liabilities, restrictions, disabilities, and duties of both BFC and
INTERIM.
3.4 Certificate of Incorporation. At the Effective Time of the
----------------------------
Merger, the Certificate of Incorporation of BFC, as in effect immediately
prior to the Effective Time of the Merger, shall constitute the Certificate
of Incorporation of BFC as the Surviving Corporation, unless and until the
same shall be amended as provided by law and the terms of such Certificate of
Incorporation.
3.5 Bylaws. At the Effective Time of the Merger, the Bylaws of
------
BFC, as in effect immediately prior to the Effective Time of the Merger, shall
continue to be its Bylaws as the Surviving Corporation, unless and until
amended or repealed as
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
PAGE 85
<PAGE> 279
provided by law, its Certificate of Incorporation and such Bylaws.
3.6 Directors and Officers. The directors and officers of BFC in
----------------------
office immediately prior to the Effective Time of the Merger shall continue to
be the directors and officers of the Surviving Corporation, to hold office as
provided in the Certificate 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 BFC as the Surviving Corporation following
----
the Merger, shall remain:
BANCFIRST CORPORATION
or such other name as BFC shall adopt.
ARTICLE 4
DESCRIPTION OF THE TRANSACTION
4.1 Conversion of the INTERIM Common Stock. At the Effective Time
--------------------------------------
of the Merger, each share of $.01 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 BFC. At the
--------------------------------------------
Effective Time of the Merger, each share of $.01 par value common stock
of BFC 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 4.3 hereof.
4.3 Exchange of BFC Shares; Exchange Ratio. At the Effective Time
--------------------------------------
of the Merger, the outstanding shares of BFC Common Stock held by the BFC
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 BFC and shall automatically be
converted exclusively into, and constitute only the right of the BFC Record
Holders to receive in exchange for their shares of BFC Common Stock, whole
shares of UPC Common Stock and a cash payment in settlement of any remaining
fractional share of UPC
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
PAGE 86
<PAGE> 280
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 BFC Record
Holders 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 BFC
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:
(A) 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, the Exchange Ratio shall be
based on a fixed Exchange Ratio of 1.078 shares of UPC Common Stock
for each share of BFC Common validly issued and outstanding
immediately prior to the Effective Time of the Merger; and
(B) In the event the Current Market Price
Per Share of UPC Common Stock should be less than $24.00 per share of
UPC Common Stock, the Exchange Ratio shall be fixed at 1.078 shares of
UPC Common Stock for each share or BFC Common Stock; provided, however,
-------- -------
BFC shall have the right to either accept the fixed Exchange Ratio of
1.078 or terminate the transaction in accordance with the terms and
provisions of the Reorganization Agreement and this Plan of Merger,
provided, further, in the event BFC should elect to terminate the
-------- -------
Reorganization Agreement and this Plan of Merger in accordance with
this Section 4.3, UPC may, in its sole discretion, reinstate the
Reorganization Agreement and this Plan of Merger and the transactions
contemplated herein by increasing the number of shares of UPC Common
Stock to be delivered by UPC to the BFC Record Holders hereunder (i.e.
the Exchange Ratio) based on a fixed price of $25.87 per share of BFC
Common Stock divided by the Current Market Price Per Share of UPC
------- --
Common Stock.
The Exchange Ratio as determined in this Section 4.3 shall be based on an
aggregate of no more than 1,905,680 shares of BFC Common Stock validly issued
and outstanding immediately prior to the Effective Time of the Merger and, for
purposes of this paragraph, counting all unexercised BFC Stock Options issued
and outstanding immediately prior to the Effective Time of the Merger as shares
of BFC Common Stock so converted and exchanged; provided, however, that no
-------- -------
fractional shares of UPC Common Stock shall be issued and if, after aggregating
all of the shares of
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
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UPC Common Stock to which a BFC Record Holder is entitled based upon the
Exchange Ratio, there shall be a fractional share of UPC Common Stock
remaining, such fractional share shall be settled by a cash payment therefor
pursuant to the Mechanics of Payment of the Consideration set forth in Section
4.4 hereof, which shall be calculated based upon the Current Market Price Per
Share of one (1) full share of UPC Common Stock.
(i) 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.
(ii) EFFECTS OF APPRAISAL RIGHTS ON THE
EXCHANGE RATIO. The Exchange Ratio shall be unaffected by Appraisal
Rights as granted under Delaware law because the BFC Common Stock is
listed for trading on the AMEX, which is a "national securities
exchange" as defined in rules promulgated by the SEC pursuant to the
1934 Act, and therefore, pursuant to Delaware Code Section 8-503-262,
no BFC Record Holder may assert Appraisal Rights in connection with
the Merger or the transactions contemplated in this Reorganization
Agreement.
(iii) EFFECT OF STOCK SPLITS, REVERSE STOCK
SPLITS, STOCK DIVIDENDS AND SIMILAR CHANGES IN THE CAPITAL OF BFC.
Should BFC effect any stock splits, reverse stock splits, stock
dividends or similar changes in its 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
in such a manner as the Board of Directors of UPC shall deem in good
faith to be fair and reasonable in order to give effect to such
changes subject to BFC Board of Directors approval.
4.4 Mechanics of Payment of the Consideration. As soon as
------------------------------------------
reasonably practicable, but in any event no more than five (5) Business Days
after the Effective Time of the Merger, the Corporate Trust Department of Union
Planters National Bank,
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REOGRANIZATION
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Memphis, Tennessee (the "Exchange Agent") shall deliver to each of the BFC
Record Holders such materials and information as may be deemed necessary by the
Exchange Agent to advise the BFC Record Holders of the procedures required for
proper surrender of their certificates evidencing and representing shares of
the BFC Common Stock in order for the BFC Record Holders to receive the
Consideration. Such materials shall include, without limitation, a Letter of
Transmittal, an Instruction Sheet, and a return mailing envelope addressed to
the Exchange Agent (collectively the "Shareholder Materials"). All Shareholder
Materials shall be sent by United States mail to the BFC Record Holders at the
addresses set forth on a certified shareholder list to be delivered by BFC to
UPC at the Closing (the "Shareholder List") and shall also be made available at
the Corporate Trust Department offices of the Exchange Agent. As soon as
reasonably practicable thereafter, the BFC Record Holders of all of the
outstanding shares of BFC Common Stock, shall deliver, or cause to be
delivered, by United States Postal Service, hand delivery or any other means of
delivery selected by such BFC Record Holders, to the Exchange Agent, pursuant
to the Shareholder Materials, the certificates evidencing and representing all
of the shares of BFC Common Stock which were validly issued and outstanding
immediately prior to the Effective Time of the Merger, and the Exchange Agent
shall take prompt action to process such certificates formerly evidencing and
representing shares of BFC Common Stock received by it (including the prompt
return of any defective submissions with instructions as to those actions which
may be necessary to remedy any defects). Upon receipt of the proper submission
of the certificate(s) formerly representing and evidencing ownership of the
shares of BFC Common Stock, the Exchange Agent shall, on or prior to the 30th
day after the Effective Time of the Merger, mail to the former BFC Shareholders
in exchange for the certificate(s) surrendered by them, the Consideration to be
paid for each such BFC Shareholder's shares of BFC 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 BFC Common Stock of a BFC Record
Holder, subject to the provisions of this Section 4.4, shall be deemed for all
corporate purposes to represent and evidence only the right to receive the
Consideration into which such BFC Record Holder's shares of BFC 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 BFC Record
Holder's BFC Common Stock shall have been surrendered as provided above, the
Consideration payable to the BFC Record
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANINZATION
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Holder(s) of the cancelled shares as of any time after the Effective Date shall
not be paid to the BFC Record Holder(s) of such certificate(s) until such
certificates shall have been surrendered in the manner required. Each BFC
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 BFC 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 BFC Record Holder is
entitled, provided that each such BFC 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 BFC Shareholder.
4.5 Stock Transfer Books. At the Effective Time of the Merger,
--------------------
the stock transfer books of BFC shall be closed and no transfer of shares of
BFC Common Stock shall be made thereafter.
4.6 Effects of the Merger. At the Effective Time of the Merger,
---------------------
the separate existence of INTERIM shall cease, and INTERIM shall be merged with
and into BFC 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 BFC and INTERIM.
4.7 Transfer of Assets. At the Effective Time of the Merger, all
------------------
rights, assets, licenses, permits, franchises and interests of BFC 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
BFC 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
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
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<PAGE> 284
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 Appraisal Rights of BFC Shareholders. Pursuant to the
------------------------------------
provisions of Section 8-503-262 of the Delaware Code, BFC Shareholders shall
not be entitled to assert Appraisal Rights in connection with the Merger or to
seek those appraisal remedies afforded by the Delaware Code because the BFC
Common Stock is listed for trading on the AMEX, which is a "national securities
exchange" as defined in rules promulgated by the SEC pursuant to the 1934 Act,
and therefore, pursuant to Delaware Code Section 8- 503-262, no BFC Record
Holder may assert Appraisal Rights in connection with the Merger or the
transactions contemplated in this Reorganization Agreement.
4.10 Approvals of Shareholders of BFC and INTERIM. In order to
--------------------------------------------
become effective, the Merger must be approved by the respective shareholders of
BFC 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 Delaware.
4.11 BFC Stock Options. In the event and to the extent that there
-----------------
are any BFC Stock Options validly issued and outstanding at the time of
Closing, such BFC Stock Options shall at the Effective Time of the Merger
automatically and without further action on the part of anyone be converted
into options to purchase shares of UPC Common Stock on the same terms and
conditions attributable to the BFC Stock Options to purchase shares of BFC
Common Stock adjusted by and in accordance with the Exchange Ratio.
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 BFC 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 BFC Record Holders
determined as provided in Section 4.3 of this Plan of Merger nor shall this
Plan of Merger be amended to permit UPC to utilize assets other than cash or
good funds to
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
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<PAGE> 285
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 (except as provided for in the Reorganization Agreement)
of the BFC Record Holders of the shares of BFC 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 Delaware Secretary of State, to
waive any default in the performance of any term of this Plan of Merger by BFC,
to waive or extend the time for the compliance or fulfillment by BFC 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, BFC, 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 Delaware 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 conditions precedent to the obligations of BFC 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:
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
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<PAGE> 286
If to UPC or INTERIM:
<TABLE>
<S> <C>
Union Planters Corporation
P.O. Box 387 (mailing)
Memphis, Tennessee 38147
7130 Goodlett Farms Parkway (deliveries)
Memphis, Tennessee 38018
Fax: (901) 383-2877
Attn: Mr. Jackson W. Moore, President
Gary A. Simanson,
Associate General Counsel
If to BFC: BANCFIRST Corporation
255 Grant Street, S.E.
(P.O. Box 1429)
Decatur, Alabama 35602
Fax: (205) 351-4307
Attn: Mr. William D. Powell
President and Chief Executive Officer
With a copy to: Breyer & Aguggia
601 13th Street, N.W.
Washington, D.C. 20005
Fax: (202) 737-7979
Attn: John F. Breyer, Jr., Esq.
</TABLE>
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 Delaware with respect to
those provisions of this Plan of Merger expressly required by Delaware law to
be included in this Plan of Merger, disregarding, however, the Delaware
conflicts 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.
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
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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.
<TABLE>
<S> <C>
ATTEST: UNION PLANTERS CORPORATION
- ------------------- By: --------------------------
J. F. Springfield Jackson W. Moore
Its: Secretary Its: President
ATTEST: BFC ACQUISITION COMPANY, INC.
- -------------------- By:
----------------------------
J. F. Springfield Jackson W. Moore
Its: Secretary Its: President
ATTEST: BANCFIRST CORPORATION
- -------------------- By:
----------------------------
Miles A. Wright William D. Powell
Its: Secretary Its: President and
Chief Executive Officer
</TABLE>
PLAN OF MERGER - EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
PAGE 94
<PAGE> 288
EXHIBIT B
January 27, 1994
BANCFIRST Corporation
255 Grant Street, S.E.
Decatur, Alabama 35602
Gentlemen:
We have today entered into an Agreement and Plan of Reorganization
(the "Agreement") between Union Planters Corporation ("UPC"); BFC Acquisition
Company, Inc., a wholly owned acquisition subsidiary of UPC; BANCFIRST
Corporation ("BFC"); and BANKFIRST, a federal savings bank ("BFSB"). This
letter is intended to set forth certain additional agreements and undertakings
of each of the above parties and each of such parties agrees that this letter
is an integral part of the Agreement (as referred to in Section 10.7 thereof)
and is being entered into separately solely as an accommodation to UPC. All
terms used herein without definition shall have the same meaning as ascribed in
the Agreement.
Accordingly, in consideration of the parties having entered into the
Agreement and for other good and valuable considerations, the receipt of which
is hereby acknowledged, it is hereby further agreed that:
A. Employees.
---------
1. Following the effective date of eligibility of BFC and BFSB
employees to participate in all employee benefit plans of UPC, including all
qualified pension, profit sharing, and stock bonus, and employee stock
ownership plans and all employee welfare benefit plans, BFC and BFSB shall take
such steps as are necessary to terminate the BFSB pension plan, provide for the
merger of the BFSB 401(k) profit sharing plan with and into the UPC 401(k)
profit sharing plan, and terminate its existing employee welfare benefit plans.
Upon the termination of the BFSB pension plan, employees of BFC and BFSB who
are participants in such pension plan will, to the extent provided by under the
plan and by applicable law, become fully vested in and eligible to receive
benefits under the plan and such plan will be fully funded by BFC or BFSB prior
to termination to the extent required by applicable law. To the extent
permitted by the plan and applicable law, BFC shall distribute all vested
accrued benefits to plan participants as soon as reasonably practicable
following the termination of the BFSB pension plan in the manner required by
applicable law. BFC and BFSB shall obtain such regulatory determinations
regarding the termination or merger of any
<PAGE> 289
BANCFIRST Corporation
January 27, 1994
Page 2
tax-qualified plan as may be appropriate to insure the qualified status of such
plans (and related trusts) under the Internal Revenue Code. Upon the election
of any participant, any vested accrued benefit under any retirement plan
sponsored by BFC may be transferred to UPC's 401(k) profit sharing plan or, at
the election of the participant, to any other plan of UPC that is permitted to
accept a transfer from another qualified retirement plan.
Following the Merger and, in any event, no later than January
1, 1995, employees of BFC or BFSB shall be eligible to receive group
hospitalization, medical, life, disability, and other employee welfare benefits
no less than those provided to other employees of UPC holding comparable
positions.
Following the Merger and, in any event, no later than January
1, 1995, employees of BFC and BFSB shall be entitled to participate, to the
same extent and on the same terms as the employees of UPC, in any qualified
pension, profit sharing, stock bonus plans, and employee stock ownership plans
in effect at such time for employees of UPC. Employees of BFC and BFSB shall
receive service credit from their hire date of employment at BFC and BFSB for
purposes of eligibility and vesting requirements under UPC's employee benefit
plans. UPC shall provide full coverage under its group medical, disability,
and life insurance plans for pre-existing medical conditions (to the extent
such condition is currently covered under the BFC or BFSB plan, and such
condition would be covered under UPC's plan if it were not preexisting).
Following the Merger, all previously accrued vacation,
holiday, sick, personal or other leave of BFC or BFSB employees shall be
credited to such employees and be available for use upon such terms as local
management may provide.
Notwithstanding anything in this paragraph A(1) to the
contrary, no rights or vesting in any stock plan of BFC or BFSB, including any
stock option plan, shall be accelerated or modified in contravention of the
accounting rules necessary to account for the Merger under the "pooling of
interests" method of accounting.
2. Any changes in personnel within one year of the Merger will be
subject to the approval of BFSB's current Chief Executive Officer, Mr. William
D. Powell. Subject to the provisions of paragraph A(3), all employees who are
continued in the employ of BFC or BFSB shall retain their current titles and
position with BFC or BFSB during any period of service with BFC or BFSB
following the Merger, except as otherwise provided for herein. Following the
Merger, the salary and bonus of all employees, other than Mr. Powell, shall be
determined annually or as otherwise determined by the local management or board
of directors of BFC or BFSB, as appropriate, without prior approval by UPC.
Mr. Powell's initial salary shall be determined in accordance with the terms of
his employment agreement with UPC. Thereafter, Mr. Powell's salary and bonus
shall be determined no less frequently than annually by the management of UPC.
Following the Merger, all perquisites or similar
<PAGE> 290
BANCFIRST Corporation
January 27, 1994
Page 3
benefits currently provided to Mr. Powell and other employees of BFC or BFSB,
including, but not limited to, the use of employer-owned automobiles (as
assigned to employees by the Chief Executive Officer of BFSB), expense
accounts, free checking, professional or club memberships or dues, vacation
leave, sick leave, incentive bonuses and personal leave, shall continue to be
provided at the discretion of, and to the extent authorized by the Board of
Directors of BFC and BFSB, respectively, without prior approval by UPC.
Following the Merger, all matters relating to personnel, including the hiring
of, assignment of positions and titles to, and retention of, employees in the
normal course of business, shall be determined by the local management of BFC
or BFSB, as appropriate, without prior approval by UPC.
3. UPC will provide severance payments to employees of BFC and
BFSB (other than employees whose severance benefits are provided for in written
employment agreements) whose employment is terminated within two years (2)
years after the Effective Date due to job reductions initiated at the request
of UPC and not in the ordinary course of business by BFC or BFSB consistent
with the severance policies of UPC as set forth in Exhibit I attached hereto.
All years of service of a terminated employee with BFC or BFSB prior to the
Merger shall be counted for purposes of computing "Service" under the UPC
severance schedule. Any employee terminated pursuant to this paragraph shall
also be paid for all accrued but unused vacation days.
B. Existing Employment Agreement. UPC will cause BFC and BFSB to
-----------------------------
honor its existing employment contracts with Mr. Powell and Mr. C. Raymond
Duncan, Senior Vice President/Treasurer of BFC and BFSB, and UPC acknowledges
and agrees that the Merger constitutes a Change of Control under the existing
Employment Agreements. The payments due to Mr. Powell and Mr. Duncan upon the
Closing Date are $389,774 and $230,765, respectively. In addition, following
the Merger, Messrs. Powell and Duncan will continue to serve in their present
capacities with BFC and BFSB and will be provided with new employment contracts
in the form attached as Exhibit II. BFC, BFSB, and UPC will enter into
separate agreements to provide for the payment of supplemental retirement
benefits to Messrs. Powell and Duncan in the form attached hereto as Exhibit
III.
C. Stock Options.
-------------
1. In connection with the Merger, Messrs. Powell and Mr.
Duncan shall receive 10,000 and 5,000 options, respectively, to purchase shares
of UPC's common stock upon the terms set forth in their respective employment
agreements with UPC and the UPC 1992 Nonqualified Stock Plan. Senior Vice
Presidents Wallace Terry, Miles Wright, and Richard Gowan will each receive
stock options to purchase 1,500 shares of UPC's common stock, subject to the
terms and conditions of the UPC 1992 Nonqualified Stock Plan.
<PAGE> 291
BANCFIRST Corporation
January 27, 1994
Page 4
2. Following the merger, management personnel of BFC and
BFSB shall be reviewed for possible grants of options to purchase UPC stock at
such times and to the same extent and on the same conditions as management
personnel at other affiliates of UPC, as determined by the Stock Option
Committee of the Board of Directors of UPC.
D. Indemnification
---------------
1. From and after the Effective Time of the Merger, UPC
(including its successors) shall indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date hereof or who
becomes prior to the Effective Time of the Merger, an officer, director or
employee of BFC or BFSB (the "Indemnified Parties") against all losses, claims,
damages, costs, expenses (including attorney's fees), liabilities or judgments
or amounts that are paid in settlement of or in connection with any claim,
action, suit, proceeding or investigation (each a "Claim") in which an
Indemnified Party is, or is threatened to be made, a party or a witness based
in whole of in part on or arising in whole or in part out of the fact that such
person is or was a director, officer or employee of BFC or BFSB or any BFC
subsidiary if such Claim pertains to any matter or fact arising, existing or
occurring prior to the Effective Time of the Merger (including, without
limitation, the Merger and other transactions contemplated by the Agreement),
regardless of whether such Claim is asserted or claimed prior to, or at or
after, the Effective Time of the Merger (the "Indemnified Liabilities") to the
full extent permitted under applicable state or federal law in effect as of the
date hereof or as amended applicable to a time prior to the Effective Time of
the Merger and under BFC's Certificate of Incorporation and Bylaws and the
BFSB's Federal Stock Charter and Bylaws (and UPC shall pay expenses in advance
of the final disposition of any such action or proceeding to each Indemnified
Party to the full extent permitted by applicable state or federal law in effect
as of the date hereof or as amended applicable to a time prior to the Effective
Time of the Merger upon receipt of any undertaking required by applicable law).
Any Indemnified Party wishing to claim indemnification hereunder upon learning
of any Claim shall notify UPC (but the failure to notify UPC shall not relieve
UPC from any liability which they may have hereunder except to the extent such
failure prejudices UPC) and shall deliver to UPC the undertaking, if any,
required by applicable law. The obligations of UPC hereunder shall continue in
full force and effect, without any amendment thereto, for a period of not less
than six years from the Effective Time of the Merger; provided, however, that
all rights to indemnification in respect of any Claim asserted or made within
such period shall continue until the final disposition of such Claim.
2. From and after the Effective Time of the Merger, the
directors, officers and employees of BFC or the BFSB who become directors,
officers or employees of UPC or any of subsidiaries, (i) except for the
indemnification rights set forth in paragraph (1) hereunder, shall have
indemnification rights having prospective application only and (ii) shall be
covered on a prospective basis by UPC's directors and officers liability
insurance policy on a basis at least equal to the coverage provided to persons
in similar positions at UPC and
<PAGE> 292
BANCFIRST Corporation
January 27, 1994
Page 5
its subsidiaries. The prospective indemnification rights shall consist of such
rights to which directors, officers and employees of UPC or its subsidiaries
are entitled under the provisions of the Articles of Incorporation, or similar
governing documents, of UPC and its subsidiaries, as in effect from time to
time after the Effective Time of the Merger, as applicable, and provisions of
applicable state and federal law as in effect from time to time after the
Effective Time of the Merger.
3. The obligation of UPC provided under paragraphs (1)
and (2) hereunder are intended to benefit, and be enforceable against UPC
directly by, the Indemnified Parties, and shall be binding on all respective
successors and assigns of UPC.
E. Continuation of Business. UPC agrees to continue the separate
------------------------
corporate existence and corporate name of BFC (or such corporate name as BFC
may assume prior to, or upon, the Effective Time of the Merger) and BFSB as
subsidiaries of UPC for a period of three (3) years and provide the operation
of BFC and BFSB as community banks within UPC's corporate structure. Further,
UPC agrees to continue all existing branches of BFSB for a period of at least
one (1) year.
F. Boards of Directors of BFC and BFSB.
-----------------------------------
1. The Boards of Directors of BFC and BFSB following the
Effective Time of the Merger shall consist of those persons serving as
directors immediately prior to such effective time and each such person shall
continue to serve as a director for the remainder of the term for which he was
elected in accordance with law and the BFC's and BFSB's Charter and Bylaws.
Thereafter, UPC agrees that each such person shall be reelected director for at
least one (1) additional three (3) year term regardless of any otherwise
applicable age-related requirement; provided, however, each director shall be
eligible for reelection only if (i) he continues to qualify to serve as a
director, (ii) he is not permanently incapacitated and unable to serve as a
director, (iii) he continues to adequately perform his services as a director
and (iv) UPC has not determined that the BFSB has failed to meet the general
performance standards of other UPC banking subsidiaries. The fees paid to the
directors of the BFSB following the Effective Time of the Merger shall be at
least the same amount paid to the directors immediately prior to such time and
such fees may be increased from time to time by action of the Board. All of
the Saving Bank's directors shall be eligible to receive such fees other than
persons who serve in day to day management positions with the BFSB.
2. To further the development of business opportunities
for BFC and BFSB, the Board of BFC or BFSB may, from time to time, authorize
the creation of advisory boards thereto, provide for the appointment of
advisory directors, and establish an incentive compensation program for such
advisory directors.
<PAGE> 293
BANCFIRST Corporation
January 27, 1994
Page 6
G. Management of BFC and BFSB. As of the effective date of the
--------------------------
Merger and subject to the authority of local management as provided under
paragraph A(2), and without implying a contractual right of employment on the
part of any employees of BFSB other than Messrs. Powell and Duncan, Exhibit IV
sets forth the positions that key management employees of BFC and BFSB will
have following the Merger and the location of their employment.
H. Officer and Director Loans. Subject to restrictions of
--------------------------
applicable regulations and law, the loans from BFSB currently held by officers
and directors and employees of BFSB will not be affected by the Merger.
I. Post Merger Securities Filings. UPC shall use its best
------------------------------
efforts to ensure that not later than twenty (20) days following the end of the
first calendar quarter in which UPC and BFC have completed thirty (30) days of
combined post acquisition operations, UPC will publish financial results
containing the combined UPC and BFC results of operations.
<PAGE> 294
BANCFIRST Corporation
January 27, 1994
Page 7
Upon execution of this letter (or counterparts thereof) by the parties
hereto, this letter shall constitute an agreement between the parties to be
enforceable following the Effective Time of the Merger by either party hereto
or any other party who is intended to be benefitted hereunder.
UNION PLANTERS CORPORATION
By: /s/ Jackson W. Moore
-----------------------------
BFC ACQUISITION COMPANY, INC.
By: /s/ Jackson W. Moore
-----------------------------
BANCFIRST CORPORATION
By: /s/ William D. Powell
-----------------------------
BANKFIRST, A FEDERAL
SAVINGS BANK
By: /s/ William D. Powell
-----------------------------
<PAGE> 295
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made effective as of 1994, by and
--------------------
between BANCFIRST CORPORATION ("BFC"), BANKFIRST, A FEDERAL SAVINGS BANK (the
"Bank"), UNION PLANTERS CORPORATION ("UPC"), and WILLIAM D. POWELL (the
"Executive"). (All references herein to the Bank include BFC, unless otherwise
indicated).
WHEREAS, the Executive has heretofore served as President and Chief
Executive Officer of BFC and the Bank and is experienced in all phases of the
business of the Bank;
WHEREAS, BFC, the Bank, and UPC wish to be assured of the continued
services of the Executive following the acquisition of BFC by UPC on the date
first written above and the Executive is willing to serve in the employ of the
Bank and BFC on a full-time basis; and
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereby agree as follows:
1. Employment. The Bank agrees to continue the Executive in its
----------
employ, and the Executive agrees to remain in the employ of the Bank, for the
period stated in paragraph 3 hereof and upon the other terms and conditions
herein provided.
2. Position and Responsibilities. The Bank shall employ the
-----------------------------
Executive and the Executive agrees to serve as President and Chief Executive
Officer for the term and on the conditions hereinafter set forth. The
Executive agrees to perform such services not inconsistent with his position as
shall from time to time be assigned to him by the Board of Directors of the
Bank.
3. Term and Duties
---------------
(a) Term of Employment. The initial term of employment under
this Agreement shall be for the period commencing 1994 and ending
------------
1999. Upon the expiration of the initial term of employment
- -----------
hereunder, the Executive's period of employment shall be extended for one (1)
year unless 120 days prior to the expiration of the initial term of employment,
the Bank gives notice to the Executive that the term will not be so extended.
Thereafter, upon the expiration of any one-year extension, the term shall be
extended for one (1) year unless 120 days prior to the expiration of such one
year term, the Bank gives notice to Executive that the term will not be so
extended.
(b) Duties. During the period of his employment
------
hereunder and except for illnesses, reasonable vacation periods, and reasonable
leaves of absence, the Executive shall devote his business time, attention,
skill, and efforts to the faithful performance of his duties hereunder;
provided, however, the Executive may, from time to time, serve, or continue to
serve, on
<PAGE> 296
the boards of directors, of, and hold any other offices or positions in,
companies or organizations, which do not present any material conflict of
interest with the Employers, or unfavorably affect the performance of the
Executive's duties pursuant to this Agreement, or will not violate any
applicable statute or regulation.
4. Compensation and Reimbursement of Expenses.
------------------------------------------
(a) Compensation. The Bank agrees to pay the Executive
------------
during the term of this Agreement a salary at the rate of $150,000 per annum;
provided, that the rate of such salary shall be reviewed by the management of
UPC not less often than annually. Such rate of salary, or increased rate of
salary, if any, as the case may be, may be further increased (but not
decreased) from time to time in such amounts as the management of UPC in its
discretion may decide. Such salary shall be payable in accordance with the
customary payroll practices of the Bank, but in no event less frequently than
monthly.
(b) Bonuses. The Executive shall be entitled to
-------
participate in an equitable manner in any incentive bonus plan or program
maintained by UPC for senior executives of its subsidiaries. No other
compensation provided for in this Agreement shall be deemed a substitute for
the Executive's right to participate in such incentive bonus plan or program.
(c) Reimbursement of Expenses. The Bank shall pay or
-------------------------
reimburse the Executive for all reasonable travel and other expenses incurred
by the Executive in the performance of his obligations under this Agreement.
The Bank further agrees to provide the Executive with the full-time use of an
automobile of a make and model selected by the Executive, not more than two
years' old and commensurate with his position during his period of employment
and to reimburse the Executive for all initiation fees and dues associated with
membership in professional, social, civic and service clubs which the Executive
joins or has joined and which membership, in whole or part, furthers the
interests of or promotes the interest of the Bank or assists the Executive in
business relationships on behalf of the Bank.
5. Participation in Benefit Plans.
------------------------------
(a) Except as otherwise provided in this Agreement, the
payments provided in paragraphs 4, 7, and 9 hereof are in addition to any
benefits to which the Executive may be, or may become, entitled under any
general group hospitalization, health, dental care, or sick leave plan, life or
other insurance or death benefit plan, or workmen's compensation, disability or
social security, travel or accident insurance, or executive contingent
compensation plan, including, without limitation, capital accumulation and
-2-
<PAGE> 297
termination pay programs, restricted stock or stock purchase plan, stock option
plan, retirement income, tax-qualified retirement plan, supplemental pension
plan (excess benefit plan), or other present or future group employee benefit
plan or program of the Bank or UPC for which general employees of the Bank or
UPC are or shall become eligible, and the Executive shall be eligible to
receive during the period of his employment under this Agreement, and during
any subsequent period for which he shall be entitled to receive payments from
the Bank under paragraph 7 or paragraph 10, all fringe benefits and emoluments
for which executive employees of the Bank and general employees of UPC are
eligible under every such plan or program to the extent permissible under the
general terms and provisions of such plans or programs and in accordance with
the provisions thereof.
(b) Following his termination of employment (for any reason)
with the Bank and BFC at any time after attaining age 62, the Executive shall
be entitled to receive all benefits generally provided to retirees by the Bank
or UPC, including, but not limited to, retiree medical coverage for the
Executive and his spouse under the UPC Group Medical Plan on the same terms as
other UPC retirees but without regard to any "length of service" requirement to
establish eligibility for such retiree medical coverage.
6. Vacation and Sick Leave. At such reasonable times as the
-----------------------
Board of Directors of the Bank shall in its discretion permit, the Executive
shall be entitled, without loss of pay, to absent himself voluntarily from the
performance of his employment under this Agreement, all such voluntary absences
to count as vacation time; provided that:
(a) The Executive shall be entitled to annual vacation in
accordance with the policies as periodically established by the Board of
Directors of the Bank for senior management of the Bank, which shall in no
event be less than three weeks per annum.
(b) The Executive shall not be entitled to receive any
additional compensation from the Bank on account of his failure to take a
vacation; nor shall he be entitled to accumulate unused vacation from one
fiscal year to the next except to the extent authorized by the Board of
Directors of the Bank.
(c) In addition to the aforesaid paid vacations, the
Executive shall be entitled, without loss of pay, to absent himself voluntarily
from the performance of his employment with the Bank for such additional
periods of time and for such valid and legitimate reasons as the Board of
Directors of the Bank in its discretion may determine. Further, the Board may
grant to the Executive a leave or leaves of absence with or without pay at such
time or times and upon such terms and conditions as the Board in its discretion
may determine.
-3-
<PAGE> 298
(d) In addition, the Executive shall be entitled to an
annual sick leave as established by the Board of Directors of the Bank but in
no event in an amount less than that provided for pursuant to the policy
currently in effect as of the date of this Agreement. In the event any sick
leave time shall not have been used during any year, such leave shall accrue to
subsequent years only to the extent authorized by the Board.
(e) Upon termination of employment, the Executive shall
be entitled to receive additional compensation from the Bank for unused sick
leave or vacation time only to the extent provided under the general policies
of the Bank.
7. Benefits Payable Upon Disability.
--------------------------------
(a) Primary Disability Benefits. In the event of the
---------------------------
Disability (as hereinafter defined) of the Executive, the Bank shall continue
to pay the Executive the monthly compensation provided in paragraph 4 hereof
during the period of his disability provided, however, that in the event the
Executive is disabled for a continuous period exceeding eighteen (18) calendar
months, the Bank may, at its election, terminate the Agreement, in which event
the Executive shall be entitled to receive the benefits described in paragraph
7(b).
As used in this Agreement, the term "disability"
shall mean the complete inability of the Executive to perform his duties under
this Agreement as determined by an independent physician selected with the
approval of the Bank and the Executive.
(b) Secondary Disability Benefits. In the event that the
-----------------------------
Bank elects to terminate this Agreement pursuant to Section 7(a), then in lieu
of any other benefits the Executive would have been entitled to hereunder, the
Bank shall pay to the Executive a monthly disability benefit equal to seventy
(70) percent of his monthly salary at the time he became disabled. Payment of
such disability benefit shall commence on the last day of the month following
the month for which the final payment under paragraph 7(a) was made and cease
with the earlier of (i) the payment for the month in which the Executive dies
or (ii) the payment for the month preceding the month in which the Executive
attains age 65.
(c) Disability Benefit Offset. Any amounts payable under
-------------------------
paragraph 7(a) or 7(b) shall be reduced by any amounts paid to the Executive
under any other disability program maintained by UPC in which the Executive
participates; however, such payments shall not be reduced by the amount of any
payments pursuant to social security and workmen's compensation.
(d) Service During Disability. During the period the
-------------------------
Executive is entitled to receive payments under paragraphs 7(a) and
-4-
<PAGE> 299
(b), the Executive shall, to the extent that he is physically and mentally able
to do so, furnish information and assistance to the Bank and UPC.
8. Grant of Stock Options. Upon the effective date of this
----------------------
Agreement, the Executive shall be granted 10,000 options to purchase UPC Stock
(at the fair market value on such date) under the 1992 UPC Nonqualified Stock
Plan ("Stock Plan") or any similar plan then maintained by UPC. Such options
shall be issued in accordance with the terms of the Stock Plan and shall be
exercisable over a five-year period as provided under the Stock Plan, but in
any event, such options shall be fully exercisable no later than the date of
the Executive's retirement. Following the Executive's retirement, such options
shall remain exercisable for a period equal to the greater of (a) ninety (90)
days from the date of the Executive's retirement or (b) the period specified by
the Stock Option Committee of the Board of Directors of UPC.
9. Payments to the Executive Upon Termination of Employment.
--------------------------------------------------------
(a) Event of Termination. Upon the occurrence of an
--------------------
Event of Termination (as hereinafter defined) during the period of the
Executive's employment under this Agreement, the provisions of this paragraph 9
shall apply. As used in this Agreement, an "Event of Termination" shall mean
the termination of the Executive's employment hereunder for any reason other
than "cause" or retirement at or after the normal retirement age under any
qualified retirement plan(s) maintained by UPC or termination pursuant to
Paragraph 7. A termination for "cause" shall include termination because of
the Executive's personal dishonesty, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order, or material breach or any
provision of this Agreement. In the event of termination for cause the
Executive shall have no right to receive compensation or other benefits for any
period after such termination; provided, however, that, the Executive shall be
entitled to receive all vested benefits as of the date of such termination.
(b) Event of Termination Without Change of Control. Upon
----------------------------------------------
the occurrence of an Event of Termination other than after a Change of Control
(as hereinafter defined), the Bank shall pay to the Executive monthly, or in
the event of his subsequent death, to his designated beneficiary or
beneficiaries, or to his estate, as the case may be, as severance pay or
liquidated damages, or both, during the period below described a sum equal to
the highest monthly rate of salary paid to the Executive at any time under this
Agreement. Such payments shall commence on the last day of the month following
the date of said Event of Termination and shall continue until the date this
Agreement would have expired but for
-5-
<PAGE> 300
said occurrence, with such occurrence being viewed as a determination by the
Bank not to extend the Agreement as provided for in paragraph 3.
(c) Event of Termination After Change of Control. If,
--------------------------------------------
after a "Change of Control" (as hereinafter defined) of UPC, BFC, or the Bank,
any of the parties hereto, or their successors or assigns, shall terminate the
employment of the Executive during the period of employment under this
Agreement for any reason other than "cause," as defined in paragraph 9(a),
retirement at or after the normal retirement age under any tax-qualified
retirement plan(s) maintained by UPC, termination pursuant to paragraph 7, or
nonrenewal, or otherwise change the present capacity or circumstances in which
the Executive is employed as set forth in paragraph 2 of this Agreement or
cause a reduction in the Executive's responsibilities or authority or
compensation or other benefits provided under this Agreement without the
Executive's written consent, then the Executive, or his beneficiaries,
dependents and estate, as the case may be, shall be entitled to the following:
(i) The Executive shall receive a sum equal to
the total amount of the present value of 2.99 times the average annual
compensation payable under this Agreement and includible by the Executive in
gross income for the most recent five taxable years ending before the date on
which the ownership or control of UPC, BFC, or the Bank changed. Such amount
shall be payable to the Executive in a lump sum within ten (10) days of the
occurrence of an Event of Termination under this paragraph 9(c).
(ii) During a period of thirty-six (36)
calendar months beginning with the Event of Termination, the Executive, his
dependents, beneficiaries and estate shall continue to be covered under all
employee benefit plans of the Bank, BFC, or UPC, including, without limitation,
any UPC tax-qualified retirement plans, as if the Executive was still employed
during such period under this Agreement.
(iii) If and to the extent that benefits or service
credit for benefits provided by paragraph 9(c)(ii) shall not be payable or
provided under any such plans to the Executive, his dependents, beneficiaries
and estate, by reason of his no longer being an employee of the Bank, as a
result of termination of employment, UPC shall itself pay or provide for
payment of such benefits and service credit for benefits to the Executive, his
dependents, beneficiaries and estate. Any such payment relating to retirement
shall commence on a date selected by the Executive which must be a date on
which payments under any UPC tax-qualified retirement plan(s) may commence.
-6-
<PAGE> 301
(iv) The Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise nor shall any amounts received from other employment or
otherwise by the Executive offset in any manner the obligations of UPC
hereunder.
(d) Change of Control. Paragraph 9(c) shall become
-----------------
operative upon the occurrence of a Change of Control of UPC, BFC, or the Bank.
For purposes of this Agreement, "Change of Control" means the sale of
substantially all of the assets of UPC, BFC, or the Bank, or the acquisition,
whether directly, indirectly, beneficially (within the meaning of Rule 13d-3 of
the Securities Exchange Act of 1934, as amended (the "Act")), or of record, of
securities of UPC, BFC, or the Bank representing twenty-five percent (25%) or
more in the aggregate voting power of UPC's, BFC's, or the Bank's
then-outstanding Common Stock by any "person" (within the meaning of Sections
13(d) and 14(d) of the Act), including any corporation or group of associated
persons acting in concert, other than (i) UPC or its subsidiaries and/or (ii)
any tax-qualified employee stock ownership plan of UPC or its subsidiaries,
including a trust established pursuant to any such plan; provided, that a
Change of Control will not result from (A) a transfer of voting securities of
UPC, BFC, or the Bank by a person who is the beneficial owner, directly or
indirectly, of twenty-five percent (25%) or more of the voting securities of
the UPC, BFC, or the Bank (a "25 Percent Owner") to (i) a member of such 25
Percent Owner's lifetime or by will or the laws of descent and distribution;
(ii) any trust as to which the 25 Percent Owner or a member (or members) of his
immediate family (within the meaning of Rule 16a-1(e) of the Act) is the
beneficiary; (iii) any trust as to which the 25 Percent Owner is the settlor
with sole power to revoke; (iv) any entity over which such 25 Percent Owner has
the power, directly or in directly, to direct or cause the direction of the
management and policies of the entity, whether through the ownership of voting
securities, by contract or otherwise; or (v) any charitable trust, foundation
or corporation under Section 501(c)(3) of the Code which is funded by the 25
Percent Owner; or (B) the acquisition of voting securities of UPC, BFC, or the
Bank, by either (i) a person who was a 25 Percent Owner on the effective date
of the Agreement or (ii) a person, trust or other entity described in the
foregoing clauses (A)(i)-(v) of this subsection; or (C) the spin-off or other
distribution by UPC to its shareholders of the capital stock or assets of BFC
or the Bank.
(e) Suspension and Special Regulatory Rules.
---------------------------------------
(i) If the Executive is suspended and/or temporarily
prohibited from participating in the conduct of the Bank's affairs by a notice
served under section 8(e)(3) or section (g)(1) of the Federal Deposit Insurance
Act ("FDI Act"), the Bank's obligations under this Agreement shall be suspended
as of the date
-7-
<PAGE> 302
of service of such notice, unless stayed by appropriate proceedings. If the
charges in the notice are dismissed, the Bank shall (i) pay the Executive all
or part of the compensation withheld while its contract obligations were
suspended and (ii) reinstate in whole or in part any of its obligations which
were suspended.
(ii) If the Executive is removed and/or permanently
prohibited from participating in the conduct of the Bank's affairs by an order
issued under section 8(e)(4) or section (g)(1) of the FDI Act, all obligations
of the Bank under this Agreement shall terminate as of the effective date of
the order; however, no vested rights of the Executive shall be affected by such
termination.
(iii) If the Bank is in default (as defined in
section 3(x)(1) of the FDI Act), all obligations under this Agreement shall
terminate as of the date of default; however, no vested rights of the Executive
shall be affected by such termination.
(iv) All obligations under this Agreement shall be
terminated, except to the extent that it may be determined that continuation of
this Agreement is necessary for the continued operation of the Bank, (1) by the
Director of the Office of Thrift Supervision ("OTS") or his or her designee at
the time the Federal Deposit Insurance Corporation ("FDIC") or the Resolution
Trust Corporation enters into an agreement to provide assistance to or on
behalf of the Bank under the authority contained in Section 13(c) of the FDI
Act; or (2) the Director of OTS or his or her designee at any time the Director
of OTS or his or her designee approves a supervisory merger to resolve problems
related to the operation of the Bank or when the Bank is determined by the OTS
to be in an unsafe or unsound condition. No vested rights of the Executive
shall be affected by such action.
(f) Termination of Employment of, or by, the Executive.
--------------------------------------------------
The Board of Directors of the Bank may terminate the employment of the
Executive at any time; in the event of such termination, the provisions of this
paragraph 9 shall fully apply. The Executive may terminate his service under
this Agreement at any time upon three (3) months written notice to the Bank.
In the event of the Executive's voluntary termination of employment under this
paragraph 9(f), the provisions of paragraph 9(a)-(e) shall not apply and the
Executive shall be entitled to receive his salary, bonus, and other employee
benefits through his date of termination and such termination shall be without
prejudice to any other benefits as to which the Executive is vested.
10. Source of Payments; UPC Guarantee. Except as to any payments
---------------------------------
made pursuant to paragraph 9(c), all payments to the Executive under the terms
of any provision of this Agreement shall
-8-
<PAGE> 303
be paid in cash from the general funds of the Bank, and no special or separate
fund shall be established and no other segregation of assets shall be made to
assure payment. The Executive shall have no right, title, or interest whatever
in or to any investments which the Bank may make to aid the Bank in meeting its
obligations hereunder. The obligation of the Bank to make any payments or
provide any benefits under this Agreement shall, in all events and without
limitation, be guaranteed by UPC and its successors and assigns and such
guarantee shall inure to the benefit of the Executive and his successors and
assigns.
11. Confidential Information. The Executive shall not, to the
------------------------
detriment of the Bank, knowingly disclose or reveal to any authorized person
any confidential information relating to the Bank, its subsidiaries or
affiliates, or to any of the businesses operated by them, and the Executive
confirms that such information constitutes the exclusive property of the
Employers. The Executive shall not otherwise knowingly act or conduct himself
(i) to the material detriment of the Bank, or (ii) in a manner which is
inimical or contrary to the interests thereof.
12. Federal Income Tax Withholding. The Bank or UPC may withhold
------------------------------
from any benefits payable under this Agreement all federal, state, city or
other taxes as shall be required pursuant to any law or governmental regulation
or ruling.
13. Effect of Prior Agreements. This Agreement contains the
--------------------------
entire understanding between the parties hereto and supersedes any prior
employment agreement between the Bank or any predecessor of the Bank and the
Executive; provided, however, that the Executive's right to payment under
section 8(c) of that certain agreement between the Executive, the Bank, and BFC
dated February 15, 1991 following the effective date of the merger of UPC and
BFC is hereby acknowledged by UPC and shall not be affected by any provision of
this Agreement.
14. Payment of Legal Expenses. The Bank shall pay all legal fees
-------------------------
and expenses (as such fees and expenses are incurred) which the Executive may
incur as a result of any action ultimately found in favor of the Executive
contesting the validity or enforceability of this Agreement and the Executive
shall be entitled to receive interest thereon for the period of any delay in
payment from the date such payment was due at the rate determined by adding two
hundred basis points to the six month Treasury Bill rate.
15. Consolidation, Merger, or Sale of Assets. Nothing in this
----------------------------------------
Agreement shall preclude UPC from (i) consolidating or merging into or with, or
causing BFC or the Bank from consolidating or merging into or with or (ii)
transferring all or substantially all of its assets or the assets of BFC or the
Bank to, another
-9-
<PAGE> 304
corporation which assumes this Agreement and all obligations and undertakings
of the UPC, BFC, and the Bank hereunder.
16. General Provisions.
------------------
(a) Nonassignability. Neither this Agreement nor any
----------------
right or interest hereunder shall be assignable by the Executive, his
beneficiaries, or legal representatives without the Employers' prior written
consent; provided, however, that nothing in this paragraph 16(a) shall preclude
(i) the Executive from designating a beneficiary to receive any benefits
payable hereunder upon his death, or (ii) the Executors, administrators, or
other legal representatives of the Executive or his estate from assigning any
rights hereunder to the person or persons entitled thereto.
(b) No Attachment. Except as required by law, no right
-------------
to receive payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge, or
hypothecation or to execution, attachment, levy, or similar process of
assignment by operation of law, and any attempt, voluntary or involuntary, to
effect any such action shall be null, void and of no effect.
(c) Binding Agreement. This Agreement shall be binding
-----------------
upon, and inure to the benefit of, the Executive, BFC, the Bank, and UPC, and
their respective permitted successors and assigns.
17. Modification and Waiver.
-----------------------
(a) Amendment of Agreement. This Agreement may not be
----------------------
modified or amended except by an instrument in writing signed by the parties
hereto.
(b) Waiver. No term or condition of this Agreement shall
------
be deemed to have been waived, nor shall there be an estoppel against the
enforcement of any provision of this Agreement, except by written instrument of
the party charged with such waiver or estoppel. No such written waiver shall
be deemed a continuing waiver unless specifically stated therein, and each
waiver shall operate only as to the specific term or condition waived and shall
not constitute a waiver of such term or condition for the future or as to any
act other than the specifically waived.
18. Severability. If, for any reason, any provision of this
------------
Agreement is held invalid, such invalidity shall not affect any other provision
of this Agreement not held so invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect. If any
provision of this Agreement shall be held invalid in part, such invalidity
shall in no way affect the rest of such provision, together with all other
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<PAGE> 305
provisions of this Agreement, shall to the full extent consistent with law
continue in full force and effect.
19. Headings. The headings of paragraph herein are included
--------
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
20. Applicable Law. This Agreement has been executed and
--------------
delivered in the State of Alabama, and its validity, interpretation,
performance, and enforcement shall be governed the laws of said State, except
to the extent Federal law is governing. Any payment to the Executive hereunder
shall be subject to and conditioned upon compliance with 12 U.S.C. #1828(k) and
any regulations promulgated thereunder.
-11-
<PAGE> 306
IN WITNESS WHEREOF, BFC, the Bank, and UPC have caused this Agreement
to be executed and their seals to be affixed hereunto by its officers thereunto
duly authorized, and the Executive has signed this Agreement, all as of the day
and year first above written.
<TABLE>
<S> <C>
ATTEST: BANCFIRST CORPORATION
- ------------- BY:
----------------------------
ATTEST: BANKFIRST, A FEDERAL SAVINGS BANK
- ------------- BY:
----------------------------------
ATTEST: UNION PLANTERS CORPORATION
- ------------- BY:
---------------------------------
- ------------- ------------------------------------
Witness William D. Powell
</TABLE>
-12-
<PAGE> 307
SUPPLEMENTAL RETIREMENT AGREEMENT
THIS AGREEMENT entered into as of this day of , 1994,
---- -----------
by and between BANCFIRST CORPORATION ("BFC"); BANKFIRST, A FEDERAL SAVINGS BANK
("BFSB"); UNION PLANTERS CORPORATION ("UPC"); and WILLIAM D. POWELL (the
"Executive"). (All references to BFSB shall include BFC, unless otherwise
indicated.)
WHEREAS, effective as of the date of this Agreement, BFC, and its
subsidiaries, including BFSB, will be acquired by UPC pursuant to the terms of
the Agreement and Plan of Reorganization between UPC and BFC dated
, 1994 (the "Merger") and continue as subsidiaries of UPC; and
- ---------------
WHEREAS, the Executive has been employed in the capacity of President
and Chief Executive Officer, and serves as a member of the Board of Directors,
of BFC and BFSB and is expected to continue to serve in these capacities
following the Merger; and
WHEREAS, the Executive's extensive knowledge and experience in the
savings and loan industry is such that BFC, BFSB, and UPC wish to seek
assurance of his continued service; and
WHEREAS, the Merger will result in the termination of the Plan and the
Executive's accrual of benefits thereunder will cease as of the date of such
termination; and
WHEREAS, BFC, BFSB, and UPC wish to establish this Agreement to
provide the Executive with certain benefits upon his retirement or other
termination of employment in recognition of the Executive's loss of retirement
income as a result of the premature termination of the Plan;
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements hereinafter contained, and other good and valuable
consideration, receipt of which is hereby acknowledged, the parties hereto
agree to this Agreement as follows:
SECTION I
DEFINITIONS
-----------
"Agreement" shall mean this agreement between the Executive, BFC,
BFSB and UPC.
"Disability" shall have the meaning set forth in, and be determined in
accordance with, Paragraph 7 of the Employment Agreement.
"Early Termination Benefit" shall mean the sum of (i) the vested
accrued lump-sum benefit distributable to the Executive in the event of the
termination of the Plan at any time prior to the Executive's normal retirement
age (65) and (ii) the cumulative earnings attributable to the Executive's
investment of the amount determined under clause (i) (assuming the transfer of
such amount to an Individual Retirement Account and a six percent annual rate
of return) during the period beginning on the date of distribution of such
amount to the Executive following termination of the Plan and ending on the
date the Executive attains age 65.
"Employment Agreement" shall mean the Executive's employment agreement
dated , 1994, by and between, the Executive, UPC, BANCFIRST,
------------------
and BANKFIRST.
"Lump Sum Amount" shall mean a sum equal to the Executive's estimated
lump-sum benefit at normal retirement age under the Plan determined as of the
date of Plan termination. Such sum shall be calculated by assuming that the
Plan had not terminated prior to the Executive's normal retirement age under
the Plan (age 65) and using (i) the assumptions stated in the Plan regarding
the calculation of actuarially equivalent benefit forms and
<PAGE> 308
(ii) the salary scale assumption used in connection with the preparation
of the Plan actuarial report prepared for the plan year beginning prior
to the date of termination.
"Plan" shall mean the BANKFIRST Pension Plan and Trust
"Surviving Spouse" shall mean the Executive's spouse on the date of
his death, but shall not include a spouse from whom he is legally separated or
divorced at the time of his death.
SECTION II
BENEFITS
--------
(a) In the event of the termination of the Plan prior to the date the
Executive attains age 65, then (i) in the event of the Executive's termination
of employment with BFSB on or after the date the Executive attains age 65 or
(ii) in the event of the Executive's death or disability while actively
employed by BFSB, BFSB shall pay the Executive the following sum at the time
specified in Section 2(c):
(1) The Executive's Lump Sum Amount less the Executive's
Early Termination Benefit;
and
(2) an amount determined as follows:
$D times (R/(1-R)) = amount of payment
For purposes of this formula, "D" shall equal
the amount determined under Section 2(a)(1),
and "R" shall equal the sum of the highest
marginal federal, state, local, and
withholding tax rates applicable to the
Executive during the calendar year in which
benefits are paid to the Executive under this
Agreement.
Any determination regarding the calculation of the Executive's Lump
Sum or Early Termination Benefits shall be made by the Plan's actuary (as
retained by BFSB or the Plan for the year in which such determination is made).
Such determination shall be binding upon the parties to this Agreement.
(b) In the event of the Executive's termination of employment with
BFSB prior to age 65, other than by reason of death or disability, the amount
determined under Section 2(a)(1) shall be reduced by 6.7 percent for each full
year that the Executive's age at termination of employment is less than age 65.
(c) The amount determined under Section 2(a) or 2(b) shall be payable
within thirty (30) days after the date of the Executive's termination of
employment with BFSB. In the event of the Executive's death prior to the date
any payment is due under this Agreement, such amount shall be payable to the
Executive's Surviving Spouse or, if none, his estate.
SECTION III
SOURCE OF BENEFITS
------------------
All payments hereunder shall constitute an unfunded, unsecured promise
by BFSB to provide such payments in the future, as and to the extent such
benefits become payable. Benefits shall be paid from the general assets of
BFSB, and no person shall, by virtue of this Agreement, have any interest in
such assets (other than an unsecured creditor of BFSB). The obligation of BFSB
to make any payments or provide any benefits under this Agreement
- 2 -
<PAGE> 309
shall, in all events and without limitation, be guaranteed by UPC and its
successors and assigns and such guarantee shall inure to the benefit of the
Executive and his successors and assigns. In the event BFC or UPC elect in
their sole option to purchase life insurance on Executive payable to BFC or UPC
to assist BFC and UPC in funding their obligations hereunder, Executive agrees
to cooperate with BFC and UPC in obtaining life insurance payable to BFC and
UPC to cover any or all of the benefits to be provided hereunder.
SECTION IV
ASSIGNMENT
----------
Except as otherwise provided by this Agreement, it is agreed that
neither the Executive nor his Surviving Spouse (if any) shall have any right to
commute, sell, assign, transfer, encumber and pledge or otherwise convey the
right to receive any benefits hereunder, which benefits and the rights thereto
are expressly declared to be nonassignable and nontransferable.
SECTION V
NO RETENTION OF SERVICES
------------------------
The benefits payable under this Agreement shall be independent of, and
in addition to, any other employment agreement that may exist from time to time
between the parties hereto, or any other compensation payable by BFSB to the
Executive, whether salary, bonus, retirement income under employee benefit
plans sponsored or maintained by UPC or BFSB, or otherwise. This Agreement
shall not be deemed to constitute a contract of employment between the parties
hereto.
SECTION VI
REORGANIZATION
--------------
BFSB and UPC further agree that neither party will cease its business
activities or terminate its existence without having made adequate provision
for the fulfillment of its obligation hereunder.
SECTION VII
AMENDMENTS
----------
This Agreement may be revoked or be amended in whole or in part only
by a writing signed by all the parties hereto.
SECTION VIII
GOVERNING LAW
-------------
This Agreement shall be construed and governed in all respects under
and by the laws of the State of Alabama. If any provision of this Agreement
shall be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective.
- 3 -
<PAGE> 310
SECTION IX
HEADINGS
--------
Headings and subheadings in this Agreement are inserted for
convenience and reference only and constitute no part of this Agreement.
SECTION X
COUNTERPARTS
------------
This Agreement may be executed in an original and any number of
counterparts, each of which shall constitute an original of one and the same
instrument.
SECTION XI
GENDER
------
This Agreement shall be construed, where required, so that the
masculine gender includes the feminine.
SECTION XII
EFFECTIVE DATE
--------------
This Agreement shall be effective as of the date first written above.
The Agreement shall remain in effect until all amounts payable hereunder have
been paid to the Executive, his Surviving Spouse, or his estate, as
appropriate.
SECTION XIII
LEGAL EXPENSES
--------------
BFSB shall promptly reimburse all legal fees and expenses which the
Executive may incur (as such fees and expenses are incurred) as a result of an
action ultimately found in favor of the Executive brought by BFSB, UPC, or the
Executive in which the validity or enforceability of this Agreement is at
issue.
SECTION XIV
SUCCESSORS AND ASSIGNS
----------------------
This Agreement shall be binding upon and inure to the benefit of BFC,
BFSB, UPC, the Executive, and their successors and assigns.
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<PAGE> 311
IN WITNESS WHEREOF, BFC, BFSB, and UPC have caused this Agreement to
be signed in corporate name by a duly authorized officer, impressed with their
corporate seal, and properly attested to, and the Executive has hereto set his
hand, all on the day and year first above written.
<TABLE>
<S> <C>
ATTEST: BANCFIRST CORPORATION
- -------------- BY:
-----------------------------------------
ATTEST: BANKFIRST, A FEDERAL SAVINGS BANK
- -------------- BY:
-----------------------------------------
ATTEST: UNION PLANTERS CORPORATION
- -------------- BY:
-----------------------------------------
- -------------- -----------------------------------------
Witness William D. Powell
</TABLE>
- 5 -
<PAGE> 312
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made effective as of , 1994, by and
-----------------
between BANCFIRST CORPORATION ("BFC"), BANKFIRST, A FEDERAL SAVINGS BANK (the
"Bank"), UNION PLANTERS CORPORATION ("UPC"), and C. RAYMOND DUNCAN (the
"Executive"). (All references herein to the Bank include BFC, unless otherwise
indicated).
WHEREAS, the Executive has heretofore served as Senior Vice
President/Treasurer of BFC and the Bank and is experienced in all phases of the
business of the Bank;
WHEREAS, BFC, the Bank, and UPC wish to be assured of the continued
services of the Executive following the acquisition of BFC by UPC on the date
first written above and the Executive is willing to serve in the employ of the
Bank and BFC on a full-time basis; and
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereby agree as follows:
1. Employment. The Bank and BFC agree to continue the Executive
----------
in its employ, and the Executive agrees to remain in the employ of the Bank,
for the period stated in paragraph 3 hereof and upon the other terms and
conditions herein provided.
2. Position and Responsibilities. The Bank shall employ the
-----------------------------
Executive and the Executive agrees to serve as Senior Vice President/Treasurer
of the Bank for the term and on the conditions hereinafter set forth. The
Executive agrees to perform such services not inconsistent with his position as
shall from time to time be assigned to him by the Board of Directors of the
Bank.
3. Term and Duties
---------------
(a) Term of Employment. The initial term of employment under
------------------
this Agreement shall be for the period commencing 1994 and ending
----------
1997. The said 36-month period of employment may be extended for an
- -----------
additional 12 full calendar months by action of the Board of Directors of the
Bank on , 1995, and on each succeeding thereafter
-------- ----------
respectively.
(b) Duties. During the period of his employment
------
hereunder and except for illnesses, reasonable vacation periods, and reasonable
leaves of absence, the Executive shall devote his business time, attention,
skill, and efforts to the faithful performance of his duties hereunder;
provided, however, the Executive may, from time to time, serve, or continue to
serve, on the boards of directors, of, and hold any other offices or positions
in, companies or organizations, which do not present any material conflict of
interest with the Employers, or unfavorably affect the performance of the
Executive's duties pursuant to this Agreement, or will not violate any
applicable statute or regulation.
<PAGE> 313
4. Compensation and Reimbursement of Expenses.
------------------------------------------
(a) Compensation. The Bank agrees to pay the Executive
------------
during the term of this Agreement a salary at the rate of $80,000 per annum;
provided, that the rate of such salary shall be reviewed by the Board of
Directors of the Bank not less often than annually. Such rate of salary, or
increased rate of salary, if any, as the case may be, may be further increased
(but not decreased) from time to time in such amounts as the Board in its
discretion may decide. Such salary shall be payable in accordance with the
customary payroll practices of the Bank, but in no event less frequently than
monthly.
(b) Bonuses. The Executive shall be entitled to
-------
participate in an equitable manner in any incentive bonus plan or program
maintained by the Bank for senior executives of the Bank and its subsidiaries.
No other compensation provided for in this Agreement shall be deemed a
substitute for the Executive's right to participate in such incentive bonus
plan or program.
(c) Reimbursement of Expenses. The Bank shall pay or
-------------------------
reimburse the Executive for all reasonable travel and other expenses incurred
by the Executive in the performance of his obligations under this Agreement.
The Bank further agrees to provide the Executive with the use of an automobile,
and any other benefits which are commensurate with his position during his
period of employment.
5. Participation in Benefit Plans. The Executive shall be
------------------------------
eligible to participate in any fringe benefits which may become applicable to
the Bank's executive employees and any benefit plans or programs which are
generally offered to employees of the Bank or subsidiaries of UPC, including
any tax-qualified retirement programs and any group employee welfare benefit
plans.
6. Vacation and Sick Leave. At such reasonable times as the
-----------------------
Chief Executive Officer of the Bank shall in his discretion permit, the
Executive shall be entitled, without loss of pay, to absent himself voluntarily
from the performance of his employment under this Agreement, all such voluntary
absences to count as vacation time; provided that:
(a) The Executive shall be entitled to annual vacation in
accordance with the policies as periodically established by the Board of
Directors for senior management officials of the Bank, which shall in no event
be less than three weeks per annum. The timing of vacations shall be scheduled
in a reasonable manner by the Chief Executive Officer of the Bank.
(b) The Executive shall not be entitled to receive any
additional compensation from the Bank on account of his failure to
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<PAGE> 314
take a vacation; nor shall he be entitled to accumulate unused vacation from
one fiscal year to the next except to the extent authorized by the Chief
Executive Officer of the Bank.
(c) In addition to the aforesaid paid vacations, the
Executive shall be entitled, without loss of pay, to absent himself voluntarily
from the performance of his employment with the Bank for such additional
periods of time and for such valid and legitimate reasons as the Chief
Executive Officer of the Bank in his discretion may determine. Further, the
Chief Executive Officer of the Bank may grant to the Executive a leave or
leaves of absence with or without pay at such time or times and upon such terms
and conditions as the Board of Directors of the Bank in its discretion may
determine after consultation with the Chief Executive Officer.
(d) In addition, the Executive shall be entitled to an
annual sick leave as established by the Board of Directors of the Bank for
senior management officials of the Bank but in no event in an amount less than
that provided for pursuant to the policy currently in effect as of the date of
this Agreement. In the event any sick leave time shall not have been used
during any year, such leave shall accrue to subsequent years only to the extent
authorized by the Board of Directors.
(e) Upon termination of employment, the Executive shall be
entitled to receive additional compensation from the Bank for unused sick leave
or vacation time only to the extent provided under the general policies of the
Bank.
7. Grant of Stock Options. Upon the effective date of this
----------------------
Agreement, the Executive shall receive a grant of 5,000 options to purchase UPC
Stock (at the fair market value on such date) under the 1992 UPC Nonqualified
Stock Plan ("Stock Plan") or any similar plan then maintained by UPC. Such
options shall be issued in accordance with the terms of the Stock Plan and
shall be exercisable over a five-year period as provided under the Stock Plan,
but in any event, such options shall be fully exercisable no later than the
date of the Executive's retirement. Following the Executive's retirement, such
options shall remain exercisable for a period equal to the greater of (a)
ninety (90) days from the date of the Executive's retirement or (b) the period
specified by the Stock Option Committee of the Board of Directors of UPC.
8. Payments to the Executive Upon Termination of Employment.
--------------------------------------------------------
(a) Event of Termination. Upon the occurrence of an
--------------------
Event of Termination (as hereinafter defined) during the period of the
Executive's employment under this Agreement, the provisions of this paragraph 8
shall apply. As used in this Agreement, an "Event of Termination" shall mean
the termination of the Executive's employment hereunder for any reason other
than "cause" or
-3-
<PAGE> 315
retirement at or after the normal retirement age under any tax-retirement plan
maintained by UPC, or termination pursuant to paragraph 9. A termination for
"cause" shall include termination because of the Executive's personal
dishonesty, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach or any provision of this Agreement.
In the event of termination for cause the Executive shall have no right to
receive compensation or other benefits for any period after such termination;
provided, however, that, the Executive shall be entitled to receive all vested
benefits as of the date of such termination.
(b) Event of Termination Without Change of Control. Upon
----------------------------------------------
the occurrence of an Event of Termination other than after a Change of Control
(as hereinafter defined), the Bank shall pay to the Executive monthly, or in
the event of his subsequent death, to his designated beneficiary or
beneficiaries, or to his estate, as the case may be, as severance pay or
liquidated damages, or both, during the period below described a sum equal to
the highest monthly rate of salary paid to the Executive at any time under this
Agreement. Such payments shall commence on the last day of the month following
the date of said Event of Termination and shall continue until the date this
Agreement would have expired but for said occurrence, with such occurrence
being viewed as a determination by the Bank not to extend the Agreement as
provided for in paragraph 3.
(c) Event of Termination After Change of Control. If,
--------------------------------------------
after a "Change of Control" (as hereinafter defined) of UPC, BFC, or the Bank,
any of the parties hereto, or their successors or assigns, shall terminate the
employment of the Executive during the period of employment under this
Agreement for any reason other than "cause," as defined in paragraph 8(a),
retirement at or after the normal retirement age under any tax-qualified
retirement plan(s) maintained by UPC, termination pursuant to paragraph 9, or
otherwise change the present capacity or circumstances in which the Executive
is employed as set forth in paragraph 2 of this Agreement or cause a reduction
in the Executive's responsibilities or authority or compensation or other
benefits provided under this Agreement without the Executive's written consent,
then the Executive, or his beneficiaries, dependents and estate, as the case
may be, shall be entitled to the following:
(i) The Executive shall receive a sum equal to
the total amount of the present value of 2.99 times the average annual
compensation payable under this Agreement and includible by the Executive in
gross income for the most recent five taxable years ending before the date on
which the ownership or control of UPC, BFC, or the Bank changed. Such amount
shall be payable to the
-4-
<PAGE> 316
Executive in a lump sum within ten (10) days of the occurrence of an Event of
Termination under this paragraph 9(c).
(ii) During a period of thirty-six (36)
calendar months beginning with the Event of Termination, the Executive, his
dependents, beneficiaries and estate shall continue to be covered under all
employee benefit plans of the Bank, BFC, or UPC, including without limitation,
any UPC tax-qualified retirement plans, as if the Executive was still employed
during such period under this Agreement.
(iii) If and to the extent that benefits or
service credit for benefits provided by paragraph 8(c)(ii) shall not be
payable or provided under any such plans to the Executive, his dependents,
beneficiaries and estate, by reason of his no longer being an employee of the
Bank as a result of termination of employment, UPC shall itself pay or
provide for payment of such benefits and service credit for benefits to the
Executive, his dependents, beneficiaries and estate. Any such payment
relating to retirement shall commence on a date selected by the Executive
which must be a date on which payments under any UPC tax-qualified retirement
plan may commence.
(iv) The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise nor shall any amounts received from other
employment or otherwise by the Executive offset in any manner the obligations
of the Bank hereunder.
(d) Change of Control. Paragraph 8(c) shall become
-----------------
operative upon the occurrence of a Change of Control of UPC, BFC, or the Bank.
For purposes of this Agreement, "Change of Control" means the sale of
substantially all of the assets of UPC, BFC, or the Bank, or the acquisition,
whether directly, indirectly, beneficially (within the meaning of Rule 13d-3 of
the Securities Exchange Act of 1934, as amended (the "Act")), or of record, of
securities of UPC, BFC, or the Bank representing twenty- five percent (25%) or
more in the aggregate voting power of UPC's, BFC's, or the Bank's
then-outstanding Common Stock by any "person" (within the meaning of Sections
13(d) and 14(d) of the Act), including any corporation or group of associated
persons acting in concert, other than (i) the UPC or its subsidiaries and/or
(ii) any tax-qualified employee stock ownership plan of UPC or of its
subsidiaries, including a trust established pursuant to any such plan;
provided, that a Change of Control will not result from (A) a transfer of
voting securities of UPC, BFC, or the Bank by a person who is the beneficial
owner, directly or indirectly, of twenty-five percent (25%) or more of the
voting securities of the UPC, BFC, or the Bank (a "25 Percent Owner") to (i) a
member of such 25 Percent Owner's lifetime or by will or the laws of descent
and distribution; (ii) any trust as to which the 25 Percent Owner
-5-
<PAGE> 317
or a member (or members) of his immediate family (within the meaning of Rule
16a-1(e) of the Act) is the beneficiary; (iii) any trust as to which the 25
Percent Owner is the settlor with sole power to revoke; (iv) any entity over
which such 25 Percent Owner has the power, directly or in directly, to direct
or cause the direction of the management and policies of the entity, whether
through the ownership of voting securities, by contract or otherwise; or (v)
any charitable trust, foundation or corporation under Section 501(c)(3) of the
Code which is funded by the 25 Percent Owner; or (B) the acquisition of voting
securities of UPC, BFC, or the Bank, by either (i) a person who was a 25
Percent Owner on the effective date of the Agreement or (ii) a person, trust or
other entity described in the foregoing clauses (A)(i)-(v) of this subsection;
or (C) the spin-off or other distribution by UPC to its shareholders of the
capital stock or assets of BFC or the Bank.
(e) Suspension and Special Regulatory Rules.
---------------------------------------
(i) If the Executive is suspended and/or temporarily
prohibited from participating in the conduct of the Bank's affairs by a notice
served under section 8(e)(3) or section (g)(1) of the Federal Deposit Insurance
Act ("FDI Act"), the Bank's obligations under this Agreement shall be suspended
as of the date of service of such notice, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Bank shall (i)
pay the Executive all or part of the compensation withheld while its contract
obligations were suspended and (ii) reinstate in whole or in part any of its
obligations which were suspended.
(ii) If the Executive is removed and/or permanently
prohibited from participating in the conduct of the Bank's affairs by an order
issued under section 8(e)(4) or section (g)(1) of the FDI Act, all obligations
of the Bank under this Agreement shall terminate as of the effective date of
the order; however, no vested rights of the Executive shall be affected by such
termination.
(iii) If the Bank is in default (as defined in
section 3(x)(1) of the FDI Act), all obligations under this Agreement shall
terminate as of the date of default; however, no vested rights of the Executive
shall be affected by such termination.
(iv) All obligations under this Agreement shall be
terminated, except to the extent that it may be determined that continuation of
this Agreement is necessary for the continued operation of the Bank, (1) by the
Director of the Office of Thrift Supervision ("OTS") or his or her designee at
the time the Federal Deposit Insurance Corporation ("FDIC") or the Resolution
Trust Corporation enters into an agreement to provide assistance to or on
behalf of the Bank under the authority contained in Section 13(c)
-6-
<PAGE> 318
of the FDI Act; or (2) the Director of OTS or his or her designee at any time
the Director of OTS or his or her designee approves a supervisory merger to
resolve problems related to the operation of the Bank or when the Bank is
determined by the OTS to be in an unsafe or unsound condition. No vested
rights of the Executive shall be affected by such action.
(f) Termination of Employment of, or by, the Executive.
--------------------------------------------------
The Board of Directors of the Bank may terminate the employment of the
Executive at any time; in the event of such termination, the provisions of this
paragraph 8 shall fully apply. The Executive may terminate his service under
this Agreement at any time upon three (3) months written notice to the Bank.
In the event of the Executive's voluntary termination of employment under this
paragraph 8(f), the provisions of this paragraph 8(a)-(e) shall not apply, and
the Executive shall be entitled to receive his salary, bonus, and other
employee benefits through his date of termination and such termination shall be
without prejudice to any other benefits as to which the Executive is vested.
9. Disability. If the Executive shall become disabled or
----------
incapacitated to the extent that he is unable to perform the duties of Senior
Vice President/Treasurer, he shall nevertheless continue to receive the
following percentages of his compensation under Paragraph 2 of this Amended
Agreement for the following periods of his disability: 100% for up to eighteen
(18) months, less any amount paid to the Executive under any other disability
program maintained by the Bank. Upon returning to active full-time employment,
the Executive's full compensation as set forth in this Agreement shall be
reinstated. In the event that said Executive returns to active employment on
other than a full-time basis, then his compensation (as set forth in Paragraph
2 of this Agreement) shall be reduced in proportion to the time spent in said
employment. However, if the Executive is again unable to perform the duties of
his position hereunder due to illness or other incapacity, he must have been
engaged in active full-time employment for at least twelve (12) consecutive
months immediately prior to such later absence or inability in order to qualify
for the full or partial continuance of his salary under this Paragraph 10. If
the Executive is disabled for a continuous period exceeding eighteen (18)
calendar months, the Bank may, at its election, terminate the Agreement.
10. Confidential Information. The Executive shall not, to the
------------------------
detriment of the Employers, knowingly disclose or reveal to any authorized
person any confidential information relating to the Bank, its subsidiaries or
affiliates, or to any of the businesses operated by them, and the Executive
confirms that such information constitutes the exclusive property of the
Employers. The Executive shall not otherwise knowingly act or conduct himself
(i) to the material detriment of the Employers, their subsidiaries, or
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<PAGE> 319
affiliates, or (ii) in a manner which is inimical or contrary to the interests
thereof.
11. Federal Income Tax Withholding. The Bank may withhold from
------------------------------
any benefits payable under this Agreement all federal, state, city or other
taxes as shall be required pursuant to any law or governmental regulation or
ruling.
12. Effect of Prior Agreements. This Agreement contains the
--------------------------
entire understanding between the parties hereto and supersedes any prior
employment agreement between the Bank or any predecessor of the Bank and the
Executive; provided, however, that the Executive's right to payment under
section 8(c) of that certain agreement between the Executive and the Bank dated
February 15, 1991 following the effective date of the merger of UPC and BFC is
hereby acknowledged by UPC and shall not be affected by any provision of this
Agreement.
13. Payment of Legal Expenses. The Bank shall pay all legal fees
-------------------------
and expenses which the Executive may incur (as such fees and expenses are
incurred) as a result of any action ultimately found in favor of the Executive
contesting the validity or enforceability of this Agreement and the Executive
shall be entitled to receive interest thereon for the period of any delay in
payment from the date such payment was due at the rate determined by adding two
hundred basis points to the six month Treasury Bill rate.
14. Consolidation, Merger, or Sale of Assets. Nothing in this
----------------------------------------
Agreement shall preclude UPC from consolidating or merging into or with, or
transferring all or substantially all of its assets or the assets of BFC or the
Bank to another corporation which assumes this Agreement and all obligations
and undertakings of the UPC, BFC, and the Bank hereunder.
15. General Provisions.
------------------
(a) Nonassignability. Neither this Agreement nor any
----------------
right or interest hereunder shall be assignable by the Executive, his
beneficiaries, or legal representatives without the Employers' prior written
consent; provided, however, that nothing in this paragraph 15(a) shall preclude
(i) the Executive from designating a beneficiary to receive any benefits
payable hereunder upon his death, or (ii) the Executors, administrators, or
other legal representatives of the Executive or his estate from assigning any
rights hereunder to the person or persons entitled thereto.
(b) No Attachment. Except as required by law, no right
-------------
to receive payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge, or
hypothecation or to execution, attachment, levy, or similar process of
assignment by operation of
-8-
<PAGE> 320
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
(c) Binding Agreement. This Agreement shall be binding
-----------------
upon, and inure to the benefit of, the Executive and the Bank and their
respective permitted successors and assigns.
16. Modification and Waiver.
-----------------------
(a) Amendment of Agreement. This Agreement may not be
----------------------
modified or amended except by an instrument in writing signed by the parties
hereto.
(b) Waiver. No term or condition of this Agreement shall
------
be deemed to have been waived, nor shall there be an estoppel against the
enforcement of any provision of this Agreement, except by written instrument of
the party charged with such waiver or estoppel. No such written waiver shall
be deemed a continuing waiver unless specifically stated therein, and each
waiver shall operate only as to the specific term or condition waived and shall
not constitute a waiver of such term or condition for the future or as to any
act other than the specifically waived.
17. Severability. If, for any reason, any provision of this
------------
Agreement is held invalid, such invalidity shall not affect any other provision
of this Agreement not held so invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect. If any
provision of this Agreement shall be held invalid in part, such invalidity
shall in no way affect the rest of such provision, together with all other
provisions of this Agreement, shall to the full extent consistent with law
continue in full force and effect.
18. Headings. The headings of paragraph herein are included
--------
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
19. Applicable Law. This Agreement has been executed and
--------------
delivered in the State of Alabama, and its validity, interpretation,
performance, and enforcement shall be governed the laws of said State, except
to the extent Federal law is governing. Any payment to the Executive hereunder
shall be subject to and conditioned upon compliance with 12 U.S.C. Section
1828(k) and any regulations promulgated thereunder.
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<PAGE> 321
IN WITNESS WHEREOF, BFC, the Bank, and UPC have caused this Agreement
to be executed and their seals to be affixed hereunto by its officers thereunto
duly authorized, and the Executive has signed this Agreement, all as of the day
and year first above written.
<TABLE>
<S> <C>
ATTEST: BANCFIRST CORPORATION
BY:
- --------------- ----------------------------
ATTEST: BANKFIRST, A FEDERAL SAVINGS BANK
BY:
- --------------- ----------------------------------
ATTEST: UNION PLANTERS CORPORATION
BY:
- --------------- ---------------------------------
- ------------- ------------------------------------
Witness C. Raymond Duncan
</TABLE>
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SUPPLEMENTAL RETIREMENT AGREEMENT
---------------------------------
THIS AGREEMENT entered into as of this day of , 1994,
---- ------------
by and between BANCFIRST CORPORATION ("BFC"); BANKFIRST, A FEDERAL SAVINGS BANK
("BFSB"); UNION PLANTERS CORPORATION ("UPC"); and C. RAYMOND DUNCAN (the
"Executive"). (All references to BFSB shall include BFC, unless otherwise
indicated.)
WHEREAS, effective as of the date of this Agreement, BFC, and its
subsidiaries, including BFSB, will be acquired by UPC pursuant to the terms of
the Agreement and Plan of Reorganization between UPC and BFC dated
, 1994 (the "Merger") and continue as subsidiaries of UPC; and
- ---------------
WHEREAS, the Executive has been employed in the capacity of Senior
Vice President/Treasurer of BFC and BFSB and is expected to continue to serve
in these capacities following the Merger; and
WHEREAS, the Executive's extensive knowledge and experience in the
savings and loan industry is such that BFC, BFSB, and UPC wish to seek
assurance of his continued service; and
WHEREAS, the Merger will result in the termination of the Plan and the
Executive's accrual of benefits thereunder will cease as of the date of such
termination; and
WHEREAS, BFC, BFSB, and UPC wish to establish this Agreement to
provide the Executive with certain benefits upon his retirement or other
termination of employment in recognition of the Executive's loss of retirement
income as a result of the premature termination of the Plan;
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements hereinafter contained, and other good and valuable
consideration, receipt of which is hereby acknowledged, the parties hereto
agree to this Agreement as follows:
SECTION I
DEFINITIONS
"Agreement" shall mean this agreement between the Executive, BFC, BFSB
and UPC.
"Early Termination Benefit" shall mean the sum of (i) the vested
accrued lump-sum benefit distributable to the Executive in the event of the
termination of the Plan at any time prior to the Executive's normal retirement
age (65) and (ii) the cumulative earnings attributable to the Executive's
investment of the amount determined under clause (i) (assuming the transfer of
such amount to an Individual Retirement Account and a six percent annual rate
of return) during the period beginning on the date of distribution of such
amount to the Executive following termination of the Plan and ending on the
date the Executive attains age 65.
"Employment Agreement" shall mean the Executive's employment agreement
dated , 1994, by and between, the Executive, UPC, BANCFIRST,
------------------
and BANKFIRST.
"Lump Sum Amount" shall mean a sum equal to the Executive's estimated
lump-sum benefit at normal retirement age under the Plan determined as of the
date of Plan termination. Such sum shall be calculated by assuming that the
Plan had not terminated prior to the Executive's normal retirement age under
the Plan (age 65) and using (i) the assumptions stated in the Plan regarding
the calculation of actuarially equivalent benefit forms and (ii) the salary
scale assumption used in connection with the preparation of the Plan actuarial
report prepared for the plan year beginning prior to the date of termination.
"Plan" shall mean the BANKFIRST Pension Plan and Trust.
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"Surviving Spouse" shall mean the Executive's spouse on the date of
his death, but shall not include a spouse from whom he is legally separated or
divorced at the time of his death.
"UPC Plan Benefits" shall mean the lump-sum amount distributable to
the Executive upon termination of employment with BFSB under all tax-qualified
retirement plans of UPC ("UPC Plans") in which the Executive is a participant
following the Merger.
SECTION II
BENEFITS
--------
(a) In the event of the termination of the Plan prior to the date the
Executive attains age 65, then (i) in the event of the Executive's termination
of employment with BFSB on or after the date the Executive attains age 65, BFSB
shall pay the Executive the following sum at the time specified in Section
2(c):
(1) The Executive's Lump Sum Amount less the sum of the
Executive's Early Termination Benefit and the
Executive's UPC Plan Benefits;
and
(2) an amount determined as follows:
$D times (R/(1-R)) = amount of payment
For purposes of this formula, "D" shall
equal the amount determined under Section
2(a)(1), and "R" shall equal the sum of
the highest marginal federal, state,
local, and withholding tax rates
applicable to the Executive during the
calendar year in which benefits are paid
to the Executive under this Agreement.
Any determination regarding the calculation of the Executive's Lump
Sum or Early Termination Benefits shall be made by the Plan's actuary (as
retained by BFSB or the Plan for the year in which such determination is made).
Such determination shall be binding upon the parties to this Agreement.
(b) In the event of the Executive's termination of employment with
BFSB prior to age 65, the amount determined under Section 2(a)(1) shall be
reduced by 6.7 percent for each full year that the Executive's age at
termination of employment is less than age 65 for the first five such years and
3.3% for each year thereafter.
(c) The amount determined under Section 2(a) shall be payable within
thirty (30) days after the date of the Executive's termination of employment
with BFSB. In the event of the Executive's death prior to the date any payment
is due under this Agreement, such amount shall be payable to the Executive's
Surviving Spouse or, if none, his estate.
SECTION III
SOURCE OF BENEFITS
------------------
All payments hereunder shall constitute an unfunded, unsecured promise
by BFSB to provide such payments in the future, as and to the extent such
benefits become payable. Benefits shall be paid from the general assets of
BFSB, and no person shall, by virtue of this Agreement, have any interest in
such assets (other than an unsecured creditor of BFSB). The obligation of BFSB
to make any payments or provide any benefits under this Agreement
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shall, in all events and without limitation, be guaranteed by UPC and its
successors and assigns and such guarantee shall inure to the benefit of the
Executive and his successors and assigns. In the event BFC or UPC elect in
their sole option to purchase life insurance on Executive payable to UPC to
assist UPC in funding its obligations hereunder, Executive agrees to cooperate
with UPC in obtaining life insurance payable to UPC to cover any or all of the
benefits to be provided hereunder.
SECTION IV
ASSIGNMENT
----------
Except as otherwise provided by this Agreement, it is agreed that
neither the Executive nor his Surviving Spouse (if any) shall have any right to
commute, sell, assign, transfer, encumber and pledge or otherwise convey the
right to receive any benefits hereunder, which benefits and the rights thereto
are expressly declared to be nonassignable and nontransferable.
SECTION V
NO RETENTION OF SERVICES
------------------------
The benefits payable under this Agreement shall be independent of, and
in addition to, any other employment agreement that may exist from time to time
between the parties hereto, or any other compensation payable by BFSB to the
Executive, whether salary, bonus, retirement income under employee benefit
plans sponsored or maintained by UPC or BFSB, or otherwise, except for those
benefits received by Executive under the UPC Plan Benefits. This Agreement
shall not be deemed to constitute a contract of employment between the parties
hereto.
SECTION VI
REORGANIZATION
--------------
BFSB and UPC further agree that neither party will cease its business
activities or terminate its existence without having made adequate provision
for the fulfillment of its obligation hereunder.
SECTION VII
AMENDMENTS
----------
This Agreement may be revoked or be amended in whole or in part only
by a writing signed by all the parties hereto.
SECTION VIII
GOVERNING LAW
-------------
This Agreement shall be construed and governed in all respects under
and by the laws of the State of Alabama. If any provision of this Agreement
shall be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective.
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SECTION IX
HEADINGS
--------
Headings and subheadings in this Agreement are inserted for
convenience and reference only and constitute no part of this Agreement.
SECTION X
COUNTERPARTS
------------
This Agreement may be executed in an original and any number of
counterparts, each of which shall constitute an original of one and the same
instrument.
SECTION XI
GENDER
------
This Agreement shall be construed, where required, so that the
masculine gender includes the feminine.
SECTION XII
EFFECTIVE DATE
--------------
This Agreement shall be effective as of the date first written above.
The Agreement shall remain in effect until all amounts payable hereunder have
been paid to the Executive, his Surviving Spouse, or his estate, as
appropriate.
SECTION XIII
LEGAL EXPENSES
--------------
BFSB shall promptly reimburse all legal fees and expenses which the
Executive may incur (as such fees and expenses are incurred) as a result of an
action ultimately found in favor of the Executive brought by BFSB, UPC, or the
Executive in which the validity or enforceability of this Agreement is at
issue.
SECTION XIV
SUCCESSORS AND ASSIGNS
----------------------
This Agreement shall be binding upon and inure to the benefit of BFC,
BFSB, UPC, the Executive, and their successors and assigns.
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IN WITNESS WHEREOF, BFC, BFSB, and UPC have caused this Agreement to
be signed in corporate name by a duly authorized officer, impressed with their
corporate seal, and properly attested to, and the Executive has hereto set his
hand, all on the day and year first above written.
<TABLE>
<S> <C>
ATTEST: BANCFIRST CORPORATION
- ---------------- BY:
-----------------------------------------
ATTEST: BANKFIRST, A FEDERAL SAVINGS BANK
- ---------------- BY:
-----------------------------------------
ATTEST: UNION PLANTERS CORPORATION
- ---------------- BY:
-----------------------------------------
- ---------------- -----------------------------------------
Witness C. Raymond Duncan
</TABLE>
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<PAGE> 327
APPENDIX C
FAIRNESS OPINION OF RP FINANCIAL, INC.
<PAGE> 328
[RP Financial Letterhead]
July 29, 1994
Board of Directors
BANCFIRST CORPORATION
255 Grant Street, S.E.
Decatur, Alabama 35601
Gentlemen:
You have requested RP Financial, Inc. ("RP Financial") to provide you
with its opinion as to the fairness from a financial point of view to the
shareholders of BNF BANCORP, INC., Decatur, Alabama ("BNF"), of the
Agreement and Plan of Reorganization (collectively, the "Reorganization
Agreement"), dated January 27, 1994, by and between the Union Planters
Corporation ("UPC"), Memphis, Tennessee, and BNF whereby BNF, and its
wholly-owned subsidiary, BANKFIRST, a federal savings bank ("BANKFIRST"), will
merge into UPC (the "Reorganization").
Summary Description of Consideration
Pursuant to the Reorganization Agreement (incorporated herein by
reference), on the effective date of the Reorganization, if the Current Market
Price per share of UPC Common Stock is greater than or equal to $24.00 per
share, shares of Common Stock of BNF shall be converted into UPC Common Stock
based on a fixed exchange ratio (the "Exchange Ratio") such that each share of
BNF Common Stock will be converted into 1.078 shares of UPC Common Stock.
"Current Market Price" of UPC Common Stock is defined as the average closing
price per share on the New York Stock Exchange for the 10 days immediately
preceding the closing date of the Reorganization. In the event that the Current
Market Price per share of UPC Common Stock is less than $24.00 per share, BNF
shall have the right to terminate the Reorganization Agreement. If BNF should
elect to terminate the Reorganization Agreement as a result of UPC's Current
Market Price Per Share being below 24.00 per share, UPC may, in its sole
discretion, reinstate the Reorganization Agreement by increasing the number of
shares of UPC Common Stock exchanged for BNF Common Stock (i.e., the Exchange
Ratio) such that each share of BNF Common Stock is converted into UPC Common
Stock with a value of $25.87 per share based on the Current Market Price Per
Share of UPC Common Stock at the Effective Date.
Pursuant to the Reorganization Agreement, all validly issued and
outstanding BNF Stock Options outstanding immediately prior to the Closing
will automatically be converted at the Effective Time of the Reorganization
into options to purchase shares of UPC Common Stock based on the Exchange Ratio.
The value of the Reorganization Consideration per
share of BNF Common Stock (assuming the Reorganization was effective as of July
25, 1994) was $26.32 based on the closing price of UPC Common
Stock for the 10 trading days ending July 22, 1994.
<PAGE> 329
RP Financial, Inc.
Board of Directors
July 29, 1994
Page 2
RP Financial Background and Experience
RP Financial, as part of its financial institution valuation and
consulting practice, is regularly engaged in the valuation of financial
institution securities in connection with mergers and acquisitions of
commercial banks and thrift institutions, initial and secondary offerings,
mutual-to-stock conversions of thrift institutions, and business valuations for
other corporate purposes for financial institutions. As specialists in the
securities of financial institutions, RP Financial has experience in, and
knowledge of, the Alabama and Southeast markets for thrift and bank securities
and the institutions operating in Alabama.
Materials Reviewed
In rendering this fairness opinion letter, RP Financial reviewed and
analyzed the following material: (1) the Reorganization Agreement, dated
January 27, 1994, inclusive of exhibits; (2) the Proxy Statement/Prospectus,
dated July __,1994; (3) the following information for BNF and BANKFIRST -- (a)
audited financial statements for the fiscal years ended September 30, 1989
through 1993, included or incorporated in Annual Reports to Shareholders, or
Annual Reports on Forms 10-K, and unaudited shareholder financial statements
for the three months and nine months ended June 30, 1994, and certain internal
and regulatory reports through June 30, 1994, (b) proxy statements for the last
two years, (c) the business plan for the period from September 30, 1992 through
September 30, 1995, and (d) unaudited internal and regulatory financial reports
and analyses prepared by management and other related corporate records and
documents regarding various aspects of BNF's assets and liabilities,
particularly rates, volumes, maturities, market values, trends, credit risk,
interest rate risk and liquidity risk of BNF's assets, liabilities, off-balance
sheet assets, commitments and contingencies; (4) the following information for
UPC -- (a) audited financial statements for the calendar years ending December
31, 1988 through 1993, included or incorporated in Annual Reports to
Shareholders or Annual Reports on Forms 10-K and unaudited shareholder
financial statements for the six months ended June 30, 1994 and other recent
internal and regulatory reports, and Form 8-K, dated July 1, 1994, (b) proxy
statements for the last two years, (c) 1993 and 1994 budget reports, (d)
unaudited internal and regulatory financial reports prepared by management and
other related corporate records and documents regarding various aspects of
UPC's assets and liabilities, particularly rates, volumes, maturities, market
values, trends, credit risk, interest rate risk and liquidity risk of UPC's
assets, liabilities, off-balance sheet assets, commitments and contingencies;
(5) discussions with BNF's current management and UPC's management regarding
past and current business operations, financial condition, and future prospects
of the respective institutions; (6) UPC's results compared to the latest
publicly-available published financial statements, operating results and market
pricing of publicly-traded banks and bank holding companies, including those
with comparable characteristics; (7) market value information and pricing
ratios of UPC Common Stock, such as market capitalization, volume, price
history, price/earnings ratio, price/book ratio, price/tangible book ratio,
price/assets ratio, dividend yield and dividend payout ratio, compared to other
publicly-traded banks and bank holding companies with comparable
characteristics; (8) the trading market for the BNF Common Stock compared to
similar information for savings institutions or savings and loan holding
companies with comparable resources, financial condition, earnings, operations
and markets as well as for publicly-traded savings institutions and savings and
loan holding companies with comparable financial condition, earnings,
operations and markets; (9) BNF's financial, operational and market area
characteristics compared to similar information for comparable savings
institutions or savings and loan holding companies; (10) the potential for
growth and profitability for BNF and UPC in their respective markets,
specifically regarding competition by other banks, savings institutions,
mortgage banking companies and other financial services companies, (11)
economic projections in the local market area, and the impact of the
regulatory, legislative and economic environments on operations of the thrift
and banking industries; (12) the financial terms, financial and operating
conditions and market areas of other recent business combinations of comparable
savings institutions and savings and loan holding companies; and (13) the
potential pro forma impact of the
<PAGE> 330
RP Financial, Inc.
Board of Directors
July 29, 1994
Page 3
Reorganization and other pending acquisitions on UPC's financial
condition, operating results and per share figures.
In rendering its opinion, RP Financial relied, without independent
verification, on the accuracy and completeness of the information concerning
BNF, and UPC as furnished by the respective institutions to RP Financial for
review for purposes of its opinion, as well as publicly-available information
regarding other financial institutions and economic data. With respect to the
financial forecasts RP Financial reviewed for each institution, RP Financial
assumed that they had been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of each
respective institution. BNF and UPC did not restrict RP Financial as to the
material it was permitted to review. RP Financial did not perform or obtain
any independent appraisals or evaluations of the assets and liabilities and
potential and/or contingent liabilities of BNF and UPC. RP Financial expresses
no opinion on matters of a legal, regulatory, tax or accounting nature or the
ability of the Reorganization as set forth in the Reorganization Agreement to
be consummated. RP Financial did not address BNF's underlying business
decision to proceed with the Reorganization and did not make any recommendation
to the BNF Board with respect to any approval of the Reorganziation or to the
holders of BNF Common Stock with respect to any approval of the Reorganization.
In rendering its opinion, RP Financial assumed that in the course of
obtaining the necessary regulatory and governmental approvals for the proposed
Reorganization, no restriction will be imposed on UPC that would have a
material adverse effect on the contemplated benefits of the Reorganization. RP
Financial also assumed that there would not occur any change in applicable law
or regulation that would cause a material adverse change in the prospects or
operations of UPC after the Reorganization.
Opinion
It should be noted that this opinion is based on market conditions and
other circumstances existing on the date hereof, and this opinion does not
represent our opinion as to what the value of UPC Common Stock necessarily will
be when the UPC Common Stock is issued to the stockholders of BNF upon
consummation of the Reorganization or thereafter.
It is understood that this opinion may be included in its entirety in
any communication by BNF or its Board of Directors to the stockholders of BNF.
This opinion may not, however, be summarized, excerpted from or otherwise
publicly referred to without our prior written consent.
Based upon and subject to the foregoing, and other such matters as we
consider relevant, it is RP Financial's opinion that, as of the date hereof,
the consideration to be received by BNF shareholders in the
Reorganization is fair to such shareholders from a financial point of view.
Respectfully submitted,
/s/ RP FINANCIAL, INC.
RP FINANCIAL, INC.
