<PAGE> 1
Filed pursuant to Rule 424(b)(4)
Registration No. 333-12015
FINANCIAL BANCSHARES, INC.
3805 South Broadway
St. Louis, Missouri 63118
September 20, 1996
TO THE SHAREHOLDERS OF FINANCIAL BANCSHARES, INC.
You are cordially invited to attend a Special Meeting of the
shareholders of Financial Bancshares, Inc. ("FBI") to be held at Westborough
Country Club, 631 South Berry Road, Kirkwood, Missouri, 63122, at 9:30 a.m.,
local time on Wednesday, October 23, 1996.
At the Special Meeting you will have the opportunity to consider and
vote on a proposal to approve the Agreement and Plan of Reorganization dated as
of June 27, 1996, along with the Plan of Merger annexed thereto as Exhibit A,
as amended by the First Amendment to Agreement and Plan of Reorganization and
Plan of Merger dated as of September 6, 1996 (the "Reorganization Agreement"),
pursuant to which FBI would be merged with and into Capital Bancorporation,
Inc. ("Capital"), a wholly-owned subsidiary of Union Planters Corporation
("UPC"), a bank holding company headquartered in Memphis, Tennessee (the
"Merger"), with Capital surviving the Merger. As a result of the Merger, FBI
would be acquired by UPC and the current subsidiaries of FBI would, therefore,
become indirect subsidiaries of UPC. The Boards of Directors of FBI, UPC
and Capital have each unanimously approved the Reorganization Agreement and
the Plan of Merger.
In the Merger, holders of FBI's common stock, $0.01 par value per
share ("FBI Common Stock") outstanding immediately prior to the effective time
of the Merger, would receive in exchange for each of their shares of FBI Common
Stock, 1.7415 shares of UPC's common stock, $5.00 par value per share, ("UPC
Common Stock"). In no event will UPC issue a fractional share of UPC Common
Stock, but instead will make a cash payment to settle any fractional share
equal to the amount determined by multiplying the fraction by the last sale
price of UPC Common Stock on the New York Stock Exchange on the last trading
day prior to the Effective Date of the Merger.
Based on the market value of the UPC Common Stock on September 17,
1996, the value of the UPC Common Stock to be received for each share of FBI
Common Stock would be approximately $63.13. However, the value of UPC Common
Stock, which is traded on the New York Stock Exchange under the symbol "UPC",
is subject to fluctuation, and the value of the UPC Common Stock to be received
upon consummation of the Merger may be more or less than $63.13.
The annexed Notice of Special Meeting of Shareholders and
Prospectus/Proxy Statement explain the Merger, the Exchange Ratio and the
Reorganization Agreement and provide more specific information related to the
Special Meeting. Please read these materials carefully and thoughtfully
consider the information contained in them. The approvals of not only FBI's
shareholders, but also those of certain federal and state governmental
regulatory agencies, are required to consummate the Merger. Only the holders of
record of FBI Common Stock on September 17, 1996 are entitled to vote at the
Special Meeting.
<PAGE> 2
Whether or not you plan to attend the Special Meeting, you are urged
to complete, sign, date and promptly return the enclosed Proxy Appointment Card
to assure that your shares of FBI Common Stock will be voted at the Special
Meeting. There is included with this material a postage-paid addressed envelope
for returning your Proxy Appointment Card. No additional postage is required if
mailed in the United States.
Your Board of Directors has unanimously approved the Reorganization
Agreement and believes that the Merger is in the best interests of FBI and the
FBI shareholders. Accordingly, the Board of Directors of FBI unanimously
recommends that you vote "FOR" approval of the Reorganization Agreement and
Plan of Merger being considered.
Sincerely,
Financial Bancshares, Inc.
/s/ Arthur E.S. Schmid /s/ Clifford A. Schmid
Arthur E.S. Schmid Clifford A. Schmid
Chairman of the Board President
PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES AT THIS TIME
<PAGE> 3
FINANCIAL BANCSHARES, INC.
3805 SOUTH BROADWAY
ST. LOUIS, MISSOURI 63118
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 23, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Financial Bancshares, Inc. ("FBI") has been called by the Board
of Directors of FBI and will be held at Westborough Country Club, 631 South
Berry Road, Kirkwood, Missouri, 63122, on Wednesday, October 23, 1996, at 9:30
a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement
and Plan of Reorganization dated as of June 27, 1996 together with the Plan of
Merger annexed thereto as Exhibit A, as amended by the First Amendment to
Agreement and Plan of Reorganization and Plan of Merger dated as of September 6,
1996 (collectively, the "Reorganization Agreement") by and between FBI, Union
Planters Corporation ("UPC"), a Tennessee-chartered bank holding company
headquartered in Memphis, Tennessee, and Capital Bancorporation, Inc.
("Capital"), a wholly-owned subsidiary of UPC pursuant to which (i) FBI would
merge with and into Capital (the "Merger"), (ii) each share of FBI's common
stock, $0.01 par value per share ("FBI Common Stock"), issued and outstanding
immediately prior to the effective time of the Merger would be exchanged for
1.7415 shares of the common stock, $5.00 par value per share of UPC ("UPC
Common Stock"), and (iii) UPC would assume the obligations of FBI under its
stock option plan, all as more fully described in the accompanying
Prospectus/Proxy Statement. No fractional shares of UPC Common Stock will be
issued, but instead UPC will settle any fractional share with a cash payment
determined by multiplying the fraction by the last sale price of UPC Common
Stock on the New York Stock Exchange on the last trading day prior to the
effective date of the Merger.
2. To transact such other business as may properly come before
the Special Meeting or any adjournments or postponements thereof. Management is
not aware of any other business to be transacted at the Special Meeting.
Only FBI shareholders of record at the close of business on September 17, 1996,
will be entitled to receive notice of and to vote at the Special Meeting and at
any adjournments or postponements thereof.
FBI SHAREHOLDERS HAVE THE RIGHT TO EXERCISE STATUTORY DISSENTERS' RIGHTS WITH
RESPECT TO THE MERGER AND TO RECEIVE THE "FAIR VALUE" OF THEIR SHARES OF FBI
COMMON STOCK IN CASH IF THE MERGER IS ACTUALLY CONSUMMATED. NUMEROUS STEPS MUST
BE TAKEN TO PROPERLY PERFECT THESE DISSENTERS' RIGHTS. THE RIGHTS TO DISSENT
AND THE MECHANICS TO PROPERLY PERFECT STATUTORY DISSENTERS' RIGHTS ARE MORE
SPECIFICALLY DISCUSSED IN THE ACCOMPANYING PROSPECTUS/PROXY STATEMENT. IN
ADDITION, A COPY OF SECTION 351.455 OF THE GENERAL AND BUSINESS CORPORATION LAW
OF MISSOURI (THE "MISSOURI ACT") GOVERNING APPLICABLE DISSENTERS' RIGHTS IS
ATTACHED AS APPENDIX E TO THE ACCOMPANYING PROSPECTUS/PROXY STATEMENT.
<PAGE> 4
Whether or not you plan to attend the Special Meeting, please sign and date the
enclosed Proxy Appointment Card and return it at once in the stamped return
envelope in order to ensure that your shares of FBI Common Stock will be
represented at the Special Meeting. PLEASE DO NOT SEND IN ANY STOCK
CERTIFICATES AT THIS TIME. If you should attend in person, your Proxy
Appointment Card can be revoked if you wish and you may vote in person your own
shares.
By Order of the Board of Directors
/s/ Arthur E.S. Schmid /s/ Clifford A. Schmid
Arthur E.S. Schmid Clifford A. Schmid
Chairman of the Board President
St. Louis, Missouri
DATED: September 20, 1996
THE BOARD OF DIRECTORS OF FINANCIAL BANCSHARES, INC., BY UNANIMOUS VOTE,
RECOMMENDS THAT SHAREHOLDERS OF FINANCIAL BANCSHARES, INC. VOTE "FOR" APPROVAL
OF THE REORGANIZATION AGREEMENT AND PLAN OF MERGER, AS AMENDED.
<PAGE> 5
PROSPECTUS
1,231,000 SHARES OF COMMON STOCK
OF
UNION PLANTERS CORPORATION
PROXY STATEMENT
FINANCIAL BANCSHARES, INC.
SPECIAL MEETING TO BE HELD WEDNESDAY, OCTOBER 23, 1996
This Prospectus and Proxy Statement (hereinafter referred to as the
"Prospectus/Proxy Statement") relates to up to 1,231,000 shares of the common
stock, $5.00 par value per share, including the associated "Preferred Share
Rights" (as hereinafter defined) ("UPC Common Stock") of Union Planters
Corporation ("UPC"), a Tennessee-chartered bank holding company, to be issued
to holders of the common stock, $0.01 par value per share ("FBI Common Stock")
of Financial Bancshares, Inc. ("FBI"), a Missouri-chartered bank holding
company, upon consummation of the merger (the "Merger") described herein. In
the Merger FBI would be merged with and into Capital Bancorporation, Inc.
("Capital"), a Tennessee-chartered bank holding company and wholly-owned
subsidiary of UPC, pursuant to the terms of the Agreement and Plan of
Reorganization dated as of June 27, 1996 by and between FBI, Capital and UPC,
along with the Plan of Merger ("Plan of Merger") annexed thereto as Exhibit A,
as amended by the First Amendment to Agreement and Plan of Reorganization and
Plan of Merger (the "Amendment") dated as of September 6, 1996 (collectively,
the "Reorganization Agreement"), and the Letter Agreement ("Supplemental
Letter") dated as of June 27, 1996 between UPC, Capital and FBI annexed to this
Prospectus/Proxy Statement as Appendix C. In the Merger, those persons who are
record holders of FBI Common Stock issued and outstanding immediately prior to
the effective time of the Merger ("FBI Record Holders") would receive in
exchange for each of their shares of FBI Common Stock, 1.7415 shares of UPC
Common Stock (the "Exchange Ratio"). The Exchange Ratio is not subject to
adjustment based upon fluctuations in the market price of UPC Common Stock but
may be adjusted to a rate deemed reasonable by the Board of Directors of UPC
either in the event of a stock split, reverse stock split, stock dividend or
similar change in the capital accounts of FBI or if there should be more than
706,877 fully diluted shares of FBI Common Stock outstanding immediately prior
to the effective time of the Merger (the "Effective Time").
Shares of the UPC Common Stock are now, and the UPC Common Stock to be
issued in connection with the Merger will be, listed for trading on the New
York Stock Exchange (the "NYSE") under the symbol "UPC." On June 26, 1996, the
day prior to the announcement of the Merger, the last reported sale price of
UPC Common Stock on the NYSE was $30.00 per share. The last reported sale price
of UPC Common Stock on the NYSE on September 17, 1996 was $36.25 per share.
Based on the market value of the UPC Common Stock on September 17, 1996, the
value of the UPC Common Stock to be received for each share of FBI Common Stock
would be approximately $63.13. However, the value of UPC Common Stock is
subject to fluctuation, and the value of the UPC Common Stock to be received by
FBI Record Holders upon consummation of the Merger may be more or less than
$63.13.
<PAGE> 6
This Prospectus also serves as a Proxy Statement of FBI and is being
furnished to the shareholders of FBI in connection with the solicitation of
proxies by the Board of Directors of FBI for use at its Special Meeting of
Shareholders [including any adjournments or postponements thereof] (the "Special
Meeting") to be held on Wednesday, October 23, 1996, to consider and vote upon
the Reorganization Agreement, the Plan of Merger and the Amendment. The annexed
Notice of Special Meeting of Shareholders and this Prospectus/Proxy Statement
explain the Merger and the Amendment the Exchange Ratio, the Reorganization
Agreement, the Plan of Merger and the Amendment and provide specific
information relative to the Special Meeting. Please read these materials
carefully and thoughtfully consider the information contained in them.
All information contained in this Prospectus/Proxy Statement
pertaining to UPC and its subsidiaries, including Capital, has been supplied by
UPC, and all information pertaining to FBI and its subsidiaries has been
supplied by FBI. This Prospectus/Proxy Statement and the accompanying Proxy
Appointment Cards are first being mailed to the FBI shareholders on or about
September 20, 1996.
THE SHARES OF UPC COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS
ACCOUNTS, OR OTHER OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS/PROXY STATEMENT IS SEPTEMBER 20, 1996.
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION (i)
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE (ii)
SUMMARY 1
The Parties 1
Special Meeting of FBI Shareholders 3
Votes Required; Record Date 3
The Merger 3
Reasons for the Merger; Recommendations of the FBI Board 5
Fairness Opinion of Financial Advisor 5
Effective Date 5
Waiver and Amendment; Termination 5
Conditions; Regulatory Approvals 6
Limitation on Negotiations 6
Management After the Merger 7
Interests of Certain Persons in the Merger 7
Dissenters' Rights 8
Comparison of the Rights of UPC and FBI Shareholders 8
Provisions That May Have an Anti-Takeover Effect 8
Certain Federal Income Tax Consequences 9
Accounting Treatment 9
Market Prices of Common Stock 9
Selected Consolidated Financial Data 12
Equivalent and Pro Forma Per Share Data 20
Pro Forma Condensed Consolidated Financial Information 23
THE SPECIAL MEETING 30
Time and Place of Special Meeting; Solicitation of Proxies; Revocation 30
Votes Required 31
Voting 31
Dissenters' Rights 31
Recommendation 33
THE MERGER 34
Background of the Merger 34
Reasons for the Merger 35
Fairness Opinion of Financial Advisor 37
Terms of the Merger 44
Effective Date and Effective Time of the Merger 45
Surrender of Certificates 46
Conditions to Consummation of the Merger 47
Regulatory Approvals 49
</TABLE>
<PAGE> 8
<TABLE>
<S> <C>
Conduct of Business Pending the Merger 50
Payment of Dividends 50
Waiver and Amendment; Termination 51
Management after the Merger 52
Interests of Certain Persons in the Merger 52
Limitation on Negotiations 54
Certain Federal Income Tax Consequences 54
Accounting Treatment 56
Expenses 57
Resales of UPC Common Stock 57
CERTAIN REGULATORY CONSIDERATIONS 57
General 58
Payment of Dividends 60
Capital Adequacy 61
Support of Subsidiary Banks 62
Prompt Corrective Action 63
FDIC Insurance Assessments 65
Proposed Legislation 66
DESCRIPTION OF UPC COMMON AND PREFERRED STOCK 66
UPC Common Stock 66
UPC Preferred Stock 68
CERTAIN PROVISIONS THAT MAY HAVE AN ANTI-TAKEOVER EFFECT 68
Charter and Bylaw Provisions 68
Share Purchase Rights Plan 69
Tennessee Anti-Takeover Statutes 69
EFFECT OF MERGER ON RIGHTS OF FBI SHAREHOLDERS 71
Removal of Directors 72
Required Shareholder Votes 72
Election of Directors 72
Method of Casting Votes 72
Share Purchase Rights Plan 73
Restrictions on Changes in Control 73
LEGAL OPINIONS 73
EXPERTS 73
</TABLE>
<PAGE> 9
INDEX TO APPENDICES 76
Appendix A
<TABLE>
<S> <C>
A-1 Annual Report on Form 10-K of Financial Bancshares, Inc.
for the year ended December 31, 1995
A-2 Quarterly Report on Form 10-Q of Financial Bancshares,
Inc. for the quarterly period ended June 30, 1996
Appendix B Agreement and Plan of Reorganization between Union
Planters Corporation, Capital Bancorporation, Inc. and
Financial Bancshares, Inc. dated as of June 27, 1996,
together with the related Plan of Merger annexed
thereto as Exhibit A and the First Amendment to
Agreement and Plan of Reorganization and Plan of
Merger, dated as of September 6, 1996
Appendix C Letter Agreement between Union Planters Corporation,
Capital Bancorporation, Inc. and Financial Bancshares,
Inc. dated as of June 27, 1996
Appendix D Fairness Opinion of Mercer Capital Management, Inc.
Appendix E Section 351.455 of The General and Business Corporation
Law of Missouri pertaining to applicable Dissenters'
Rights provisions
</TABLE>
<PAGE> 10
AVAILABLE INFORMATION
UPC is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, (the "Exchange Act") and in accordance
therewith is required to file reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). FBI is subject
only to the periodic reporting requirements of the Exchange Act and is required
to file reports and other information with the Commission. Copies of such
reports and other information and in the case of UPC, proxy statements, can be
obtained, at prescribed rates, from the Commission by addressing written
requests for such copies to the Public Reference Section of the Commission at
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. In addition,
such reports and other information and in the case of UPC, proxy statements,
can be inspected and copied at the public reference facilities referred to
above, at the regional offices of the Commission at Room 1024, 7 World Trade
Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661, or, if such
reports or proxy statements have been filed electronically, through the
Internet Web site maintained by the Commission at (http://www.sec.gov).
Furthermore, UPC Common Stock is listed on the NYSE. Reports, proxy statements
and other information concerning UPC may be inspected at the offices of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
This Prospectus/Proxy Statement constitutes part of the Registration
Statement on Form S-4 of UPC (including any exhibits, appendices and amendments
thereto, the "Registration Statement") filed with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"), relating to the
securities offered hereby. This Prospectus/Proxy Statement does not contain all
of the information in the Registration Statement, certain portions of which
have been omitted consistent with the rules and regulations of the Commission.
For further information about UPC and the securities offered hereby, reference
is made to the Registration Statement. The Registration Statement may be
inspected and copied, at prescribed rates, at the Commission's public reference
facilities at the addresses set forth above.
Certain financial and other information relating to UPC and FBI is
contained in the documents indicated below under "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
All information contained in this Prospectus/Proxy Statement or
incorporated herein by reference with respect to UPC was supplied by UPC and
all information contained in this Prospectus/Proxy Statement or incorporated
herein by reference with respect to FBI was supplied by FBI. Although neither
UPC nor FBI has actual knowledge that would indicate that any statements or
information (including financial statements) relating to the other party
contained or incorporated herein are inaccurate or incomplete, neither UPC nor
FBI warrants the accuracy or completeness of such statements or information as
they relate to the other party.
(i)
<PAGE> 11
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS/PROXY STATEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS/PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS
PROSPECTUS/PROXY STATEMENT IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS PROSPECTUS/PROXY STATEMENT NOR ANY DISTRIBUTION OF THE
SECURITIES BEING OFFERED PURSUANT TO THIS PROSPECTUS/PROXY STATEMENT SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF UPC OR FBI OR THE INFORMATION SET FORTH HEREIN SINCE THE DATE OF
THIS PROSPECTUS/PROXY STATEMENT.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by UPC
pursuant to the Exchange Act (Commission File No. 1-10160 except as otherwise
indicated) are hereby incorporated by reference herein:
(a) UPC's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
(b) UPC's Quarterly Reports on Form 10-Q for the quarterly periods
ended March 31, 1996 and June 30, 1996;
(c) UPC's Current Reports on Form 8-K dated January 5, 1996, March
8, 1996, April 1, 1996, April 2, 1996, April 18, 1996, May 21,
1996, May 22, 1996, July 18, 1996, August 15, 1996 and August
16, 1996;
(d) The description of the current management and Board of
Directors contained in the Proxy Statement pursuant to Section
14(a) of the Exchange Act for UPC's Annual Meeting of
Shareholders held April 25, 1996;
(e) UPC's Registration Statement on Form 8-A dated January 19,
1989, filed on February 1, 1989 (Commission File Number
0-6919), in connection with UPC's designation and
authorization of its Series A Preferred Stock; and
(f) The description of the UPC Common Stock contained in UPC's
Registration Statement under Section 12(b) of the Exchange Act
and any amendment or report filed for the purpose of updating
such description.
UPC's Annual Report on Form 10-K for the year ended December 31, 1995,
incorporates by reference specific portions of UPC's Annual Report to
Shareholders for that year (UPC's "Annual Report to Shareholders" which is
Exhibit 13 to said Form 10-K) but does not incorporate other portions of UPC's
Annual Report to Shareholders. The portion of UPC's Annual Report
(ii)
<PAGE> 12
to Shareholders captioned "Letter to Shareholders" and certain other portions
of UPC's 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.
The following documents previously filed with the Commission by FBI
pursuant to the Exchange Act (Commission File No. 33-33940 except as otherwise
indicated) are hereby incorporated by reference herein:
(a) FBI's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 (a copy of which is included in this
Prospectus/Proxy Statement as Appendix A-1);
(b) FBI's Quarterly Reports on Form 10-Q for the quarterly periods
ended March 31, 1996 and June 30, 1996 (a copy of the June 30,
1996 Form 10-Q is included in this Prospectus/Proxy Statement
as Appendix A-2); and
(c) FBI's Current Report on Form 8-K dated July 11, 1996.
All documents filed by UPC and FBI pursuant to Sections 13(a), 13(c),
14, or 15(d) of the Exchange Act after the date of this Prospectus/Proxy
Statement and prior to the date of the Special Meeting shall be deemed to be
incorporated by reference into this Prospectus/Proxy Statement and to be a part
hereof from the date of filing of such documents. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes hereof to the
extent that a statement contained herein or in any subsequently filed document
which also is, or is deemed to be, incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part hereof, except as so modified or superseded.
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF THESE DOCUMENTS
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE) ARE AVAILABLE WITHOUT CHARGE, UPON THE WRITTEN OR
ORAL REQUEST OF ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS
PROSPECTUS/PROXY STATEMENT IS DELIVERED. SUCH REQUESTS FOR DOCUMENTS RELATING
TO UPC SHOULD BE DIRECTED TO UNION PLANTERS CORPORATION, POST OFFICE BOX 387,
MEMPHIS, TENNESSEE 38147 (TELEPHONE (901) 383-6584), ATTENTION: E. JAMES
HOUSE, JR., SECRETARY. SUCH REQUESTS FOR DOCUMENTS RELATING TO FBI SHOULD BE
DIRECTED TO FINANCIAL BANCSHARES, INC., 3805 SOUTH BROADWAY, ST. LOUIS,
MISSOURI 63118 (TELEPHONE (314) 664-6250), ATTENTION: VIRGINIA A. RENZ, VICE
PRESIDENT/SECRETARY. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST SHOULD BE MADE BY OCTOBER 15, 1996.
(iii)
<PAGE> 13
SUMMARY
The following is a summary of certain information contained in this
Prospectus/Proxy Statement and the documents incorporated herein by reference.
This summary is not intended to be a complete description of the matters
covered in this Prospectus/Proxy Statement and is qualified in its entirety by
the more detailed information appearing elsewhere or incorporated by reference
into this Prospectus/Proxy Statement. FBI shareholders are urged to read
carefully the entire Prospectus/Proxy Statement, including each of the
Appendices. As used in this Prospectus/Proxy Statement, the terms "UPC" and
"FBI" refer to those entities, respectively and, where the context requires, to
those entities and their respective subsidiaries.
THE PARTIES
Union Planters Corporation. UPC is a multi-state bank holding company
and savings and loan holding company headquartered in Memphis, Tennessee. At
June 30, 1996, UPC had total consolidated assets of approximately $11.4
billion, total consolidated loans of approximately $7.2 billion, total
consolidated deposits of approximately $9.3 billion and total consolidated
stockholders' equity of approximately $1.0 billion. As of that date, UPC was
the second largest independent bank holding company headquartered in Tennessee
as measured by total consolidated assets.
UPC conducts its business activities through its principal bank
subsidiary, the $2.2-billion asset Union Planters National Bank ("UPNB"),
founded in 1869 and headquartered in Memphis, Tennessee, and through 33 other
bank subsidiaries and two savings bank subsidiaries located in Tennessee,
Mississippi, Missouri, Arkansas, Louisiana, Alabama and Kentucky (collectively,
the "UPC Banking Subsidiaries"). Through the UPC Banking Subsidiaries, UPC
provides a diversified range of financial services in the communities in which
it operates, including traditional banking services, consumer, commercial and
corporate lending, retail banking and mortgage banking. UPC 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 loans.
Through the UPC Banking Subsidiaries, UPC operates approximately 402
banking offices. UPC's assets at June 30, 1996 are allocable by state to its
banking offices (before consolidating adjustments) approximately as follows:
$6.0 billion in Tennessee, $2.4 billion in Mississippi, $1.0 billion in
Missouri, $915 million in Arkansas, $548 million in Louisiana, $249 million in
Alabama and $110 million in Kentucky.
Acquisitions have been, and are expected to continue to be, an
important part of the expansion of UPC's business. UPC completed four
acquisitions in 1992, twelve in 1993, thirteen in 1994, and three in 1995,
adding approximately $1.6 billion in total assets in 1992, $1.3 billion in
1993, $3.8 billion in 1994, and $1.3 billion in 1995. UPC has completed two
acquisitions in 1996 (the "Recently Completed Acquisitions"), adding
approximately $122 million in assets. Prior to the date hereof, UPC had entered
into definitive agreements to acquire five additional
1
<PAGE> 14
financial institutions with total assets of approximately $3.9 billion
(collectively, the "Other Pending Acquisitions"). For additional information
regarding the Other Pending Acquisitions, see "--Recent Developments Affecting
UPC-Pending Acquisitions" and "--Pro Forma Condensed Consolidated Financial
Information." For a discussion of UPC's acquisition program and UPC
management's philosophy on that subject, see the caption "Acquisitions" (on
page 6) and Note 2 to UPC's audited consolidated financial statements for the
years ended December 31, 1995, 1994 and 1993 (on pages 41 through 43) contained
in UPC's Annual Report to Shareholders which is Exhibit 13 to UPC's Annual
Report on Form 10-K for the year ended December 31, 1995, which Exhibit 13 is
incorporated by reference herein to the extent indicated.
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. Future acquisitions may entail the
payment by UPC of consideration in excess of the book value of the underlying
net assets acquired, may result in the issuance of additional shares of UPC
capital stock or the incurring of additional indebtedness by UPC, and could
have a dilutive effect on the earnings or book value per share of UPC Common
Stock. Moreover, significant charges against earnings are sometimes required
incidental to acquisitions. For a description of acquisitions which are
currently pending and a discussion of potential significant charges against
earnings, 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 concerning UPC is included in the documents incorporated
by reference into this Prospectus/Proxy Statement. See "AVAILABLE INFORMATION"
and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
Financial Bancshares, Inc. FBI is a Missouri multi-bank holding
company headquartered in St. Louis, Missouri. Through its five majority-owned
subsidiary banks (the "FBI Subsidiary Banks"), FBI provides a full range of
banking services to individual and corporate customers. At June 30, 1996, on a
consolidated basis, FBI had total assets of approximately $323 million, total
loans of approximately $196 million, total deposits of approximately $289
million, and total stockholders' equity of approximately $23.2 million. The FBI
Subsidiary Banks are: 1) First Financial Bank of St. Louis, St. Louis,
Missouri ("FFB--St. Louis"); 2) First Financial Bank of Mississippi County,
East Prairie, Missouri ("MissCo"); 3) First Financial Bank of St. Genevieve,
St. Genevieve, Missouri ("FFB--St. Genevieve"); 4) First Financial Bank of
Southeast Missouri, Sikeston, Missouri ("SEMO"); and 5) Citizens First
Financial Bank, Dexter, Missouri ("Citizens").
FBI's corporate office is located at 3805 South Broadway, St. Louis,
Missouri 63118-4607 and its telephone number is (314) 664-6250. Additional
information concerning FBI is included in the documents incorporated by
reference into this Prospectus/Proxy Statement. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
2
<PAGE> 15
Capital Bancorporation, Inc. Capital is a bank holding company and a
wholly-owned subsidiary of UPC. Capital was incorporated under the laws of the
State of Tennessee in June, 1995 to acquire Capital Bancorporation, Inc., a
Missouri bank holding company, in an acquisition consummated on December 31,
1995. Capital conducts its business activities through four banking
subsidiaries: Union Planters Bank of Southeast Missouri headquartered in Cape
Girardeau, Union Planters Bank of Southwest Missouri headquartered in
Springfield, Union Planters Bank of Sikeston, Missouri headquartered in
Sikeston, and Union Planters Bank of Mid-Missouri, headquartered in Columbia,
Missouri and one bank holding company subsidiary which operates Union Planters
Bank of Missouri in Clayton, Missouri. Capital's corporate office is located at
7130 Goodlett Farms Parkway, Memphis, Tennessee 38018 and its telephone number
is (901) 383-6000.
SPECIAL MEETING OF FBI SHAREHOLDERS
This Prospectus/Proxy Statement is being furnished to the holders of
FBI Common Stock in connection with the solicitation by the Board of Directors
of FBI of proxies for use at the Special Meeting of the FBI shareholders to be
held on Wednesday, October 23, 1996, at 9:30 a.m., local time, at Westborough
Country Club, 631 South Berry Road, Kirkwood, Missouri. At the Special Meeting,
FBI shareholders will be asked to consider and vote upon a proposal to approve
the Reorganization Agreement and the Plan of Merger, as amended by the
Amendment. See "THE SPECIAL MEETING."
VOTES REQUIRED; RECORD DATE
FBI's Board of Directors has fixed the close of business on September
17, 1996 as the record date (the "Record Date") for determination of the
shareholders entitled to notice of, and to vote at the Special Meeting. Only
FBI shareholders of record on the Record Date will be entitled to receive
notice of and to vote at the Special Meeting. The affirmative votes of the
holders of at least 66 2/3% of the shares of FBI Common Stock outstanding on
the Record Date are required to approve the Reorganization Agreement. See
"THE SPECIAL MEETING - Votes Required."
The directors and executive officers of FBI (the "FBI Management
Group") held beneficially as of the Record Date, 312,993 shares, or
approximately 45.7%, of the outstanding shares of FBI Common Stock, which they
have advised that they intend to vote "FOR" approval of the Reorganization
Agreement. See "THE SPECIAL MEETING."
THE MERGER
The Reorganization Agreement provides for the acquisition by UPC of
the FBI Subsidiary Banks through the Merger of FBI with and into Capital, which
would survive the Merger. At the Effective Time each share of FBI Common Stock
outstanding immediately prior to the Effective Time (except for those shares
with respect to which dissenters' rights shall have been perfected) will be
converted exclusively into the right to receive 1.7415 shares of UPC Common
3
<PAGE> 16
Stock. The Exchange Ratio is, however, subject to adjustment to give effect to
any stock split, reverse stock split, stock dividend or similar changes with
respect to the FBI Common Stock which might occur prior to the Effective Time
of the Merger. Also, the Exchange Ratio is subject to adjustment to the extent
that the number of shares of FBI Common Stock outstanding, on a fully diluted
basis, exceeds 706,877. In such cases, the Exchange Ratio will be adjusted in
such a manner as the Board of Directors of UPC (the "UPC Board"), in good
faith, deems fair and reasonable. See "THE MERGER-- Terms of the Merger."
Furthermore, options issued pursuant to FBI's 1995 Non-Qualified Stock
Option Plan ("FBI Options") outstanding immediately prior to the Effective Time
of the Merger will be automatically amended to represent options to purchase,
on the same terms and conditions, that number of shares of UPC Common Stock as
shall equal the Exchange Ratio (rounded down to the nearest whole share),
multiplied by the number of shares of FBI Common Stock subject to purchase
immediately prior to the Effective Time.
UPC will not issue fractional shares of UPC Common Stock to FBI Record
Holders as a result of the Merger. Instead, after aggregating all whole and
fractional shares of UPC Common Stock otherwise due to an FBI Record Holder,
any resulting fractional share will be settled with a cash payment determined
by multiplying the fraction by the last sale price of UPC Common Stock on the
NYSE on the last trading day prior to the effective date of the Merger. See
"THE MERGER--Terms of the Merger" for descriptions of the Exchange Ratio,
potential adjustments to the Exchange Ratio and the effect of the Merger being
consummated on the FBI Options. See also the Reorganization Agreement, a copy
of which is attached hereto as Appendix B, for the specific provisions
concerning these matters.
Based on the market value of the UPC Common Stock on September 17,
1996, the value of the UPC Common Stock to be received for each share of FBI
Common Stock would be approximately $63.13. However, the value of UPC Common
Stock is subject to fluctuation, and the value of the UPC Common Stock to be
received upon consummation of the Merger may be more or less than $63.13.
The market price of the UPC Common Stock may change significantly
prior to the effective date of the Merger. The Reorganization Agreement DOES
NOT contain any provisions which would cause an adjustment to the Exchange
Ratio based on the market price of UPC Common Stock. However, it is a condition
precedent to FBI's obligation to consummate the Merger that the fairness
opinion received by FBI's Board of Directors (the "FBI Board") from Mercer
Capital Management, Inc. shall not have been withdrawn on or prior to the
closing date (the "Closing Date"). See "THE MERGER--Fairness Opinion of
Financial Advisor" and "THE MERGER--Conditions to Consummation of the Merger".
4
<PAGE> 17
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE FBI BOARD
The FBI Board believes the Merger is fair to, and in the best
interests of FBI and its shareholders and unanimously recommends that the FBI
shareholders vote "FOR" approval of the Reorganization Agreement. The FBI
Board, after consideration of a number of alternatives available to FBI and the
FBI shareholders, believes that the Merger will enable the FBI Record Holders
to participate in opportunities for investment value and growth. The Merger and
the resulting affiliation with UPC's banking network would give the FBI
Subsidiary Banks access to a substantially larger base of capital and enhanced
regulatory and operating expertise. Moreover, affiliation with UPC will enhance
the ability of the FBI Subsidiary Banks to compete more effectively in their
marketplaces and to enjoy certain economies of scale in their banking
operations. See "THE MERGER--Background of and Reasons for the Merger."
FAIRNESS OPINION OF FINANCIAL ADVISOR
FBI has retained Mercer Capital Management, Inc. ("Mercer Capital") as
its financial advisor in connection with the Merger and requested that Mercer
Capital render an opinion that the Exchange Ratio was fair from a financial
point of view to the FBI shareholders. A copy of Mercer Capital's opinion is
attached hereto as Appendix D and should be read in its entirety with respect
to assumptions made, limitations on review undertaken and other matters. The
description of Mercer Capital's opinion set forth herein is qualified in its
entirety by reference to the opinion. See "THE MERGER-- Fairness Opinion of
Financial Advisor" for information regarding, among other things, the selection
of Mercer Capital and its compensation for services rendered in connection with
the Merger and its rendering of such opinion.
EFFECTIVE DATE
The Merger would become effective at the time Articles of Merger are
filed with the Secretary of State of Tennessee, or at such later time as may be
set forth in the Articles of Merger (the "Effective Time of the Merger").
Assuming the timely receipt of all prior regulatory approvals, the expiration
of all statutory waiting periods and the satisfaction or waiver of all
contractual conditions to closing set forth in the Reorganization Agreement, it
is expected that the Merger would become effective in the fourth quarter of
1996. The effective date of the Merger will be the day on which the Effective
Time occurs (the "Effective Date of the Merger"). Only FBI Record Holders will
be entitled to receive the shares of UPC Common Stock and cash payment for any
fractional share to be exchanged in the Merger pursuant to the Reorganization
Agreement.
WAIVER AND AMENDMENT; TERMINATION
Prior to the Effective Time, any condition to consummation of the
Merger (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 Board of Directors of UPC and FBI; provided, however, that no
such amendment may be effected after approval by the FBI
5
<PAGE> 18
shareholders of the Reorganization Agreement without such shareholders'
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 FBI Record Holders.
The Reorganization Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time by mutual consent of UPC,
Capital and FBI, or by one or all of the parties under certain circumstances,
including if (i) the Merger is not consummated by June 24, 1997 (which may in
certain circumstances, be extended to August 31, 1997), unless the failure to
consummate the Merger by such time is due to a breach of the Reorganization
Agreement by the party seeking to terminate, and (ii) in the event that the
holders of more than 9% of the outstanding shares of FBI Common Stock should
perfect their dissenters' rights. See "THE MERGER--Waiver and Amendment;
Termination."
CONDITIONS; REGULATORY APPROVALS
Consummation of the Merger is subject to various conditions, including
receipt of the approval of the FBI shareholders, receipt of the required prior
regulatory approvals and satisfaction of certain customary contractual closing
conditions. For a discussion of these conditions, see "THE MERGER--Conditions
to Consummation of the Merger."
The regulatory approvals and consents necessary to consummate the
transactions contemplated by the Reorganization Agreement include the prior
approval of the Board of Governors of the Federal Reserve System (the "Federal
Reserve") and the Missouri Division of Finance (the "Missouri Division"). An
application to the Federal Reserve for such approval was submitted on August
23, 1996. It is anticipated that the application to the Missouri Division will
be submitted on or about October 31, 1996. As of the date hereof, approval has
not yet been received from the Federal Reserve. There can be no assurance as to
when or if all of the necessary regulatory approvals will be obtained. There
also can be no assurance that any such approvals will not impose conditions
that would be deemed materially burdensome by UPC. See "THE MERGER--Conditions
to Consummation of the Merger," "THE MERGER--Regulatory Approvals" and "CERTAIN
REGULATORY CONSIDERATIONS."
LIMITATION ON NEGOTIATIONS
FBI is prohibited from instituting, soliciting or encouraging any
inquiry, discussion or proposal concerning any "Acquisition Proposal" (defined
generally as any agreement or proposal pursuant to which any person, entity or
group, other than UPC or the UPC Banking Subsidiaries, would, directly or
indirectly: i) acquire or enter into a business combination, including a merger
or consolidation, with FBI or any FBI Subsidiary Bank; ii) acquire the right to
vote ten percent (10%) or more of the outstanding FBI Common Stock or the
outstanding voting stock of any FBI Subsidiary Bank; iii) acquire a significant
portion of the assets or earning power of FBI or any FBI Subsidiary Bank; or
iv) acquire in excess of 10% of the outstanding FBI Common Stock or the common
stock of any FBI Subsidiary Bank.) In the event FBI were to enter into a letter
of intent or agreement with respect to an Acquisition Proposal, FBI or the
acquirer would be
6
<PAGE> 19
required to pay liquidating damages to UPC in the amount of $3.44 million. Such
sum would be payable immediately in the event that FBI were to enter into a
letter of intent or agreement with respect to an Acquisition Proposal. The
limitation will remain in effect until December 31, 1997, unless before that
date the Merger shall have been consummated, the Reorganization Agreement shall
have been terminated, or the Merger shall not have been consummated as a result
of failure by UPC or Capital to perform certain obligations under the
Reorganization Agreement, under specified circumstances. See "THE
MERGER--Limitation on Negotiations."
MANAGEMENT AFTER THE MERGER
The directors and officers of Capital in office immediately prior to
the Effective Time of the Merger would continue as directors and officers of
Capital, as the surviving company, following the Merger. Each of the current
officers and directors of Capital are officers or directors of UPC. Information
concerning the current management and Board of Directors of UPC is included in
the documents incorporated herein by reference. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE." For additional information regarding the interests of
certain persons in the Merger, see "-- Interests of Certain Persons in the
Merger."
It is anticipated that after the Merger, certain of the FBI Subsidiary
Banks will be merged with and into certain of the UPC Banking Subsidiaries (the
"Subsidiary Bank Mergers"). At the time of the Subsidiary Bank Mergers, UPC
expects that the minority interests in the FBI Subsidiary Banks will be
reacquired or eliminated.
While the directors and officers of FBI will be affected by the
Merger, it is expected that the directors and officers of the FBI Subsidiary
Banks will continue to hold their positions until the Subsidiary Bank Mergers
are effective. Following the effective time of the Subsidiary Bank Mergers some
or all of those former FBI Subsidiary Bank officers and directors may be
retained. See "THE MERGER--Management after the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In addition to the Reorganization Agreement, UPC and FBI have executed
the Supplemental Letter, attached hereto as Appendix C, requiring UPC to assume
or enter into specified agreements and benefit plans with certain employees of
FBI. Among other requirements, the Supplemental Letter requires UPC to either
honor all existing employment agreements and management continuity agreements
between FBI and its employees or enter into new agreements which are mutually
acceptable to UPC and the FBI employees. For a more detailed discussion of the
requirements set forth in the Supplemental Letter, see "THE MERGER--Interests
of Certain Persons in the Merger."
7
<PAGE> 20
DISSENTERS' RIGHTS
Under Missouri law, an FBI shareholder entitled to vote at the Special
Meeting may dissent from the Merger and receive payment of the "fair value" of
such shares in cash if the Merger is consummated by following certain
procedures set forth in Section 351.455 of the Missouri Act, the text of which
is attached hereto as Appendix E. Failure to follow such procedures may result
in the loss of dissenters' rights. Any FBI shareholder returning an executed
Proxy Appointment Card which does not provide instructions to vote against the
Merger will be deemed to have approved the Reorganization Agreement and the
Plan of Merger and the Amendment, thereby waiving any such dissenters' rights.
See "THE SPECIAL MEETING-- Shareholders' Dissenters' Rights" and Section
351.455 of the Missouri Act, which is attached hereto as Appendix E.
It is a condition to UPC's obligation to consummate the Merger that
dissenters' rights are not perfected under the Missouri Act for more than nine
percent (9%) of the outstanding shares of FBI Common Stock.
COMPARISON OF THE RIGHTS OF UPC AND FBI SHAREHOLDERS
Upon consummation of the Merger, the FBI shareholders, whose rights are
presently governed by the Missouri Act and FBI's charter and bylaws, as
amended, would become shareholders of UPC, a Tennessee corporation ("UPC
Shareholders"). Accordingly, their rights would be governed by the Tennessee
Business Corporation Act (the "Tennessee Act") and the charter ("UPC's
Charter") and bylaws ("Bylaws") of UPC. Because of differences between UPC's
Charter and Bylaws and the charter and bylaws of FBI, as well as between the
Tennessee Act and the Missouri Act, certain rights of such shareholders will be
changed upon consummation of the Merger. For a discussion of material
differences between the rights of FBI shareholders and the rights of UPC
Shareholders, see "EFFECT OF THE MERGER ON RIGHTS OF FBI SHAREHOLDERS."
PROVISIONS THAT MAY HAVE AN ANTI-TAKEOVER EFFECT
UPC's Charter and Bylaws include provisions that may discourage,
delay or prevent certain types of transactions involving an actual or
potential change in control of UPC including transactions in which UPC
Shareholders might otherwise receive a premium for their shares of UPC Common
Stock over the current market prices. These "anti- takeover" provisions may
limit the ability of the shareholders of UPC to approve transactions that they
deem to be in their best personal interests. In addition, Tennessee and Federal
law require the approvals of the Tennessee Department of Financial Institutions
("TDFI"), the Federal Reserve and the Office of Thrift Supervision ("OTS")
prior to acquisition of "control" of a Tennessee bank or savings and loan
holding company. These provisions may have the effect of delaying or preventing
a change in control of UPC and, therefore, could adversely affect the price of
UPC Common Stock. See "DESCRIPTION OF UPC COMMON AND PREFERRED STOCK" and
"CERTAIN PROVISIONS THAT MAY HAVE AN ANTI-TAKEOVER EFFECT."
8
<PAGE> 21
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is intended that the Merger will be treated as a reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, no gain or loss would be recognized by an
FBI Record Holder upon the exchange of such shareholder's FBI Common Stock
solely for shares of UPC Common Stock in the Merger. Subject to the provisions
and limitations of Section 302(a) of the Code, gain or loss will be recognized
with respect to cash received in lieu of fractional shares and cash received by
FBI shareholders who exercise dissenters' rights. See "THE MERGER--Certain
Federal Income Tax Consequences." DUE TO THE INDIVIDUAL NATURE OF THE TAX
CONSEQUENCES OF THE MERGER, FBI RECORD HOLDERS ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS TO DETERMINE THE EFFECT OF THE MERGER ON THEM, UNDER FEDERAL,
STATE, LOCAL AND FOREIGN TAX LAWS. For a further discussion of the federal
income tax consequences of the Merger, see "THE MERGER--Certain Federal Income
Tax Consequences."
ACCOUNTING TREATMENT
The Merger is currently expected to be accounted for as a purchase
under generally accepted accounting principles ("GAAP") as described in
Accounting Principles Board Opinion No. 16 and the interpretations thereof
("APB No. 16"). However, if UPC elects not to repurchase the approximate
number of shares as issued to FBI Record Holders, as described herein, prior to
or subsequent to the Effective Time, UPC will be required to account for the
transaction as a "pooling of interests." UPC does not believe that the pro
forma financial information, if adjusted to reflect the Merger as a pooling of
interests, would be materially different from the pro forma information
contained herein. See "THE MERGER--Accounting Treatment."
MARKET PRICES OF COMMON STOCK
UPC Common Stock. The UPC Common Stock is listed on the NYSE under the
symbol "UPC." The following table sets forth for the periods indicated the high
and low closing sale prices of the UPC Common Stock on the NYSE and the cash
dividends declared per share of UPC Common Stock for the periods indicated:
9
<PAGE> 22
<TABLE>
<CAPTION>
PRICE RANGE Cash Dividends
--------------------------------------- Declared Per
HIGH LOW Share
---------------- ---------------- -------------
<S> <C> <C> <C>
1996
First Quarter $31.75 $29.00 $0.27
Second Quarter 31.25 29.63 0.27
Third Quarter 36.25 28.63 0.27
Through September 17, 1996 ------ ------ -----
Total $0.81
=====
1995
First Quarter $24.50 $20.88 $0.23
Second Quarter 28.13 23.13 0.25
Third Quarter 30.75 26.13 0.25
Fourth Quarter 32.25 29.63 0.25
-----
Total $0.98
=====
1994
First Quarter $26.25 $23.13 $0.21
Second Quarter 28.75 24.75 0.21
Third Quarter 26.00 23.50 0.23
Fourth Quarter 24.50 19.63 0.23
-----
Total $0.88
=====
</TABLE>
On June 26, the day prior to the date the Merger was publicly
announced, the last reported sale price of the UPC Common Stock on the NYSE was
$30.00 per share. On September 17, 1996, the last sale price of UPC Common
Stock as reported on the NYSE was $36.25 per share.
The holders of UPC Common Stock are entitled to receive dividends
when, as and if declared by the UPC Board out of funds legally available
therefor. Although UPC currently intends to continue to pay quarterly cash
dividends on the UPC Common Stock, there can be no assurance that UPC's
dividend policy will remain unchanged after completion of the Merger. The
declaration and payment of dividends thereafter will depend upon business
conditions, operation results, capital and reserve requirements, and the UPC
Board's consideration of other relevant factors.
UPC is a legal entity separate and distinct from its subsidiaries and
its revenues depend in significant part on the payment of dividends and fees
from its subsidiary depository institutions. UPC's subsidiary depository
institutions are subject to certain legal restrictions on the amount of
dividends they are permitted to pay. See "CERTAIN REGULATORY
CONSIDERATIONS--Payment of Dividends."
10
<PAGE> 23
FBI Common Stock. FBI Common Stock has never been listed or publicly
traded on any securities exchange or actively traded in the over-the-counter
market. However, there are occasional over-the-counter sales of shares of FBI
Common Stock reported on pink sheets. The following table sets forth quarterly
high and low sales prices for recent sales of FBI Common Stock to the extent
known by FBI's management (which does not necessarily include all of the
transactions or offers which occurred during the indicated periods). The table
also sets forth per share dividends paid on FBI Common Stock during the
indicated periods.
<TABLE>
<CAPTION>
PRICE RANGE
------------------------------------- CASH DIVIDENDS
HIGH LOW DECLARED PER SHARE
-------------- -------------- ------------------
<S> <C> <C> <C>
1996
First Quarter $27.00 $26.00 $ ---
Second Quarter 27.00 26.00 0.625
Third Quarter
Through September 17, 1996 (1) (1) ------
Total $ 0.625
======
1995
First Quarter (1) (1) $ ---
Second Quarter 27.00 25.00 0.625
Third Quarter 28.00 26.00 ---
Fourth Quarter 27.00 26.00 0.655
-----
Total $ 1.280
=====
1994
First Quarter (1) (1) $ ---
Second Quarter 28.00 25.00 0.625
Third Quarter 27.00 25.00 ---
Fourth Quarter 27.00 25.00 0.625
-----
Total $ 1.250
=====
</TABLE>
(1) Prices have been omitted for this quarter as FBI's management is not
aware of any sales having been made during this period.
In each of its past two fiscal years, FBI paid a cash dividend on a
semi-annual basis. The Reorganization Agreement prohibits FBI from paying any
dividends other than its regular semi-annual cash dividend of sixty-two and
one- half cents ($0.625) per share of FBI Common Stock as the first cash
dividend in a calendar year and sixty-seven and one- half cents ($0.675) per
share of FBI Common Stock as the second cash dividend in a calendar year. See
"THE MERGER-- Payment of Dividends." FBI's revenues are derived primarily from
dividends paid to it by the FBI Subsidiary Banks. The amount of dividends that
the FBI Subsidiary Banks may pay are restricted by loan covenants and by
federal and state banking laws and regulations. See "CERTAIN REGULATORY
CONSIDERATIONS--Payment of Dividends."
11
<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables present for both UPC and FBI selected
consolidated financial data for each of the five years ended December 31, 1995
and for the six month periods ended June 30, 1996 and 1995. The information for
UPC has been derived from the consolidated financial statements of UPC,
including the unaudited consolidated financial statements of UPC incorporated
into this Prospectus/Proxy Statement by reference to UPC's Quarterly Reports on
Form 10-Q for the quarterly period ended June 30, 1996, and the audited
consolidated financial statements of UPC incorporated into this
Prospectus/Proxy Statement by reference to UPC's 1995 Annual Report on Form
10-K for the year ended December 31, 1995, and should be read in conjunction
therewith and with the notes thereto. See "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE." The information for FBI has been derived from the consolidated
financial statements of FBI, including the unaudited consolidated financial
statements of FBI for the six months ended June 30, 1996 incorporated by
reference to FBI's Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1996 and the audited consolidated financial statements of FBI for the
three years ended December 31, 1995, incorporated by reference to FBI's Annual
Report on Form 10-K for the year ended December 31, 1995 (copies of which Forms
10-K and 10-Q of FBI are provided in this Prospectus/Proxy Statement
collectively as Appendix A), and should be read in conjunction therewith and
with the notes thereto. Historical results are not necessarily indicative of
results to be expected for any future period. In the opinions of the management
of both UPC and FBI, all adjustments, consisting only of normal recurring
adjustments necessary to arrive at a fair statement of interim results of
operations of UPC and FBI, have been included. See "-- Recent Developments
Affecting UPC" for information concerning UPC's recently completed and pending
acquisitions.
12
<PAGE> 25
UPC Selected Consolidated Financial Data
<TABLE>
<CAPTION>
Six Months Ended
June 30, (1) Years Ended December 31,
---------------------- -----------------------------------
1996 1995 1995 1994 1993
--------- -------- -------- -------- --------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income Statement Data
Net interest income $232,316 $219,564 $447,431 $423,114 $375,033
Provision for losses on loans 15,851 4,538 22,231 4,894 17,950
Investment securities gains (losses) 66 (3) 476 (20,298) 4,506
Other noninterest income 81,404 75,707 157,176 121,103 123,056
Noninterest expense 178,362 184,371 382,164 427,697 346,450
-------- -------- -------- -------- --------
Earnings before income taxes, extraordinary item,
and accounting changes 119,573 106,359 200,688 91,328 138,195
Applicable income taxes 39,786 34,251 65,286 25,467 41,168
-------- -------- -------- -------- --------
Earnings before extraordinary item and accounting changes 79,787 72,108 135,402 65,861 97,027
Extraordinary item - defeasance of debt, net of taxes 0 0 0 0 (3,206)
Accounting changes, net of taxes 0 0 0 0 5,782
-------- -------- -------- -------- --------
Net earnings $79,787 $72,108 $135,402 $65,861 $99,603
======== ======== ======== ========= =========
Per Common Share Data
Primary
Earnings before extraordinary item and accounting changes $1.66 $1.52 $2.82 $1.28 $2.24
Extraordinary item - defeasance of debt, net of taxes 0 0 0 0 (0.08)
Accounting changes, net of taxes 0 0 0 0 0.15
Net earnings 1.66 1.52 2.82 1.28 2.31
Fully diluted
Earnings before extraordinary item and accounting changes 1.58 1.45 2.70 1.28 2.18
Extraordinary item - defeasance of debt, net of taxes 0 0 0 0 (0.07)
Accounting changes, net of taxes 0 0 0 0 0.13
Net earnings 1.58 1.45 2.70 1.28 2.24
Cash dividends 0.54 0.48 0.98 0.88 0.72
Book value 19.96 17.87 19.24 16.08 16.25
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1992 1991
--------- ----------
<S> <C> <C>
Income Statement Data
Net interest income $305,211 $256,537
Provision for losses on loans 29,071 35,960
Investment securities gains (losses) 14,019 2,633
Other noninterest income 103,506 95,415
Noninterest expense 297,665 255,906
-------- --------
Earnings before income taxes, extraordinary item,
and accounting changes 96,000 62,719
Applicable income taxes 27,048 14,443
-------- --------
Earnings before extraordinary item and accounting changes 68,952 48,276
Extraordinary item - defeasance of debt, net of taxes 0 0
Accounting changes, net of taxes 0 0
-------- --------
Net earnings $68,952 $48,276
======== ========
Per Common Share Data
Primary
Earnings before extraordinary item and accounting changes $1.75 $1.35
Extraordinary item - defeasance of debt, net of taxes 0 0
Accounting changes, net of taxes 0 0
Net earnings 1.75 1.35
Fully diluted
Earnings before extraordinary item and accounting changes 1.73 1.35
Extraordinary item - defeasance of debt, net of taxes 0 0
Accounting changes, net of taxes 0 0
Net earnings 1.73 1.35
Cash dividends 0.60 0.48
Book value 14.08 12.88
</TABLE>
(continued on following page)
13
<PAGE> 26
<TABLE>
<CAPTION>
UPC Selected Consolidated Financial Data (continued)
Six Months Ended
June 30, (1) Years Ended December 31,
------------------------- --------------------------------------
1996 1995 1995 1994 1993
---------- ----------- ----------- ----------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data (at period end)
Total assets $11,367,625 $10,921,482 $11,277,116 $10,985,020 $9,919,944
Loans, net of unearned income 7,169,872 6,960,602 7,069,853 6,721,597 5,293,850
Allowance for losses on loans 136,255 132,884 133,487 133,966 125,499
Investment securities 3,053,759 2,639,545 2,774,890 3,084,110 3,431,081
Deposits 9,343,893 9,291,329 9,447,736 9,253,165 8,445,760
Short-term borrowings 421,061 167,540 241,023 455,010 300,414
Long-term debt (3)
Parent company 213,453 115,368 214,758 114,790 114,729
Subsidiary banks 259,691 325,446 270,500 241,218 212,149
Total shareholders' equity 1,007,608 897,066 966,331 805,147 751,844
Average assets 11,285,745 10,837,594 10,954,895 10,948,979 9,706,356
Average shareholders' equity 971,638 862,212 899,615 850,934 707,788
Average shares outstanding (in thousands)
Primary 45,940 44,648 45,008 43,741 38,914
Fully diluted 50,533 49,138 49,618 44,083 43,144
Profitability and Capital Ratios
Return on average assets 1.42 % 1.34 % 1.24 % 0.60 % 1.03 %
Return on average common equity 17.40 18.01 15.92 7.61 15.10
Net interest income (taxable-equivalent) to
average earning assets (2) 4.63 4.58 4.59 4.36 4.40
Loans/deposits 76.73 74.92 74.83 72.64 62.68
Common and preferred dividend payout ratio 35.41 34.12 37.55 62.50 32.64
Equity/assets (period end) 8.86 8.21 8.57 7.33 7.58
Average shareholders' equity/average total assets 8.61 7.96 8.21 7.77 7.29
Leverage ratio (4) 8.49 7.88 8.09 7.15 7.21
Tier 1 capital to risk-weighted assets (4) 13.19 12.51 12.64 11.88 13.10
Total capital to risk-weighted assets (4) 16.85 14.86 16.35 14.27 15.74
Asset Quality Ratios
Allowance/period end loans 1.90 1.91 1.89 1.99 2.37
Nonperforming loans/total loans (5) 0.53 0.47 0.48 0.32 0.58
Allowance/nonperforming loans (5) 355 404 391 614 411
Nonperforming assets/loans and foreclosed properties (6) 0.63 0.57 0.59 0.43 0.78
Provision/average loans 0.44 0.13 0.32 0.08 0.35
Net charge-offs/average loans 0.38 0.22 0.36 0.09 0.28
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1992 1991
---- ----
<S> <C> <C>
Balance Sheet Data (at period end)
Total assets $8,331,073 $6,566,973
Loans, net of unearned income 4,193,149 3,613,945
Allowance for losses on loans 100,282 74,739
Investment securities 2,935,665 1,864,871
Deposits 7,171,191 5,698,062
Short-term borrowings 343,452 244,513
Long-term debt (3)
Parent company 74,292 38,163
Subsidiary banks 38,463 18,790
Total shareholders' equity 595,106 475,128
Average assets 7,586,827 6,555,009
Average shareholders' equity 551,650 442,756
Average shares outstanding (in thousands)
Primary 35,463 34,569
Fully diluted 38,307 34,922
Profitability and Capital Ratios
Return on average assets 0.91 % 0.74 %
Return on average common equity 13.11 10.95
Net interest income (taxable-equivalent) to
average earning assets (2) 4.57 4.48
Loans/deposits 58.47 63.42
Common and preferred dividend payout ratio 36.12 34.51
Equity/assets (period end) 7.14 7.24
Average shareholders' equity/average total assets 7.27 6.75
Leverage ratio (4) 7.07 7.06
Tier 1 capital to risk-weighted assets (4) 12.85 11.66
Total capital to risk-weighted assets (4) 14.83 13.80
Asset Quality Ratios
Allowance/period end loans 2.39 2.07
Nonperforming loans/total loans (5) 1.22 1.01
Allowance/nonperforming loans (5) 196 205
Nonperforming assets/loans and foreclosed properties (6) 1.58 1.60
Provision/average loans 0.72 0.95
Net charge-offs/average loans 0.55 0.92
</TABLE>
- ---------------
(1) Interim period ratios have been annualized where applicable.
(2) Average balances and calculations do not include the impact of the net
unrealized gain or loss on available for sale securities.
(3) Long-term debt includes subordinated notes and debentures, obligations
under capital leases, mortgage indebtedness, and notes payable with
maturities greater than one year. Subsidiary banks' long-term debt is
primarily Federal Home Loan Bank ("FHLB") advances.
(4) 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% (5% for bank holding companies effecting acquisitions).
(5) Nonperforming loans include loans on nonaccrual status and restructured
loans.
(6) Nonperforming assets include nonperforming loans and foreclosed
properties.
14
<PAGE> 27
FBI SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Six Months Ended
June 30,(1) Years Ended December 31,
------------------------ --------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ---------- ----------- ---------- ---------- --------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income $ 6,180 $ 6,106 $ 12,250 $ 12,488 $ 12,558 $ 11,401 $ 9,455
Provision for loan losses 366 474 1,678 2,860 4,614 1,073 1,674
Investment securities gains (losses) (33) 1 (31) (37) 113 52 (97)
Other noninterest income 714 729 1,401 1,342 1,205 1,155 1,228
Noninterest expense 4,676 4,787 9,455 9,451 8,400 8,241 7,723
---------- --------- --------- ---------- ---------- ---------- --------
Earnings before income taxes and
accounting changes 1,819 1,575 2,487 1,482 862 3,294 1,189
Applicable income taxes 656 468 631 417 145 654 237
Accounting changes, net of taxes 0 0 0 0 132 0 0
---------- --------- --------- ---------- ----------- ----------- ---------
Net earnings $ 1,163 $ 1,107 $ 1,856 $ 1,065 $ 849 $ 2,640 $ 952
========== ========= ========= ========== =========== =========== =========
PER COMMON SHARE DATA
Primary
Earnings before accounting changes $ 1.70 $ 1.62 $ 2.71 $ 1.56 $ 1.05 $ 3.86 $ 1.39
Accounting changes, net of taxes 0.19
Net earnings 1.70 1.62 2.71 1.56 1.24 3.86 1.39
Cash dividends 0.625 0.625 1.28 1.25 1.25 1.125 0.86
Book value 33.87 33.64 34.58 30.04 33.61 32.27 29.50
</TABLE>
(continued on following page)
15
<PAGE> 28
FBI SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Six Months Ended
June 30,(1) Years Ended December 31,
------------------------ --------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ---------- ----------- ---------- ---------- --------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END)
Total assets $322,833 $311,463 $325,924 $302,015 $304,394 $290,113 $268,919
Loans, net of unearned interest 195,712 190,080 187,064 181,879 175,972 164,562 148,573
Allowance for losses on loans 4,498 3,626 4,160 3,976 3,671 2,341 2,016
Investment securities 100,812 91,572 102,565 90,925 94,780 90,413 83,583
Deposits 288,974 276,907 294,450 270,572 275,059 262,555 241,632
Short-term borrowings 4,188 5,210 1,250 5,008 2,565 772 1,430
Long term debt (3) 3,794 4,019 4,019 4,019 2,244 2,469 2,669
Total shareholders' equity 23,182 23,023 23,663 20,560 23,001 22,086 20,191
Average assets 325,448 303,882 309,415 302,926 296,630 278,420 265,163
Average shareholders' equity 23,773 22,641 22,490 22,301 23,090 21,140 20,042
Average shares outstanding (in thousands) 684 684 684 684 684 684 684
Profitability and Capital Ratios
Return on average assets 0.72% 0.73% 0.60% 0.35% 0.29% 0.95% 0.36%
Return on average common equity 9.84% 9.86% 8.25% 4.78% 3.68% 12.49% 4.75%
Net interest income (tax-equivalent) to
average earning assets (2) 4.18% 4.45% 4.36% 4.54% 4.69% 4.59% 4.04%
Loans/deposits 67.73% 68.64% 63.53% 67.22% 63.98% 62.68% 61.49%
Common dividend payout ratio 36.76% 38.58% 47.23% 80.13% 100.81% 29.15% 61.87%
Equity/assets (period end) 7.18% 7.39% 7.26% 6.81% 7.56% 7.61% 7.51%
Average shareholders' equity/
average total assets 7.30% 7.45% 7.27% 7.36% 7.78% 7.59% 7.56%
Leverage ratio (4) 7.17% 7.12% 7.10% 7.06% 6.90% 7.50% 7.06%
Tier 1 capital to risk-weighted assets (4) 10.62% 10.79% 10.80% 10.67% 10.65% 11.47% 11.08%
Total capital to risk-weighted assets (4) 11.88% 12.05% 12.05% 11.93% 11.91% 12.73% 12.23%
ASSET QUALITY RATIOS
Allowance/period end loans 2.30% 1.91% 2.22% 2.19% 2.09% 1.42% 1.36%
Nonperforming loans/total loans (5) 0.27% 0.56% 0.72% 0.76% 1.14% 0.97% 1.63%
Allowance/nonperforming loans (5) 845.49% 338.25% 309.06% 286.46% 183.64% 146.96% 83.27%
Nonperforming assets/loans and foreclosed
properties (6) 0.64% 1.04% 1.18% 1.25% 1.50% 1.52% 3.16%
Provision/average loans 0.39% 0.53% 0.91% 1.62% 2.68% 0.69% 1.14%
Net charge-offs/average loans 0.03% 0.93% 0.81% 1.45% 1.91% 0.48% 0.84%
</TABLE>
- -----------------------------
(1) Interim period ratios have been annualized where applicable
(2) Average balances and calculations do not include the impact of the net
unrealized gain or loss on available for sale securities.
(3) Long-term debt is note payable of parent company.
(4) The risk-based capital ratios are based upon capital guidelines prescribed
by Federal bank regulatory authorities. Under these 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 6%.
(5) Nonperforming loans include loans on nonaccrual status and restructured
loans.
(6) Nonperforming assets include loans and foreclosed properties.
16
<PAGE> 29
RECENT DEVELOPMENTS AFFECTING UPC
Recently Completed Acquisitions. Since December 31, 1995, UPC has
completed the acquisition of the following institutions (collectively, the
"Recently Completed Acquisitions").
<TABLE>
<CAPTION>
ASSET SIZE
INSTITUTION (IN MILLIONS)(1) TYPE OF CONSIDERATION
- ---------------------------------- --------------------- ------------------------------
<S> <C> <C>
First Bancshares of Eastern $ 60 Cash
Arkansas, Inc., West Memphis,
Arkansas, and its subsidiary, First
National Bank of West Memphis,
Arkansas
First Bancshares of N.E. Arkansas, 62 Cash
Inc., Osceola, Arkansas, and its
subsidiary, First National Bank of
Osceola, Arkansas
----
Total $122
====
</TABLE>
(1) At date of acquisition.
17
<PAGE> 30
UPC Pending Acquisitions. UPC has entered into definitive agreements
to acquire the following five financial institutions in addition to FBI, which
UPC's management considers probable of consummation and which are expected to
close in 1996 (collectively, the "Other Pending Acquisitions").
<TABLE>
<CAPTION>
ASSET SIZE
INSTITUTION (IN MILLIONS)(1) TYPE OF CONSIDERATION
- ---------------------------------- ------------------------ -----------------------------------
<S> <C> <C>
Leader Financial Corporation $3,211 Approximately 16.6 million shares
("Leader"), Memphis, Tennessee, of UPC Common Stock
and its subsidiary, Leader Federal
Bank for Savings ("Leader
Federal") (2)
Eastern National Bank ("ENB"), 286 Cash, notes and UPC Series E
Miami, Florida (3) Preferred Stock (4)
Valley Federal Savings Bank 118 Approximately 435,000 shares of
("Valley Federal"), Sheffield, UPC Common Stock
Alabama
Franklin Financial Group, Inc. 138 Approximately 738,000 shares of
("FFGI"), Morristown, Tennessee, UPC Common Stock
and its subsidiary, Franklin
Federal Savings Bank
BancAlabama, Inc. ("BancAlabama"), 99 Approximately 415,000 shares of
Huntsville, Alabama, and its UPC Common Stock
subsidiary BankAlabama-Huntsville
------
$3,852
======
</TABLE>
- ------------
(1) At June 30, 1996.
(2) Reference is made to UPC's Current Reports on Form 8-K dated March 8,
1996, April 1, 1996, May 21, 1996, August 15, 1996 and August 16,
1996, incorporated by reference herein, for additional information
concerning the acquisition of Leader.
(3) UPC's management expects to complete the acquisition of ENB on or
before December 31, 1996, provided that disputes between ENB's
shareholders and agencies of the Republic of Venezuela and others
pending before the United States District Court for the Southern
District of Florida shall have been resolved to the satisfaction of
UPC by that date.
(4) Cash in the amount of $4.5 million, UPC promissory notes in the
aggregate original principal amount of $14.5 million, and up to
317,458 shares of Series E Preferred Stock of UPC.
18
<PAGE> 31
Earnings Considerations Related to Pending Acquisitions. It is
expected that either UPC or the institutions to be acquired in connection with
the Merger and the Other Pending Acquisitions will incur charges arising from
such acquisitions and from the assimilation of those institutions into the UPC
organization. Anticipated charges would normally arise from matters such as,
but not limited to, legal and accounting fees, financial advisory fees,
consulting fees, payment of contractual benefits triggered by a change of
control, early retirement and involuntary separation and related benefits,
costs associated with the elimination of duplicate facilities, branch closures,
data processing charges, cancellation of vendor contracts, the potential for
additional provisions for loan losses and similar costs which normally arise
from the consolidation of operational activities.
Aggregate charges expected to arise with respect to the acquisition of
FBI and the Other Pending Acquisitions (primarily the Leader acquisition) have
been preliminarily estimated to be in the range of $17 million to $22 million
after taxes. To the extent that UPC's recognition of these acquisition-related
charges is contingent upon consummation of a particular transaction, those
charges would be recognized in the period in which such transaction closes. In
addition, the range of estimated potential charges set forth above does not
take into account any potential assessment for recapitalization of the Savings
Association Insurance Fund discussed below under the heading "--Earnings
Considerations Related to Potential Special Regulatory Assessments." This range
of potential charges is based on currently available information as well as
preliminary estimates and is subject to change. The range is provided as a
preliminary estimate of the significant charges which may in the aggregate be
required and should be viewed accordingly. These charges are not reflected in
the pro forma consolidated financial statements.
Earnings Considerations Related to Potential Special Regulatory
Assessment. There are several proposals currently under consideration by the
U.S. Congress, the purposes of which are to provide additional financing for
the Savings Association Insurance Fund ("SAIF") and to provide for interest
payments on the Financing Corporation ("FICO") bonds issued in connection with
earlier Congressional efforts to support the then failing thrift industry. A
common feature of these proposals is a one-time special assessment of from 70
to 85 basis points on all deposits insured by the SAIF ($0.70 to $0.85 per $100
of covered deposits) ("SAIF-Insured Deposits"). All SAIF-Insured Deposits may
not be subject to an assessment at the 70 to 85 basis point level. Those
SAIF-Insured Deposits which have been acquired by banks in so-called Oakar
transactions ("Oakar Deposits") may be assessed at a lower rate (one proposal
suggests 20% lower). In addition to the special assessment on SAIF-Insured
Deposits, the proposals also contemplate annual assessments on deposits which
are insured by the Bank Insurance Fund ("BIF") ("BIF Deposits"). The assessment
on BIF Deposits would be for the purpose of providing financial support to pay
interest on the FICO bonds until they mature in 2017. It is unknown at this
time what the assessment level will be on BIF Deposits, but it has been
suggested that the assessment will be approximately 2.4 basis points ($0.024
per $100 of covered deposits). The proposals generally provide that such
assessments will reduce the paying institution's taxable income.
19
<PAGE> 32
At June 30, 1996, UPC's Banking Subsidiaries held approximately $1.3
billion in SAIF-Insured Deposits, approximately $1.0 billion of which are Oakar
Deposits. At June 30, 1996, Leader held approximately $1.6 billion in
SAIF-Insured Deposits and the Other Pending Acquisitions held approximately
$217 million in SAIF-Insured Deposits. If the FBI Merger, all Recently
Completed and Other Pending Acquisitions had been consummated by June 30, 1996,
then UPC's subsidiaries would have held approximately $3.2 billion in
SAIF-Insured Deposits, approximately $1.0 billion of which would have been
Oakar Deposits, assuming the savings associations to be acquired (FFGI, Leader
Federal and Valley Federal) had not been merged into other UPC Banking
Subsidiaries. Should the proposed legislation be adopted at levels indicated,
both UPC and FBI, as well as all other financial institutions with insured
deposits, would be required to take significant charges in relation to these
special assessments. These proposals to recapitalize the SAIF have not passed
and are under strong criticism by the banking industry. It is questionable
whether any such legislation will actually pass in 1996, however, UPC does
expect some form of legislation to be passed in the near future relative to the
recapitalization of the SAIF and that such legislation will provide for special
assessments of or above the levels discussed above against both SAIF-Insured
Deposits and BIF Deposits.
A number of other related proposals are also under consideration
relating to the elimination of the thrift charter and the conversion of all
federally-chartered thrifts to state-chartered banks or national banks and the
merger of the Office of Thrift Supervision (the "OTS") into the Office of the
Comptroller of the Currency (the "OCC"). It is not expected that any such
proposals would have a material adverse impact on UPC, either before or after
considering the pending acquisitions, except to the extent such proposals are
tied to the recapitalization of the SAIF as discussed above. However, none of
these proposals are currently in definitive form, and all are subject to
amendment, and UPC is unable to predict with any accuracy the impact any such
proposals will have on UPC and its subsidiaries when and if actually passed.
See "CERTAIN REGULATORY CONSIDERATIONS."
EQUIVALENT AND PRO FORMA PER SHARE DATA
The following table presents selected, comparative, unaudited per
share data for: (i) UPC Common Stock and FBI Common Stock on an historical
basis; (ii) UPC Common Stock on a pro forma basis, giving effect to the Merger,
all Recently Completed Acquisitions and the Other Pending Acquisitions; and
(iii) FBI Common Stock on an equivalent pro forma basis, including all Recently
Completed Acquisitions and the Other Pending Acquisitions, for the periods
indicated. Pro forma and equivalent pro forma per share data is not presented
separately for FBI because it would not be significantly different from UPC's
results. See "Recent Developments Affecting UPC--Recently Completed
Acquisitions and Pending Acquisitions."
The pro forma data for 1995 and the six month period ended June 30,
1996 reflect the assumed acquisition of FBI, all Recently Completed
Acquisitions and all Other Pending Acquisitions as of January 1, 1995. The pro
forma data for 1994 and 1993 reflect only the assumed acquisition of Leader
because the Other Pending Acquisitions and Recently Completed Acquisitions are
not considered significant to UPC from a financial statement presentation
20
<PAGE> 33
standpoint. Reference is made to UPC's Current Reports on Form 8-K dated March
8, 1996, April 1, 1996, May 21, 1996, August 15, 1996 and August 16, 1996 for
information regarding the Leader acquisition and the pro forma financial
statements which are incorporated by reference herein. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
The pro forma information is not necessarily indicative of the results
of the future operations of either UPC, FBI, the Recently Completed
Acquisitions or the Other Pending Acquisitions, or the actual results that
would have occurred had the Merger been consummated on January 1, 1995. The
information is derived from, and should be read in conjunction with, the
historical consolidated financial statements of UPC (including related notes
thereto) which are incorporated by reference herein, the historical
consolidated financial statements of FBI (including related notes thereto),
which are incorporated by reference herein, the historical consolidated
financial statements of Leader (including related notes thereto) which are
incorporated by reference to UPC's Current Reports on Form 8-K dated April 1,
1996, May 21, 1996 and August 15, 1996, and the pro forma consolidated
financial statements (including related notes thereto) which are incorporated
by reference to UPC's Current Report on Form 8-K dated August 16, 1996.
See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "--Selected Consolidated
Financial Data," "--Recent Developments Affecting UPC," and "--Pro Forma
Condensed Consolidated Financial Information."
21
<PAGE> 34
UNION PLANTERS CORPORATION
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Year Ended December 31, (1)
----------------------------------------
1996 1995 1994 1993
---------- ----------------------------------------
<S> <C> <C> <C> <C>
EARNINGS BEFORE EXTRAORDINARY ITEMS
AND ACCOUNTING CHANGES
UPC
Primary $ 1.66 $ 2.82 $ 1.28 $ 2.24
Fully diluted 1.58 2.70 1.28 2.18
FBI 1.70 2.71 1.56 1.05
UPC pro forma (all recently completed and
other pending acquisitions and FBI) (1)
Primary 1.60 2.66 1.52 2.17
Fully diluted 1.54 2.57 1.52 2.11
FBI equivalent pro forma (all recently completed
and other pending acquisitions and FBI) (1)
Primary 2.79 4.63 2.65 3.78
Fully diluted 2.68 4.48 2.65 3.67
Cash dividends per share
UPC 0.54 0.98 0.88 0.72
UPC pro forma (all recently completed and
other pending acquisitions and FBI) (1) 0.54 0.98 0.88 0.72
FBI 0.63 1.28 1.25 1.25
FBI equivalent pro forma (1) 0.94 1.71 1.53 1.25
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------- --------------
<S> <C> <C>
BOOK VALUE PER COMMON SHARE
UPC $ 19.96 $ 19.24
FBI 33.87 34.58
UPC pro forma (all recently completed and other
pending acquisitions and FBI) 19.58 18.63
FBI pro forma equivalent (all recently completed
and other pending acquisitions and FBI) (1) 34.10 32.44
</TABLE>
- --------------------------
(1) The equivalent pro forma per share data for FBI are computed by multiplying
UPC's pro forma information by 1.7415, the Exchange Ratio.
(2) See also, "-- Recent Developments Affecting UPC."
22
<PAGE> 35
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following tables contain unaudited pro forma condensed
consolidated financial statements, including a balance sheet at June 30, 1996
and statements of earnings for the six months ended June 30, 1996 and for the
years ended December 31, 1995, 1994 and 1993. These statements present on a pro
forma basis historical results for (i) UPC for all periods, (ii) UPC and
Leader, combined, for all periods, and (iii) UPC, FBI, the Recently Completed
Acquisitions, and the Other Pending Acquisitions, as of and for the six months
ended June 30, 1996 and for the twelve months ended December 31, 1995.
The unaudited pro forma condensed consolidated financial statements
also reflect UPC's Recently Completed Acquisitions: (i) First Bancshares of
Eastern Arkansas, Inc., and its subsidiary, First National Bank of West
Memphis, Arkansas, with total assets of approximately $60 million; and (ii)
First Bancshares of N.E. Arkansas, Inc., and its subsidiary, First National
Bank of Osceola, Arkansas, with total assets of approximately $62 million. Both
acquisitions were accounted for using the purchase method of accounting.
Additionally, these statements reflect the Merger and UPC's Other Pending
Acquisitions: (i) Leader in Memphis, Tennessee, a savings and loan holding
company, and its subsidiary, Leader Federal, with total assets of approximately
$3.2 billion, which is expected to be accounted for using the pooling of
interests method of accounting; (ii) Valley Federal in Sheffield, Alabama, with
total assets of approximately $118 million, which is expected to be accounted
for using the pooling of interests method of accounting; (iii) ENB in Miami,
Florida, with total assets of approximately $286 million, which is expected to
be accounted for using the purchase method of accounting; (iv) FFGI in
Morristown, Tennessee, a savings and loan holding company, and its subsidiary,
Franklin Federal Savings Bank ("Franklin Federal"), with total assets of
approximately $138 million, which is expected to be accounted for using the
pooling of interests method of accounting; and (v) BancAlabama in Huntsville,
Alabama, a bank holding company, and its subsidiary, BankAlabama-Huntsville,
with total assets of approximately $99 million, which is expected to be
accounted for using the pooling of interests method of accounting. (Information
regarding the total assets of all Recently Completed and Other Pending
Acquisitions is as of June 30, 1996.)
The operating results for FFGI and Valley Federal included in the
unaudited pro forma statement of earnings have been converted from their
respective fiscal year ends (September 30) to UPC's fiscal year end (December
31) by adding their respective first quarter operating results for the current
year and subtracting first quarter operating results for the previous year.
The Recently Completed Acquisitions and the Other Pending
Acquisitions, with the exception of the Leader transaction, are not considered
significant to UPC from a financial statement presentation standpoint.
Therefore, the financial information for the transactions expected to be
accounted for using the pooling of interests method of accounting have been
restated only for the current period.
23
<PAGE> 36
The unaudited pro forma condensed consolidated financial statements
include adjustments necessary to record the entities that have been or are
expected to be acquired using the purchase method of accounting. Eliminations
have been made for significant intercompany transactions.
The unaudited pro forma condensed consolidated financial statements
should be read in conjunction with the historical consolidated financial
statements of UPC, FBI and Leader, which are incorporated by reference herein,
and in conjunction with the information presented in UPC's Current Reports on
Form 8-K dated March 8, 1996, April 1, 1996, May 21, 1996, August 15, 1996 and
August 16, 1996 which are incorporated by reference herein. Pro forma results
are not necessarily indicative of future operating results. Certain
nonrecurring charges as discussed in "--Recent Developments Affecting
UPC--Earnings Considerations Related to Pending Acquisitions" have not been
included in the unaudited pro forma condensed consolidated financial
statements. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
24
<PAGE> 37
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30,1996
(Dollars in thousands)
<TABLE>
<CAPTION>
UPC, LEADER,
FBI, RECENTLY
UPC COMPLETED AND
AND OTHER PENDING
UPC LEADER ACQUISITIONS
----------- ------------ ---------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 465,555 $ 495,869 $ 530,181
Interest-bearing deposits at financial
institutions 4,962 5,892 10,353
Federal funds sold and securities
purchased under agreements to resell 61,918 143,918 114,104
Trading account assets 134,528 134,528 134,528
Loans held for resale 68,046 86,837 86,837
Available for sale securities, at fair value 3,053,759 3,941,548 4,169,432
Loans 7,201,771 9,186,196 9,828,016
Less: Unearned income (31,899) (40,222) (41,112)
Allowance for losses on loans (136,255) (158,663) (166,721)
------------ ------------ ------------
Net loans 7,033,617 8,987,311 9,620,183
Premises and equipment 229,124 248,435 278,723
Accrued interest receivable 103,009 177,371 184,633
Goodwill and other intangibles 60,610 60,610 84,498
Other assets 152,497 296,647 312,084
------------ ------------ ------------
Total assets $ 11,367,625 $ 14,578,966 $ 15,525,556
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 1,392,856 $ 1,564,416 $ 1,670,829
Certificates of deposit of $100,000
and over 749,833 916,301 1,022,710
Other interest-bearing 7,201,204 8,432,898 9,065,447
------------ ------------ ------------
Total deposits 9,343,893 10,913,615 11,758,986
Short-term borrowings 421,061 1,062,228 1,076,419
FHLB advances 258,269 835,840 849,091
Long-term debt 214,875 231,618 249,239
Accrued interest, expenses, and taxes 83,349 116,424 120,206
Other liabilities 38,570 144,966 156,955
------------ ------------ ------------
Total liabilities 10,360,017 13,304,691 14,210,896
------------ ------------ ------------
Shareholders' equity
Convertible preferred stock 87,233 87,233 95,169
Common stock 230,602 306,457 311,492
Additional paid-in capital 123,962 136,625 156,558
Net unrealized gain on available for sale securities 2,489 8,695 7,780
Retained earnings 563,322 735,265 743,661
------------ ------------ ------------
Total shareholders' equity 1,007,608 1,274,275 1,314,660
------------ ------------ ------------
Total liabilities and shareholders' equity $ 11,367,625 $ 14,578,966 $ 15,525,556
============ ============ ============
</TABLE>
25
<PAGE> 38
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
UPC, LEADER,
FBI, RECENTLY
UPC COMPLETED AND
AND OTHER PENDING
UPC LEADER ACQUISITIONS
----------- ------------ ---------------
<S> <C> <C> <C>
Interest income
Interest and fees on loans $ 327,252 $ 418,524 $ 447,949
Interest on investment securities
Taxable 74,982 105,817 113,003
Tax-exempt 14,991 15,220 15,220
Interest on deposits at financial institutions 98 109 219
Interest on federal funds sold and securities
purchased under agreements to resell 6,140 8,507 8,115
Interest on trading account assets 5,115 5,115 5,115
Interest on loans held for resale 2,838 3,705 3,705
----------- ------------ ------------
Total interest income 431,416 556,997 593,326
----------- ------------ ------------
Interest expense
Interest on deposits 177,253 215,009 231,438
Interest on short-term borrowings 6,663 23,156 23,356
Interest on FHLB advances and long-term debt 15,184 32,221 33,255
----------- ------------ ------------
Total interest expense 199,100 270,386 288,049
----------- ------------ ------------
Net interest income 232,316 286,611 305,277
Provision for losses on loans 15,851 18,772 20,736
----------- ------------ ------------
Net interest income after provision
for losses on loans 216,465 267,839 284,541
Noninterest income
Service charges on deposit accounts 34,111 36,487 38,315
Bank card income 10,287 10,747 10,747
Mortgage servicing income 4,872 17,282 17,330
Trust service income 5,772 5,772 5,772
Profits and commissions from trading activities 3,104 3,104 3,104
Investment securities gains 66 66 30
Other income 23,258 26,864 28,598
----------- ------------ ------------
Total noninterest income 81,470 100,322 103,896
----------- ------------ ------------
Noninterest expense
Salaries and employee benefits 85,806 100,007 108,184
Net occupancy expense 13,565 15,164 17,281
Equipment expense 14,391 16,613 16,613
Other expense 64,600 77,751 85,970
----------- ------------ ------------
Total noninterest expense 178,362 209,535 228,048
----------- ------------ ------------
Earnings before income taxes 119,573 158,626 160,389
Applicable income taxes 39,786 53,695 55,453
----------- ------------ ------------
Net earnings $ 79,787 $ 104,931 $ 104,936
=========== ============ ============
Earnings per common share
Primary $ 1.66 $ 1.65 $ 1.60
Fully diluted 1.58 1.59 1.54
Weighted average shares outstanding
(in thousands)
Primary 45,940 61,520 63,036
Fully diluted 50,533 66,139 68,052
</TABLE>
26
<PAGE> 39
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
UPC, LEADER,
FBI, RECENTLY
UPC COMPLETED AND
AND OTHER PENDING
UPC LEADER ACQUISITIONS
----------- ------------ ---------------
<S> <C> <C> <C>
Interest income
Interest and fees on loans $ 636,769 $ 804,420 $ 869,944
Interest on investment securities
Taxable 137,453 177,272 193,752
Tax-exempt 31,816 32,313 33,218
Interest on deposits at financial institutions 1,910 1,936 2,151
Interest on federal funds sold and securities
purchased under agreements to resell 12,095 17,041 15,945
Interest on trading account assets 12,774 12,774 12,774
Interest on loans held for resale 3,865 5,318 5,318
---------- ---------- ----------
Total interest income 836,682 1,051,074 1,133,102
---------- ---------- ----------
Interest expense
Interest on deposits 347,859 422,360 459,489
Interest on short-term borrowings 12,825 33,856 34,241
Interest on FHLB advances and long-term debt 28,567 58,917 62,314
---------- ---------- ----------
Total interest expense 389,251 515,133 556,044
---------- ---------- ----------
Net interest income 447,431 535,941 577,058
Provision for losses on loans 22,231 27,381 32,576
---------- ---------- ----------
Net interest income after provision
for losses on loans 425,200 508,560 544,482
Noninterest income
Service charges on deposit accounts 71,611 75,694 80,649
Bank card income 20,103 20,740 20,740
Mortgage servicing income 9,835 36,645 36,645
Trust service income 8,010 8,010 8,010
Profits and commissions from trading activities 10,441 10,441 10,441
Investment securities gains 476 409 342
Other income 37,176 42,110 45,819
---------- ---------- ----------
Total noninterest income 157,652 194,049 202,646
---------- ---------- ----------
Noninterest expense
Salaries and employee benefits 171,325 197,855 216,820
Net occupancy expense 27,192 30,447 34,761
Equipment expense 30,156 34,405 35,257
Other expense 153,491 180,498 197,961
---------- ---------- ----------
Total noninterest expense 382,164 443,205 484,799
---------- ---------- ----------
Earnings before income taxes 200,688 259,404 262,329
Applicable income taxes 65,286 86,649 88,110
---------- ---------- ----------
Net earnings $ 135,402 $ 172,755 $ 174,219
========== ========== ==========
Earnings per common share
Primary $ 2.82 $ 2.72 $ 2.66
Fully diluted 2.70 2.64 2.57
Weighted average shares outstanding
(in thousands)
Primary 45,008 60,385 61,893
Fully diluted 49,618 64,995 67,141
</TABLE>
27
<PAGE> 40
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data) UPC
AND
UPC LEADER
---------- ----------
<S> <C> <C>
Interest income
Interest and fees on loans $ 517,032 $ 644,690
Interest on investment securities
Taxable 162,012 193,276
Tax-exempt 32,999 33,415
Interest on deposits at financial institutions 734 748
Interest on federal funds sold and securities
purchased under agreements to resell 4,472 6,862
Interest on trading account assets 9,143 9,143
Interest on loans held for resale 1,573 2,396
---------- ----------
Total interest income 727,965 890,530
---------- ----------
Interest expense
Interest on deposits 262,572 317,721
Interest on short-term borrowings 21,300 28,277
Interest on FHLB advances and long-term debt 20,979 38,927
---------- ----------
Total interest expense 304,851 384,925
---------- ----------
Net interest income 423,114 505,605
Provision for losses on loans 4,894 9,661
---------- ----------
Net interest income after provision
for losses on loans 418,220 495,944
Noninterest income
Service charges on deposit accounts 55,551 59,564
Bank card income 10,953 11,386
Mortgage servicing income 9,621 31,060
Trust service income 7,990 7,990
Profits and commissions from trading activities 6,639 6,639
Investment securities losses (20,298) (22,515)
Other income 30,349 42,365
---------- ----------
Total noninterest income 100,805 136,489
---------- ----------
Noninterest expense
Salaries and employee benefits 175,218 201,532
Net occupancy expense 28,041 31,638
Equipment expense 28,698 32,618
Other expense 195,740 221,048
---------- ----------
Total noninterest expense 427,697 486,836
---------- ----------
Earnings before income taxes 91,328 145,597
Applicable income taxes 25,467 45,174
---------- ----------
Net earnings $ 65,861 $ 100,423
========== ==========
Earnings per common share
Primary $ 1.28 $ 1.52
Fully diluted 1.28 1.52
Weighted average shares outstanding
(in thousands)
Primary 43,741 59,587
Fully diluted 44,083 59,929
</TABLE>
28
<PAGE> 41
UNION PLANTERS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data) UPC
AND
UPC LEADER
---------- ----------
<S> <C> <C>
Interest income
Interest and fees on loans $ 425,967 $ 531,417
Interest on investment securities
Taxable 157,403 186,966
Tax-exempt 30,507 30,596
Interest on deposits at financial institutions 1,862 1,884
Interest on federal funds sold and securities
purchased under agreements to resell 6,175 8,569
Interest on trading account assets 6,194 6,194
Interest on loans held for resale 7,438 8,163
---------- ----------
Total interest income 635,546 773,789
---------- ----------
Interest expense
Interest on deposits 238,019 298,312
Interest on short-term borrowings 8,203 8,203
Interest on FHLB advances and long-term debt 14,291 27,984
---------- ----------
Total interest expense 260,513 334,499
---------- ----------
Net interest income 375,033 439,290
Provision for losses on loans 17,950 22,660
---------- ----------
Net interest income after provision
for losses on loans 357,083 416,630
Noninterest income
Service charges on deposit accounts 49,490 53,723
Bank card income 10,393 10,884
Mortgage servicing income 9,595 28,266
Trust service income 7,643 7,643
Profits and commissions from trading activities 13,787 13,787
Investment securities gains 4,506 3,508
Other income 32,148 39,951
---------- ----------
Total noninterest income 127,562 157,762
---------- ----------
Noninterest expense
Salaries and employee benefits 163,711 186,703
Net occupancy expense 25,393 28,476
Equipment expense 25,989 30,345
Other expense 131,357 163,364
---------- ----------
Total noninterest expense 346,450 408,888
---------- ----------
Earnings before income taxes, extraordinary
items, and accounting changes 138,195 165,504
Applicable income taxes 41,168 51,864
---------- ----------
Earnings before extraordinary items
and accounting changes $ 97,027 $ 113,640
========== ==========
Earnings per common share before extraordinary items
and accounting changes (1)
Primary $ 2.24 $ 2.17
Fully diluted 2.18 2.11
Weighted average shares outstanding
(in thousands)
Primary 38,914 43,192
Fully diluted 43,144 47,422
- ---------------------
</TABLE>
(1) - Leader was organized on March 18, 1993 in connection with the conversion
of its principal subsidiary, Leader Federal Bank for Savings and
subsidiaries, from a federal mutual savings bank to a federally-chartered
capital stock savings bank. Accordingly, the calculation of pro forma
earnings per share on a pooled basis is based on Leader's fourth quarter
net income since the stock conversion occured on September 30, 1993.
29
<PAGE> 42
THE SPECIAL MEETING
TIME AND PLACE OF SPECIAL MEETING; SOLICITATION OF PROXIES; REVOCATION
Each copy of this Prospectus/Proxy Statement is accompanied by a Proxy
Appointment Card furnished in connection with the FBI Board's solicitation of
proxies for use at the Special Meeting and at any adjournments or postponements
thereof. The Special Meeting is scheduled to be held at 9:30 a.m., local time
on Wednesday, October 23, 1996, at Westborough Country Club, 631 South Berry
Road, Kirkwood, Missouri. Only FBI shareholders at the close of business on
September 17, 1996 (the "Record Date") are entitled to receive notice of and to
vote at the Special Meeting. At the Special Meeting, FBI shareholders will
consider and vote upon a proposal to approve the Reorganization Agreement
including the Plan of Merger. If a signed Proxy Appointment Card is returned to
FBI and the FBI shareholder has not marked his or her vote with respect to the
proposed Merger, all of the shares represented by that Proxy Appointment Card
will be voted "FOR" approval of the Reorganization Agreement. If matters other
than the consideration of the proposed Merger properly come before the Special
Meeting, the proxy will be voted by the persons named therein in a manner which
they consider to be in the best interests of FBI. FBI's management is not aware
of any other matters to be acted upon at the Special Meeting.
FBI SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE
ACCOMPANYING PROXY APPOINTMENT CARD AND RETURN IT PROMPTLY TO FBI IN THE
ENCLOSED, POSTAGE-PAID ENVELOPE. FAILURE TO RETURN YOUR PROPERLY EXECUTED PROXY
APPOINTMENT CARD OR FAILURE TO VOTE AT THE SPECIAL MEETING WILL HAVE THE SAME
EFFECT AS A VOTE AGAINST THE APPROVAL OF THE REORGANIZATION AGREEMENT (BUT WILL
NOT BE SUFFICIENT, WITHOUT FURTHER ACTION, TO PERFECT DISSENTERS' RIGHTS). FBI
SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR PROXY
APPOINTMENT CARDS.
Any FBI shareholder who has executed and delivered a Proxy Appointment
Card may nevertheless 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 by submitting a signed Proxy Appointment Card
bearing a later date by mail, delivery or facsimile to Financial Bancshares,
Inc., 3805 S. Broadway, St. Louis, Missouri 63118, Attention: Virginia A. Renz,
Corporate Secretary (facsimile number (314) 664-0429), provided such notice or
later dated Proxy Appointment Card is actually received by FBI before the vote
of FBI shareholders has been taken.
In addition to solicitation of proxies from FBI shareholders by use of
the mail, proxies also may be solicited by personal interview, telephone and
facsimile by directors, officers and employees of FBI who will not be
specifically compensated for such services. It is expected that banks,
brokerage houses, and other institutions, nominees or fiduciaries will be
requested to
30
<PAGE> 43
forward the soliciting materials to their principals and obtain authorization
for the execution of proxies. All costs of soliciting proxies, assembling and
mailing the Prospectus, all papers which now accompany or hereafter may
supplement the same, as well as reasonable out-of-pocket expenses incurred by
such banks, brokerage houses, and other institutions, nominees or fiduciaries
for forwarding proxy materials to and obtaining proxies from their principals,
will be borne by FBI; provided, however, that UPC will pay all Commission
filing fees and other regulatory filing fees incurred in connection with the
Merger and the costs of printing the Prospectus/Proxy Statement.
VOTES REQUIRED
The affirmative votes of 66 2/3% of the outstanding shares of FBI
Common Stock entitled to vote at the Special Meeting are required in order to
approve the Reorganization Agreement. As of the Record Date, there were 684,377
shares of FBI Common Stock outstanding and entitled to vote at the Special
Meeting, with each share entitled to one vote.
The FBI management group held beneficially as of the Record Date
312,993 shares, or approximately 45.7% of the outstanding shares of FBI Common
Stock. FBI has been advised by the members of the FBI Management Group that
they intend to vote their shares of FBI Common Stock "FOR" approval of the
Reorganization Agreement. Should all members of the FBI management group vote
"FOR" approval of the Reorganization Agreement, only 143,258 additional shares
of FBI Common Stock must be voted "FOR" approval of the Reorganization
Agreement in order to meet the shareholder approval requirements.
VOTING
Two-thirds of the outstanding shares of FBI Common Stock present in
person or by proxy will constitute a quorum for the transaction of business at
the Special Meeting. Proxies marked to abstain from voting will be treated as
shares that are present at the Special Meeting for purposes of determining the
presence of a quorum for the transaction of business at the Special Meeting.
The proposal to approve the Reorganization Agreement requires the
affirmative votes of the holders of 66 2/3% of the issued and outstanding
shares of FBI Common Stock as of the Record Date. Therefore, failure to return
a properly executed Proxy Appointment Card or to vote in person at the Special
Meeting, and abstentions, will have the same effect as a vote against approval
of the Reorganization Agreement.
DISSENTERS' RIGHTS
Each FBI shareholder entitled to vote at the Special Meeting has the
right to dissent from the Merger and receive from Capital, the surviving
corporation, the fair value of his or her shares of FBI Common Stock in cash if
the FBI shareholder strictly complies with the procedures set forth under
Section 351.455 of the Missouri Act, a copy of which is attached hereto as
31
<PAGE> 44
Appendix E. Under Section 351.455 of the Missouri Act, an FBI shareholder
entitled to vote at the Special Meeting must (1) file with FBI, prior to or at
the Special Meeting, a written objection to the Merger; (2) not vote in favor
of the Reorganization Agreement or the Merger; and (3) within 20 days after the
Effective Date of the Merger, make written demand on Capital for payment of the
fair value of his or her shares of FBI Common Stock as of the day prior to the
date of the Special Meeting. Such demand by a Dissenting FBI Shareholder must
state the number of shares of FBI Common Stock owned by such dissenting
shareholder. As soon as reasonably practical following the Effective Date of
the Merger, UPC will mail to each FBI Record Holder, Exchange Materials which
will include notice of the Effective Date of the Merger. Any FBI shareholder
failing to make demand within the 20-day period shall be conclusively presumed
to have consented to the Merger and shall be bound by the terms thereof. A
PROXY OR VOTE AGAINST THE MERGER WILL NOT, BY ITSELF, BE REGARDED AS A WRITTEN
OBJECTION FOR PURPOSES OF ASSERTING DISSENTERS' RIGHTS.
If within 30 days after the Effective Date of the Merger, the fair
value of shares of FBI Common Stock the holders of which have perfected their
dissenters' rights (the "Dissenting FBI Shareholder") shall have been agreed
upon between the Dissenting FBI Shareholder and the surviving corporation,
payment therefor shall be made by the surviving corporation within 90 days
after the Effective Date of the Merger upon the surrender by the Dissenting FBI
Shareholder of the certificate or certificates representing his shares of FBI
Common Stock. Upon payment of the agreed value, the Dissenting FBI Shareholder
shall cease to have any interest in such shares or in Capital or UPC.
If within 30 days after the Effective Date of the Merger the
Dissenting FBI Shareholder and Capital do not agree as to the fair value of
shares of FBI Common Stock, then the Dissenting FBI Shareholder may, within 60
days after the expiration of the 30-day period, file a petition in any court of
competent jurisdiction asking for a finding and determination of the fair value
of such shares of FBI Common Stock and shall be entitled to judgment against
Capital for the amount of such fair value as of the day prior to the date of
the Special Meeting, together with interest thereon accumulated until the date
of such judgment. The "fair value" of the shares determined by the court may be
more or less than the amount offered to FBI shareholders under the
Reorganization Agreement. The judgment will be payable only upon and
simultaneously with the surrender to Capital of the certificate or certificates
representing said shares of FBI Common Stock. Upon the payment of the judgment,
the Dissenting FBI Shareholder shall cease to have any interest in such shares
of FBI Common Stock or in Capital or UPC. Unless a Dissenting FBI Shareholder
shall have filed such petition within such 60-day period, such Dissenting FBI
Shareholder, and all persons claiming under such Dissenting FBI Shareholder,
will be conclusively presumed to have approved and ratified the Merger, and
will be bound by the terms thereof.
The foregoing summary of the applicable provisions of Section 351.455
of the Missouri Act is not intended to be a complete statement of such
provisions, and is qualified in its entirety by reference to such Section, a
copy of which is annexed to this Prospectus/Proxy Statement as Appendix E.
FAILURE TO COMPLY WITH THESE PROCEDURES WILL CAUSE THE
32
<PAGE> 45
DISSENTING FBI SHAREHOLDER TO LOSE HIS OR HER DISSENTERS' RIGHTS TO RECEIVE IN
CASH PAYMENT FOR HIS OR HER SHARES OF FBI COMMON STOCK IN LIEU OF SHARES OF UPC
COMMON STOCK. CONSEQUENTLY, ANY FBI SHAREHOLDER WHO DESIRES TO EXERCISE HIS OR
HER RIGHTS TO PAYMENT FOR HIS OR HER SHARES OF FBI COMMON STOCK IS URGED TO
CONSULT HIS OR HER LEGAL ADVISER BEFORE ATTEMPTING TO EXERCISE SUCH RIGHTS.
The Reorganization Agreement provides that, should FBI shareholders
holding more than nine percent (9%) of the FBI Common Stock issued and
outstanding at the Closing Date have perfected their dissenters' rights in
accordance with the Missouri Act through the Closing Date, UPC and Capital have
the right, exercisable in their sole discretion to terminate the Reorganization
Agreement without penalty.
For a discussion of certain federal income tax consequences in
connection with exercising dissenters' rights, see "THE MERGER--Certain Federal
Income Tax Consequences."
RECOMMENDATION
For the reasons described below, the FBI Board has adopted and
approved the Reorganization Agreement and believes that the Merger is in the
best interest of FBI and the FBI shareholders and recommends that the FBI
shareholders vote "FOR" the approval of the Reorganization Agreement.
33
<PAGE> 46
THE MERGER
The following information describes the material aspects of the
Merger. This description does not purport to be complete and is qualified in
its entirety by reference to the Appendices hereto, including the
Reorganization Agreement and the Plan of Merger, which is attached as Appendix
B to this Prospectus/Proxy Statement and incorporated herein by reference. All
shareholders are urged to read the Appendices in their entirety.
BACKGROUND OF THE MERGER
During the second half of 1995, senior FBI management (Arthur E. S.
Schmid, Chairman, Clifford A. Schmid, President and Edward J. Vega, Senior Vice
President) had three meetings with representatives of Hovde Financial, Inc., a
Washington, D.C. investment banking firm ("Hovde"). At these meetings the Hovde
representatives expressed their view that, given market conditions at that
time, FBI should explore the possibility of its acquisition by another
financial institution.
At the last of the three meetings, on December 15, 1995, the Hovde
representatives informed senior FBI management that UPC had a serious interest
in acquiring FBI and that Hovde was acting as financial advisor to UPC. They
provided the reasons for UPC's interest in FBI, arguments for considering a
sale soon rather than further in the future, summary financial information on
UPC, and the locations of UPC-owned banks.
Shortly after that meeting, Arthur E. S. Schmid contacted Z.
Christopher Mercer, President of Mercer Capital, regarding the valuation of FBI
stock and the need for FBI to retain a financial advisor, although Mercer
Capital was not formally retained at that time.
On March 21, 1996, a meeting was held with UPC representatives. In
this meeting the two Messrs. Schmid were, for the first time, introduced to
UPC's Chairman and Chief Executive Officer, Benjamin W. Rawlins, Jr. and its
President and Chief Operating Officer, Jackson W. Moore. No conclusions were
reached at this meeting, but the UPC representatives confirmed UPC's interest
in acquiring FBI.
In these circumstances, the two Messrs. Schmid, on behalf of the FBI
Board, formally retained Mercer Capital as FBI's financial advisor effective
April 10, 1996. Mercer Capital's initial engagement was to prepare a market
valuation of the equity of FBI.
At a meeting on April 16, 1996, representatives of Hovde generally
described to the two Messrs. Schmid and to Mr. Mercer the basis upon which, in
their opinion, UPC would arrive at an overall price and emphasized that the
then active mergers and acquisitions market might become less active in the
future. However, no conclusions were reached at this meeting.
34
<PAGE> 47
On or about May 2, 1996, Mercer Capital completed its valuation of
FBI's equity, and on May 3, 1996, Mr. Mercer met with the two Messrs. Schmid to
report in depth on Mercer Capital's findings and methodology.
On May 16, 1996, the two Messrs. Schmid, Messrs. Rawlins and Moore,
Mr. Mercer, and representatives of Hovde conducted serious negotiations which
resulted in a tentative agreement as to the consideration for the proposed
acquisition of FBI by UPC, which was subsequently incorporated in the
Reorganization Agreement as originally executed.
The FBI Board met on June 18, 1996, with Mr. Mercer also attending.
Mr. Mercer reported on UPC's overall interest, including the tentative price
agreement, and compared that consideration with the findings contained in
Mercer Capital's report on the market valuation of FBI's equity. Mr. Mercer
delivered Mercer Capital's preliminary opinion of the fairness of the proposed
transaction, from a financial point of view, subject to the negotiation of a
definitive agreement reflecting the basic terms negotiated. Following Mr.
Mercer's presentation the FBI Board authorized FBI management to continue
meeting with representatives of UPC to develop a mutually acceptable definitive
acquisition agreement. These negotiations, which included counsel for FBI and
UPC, resulted in the definitive Reorganization Agreement. At a meeting of the
FBI Board on June 26, 1996, the draft Reorganization Agreement was described in
detail by Bruce E. Woodruff, of the law firm of Armstrong, Teasdale, Schlafly &
Davis, FBI's outside counsel. At the conclusion of the meeting, the FBI Board
adopted a series of resolutions approving the Reorganization Agreement, which
was executed and delivered by FBI on June 27, 1996.
Upon completion of UPC's due diligence and at the request of UPC's
management, on September 6, 1996 the FBI Board approved the Amendment
reducing the Exchange Ratio from 1.7444 to 1.7415 and increasing the maximum
number of shares of UPC Common Stock to be issued in the Merger from 1,220,000
to 1,231,000. These amendments were deemed to be appropriate to fully take into
account outstanding FBI Options and other rights associated therewith.
REASONS FOR THE MERGER
UPC's Reasons for the Merger. In approving the Reorganization
Agreement and the Merger, the UPC Board considered a number of factors
concerning the benefits of the Merger. The UPC Board of Directors considered
the following material factors:
(a) the information presented to the directors by the management
of UPC concerning the business, operations, earnings, asset quality, and
financial condition of FBI, including the composition of the earning assets
portfolio of FBI;
(b) the financial terms of the Merger, including the relationship
of the value of the consideration issuable in the Merger to the market value,
tangible book value, and earnings per share of FBI Common Stock;
35
<PAGE> 48
(c) the nonfinancial terms of the Merger, including the treatment
of the Merger as a tax-free exchange of FBI Common Stock for UPC Common Stock
for federal income tax purposes;
(d) the likelihood of the Merger being approved by applicable
regulatory authorities without undue conditions or delay;
(e) the attractiveness of the FBI franchise, the market position
of FBI in each of the markets in which it operates, and the opportunity to
increase its market share in the State of Missouri; and
(f) the compatibility of the community bank orientation of the
operations of FBI to that of UPC.
The foregoing includes all of the material factors considered by the
UPC Board of Directors. The UPC Board of Directors did not quantify or
otherwise attempt to assign relative or specific weights to the factors
considered in reaching its determination that the Reorganization Agreement, the
Plan of Merger and the Merger are in the best interests of shareholders.
FBI's Reasons for the Merger. The FBI Board has determined that the
Reorganization Agreement entails a fair price for the FBI Common Stock and
recommends that the FBI shareholders approve the Reorganization Agreement.
Among the factors considered by the FBI Board in making this recommendation
were the following:
(a) the opportunity provided by the Merger for FBI shareholders to
exchange their shares of FBI Common Stock, which has had only limited
liquidity, for shares of UPC Common Stock, which is listed on the New York
Stock Exchange, and thereby enjoy a much broader resale market than that for
shares of FBI Common Stock;
(b) while future dividends on the UPC Common Stock cannot be
assured, the Exchange Ratio, when considered along with the current annual cash
dividend rate per share on UPC Common Stock, means that an FBI shareholder who
receives UPC Common Stock in exchange for his or her FBI Common Stock in the
Merger would receive a substantially higher annual cash dividend return than
that received in recent years on the FBI Common Stock so exchanged;
(c) based on trading prices of the UPC Common Stock at the time of
the FBI Board's approval of the Reorganization Agreement, the market value of
the shares of UPC Common Stock to be received in the Merger represented
approximately 1.5 times the March 31, 1996 book value of the FBI Common Stock;
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(d) the FBI Board considered the likelihood of future appreciation
of the UPC Common Stock to be greater than that for the FBI Common Stock, on
the basis that UPC's multistate banking operations and pro forma consolidated
total assets exceeding $15 billion give UPC access to a much larger and more
diversified potential customer base than FBI; and
(e) the FBI Board also relied in part on the opinion of
Mercer Capital, as first orally expressed at the FBI Board's meeting on June
18, 1996 and later confirmed in its written opinion dated September 12, 1996,
that the Exchange Ratio was fair from a financial point of view to the holders
of FBI Common Stock. See "--Fairness Opinion of Financial Advisor."
The foregoing includes all of the material factors considered by the
FBI Board. The FBI Board did not quantify or otherwise attempt to assign
relative or specific weights to the factors considered in reaching its
determination that the Reorganization Agreement and the Merger are in the best
interests of the FBI shareholders.
FAIRNESS OPINION OF FINANCIAL ADVISOR
In late 1995, Mercer Capital was contacted by Arthur E.S. Schmid to
prepare a valuation analysis outlining the relative merits, from the viewpoint
of FBI's shareholders, of selling versus remaining independent. The proposed
analysis was not immediately begun. Following meetings between FBI and
representatives of UPC in March, 1996, Mercer Capital's involvement was
expanded to include representation in a possible sale. An engagement letter,
dated April 10, 1996, was entered into between Mercer Capital and FBI which
called for Mercer Capital to: (a) act as financial advisor with respect to a
potential transaction; (b) develop a short list of other potential acquirers
and solicit additional expressions of interest; (c) negotiate the financial
aspects of the respective offer(s); (d) assist in the evaluation of multiple
offers, to the extent that they developed; (e) prepare a fairness opinion; and
(f) review the appropriate merger related documents and assist in other matters
as deemed appropriate.
Mercer Capital is a national valuation consulting and transaction
advisory firm which renders independent valuations and related financial
advisory services, including the issuance of fairness opinions for mergers
and acquisitions, to financial institutions and businesses throughout the U.S.
Mercer Capital was formed in 1982 and was selected by the FBI Board to
represent FBI in its negotiations with UPC based upon its extensive experience
in the banking industry.
During April, May and June of 1996, Mercer Capital negotiated on
behalf of FBI with UPC's financial advisors. On June 18, 1996, a
representative of Mercer Capital presented an oral, preliminary fairness
opinion to the FBI Board stating that the proposed terms of the then
contemplated acquisition were fair to the FBI shareholders from a financial
point of view. A written fairness opinion was rendered on September 12, 1996
stating that the consideration to be received by FBI shareholders pursuant to
the Reorganization Agreement is fair from a financial point of view. A copy of
the opinion is included in this Proxy Statement/Prospectus as Appendix D. FBI
shareholders are urged to read the entire opinion.
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No limitations were imposed by the FBI Board with respect to the
investigations made or the procedures followed by Mercer Capital in rendering
its fairness opinion.
As part of its investigation, Mercer Capital reviewed: (1) the
Reorganization Agreement; (2) FBI's and UPC's annual reports to shareholders
for fiscal years 1991, 1992, 1993, 1994 and 1995; (3) FBI's and UPC's annual
reports on Form 10-K for the fiscal years ended December 31, 1991, 1992, 1993,
1994 and 1995; (4) FBI's and UPC's quarterly reports on Form 10-Q for the
quarters ended March 31, 1996 and June 30, 1996; (5) FBI's Call Reports as of
March 31, 1996 and June 30, 1996; (6) FBI's and UPC's reports to the Federal
Reserve on Forms Y-9 LP and Y-9C as of March 31, 1996 and June 30, 1996; (7)
FBI's and UPC's 1996 budgets; (8) historical market prices and trading volumes
for the UPC Common stock; (9) transaction data involving banks which have been
acquired; and, (10) public market pricing data of publicly traded bank holding
companies which Mercer Capital deemed comparable to UPC.
As part of its engagement, a representative of Mercer Capital visited
with FBI's management on numerous occasions in St. Louis, and also visited with
UPC's management in Memphis. Factors considered in rendering the opinion
include: (1) terms of the Reorganization Agreement; (2) the process by which
the Reorganization Agreement was negotiated; (3) the valuation analysis of FBI
presented to the FBI Board at the June 18, 1996 meeting; (4) an analysis of the
estimated pro forma changes in book value per share, earnings per share, and
dividends per share from the perspective of the FBI shareholders; (5) a review
of UPC's historical financial performance, historical stock pricing, the
liquidity of its shares and current pricing in relation to other publicly
traded bank holding companies; (6) tax consequences of the Merger for the FBI
shareholders; and, (7) restrictions placed on the UPC Common Stock received in
the Merger.
Mercer Capital did not compile or audit UPC's or FBI's financial
statements, nor did Mercer Capital independently verify the information
reviewed. Mercer Capital relied upon such information as being complete and
accurate in all material respects. Mercer Capital did not make an independent
valuation of the loan portfolio, adequacy of the loan loss reserve or other
assets or liabilities of either institution.
Mercer Capital's opinion does not constitute a recommendation to any
FBI shareholder as to how the shareholder should vote on the proposed Merger;
nor did Mercer Capital express any opinion as to the prices at which any
security of UPC or FBI might trade in the future.
Transaction Overview. Mercer Capital noted that under the terms of the
Reorganization Agreement, FBI will be merged into Capital, a wholly owned
subsidiary of UPC. FBI shareholders will receive 1.7415 shares of UPC Common
Stock for each share of FBI Common Stock. Given FBI's 706,877 outstanding
common share equivalents, UPC will issue 1,231,000 shares of UPC Common Stock
to the FBI shareholders. The Reorganization Agreement includes a "fixed"
Exchange Ratio; accordingly, the Exchange Ratio will not be adjusted for
fluctuations in UPC's stock price prior to closing.
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At the date of the announcement of the Reorganization Agreement, UPC
Common Stock was trading in the vicinity of $30.00 per share, which implied
that FBI shareholders would receive an aggregate consideration of $36.6
million, or $52.33 per share of FBI Common Stock. The implied price/book value
("P/B") ratio was about 150% of fully diluted book value per share as of March
31, 1996, while the price/earnings ("P/E") ratio was about 20x based upon fully
diluted earnings per share for the twelve-month period ended March 31, 1996.
Mercer Capital noted that since then, UPC's shares have trended up to a recent
high of $34.75 per share. The current implied aggregate consideration is
approximately $42.8 million, or $60.52 per share of FBI Common Stock, based
upon UPC's recent price of $34.75 per share. The current implied P/B ratio is
180%, and the P/E ratio is about 22x fully diluted earnings per share for the
twelve-month period ended June 30, 1996.
Negotiation Process. In Mercer Capital's opinion, the process by which
the Reorganization Agreement was reached provided an additional perspective of
overall fairness to FBI shareholders in addition to the pricing and terms of
the Reorganization Agreement. Mercer Capital noted the following:
(a) The FBI Board took reasonable steps to obtain qualified
financial advisory services to assist with its analysis and evaluation of the
Reorganization Agreement for purposes of making an informed decision;
(b) Negotiations between FBI and UPC and each party's respective
financial advisors could be characterized as intense, with vigorous discussions
related to the pricing and terms of the Reorganization Agreement;
(c) FBI was "shopped" on a limited basis with other area financial
institutions. Commerce Bancshares, Inc. declined to make an offer, expressing
concerns about the condition of FBI--St. Louis. Magna Group, Inc. ("Magna")
made a preliminary, oral offer of aggregate consideration in the range of $33
million to $34 million, consisting of either cash or a combination of cash and
stock, with the stock portion not to exceed 50%. Other potential acquirers were
ruled out for several reasons (e.g. too small to have a viable market, too
great of a market share on a pro forma basis in certain areas, too large to
provide a realistic opportunity for a subsequent sale of the acquirer, etc.).
UPC's final offer was considered superior to available alternatives due to the
higher price and the provision for an all stock transaction, which allows all
FBI shareholders the opportunity to receive UPC Common Stock without incurring
any capital gains (or losses) taxes; and
(d) UPC, through the efforts of the FBI Board and Mercer Capital,
raised its initial offer price twice, from $31.5 million to $36.6 million
(based upon UPC's market price of $30.00 per share at the time), as a result of
the negotiation process.
Valuation Analysis. A valuation analysis of FBI was presented to the
FBI Board at its June 18, 1996 board meeting. Among other things, the valuation
analysis assumed a market value of $30.00 per share for UPC Common Stock based
on its trading value at that time.
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The valuation analysis of FBI was based upon four methods, Transaction
Analysis, Dilution Analysis, Discounted Cash Flow Analysis and Sell Now vs.
Sell Later Analysis. Mercer Capital did not place greater weight on any one
method and emphasized that each analysis must be considered in its entirety
within the context of the overall analysis.
Transaction Analysis. The comparable transaction method seeks to
develop an indication of value for a subject company by analyzing prices paid
for similar institutions which have been acquired. With regard to the banking
industry, most transactions are measured in terms of price/book ratios,
price/tangible book ratios and price/earnings ratios.
With regard to FBI, Mercer Capital reviewed prices paid for acquired
banks in relation to the sellers' book value and earnings as compiled by SNL
Securities. The data was divided into six groups with average and median P/E,
P/B and price/tangible book value ("P/TB") ratios calculated for calendar years
1990-1995 and year-to-date through the first quarter of 1996:
1. All privately acquired U.S. commercial banks;
2. Midwest-based commercial banks which have been acquired;
3. Southwest-based commercial banks which have been acquired;
4. Missouri banks which have been acquired;
5. Missouri banks and banks in surrounding states which have been
acquired; and,
6. Banks with $250 million to $500 million of assets which have been
acquired.
Mercer Capital's analysis indicated an overall range of $33.00 to
$70.00 per share of FBI Common Stock. The overall median indicated values
ranged from $39.00 to $61.00 per share of FBI Common Stock. Mercer Capital
noted that the implied price for FBI of $52.33 per share of FBI Common Stock
fell within the cited range, and compared favorably with price/earnings
derived indications of value.
Dilution Analysis. A dilution analysis was conducted whereby
hypothetical acquisition offers for FBI were generated under the assumption
that the buyer would structure an offer so that pro forma earnings would not be
diluted in a stock-for-stock transaction.
The stock-for-stock valuation analysis for FBI was based upon
hypothetical non-dilutive mergers with UPC, Magna, Commerce Bancshares, Inc.,
Boatmen's Bancshares, Inc., Mercantile Bancorporation, Inc. and Mark Twain
Bancshares, Inc.. The analysis assumed that each institution, with the
exception of UPC and Magna, would offer a price which would not dilute their
projected 1996 earnings per share based upon the sum of FBI's projected 1996
earnings and expense savings of 10% to 20% of FBI's non-interest expenses. With
regard to UPC and Magna, the analysis reflected each institution's actual offer
price for FBI.
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The analysis yielded an overall range of value of $48.00 to $59.00 per
share of FBI Common Stock. Mercer Capital noted that the implied price of
$52.33 per share for FBI Common Stock based upon a market price of $30.00 per
share for UPC Common Stock fell slightly below the mid-point of the range.
Discounted Cash Flow Analysis. A discounted cash flow ("DCF") analysis
was also conducted to develop an estimate of value FBI shareholders might
realize based upon a hypothetical analysis in which a sale is delayed until the
end of 1998. Value derived using a DCF analysis is equal to the present value
of any interim cash flows (i.e., dividends) and the present value of a
projected terminal value (i.e., the estimated value of the subject at the end
of the projection period).
Three-year projections were prepared by FBI management which were
considered general in nature for purposes of Mercer Capital's valuation
analysis. These projections were not considered a specific forecast of future
earnings; rather the projections were prepared to assist Mercer Capital in its
valuation analysis and thereby the FBI Board's decision-making process. The
projections estimated average assets, return on assets, and net income for FBI
and each FBI Subsidiary Bank for fiscal years 1996, 1997 and 1998. The terminal
value was based upon projected 1998 earnings times a P/E ratio. A P/E multiple
of 14x to 15x was applied to projected 1998 earnings based upon an analysis of
the transaction data.
Interim shareholder cash flows consisted of dividends, which were
assumed to increase $0.05 per share per year (solely for purposes of the
valuation analysis) from $1.28 per share in 1995 (reported) to $1.43 per share
by 1998 (projected).
The interim cash flows (i.e., dividends) and the terminal value were
discounted to their present values based upon risk adjusted discount rates of
13% and 15%. The discount rates were deemed reasonable given the yield of
long-term U.S. Treasury bonds and an appropriate equity risk premium above the
risk-free rate.
Based upon its analysis, Mercer Capital calculated a range of value of
$48.62 to $54.18 per share of FBI Common Stock, and noted that the implied
price of $52.33 per share for FBI Common Stock based upon a market value of
$30.00 per share for UPC Common Stock was at the upper end of the indicated
range. Further Mercer Capital noted that the analysis indicated the overall
reasonableness of the acquisition price for FBI given the assumption that
projected 1998 earnings would improve substantially over that which was
reported in 1995.
Sell Now vs. Sell Later Analysis. A sell now vs. sell later analysis
was evaluated based upon the projected future value of FBI Common Stock at the
end of a three-year investment horizon period assuming FBI remained
independent until the end of 1998. The indicated future value for the
independence strategy was then compared with the implied future value of an FBI
shareholder's interest in UPC at the end of 1998.
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The future value of shares of FBI Common Stock under the independence
strategy was derived by adding the value of reinvested dividends to the
terminal value. The terminal value was derived by multiplying a P/E ratio times
projected 1998 earnings. Based upon the value of reinvested dividends, plus
projected 1998 earnings times a P/E ratio of 14.0x to 15.0x, the indicated
range for the independence strategy was $68.87 to $73.52 per share of FBI
Common Stock.
Mercer Capital derived two indications of value for UPC shares (to
FBI shareholders) at the end of 1998 of $65.96 and $75.97 per share of FBI
Common Stock. The lower value was obtained by assuming no increase in UPC's
stock price ($30.00) between the date of the Merger announcement and the
presumed closing at year-end 1996. The higher value was obtained by assuming
that UPC's stock price were to rise to $34.88 per share by the Closing Date.
Both UPC values (and the FBI equivalent values) were then assumed to increase
by the rate of growth in UPC's projected earnings per share through the end of
1998. In addition, the indicated values also considered the reinvestment of
projected UPC dividends.
Based upon the analysis, Mercer Capital concluded that the implied
future value of shares of UPC Common Stock per FBI exchange adjusted shares of
$65.96 per share to $73.52 per share compared favorably with the two indicated
future values for FBI's shares assuming a sale is delayed for three years.
Mercer Capital further noted that the future value of the independence strategy
was predicated upon a dramatic improvement in projected 1998 earnings relative
to current performance.
Pro Forma Analysis of Per Share Data. Mercer Capital also analyzed the
changes in pro forma dividends per share, earnings per share and book value per
share from the perspective of FBI's shareholders. Mercer Capital did not
represent or warrant that the actual pro forma data reflected in the
Prospectus/Proxy Statement would reflect that which was developed in its
analysis.
With regard to the pro forma data, Mercer Capital made the following
observations:
1. Dividends Per Share. FBI paid a dividend of $0.625 per share
in the first half of 1995 and $0.655 in the second half
of 1995. Given UPC's current quarterly annualized dividend of
$1.08 per share and the 1.7415 exchange ratio, FBI
shareholders will experience a 47% increase in their current
annual dividend to $1.88 per exchange adjusted share of FBI
Common Stock.
2. Earnings Per Share. Pro forma fiscal 1995 earnings were
estimated to total $4.48 per exchange adjusted share of FBI
Common Stock, an increase of 70% over FBI's reported earnings
of $2.63 per fully diluted share. Pro forma earnings for the
first six months of 1996 reflected a 62% increase over that
which has been reported by FBI; and
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3. Book Value Per Share. Exchange adjusted book value per fully
diluted share of FBI Common Stock was estimated to remain
essentially unchanged from that which was reported by FBI at
June 30, 1996.
Review of Union Planters Corporation. Mercer Capital reviewed UPC's
operating strategy, historical financial performance, current financial
position and prospective financial performance based upon discussions with UPC
management and a review of UPC's publicly available financial information. In
addition, Mercer Capital reviewed the historical and current market pricing of
UPC's shares.
Mercer Capital noted that the UPC Common Stock is listed on the New
York Stock Exchange. Based upon a recent market price of approximately $34.75
per share and 46.1 million outstanding common shares, UPC's market
capitalization is $1.60 billion. Weekly volume during 1996 has averaged about
247,000 shares, or 28% of the Company's shares on an annualized basis.
Based upon its analysis, Mercer Capital calculated that the UPC Common
Stock has appreciated 387%, between early 1991 and early September, 1996, an
amount which exceeds the 337% increase in the NASDAQ Banking Index during the
same period.
Mercer Capital observed that at the date of the announcement of the
Agreement through mid-August, 1996, UPC Common Stock was priced at a noticeable
discount to common stock of mid-south-based public bank holding companies and
publicly traded bank holding companies with assets of $10 billion to $30
billion in terms of its P/E, P/B, P/TB and dividend yield ratios. Since then,
most, but not all, of the pricing differential between UPC and the selected
publicly traded bank holding companies has been eliminated as a result of the
increase in UPC's market price.
Mercer Capital speculated that the pricing difference between UPC
Common Stock and shares of its public market peers that existed prior to late
August may have been related, in part, to arbitragers who were attempting to
lock in profits by shorting UPC Common Stock and purchasing Leader's shares. As
of mid-August, short interest in UPC Common Stock totaled 2.9 million shares,
and represented 27 days to cover as compared to an average of about 7 days for
all NYSE listed banks. Mercer Capital also speculated that the run-up in UPC
Common Stock since mid-August may have reflected some short interest covering,
as well as investor interest in regional bank holding companies following the
August 30 announcement by NationsBank that it will acquire Boatmen's
Bancshares, Inc.
Mercer Capital did not make any representations or warranties,
however, regarding the price at which any security of UPC or FBI would trade at
in the future.
Other Considerations. In addition to the items discussed above, Mercer
Capital considered the following other factors in rendering its fairness
opinion:
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1. All shares of UPC Common Stock received by FBI Record Holders
will be freely transferable, except shares received by
persons who are deemed to be "affiliates" of FBI as defined
under Rule 145 of the Securities Act of 1933;
2. Given its size and market presence in Memphis, Nashville and
many secondary markets in its seven-state region, UPC is an
acquisition candidate. Mercer Capital makes no representations
whether UPC will ever be acquired; or, if it is acquired,
whether shareholders will receive a premium price; and
3. It is presently anticipated that the transaction will be
treated as a tax-free reorganization under Section 368(a) of
the Code for federal income tax purposes. Thus, the merger
will not trigger capital gains tax liabilities for FBI
shareholders.
Compensation of Mercer Capital. Pursuant to its engagement letter, FBI
agreed to pay Mercer Capital a fee of $25,000 to prepare a valuation analysis
of FBI. In addition, FBI agreed to pay a transaction fee equal to 0.30% of the
purchase price based upon the value of the purchase price at the date the
Reorganization Agreement was signed. The transaction fee approximates $109,000.
FBI also agreed to indemnify Mercer Capital, its officers, employees and
agents, and to hold Mercer Capital, its officers, employees and agents harmless
from any and all obligations, claims, charges, expenses or costs of any nature
arising out of the engagement. The indemnification would not apply if Mercer
Capital were negligent in carrying out its duties.
TERMS OF THE MERGER
At the Effective Time of the Merger, FBI will merge with and into
Capital with Capital surviving the Merger and continuing after the Effective
Time to operate under the name "Capital Bancorporation, Inc." In the Merger,
each share of FBI Common Stock outstanding immediately prior to the Effective
Time of the Merger, other than shares of FBI Common Stock with respect to which
dissenters' rights shall have been perfected as described above, will be
converted exclusively into the right of the FBI Record Holder to receive shares
of UPC Common Stock and all options to purchase FBI Common Stock will be
converted exclusively into options to purchase UPC Common Stock, all as
provided for in the Reorganization Agreement.
The Exchange Ratio; Adjustments. Under the Reorganization Agreement,
the FBI Record Holders would receive for each of their shares of FBI Common
Stock, 1.7415 shares of UPC Common Stock. The Exchange Ratio is not subject to
adjustment based upon fluctuations in the market price of UPC Common Stock but
may be adjusted to a rate deemed reasonable by the Board of Directors of UPC in
the event either of a stock split, reverse stock split, stock dividend or
similar change in the capital accounts of FBI or there should be more than
706,877 fully diluted shares of FBI Common Stock outstanding immediately prior
to the effective time of the Merger (the "Effective Time"). No fractional
shares of UPC Common Stock will be issued in respect to FBI Common Stock, and,
if after aggregating all of the whole and fractional shares of UPC Common Stock
to which an FBI Record Holder is entitled based upon the Exchange Ratio, there
should be a fractional share of UPC Common Stock remaining, cash will be paid
by UPC
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in lieu of such remaining fractional share based on the Current Market Price
Per Share of one full share of UPC Common Stock. The "Current Market Price Per
Share" shall be the closing price per share of the UPC Common Stock on the New
York Stock Exchange Consolidated Tape (as published in The Wall Street Journal,
Midwestern Edition) on the last trading day prior to the Effective Date of the
Merger.
FBI Options. Pursuant to the Reorganization Agreement, at the
Effective Time of the Merger all FBI options then outstanding immediately prior
to the Effective Time will be automatically amended to represent the option to
purchase, under the same terms and conditions, that number of shares (rounded
down to the nearest whole share) of UPC Common Stock as would be equal to the
number of shares of FBI Common Stock which otherwise could have been purchased
multiplied by the Exchange Ratio. No fractional shares will be issued after the
Effective Time to holders of FBI Options. Any fractional share resulting after
aggregating all whole and fractional shares of UPC Common Stock to be purchased
by an FBI Option holder shall be forfeited and no payment shall be made in lieu
thereof. After the Effective Time, the stock option plan pursuant to which the
FBI Options were issued will remain in effect, however, no additional FBI
Options will be issued under the Plan; all outstanding FBI Options will become
immediately exercisable at the Effective Time of the Merger; and the relevant
option exercise price of the FBI Options shall be appropriately adjusted on a
pro rata basis so that the aggregate option exercise price of such FBI Options
for UPC Common Stock immediately following the Effective Time will be the same
as the aggregate option exercise price of such FBI Options for FBI Common Stock
immediately prior to the Effective Time of the Merger. UPC will register with
the Commission on a Form S-8 Registration Statement, which is expected to
become effective on or shortly after the Effective Date of the Merger, the
shares of UPC Common Stock to be issued upon exercise of the FBI Options
outstanding immediately prior to the Effective Time of the Merger. Such shares
will also be listed on the NYSE.
All contractual restrictions or limitations on transfer with respect
to FBI Common Stock awarded under the FBI stock option plan or any other plan,
program, or arrangement of any FBI subsidiary, to the extent that such
restrictions or limitations shall not have already lapsed, and except as
otherwise expressly provided in such plan, program, or arrangement, would
remain in full force and effect with respect to shares of UPC Common Stock into
which such restricted stock or right is converted pursuant to the
Reorganization Agreement.
EFFECTIVE DATE AND EFFECTIVE TIME OF THE MERGER
As soon as reasonably 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
FBI, the parties will cause to be filed Articles of Merger with the Secretary
of State of each of the States of Tennessee and Missouri. The Effective Time of
the Merger will be the time specified in the Articles of Merger. The Effective
Date of the Merger will be the day on which the Effective Time occurs. It is
presently expected that the Effective
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Time will occur in the fourth quarter of 1996. There can be no assurance that
such expectation will be achieved.
SURRENDER OF CERTIFICATES
As soon as reasonably practicable after the Effective Time of the
Merger, the Corporate Trust Department of UPNB, acting in the capacity of
exchange agent for UPC and FBI (the "Exchange Agent"), will mail to each FBI
Record Holder a form letter of transmittal, together with instructions and any
other information deemed necessary by the Exchange Agent, (collectively, the
"Exchange Materials") for the exchange of certificates formerly representing
shares of FBI Common Stock for certificates representing shares of UPC Common
Stock.
FBI SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE EXCHANGE MATERIALS FROM THE EXCHANGE AGENT.
Upon receipt of the Exchange Materials, FBI 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 FBI Common Stock, to the Exchange Agent. Upon
surrender to the Exchange Agent of certificates previously representing FBI
Common Stock, together with a properly completed letter of transmittal, there
will be issued and mailed to each FBI Record Holder a certificate representing
the whole number of shares of UPC Common Stock, after aggregation of all shares
and fractional shares, to which such holder is entitled and a check for the
amount of any cash consideration to be paid in lieu of a fractional share
(without interest). No consideration will be delivered to an FBI Record Holder
unless and until such holder shall have properly delivered to the Exchange
Agent certificates formerly representing the shares of FBI Common Stock owned
by him or her and in respect of which he or she claims payment is due, or such
documentation, if applicable, and security in respect of lost or stolen
certificates as may be required by the Reorganization Agreement or the Exchange
Materials.
No dividend or other distribution with respect to the shares of UPC
Common Stock will be paid or delivered to the holder of any unsurrendered
certificate(s) formerly evidencing and representing shares of FBI Common Stock
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 any interest thereon.
After the Effective Time of the Merger, there will be no further
transfers recognized of FBI Common Stock on FBI's stock transfer books. If
certificates representing shares of FBI Common Stock should be presented for
transfer after the Effective Time of the Merger, they will be returned to the
presenter together with a form of letter of transmittal and exchange
instructions.
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Neither UPC, Capital, the Exchange Agent, nor any other person shall
be liable to any former FBI Record Holder for any amount properly delivered to
a public official pursuant to applicable unclaimed property, escheat or similar
laws.
If a certificate formerly representing FBI Common Stock shall have
been lost or destroyed, the Exchange Agent will deliver the consideration
properly payable with respect to the shares of FBI Common Stock formerly
represented by such certificate in accordance with the Reorganization Agreement
upon receipt of: 1) a sworn statement certifying the fact of such loss or
destruction and specifying the circumstances thereof; and 2) an open penalty
lost instrument bond duly executed by a corporate surety indemnifying Capital,
UPC and the Exchange Agent against any loss or expense which they may incur as
a result of such lost or destroyed certificates.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to the satisfaction of the
following conditions prior to the Effective Time of the Merger: (i) the absence
of any claim, action, suit or other proceeding, pending or threatened, before
any court or agency which presents a substantial risk of restraint or
prohibition of the Merger or of the obtaining of material damages or other
relief in connection therewith; (ii) receipt of approval of the Reorganization
Agreement and the transactions contemplated thereby from the Federal Reserve
and the Missouri Division and the expiration of any statutory waiting periods
with respect thereto; (iii) receipt of approval of the Reorganization Agreement
and the transactions contemplated thereby by the affirmative votes of the
holders of at least two-thirds of the outstanding shares of FBI Common Stock on
the Record Date; and (iv) the Registration Statement of which this
Prospectus/Proxy Statement forms a part being declared effective by the
Commission and necessary Commission and state approvals relating to the
issuance or trading of the shares of UPC Common Stock issuable pursuant to the
Merger received.
The obligations of UPC and Capital to effect the Merger are further
subject to the satisfaction, or waiver by UPC, of the following conditions: (i)
FBI and each FBI subsidiary shall have performed all material acts and
undertakings required under the Reorganization Agreement to be performed by it
or their subsidiaries prior to or at the Closing Date; (ii) each of the
representations, warranties and covenants of FBI and each FBI subsidiary set
forth in the Reorganization Agreement shall, in all material respects, be true
on the Closing Date; (iii) UPC shall have received certificates from the
executive officers of FBI and each FBI subsidiary stating that the consummation
of the Merger has been duly authorized and that the persons executing and
delivering documents on behalf of FBI are duly appointed and that their
signatures are genuine; (iv) there shall have been no material damage to or
destruction of any property of FBI or any material adverse change in the
business, assets, liabilities, prospects, operations, liquidity, income or
condition of FBI or any FBI subsidiary; (v) UPC shall have received a legal
opinion, dated the Closing Date, from counsel to FBI as to the good standing of
FBI, the enforceability and due authorization of the Reorganization Agreement
and the receipt of all required approvals; (vi) FBI shall not have effected, or
committed to effect, any form of business combination with, or asset
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sale to any other person or entity, or adopted any "poison pill," shareholders'
rights provision, "golden parachute" or any similar program the effect of which
would be to materially diminish the value of FBI; (vii) FBI shall have
maintained certain asset and capital covenants; (viii) each inside director of
FBI and the president or chief executive officer of each of the FBI Subsidiary
Banks shall have entered into a non-compete agreement with UPC, FBI and each of
the FBI Subsidiary Banks; (ix) UPC shall have received a legal opinion from its
legal counsel that the Merger will constitute a tax-free reorganization under
Section 368 of the Code; (x) UPC shall have received letters from all FBI
Record Holders who would be deemed to be "affiliates" of FBI committing not to
pledge, assign, sell or take any other action which would diminish the risk of
owning the UPC Common Stock to the extent that such action would jeopardize the
eligibility of the Merger to qualify as a tax-free reorganization under Section
368 of the Code, and further committing to resell the shares of UPC Common
Stock they receive in the Merger only in accordance with the Federal securities
laws; (xi) UPC shall have received an opinion from its independent financial
adviser to the effect that the consideration to be delivered to the FBI Record
Holders is fair to the UPC shareholders from a financial point of view and such
opinion shall not have been withdrawn prior to the Closing Date and shall have
been updated within five (5) days of the Closing Date reconfirming the
financial adviser's opinion.
The obligation of FBI to effect the Merger is further subject to the
satisfaction, or waiver by FBI, of the following conditions: (i) UPC and
Capital shall have performed all material acts and undertakings required under
the Reorganization Agreement to be performed by it and its subsidiaries prior
to or at the Closing Date; (ii) each of the representations, warranties and
covenants of UPC and Capital set forth in the Reorganization Agreement shall,
in all material respects, be true on the Closing Date; (iii) FBI shall have
received certificates from the executive officers of UPC and Capital stating
that the consummation of the Merger has been duly authorized and that the
persons executing and delivering documents on behalf of UPC and Capital are
duly appointed and that their signatures are genuine; (iv) FBI shall have
received from the Exchange Agent a certificate to the effect that the Exchange
Agent has received proper authorization to issue certificates representing the
UPC Common Stock, and cash for any fractional shares, in an amount sufficient
under the circumstances set forth in the Reorganization Agreement; (v) FBI
shall have received a legal opinion, dated the Closing Date, from counsel to
UPC and Capital as to the good standing of UPC and Capital, the enforceability
and due authorization of the Reorganization Agreement and the receipt of
required approvals; (vi) there shall have been no material adverse change in
the business, property, assets, liabilities, prospects, operations, liquidity,
income or condition of UPC or any subsidiary thereof; (vii) FBI shall have
received an opinion from Mercer Capital that the Exchange Ratio is fair to the
FBI shareholders from a financial point of view, and such fairness opinion
shall not have been withdrawn prior to the Closing Date; (viii) FBI shall have
received a legal opinion from its legal counsel that the Merger will constitute
a tax-free reorganization under Section 368 of the Code and that FBI Record
Holders will not recognize any gain or loss with respect to whole shares of FBI
Common Stock exchanged for UPC Common Stock in the Merger.
No assurance can be provided as to when, if ever, the regulatory
consents and approvals necessary to consummate the Merger will be obtained (or,
if so obtained, that such consents and
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approvals will not contain conditions or requirements which would materially
reduce the benefits of, and result in abandonment of the Merger) or whether all
of the other conditions precedent to the Merger will be satisfied or waived by
the party lawfully permitted to do so.
REGULATORY APPROVALS
The Merger and its related transactions are subject to prior approval
by (i) the Federal Reserve under Section 3(a) of the Bank Holding Company Act;
and (ii) the Missouri Division under Section 362.920 of the Revised Statutes of
Missouri. The Bank Holding Company Act, as amended (the "BHC Act"), requires
that the Federal Reserve take into consideration, among other factors, the
financial and managerial resources and future prospects of the institutions and
the convenience and needs of the communities to be served. The BHC Act
prohibits the Federal Reserve from approving the Merger if it would result in a
monopoly or be in furtherance of any combination or conspiracy to monopolize or
to attempt to monopolize the business of banking in any part of the United
States, or if its effect in any section of the country would be to
substantially lessen competition or to tend to create a monopoly, or if it
would in any other manner be a restraint of trade, unless it should find that
the anticompetitive effects of the Merger are clearly outweighed by the public
interest and the probable effect of the transaction in meeting the convenience
and needs of the communities to be served. The Federal Reserve also has the
authority to deny an application if it should conclude that the combined
organization would have an inadequate capital position or if the acquiring
organization does not comply with the requirements of the Community
Reinvestment Act of 1977, as amended (the "CRA").
Under the BHC Act, the Merger may not be consummated earlier than the
15th day following the date of approval by the Federal Reserve, during which
period the United States Department of Justice is afforded an opportunity to
challenge the Merger on antitrust grounds. The commencement of an antitrust
action would stay the effectiveness of the Federal Reserve's approval unless a
court should specifically order otherwise. There can be no assurance that the
Department of Justice will not challenge the Merger, or if such challenge is
made, as to the result thereof.
An application seeking regulatory approval of the Merger was filed on
August 23, 1996 with the Federal Reserve. As of the date of this
Prospectus/Proxy Statement, the Federal Reserve has not acted on the
application. It is expected that an application for approval of the Merger will
be filed with the Missouri Division on or about October 31, 1996.
The Merger may not lawfully proceed in the absence of the requisite
regulatory approvals. See "--Conditions to Consummation of the Merger" and
"--Waiver and Amendment; Termination."
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CONDUCT OF BUSINESS PENDING THE MERGER
The Reorganization Agreement contains certain restrictions upon the
conduct of FBI's business pending consummation of the Merger. In particular,
the Reorganization Agreement provides that, except as otherwise provided in the
Reorganization Agreement and/or without the written consent of UPC, FBI may
not, among other things; (i) amend its Articles of Incorporation or bylaws;
(ii) permit any lien or incumbrance to exist in respect to any share of stock
held by FBI or any FBI Subsidiary, with the exception of the lien on the FBI
Subsidiary Bank Stock held by Mercantile Bank of St. Louis, N.A. which has a
current balance of approximately $4 million; (iii) repurchase any of its
capital stock, split or otherwise subdivide its capital stock, recapitalize in
any way or declare a stock or cash dividend with respect to the FBI Common
Stock other than its regular semi-annual cash dividend of sixty-two and
one-half cents ($0.625) per share of FBI Common Stock as the first cash
dividend in a calendar year and sixty-seven and one-half cents ($0.675) per
share of FBI Common Stock as the second cash dividend in a calendar year, the
declaration dates of which shall be consistent with FBI's past practice; (iv)
acquire direct or indirect control over any entity except in the ordinary
course of business or in connection with internal reorganizations and
acquisitions in FBI's fiduciary capacity; (v) issue or sell any FBI Common
Stock or sell or otherwise dispose of a substantial part of FBI's assets or
earning power, or buy a substantial part of the assets or earning power of
another person or entity; (vi) incur any additional debt in excess of an
aggregate of $50,000 except in the ordinary course of business; (vii) increase
compensation, pay bonuses or enter into severance arrangements except in
accordance with past practices; (viii) amend any existing employment contract
with any person having a salary in excess of $30,000 per year or enter into any
new employment contract providing for an annual salary exceeding $30,000 per
year unless FBI or its subsidiaries may terminate the same at will without
liability; (ix) adopt any new, or make any change in or termination of any
existing, benefit plan; (x) enter into any material new lease agreement or
service contract; (xi) make any capital expenditures except in the ordinary
course of business; (xii) enter any material transaction except in the ordinary
course of business; or (xiii) extend credit (or commit to extend credit) to any
officer, director or holder of 2% or more of FBI Common Stock if such extension
of credit, with all other credits then outstanding to the same borrower and
his, her or its affiliates, would exceed $1 million or amend the terms of any
such credit.
Moreover, FBI shall, among other things, operate in the usual, regular
and ordinary course, preserve its organization and assets and maintain its
rights and franchises, not default on a material contract, use its best efforts
to retain its customer base and assist UPC in procuring all applicable
regulatory approvals.
PAYMENT OF DIVIDENDS
FBI is prohibited under the Reorganization Agreement from paying
dividends on or making any other type of distribution with respect to the FBI
Common Stock, with the exception of its regular semi-annual cash dividend of
sixty- two and one-half cents ($0.625) per share of FBI Common Stock as the
first cash dividend in a calendar year and sixty-seven and one-half cents
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($0.675) per share of FBI Common Stock as the second cash dividend in a
calendar year, the declaration dates of which shall be consistent with FBI's
past practice.
WAIVER AND AMENDMENT; TERMINATION
To the extent permitted by applicable law, UPC unilaterally may amend
the Reorganization Agreement in order to achieve tax benefits or for any other
reason UPC may deem advisable; provided, however, that without the approval of
the FBI Board of Directors, UPC may not make any revision to the structure of
the Merger which changes the amount of consideration which FBI Record Holders
are entitled to receive in the Merger, changes the tax-free effect of the
Merger to UPC, Capital, FBI or any FBI Record Holder or would permit UPC to pay
the consideration other than by delivery of registered shares of UPC Common
Stock. In addition, at any time prior to the Closing Date or termination of the
Reorganization Agreement, either UPC or FBI, acting through its authorized
officers, may extend the time for compliance or fulfillment by the other party
of any of its obligations under the Reorganization Agreement, waive any
inaccuracies in the representations and warranties made by the other party in
the Reorganization Agreement or other document delivered pursuant thereto;
waive compliance with any of the covenants or agreements in the Reorganization
Agreement or the Supplemental Letter; or amend or add to any provision of the
Reorganization Agreement or Plan of Merger. No such waiver will be effective
unless made in writing and unless executed by a duly authorized officer of each
of FBI, Capital and UPC.
The Reorganization Agreement may be terminated at any time prior to
the Closing Date as follows: (i) by mutual consent in writing of the parties;
(ii) by UPC or Capital if FBI or any FBI subsidiary should violate any
affirmative or negative covenant in the Reorganization Agreement in respect to
the operation of its or their business; (iii) by UPC, Capital or FBI if the
Closing Date shall not, with certain exceptions, have occurred by June 24, 1997
(which may, in certain circumstances, be extended to August 31, 1997), unless
the failure should be due to actions of the party seeking to terminate; (iv) by
either party if any governmental or regulatory approval should be denied (or
conditioned upon a substantial deviation from the transactions contemplated)
and not successfully appealed within certain time limits; (v) by either party
if the other party's closing conditions shall not have been satisfied in all
material respects or waived as of the Closing Date or if the other party shall
have committed a material breach which shall not have been cured within 30 days
after the breaching party receives notice of such breach; (vi) by either party
if there shall have been a material adverse change in the business, properties,
assets, liabilities, prospects, operations, liquidity, income, condition or net
worth of the other party; (vii) by UPC or Capital should FBI or any FBI
subsidiary enter into any business combination or any letter of intent or
agreement with respect thereto with any other person or if FBI or any FBI
Subsidiary Bank should enter into a formal capital plan in cooperation with any
applicable bank regulatory authority; or by UPC in the event holders of more
than nine percent of the outstanding shares of FBI Common Stock exercise their
dissenters' rights.
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In the event of the valid termination of the Reorganization Agreement
by either UPC or FBI, all obligations of UPC, Capital and FBI under the
Reorganization Agreement would terminate without further liability to any other
parties thereto. However, termination of the Reorganization Agreement will not
relieve any party to the Reorganization Agreement from liability for breach
thereof or from any misstatement or misrepresentation made thereunder prior to
the termination.
MANAGEMENT AFTER THE MERGER
The Reorganization Agreement and the Plan of Merger provide that the
Charter and bylaws of Capital as in effect immediately prior to the Effective
Time of the Merger shall continue to be the Charter and bylaws of Capital
following the Effective Time of the Merger. The directors and officers of
Capital immediately prior to the Effective Time of the Merger shall continue to
be the directors and officers of Capital, the surviving corporation, after the
Effective Time, until such directors or officers shall be replaced in
accordance with the surviving corporation's Charter and bylaws. All of the
current directors and officers of Capital are directors and officers of UPC.
Information concerning the current management and Board of Directors of UPC is
included in the documents incorporated by reference. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE." It is anticipated that those persons who are
directors and officers of the FBI Subsidiary Banks will continue after the
Effective Time of the Merger to serve in their respective capacities until such
time as the Subsidiary Bank Mergers become effective. Following the effective
time of the Subsidiary Bank Mergers some or all of those former FBI Subsidiary
Bank officers and directors may be retained.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In addition to the Reorganization Agreement, UPC and FBI have executed
the Supplemental Letter, a copy of which is attached hereto as Appendix C. The
Supplemental Letter requires UPC either to assume existing obligations of FBI
to certain employees or to enter into specified agreements with, and provide
other benefits to, certain executive officers and employees of FBI and the FBI
Subsidiary Banks. Specifically, FBI is currently a party to management
continuity agreements with the following employees: Joe W. Gooch, J. Michael
Pobst, Jack L. Huffman, Donald E. Palisch, David B. Brewer, Danny H. Griffin,
Virginia A. Renz, Edward J. Vega and Edwin A. Schmid, II. The management
continuity agreements generally provide that if the employee's employment with
FBI or any of its successors should be terminated by the employee for any
reason within one year after a change of control (as defined in the
agreements) or by FBI or any of its successors (except with cause) within two
years after a change of control, FBI or its successors will be obligated for
a period of time ranging from 12 to 24 months following the date of such
employee's termination to (i) pay the higher of the employee's monthly gross
salary for the last month preceding either the date of the termination or the
date of the change of control, (ii) pay an amount equal to the higher of
one-twelfth of the last annual bonus paid by FBI or any of its successors to
the employee preceding either the termination date or the date of the change of
control, and (iii) maintain at its sole cost and expense all fringe benefit
plan programs enjoyed by such employee immediately prior to such change of
control (reduced by any
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benefits provided to the employee by the successor following the change of
control). UPC will honor the terms of those management continuity agreements
(including the change of control provisions described above) unless an employee
elects to forfeit his or her rights under that agreement and execute a new
employment agreement with the surviving corporation or one of its subsidiaries.
It is anticipated that the new employment agreements will contain similar
change of control provisions to those contained in the existing management
continuity agreements and such other terms as may be negotiated by UPC and the
employee.
In consideration for the promise to make the payments set forth above,
the new employment agreements will also contain covenants not to compete
restricting the employees from, among other things, engaging in any business
which is competitive with that of FBI or the FBI Bank Subsidiaries, within a
50-mile radius of their respective work locations for a period of time.
The Supplemental Letter provides that, at the Effective Time of the
Merger, Arthur E.S. Schmid, currently Chairman and Chief Executive Officer of
FBI, and Clifford A. Schmid, currently President of FBI, for annual fees of
$45,000 and $42,000 respectively, will each retire from active employment with
FBI; provided, however, that UPC has agreed, that if the Effective Time of the
Merger occurs prior to December 31, 1996, Clifford A. Schmid shall remain an
active employee until December 31, 1996, at which time he will become fully
vested in FBI's Supplementary Pension Plan (the "Supplementary Plan").
Furthermore, the Supplemental Letter requires Capital, as the corporation
surviving the Merger, to enter into separate three year consulting agreements
with each of Arthur E.S. Schmid and Clifford A. Schmid providing for each of
them an automobile allowance, reimbursement of expenses related to membership
in a country club or a luncheon club and group hospitalization, medical and
other employee benefits as are available to employees of UPC holding positions
comparable to the positions from which the two men are retiring.
FBI has also entered into an employment agreement with Joe W. Gooch,
currently president of SEMO (one of the FBI Subsidiary Banks). After the
Effective Date of the Merger, Mr. Gooch will also become a senior executive of
UPC's subsidiary bank headquartered in Cape Girardeau, Missouri. It is
anticipated that Mr. Gooch will enter into a new employment agreement with UPC
or its subsidiary.
The Supplemental Letter contains provisions relating to the effect of
the Merger on certain benefit plans of FBI established for the benefit of FBI
employees. With respect to the Supplementary Plan, FBI will make arrangements
to set aside up to $500,000 in the aggregate for the purpose of funding such
Supplementary Plan, which will remain in effect after the Effective Time of the
Merger for the benefit of those individuals enrolled in or entitled to benefits
under such plan. With respect to FBI's Pension Plan, FBI will take such steps
as are necessary for such Pension Plan to be terminated as soon as reasonably
practicable after the Effective Time of the Merger. With respect to FBI's
incentive bonus plan arrangement, benefits will be paid under such plan to the
extent that FBI fully reserves for such payments prior to the Effective Time of
the Merger, provided that such payments may not exceed $365,110.
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Furthermore, employees of FBI who will remain employees of Capital, the
surviving corporation, following the Effective Time of the Merger will become
eligible to receive group hospitalization, medical, life insurance, disability
insurance and other employee welfare benefits no less than those provided to
other employees of UPC holding comparable positions and with the same years of
service immediately following the Effective Time of the Merger and will become
subject to UPC policies and procedures regarding accrued vacation, sick leave
and other paid time-off benefits at the beginning of the first calendar year
following the Effective Time of the Merger.
For a more specific review of the interests of certain persons in the
Merger, see the Supplemental Letter, which is attached to this Prospectus/Proxy
Statement as Appendix C.
LIMITATION ON NEGOTIATIONS
The Reorganization Agreement provides that FBI and its subsidiaries
shall not (and shall use their best efforts to ensure that their respective
directors, officers, employees and advisors do not) institute, solicit or
encourage any inquiry, discussion or proposal, or participate in any
discussions or negotiations with, or provide any confidential or non-public
information to, any entity or group concerning any Acquisition Proposal, except
for actions reasonably considered by the FBI Board, based upon the advice of
outside counsel, to be required in order for the FBI Board to fulfill its
fiduciary obligations. FBI must notify UPC immediately following receipt of any
Acquisition Proposal. In the event FBI were to enter into a letter of intent or
agreement with respect to an Acquisition Proposal, FBI or the acquirer would be
required to pay liquidated damages in the amount of $3.44 million to UPC, which
amount represents the sum of the agreed expenses incurred by UPC in connection
with the Merger and the agreed loss to UPC in the event the Merger were not
consummated. Payment of such sum is an unconditionally binding condition
precedent to FBI's entering a letter of intent or agreement with respect to an
Acquisition Proposal. The limitation on negotiations and provision for
liquidated damages will remain in effect until December 31, 1997 unless before
that date the Reorganization Agreement should be terminated or, under specified
circumstances, the Merger is not consummated. These provisions may have the
effect of discouraging competing offers to acquire or merge with FBI.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW IS ABBREVIATED IN
NATURE AND IS INCLUDED FOR GENERAL INFORMATION ONLY. FURTHER, THE FEDERAL
INCOME TAX DISCUSSION BELOW DOES NOT ADDRESS THE TAX CONSEQUENCES OF THE
MERGER, INCLUDING BUT NOT LIMITED TO ANY WITHHOLDING OBLIGATION, UPON FBI
SHAREHOLDERS WHO ARE NOT RESIDENT CITIZENS OF THE UNITED STATES. ALL FBI
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISERS AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
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This discussion is based on the Code, regulations and rulings now in
effect or proposed thereunder, current administrative rulings and practice, and
judicial precedent, all of which are subject to change. Any such change, which
may or may not be retroactive, could alter the tax consequences discussed
herein. This discussion is also based on certain assumptions regarding the
factual circumstances that will exist at the Effective Time of the Merger,
including certain representations of UPC and FBI. If any of these factual
assumptions should be inaccurate, the tax consequences of the Merger could
differ from those described herein. This discussion assumes that shares of FBI
Common Stock are held as capital assets (within the meaning of Section 1221 of
the Code) at the Effective Time of the Merger.
Assuming the Merger occurs in accordance with the Reorganization
Agreement, the Merger will constitute a "reorganization" for federal income tax
purposes under Section 368(a)(1) of the Code, with the following federal income
tax consequences:
(1) FBI Record Holders will recognize no gain or loss as a result
of the exchange of their FBI Common Stock solely for shares of UPC Common Stock
pursuant to the Merger, except with respect to cash received in lieu of
fractional shares, if any, as discussed below.
(2) The aggregate adjusted tax basis of the shares of UPC Common
Stock received by each FBI Record Holder in the Merger (including any
fractional share of UPC Common Stock deemed to have been received, as described
in Paragraph 4 below) will be equal to the aggregate adjusted tax basis of the
shares of FBI Common Stock surrendered.
(3) The holding period of the shares of UPC Common Stock received
by each FBI Record Holder in the Merger (including any fractional share of UPC
Common Stock deemed to have been received, as described in Paragraph 4 below)
will include the holding period of the shares of FBI Common Stock exchanged
therefor.
(4) An FBI Record Holder who receives cash in the Merger in lieu
of a fractional share of UPC Common Stock will be treated as if the fractional
share had been received in the Merger and then redeemed by UPC in return for
cash. Such redemption will be subject to the conditions and limitations of
Section 302 of the Code, including the attribution rules of Section 318. If
such redemption qualifies as an "exchange" under such conditions and
limitations of Section 302 of the Code, such FBI Record Holder will recognize
capital gain (or loss) measured by the difference between the amount of cash
received by such FBI Record Holder and the basis in his or her shares of FBI
Common Stock. If such redemption does not qualify as an "exchange," such FBI
Record Holder will have dividend income taxable as ordinary income equal to the
amount of cash received.
(5) An FBI Record Holder who perfects his or her dissenters'
rights under the Missouri Act and who receives a cash payment for the "fair
value" of his or her shares of FBI Common Stock will be treated as having
received such payment in redemption of such stock. Such redemption will be
subject to the conditions and limitations of Section 302 of the Code, including
the attribution rules of Section 318. If such redemption qualifies as an
"exchange" under such
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conditions and limitations of Section 302 of the Code, such FBI Record Holder
will recognize capital gain (or loss) measured by the difference between the
amount of cash received by such FBI Record Holder and the basis in his or her
shares of FBI Common Stock. If such redemption does not qualify as an
"exchange," such FBI Record Holder will have dividend income taxable as
ordinary income equal to the amount of cash received. Each FBI shareholder who
contemplates exercising his or her dissenters' rights should consult his or her
own tax advisor as to the possibility that any payment to him or her would be
treated as dividend income.
THE FOREGOING IS A GENERAL DISCUSSION OF CERTAIN OF THE MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND IS INCLUDED FOR GENERAL
INFORMATION ONLY. THE FOREGOING DISCUSSION DOES NOT TAKE INTO ACCOUNT THE
PARTICULAR FACTS AND CIRCUMSTANCES OF EACH FBI SHAREHOLDER'S TAX STATUS AND
ATTRIBUTES. AS A RESULT, THE FEDERAL INCOME TAX CONSEQUENCES ADDRESSED IN THE
FOREGOING DISCUSSION MAY NOT APPLY TO EACH FBI SHAREHOLDER. IN VIEW OF THE
INDIVIDUAL NATURE OF INCOME TAX CONSEQUENCES, EACH FBI SHAREHOLDER SHOULD
CONSULT THEIR OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE
MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL AND
OTHER TAX LAWS.
ACCOUNTING TREATMENT
The Merger is currently expected to be treated by UPC as a purchase
for accounting purposes. Accordingly, under GAAP as described in APB No. 16 for
business combinations, the assets and liabilities of FBI will be adjusted to
their fair values as of the date of acquisition and the resulting goodwill
allocated in accordance with APB No. 16. Net income of UPC subsequent to the
Effective Time of the Merger will include the net income of both UPC and FBI.
UPC is currently considering the repurchase of the approximate number
of shares of UPC Common Stock as issued to the FBI shareholders in connection
with the Merger. If UPC anticipates that such shares will be repurchased prior
to or subsequent to the Effective Time of the Merger, UPC will be required to
account for the transaction as a purchase as described above.
However, if the shares are not repurchased and UPC does not have a
formal plan to repurchase the shares after consummation, UPC will be required
to account for the transaction as a pooling of interests as described in APB
No. 16. Up to the present time, UPC has only explored the various options
available to repurchase the shares and, accordingly, such plans are preliminary
and have not been approved by UPC's Board of Directors. Under the pooling of
interests method of accounting, the assets and liabilities of FBI would be
carried at their previously recorded amounts and, due to FBI not being
significant to UPC, only the current year financial information will be
restated as though FBI and UPC had been combined at the beginning of the year.
Net income of UPC subsequent to the Merger becoming effective would
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include the net income of FBI and UPC for the entire fiscal period in which the
Merger is consummated.
UPC does not believe that the pro forma financial information, if
adjusted to reflect the Merger as a pooling of interests, would be materially
different from the pro forma information contained herein.
EXPENSES
The Reorganization Agreement provides, in general, that UPC, FBI and
Capital will each pay its own expenses in connection with the Reorganization
Agreement and the transactions contemplated thereby, including fees and
expenses of its own independent accountants and counsel.
RESALES OF UPC COMMON STOCK
The shares of UPC Common Stock issued to FBI Record Holders pursuant
to the Reorganization Agreement will be freely transferable under the
Securities Act, except for those shares of UPC Common Stock issued to any FBI
executive officer, director or shareholder who shall be deemed as of the date
of the Special Meeting to be an "affiliate" of FBI and, therefore, an
"underwriter" with respect to the UPC Common Stock received for purposes of
Rule 145 under the Securities Act. Affiliates may not sell their shares of UPC
Common Stock acquired in connection with the Merger except pursuant to an
effective registration statement under the Securities Act 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 FBI generally include individuals
or entities that control, are controlled by or are under common control with,
FBI and includes its executive officers, directors, or holders of ten percent
(10%) or more of the outstanding FBI Common Stock. UPC will place restrictive
legends on certificates representing UPC Common Stock issued to all persons who
are deemed by UPC to be "affiliates." For more information regarding the
restrictive legend, see the Reorganization Agreement attached to this
Prospectus/Proxy Statement as Appendix B.
CERTAIN REGULATORY CONSIDERATIONS
The following discussion sets forth certain of the material elements
of the regulatory framework applicable to banks and bank holding companies and
provides certain specific information related to UPC. For additional
information regarding community reinvestment, transactions with affiliates,
brokered deposits, safety and soundness standards, and depositor preference,
see Part I, Item 1 of UPC's Annual Report on Form 10-K for the year ended
December 31, 1995, under the caption GOVERNMENTAL SUPERVISION AND REGULATION OF
FINANCIAL INSTITUTIONS, which information is hereby incorporated by reference in
this Prospectus/Proxy Statement, and Part I, Item 1 of FBI's Annual Report on
Form 10-K for the year
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ended December 31, 1995, under the caption REGULATION AND SUPERVISION which
information is hereby incorporated by reference in this Prospectus/Proxy
Statement.
GENERAL
UPC is a bank holding company registered with the Federal Reserve
under the BHC Act. As such, UPC and its non- bank subsidiaries are subject to
the supervision, examination, and reporting requirements of the BHC Act and the
regulations of the Federal Reserve. In addition, as a savings and loan holding
company, UPC is registered with the OTS under the Home Owners' Loan Act of
1933, as amended ("HOLA") and is subject to regulation, supervision,
examination, and reporting requirements of the OTS.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or
control more than 5.0% of the voting shares of the bank; (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of any bank; or (iii) it may merge or consolidate with any other bank
holding company. Similar federal statutes require savings and loan holding
companies and other companies to obtain the prior approval of the OTS before
acquiring direct or indirect ownership or control of a savings association.
The BHC Act further provides that the Federal Reserve may not approve
any transaction that would result in a monopoly or would be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any section of the United States, or the effect of which
may be substantially to lessen competition or to tend to create a monopoly in
any section of the country, or that in any other manner would be in restraint
of trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served. Consideration of financial resources generally focuses on capital
adequacy, and consideration of convenience and needs issues includes the
parties' performance under the CRA, discussed below and in Part I, Item 1 of
UPC's Annual Report on Form 10-K.
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
("Interstate Banking Act"), which became effective on September 29, 1995,
repealed the prior statutory restrictions on interstate acquisitions of banks
by bank holding companies, such that UPC and any other bank holding company
located in Tennessee may now acquire a bank located in any other state, and any
bank holding company located outside of Tennessee may lawfully acquire any
Tennessee-based bank, regardless of state law to the contrary, in either case
subject to certain deposit-percentage, aging requirements, and other
restrictions. The Interstate Banking Act also generally provides that, after
June 1, 1997, national and state-chartered banks may branch interstate through
acquisitions of banks in other states. By adopting legislation prior to that
date, a state has the ability either to
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"opt in" and accelerate the date after which interstate branching is
permissible or "opt out" and prohibit interstate branching altogether. As of
the date of this Prospectus/Proxy Statement, Tennessee has not "opted in" nor
"opted out." Assuming no state action prior to June 1, 1997, UPC would be able
to consolidate all of its bank subsidiaries into a single bank with interstate
branches following that date, however, its present intention is to maintain
separately chartered regional banks to serve each of UPC's significant
geographical service areas.
The BHC Act generally prohibits UPC from engaging in activities other
than banking or managing or controlling banks or other permissible subsidiaries
and from acquiring or retaining direct or indirect control of any company
engaged in any activities other than those activities determined by the Federal
Reserve to be so closely related to banking or managing or controlling banks as
to be a proper incident thereto. In determining whether a particular activity
is permissible, the Federal Reserve must consider whether the performance of
such an activity reasonably can be expected to produce benefits to the public,
such as greater convenience, increased competition, or gains in efficiency,
that outweigh possible adverse effects, such as undue concentration of
resources, decreased or unfair competition, conflicts of interest, or unsound
banking practices. For example, factoring accounts receivable, acquiring or
servicing loans, leasing personal property, conducting discount securities
brokerage activities, performing certain data processing services, acting as
agent or broker in selling credit life insurance and certain other types of
insurance in connection with credit transactions, and performing certain
insurance underwriting activities all have been determined by the Federal
Reserve to be permissible activities of bank holding companies. The BHC Act
does not place territorial limitations on permissible non-banking activities of
bank holding companies. Despite prior approval, the Federal Reserve has the
power to order a holding company or its subsidiaries to terminate any activity
or to terminate its ownership or control of any subsidiary when it has
reasonable cause to believe that continuation of such activity or such
ownership or control constitutes a serious risk to the financial safety,
soundness, or stability of any bank subsidiary of that bank holding company.
Each of the banking and thrift subsidiaries of UPC is a member of the
Federal Deposit Insurance Corporation (the "FDIC"), and as such, its deposits
are insured by the FDIC to the maximum extent provided by law. Each such
subsidiary is also subject to numerous state and federal statutes and
regulations that affect its business, activities, and operations, and each is
supervised and examined by one or more state or federal bank regulatory
agencies.
All of UPC's Banking Subsidiaries that are state-chartered banks which
are not members of the Federal Reserve System, are subject to regulation,
supervision, and examination by the FDIC and the state banking authorities of
the states in which they are located. The banking subsidiaries of UPC that are
national banking associations are subject to regulation, supervision, and
examination by the OCC and the FDIC. The thrift subsidiaries of UPC are subject
to regulation, supervision, and examination by the OTS and the FDIC. The
federal banking regulator for each of the banking and thrift subsidiaries of
UPC, as well as the appropriate state banking authorities in the case of those
depository institution subsidiaries that are state-chartered, regularly examine
the operations of each of the banking and thrift subsidiaries of UPC and are
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given authority to approve or disapprove mergers, consolidations, the
establishment of branches, and similar corporate actions. The federal and state
banking regulators also have the power to prevent the continuance or
development of unsafe or unsound banking practices or other violations of law.
PAYMENT OF DIVIDENDS
UPC and FBI are legal entities separate and distinct from their
banking, thrift, and other subsidiaries. The principal sources of cash flow of
both UPC and FBI, including the cash flow required to pay dividends to their
respective stockholders, are dividends and management fees received from their
banking and thrift subsidiaries. There are statutory and regulatory limitations
on the payment of dividends by these depository-institution subsidiaries to UPC
and FBI, as well as by UPC and FBI to their stockholders.
All of UPC's Banking Subsidiaries are subject to the respective laws
and regulations of the states in which they are chartered as to the payment of
dividends. Each national banking association subsidiary of UPC is required by
federal law to obtain the prior approval of the OCC for the payment of
dividends if the total of all dividends declared by the bank in any year would
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 lawfully pay only
dividends to the extent that their retained net profits (including the portion
transferred to surplus) exceed statutory bad debts (as defined by regulation).
If, in the opinion of its federal banking regulator, a bank or thrift
under its jurisdiction is engaged in or is about to engage in an unsafe or
unsound practice (which, depending on the financial condition of the depository
institution, could include the payment of dividends), such authority may
require, after notice and hearing, that such institution cease and desist from
such practice. The federal banking agencies have indicated that paying
dividends that deplete a depository institution's capital base to an inadequate
level would be an unsafe and unsound banking practice. Under the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), a depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. See "--Prompt Corrective
Action." Moreover, the federal agencies have issued policy statements that
provide that bank holding companies and insured banks should generally only pay
dividends out of current operating earnings.
At June 30, 1996, under dividend restrictions imposed under federal
and state laws, the depository subsidiaries of UPC, without obtaining
government approvals, could have lawfully declared aggregate dividends to UPC
of approximately $49.0 million. At June 30, 1996, under dividend restrictions
imposed under the covenants of a loan agreement and the most restrictive of
applicable federal and state laws and regulatory commitments, the FBI Bank
Subsidiaries, without obtaining lender or government approvals, could have
lawfully declared aggregate dividends to FBI of approximately $3.653 million.
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The payment of dividends by UPC and FBI and their banking and thrift
subsidiaries may also be affected or limited by other factors, such as the
requirement to maintain adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
UPC, FBI, and their respective banking and thrift subsidiaries are
required to comply with the capital adequacy standards established by the
Federal Reserve and, in the case of UPC, the OTS and by the appropriate federal
banking regulator in the case of each of their banking and thrift subsidiaries.
There are two basic measures of capital adequacy for bank holding companies
that have been promulgated by the Federal Reserve: a risk-based measure and a
leverage measure. All applicable capital standards must be satisfied for a bank
holding company to be considered to be "well-capitalized."
The risk-based capital standards are designed to make regulatory
capital requirements more sensitive to differences in risk profile among banks
and bank holding companies, to account for off-balance-sheet exposure, and to
minimize disincentives for holding liquid assets. Assets and off-balance-sheet
items are assigned to broad risk categories, each with appropriate weighting.
The resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance-sheet items.
The minimum guideline for the ratio ("Risk-Based Capital Ratio") of
total capital ("Total Capital") to risk- weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8.0%. At least
one-half of Total Capital must consist of common stock, minority interests in
the equity accounts of consolidated subsidiaries, noncumulative perpetual
preferred stock, and a limited amount of cumulative perpetual preferred stock,
less goodwill and certain other intangible assets ("Tier 1 Capital"). The
remainder may consist of subordinated debt, other preferred stock, and a
limited amount of loan loss reserves ("Tier 2 Capital"). At June 30, 1996,
UPC's consolidated Risk-Based Capital Ratio and its Tier 1 Risk-Based Capital
Ratio (i.e., the ratio of Tier 1 Capital to risk-weighted assets) were 16.85%
and 13.19%, respectively, and FBI's consolidated Risk-Based Capital and Tier 1
Risk- Based Capital Ratios were 11.88% and 10.62% respectively.
In addition, the Federal Reserve has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less
goodwill and certain other intangible assets, of 3.0% for bank holding
companies that meet certain specified criteria, including having the highest
regulatory rating. All other bank holding companies generally are required to
maintain a Leverage Ratio of at least 3.0%, plus an additional cushion of 100
to 200 basis points. UPC's and FBI's respective Leverage Ratios at June 30,
1996, were 8.49% and 7.17%, respectively. The guidelines also provide that bank
holding companies experiencing internal growth or making acquisitions will be
expected to maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve has indicated that it will consider a
"tangible Tier 1 Capital Leverage Ratio"
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(deducting all intangibles) and other indicia of capital strength in evaluating
proposals for expansion or new activities.
Each of UPC's and FBI's banking and thrift subsidiaries is subject to
risk-based and leverage capital requirements adopted by its federal banking
regulator, which are substantially similar to those adopted by the Federal
Reserve for bank holding companies. Each of the banking and thrift subsidiaries
was deemed to be "well-capitalized" under applicable capital guidelines as of
June 30, 1996. Neither UPC, FBI, nor any of their banking and thrift
subsidiaries has been advised by any federal banking agency of any specific
minimum capital ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank (or thrift) to
a variety of enforcement remedies, including issuance of a capital directive,
the termination of deposit insurance by the FDIC, a prohibition on the taking
of brokered deposits, and certain other restrictions on its business. As
described below, substantial additional restrictions can be imposed upon
FDIC-insured depository institutions that fail to meet applicable capital
requirements. See "--Prompt Corrective Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve, the OCC, and the FDIC have,
pursuant to FDICIA, proposed an amendment to the risk-based capital standards
that would calculate the change in an institution's net economic value
attributable to increases and decreases in market interest rates and would
require banks with excessive interest rate risk exposure to hold additional
amounts of capital against such exposures. The OTS has already included an
interest-rate risk component in its risk-based capital guidelines for savings
associations that it regulates.
SUPPORT OF SUBSIDIARY BANKS
Under Federal Reserve policy, UPC is expected to act as a source of
financial strength for, and to commit resources to support, each of its banking
subsidiaries. This support may be required at times when, absent such Federal
Reserve policy, UPC may not be inclined to provide it. In addition, any capital
loans by a bank holding company to any of its banking subsidiaries are
subordinate in right of payment to deposits and to certain other indebtedness
of such banks. 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 banking subsidiary would be assumed by the bankruptcy
trustee and entitled to priority of payment.
Under the Federal Deposit Insurance Act ("FDIA"), a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989, in
connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) any assistance provided by the FDIC to any
commonly controlled FDIC-insured depository institution "in danger of default."
"Default" is defined generally as the appointment of a conservator or receiver,
and "in danger of default" is defined
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generally as the existence of certain conditions indicating that a default is
likely to occur in the absence of regulatory assistance. The FDIC's claim for
damages is superior to claims of shareholders of the insured depository
institution or its holding company, but is subordinate to claims of depositors,
secured creditors, and holders of subordinated debt (other than affiliates) of
the commonly controlled insured depository institution. The banking and thrift
subsidiaries of UPC and FBI are subject to these cross-guarantee provisions. As
a result, any loss suffered by the FDIC in respect of any of these subsidiaries
would likely result in assertion of the cross-guarantee provisions, the
assessment of such estimated losses against the banks' or the thrifts'
depository institution affiliates, and a potential loss of UPC's investments in
such other banking and thrift subsidiaries.
PROMPT CORRECTIVE ACTION
FDICIA establishes a system of "prompt corrective action" to resolve
the problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to
a narrow exception, FDICIA requires the appropriate banking regulator to
appoint a receiver or conservator for an institution that is critically
undercapitalized. The federal banking agencies have specified by regulation the
relevant capital level for each category.
Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Risk-Based Capital Ratio of 10% or
greater, a Tier 1 Risk-Based Capital Ratio of 6.0% or greater, and a Leverage
Ratio of 5.0% or greater and (ii) is not subject to any written agreement,
order, capital directive, or prompt corrective action directive issued by the
appropriate federal banking agency is deemed to be "well capitalized." An
institution with a Risk-Based Capital Ratio of 8.0% or greater, a Tier 1
Risk-Based Capital Ratio of 4.0% or greater, and a Leverage Ratio of 4.0% or
greater is considered to be "adequately capitalized." A depository institution
that has a Risk-Based Capital Ratio of less than 8.0%, a Tier 1 Risk-Based
Capital Ratio of less than 4.0%, or a Leverage Ratio of less than 4.0% is
considered to be "undercapitalized." A depository institution that has a
Risk-Based Capital Ratio of less than 6.0%, a Tier 1 Risk-Based Capital Ratio
of less than 3.0%, or a Leverage Ratio of less than 3.0% is considered to be
"significantly undercapitalized," and an institution that has a tangible equity
capital to assets ratio equal to or less than 2.0% is deemed to be "critically
undercapitalized." For purposes of the regulation, the term "tangible equity"
includes core capital elements counted as Tier 1 Capital for purposes of the
risk-based capital standards, plus the amount of outstanding cumulative
perpetual preferred stock (including related surplus), minus all intangible
assets with certain exceptions. A depository institution 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.
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An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary
depository institution will meet its capital restoration plan, subject to
certain limitations. The obligation of a controlling bank holding company under
FDICIA to fund a capital restoration plan is limited to the lesser of 5.0% of
an undercapitalized subsidiary's assets or the amount required to meet
regulatory capital requirements. An undercapitalized institution is also
generally prohibited from increasing its average total assets, making
acquisitions, establishing any branches, or engaging in any new line of
business, except in accordance with an accepted capital restoration plan or
with the approval of the FDIC. In addition, the appropriate federal banking
agency is given authority with respect to any undercapitalized depository
institution to take any of the actions it is required to, or may take with
respect to a significantly undercapitalized institution as described below if
it determines "that those actions are necessary to carry out the purpose" of
FDICIA.
For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the appropriate
federal banking agency must require the institution to take one or more of the
following actions: (i) sell enough shares, including voting shares, to become
adequately capitalized; (ii) merge with (or be sold to) another institution (or
holding company), but only if grounds exist for appointing a conservator or
receiver; (iii) restrict certain transactions with banking affiliates as if the
"sister bank" exception to the requirements of Section 23A of the Federal
Reserve Act did not exist; (iv) otherwise restrict transactions with bank or
non-bank affiliates; (v) restrict interest rates that the institution pays on
deposits to "prevailing rates" in the institution's "region," (vi) restrict
asset growth or reduce total assets; (vii) alter, reduce, or terminate
activities; (viii) hold a new election of directors; (ix) dismiss any director
or senior executive officer who held office for more than 180 days immediately
before the institution became undercapitalized, provided that in requiring
dismissal of a director or senior officer, the agency must comply with certain
procedural requirements, including the opportunity for an appeal in which the
director or officer will have the burden of proving his or her value to the
institution; (x) employ "qualified" senior executive officers; (xi) cease
accepting deposits from correspondent depository institutions; (xii) divest
certain nondepository affiliates which pose a danger to the institution; or
(xiii) be divested by a parent holding company. In addition, without the prior
approval of the appropriate federal banking agency, a significantly
undercapitalized institution may not pay any bonus to any senior executive
officer or increase the rate of compensation for such an officer.
At June 30, 1996, all of the banking and thrift subsidiaries of both
UPC and FBI had the requisite capital levels to qualify as "well capitalized."
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FDIC INSURANCE ASSESSMENTS
In July 1993, the FDIC adopted a new risk-based assessment system for
insured depository institutions that takes into account the risks attributable
to different categories and concentrations of assets and liabilities. The new
system, which went into effect on January 1, 1994, and replaced a transitional
system that the FDIC had utilized for the 1993 calendar year, assigns an
institution to one of three capital categories: (i) well capitalized; (ii)
adequately capitalized; and (iii) undercapitalized. These three categories are
substantially similar to the categories described above under "Prompt
Corrective Action," with the undercapitalized category including institutions
that are undercapitalized, significantly undercapitalized, and critically
undercapitalized for prompt corrective action purposes. An institution is also
assigned by the FDIC to one of three supervisory subgroups within each capital
group. The supervisory subgroup to which an institution is assigned is based on
a supervisory evaluation provided to the FDIC by the institution's primary
federal regulator and information which the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance funds (which may include, if applicable, information provided by the
institution's state supervisor). An institution's insurance assessment rate is
then determined based on the capital category and supervisory category to which
it is assigned. Under the final risk-based assessment system, as well as the
prior transitional system, there are nine assessment risk classifications
(i.e., combinations of capital groups and supervisory subgroups) to which
different assessment rates are applied. Assessment rates for members of both
the BIF and the SAIF for the first half of 1995, as they had been during 1994,
ranged from 23 basis points (0.23% of deposits) for an institution in the
highest category (i.e., "well capitalized" and "healthy") to 31 basis points
(0.31% of deposits) for an institution in the lowest category (i.e.,
"undercapitalized" and "substantial supervisory concern"). These rates were
established for both funds to achieve a designated ratio of reserves to insured
deposits (i.e., 1.25%) within a specified period of time.
Once the designated ratio for the BIF was reached, which appears to
have occurred some time during May 1995, the FDIC was authorized to reduce the
minimum assessment rate below 23 basis points and to set future assessment
rates at such levels that would maintain a fund's reserve ratio at the
designated level. More recently, on November 14, 1995, the FDIC announced that,
beginning in 1996, it would reduce the deposit insurance premiums for BIF
members in the highest capital and supervisory categories to $2,000 per year,
regardless of deposit size. The FDIC has also elected to retain the existing
assessment rate of 23 to 31 basis points for SAIF members for the foreseeable
future given the undercapitalized status of that insurance fund.
Several proposed bills have been introduced into the United States
legislature, the main purpose of which is to provide additional capitalization
of the SAIF and to provide funds to pay interest and/or principal on bonds
issued to finance governmental costs associated with the savings and loan
industry. A common feature of the proposed legislation is a one-time payment to
the SAIF and BIF by both savings associations and banks. The consideration of
these proposed bills is ongoing, and at this time it is impossible to state
with accuracy the amounts, if any, UPC and FBI, or any of their subsidiaries,
will be required to pay in connection with any such legislation should it be
passed, or the effect such payments, if any, will have on the
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financial condition of UPC or FBI. See "SUMMARY--Recent Developments Affecting
UPC--Earnings Considerations Relating to Potential Special Regulatory
Assessment".
Under the FDIA, insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe and unsound
practices, is in an unsafe or unsound condition to continue operations, or has
violated any applicable law, regulation, rule, order, or condition imposed by
the FDIC.
PROPOSED LEGISLATION
Because of concerns relating to the competitiveness and the safety and
soundness of the industry, Congress continues to consider a number of
wide-ranging proposals for altering the structure, regulation, and competitive
relationships of the nation's financial institutions. Among such bills are
proposals to combine banks and thrifts into a unified charter, to combine
regulatory agencies, to alter the statutory separation of commercial and
investment banking, and to further expand the powers of depository
institutions, bank holding companies, and competitors of depository
institutions. It cannot be predicted whether or in what form any of these
proposals will be adopted or the extent to which the business of UPC or FBI may
be affected thereby.
DESCRIPTION OF UPC COMMON AND PREFERRED STOCK
UPC's Charter currently authorizes the issuance of 100,000,000 shares
of common stock having a par value of $5.00 per share (the "UPC Common Stock")
and 10,000,000 shares of preferred stock having no par value (the "UPC
Preferred Stock"). As of August 31, 1996, 46,221,921 shares of UPC Common Stock
were issued and outstanding and approximately 1,101,000 shares were subject to
issuance 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 502,000 shares were authorized for issuance pursuant to said
plans but not yet subject to option grants or otherwise issued; and
approximately 4,758,492 shares were authorized for issuance and reserved for
conversion of certain outstanding shares of UPC Preferred Stock. In addition,
as of August 31, 1996, 3,489,336 shares of UPC's 8% Cumulative, Convertible
Preferred Stock, Series E (the "Series E Preferred Stock") were issued and
outstanding. As of August 31, 1996, none of UPC's authorized shares of Series A
Preferred Stock were issued and outstanding nor is management aware of the
existence of circumstances from which it may be inferred that such issuance is
imminent. THE CAPITAL STOCK OF UPC DOES NOT REPRESENT OR CONSTITUTE A DEPOSIT
ACCOUNT AND IS NOT INSURED BY THE FDIC, THE BIF, THE SAIF OR ANY GOVERNMENTAL
AGENCY.
UPC COMMON STOCK
General. Shares of UPC Common Stock may be issued at such time or
times and for such consideration (not less than the par value thereof) as the
UPC Board may deem advisable, subject to such limitations as may be set forth
in the laws of the State of Tennessee, UPC's
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Charter or Bylaws or the rules of the NYSE. UPNB, a wholly-owned subsidiary of
UPC, is the Registrar, Transfer Agent and Dividend Disbursing Agent for shares
of UPC Common Stock. Its street address is Union Planters National Bank,
Corporate Trust Department, 6200 Poplar Avenue, Third Floor, Memphis, Tennessee
38119. Its mailing address is P.O. Box 387, Memphis, Tennessee 38147.
Dividends. Subject to the preferential dividend rights applicable to
outstanding 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, if any, for all outstanding UPC Preferred Stock,
the holders of the UPC Common Stock are entitled to receive, to the extent
permitted by law, only such dividends as may be declared from time to time by
the UPC Board.
UPC has the right to, and may from time to time, enter into borrowing
arrangements or issue other debt instruments, the provisions of which may
restrict payment of dividends and other distributions on UPC Common Stock and
UPC Preferred Stock; however, UPC has no such arrangements in effect at the
date hereof.
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 required to be distributed to
the holders of UPC Preferred Stock, holders of UPC Common Stock will be
entitled to receive all of the remaining assets of UPC, of whatever kind,
available for distribution to stockholders ratably in proportion to the number
of shares of UPC Common Stock held. The UPC Board may distribute in kind to the
holders of UPC Common Stock such remaining assets of UPC or may sell, transfer
or otherwise dispose of all or any part of such remaining assets to any other
person or entity and receive payment therefor in cash, stock or obligations of
such other person or entity, and may sell all or any part of the consideration
so received and distribute any balance thereof in kind to holders of UPC Common
Stock. Neither the merger or consolidation of UPC with or into 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 stockholders, including the holders of UPC Preferred Stock and
UPC Common Stock, to participate in the distribution of the assets of a
subsidiary of UPC in connection with the subsidiary's 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.
For a further discussion of UPC Common Stock, see "EFFECT OF MERGER ON
RIGHTS OF FBI STOCKHOLDERS."
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UPC PREFERRED STOCK
Series A Preferred Stock. UPC's Charter provides for the issuance of
up to 750,000 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 Registration
Statement on Form 8-A dated January 19, 1989, and filed February 1, 1989
(Commission File No. 0-6919) which is incorporated by reference herein.
Series E Preferred Stock. 3,489,336 shares of Series E Preferred Stock
were outstanding as of August 31, 1996. Up to 317,458 shares of Series E
Preferred Stock are expected to be issued upon consummation of UPC's pending
acquisition of ENB, if and when adverse claims to ENB's stock shall have been
resolved to UPC's satisfaction in pending court proceedings. See
"SUMMARY--Recent Developments Affecting UPC--Other Pending Acquisitions." All
shares of Series E Preferred Stock have a stated value of $25.00 per share.
Dividends are payable at the rate of $0.50 per share per quarter and are
cumulative. The Series E Preferred Stock is convertible at the election of the
holder at the rate of 1.25 shares of UPC Common Stock for each share of Series
E Preferred Stock. The Series E Preferred Stock is not subject to any sinking
fund provisions and has no preemptive rights. Such shares have a liquidation
preference of $25.00 per share plus unpaid dividends accrued thereon and, at
UPC's option and with the prior approval of the Federal Reserve, are subject to
redemption by UPC at any time or from time to time after March 31, 1997 at a
redemption price of $25.00 per share plus any unpaid dividend. 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 applicable Tennessee law.
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 Bylaws also provide that the
affirmative vote of the holders of 66 2/3% of the outstanding shares of UPC
Common Stock is required to remove any or all of the directors of UPC.
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<PAGE> 81
UPC's Charter requires the affirmative votes of the holders of 66 2/3%
of the outstanding shares for approval of a merger, consolidation or a sale or
lease of all or substantially all of the assets of UPC if the other party to
the transaction is a beneficial owner of 10% or more of the outstanding shares
of UPC. UPC's Charter also requires the affirmative votes of the holders of 66
2/3% of the outstanding stock to change the number, election and classification
of directors; to approve certain transactions as described above; or to amend
certain other provisions of UPC's Charter.
SHARE PURCHASE RIGHTS PLAN
In 1989 the UPC Board adopted a Preferred Share Purchase Rights
Plan and distributed a dividend of one Preferred Share Unit Purchase Right (a
"Preferred Share Right") for each outstanding share of UPC Common Stock.
Moreover, one Preferred Share Right was required to be, automatically and
without further action by UPC, distributed with respect to each share of UPC
Common Stock issued thereafter. The Preferred Share Rights are generally
designed to deter coercive takeover tactics and to encourage all persons
interested in potentially acquiring control of UPC to treat each stockholder on
a fair and equal basis. Each Preferred Share 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 Preferred Share Rights would separate from UPC Common Stock
and each holder of a Preferred Share Right (other than the potential acquirer)
would be entitled to purchase certain equity securities at prices below their
market value. UPC has authorized 750,000 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/Proxy Statement. Until a Preferred Share
Right is exercised, the holders thereof, as such, will have no rights as
stockholders of UPC and, consequently, will have no right to vote or to receive
dividends with respect thereto.
TENNESSEE ANTI-TAKEOVER STATUTES
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 impose certain restrictions on business combinations including, but not
limited to, combinations with interested stockholders 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 a corporation 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 the corporation's stock then
outstanding) for a period of five years after the date the person becomes an
Interested Shareholder unless prior to such date, the board of directors
approved either the business combination or the transaction pursuant to which
the Interested Shareholder became such and the business combination satisfies
any other applicable requirements imposed by law or by the corporation's
69
<PAGE> 82
charter or bylaws. The Tennessee BCA also severely limits the extent to which a
corporation 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.
The Tennessee CSAA generally provides that any person or group of
persons that acquires the power to vote more than specified levels (one-fifth,
one-third or a majority) of the shares of certain domestic corporations will
not have the right to vote such shares unless granted voting rights by the
holders of a majority of the votes entitled to be cast, excluding "interested
shares." Interested shares are those shares held by the acquiring person,
officers of the corporation and employees of the corporation who are also
directors of the corporation. If approval of voting power for the shares is
obtained at one of the specified levels, additional shareholder approval is
required when a shareholder seeks to acquire the power to vote shares at the
next level. In the absence of such approval, the additional shares acquired by
the shareholder may not be voted until they are transferred to another person
in a transaction other than a control share acquisition. The Tennessee CSAA
applies only to those Tennessee corporations whose charters or bylaws contain
an express declaration that control share acquisitions in respect of the shares
of such corporations are governed by and subject to the provisions of such act.
The Tennessee Greenmail Act ("Tennessee GA") prohibits a Tennessee
corporation having a class of voting stock registered or traded on a national
securities exchange or registered with the Commission pursuant to Section 12(g)
of the Exchange Act from purchasing, directly or indirectly, any of its shares
at a price above the market value of such shares (defined as the average of the
highest and lowest closing market price of such shares during the 30 trading
days preceding the purchase or preceding the commencement or announcement of a
tender offer if the seller of such shares has commenced a tender offer or
announced an intention to seek control of the corporation) from any person who
holds more than 3% of the class of securities to be purchased if such person
has held such shares for less than two years, unless the purchase has been
approved by the affirmative vote of a majority of the outstanding shares of
each class of voting stock issued by such corporation or the corporation makes
an offer, of at least equal value per share, to all holders of shares of such
class.
The Tennessee BCA provides that no resident domestic corporation
having any class of voting stock registered or traded on a national securities
exchange or registered with the Commission pursuant to Section 12(g) of the
Exchange Act or any of its officers or directors may be held liable at law or
in equity for either having failed to approve the acquisition of shares by an
interested shareholder on or before the date such shareholder became an
interested shareholder,
70
<PAGE> 83
or for seeking to enforce or implement the provisions of the Tennessee BCA or
the Tennessee CSAA, for failing to adopt or recommend any charter or bylaw
amendment or provision in respect of any one or more of these Acts or the
Tennessee GA, or for opposing any merger, exchange, tender offer or significant
disposition of the assets of the resident domestic corporation or any
subsidiary of such corporation because of a good faith belief that such merger,
exchange, tender offer or significant disposition of assets would adversely
affect the corporation's employees, customers, suppliers, the communities in
which the corporation or its subsidiaries operate or are located or any other
relevant factor if such factors are permitted to be considered by the board of
directors under the corporation's charter in connection with the merger,
exchange, tender offer or significant disposition of assets.
UPC is subject to the Tennessee BCA and the Tennessee GA. UPC's
Charter and Bylaws do not contain a declaration adopting the Tennessee CSAA
and, accordingly, the Tennessee CSAA will not apply to shares of UPC unless and
until UPC's Charter or Bylaws should be amended to so provide. In addition,
UPC's Charter does not include a provision authorizing its Board of Directors
to consider any additional relevant factors in connection with a merger,
exchange, tender offer or significant disposition of assets.
The provisions described above might be deemed to make UPC a less
attractive 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 stockholders following the acquisition. Furthermore, the
acquirer would not obtain the ability immediately to effect a merger,
consolidation or other similar business combination unless certain conditions
were met. As a result, UPC's stockholders may be deprived of opportunities to
sell some or all of their shares at prices that represent a premium over
prevailing market prices. The provisions described above also may make it more
difficult for UPC's stockholders promptly to replace the UPC Board or
management, even if the holders of a majority of the UPC Common Stock believe
that such replacement is in the best interest of UPC. As a result, such
provisions may tend to perpetuate the incumbent UPC Board and management.
EFFECT OF MERGER ON RIGHTS OF FBI SHAREHOLDERS
At the Effective Date of the Merger, FBI Record Holders (except for
any such holder who shall have effectively exercised his or her dissenters'
rights) automatically will become holders of the UPC Common Stock and their
rights as holders of the UPC Common Stock will be determined by the Tennessee
Business Corporation Act and by UPC's Charter and Bylaws. The following is a
summary of the material differences in the rights of holders of UPC Common
Stock and FBI Common Stock.
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<PAGE> 84
REMOVAL OF DIRECTORS
Members of the FBI Board may be removed with or without cause by the
vote of the holders of a majority of the shares entitled to vote at any meeting
called for that purpose.
In contrast, UPC's Bylaws provide that directors may be removed with
or without cause by vote of the holders of 66 2/3% or more of the outstanding
shares entitled to vote generally in the election of directors.
REQUIRED SHAREHOLDER VOTES
UPC's Charter provides that the vote of the holders of 66 2/3% or
more of the shares entitled to vote shall be required to approve any merger or
consolidation of UPC with or into any other corporation or the sale, lease,
exchange or other disposition of substantially all of UPC's assets, if on the
date a binding agreement is executed providing for such merger, sale or other
disposition, the corporation, person or entity into which UPC would be merged
or to which its assets would be sold is the beneficial owner of 10% or more of
the outstanding capital stock of UPC. While neither FBI's charter nor bylaws
require a supermajority vote in any situation, the Missouri Act requires the
affirmative votes of the holders of 66 2/3% of all issued and outstanding FBI
Common Stock in order to approve any merger or consolidation of FBI with or
into any other corporation and in other circumstances similar to those
designated in UPC's Charter and Bylaws.
ELECTION OF DIRECTORS
FBI's bylaws provide for only one class of directors and that
shareholders are entitled to elect all of FBI's directors annually. The
number of directors may be fixed from time to time by a majority of the entire
FBI Board, but in no event shall the number of directors be less than three nor
more than twenty-five (25).
In contrast, UPC's Bylaws provide for a classified board of directors
consisting of three classes with staggered terms of three years each.
Therefore, UPC shareholders are entitled to elect only one class, i.e.,
approximately one-third of UPC's directors annually. The number of UPC
directors shall be not less than seven (7) nor more than twenty-five (25). To
increase the number of directors, 66 2/3% of the directors then in office must
concur.
METHOD OF CASTING VOTES
Voting Rights. Each UPC Shareholder shall have one vote on all matters
voted upon by shareholders in respect of each share of UPC Common Stock held.
Holders of UPC Common Stock do not have cumulative voting rights.
Each FBI shareholder is entitled to one vote for each share of stock
held by him/her on each matter submitted at a meeting of shareholders.
Cumulative voting is not permitted.
72
<PAGE> 85
Reservation of Shares. Such number of shares of UPC Common Stock as
may from time to time be required for such purpose shall be reserved for
issuance (i) upon conversion of any shares of UPC Preferred Stock or any other
obligation of UPC convertible into shares of UPC Common Stock which shall be at
the time outstanding, and (ii) upon the exercise of any outstanding options or
warrants to purchase shares of UPC Common Stock.
SHARE PURCHASE RIGHTS PLAN
As described above under "CERTAIN PROVISIONS THAT MAY HAVE AN
ANTI-TAKEOVER EFFECT--Share Purchase Rights Plan," UPC Common Stock has
attached Rights, which may deter certain takeover proposals. FBI does not have
a rights plan.
RESTRICTIONS ON CHANGES IN CONTROL
FBI is subject to the control share acquisition and the business
combination sections of the Missouri Act. The Missouri business combination
statute protects domestic corporations from hostile takeovers by prohibiting
certain transactions once an acquirer has gained control. The Missouri control
share acquisition statute generally requires shareholder approval for the
purchase of control shares, as defined, of a publicly traded corporation. These
provisions generally make it more difficult for there to be a change in control
of FBI or for FBI to enter into certain business combinations. As described
above under "CERTAIN PROVISIONS THAT MAY HAVE AN ANTI-TAKEOVER
EFFECT--Provisions of the Tennessee Anti-Takeover Statutes," UPC is subject to
similar restrictions on changes in control.
LEGAL OPINIONS
The validity of the shares of the UPC Common Stock offered hereby will
be passed upon by E. James House, Jr., Secretary and Manager of the Legal
Department of UPC. E. James House, Jr. is an officer of, and receives
compensation from UPC.
The tax consequences of the Merger to the FBI Record Holders, in
general, will be passed upon by Armstrong, Teasdale, Schlafly & Davis, counsel
to FBI.
EXPERTS
The consolidated financial statements of Union Planters Corporation
incorporated into this Prospectus/Proxy Statement by reference to the Annual
Report on Form 10-K of Union Planters Corporation for the year ended December
31, 1995 have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
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<PAGE> 86
The consolidated financial statements of Financial Bancshares, Inc.
incorporated into this Prospectus/Proxy Statement by reference to the Annual
Report on Form 10-K of Financial Bancshares, Inc. for the year ended December
31, 1995 have been so incorporated in reliance upon the report of KPMG Peat
Marwick LLP, independent accountants, upon the authority of said firm as
experts in accounting and auditing.
The consolidated statements of financial position of Leader Financial
Corporation and its subsidiary as of December 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1995,
incorporated into this Prospectus/Proxy Statement by reference to UPC's Current
Report on Form 8-K, dated April 1, 1996, have been audited by KPMG Peat Marwick
LLP, independent certified public accountant, as stated in their report which
is incorporated herein by reference and in reliance on the report of such firm
given upon their authority as experts in accounting and auditing.
The report of KPMG Peat Marwick LLP refers to changes in accounting
principles related to the adoption in 1994 of the provisions of the American
Institute of Certified Public Accountants' Statement of Position 93-6,
Employers' Accounting for Employee Stock Ownership Plans, and in 1993 of the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 106, Employers' Accounting for Postretirement Benefits
Other than Pensions, and No. 115, Accounting for Certain Investments in Debt
and Equity Securities.
74
<PAGE> 87
UNION PLANTERS CORPORATION
INDEX TO APPENDICES
<TABLE>
<CAPTION>
APPENDIX
NUMBER
- --------
<S> <C> <C>
A-1 Annual Report on Form 10-K of Financial Bancshares, Inc. for the year ended December 31, 1995
A-2 Quarterly Report on Form 10-Q of Financial Bancshares, Inc. for the quarterly period ended June 30, 1996
B -- Agreement and Plan of Reorganization between Union Planters Corporation, Capital Bancorporation, Inc.
and Financial Bancshares, Inc., dated as of June 27, 1996, together with the related Plan of Merger
annexed thereto as Exhibit A and the First Amendment to Agreement and Plan of Reorganization and Plan
of Merger dated as of September 6, 1996
C -- Letter Agreement between Union Planters Corporation, Capital Bancorporation, Inc. and Financial
Bancshares, Inc., dated as of June 27, 1996
D -- Fairness Opinion of Mercer Capital Management, Inc.
E -- Section 351.455 of the Missouri Act pertaining to applicable Dissenters' Rights provisions
</TABLE>
<PAGE> 88
APPENDIX A-1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the year ended December 31, 1995 Commission File No. 33-33940
FINANCIAL BANCSHARES, INC.
MISSOURI 43-1251071
(State of incorporation) (I.R.S. Employer Identification No.)
3805 South Broadway, St. Louis, Missouri 63118-4607
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (314) 664-6250
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 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 if 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 registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
As of March 1, 1996, 684,377 shares of common stock were outstanding. Based on
the 1995 fourth quarter average sales price of $26.50 per share, the aggregate
market value of common shares of the registrant held by nonaffiliates was
approximately $7,780,000.
- --------------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE: None
================================================================================
<PAGE> 89
PART I
ITEM 1. BUSINESS
General
Financial Bancshares, Inc. (Company) is a bank holding company incorporated in
1976 which, as of December 31, 1995, owned the respective percentages indicated
below of five Missouri banks.
<TABLE>
Name of Bank % of Ownership
------------ --------------
<S> <C>
First Financial Bank of St. Louis (FFB - St. Louis) 100.00
Citizens First Financial Bank (Citizens) 99.92
First Financial Bank of Southeast Missouri (SEMO) 99.41
First Financial Bank of Ste. Genevieve County
(FFB - Ste. Genevieve) 94.87
First Financial Bank of Mississippi County (MissCo) 100.00
======
</TABLE>
The Company has one wholly owned nonbank subsidiary, First Financial Mortgage
Co., Inc. (Mortgage), which is engaged in the origination and sale of long-term
residential mortgages.
All of the Company's subsidiary banks, individually described below, operate as
community banks in their respective geographic locations. The deposit base of
these banks consists of retail core deposits gathered from within the
communities they serve and does not include brokered deposits. The banks'
commercial loans are to smaller and middle market companies in their immediate
geographic areas. The banks also hold participating interests in commercial
loans originated by other nonaffiliated banks which may be outside of the
immediate geographic area of the particular subsidiary bank but within the
geographic area of the Company as a whole. The commercial loan customers
represent a diverse range of companies and industries, including
manufactur-ing, service, and agriculture. The agricultural loan customers,
both agricul-tural production and real estate secured by farmland, are well
established, profitable, and financially strong agricultural operations located
mainly in southeastern Missouri. As discussed in "Loan Concentrations" under
"Statistical Disclosures," the Company has no significant concentration of
loans, other than to the agricultural sector and, therefore, the portfolio has
no more than the normal level of risk.
First Financial Bank of St. Louis
FFB - St. Louis was organized in 1924 under the laws of the State of Missouri.
Its principal banking office is in the City of St. Louis, Missouri. In
addition to its main banking headquarters, FFB - St. Louis operates two
facilities in the City of St. Louis and a third in suburban St. Louis County.
FFB - St. Louis provides general banking services to individuals and
businesses, including checking, savings, and time deposit accounts and safe
deposit services. Lending services include commercial, consumer, and real
2
<PAGE> 90
estate loans. FFB - St. Louis also operates a trust department for industrial
revenue bond issues. At December 31, 1995, FFB - St. Louis had total assets of
$78,125,000, deposits of $71,004,000, and aggregate capital accounts of
$6,533,000. For the year ended December 31, 1995, FFB - St. Louis had a net
loss of $380,000, the reasons for which are discussed more fully in the section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Citizens First Financial Bank
Citizens was organized in 1903 under the laws of the State of Missouri and is
engaged in the general banking business. Citizens principal banking office is
located in Dexter, Missouri, and operates a branch facility in Advance,
Missouri, approximately 20 miles north of Dexter, Missouri.
Citizens provides general banking services to individuals and businesses,
including checking, savings, and time deposit accounts, and safe deposit
services. Lending services include agricultural, commercial, consumer, and
real estate loans. Citizens does not operate a trust department. At December
31, 1995, Citizens had total assets of $92,062,000, deposits of $83,221,000,
and aggregate capital accounts of $8,132,000. For the year ended December 31,
1995, Citizens had net income of $1,254,000.
First Financial Bank of Southeast Missouri
SEMO was organized in 1936 under the laws of the State of Missouri. SEMO's
principal banking office is located in Sikeston, Missouri. In addition to its
main banking office, SEMO operates five facilities located in the following
Missouri towns: Matthews, Oran, Benton, New Madrid, and Scott City. SEMO also
operates an automatic teller machine facility in Sikeston.
SEMO provides general banking services to individuals and businesses, including
checking, savings, and time deposit accounts and safe deposit services.
Lending services include agricultural, commercial, consumer, and real estate
loans. SEMO does not operate a trust department. At December 31, 1995, SEMO
had total assets of $90,558,000, deposits of $82,823,000, and aggregate capital
accounts of $6,399,000. For the year ended December 31, 1995, SEMO had net
income of $1,036,000.
First Financial Bank of Ste. Genevieve County
FFB - Ste. Genevieve was organized in 1901 under the laws of the State of
Missouri. It maintains its principal banking office in Ste. Genevieve,
Missouri, and it operates a branch facility in St. Mary, Missouri.
FFB - Ste. Genevieve provides general banking services to individuals and
businesses, including checking, savings, and time deposit accounts and safe
deposit services. Lending services include commercial, consumer, and real
estate loans. It does not operate a trust department. At December 31, 1995,
FFB - Ste. Genevieve had total assets of $28,496,000, deposits of $26,253,000,
and aggregate capital accounts of $2,059,000. For the year ended December 31,
1995, FFB - Ste. Genevieve had net income of $300,000.
3
<PAGE> 91
First Financial Bank of Mississippi County
MissCo was organized in 1931 under the laws of the State of Missouri. It
maintains its principal banking office in East Prairie, Missouri, and it
operates a facility in Charleston, Missouri, approximately 10 miles north of
East Prairie, Missouri.
MissCo provides general banking services to individuals and businesses,
including checking, savings, and time deposit accounts and safe deposit
services. Lending services include agricultural, commercial, consumer, and
real estate loans. It does not operate a trust department. At December 31,
1995, MissCo had total assets of $35,297,000, deposits of $31,367,000, and
aggregate capital accounts of $3,123,000. For the year ended December 31,
1995, MissCo had net income of $344,000.
First Financial Mortgage Co., Inc.
Organized in 1989, Mortgage is a Missouri corporation engaged in the business
of originating and selling long-term residential mortgages to secondary market
institutional purchasers. Its principal office and place of business is
located at 3805 South Broadway, St. Louis, Missouri.
At December 31, 1995, Mortgage had total assets of $195,000. For the year
ended December 31, 1995, Mortgage had a net loss of $2,000.
Prior to the end of 1990, senior management of the Company recommended, and the
Company's Board of Directors concurred, that Mortgage discontinue its
operations and liquidate its business in an orderly manner. This action and
the continuing orderly liquidation has not had, and the Company anticipates it
will not have, a material effect on the Company's business as a whole.
Competition
The Company's banking subsidiaries compete with numerous other banks which do
business in their respective trade areas, many of which are larger than the
subsidiary banks, and, to a lesser extent, with savings and loan associations,
credit unions, and other financial institutions.
REGULATION AND SUPERVISION
General
The Company is a registered bank holding company within the meaning of the Bank
Holding Company Act of 1956 (BHC Act) and is subject to regulation and
examination by the Board of Governors of the Federal Reserve System (the FRB).
The Company is required to file an annual report and such other reports as the
FRB may require. The Company is also subject to examination by the FRB.
The Company's banking subsidiaries are all chartered under the laws of the
State of Missouri and are, therefore, subject to the supervision of and are
regularly examined by the Missouri Division of Finance. The banking
subsidiaries are insured members of the Federal Deposit Insurance Corporation
(FDIC) and, as such, are subject to regulation and examination by the FDIC.
The Company's deposits are insured by the FDIC's Bank Insurance Fund (BIF),
except for those deposits exceeding the BIF insured deposit limit of $100,000.
Insurance premiums under the BIF were substantially lowered in the third
quarter of 1995 from $0.23 to $0.04 per $100 of insured deposits.
4
<PAGE> 92
Dividends
As a bank holding company, the principal source of income for the Company is
the dividends received from its banking subsidiaries. The subsidiary banks'
abilities to pay dividends may be restricted by federal and state agencies. It
is expected that dividends from the subsidiary banks will remain the principal
source of operating revenues for the Company.
Employees
At December 31, 1995, the Company and its subsidiaries had 142 full-time
equivalent employees. A variety of employee benefit programs are provided by
the Company and its subsidiaries. Management considers employee relations to
be satisfactory.
5
<PAGE> 93
Statistical Disclosures
Following is selected statistical information of the Company and its
subsidiaries as of and for various periods ended December 31, 1995.
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS'
EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL
The following tables present at the date and for the periods indicated the
average interest-earning assets, average interest-bearing liabilities, interest
income and expense, and average rates earned and paid by the Company and its
subsidiaries. Average rates earned and paid are derived by dividing income or
expense by the average of assets and liabilities, respectively.
<TABLE>
<CAPTION>
Year ended December 31, 1995
-----------------------------------------
Percent Interest Average
Average of total income/ yield/
balance assets expense rate
------- ------ ------- ----
(dollars in thousands)
<S> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Net loans (1)(2)(3) $ 184,319 59.57% $ 16,846 9.14%
Investment securities:
Taxable 81,839 26.45 5,015 6.13
Exempt from federal income
taxes (2) 10,918 3.53 891 8.16
Interest-bearing due from banks 1,243 .40 84 6.76
Funds sold 9,652 3.12 547 5.67
--------- ------ --------
Total interest-earning
assets 287,971 93.07 23,383 8.12
-------- ====
Non-interest-earning assets:
Cash and due from banks 10,482 3.39
Premises and equipment, net 7,566 2.45
Reserve for possible loan
losses (3,970) (1.28)
Other assets 7,366 2.37
--------- ------
Total assets $ 309,415 100.00%
========= ======
Liabilities:
Interest-bearing liabilities:
Interest-bearing deposits:
NOW, money market, and
savings accounts 97,485 31.51% 2,589 2.66%
Time deposits 142,378 46.01 7,717 5.42
Short-term borrowings 3,194 1.03 165 5.17
Notes payable 4,019 1.30 365 9.08
--------- ------ --------
Total interest-bearing
liabilities 247,076 79.85 10,836 4.39
-------- ====
Non-interest-bearing deposits 37,755 12.20
Other liabilities 2,094 .68
--------- ------
Total liabilities 286,925 92.73
Stockholders' equity 22,490 7.27
--------- ------
Total liabilities and
stockholders' equity $ 309,415 100.00%
========= ======
Net interest income/net yield on
earnings assets $ 12,547 4.36%
======== ====
</TABLE>
(Continued)
6
<PAGE> 94
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS'
EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL, CONTINUED
<TABLE>
<CAPTION>
Year ended December 31, 1995
-----------------------------------------
Percent Interest Average
Average of total income/ yield/
balance assets expense rate
------- ------ ------- ----
(dollars in thousands)
<S> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Net loans (1)(2)(3) $ 176,806 58.37% $ 14,913 8.43%
Investment securities:
Taxable 85,582 28.25 4,818 5.63
Exempt from federal income
taxes (2) 10,663 3.52 942 8.83
Interest-bearing due from banks 1,997 .66 131 6.56
Funds sold 7,172 2.37 269 3.75
--------- ------ --------
Total interest-earning
assets 282,220 93.17 21,073 7.47
-------- ====
Non-interest-earning assets:
Cash and due from banks 10,676 3.52
Premises and equipment, net 7,499 2.48
Reserve for possible loan
losses (3,751) (1.24)
Other assets 6,282 2.07
--------- ------
Total assets $ 302,926 100.00%
========= ======
Liabilities:
Interest-bearing liabilities:
Interest-bearing deposits:
NOW, money market, and
savings accounts 115,073 37.99% 2,935 2.55%
Time deposits 116,671 38.51 4,745 4.07
Short-term borrowings 6,212 2.05 287 4.62
Notes payable 3,876 1.28 293 7.56
--------- ------ --------
Total interest-bearing
liabilities 241,832 79.83 8,260 3.42
Non-interest-bearing deposits 37,523 12.39 -------- ====
Other liabilities 1,270 .42
--------- ------
Total liabilities 280,625 92.64
Stockholders' equity 22,301 7.36
--------- ------
Total liabilities and
stockholders' equity $ 302,926 100.00%
========= ======
Net interest income/net yield on
earnings assets $ 12,813 4.54%
======== ====
</TABLE>
(Continued)
7
<PAGE> 95
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS'
EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL, CONTINUED
<TABLE>
<CAPTION>
Year ended December 31, 1995
-----------------------------------------
Percent Interest Average
Average of total income/ yield/
balance assets expense rate
------- ------ ------- ----
(dollars in thousands)
<S> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Net loans (1)(2)(3) $ 172,332 58.10% $ 14,874 8.63%
Investment securities:
Taxable 79,854 26.92 5,017 6.28
Exempt from federal income
taxes (2) 11,069 3.73 1,039 9.39
Interest-bearing due from banks 3,676 1.24 167 4.54
Funds sold 8,661 2.92 254 2.93
--------- ------ --------
Total interest-earning
assets 275,592 92.91 21,351 7.75
Non-interest-earning assets:
Cash and due from banks 10,264 3.46
Premises and equipment, net 7,037 2.37
Reserve for possible loan
losses (2,553) (.86)
Other assets 6,290 2.12
--------- ------
Total assets $ 296,630 100.00%
========= ======
Liabilities:
Interest-bearing liabilities:
Interest-bearing deposits:
NOW, money market, and
savings accounts 115,273 38.86% 3,355 2.91%
Time deposits 116,730 39.35 4,814 4.12
Short-term borrowings 3,894 1.32 120 3.08
Notes payable 2,468 .83 150 6.08
-------- ------ --------
Total interest-bearing
liabilities 238,365 80.36 8,439 3.54
-------- ====
Non-interest-bearing deposits 33,266 11.22
Other liabilities 1,909 .64
-------- ------
Total liabilities 273,540 92.22
Stockholders' equity 23,090 7.78
-------- ------
Total liabilities and
stockholders' equity $ 296,630 100.00%
========= ======
Net interest income/net yield on
earnings assets $ 12,912 4.69%
======== ====
</TABLE>
(1) Average balances include nonaccrual loans. The income on such loans is
included, but is recognized only upon receipt.
(2) Interest yields are presented on a tax-equivalent basis. Nontaxable
income has been adjusted upward by the amount of federal income tax that
would have been paid if the income had been taxable at a rate of 34%,
adjusted downward by the disallowance of the interest cost to carry
nontaxable securities.
(3) Interest includes loan fees, which are immaterial to the total amount of
loan income.
8
<PAGE> 96
RATE/VOLUME ANALYSIS
The following table presents the dollar amount of changes in interest income
and expense for major components of interest-earning assets and
interest-bearing liabilities. It distinguishes between changes related to
volume and those due to changes in interest rates. For each category of
interest income and interest expense, information is provided on changes
attributed to (i) changes in volume (i.e., changes in volume multiplied by
prior-year rate) and (ii) changes in rate (i.e., changes in rate multiplied by
prior-year volume). For purposes of this table, changes attributable to both
rate and volume have been allocated to rate and volume changes in proportion to
the relationship of the absolute dollar amounts of the change in each.
<TABLE>
<CAPTION>
Amount of increase (decrease)
-----------------------------------------
From 1994 to 1995 From 1993 to 1994
change due to change due to
------------------------ ------------------------
Yield/ Yield/
Volume rate Total Volume rate Total
------ ---- ----- ------ ---- -----
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loans $ 648 1,285 1,933 380 (341) 39
Investment securities:
Taxable (217) 414 197 344 (543) (199)
Exempt from federal
income taxes 22 (73) (51) (43) (54) (97)
------ ----- ----- --- ---- ----
Total investment
securities (195) 341 146 301 (597) (296)
------ ----- ----- --- ---- ----
Interest-bearing due
from banks (51) 4 (47) (93) 57 (36)
Funds sold 112 166 278 (49) 64 15
------ ----- ----- --- ---- ----
Total interest
income 514 1,796 2,310 539 (817) (278)
------ ----- ----- --- ---- ----
Interest expense:
Deposits:
NOW, money market, and
savings accounts (461) 115 (346) (7) (413) (420)
Time 1,186 1,786 2,972 (2) (67) (69)
------ ----- ----- --- ---- ----
Total deposits 725 1,901 2,626 (9) (480) (489)
Short-term borrowings (162) 40 (122) 91 76 167
Notes payable 11 61 72 100 43 143
------ ----- ----- --- ---- ----
Total interest
expense 574 2,002 2,576 182 (361) (179)
------ ----- ----- --- ---- ----
Net interest
income
(expense) $ (60) (206) (266) 357 (456) (99)
====== ===== ===== === ==== ====
</TABLE>
9
<PAGE> 97
INVESTMENT PORTFOLIO
Amortized Cost
--------------
The amortized cost of investment securities (both held to maturity and
available for sale) at the dates indicated are summarized as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
(in thousands)
United States Treasury and obligations
of United States government agencies
and corporations $ 88,234 76,148 73,693
States and political subdivisions 10,146 11,210 11,605
Other securities 3,590 6,195 8,082
--------- ------ ------
$ 101,970 93,553 93,380
========= ====== ======
</TABLE>
Maturities
----------
The maturities of investment securities at December 31, 1995 and the weighted
average yields of such securities are as follows:
<TABLE>
<CAPTION>
Amor- Weighted
tized average
cost yield
---- -----
<S> <C> <C>
(dollars in thousands)
United States Treasury and obligations
of United States government agencies
and corporations:
0 to 1 year $ 12,855 5.67%
1 to 5 years 24,789 5.84
5 to 10 years 21,967 5.74
Over 10 years 28,623 7.00
---------
$ 88,234 6.16
========= ====
States and political subdivisions:
0 to 1 year 226 8.91%
1 to 5 years 1,498 10.02
5 to 10 years 6,039 9.22
Over 10 years 2,383 8.34
---------
$ 10,146 9.12
========= ====
Other securities:
0 to 1 year 972 6.55%
1 to 5 years 2,318 6.92
5 to 10 years 300 9.45
Over 10 years - -
---------
$ 3,590 7.03
========= ====
Total investment securities:
0 to 1 year 14,053 5.78%
1 to 5 years 28,605 6.14
5 to 10 years 28,306 6.52
Over 10 years 31,006 7.10
---------
$ 101,970 6.49
========= ====
</TABLE>
Notes:
(1) While weighted average yields by range of maturity are
routinely provided by the Company's accounting system on a
tax-equivalent basis, the individual amounts of adjustments are not
provided. In total, at an assumed federal income tax rate of 34%
(adjusted for interest disallowance), the adjustment amounted to
approximately $315,000.
(2) At December 31, 1995, the investment securities portfolio
contained no securities of any issuer with an aggregate book or
market value in excess of 10% of the Company's stockholders'
equity, excluding those issued by the United States government, its
agencies, or corporations.
10
<PAGE> 98
LOAN PORTFOLIO
Types of Loans
A summary of loans by type, net of unearned discount, is as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Commercial $ 31,548 28,148 27,600 27,417 37,329
Agricultural production 32,232 23,868 20,371 16,431 8,373
Real estate - construction 5,530 6,311 4,398 3,696 3,723
Real estate - mortgage 67,004 73,405 74,595 71,632 52,774
Real estate - farmland 21,698 21,264 15,867 11,924 13,464
Mortgage loans held for sale 158 206 537 859 1,575
Consumer and other, net of
unearned discount 28,894 28,677 32,604 32,603 31,335
--------- -------- ------- ------- -------
$ 187,064 181,879 175,972 164,562 148,573
</TABLE> ========= ======= ======= ======= =======
Maturities and Sensitivity to Changes in Interest Rates
-------------------------------------------------------
The following table shows the amounts of loans (excluding real estate -
mortgage and farmland, mortgage loans held for sale, and consumer and other
loans) outstanding as of December 31, 1995 which, based on remaining scheduled
repayments of principal, are due for the periods indicated:
<TABLE>
<CAPTION>
Within 1 to 5 After
1 year years 5 years Total
------ ----- ------- -----
(in thousands)
<S> <C> <C> <C> <C>
Commercial $ 21,651 8,189 1,708 31,548
Agricultural production 13,193 16,661 2,378 32,232
Real estate - construction 3,292 2,225 13 5,530
-------- ------ ----- ------
$ 38,136 27,075 4,099 69,310
======== ====== ===== ======
</TABLE>
Such loans with maturities greater than one year have the following interest
sensitivities:
<TABLE>
<CAPTION>
Fixed Floating
rate rate Total
---- ---- -----
(in thousands)
<S> <C> <C> <C>
Due after one but within
five years $ 21,406 5,669 27,075
Due after five years 3,166 933 4,099
-------- ----- ------
$ 24,572 6,602 31,174
======== ===== ======
</TABLE>
In the normal course of business, it is the practice of the Company to consider
and act upon borrowers' requests for renewal of loans at their maturity.
Evaluation of such requests include a review of the borrower's credit history,
the collateral securing the loan, and the purpose for such request. In
general, loans which the Company renews at maturity require payment of accrued
interest, a reduction in the loan balance, and/or the
11
<PAGE> 99
pledging of additional collateral and a potential adjustment of the interest
rate to reflect changes in economic conditions.
Risk Elements Involved in Lending Activities
Nonaccrual, past-due, and restructured loans are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 1,072 1,388 1,999 704 2,213
Accruing loans past
due 90 days or more 274 798 352 726 935
Restructured loans - - - 889 208
------- ----- ----- ----- -----
$ 1,346 2,186 2,351 2,319 3,356
======= ===== ===== ===== =====
</TABLE>
Note: Loans are included only once in the above table. The loans are
disclosed in the highest risk classification for which their
circumstances warrant.
It is the policy of the Company to periodically review its loans and to
discontinue the accrual of interest on any loan on which full collectibility of
principal or interest is doubtful. Subsequent interest income is recognized
only upon receipt, and only when the Company considers the principal to be
fully collectible. The interest income which would have been recorded under
the original terms of nonaccrual and restructured loans in 1995, 1994, and 1993
was $127,800, $33,800, and $124,400, respectively, and the interest income
actually recorded on such loans was $45,600, $91,900, and $69,800,
respectively.
Potential Problem Loans
As of December 31, 1995, 91 loans with a total principal balance of $3,221,000
were identified by management as having possible credit problems that raise
doubts as to the ability of the borrowers to comply with current repayment
terms (i.e., impaired loans). While many of these borrowers are currently
meeting all the terms of the applicable loan agreements, their financial
condition has caused management to believe that their loans may result in
disclosure at some future time as nonaccrual, past due, or restructured.
The Company adopted revised accounting methods for impaired loans in 1995, as
mandated by Statement of Financial Accounting Standards (SFAS) No. 114 (as
amended by SFAS No. 118). SFAS No. 114 does not apply to smaller-balance
homogeneous loans which management has assessed to include real estate
- -mortgage, mortgage loans held for sale, and consumer and other loans.
Accordingly, the loan classifications affected by SFAS No. 114 are commercial,
agricultural production, real estate - construction, and real estate -
farmland. The adoption of SFAS No. 114 did not result in a significant change
in the Company's risk identification process. SFAS No. 114 requires that a
loan be reported as impaired when it is probable that a creditor will be unable
to collect all amounts due according to the contractual terms of the loan
agreement. The Company's loan policy generally requires that a credit meeting
the above criteria be placed on nonaccrual status; however, loans which are
past due more than 90 days as to the payment of principal or interest are also
considered to be impaired. These loans are included in the total of
nonperforming assets. Loans past due less than 90 days are generally
12
<PAGE> 100
not considered impaired; however, a loan which is current as to payments may be
determined by management to demonstrate some of the characteristics of an
impaired loan. In these cases, the loan is classified as impaired while
management evaluates the appropriate course of action.
The Company's primary basis for measurement of impaired loans is the collateral
underlying the identified loan. Because of the similarities between the
Company's risk identification process before and after the adoption of SFAS No.
114, management does not believe the comparability of the nonperforming asset
table was affected. In addition, management does not anticipate any changes in
the Company's charge-off policy as a result of the adoption of SFAS No. 114.
Foreign Outstandings
At December 31, 1995, 1994, 1993, 1992, and 1991, the Company had no
outstanding loans to any foreign countries.
Loan Concentrations
At December 31, 1995, the Company had no significant concentration of loans.
The Company's commercial, agricultural, and consumer loan portfolios, while a
significant portion of the total consolidated loan portfolio, are not
concentrated in any one particular area or line of business. Accordingly, the
Company does not believe these portions of the portfolio maintain more than the
normal level of risk. In prior years, the Company has concentrated its lending
efforts in the commercial and consumer areas due to the higher rates and
shorter terms available therein, as opposed to permanent residential mortgage
financing. The Company has made a specific effort to make loans to profitable
and financially strong agricultural operations as those operations become
dissatisfied with the government-sponsored lending programs, which are
consolidating and becoming more centralized. This specific effort is the
reason for the increase in agricultural production loans, which at December 31,
1995 amounted to $32,232,000 or 17.2% of the Company's loan portfolio.
Additionally, the Company's banking subsidiaries have $21,698,000 of loans
secured by agricultural real estate. The Company believes the benefits
associated with commercial, agricultural, and consumer lending outweigh the
increased credit and valuation risks over those of permanent mortgage
financing. Commercial and agricultural loans are generally made on a fully
secured basis, with collateral for such loans comprising the corporate assets
of the borrowing entity, including inventory, accounts receivable, property and
equipment, etc. Additionally, such loans are made only after a thorough review
of the borrower's financial ability to repay the debt in accordance with the
terms of the various loan agreements. In the rare instances in which unsecured
loans are made by the Company, such loans are made based on the borrower's
financial condition and wherewithal to repay the debt. Consumer loans
generally consist of automobile financing, secured by a first lien on the
borrower's automobile, and are considered fully secured.
Other Interest-Bearing Assets
At December 31, 1995, the Company held no other interest-bearing assets
considered to be risk element assets if such assets were loans.
13
<PAGE> 101
Summary of Loan Loss Experience
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Average loans outstanding $ 184,319 176,806 172,332 156,286 146,938
========= ======= ======= ======= =======
Balance at beginning of
year 3,976 3,671 2,341 2,015 1,575
------- ------- ------- ------- -------
Charge-offs:
Commercial (716) (1,798) (2,631) (600) (572)
Agricultural production - - - (2) (2)
Real estate - construction - - - - (100)
Real estate - mortgage (562) (608) (308) (106) (450)
Real estate - farmland - - - - -
Consumer and other (749) (879) (652) (294) (450)
------- ------- ------- ------- -------
(2,027) (3,285) (3,591) (1,002) (1,574)
------- ------- ------- ------- -------
Recoveries:
Commercial 211 295 43 89 149
Agricultural production - 1 - - -
Real estate - construction - - - - -
Real estate - mortgage 50 43 14 18 32
Real estate - farmland - - - - -
Consumer and other 272 391 250 148 159
------- ------- ------- ------- -------
533 730 307 255 340
------- ------- ------- ------- -------
Net charge-offs (1,494) (2,555) (3,284) (747) (1,234)
------- ------- ------- ------- -------
Additions charged to
expense (1) 1,678 2,860 4,614 1,073 1,674
------- ------- ------- ------- -------
Balance at end of year $ 4,160 3,976 3,671 2,341 2,015
========= ======= ======= ======= =======
Net charge-offs to average
loans .81% 1.45% 1 .91% .48% .84%
========= ======= ======= ======= =======
Ending reserve to net out-
standing loans at end of
year 2.22% 2.19% 2 .09% 1.42% 1.36%
========= ======= ======= ======= =======
</TABLE>
(1) Determinations of the adequacy of provisions for losses on loans and
the overall level of the reserve for possible loan losses are based
on analyses of historical loan loss experience in relation to loans
outstanding and on estimates of potential losses in the portfolio in
light of current and foreseeable economic conditions. These
estimates are made as a result of continuing management review of
problem loans. Loans are charged-off upon determination of
uncollectibility by management. This determination is based on
factors such as the borrower's failure to make payments, the
borrower's financial condition, the adequacy of underlying
collateral, and the strength of any guarantees or insurance claims.
Reserve Allocation
Management views the reserve for possible loan losses as being available for
all potential or presently unidentifiable loan losses which may occur in the
future. Management assesses the adequacy of the reserve for possible loan
losses in terms of the risk of future losses inherent in the loan portfolio as
a whole. This risk is not precisely quantifiable or attributable to particular
loans or categories of loans. Management, based on its review of
14
<PAGE> 102
the periodic analyses for adequacy, has estimated those portions of the reserve
that could be attributable to major categories of loans as set forth in the
table below.
Allocations estimated for the indicated categories do not represent a specific
judgment that loan charge-offs of such magnitude will necessarily be required.
Additionally, such an allocation does not restrict future loan losses
attributable to a particular category of loans from being absorbed either by
the portion of the reserve attributable to other categories or by an
unallocated portion of the reserve. The risk factors of the loan portfolio
considered when determining the overall level of the reserve are the same when
estimating the allocation by major category. The factors considered, among
other things, include evaluation of each nonperforming and/or classified loan
to determine the estimated loss exposure under existing conditions known to
management. This provides the data for the identifiable portion of the reserve
allocation. Internal loan review, management's own classification, and the
most recent regulatory examination reports are the source for the classified
and/or nonperforming loans used in the evaluation for the reserve. An overall
review of the unclassified portion of the portfolio is made mostly in light of
total past loan loss experience. The Company's management believes that since,
among other things, there are no significant concentrations of loans either by
industry or location (other than agricultural credits discussed above), no one
subsidiary bank which has greater than 29% of total loans, and the
loan-to-deposit ratio at December 31, 1995 (and the average for the past five
years) was 64%, that the above-described procedure results in an adequate level
of reserve for possible loan losses and, therefore, prudent banking practice.
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------
1995 1994 1993
-------------- -------------- --------------
Category's Category's Category's
percent percent percent
of total of total of total
Amount loans Amount loans Amount loans
------ ----- ------ ----- ------ -----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial $ 775 16.86% $ 1,300 15.48% $ 1,090 15.68%
Agricultural production 475 17.23 100 13.12 250 11.58
Real estate - construction 150 2.96 100 3.47 150 2.50
Real estate - mortgage 1,100 35.90 1,250 40.47 780 42.69
Real estate - farmland 100 11.60 100 11.69 150 9.02
Consumer 600 15.45 350 15.77 310 18.53
Unallocated 960 - 776 - 941 -
------- ------ ------- ------ ----- ------
$ 4,160 100.00% $ 3,976 100.00% $ 3,671 100.00%
======= ====== ======= ====== ===== ======
</TABLE>
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1992 1991
-------------- --------------
Category's Category's
percent percent
of total of total
Amount loans Amount loans
------ ----- ------ -----
(dollars in thousands)
<S> <C> <C> <C> <C>
Commercial $ 495 16.66% $ 490 25.13%
Agricultural production - 9.98 - 5.64
Real estate - construction 110 2.25 130 2.51
Real estate - mortgage 530 44.05 295 36.58
Real estate - farmland - 7.25 - 9.05
Consumer 280 19.81 260 21.09
Unallocated 926 - 840 -
------- ------ ------- ------
$ 2,341 100.00% $ 2,015 100.00%
======= ====== ======= ======
</TABLE>
15
<PAGE> 103
DEPOSITS
The following table sets forth the average balance of and average rates paid on
deposits for the years indicated:
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------------------------------
1995 1994 1993
-------------- -------------- --------------
Average Average Average Average Average Average
balance rate balance rate balance rate
------- ---- ------- ---- ------- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Non-interest-bearing
demand deposits $ 37,755 - % $ 37,523 - % $ 33,266 - %
Interest-bearing
demand deposits 70,907 2.69 84,524 2.55 85,469 2.94
Savings deposits 26,578 2.58 30,549 2.56 29,804 2.82
Time deposits 142,378 5.42 116,671 4.07 116,730 4.12
--------- ------- -------
Total average
deposits $ 277,618 3.71 $ 269,267 2.85 $ 265,269 3.08
========= ==== ========= ==== ========= ====
</TABLE>
The maturities of time deposits of $100 thousand or more at December 31, 1995
are summarized below:
<TABLE>
(in thousands)
<S> <C>
Three months or less $ 20,313
Three to six months 2,698
Six to twelve months 9,687
Over twelve months 2,083
--------
$ 34,781
========
</TABLE>
SHORT-TERM BORROWINGS
The following table shows the distribution of short-term borrowings at December
31, 1995, 1994, and 1993.
<TABLE>
1995 1994 1993
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Funds purchased and securities
sold under agreements to
repurchase $ 795 4,531 2,067
Federal Home Loan Bank
advances 455 477 498
------- ----- -----
$ 1,250 5,008 2,565
======= ===== =====
</TABLE>
16
<PAGE> 104
The following table shows the average interest rates, average balances, and
maximum month-end amounts outstanding for short-term borrowings.
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(dollars in thousands)
<S> <C> <C> <C>
Funds purchased and securities sold
under agreements to repurchase:
Average rate at end of year 5.61% 5.07% 2.83%
Maximum amount outstanding at
any month-end $ 8,563 16,729 9,777
Average balance for the year 2,713 5,685 3,584
Average rate paid for the year 4.96% 4.46% 3.09%
FHLB advances:
Average rate at end of year 6.24% 6.24% 3.25%
Maximum amount outstanding at any
month-end $ 4.76 497 1,000
Average balance for the year 467 492 300
Average rate paid for the year 6.33% 6.29% 3.01%
Short-term debt:
Average rate at end of year - - -
Maximum amount outstanding at
any month-end $ 100 70 30
Average balance for the year 14 35 15
Average rate paid for the year 8.88% 7.86% 6.08%
======= ==== ====
</TABLE>
RETURN ON EQUITY AND ASSETS
The following ratios are among those commonly used in analyzing a bank holding
company's financial statements. A discussion of the business factors affecting
these ratios is located under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Percentage of net income to:
Average total assets .60% .35% .29%
Average stockholders' equity 8.25 4.78 3.68
Net yield on earning assets 4.36 4.54 4.69
Percentage of common dividends
declared to net income per
common share 47.23 80.13 100.81
Percentage of average stockholders'
equity to average total assets 7.27 7.36 7.78
===== ===== =====
</TABLE>
17
<PAGE> 105
ITEM 2: PROPERTIES
Financial Bancshares, Inc.
The Company rents approximately 1,100 square feet of office space at 3805 South
Broadway, St. Louis, Missouri, on a month-to-month basis from FFB - St. Louis
at a monthly rental of $1,400.
First Financial Bank of St. Louis
FFB - St. Louis owns the two-story building housing its main banking offices at
3803 South Broadway, St. Louis, Missouri. This building consists of
approximately 6,000 square feet, of which a portion of the second floor is
rented to the Company. Adjacent to the building is a drive-up facility
connected to the main bank by a tunnel. In addition, FFB - St. Louis owns its
facilities at 3547 Hampton Avenue, consisting of approximately 2,000 square
feet, at 5440 Gravois Avenue, consisting of approximately 1,600 square feet,
and at 9538 Manchester Road, consisting of approximately 3,200 square feet.
Citizens First Financial Bank
Citizens owns its banking offices in the business district of Dexter, Missouri.
These offices, built originally in 1955, were expanded in 1987 and consist of a
one-story brick building of approximately 11,300 square feet and an adjoining
drive-up facility. In addition, Citizens owns parking areas, which adjoin the
building, of approximately 16,000 square feet. Citizens owns its facility in
Advance, Missouri, which consists of approximately 3,000 square feet. In late
March 1996, Citizens will complete construction and open a branch facility of
approximately 1,100 square feet in Dexter, Missouri across town from its main
office.
First Financial Bank of Southeast Missouri
SEMO owns and occupies a one-story brick building, which houses its main
banking offices in Sikeston, Missouri. That building consists of approximately
4,100 square feet. Adjacent to the building is a drive-up facility and a
customer and employee parking area owned by the bank which contains
approximately 10,000 square feet. In addition, SEMO owns bank facilities, and
adjoining parking space, with approximate square feet of the buildings noted in
the parentheses, in the following Missouri towns: Matthews (1,500), Oran
(5,000), Benton (2,400), New Madrid (3,600), and Scott City (1,600). SEMO owns
land on which it plans to build a new main banking office across town from its
present location. When completed in late 1996, the present main banking office
will become a branch.
First Financial Bank of Ste. Genevieve County
FFB - Ste. Genevieve owns its main banking office at 748 Center Drive in Ste.
Genevieve, Missouri, a one-story brick building with an attached drive-up
facility, constructed in 1987, consisting of approximately 3,600 square feet
and approximately 3,000 square feet of adjoining parking space. In addition,
FFB - Ste. Genevieve owns a facility in the business district of St. Mary,
Missouri. This facility office consists of a two-story brick building of
approximately 6,000 square feet, of which approximately 2,000 square feet on
the first floor is utilized for banking purposes, with the balance of the first
floor rented on a month-to-month basis to two tenants. The second floor of the
facility office is used for storage. This structure was built in approximately
1931 and has been remodeled several times. In addition, the bank owns land
adjoining or near that office which is used for parking.
18
<PAGE> 106
First Financial Bank of Mississippi County
MissCo owns its banking offices located in the business district of East
Prairie, Missouri. This one-story building contains approximately 4,700 square
feet with an adjoining drive-up and walk-up facility in which MissCo conducts
its business. MissCo also owns its facility in Charleston, Missouri, which
consists of approximately 2,800 square feet.
First Financial Mortgage Co., Inc.
Mortgage, which is in orderly liquidation, shares office space with the
Company.
ITEM 3: LEGAL PROCEEDINGS
The Company and its subsidiaries are involved as plaintiff or defendant in
various legal actions arising in the course of their businesses. While the
ultimate outcome of the various legal proceedings involving the Company and its
subsidiaries cannot be predicted with certainty, it is the opinion of
management, after consultation with counsel, that the resolution of these legal
actions should not have a material effect on the Company's consolidated
financial position.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the solicitation
of proxies or otherwise, during the year/quarter ended December 31, 1995.
19
<PAGE> 107
PART II
ITEM 5: MARKET FOR THE COMPANY'S COMMON
STOCK AND RELATED STOCKHOLD R MATTERS
Market Prices of and Dividends on Common Stock
The common stock of the Company has never been listed or publicly traded on any
securities exchange or actively traded in the over-the-counter market. However,
there are occasional sales of shares of Company common stock. The following
table sets forth quarterly high and low sales prices for recent sales of common
stock of the Company known to the Company's management (which does not
necessarily include all of the transactions or offers which occurred during the
indicated periods). The table also sets forth per share dividends paid on
Company shares during the indicated periods.
<TABLE>
<CAPTION>
Sales Prices
------------ Dividends
1995 High Low Per Share
---- ---- --- ---------
<S> <C> <C> <C>
1st Quarter $ (1) (1) -
2nd Quarter 27.00 25.00 0.625
3rd Quarter 28.00 26.00 -
4th Quarter 27.00 26.00 0.655
===== ===== =====
1994
----
1st Quarter $ (1) (1) -
2nd Quarter 28.00 25.00 0.625
3rd Quarter 27.00 25.00 -
4th Quarter 27.00 25.00 0.625
===== ===== =====
</TABLE>
--------------------------------------------
(1) Management is not aware of the prices of any sales during
this period.
20
<PAGE> 108
ITEM 6: SELECTED FINANCIAL DATA
FINANCIAL BANCSHARES, INC.
AND SUBSIDIARIES
(dollars in thousands, except per share information)
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------------------
Balance Sheet Items 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Non-interest-bearing
deposits $ 42,735 44,586 37,336 33,853 29,490
Interest-bearing deposits 251,715 225,986 237,723 228,701 212,142
--------- ------- ------- ------- -------
Total deposits $ 294,450 270,572 275,059 262,554 241,632
========= ======= ======= ======= =======
Total assets $ 325,924 302,015 304,394 290,113 268,919
Notes payable 4,019 4,019 2,244 2,469 2,669
Net loans 182,904 177,903 172,301 162,221 146,557
Stockholders' equity 23,663 20,560 23,001 22,086 20,191
========= ======= ======= ======= =======
Results of Operations
Total interest income $ 23,087 20,748 20,997 21,756 23,130
Total interest expense 10,837 8,260 8,439 10,355 13,675
--------- ------- ------- ------- -------
Net interest income $ 12,250 12,488 12,558 11,401 9,455
========= ======= ======= ======= =======
Provision for possible
loan losses $ 1,678 2,860 4,614 1,073 1,674
========= ======= ======= ======= =======
Income before cumulative
effect of accounting
change $ 1,856 1,065 717 2,640 952
Cumulative effect of
accounting change - - 132 - -
--------- ------- ------- ------- -------
Net income $ 1,856 1,065 849 2,640 952
========= ======= ======= ======= =======
Per Share Information
Book value at year-end $ 34.58 30.04 33.61 32.27 29.50
Cash dividends per share 1.28 1.25 1.25 1.125 .86
========= ======= ======= ======= =======
arnings per share:
Before accounting change $ - - 1.05 - -
Net income 2.71 1.56 1.24 3.86 1.39
========= ======= ======= ======= =======
</TABLE>
21
<PAGE> 109
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is intended to provide a review of
significant factors affecting the financial condition and results of operations
of the Company for the three years ended December 31, 1995. This discussion
provides a more comprehensive review than the consolidated financial statements
alone. Therefore, the following should be read in conjunction with the
consolidated financial statements, the notes thereto, selected consolidated
financial data, and consolidated statistical data presented elsewhere herein.
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
Net Income
Net income for 1995 was $1,856,000, an increase of 74.3% over 1994's earnings
of $1,065,000, which in turn had been an increase of 25.4% from 1993's earnings
of $849,000. Net income per share for December 31, 1995, 1994, and 1993 was
$2.71, $1.56, and $1.24, respectively. The 1993 net income was affected by the
cumulative effect of a change in accounting principle. The net income effect
of this accounting change was $132,000 or $0.19 per share.
For the three-year period, net interest income was relatively stable with
$12,251,000, $12,488,000, and $12,558,000, respectively, for 1995, 1994, and
1993. The provision for possible loan losses declined significantly over the
three years from $4,614,000 in 1993 to $2,860,000 in 1994 and $1,678,000 in
1995. The decline is due mainly to the reduction in the level of loan losses
experienced by the Company's St. Louis subsidiary bank. This has been the main
reason for the increase in net income during the three years ended December 31,
1995. Noninterest income was relatively flat at $1,369,000, $1,305,000, and
$1,318,000 for 1995, 1994, and 1993, respectively. Noninterest expense has
increased modestly over the three years from $8,400,000 in 1993 to $9,451,000
in 1994 and $9,455,000 in 1995.
Assets
Total assets increased $23,908,000 from $302,015,000 on December 31, 1994 to
$325,923,000 on December 31, 1995, and decreased $2,378,000 between year-end
1994 and 1993. The increase in 1995 was primarily reflective of the increase
in deposits. Total deposits increased $23,878,000, or 8.8% in 1995. The
increase in the deposits for 1995 results mainly from the increase in
interest-bearing time deposits of $28,274,000. In 1994, there was a decrease
in deposits of $4,487,000 to $270,572,000 from $275,059,000 at December 31,
1993. This decrease in deposits is the main reason for the decrease in assets
for the same period. The Company believes that if future market rates paid on
all deposits remains nonvolatile in the banking industry as a whole, or more
specifically in the markets served by the banking subsidiaries, its customers
will continue to become more sophisticated "financial shoppers" and thereby
influence movement among the deposit categories and those categories that will
receive most of the growth. The deposit fluctuations noted in the Company's
banking subsidiaries result from market trends in each of the areas in which
the banking subsidiaries operate.
The increase in the amount of net loans at December 31, 1995 as compared to
December 31, 1994 was $5,001,000 or 2.8%. The increase in the amount of net
loans at December 31, 1994 as compared to December 31, 1993 was $5,602,000 or
3.3%. One of the more significant reasons for the increase in loans for the
years analyzed, is the continued improvement of agricultural loan demand in
certain of the markets serviced by the Company's banking subsidiaries and the
22
<PAGE> 110
Company's continued increased emphasis in this area, particularly in
Southeastern Missouri. Other categories of earning assets also increased at
December 31, 1995 compared to December 31, 1994. The funds sold increase was
due to higher than normal year-end deposits of customers who have large amounts
of receipts just prior to year-end, especially public entities. Despite
moderate loan demand, the increase in deposits was greater than the increase in
loan demand, and the additional funds were put into the investment portfolio,
which increased $11,640,000 or 12.8% from December 31, 1994 to December 31,
1995. The 1994 increase in net loans was more than offset by the decreases in
other categories of earning assets. Adequate liquidity and a temporary
increase in short-term borrowings funded the increase in loans when deposits
declined during 1994. The increase in net loans in both 1995 and 1994 reflects
the Company's continued efforts to increase the percentage of this earning
asset category compared to total interest-earning assets. The Company has
generally invested its new deposits in investments or when prudent, new loan
growth. The Company attempts to match its longer term asset/liability maturity
mix using mainly investment securities which are all classified as available
for sale as of December 31, 1995. Additionally, the Company believes it will
be able to continue to fund new loan growth through investment maturities,
seasonal short-term borrowings, and further deposit growth.
Net Interest Income
Net interest income on a tax equivalent basis for the year ended December 31,
1995 decreased approximately $266,000 from the amount for 1994, and the net
yield on earning assets decreased from 4.54% for 1994 to 4.36% for 1995. This
decrease results from the increase in interest expense of $2,576,000 exceeding
the increase in interest income of $2,310,000. This occurred as a result of
the interest rates on deposits repricing faster than loans in the rising
interest rate environment. The increase in interest income is due to the
effect of both increased rates, up 8.7%, and volume, up 2.0%. The main reason
for the increase in interest-earning assets is the increase in the volume of
loans. This loan volume increase reflects a 35.0% increase in agricultural
production loans from year-end 1994 to year-end 1995. The three banks in
southeast Missouri are the banks which primarily account for the consolidated
agricultural related loans. The increase in interest expense is primarily the
result of higher rates rather than increased volume. The increased volume in
interest-bearing deposits for 1995 versus 1994 has continued to be reflective
of, for the most part, the growth from the three new facilities that were
opened in late 1992 and early 1993.
Net interest income on a tax equivalent basis for the year ended December 31,
1994 decreased approximately $99,000 from the amount for 1993 and the net yield
on earning assets decreased from 4.69% for 1993 to 4.54% for 1994. This 1994
decrease results from a larger decrease, $278,000, in interest income than the
decrease, $179,000, in interest expense. The decrease in interest expense is
the net result of the effect of lower rates being more than the increase caused
by the higher volume in interest-bearing liabilities between the two periods.
The same explanation applies to the decrease in interest income. The effect of
the higher volume of interest-earning assets for 1994 compared to 1993 was more
than offset by the effect of lower rates.
Provision for Possible Loan Losses
The provision for possible loan losses decreased $1,182,000, or 41.3%, to
$1,678,000 for the year ended December 31, 1995 from the $2,860,000 for the
year ended December 31, 1994, which was a decrease of $1,754,000, or 38.0% from
the $4,614,000 for the year ended December 31, 1993. Net charge-offs for 1995
were $1,494,000, a decrease of 41.5% from the $2,555,000 of net charge-
23
<PAGE> 111
offs incurred in 1994. Net charge-offs were $3,284,000 in 1993. Nonperforming
loans totaled approximately $1,346,000 at December 31, 1995, as compared with
$2,186,000 and $2,351,000 at December 31, 1994 and 1993, respectively. The
reserve for possible loan losses at December 31, 1995 of $4,160,000 was 2.22%
of net outstanding loans and provided coverage of 309% of nonperforming loans.
The corresponding percentages at December 31, 1994 and 1993 for the percentage
of net loans outstanding and nonperforming loan coverage were 2.19% and 182%,
respectively, for 1994 and 2.09% and 156%, respectively, for 1993.
The decrease in the 1995 provision for possible loan losses represents a
continued reduction in the need for provisions at the St. Louis bank. This is
mainly due to the reduction in the level of nonperforming loans discussed
above. The decrease in the 1994 provision for possible loan losses is due
mainly to the reduction in the need for significant additional provisions at
the St. Louis bank. Consolidated net charge-offs for 1994 decreased 77.8%,
almost solely due to decreased net charge-offs at FFB - St. Louis. Company and
bank management's efforts to resolve that bank's problems have resulted in
improvement in the asset quality for the bank. In addition, the status is
monitored both internally and by periodic independent review over and above
regulatory examinations.
Noninterest Income
Noninterest income increased $64,000 or 4.9%, to $1,369,000 for 1995 compared
to $1,305,000 for 1994. This increase is due mainly to service charges on
deposit accounts increasing $53,000 or 5.2%, between the two years. The
Company's banking subsidiaries reviewed their fees and charges on deposit
accounts and adjusted them upward where possible. That, along with an increase
in the number of new accounts, explain the increase. Net securities losses of
$31,000 and $37,000 were experienced in 1995 and 1994, respectively. This
change will not affect the Company's investment policies and strategies.
Liquidity planning continues to provide for the overall funding needs of the
Company, and management anticipates no increased sales of securities.
Noninterest income decreased $13,000, or 1.0%, to $1,305,000 for 1994 compared
to $1,318,000 for 1993. Net securities losses of $37,000 were experienced in
1994, compared to net securities gains of $113,000 for 1993. This change of
$150,000 between the two years more than offset the net increase in the other
categories of $137,000. The Company experienced nominal securities sales even
though a significant portion of the approximately $94,000,000 portfolio was
classified as available-for-sale. The increase in the other categories of
noninterest income was due mainly to the increase in service charges on deposit
accounts. That increase is reflective of an increase in the number of accounts
due to the continued growth from the new facilities and upward adjustments,
where possible, in the fees charged.
Noninterest Expense
Noninterest expense increased $3,000, or less than 0.1%, from $9,451,000 in
1994 to $9,455,000 in 1995. Three categories of expense had increases or
decreases of more than 10% in 1995 compared to 1994. The first is net expenses
related to other real estate, which increased $106,000, or 154.9%. This
increase was mainly due to an increase in the number of properties to manage
during the year because of more aggressive handling of nonperforming real
estate mortgage loans at the St. Louis bank. The second category with a
significant change between the two years is legal and professional fees. This
expense increased $48,000 or 10.9% from $440,000 in 1994 to $488,000 in 1995.
The reason for the increase is due mainly to the professional fees that are
continuing to be incurred in working towards resolving the loan problems at the
St. Louis banking subsidiary. Another category with a significant change
between the two years is FDIC and state assessment. This expense decreased
24
<PAGE> 112
$464,000 or 62.9% from $738,000 in 1994 to $274,000 in 1995. The reason for
this decrease is the reduction in the premium rate assessed by the FDIC from
$0.23 to $0.04 per $100 of insured deposits resulting in cash refunds of
$179,000 received in the third quarter of 1995 and reduced premiums for the
fourth quarter of 1995.
Salaries and employee benefits, the largest noninterest expense category, had a
net increase of $196,000 or 4.3%. Salaries increased about 6% due to normal
salary adjustments and benefits were down approximately 2% due to a significant
decrease in pension expense which resulted from pension asset appreciation
experienced in 1995. Occupancy expense increased $35,000 or 5.2% due to
increases in several expenses such as utilities, repairs, and insurance.
Equipment expense increased $28,000 or 3.4%. This is the net result of
decreases at four of the subsidiary banks who no longer handle their own
computer processing, offset by increases at a separate entity which is owned by
the five banking subsidiaries. This separate entity now performs the
processing for these banks. The separate entity was created by transferring
the hardware, software, and personnel from one of the banks.
Noninterest expense increased $1,051,000 or 12.5% from $8,400,000 in 1993 to
$9,451,000 in 1994. Net expenses related to other real estate, increased
$27,000 or 65.9%. This increase was mainly due to the increase in the amount
of other real estate to $653,000 at year-end 1994 from $447,000 at year-end
1993. Professional fees increased $149,000 or 51.2% from the 1993 amount of
$291,000 to the 1994 amount of $440,000. The reason for the increase was due
mainly to the necessary professional fees incurred in working to resolve the
loan problems at the St. Louis banking subsidiary. Salaries and employee
benefits increased $462,000 or 11.4% from the 1993 amount of $4,058,000 to the
1994 amount of $4,520,000. There are several reasons for the increase in
salaries and employee benefits. First, 1994 had additional personnel at the
St. Louis bank during management transitions. Second, employee benefit costs
for payroll taxes, pension plan, group medical, and almost all other categories
were all higher in 1994 versus 1993 due to increases in costs or rates.
Finally, salary increases were due to normal and merit increases throughout the
Company as well as a minor increase in the number of employees. Occupancy
expense increased $70,000 or 11.5% between the two years due mainly to the two
new facilities that opened for business in 1993, operating for a full year in
1994. Equipment expense increased $91,000 or 12.4%, between the two years due
mainly to the equipment at the new facilities. FDIC and state assessment
increased $64,000 or 9.5%, for 1994 from the 1993 amount of $674,000. Net
growth in insured deposits at the non-St. Louis banks and the timing of the
assessments at the St. Louis bank which had a decrease in insured deposits,
explains the increase in this expense category. The remaining expense
categories reflect a general rise in overhead costs of or the result of growth
in items that directly effect the expense category.
Capital Resources and Liquidity
At December 31, 1995, the Company's consolidated equity capital ratio to
consolidated assets was 7.26%. This is an increase from the ratio of 6.81% at
year-end 1994. The Company intends to continue to maintain a strong capital
position at its subsidiary banks and thereby continue to have an adequate
consolidated capital position. Additionally, the Company's capital position is
stronger than the minimum risk-based capital requirements. The Company's Tier
l risk- based capital level at December 31, 1995 was 10.80%. Company
management feels it has, and will attempt to pursue, in the future, a dividend
policy to its stockholders that reflects the intention to maintain adequate
capital and, if considered prudent, to help improve the capital-to-assets
ratio. The Company has attempted to maintain a dividend policy in which any
increases in the dividends paid to stockholders are made only when management
25
<PAGE> 113
feels it would be warranted by a favorable growth in earnings and/or capital
ratio.
The Company's principal sources of funds are dividends and management fees paid
by its banking subsidiaries. The Company's reliance on such dividends and
management fees is significant relative to the amount of dividends to its
stockholders and its debt service obligations. The management fee structure is
regulated and closely scrutinized by regulators at the subsidiary banks as well
as the parent company.
Three of the Company's banking subsidiaries are planning capital commitments
for building and premises. Citizens will open a limited service facility near
its main office late in the first quarter of 1996. SEMO plans to construct a
larger main banking office across town from the present location. It is
expected to be completed near the end of 1996. FFB - Ste. Genevieve has an
option on land for a branch office in a city located in its natural market area
in which it does not currently have an office. It is in the preliminary stages
of planning and no definite decisions on when or if they will expand have been
made.
The debt service obligations of the Company are funded by dividends from the
subsidiaries which were acquired, in part, with the debt incurred. It is the
intention of the Company to have acquired subsidiaries provide any cash flow
needs (debt service or dividends) created by their acquisition. This has been
the case over the past years. If for some reason this were not possible, the
Company would turn first, as it has in the past, to funds from the tax benefit
of the parent company, or second, to dividends from the other banking
subsidiaries. Additional debt was incurred by the Company in 1994 to restore
the St. Louis subsidiary bank's capital position to the level above the minimum
regulatory requirement deemed prudent by an agreement between the Company and
the bank's regulators. The debt service for this additional debt will be
obtained from the other four banking subsidiaries. Company management does not
expect this additional dividend requirement will have a material effect on the
ability of the four subsidiaries to provide the funds. During 1995, these
other subsidiaries provided $750,000 in additional dividends to the Company
that were used for a capital injection to the St. Louis bank. A portion of the
injection was to restore that bank's capital. The rest of the injection was to
provide the bank with enough capital for future growth until its retained
earnings are sufficient enough to maintain the capital position.
As of December 31, 1995, the Company's banking subsidiaries had approximately
$3,097,000 available for additional dividends. This amount is determined by
applying the most stringent of dividend restrictions imposed on the Company. It
is the Company's policy to limit the debt incurred in acquisitions to less than
40% of combined subsidiary bank regulatory equity capital. The ratio at
December 31, 1995 is 17.3%. The ability of the Company's banking subsidiaries
to pay dividends and management fees is subject to limitations under various
laws and regulations, and to prudent and sound banking principles. Management
believes that the future earnings of its banking subsidiaries will be
sufficient to support anticipated asset growth at the subsidiary bank level and
to provide funds to the Company to meet its operating, dividend, and debt
service needs.
The primary goal of the Company's subsidiary bank asset/liability management
policies is to maintain an appropriate balance between rate-sensitive assets
and liabilities so as to continually maximize net interest income regardless of
fluctuations in the level of interest rates. At the same time, actual
liquidity needs at each bank directly affect the allocation of funds and may
not result in the optimum rate sensitive position.
26
<PAGE> 114
The following table illustrates the Company's rate sensitivity position at
December 31, 1995 for the various time frames presented:
RATE SENSITIVITY ANALYSIS
At December 31, 1995
(In thousands, except ratios)
<TABLE>
<CAPTION>
0-90 91-180 181-365 Over one
days days days year Total
---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
EARLIEST REPRICING OPPORTUNITY:
Earning assets:
Loans $ 87,090 14,225 12,101 73,648 187,064
Investment securities (1),
(2) 21,616 1,513 5,161 73,680 101,970
Deposits with other
financial institutions - 500 510 384 1,394
Funds sold 9,365 - - - 9,365
---------- ------- ------- ------- -------
Total earning assets $ 118,071 16,238 17,772 147,712 299,793
========= ======= ======= ======= =======
Acquired funds:
Savings and NOW 79,890 - - - 79,890
Money market accounts 19,452 - - - 19,452
Time deposits 48,561 50,710 26,907 26,195 152,373
Short-term borrowings 1,250 - - - 1,250
Notes payable 4,019 - - - 4,019
--------- -------- ------- ------- -------
Total acquired funds $ 153,172 50,710 26,907 26,195 256,984
========= ======== ======= ======= =======
Gap analysis:
Interest-sensitivity gap $ (35,101) (34,472) (9,135) 121,517 42,809
========= ======= ====== ======= ========
Cumulative interest-
sensitivity gap $ (35,101) (69,573) (78,708) 42,809 42,809
========= ======= ======= ======= ========
Ratio of interest-sensitive
assets to interest-
sensitive liabilities .77x .32x .66x 5.64x 1.17x
=== ==== === ==== ====
Cumulative ratio of interest-
sensitive assets to
interest-sensitive
liabilities .77x .66x .66x 1.17x 1.17x
=== ==== === ==== ====
</TABLE>
- -------
(1) Included in the first three time periods are securities which reprice
monthly, quarterly, semiannually, or annually that mature beyond one year.
There were approximately $18,400,000 of such securities at December 31,
1995.
(2) Securities amounts are presented at amortized cost.
27
<PAGE> 115
As indicated in the previous table, the Company operates on a short-term basis
similar to most other financial institutions, as its liabilities, with savings
and NOW accounts included, could reprice more quickly than its assets.
However, the Company believes its asset/liability management program will allow
adequate reaction time for trends in the marketplace as they occur, allowing
maintenance of adequate net interest margins. Additionally, the Company's
historical analysis of customer savings and NOW accounts indicates that such
deposits have certain "core deposit" characteristics and are not susceptible to
changes in the marketplace.
The liquidity needs of the Company's subsidiary banks are met primarily through
the maturity of assets or acquisition of additional deposit funds. This is
indicated in the consolidated statements of cash flows. Investment in debt
securities, which are classified as held-to-maturity, are purchased by the
banking subsidiaries for investment purposes and are maintained and managed as
a principal source of longer-term liquidity. Company management allows each
subsidiary to manage its own rate sensitivity and liquidity positions with some
overall guidance from the Company with regard to the consolidated rate
sensitivity staying within a certain range and adjustments to the portfolio
based on the consolidated income tax position. The consolidated rate
sensitivity position has been within the desired range for all of the three
years analyzed.
Gross unrealized gains and losses in the portfolio at December 31, 1995 were
$1,227,000 and $631,000, respectively. The Company's investment portfolio had
a total market value of 100.6% of its amortized cost at December 31, 1995.
Effects of Inflation
Balance sheets of financial institutions such as the Company typically reflect
a net positive monetary position whereby monetary assets exceed monetary
liabilities. Monetary assets and liabilities are those which can be converted
to a fixed number of dollars, and include cash assets, investments, loans,
money market instruments, deposits, and short-term borrowings.
During periods of inflation, a net positive monetary position may result in an
overall decline in purchasing power of an institution. There is no clear
evidence establishing a relationship between the purchasing power of an
institution's net positive monetary position and its future earnings.
Moreover, the Company's ability to preserve the purchasing power of its net
positive monetary position will be reflected partially in the effectiveness of
its asset/liability management programs. The Company's management does not
believe that the effect of inflation on its nonmonetary assets (primarily bank
premises and equipment) is material.
28
<PAGE> 116
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Financial Bancshares, Inc. and Subsidiaries:
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Consolidated Balance Sheets, December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . 31
Consolidated Statements of Income, Years Ended December 31,
1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Consolidated Statements of Stockholders' Equity, Years Ended
December 31, 1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Consolidated Statements of Cash Flows, Years Ended December 31,
1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Notes to Consolidated Financial Statements, December 31, 1995,
1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35-47
</TABLE>
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<PAGE> 117
[LOGO] FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
[LOGO] KPMG PEAT MARWICK LLP
The Board of Directors
Financial Bancshares, Inc.:
We have audited the consolidated balance sheets of Financial Bancshares,
Inc. and subsidiaries as of December 31, 1995 and 1994, 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, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Financial
Bancshares, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
February 23, 1996
30
<PAGE> 118
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
---- ----
<S> <C> <C>
Cash and due from banks:
Non-interest-bearing $ 13,329,015 13,751,780
Interest-bearing 1,393,967 1,606,139
Funds sold 9,365,000 2,160,000
Investments in debt and marketable equity securities:
Available for sale, at estimated market value 102,565,283 67,951,303
Held to maturity, at amortized cost (estimated market
value of $21,866,733 at December 31, 1994) - 22,973,946
Loans 188,073,188 182,855,324
Less:
Unearned discount 1,009,578 976,157
Reserve for possible loan losses 4,159,996 3,976,136
------------ -----------
Net loans 182,903,614 177,903,031
------------ -----------
Premises and equipment, net 9,290,428 8,029,533
Accrued interest receivable 4,196,983 3,523,042
Other real estate 676,365 653,347
Other assets 2,202,899 3,463,302
------------ -----------
Total assets $325,923,554 302,015,423
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing demand 42,734,979 44,585,734
Interest-bearing:
NOW and money market accounts 73,762,934 72,746,344
Savings 25,579,210 29,141,274
Time deposits less than $100,000 117,592,150 94,749,670
Time deposits $100,000 and over 34,780,874 29,349,121
------------ -----------
Total deposits 294,450,147 270,572,143
Short-term borrowings 1,250,272 5,007,984
Other liabilities 2,541,208 1,856,373
Notes payable 4,019,000 4,019,000
----------- ------------
Total liabilities 302,260,627 281,455,500
----------- ------------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 value; 3,000,000 shares authorized,
693,531 shares issued and 684,377 shares outstanding 6,935 6,935
Additional paid-in capital 9,924,790 9,924,790
Retained earnings 13,599,190 12,618,896
Treasury stock; 9,154 shares (260,889) (260,889)
Unrealized gains (losses) on securities available for sale, net 392,901 (1,729,809)
------------ ------------
Total stockholders' equity 23,662,927 20,559,923
------------ ------------
Total liabilities and stockholders' equity $325,923,554 302,015,423
============ ============
Book value per share -- based on common shares outstanding
at year-end $ 34.58 30.04
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE> 119
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Interest income:
Loans $16,798,810 14,865,693 14,824,836
Investments in debt and marketable equity securities:
Taxable 5,015,595 4,818,129 5,017,540
Exempt from federal income taxes 642,018 664,741 734,200
Interest-bearing due from banks 83,691 130,794 166,753
Funds sold 547,255 269,260 254,016
----------- ---------- ----------
Total interest income 23,087,369 20,748,617 20,997,345
----------- ---------- ----------
Interest expense:
NOW and money market accounts 1,903,837 2,154,240 2,515,898
Savings deposits 685,273 781,027 838,870
Time deposits less than $100,000 5,999,693 3,804,099 3,926,623
Time deposits $100,000 and over 1,717,225 940,274 887,455
Short-term borrowings 165,238 287,171 120,577
Notes payable 365,480 293,449 149,612
----------- ---------- ----------
Total interest expense 10,836,746 8,260,260 8,439,035
----------- ---------- ----------
Net interest income 12,250,623 12,488,357 12,558,310
Provision for possible loan losses 1,678,000 2,860,000 4,614,200
----------- ---------- ----------
Net interest income after provision for
possible loan losses 10,572,623 9,628,357 7,944,110
----------- ---------- ----------
Noninterest income:
Service charges on deposit accounts 1,065,604 1,012,468 867,788
Securities gains (losses), net (31,200) (36,687) 113,441
Other noninterest income 334,667 329,367 337,097
----------- ---------- ----------
Total noninterest income 1,369,071 1,305,148 1,318,326
----------- ---------- ----------
Noninterest expense:
Salaries and employee benefits 4,716,179 4,520,153 4,058,472
Occupancy 716,884 681,694 611,426
Equipment 851,644 823,290 732,164
FDIC and state assessment 274,201 738,256 674,294
Legal and professional 488,189 440,307 290,832
Net expenses related to other real estate 174,643 68,519 41,459
Other noninterest expense 2,233,058 2,179,183 1,991,772
----------- ---------- ----------
Total noninterest expense 9,454,798 9,451,402 8,400,419
----------- ---------- ----------
Income before income taxes and
cumulative effect of change in
accounting for income taxes 2,486,896 1,482,103 862,017
Income tax expense 630,599 416,830 144,816
----------- ---------- ----------
Income before cumulative effect of change
in accounting for income taxes 1,856,297 1,065,273 717,201
Cumulative effect of change in accounting for income taxes -- -- 132,091
----------- ---------- ----------
Net income $ 1,856,297 1,065,273 849,292
=========== ========== ===========
Income per common share and common share equivalent:
Before change in accounting for income taxes $ -- -- 1.05
Net income 2.71 1.56 1.24
=========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE> 120
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
Unrealized
gains
(losses) on
Addi- securities Total
tional available- stock-
Common paid-in Retained Treasury for-sale, holders'
stock capital earnings stock net equity
----- ------- -------- ----- --- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 $ 6,935 9,924,790 12,415,269 (260,974) -- 22,086,020
Net income -- -- 849,292 -- -- 849,292
Cash dividends declared
($1.25 per share) -- -- (855,468) -- -- (855,468)
Effect of change in
accounting for debt
securities, net of tax -- -- -- -- 921,528 921,528
------- --------- ---------- -------- ------------ ----------
Balance at December 31, 1993 6,935 9,924,790 12,409,093 (260,974) 921,528 23,001,372
Net income -- -- 1,065,273 -- -- 1,065,273
Cash dividends declared
($1.25 per share) -- -- (855,470) -- -- (855,470)
Sale of treasury stock -- -- -- 85 -- 85
Net change in unrealized
gains (losses) on available-
for-sale debt securities,
net of tax -- -- -- -- (2,651,337) (2,651,337)
------- --------- ---------- -------- ------------ ----------
Balance at December 31, 1994 6,935 9,924,790 12,618,896 (260,889) (1,729,809) 20,559,923
Net income -- -- 1,856,297 -- -- 1,856,297
Cash dividends declared
($1.28 per share) -- -- (876,003) -- -- (876,003)
Net change in unrealized
gains (losses) on available-
for-sale debt securities,
net of tax -- -- -- -- 2,122,710 2,122,710
------- --------- ---------- -------- ------------ ----------
Balance at December 31, 1995 $ 6,935 9,924,790 13,599,190 (260,889) 392,901 23,662,927
======= ========= ========== ======== ============ ==========
</TABLE>
See accompanying notes to consolidated financial statements.
33
<PAGE> 121
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,856,297 1,065,273 849,292
Adjustments to reconcile net income to net cash provided
by operating activities:
Cumulative effect of change in accounting for
income taxes -- -- (132,091)
Depreciation and amortization 1,047,763 1,260,215 1,301,277
Provision for possible loan losses 1,678,000 2,860,000 4,614,200
Deferred income tax expense (benefit) 47,499 (116,149) (223,248)
Securities (gains) losses, net 31,200 36,687 (113,441)
Write-downs in value during the year on other
real estate 30,000 18,108 73,292
Increase in accrued interest receivable (673,941) (348,646) (163,132)
Other operating activities, net 580,716 797,198 (1,771,111)
------------ ------------ ------------
Net cash provided by operating
activities 4,597,534 5,572,686 4,435,038
------------ ------------ ------------
Cash flows from investing activities:
Net decrease in interest-bearing due from banks 212,172 1,283,954 1,553,290
Maturity and calls of available-for-sale debt securities 20,500,948 16,417,216 --
Maturity and calls of held-to-maturity debt securities 3,354,899 4,456,853 33,016,513
Sales of available-for-sale debt securities 8,833,130 9,749,818 --
Sales of debt and marketable equity securities -- -- 14,714,754
Purchase of available-for-sale debt securities (36,227,279) (26,389,615) --
Purchase of held-to-maturity debt securities (5,023,898) (4,763,363) (50,902,004)
Net increase in loans (8,071,877) (10,648,764) (15,282,222)
Recoveries of loans previously charged off 533,290 729,800 307,292
Purchase of premises and equipment (1,922,840) (1,155,592) (1,586,808)
Sale of other real estate and repossessed property 751,867 994,656 696,575
------------ ------------ ------------
Net cash used in investing activities (17,059,588) (9,325,037) (17,482,610)
------------ ------------ ------------
Cash flows from financing activities:
Net increase (decrease) in deposits 23,878,004 (4,487,210) 12,504,626
Net increase (decrease) in short-term borrowings (3,757,712) 2,442,782 1,793,212
Payments on notes payable -- (225,000) (225,000)
Proceeds from notes payable -- 2,000,000 --
Cash dividends paid (876,003) (855,470) (855,468)
Sale of treasury stock -- 85 --
------------ ------------ ------------
Net cash provided by (used in)
financing activities 19,244,289 (1,124,813) 13,217,370
------------ ------------ ------------
Net increase (decrease) in cash and
cash equivalents 6,782,235 (4,877,164) 169,798
Cash and cash equivalents at beginning of year 15,911,780 20,788,944 20,619,146
------------ ------------ ------------
Cash and cash equivalents at end of year $ 22,694,015 15,911,780 20,788,944
============ ============ ============
Supplemental information:
Interest paid 10,391,969 7,958,147 8,618,135
Income taxes paid, net of refunds 241,298 161,338 1,011,910
Noncash transactions:
Transfer to other real estate in settlement of loans 756,451 1,267,121 399,217
Loans originated to facilitate sale of other real estate -- -- 391,329
Transfer of securities to available for sale 24,511,949 -- 70,651,189
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
34
<PAGE> 122
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994, and 1993
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial Bancshares, Inc. (the Company) provides a full range of banking
services to individual and corporate customers through its five majority-owned
subsidiary banks located in eastern and southeastern Missouri. The Company and
its banking subsidiaries are subject to competition from other financial and
nonfinancial institutions offering financial services in its customer service
area. Additionally, the Company and its banking subsidiaries are subject to
the regulations of certain federal and state agencies and undergo periodic
examinations by those regulatory agencies. The more significant accounting
policies used by the Company in the consolidated financial statements are
summarized below.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements of the Company have been prepared in
conformity with generally accepted accounting principles and conform to
predominant practices within the banking industry. The preparation of the
consolidated financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions,
including the determination of the reserve for possible loan losses, that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, after elimination of material intercompany balances and
transactions.
INVESTMENTS IN DEBT AND
MARKETABLE EQUITY SECURITIES
Effective December 31, 1993, the Company adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities (SFAS 115). SFAS 115 addresses the accounting and reporting
for equity securities that have readily determinable fair values and all debt
securities. Under SFAS 115, debt and equity securities are classified in one
of three categories: trading, available for sale, or held to maturity.
Trading securities are bought and held principally for the purpose of
selling them in the near term. Held-to-maturity securities are those securities
which the Company has the ability and intent to hold until maturity. All other
securities not classified as trading or held to maturity are classified as
available for sale.
Trading and available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized holding gains
and losses on trading securities (for which no securities have been designated
by the Company) are included in earnings. Unrealized holding gains and losses,
net of the related tax effect, on available-for-sale securities are excluded
from earnings and reported as a separate component of stockholders' equity
until realized.
In November 1995, the Financial Accounting Standards Board issued a
Special Report, A Guide to Implementation of Statement 115 on Accounting for
Certain Investments in Debt and Equity Securities (the Special Report). Due to
uncertainties surrounding the regulatory capital treatment for unrealized gains
and losses on available-for-sale securities at the time SFAS 115 was required
to be implemented, the Special Report was issued to allow all entities a one
time opportunity to reconsider their ability and intent to hold securities to
maturity and transfer securities from held to maturity without "tainting" the
remaining held-to-maturity securities. These transfers were only allowed
during the period from the date of issuance of the Special Report through
December 31, 1995.
35
<PAGE> 123
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A decline in the market value of any available-for-sale or
held-to-maturity security below cost that is deemed other than temporary
results in a charge to earnings and the establishment of a new cost basis for
the security.
For securities classified as available for sale and held to maturity,
premiums and discounts are amortized or accreted over the lives of the
respective securities, with consideration of historical and estimated
prepayment rates, as an adjustment to yield using the interest method.
Dividend and interest income is recognized when earned. Realized gains and
losses for securities classified as available for sale and held to maturity are
included in earnings and are derived using the specific identification method
for determining the cost of securities sold.
Prior to December 31, 1993, debt securities were stated at cost and
adjusted for amortization of premium and accretion of discount using methods
approximating the interest method. The Company had the ability and intent to
hold the existing debt securities to maturity; however, certain securities were
sold in 1993 in anticipation of implementing SFAS 115 at December 31, 1993.
Gains or losses from the sale of debt securities were recognized upon
realization, based on the adjusted cost of the specific security sold.
Prior to December 31, 1993, marketable equity securities were stated at
the lower of aggregate cost or fair value. Net unrealized losses were included
as a reduction of stockholders' equity. Realized losses on the sale of such
funds were included in securities gains (losses) in noninterest income in the
consolidated statements of income.
LOANS
Interest income on commercial, agricultural, real estate, and certain
consumer loans is recognized using the simple interest method. Interest on
discount-basis consumer loans is recognized using the sum-of-the-digits method
which approximates the interest method.
The recognition of interest income is discontinued when, in management's
judgment, the interest will not be collectible in the normal course of
business. Subsequent payments received on such loans are applied to principal
if there is any doubt as to the collectibility of such principal; otherwise,
the portion of such receipts representing interest are recorded as income.
Loans are returned to accrual status when management believes full
collectibility of principal and interest is expected.
The reserve for possible loan losses is available to absorb loan
charge-offs. The reserve is increased by provisions charged to operations and
reduced by loan charge-offs less recoveries. The provision charged to
operations each year is that amount which management believes is sufficient to
bring the balance of the reserve to a level adequate to absorb potential loan
losses based on current economic conditions, past losses, collection
experience, risk characteristics of the portfolio, assessment of collateral
values by obtaining independent appraisals for significant properties, and such
other factors which, in management's judgment, deserve current recognition in
estimating loan losses.
Management believes the reserve for possible loan losses is adequate to
absorb losses in the loan portfolio. While management uses available
information to recognize loan losses, future additions to the reserve may be
necessary based on changes in economic conditions. Additionally, regulatory
agencies, as an integral part of the examination process, periodically review
the Company's subsidiary banks' reserves for possible loan losses. Such
agencies may require the Company's subsidiary banks to increase their reserves
for possible loan losses based on their judgments and interpretations about
information available to them at the time of their examinations.
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 114, Accounting by Creditors for Impairment
36
<PAGE> 124
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of a Loan (SFAS 114), as amended by Statement of Financial Accounting
Standards No. 118, Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures (SFAS 118), on January 1, 1995.
SFAS 114 (as amended by SFAS 118) defines the recognition criteria for
loan impairment and the measurement methods for certain impaired loans and
loans for which terms have been modified in troubled-debt restructurings (a
restructured loan). Specifically, a loan is considered impaired when it is
probable a creditor will be unable to collect all amounts due, both principal
and interest, according to the contractual terms of the loan agreement. When
measuring impairment, the expected future cash flows of an impaired loan are
required to be discounted at the loan's effective interest rate.
Alternatively, impairment can be measured by reference to an observable market
price, if one exists, or the fair value of the collateral for a
collateral-dependent loan. Regardless of the historical measurement method
used, SFAS 114 requires a creditor to measure impairment based on the fair
value of the collateral when the creditor determines foreclosure is probable.
Additionally, impairment of a restructured loan is measured by discounting the
total expected future cash flows at the loan's effective rate of interest as
stated in the original loan agreement.
SFAS 118 amends SFAS 114 to allow a creditor to use existing methods for
recognizing interest income on an impaired loan. Management has elected to
continue to use its existing nonaccrual methods for recognizing interest on
impaired loans.
No financial statement impact resulted from the initial adoption of SFAS
114 and SFAS 118.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are computed principally by
the straight-line method over the estimated useful lives of the respective
assets or the respective lease terms for leasehold improvements. Costs for
maintenance and repairs are expensed as incurred.
OTHER REAL ESTATE
Other real estate represents property acquired through foreclosure or
deeded to the Company's subsidiary banks in lieu of foreclosure on real estate
loans for which the borrowers have defaulted as to the payment of principal and
interest. Other real estate owned is recorded on an individual-asset basis at
the lower of fair value minus estimated selling costs or cost. If the fair
value minus the estimated selling costs is less than cost, the deficiency is
recorded as a valuation reserve through a provision against income. Subsequent
increases in the fair value minus estimated selling costs are recorded through
a reversal of the valuation reserve, but not below zero. Expenses incurred in
maintaining the properties are charged to operations.
INTANGIBLE ASSETS
The fair value of the net assets acquired, for acquisition transactions
accounted for as purchases, is recorded as an investment by the Company. The
excess of the purchase price in each transaction over the fair value of the net
assets acquired is included in other assets on the consolidated balance sheets
and amortized into noninterest expense on a straight-line basis over 15 years.
INCOME TAXES
The Company and its subsidiary banks file a consolidated federal income
tax return.
The Company adopted Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS 109), as of January 1, 1993. SFAS 109
requires a change from the deferred method to the asset and liability method of
accounting for income taxes. Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period which
37
<PAGE> 125
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
includes the enactment date. The Company adopted SFAS 109 as of January
1, 1993 on a prospective basis, with the cumulative effect of the change in
accounting principle of $132,091 recorded in 1993 earnings.
NET INCOME PER COMMON SHARE AND COMMON SHARE EQUIVALENT
Net income per common share and common share equivalent is computed by
dividing net income by the weighted average number of common shares actually
outstanding and common stock equivalents pertaining to common stock options.
The average number of shares outstanding including common stock equivalents for
1995, 1994, and 1993 were 684,489, 684,377, and 684,374, respectively. Common
stock equivalents have no material dilutive effect.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS 123), which established financial accounting and reporting
standards for stock-based employee compensation plans, including the Company's
non-qualified stock option plan. SFAS 123 defines a fair value based method of
accounting for an employee stock option and encourages all entities to adopt
that method of accounting for all employee stock compensation plans. However,
SFAS 123 allows an entity to continue to measure compensation cost for those
plans using the intrinsic value based method of accounting under previous
accounting principles. Entities electing to continue to account for
stock-based compensation under the intrinsic value based method must make pro
forma disclosures of net income and earnings per share as if the fair value
based method of accounting defined in SFAS 123 had been applied.
Under the fair value based method prescribed in SFAS 123, compensation
cost is measured at the grant date based on the value of the award, as
determined using an option-pricing model, and is recognized over the service
period, which is usually the vesting period. Under the intrinsic value based
method, compensation cost is the excess, if any, of the quoted market price of
the stock at the grant date or other measurement date over the amount an
employee must pay to acquire the stock.
SFAS 123 is effective for financial statements for fiscal years beginning
after December 15, 1995. Pro forma disclosures required for entities that
elect to continue to measure compensation cost using the intrinsic value based
method, upon the effectiveness of SFAS 123, must include the effects of all
awards granted in fiscal years that begin after December 15, 1994.
The Company anticipates continuing to use the intrinsic value based method
and does not believe SFAS 123 will have a material effect on its consolidated
financial condition when implemented.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all non-interest-bearing cash and due from banks and funds sold to be
cash equivalents.
FINANCIAL INSTRUMENTS
Financial instruments are defined as cash, evidence of an ownership
interest in an entity, or a contract that both: (1) imposes on one entity a
contractual obligation to deliver cash or another financial instrument to a
second entity or to exchange other financial instruments with the second
entity; and (2) conveys to that second entity a contractual right to receive
cash or another financial instrument from the first entity or to exchange other
financial instruments with the first entity.
RECLASSIFICATIONS
Certain 1994 and 1993 amounts in the Company's consolidated financial
statements have been reclassified to conform with the 1995 presentation. Such
reclassifications have no effect on previously reported consolidated net income
or stockholders' equity.
NOTE 2 -- INVESTMENTS IN DEBT AND MARKETABLE EQUITY SECURITIES
As discussed in note 1, effective December 31, 1993, the Company adopted
SFAS 115, for which the cumulative effect was recorded on the consolidated
balance sheet on that date. On December 31, 1993, a market valuation account
was established for available-for-sale securities of $1,400,093 to increase the
recorded
38
<PAGE> 126
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
balance of such securities at December 31, 1993 to the estimated market
value.
During December 1995, the Company transferred securities with an estimated
market value of $24,511,949 classified as held to maturity to available for
sale under the terms of the Special Report issued by the Financial Accounting
Standards Board in November 1995.
The amortized cost and estimated market value for available-for-sale and
held-to-maturity securities by major security type at December 31, 1995 and
1994 are as follows:
<TABLE>
<CAPTION>
1995
-----------------------------------------------------------------------------
Gross unrealized Estimated
Amortized --------------------- market
cost Gains Losses value
----------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Available for sale:
U.S. Treasury
issues and
obligations
of U.S.
government
agencies and
corpora-
tions $ 88,233,671 555,551 614,478 88,174,744
States and
political
subdivisions 10,145,795 534,148 7,397 10,672,546
Federal Home
Loan Bank
stock 464,100 - - 464,100
Other securities 3,126,178 136,890 9,175 3,253,893
------------ --------- ------- -----------
$101,969,744 1,226,589 631,050 102,565,283
============ ========= ======= ===========
1994
-----------------------------------------------------------------------------
Gross unrealized Estimated
Amortized --------------------- market
cost Gains Losses value
----------- ---------- --------- -----------
Available for sale:
U.S. Treasury
issues and obli-
gations of U.S.
government
agencies and
corporations $62,110,444 39,296 2,851,453 59,298,287
States and
political
subdivisions 5,485,083 205,439 42,061 5,648,461
Federal Home
Loan Bank
stock 360,110 - - 360,110
Other securities 2,623,666 33,273 12,494 2,644,445
----------- ---------- --------- -----------
$70,579,303 278,008 2,906,008 67,951,303
=========== ========== ========= ===========
Held to maturity:
U.S. Treasury
issues and obli-
gations of U.S.
government
agencies and
corporations $14,037,671 4,169 907,526 13,134,314
States and
political
subdivisions 5,725,181 136,134 225,914 5,635,401
Other securities 3,211,094 20,057 134,133 3,097,018
----------- ---------- --------- -----------
$22,973,946 160,360 1,267,573 21,866,733
=========== ========== ========= ===========
</TABLE>
As members of the Federal Home Loan Bank System administered by the
Federal Housing Finance Board, the subsidiary banks are required to maintain
investments in capital stock of the Federal Home Loan Bank of Des Moines (FHLB)
in an amount equal to the greater of 1% of the aggregate outstanding balance
of loans secured by dwelling units at the beginning of each year or .3% of the
total assets of the bank. The stock is recorded at cost which represents
redemption value.
Maturities of investment securities classified as available for sale and
held to maturity are as follows at December 31, 1995 (maturities of
mortgage-backed securities and collateralized mortgage obligations have been
presented based upon estimated cash flows, assuming no change in the current
interest rate environment). Expected maturities may differ from contractual
maturities because issuers and borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized market
cost value
------------ -----------
<S> <C> <C>
Available for sale:
Due in one year or less $14,052,708 14,011,561
Due after one year
through five years 28,604,654 28,806,344
Due after five years
through ten years 28,305,710 28,628,235
Due after ten years 31,006,672 31,119,143
------------ -----------
$101,969,744 102,565,283
============ ===========
</TABLE>
Proceeds from sales of available-for-sale securities during 1995 and 1994
were $8,833,130 and $9,749,818, respectively. Proceeds from sales of
securities during 1993 was $14,714,754. Gross gains on available-for-sale
securities of $71,047 and $20,628 and gross losses of $102,247 and $65,487 for
1995 and 1994, respectively, on available-for-sale securities were realized.
Gross gains of $193,377 and gross losses of $79,936 were realized on sales of
securities for 1993.
Gross gains and gross losses of $8,390 and $218, respectively, were
realized during 1994 on sales of held-to-maturity debt securities with an
amortized cost basis of $1,331,849. These debt securities were sold within
three months of the call date.
39
<PAGE> 127
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Debt securities with a carrying value of $44,233,835 and $41,745,434 at
December 31, 1995 and 1994, respectively, were pledged to secure public
deposits, securities sold under agreements to repurchase, and for other
purposes required or permitted by law.
NOTE 3 -- LOANS
The composition of the loan portfolio at December 31, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Commercial $ 31,548,302 28,148,222
Agricultural production 32,232,424 23,868,348
Real estate:
Construction 5,529,889 6,311,085
Mortgage 67,160,970 73,610,397
Farmland 21,697,876 21,264,000
Consumer and other 29,903,727 29,653,272
------------ -----------
$188,073,188 182,855,324
============ ===========
</TABLE>
The Company's banking subsidiaries grant agribusiness, commercial,
industrial, residential, and consumer loans throughout their market area of
eastern and southeastern Missouri. With the exception of agricultural credits,
the Company does not have any particular concentration of credit in any one
economic sector; however, a substantial portion of the remaining portfolio is
concentrated in and secured by real estate in the subsidiary banks' service
areas. The ability of the Company's borrowers to honor their contractual
obligations is dependent upon the local economies and their effect on the real
estate market.
At December 31, 1995 and 1994, the Company had loans outstanding to the
agricultural sector of approximately $53,930,300 and $45,132,348, respectively,
which comprise approximately 28.7% and 24.7%, respectively, of the Company's
total loan portfolio. Such agricultural credits are concentrated in
southeastern Missouri and are generally fully secured with either growing
crops, farmland, livestock, and/or machinery and equipment. Such loans are
subject to the overall national effects of the agricultural economy, as well as
the local effects relating to their southeastern Missouri locations.
Following is a summary of activity in the reserve for possible loan losses
for the years ended December 31, 1995, 1994, and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Balance at
beginning of
year $ 3,976,136 3,671,030 2,340,670
Provision
charged to
expense 1,678,000 2,860,000 4,614,200
Recoveries on
loans pre-
viously
charged off 533,290 729,800 307,292
Loans charged
off (2,027,430) (3,284,694) (3,591,132)
----------- ----------- -----------
Balance at
end of year $ 4,159,996 3,976,136 3,671,030
=========== =========== ===========
</TABLE>
Following is a summary of activity in 1995 of loans made by the Company to
executive officers and directors or to entities in which such individuals had a
beneficial interest. Such loans were made in the normal course of business on
substantially the same terms, including interest rates and collateral
requirements, as those prevailing at the same time for comparable transactions
with other persons, and did not involve more than the normal risk of
collectibility.
<TABLE>
<S> <C>
Balance, December 31, 1994 $9,557,008
New loans or additional borrowings 3,404,283
Payments received (5,780,736)
Other, net 311,722
----------
Balance, December 31, 1995 $7,492,278
==========
A summary of nonaccrual and impaired loans at December 31, 1995, follows:
Impaired
Impaired loans with
loans Allowance no related
continuing Total for losses on allowance
Nonaccrual to accrue impaired impaired for loan
loans interest loans loans losses
- ----- -------- ----- ----- ------
<S> <C> <C> <C> <C>
$1,072,000 2,149,000 3,221,000 645,000 1,670,000
========== ========= ========= ======= =========
</TABLE>
The average balance of impaired loans during 1995 was $4,067,000. The
balance of impaired loans at implementation, January 1, 1995, was $4,903,842.
40
<PAGE> 128
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of interest income on nonaccrual and other impaired loans for
the year ended December 31, 1995, follows:
<TABLE>
<CAPTION>
Impaired
loans
Non- continuing
accrual to accrue
loans interest Total
------- ---------- -------
<S> <C> <C> <C>
Income recognized $45,600 203,400 249,000
Interest income had
interest accrued 127,800 203,400 331,200
======= ========== =======
</TABLE>
At December 31, 1994, the Company's subsidiary banks had loans on a
nonaccrual basis totaling $1,388,000. If interest on these loans had been
accrued, such income would have amounted to approximately $33,800 and $124,400
for 1994 and 1993, respectively. Interest income on those loans, representing
cash payments, amounted to approximately $91,900 and $69,800 for 1994 and 1993,
respectively.
NOTE 4 -- PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Land $2,140,101 1,821,932
Buildings and improvements 7,297,894 6,880,584
Furniture and equipment 5,825,809 4,836,311
---------- ----------
15,263,804 13,538,827
Less accumulated deprecia-
tion and amortization 5,973,376 5,509,294
---------- ----------
$9,290,428 8,029,533
========== ==========
</TABLE>
Depreciation and amortization of premises and equipment charged to
occupancy or equipment expense amounted to $661,945, $578,995, and $545,039 for
1995, 1994, and 1993, respectively.
NOTE 5 -- SHORT-TERM BORROWINGS
A summary of short-term borrowings at December 31, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Funds purchased and securi-
ties sold under agreements
to repurchase $ 795,117 4,530,577
FHLB advances 455,155 477,407
---------- ---------
$1,250,272 5,007,984
========== =========
</TABLE>
The daily weighted average interest rates on the Company's short-term
borrowings for the years 1995, 1994, and 1993 were 5.17%, 4.62%, and 3.10%,
respectively.
The weighted average interest rates on FHLB advances during 1995, 1994,
and 1993 were 6.33%, 6.29%, and 3.01%, respectively. FHLB advances, all due
within one year, are collateralized by mortgage loans and FHLB stock. As of
December 31, 1995, mortgage loans and FHLB stock with a carrying value of
approximately $6,401,300 were pledged and available for current and future
advances.
The Company has in place a secured line of credit for $500,000 and
$300,000 with an unaffiliated bank at December 31, 1995 and 1994, respectively.
Borrowings under the line of credit bear a variable rate of interest equal to
the lending bank's prime commercial rate of 8.5% at December 31, 1995 and 1994.
The line of credit does not require a commitment fee. At December 31, 1995
and 1994, the unused portion of the line of credit was $500,000 and $300,000,
respectively. The weighted average interest rates paid under the line of
credit for 1995, 1994, and 1993 were 8.88%, 7.86%, and 6.10% respectively.
NOTE 6 -- NOTES PAYABLE
On June 7, 1995, the Company executed a term loan agreement with an
unaffiliated financial institution for $4,019,000 which replaced two loans with
this same unaffiliated financial institution: a term installment note for
$2,019,000 and a one-year note for $2,000,000. The term installment note bears
interest at the lending bank's prime commercial rate which was also the rate
charged on the previous term installment note. The interest rate on the
one-year note was at the lending bank's prime commercial rate plus 1/2%. The
lending bank's prime commercial rate was 8.5% at December 31, 1995 and 1994.
The weighted average rate paid on the term installment notes was 8.95%, 7.25%,
and 6.10% in 1995, 1994, and 1993, respectively. The weighted average rate
paid on the one-year note was 9.53% and 8.01% in 1995 and 1994, respectively.
41
<PAGE> 129
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Effective June 7, 1995, the Company has pledged, as collateral for the
term installment note, the capital stock it owns in all of its subsidiary
banks, with a combined book value at December 31, 1995 of $26,034,649. The
term loan agreement, among other matters, provides for prepayment options at
the discretion of the Company and requires that the Company maintain, or cause
the subsidiaries to comply with, various financial ratios and covenants. Any
of the ratios or covenants may be waived at the discretion of the lending
financial institution. As of December 31, 1995, the Company is in compliance
with all ratios and covenants. Management of the Company does not believe
these covenants will restrict future operations.
Following is a summary of maturities of the Company's term note payable
for each of the four years following December 31, 1995:
<TABLE>
<S> <C>
1996 $ 225,000
1997 250,000
1998 250,000
1999 3,294,000
=========
</TABLE>
NOTE 7 --INCOME TAXES
As discussed in note 1, the Company adopted SFAS 109 as of January 1,
1993. The cumulative effect of this change in accounting principle is reported
in 1993 earnings.
The components of income tax expense for the years ended December 31,
1995, 1994, and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ 507,325 404,683 297,957
State and local 75,775 128,296 70,107
---------- --------- ---------
583,100 532,979 368,064
Deferred 47,499 (116,149) (223,248)
---------- --------- ---------
Total income
tax expense $ 630,599 416,830 144,816
========== ========= =========
</TABLE>
A reconciliation of expected income tax expense, computed by applying the
statutory federal rate of 34% to income before income taxes and cumulative
effect of change in accounting for income taxes, to reported income tax expense
is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Expected income tax
expense $ 845,545 503,915 293,086
Tax-exempt interest
income (240,660) (239,384) (261,772)
Nondeductible amorti-
zation of intangi-
ble assets 57,132 57,143 57,121
State and local income
tax, net of federal
income tax effect 50,012 86,766 49,271
Other, net (81,430) 8,390 7,110
----------- --------- ---------
Total income
tax expense $ 630,599 416,830 144,816
=========== ========= =========
</TABLE>
The tax effects of temporary differences which give rise to significant
portions of the deferred tax assets and deferred tax liabilities for the years
ended December 31, 1995 and 1994 are presented below:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Deferred tax assets:
Reserve for possible loan
losses $ 697,228 631,457
Other real estate 199,621 189,702
Pension accruals - 34,495
Unrealized losses on available-for-
sale debt and marketable
equity securities - 893,514
Other 106,550 170,773
--------- ---------
Total deferred tax assets 1,003,399 1,919,941
--------- ---------
Deferred tax liabilities:
Depreciation of premises and
equipment (250,731) (252,753)
Unrealized gains on available-
for-sale debt securities (202,638) -
Other (124,229) (84,789)
--------- ---------
Total deferred tax
liabilities (577,598) (337,542)
--------- ---------
Net deferred tax assets $ 425,801 1,582,399
========= =========
</TABLE>
A valuation allowance would be provided on deferred tax assets when it is
more likely than not that some portion of the assets will not be realized. The
Company has not established a valuation allowance as of December 31, 1995 or
1994 due to management's belief that all criteria for recognition have been
met, including the existence of a history of taxes paid sufficient to support
the realization of the deferred tax assets.
42
<PAGE> 130
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
NOTEST TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 -- RETIREMENT PLAN
The Company and its subsidiaries have a single noncontributory retirement
plan covering substantially all employees. The plan provides for payments to
covered employees based on salary and years of service. The Company's funding
policy is to contribute annually the minimum amount that can be deducted for
federal income tax purposes. Contributions made to the plan by the Company
amounted to $264,325, $228,740, and $230,537 in 1995, 1994, and 1993,
respectively.
The following table sets forth the plan's funded status as of December 31,
1995 and 1994 and amounts recognized in the Company's consolidated financial
statements as of and for the years ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---------------- ----------------
<S> <C> <C>
Actuarial present value of
vested benefit obligations$ 1,649,640 1,295,695
================ ================
Accumulated benefit
obligations $ 1,707,549 1,332,952
================ ================
Projected benefit obligations,
for service rendered to
date $ (2,339,545) (1,769,872)
Plan assets at fair value 2,635,830 2,141,996
---------------- ----------------
Plan assets in excess of
projected benefit
obligations 296,285 372,124
Unrecognized portion of
net transition asset (102,757) (114,979)
Unrecognized net gain due
to investment results
and plan experience (17,932) (231,408)
---------------- ----------------
Accrued pension asset
included in other assets
in the consolidated
balance sheets $ 175,596 25,737
================ ================
Net pension cost for 1995, 1994, and 1993 included the following components:
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Service cost - benefits
earned during
period $ 149,575 199,966 166,749
Interest cost on
projected benefit
obligation 144,914 129,022 107,856
Actual return on
plan assets (385,866) (123,288) (128,731)
Net amortization
and deferral 203,406 (52,036) (20,248)
---------- -------- --------
$ 112,029 153,664 125,626
========== ======== ========
</TABLE>
The weighted average discount rates, projected rates of increase in future
compensation levels, and the projected long-term rate of return on assets used
in determining the actuarial present value of the projected benefit obligation
for 1995, 1994, and 1993 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Weighted average
discount rates 7.25% 8.50% 6.75%
Projected rates of in-
crease in future
compensation levels 5.50 5.50 5.50
Projected long-term
rate of return on
assets 8.00 8.00 8.00
===== ===== =====
</TABLE>
Effective January 1, 1994, the Company adopted a supplemental executive
retirement plan for certain key executive officers selected by a committee of
the Board of Directors. Benefits to be paid under the plan are accrued over
the remaining period to retirement of the covered executives. The related
expense charged to operations totaled approximately $59,600 and $68,500 for the
years ended December 31, 1995 and 1994, respectively.
NOTE 9 -- NON-QUALIFIED STOCK OPTION PLAN
During 1995 the Company adopted a non-qualified stock option plan under
which 50,000 shares of common stock were reserved. The plan provides for the
granting to key employees of the Company and its subsidiaries, by the Board of
Directors' Compensation Committee, of options to purchase shares of common
stock of the Company. The option plan provides the ability to exercise over
a period of 10 years from the grant date, at a price not less than the
approximate market value of the shares at the date the options are granted.
The options vest evenly on each of the first four anniversaries of the grant
date. The options do not qualify as Incentive Stock Options as defined by
Section 422 of the Internal Revenue Code of 1986, as amended. Outstanding
stock options are considered common stock equivalents in the computation of
earnings per share.
43
<PAGE> 131
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the activity and current options outstanding is a follows:
<TABLE>
<CAPTION>
Number of Option price
shares per share
------ ---------
<S> <C> <C>
At December 31, 1995:
Available for grant 35,000 $ -
Outstanding 15,000 26.00
Exercisable - -
====== ======
Changes in options outstanding were as follows:
Number of Option price
shares per share
------ ---------
Balance at December 31, 1994:
Granted 15,000 $26.00
Exercised - -
Expired or canceled - -
------ ------
Balance at December 31, 1995 15,000 $26.00
====== ======
</TABLE>
NOTE 10 -- LITIGATION
Various legal claims have arisen during the normal course of business
which, in the opinion of management after discussion with legal counsel, will
not result in any material liability to the Company.
NOTE 11 -- DISCLOSURES ABOUT
FINANCIAL INSTRUMENTS
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit
and standby letters of credit. Such instruments involve, to varying degrees,
elements of credit in excess of the amounts recognized in the balance sheets.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contractual amount of these
instruments. The Company uses the same credit policies in making commitments
and conditional obligations as it does for financial instruments included in
the consolidated balance sheets.
The contractual amount of off-balance-sheet financial instruments which
represent credit risk as of December 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Commitments to
extend credit $22,305,000 17,159,000
Standby letters
of credit 1,279,000 1,523,000
----------- ----------
$23,584,000 18,682,000
=========== ==========
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract. Standby
letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party.
Commitments and standby letters of credit generally have fixed expiration
dates or other termination clauses and may require payment of a fee. Since
certain of the commitments and standby letters of credit are expected to expire
without being drawn upon, the total commitment or standby letters of credit
amounts do not necessarily represent future cash requirements. The Company
evaluates each customer's creditworthiness on a case-by-case basis. The amount
of collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on management's credit evaluation of the customer. Collateral
held varies, but may include accounts receivable, inventory, property, plant,
and equipment, debt securities, deposits of financial institutions, residential
real estate, and/or income-producing commercial properties.
Of the total commitments to extend credit at December 31, 1995,
approximately $8,453,000 represent fixed-rate loan commitments.
44
<PAGE> 132
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Following is a summary of the carrying amounts and fair values of the
Company's financial instruments at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995
----------------------
Carrying Fair
amount value
------ -----
<S> <C> <C>
Balance sheet assets:
Cash and due from
banks $ 14,722,982 14,722,982
Funds sold 9,365,000 9,365,000
Investments in debt
and marketable
equity securities -
available for sale 102,565,283 102,565,283
Net loans 182,903,614 186,513,000
Accrued interest
receivable 4,196,983 4,196,983
-------------- -----------
$ 313,753,862 317,363,248
============== ===========
Balance sheet liabilities:
Deposits 294,450,147 295,155,139
Short-term borrowings 1,250,272 1,250,272
Notes payable 4,019,000 4,019,000
Accrued interest
payable 1,709,058 1,709,058
-------------- -----------
$ 301,428,477 302,133,469
============== ===========
</TABLE>
<TABLE>
<CAPTION>
1994
------------------------
Carrying Fair
amount value
------ -----
<S> <C> <C>
Balance sheet assets:
Cash and due from
banks $ 15,357,919 15,357,919
Funds sold 2,160,000 2,160,000
Investments in debt
and marketable
equity securities:
Available for sale 67,951,303 67,951,303
Held to maturity 22,973,946 21,866,733
Net loans 177,903,031 178,541,172
Accrued interest
receivable 3,523,042 3,523,042
-------------- ------------
$ 289,869,241 289,400,169
============== ============
Balance sheet liabilities:
Deposits 270,572,143 270,595,618
Short-term borrowings 5,007,984 5,007,984
Notes payable 4,019,000 4,019,000
Accrued interest
payable 1,264,281 1,264,281
-------------- ------------
$ 280,863,408 280,886,883
============== ============
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
such value:
CASH AND OTHER SHORT-TERM INSTRUMENTS
For cash and due from banks, funds sold, accrued interest receivable,
short-term borrowings, and accrued interest payable, the carrying amount is a
reasonable estimate of fair value, as such instruments are demand instruments
or reprice in a short time period.
DEBT AND MARKETABLE EQUITY SECURITIES
The fair values for debt and marketable equity securities are based on
quoted market prices or dealer quotes.
LOANS
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type such as commercial,
agricultural, real estate, and consumer. Each loan category is further
segmented into fixed and adjustable rate interest terms and by performing and
nonperforming categories.
For certain homogeneous categories of performing loans, such as certain
residential mortgages and consumer loans, fair value is estimated using the
quoted market prices for securities backed by similar loans, adjusted for
differences in loan characteristics. The fair value of other types of loans is
estimated by discounting the future cash flows using the current rates at which
similar loans would be made to borrowers with similar credit ratings and for
the same remaining maturities.
The fair value of performing loans is calculated by discounting scheduled
cash flows through the estimated maturity using estimated market discount rates
that reflect the credit and interest rate risk inherent in the loan. The
estimate of maturity is based on the Company's historical experience with
repayments for each loan classification, modified, as required, by an estimate
of the effect of current economic and lending conditions.
Fair value for significant nonperforming loans is based on recent external
appraisals. If appraisals are not available, estimated cash flows are
discounted using a rate commensurate with the risk associated with the
estimated cash flows. Assumptions regarding credit risk, cash flows, and
discount rates are judgmentally determined using available market information
and specific borrower information.
45
<PAGE> 133
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DEPOSITS
The fair value of deposits with no stated maturity, such as
non-interest-bearing demand deposits, NOW and money market accounts, and
savings accounts, is equal to the amount payable on demand as of December 31,
1995 and 1994. The fair value of time deposits is based on the discounted
value of contractual cash flows. The discount rate is estimated using the
rates currently offered for deposits of similar remaining maturities.
NOTES PAYABLE
The estimate of the fair value of the notes payable, which the Company has
with an unaffiliated financial institution, approximates the present carrying
value, based upon the alternative rates and terms currently available to the
Company.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
The fair value of commitments to extend credit and standby letters of
credit are estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements, the
likelihood of the counterparties drawing on such financial instruments, and the
present creditworthiness of such counterparties. The Company believes such
commitments have been made on terms which are competitive in the markets in
which it operates.
The fair value estimates provided are made at a point in time based on
market information and information about financial instruments. Because no
market exists for a portion of the Company's financial instruments, fair value
estimates are based on judgments regarding future expected loss experience,
current economic conditions, risk characteristics of various financial
instruments, and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and, therefore,
cannot be determined with precision. Changes in assumptions could
significantly effect the fair value estimates.
NOTE 12 -- REGULATORY RESTRICTIONS
Subsidiary bank dividends are the primary source of funds for payment of
dividends and the notes payable by the Company. Both federal and state laws
and certain covenants of the Company's notes payable agreements impose
restrictions on the ability of the subsidiary banks to pay dividends. Under
the most stringent of these restrictions, the Company's subsidiary banks had
available $3,097,000 for additional dividends at December 31, 1995.
The Company's banking subsidiaries are required to maintain certain daily
reserve balances on hand in accordance with regulatory requirements. The
banking subsidiaries' vault cash balances exceeded the regulatory daily reserve
balances at December 31, 1995 and 1994.
NOTE 13 -- PARENT COMPANY FINANCIAL INFORMATION
Condensed financial information for the parent company is as follows:
Financial Bancshares, Inc.
(Parent Company Only)
Condensed Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
Assets 1995 1994
------ ---- ----
<S> <C> <C>
Cash $ 147,228 145,182
Investment in subsidiaries 26,034,649 22,801,592
Excess of cost over fair
value of net assets
acquired, net of amorti-
zation 1,087,233 1,255,269
Income taxes receivable 376,502 293,413
Furniture and equipment,
net 32,968 22,029
Other assets 187,492 181,900
------------- ----------
Total assets $ 27,866,072 24,699,385
============= ==========
<CAPTION>
Liabilities and
Stockholders' Equity
---------------------
<S> <C> <C>
Accrued expenses $ 184,145 120,462
Notes payable 4,019,000 4,019,000
------------- ----------
Total liabilities 4,203,145 4,139,462
Stockholders' equity 23,662,927 20,559,923
------------- ----------
Total liabilities
and stock-
holders'
equity $ 27,866,072 24,699,385
============= ==========
</TABLE>
46
<PAGE> 134
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial Bancshares, Inc.
(Parent Company Only)
Condensed Schedules of Income
Years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues:
Dividends received
from subsidiaries $2,169,223 1,565,759 1,260,882
Management fees from
subsidiaries 429,120 700,320 600,240
Interest 1,646 9,470 75
Other income -- -- 170
---------- --------- ---------
Total income 2,599,989 2,275,549 1,861,367
---------- --------- ---------
Expenses:
Salaries and employee
benefits 571,820 467,302 377,289
Interest 366,680 296,238 150,541
Depreciation 9,665 5,670 5,186
Amortization of
intangibles 168,036 168,069 168,004
Other expenses 287,331 242,805 300,726
---------- --------- ---------
Total expenses 1,403,532 1,180,084 1,001,746
---------- --------- ---------
Income before taxes,
cumulative effect
of change in
accounting for in-
come taxes, and
equity in undistrib-
uted (excess divi-
dends over) earnings
of subsidiaries 1,196,457 1,095,465 859,621
Income tax benefit 299,493 156,308 238,437
---------- --------- ---------
Income before cumu-
lative effect of
change in accoun-
ting for income
taxes and equity
in undistributed
(excess dividends
over) earnings of
subsidiaries 1,495,950 1,251,773 1,098,058
Cumulative effect of
change in accounting
for income taxes -- -- 38,566
---------- --------- ---------
Income before equity
in undistributed
(excess dividends
over) earnings of
subsidiaries 1,495,950 1,251,773 1,136,624
Equity in undistributed
(excess dividends over)
earnings of subsidiaries 360,347 (186,500) (287,332)
---------- --------- ---------
Net income $1,856,297 1,065,273 849,292
========== ========= =========
</TABLE>
Financial Bancshares, Inc.
(Parent Company Only)
Condensed Schedules of Cash Flows
Years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,856,297 1,065,273 849,292
Adjustments to reconcile net
income to net cash provided
by operating activities:
Cumulative effect of
change in accounting
for income taxes -- -- (38,566)
Equity in excess
(undistributed) divi-
dends over earnings
of subsidiaries (360,347) 186,500 287,332
Depreciation and amortiza-
tion 177,701 173,739 173,190
(Increase) decrease in
income taxes receivable,
net of income taxes
payable (83,089) (125,692) (187,449)
Other, net 15,091 24,584 (34,615)
----------- ----------- ------------
Net cash provided
by operating
activities 1,605,653 1,324,404 1,049,184
----------- ----------- ------------
Cash flows from investing activities:
Purchase of minority shares of
subsidiary -- (30,297) (125)
Contribution of additional
paid-in capital to subsidiary (750,000) (2,300,000) --
Purchase of furniture and
equipment (20,604) (10,945) (11,434)
Payments from mortgage
banking subsidiary 43,000 210,000 46,827
----------- ----------- ------------
Net cash provided
by (used in)
investing
activities (727,604) (2,131,242) 35,268
----------- ----------- ------------
Cash flows from financing activities:
Decrease in short-term
borrowings -- -- (30,000)
Proceeds from notes payable -- 2,000,000 --
Payments on notes payable -- (225,000) (225,000)
Sale of treasury stock -- 85 --
Cash dividends paid (876,003) (855,470) (855,468)
----------- ----------- ------------
Net cash provided
by (used in)
financing
activities (876,003) 919,615 (1,110,468)
----------- ----------- ------------
Net (decrease)
increase in
cash 2,046 112,777 (26,016)
Cash at beginning of year 145,182 32,405 58,421
----------- ----------- ------------
Cash at end of year $147,228 145,182 32,405
=========== =========== ============
</TABLE>
47
<PAGE> 135
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no Current Report on Form 8-K filed within 24 months prior to
the date of the most recent financial statements reporting a change in
accountants and/or reporting disagreements on any matter of accounting
principle or financial statement disclosure.
48
<PAGE> 136
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Directors
Set forth below are the names and ages, on March 1, 1996, of the current
directors of the Company, the principal occupations of each during the past
five years, the year each first became a director, and the number and
percentage of shares of common stock of the Company held beneficially by each
as of the indicated date. Arthur E. S. Schmid and Clifford A. Schmid are
brothers.
<TABLE>
<CAPTION>
Common stock
Year --------------------
Principal first Percent
Name and age on occupations during became a Number of of
March 1, 1996 the last five years director shares class
--------------- ------------------- -------- --------- -------
<S> <C> <C> <C> <C>
James B. Becker President, James B. Becker 1995 181 (6) -
Age 66 Becker Consulting Engineers
(Civil Engineering Firm)
William C. Bollinger President, Smith-Bollinger 1992 100 (2) -
Age 60 Company (Manufacturers'
representation of mechanical
and electrical component
industry for fasteners and
fastener equipment)
David B. Brewer President of MissCo 1983 6,483 (1) .9
Age 57
William L. Frein President, Colonial Dry Cleaners 1989 3,734 (2) .5
Age 65 and Shirt Laundry, Inc.
Joe W. Gooch President of SEMO 1994 54 -
Age 50
Arthur E. S. Schmid Chairman and Chief Executive 1982 279,454 (3) 40.8
Age 66 Officer of the Company
Clifford A. Schmid President of the Company and 1983 274,096 (4) 40.1
Age 64 Chairman of FFB - St. Louis;
Chief Executive Officer of FFB -
St. Louis to March 1990
Joe. E. Weber President of Citizens 1983 1,352 (5) .2
Age 65
</TABLE>
- -----------------
(1) Consists of 5,822 shares owned jointly with his spouse and 661 shares
owned by a corporation controlled by Mr. Brewer.
(2) Owned jointly with his spouse
(3) Consists of 254,970 shares owned by family trusts and a family company
with respect to which Mr. Schmid has shared voting and dispositive powers,
and 348 shares owned by Mr. Schmid individually and 24,136 shares owned as
a trustee of personal trust.
49
<PAGE> 137
(4) Consists of 254,970 shares owned by family trusts and a family
company with respect to which Mr. Schmid has shared voting and
dispositive powers, 18,292 shares owned by Mr. Schmid individually, and
without admission of beneficial ownership by Mr. Schmid) 834 shares
owned by Mr. Schmid's spouse, 634 as trustee, and 200 as custodian for
two of their children.
(5) Includes of 851 shares owned jointly with his spouse.
(6) Includes 180 shares owned jointly with his son.
Principal Executive Officers
----------------------------
The names, offices with the Company, ages on March 1, 1996, and principal
occupations for the past five years of the current executive officers of the
Company are as follows:
<TABLE>
<CAPTION>
Name and Office Age During the past five years
--------------- --- --------------------------
<S> <C> <C>
Arthur E. S. Schmid, 67 With the Company
Chairman and Chief Executive
Officer
Clifford A. Schmid 64 With the Company
President
Edward J. Vega 48 With the Company
Senior Vice President and
Chief Financial Officer
Virginia A. Renz 62 With the Company
Vice President and Corporate
Secretary
</TABLE>
All of the executive officers of the Company serve at the pleasure of the
Company's Board of Directors.
50
<PAGE> 138
ITEM 11: EXECUTIVE COMPENSATION
The following table summarizes compensation earned or awarded to the Company's
Chief Executive Officer and all other executive officers whose aggregate annual
salary and bonuses exceed $100,000 during 1995.
<TABLE>
<CAPTION>
All other
compensation
Name and Principal Position Year Salary Bonus (1)
- --------------------------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Arthur E. S. Schmid, 1995 $130,583 17,000 7,185
Chairman and Chief 1994 130,000 - 6,960
Executive Officer 1993 118,833 20,800 6,453
Clifford A. Schmid, 1995 119,000 15,000 4,308
President 1994 115,584 - 4,308
1993 107,796 20,000 4,308
Joe W. Gooch, 1995 112,218 19,140 1,968
Chairman and Chief
Executive Officer -
SEMO and President -
FFB - St. Louis
</TABLE>
- -------------------------
(1) Consists of imputed value of life insurance and director's fees; amounts
paid in 1995 are as follows:
<TABLE>
<CAPTION>
Life
insurance Director's
benefit fees
---------- ----------
<S> <C> <C>
Mr. Arthur E. S. Schmid $2,835 4,350
Mr. Clifford A. Schmid 2,808 1,500
Mr. Joe W. Gooch 968 1,000
====== =====
</TABLE>
<TABLE>
<CAPTION>
Stock Options in 1995
---------------------
Potential realizable
value at assumed
rates of stock
Number of % of Exercise price appreciation
options total price per Expiration ------------------
Name granted granted share date 5% 10%
---- --------- ------- --------- ---------- --- ---
<S> <C> <C> <C> <C> <C> <C>
Joe W. Gooch 15,000 100% $26.00 8-9-2005 $42.35 $67.44
====== ==== ======= ======== ====== ======
</TABLE>
Employment Agreements
The Company has entered into Management Continuity Agreements with 11 of its
and the subsidiary banks' executive officers, including Mr. Clifford A. Schmid
but excluding Mr. Arthur E. S. Schmid, pursuant to the terms of which provide
the continuation of the officer's salary and a proportionate part of his or her
last annual bonus in the event the officer's employment is terminated by the
Company, other than for cause, within two years after a change of control of
the Company or voluntarily by the officer within one year after a change in
control of the Company. The period during which the salary is continued
depends on the particular agreement, and ranges from 12 to 36 months. Current
base compensation for Mr. Clifford A. Schmid is $121,500, plus $30,375 (25%)
incentive compensation plan annual benefit, and his agreement period is for 36
months.
51
<PAGE> 139
Current base compensation for Mr. Joe W. Gooch is $125,000, plus $20,000 for
dual living expenses while serving as full-time chief executive officer of FFB
- - St. Louis, and plus $27,500 (22%) incentive compensation plan annual benefit.
His Management Continuity Agreement period is for 24 months.
The Company, on August 9, 1995, entered into an Employment Agreement with Mr.
Joe W. Gooch, the terms of which, provide for mutually acceptable compensation
and related arrangements involved in the Company employing Mr. Gooch, and Mr.
Gooch accepting such employment, as chief executive officer of both SEMO and
FFB - St. Louis.
Pension Plan
Executive officers of the Company who have met the minimum employment
requirements with the Company or its subsidiaries are participants in the
Company's pension plan (the Plan). Upon retirement, participants in the Plan
will begin receiving payments based on a formula using average monthly base
earnings (which, as defined in the Plan, excludes bonuses and directors' fees).
For the purpose of determining average monthly base earnings, the highest five
consecutive years out of the last 10 years of service are used. Benefits are
not subject to offset for Social Security or other payments. The following
table shows the estimated annual benefits payable at normal retirement age
(65), assuming the straight-life annuity option is selected, for participants
in various remuneration and years-of-service groups under the Plan:
<TABLE>
<CAPTION>
Retirement Plan Table
------------------------------------------------------------
Average
annual Years of Service
compen- -------------------------------------------------
sation 10 15 20 25 30 35
------ -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$ 75,000 13,000 20,000 27,000 29,000 31,000 32,000
100,000 18,000 27,000 36,000 38,000 41,000 44,000
125,000 22,000 34,000 45,000 48,000 52,000 55,000
150,000 27,000 41,000 54,000 58,000 62,000 67,000
175,000 32,000 47,000 63,000 68,000 73,000 78,000
200,000 36,000 54,000 72,000 78,000 84,000 89,000
250,000 45,000 68,000 91,000 98,000 105,000 112,000
300,000 55,000 82,000 109,000 118,000 126,000 135,000
350,000 64,000 96,000 127,000 137,000 147,000 157,000
400,000 73,000 109,000 146,000 157,000 169,000 180,000
500,000 91,000 137,000 182,000 197,000 211,000 225,000
======= ====== ======= ======= ======= ======= =======
</TABLE>
For purposes of determining the Plan's benefits, the current compensation for
the above-named executive officers would be shown under "Salary" in the
executive compensation table above. Mr. Arthur E. S. Schmid currently has 13
years of service and is 67 years of age. Mr. Clifford A. Schmid currently has
38 years of service and will have 38 years of service at age 65. Mr. Joe W.
Gooch currently has 12 years of service and will have 27 years of service at
age 65.
Supplemental Pension Plan
Selected executive officers of the Company and the Company's banking
subsidiaries, effective January 1, 1994, are participants in a non-qualified
supplemental pension plan adopted by the Company on that date. The Company's
Pension and Compensation Committee administers the Plan, including selection of
participants.
52
<PAGE> 140
The supplemental pension plan is designed to provide participants with
retirement benefits which are comparable to those of other Company employees.
The supplemental pension plan will provide retirement benefit payments (for 15
years after the normal retirement date) to a participant, if the total of
annual qualified pension payments plus annual primary social security payments
do not equal 65% of average compensation (all three calculated at normal
retirement date). Average compensation for the supplemental pension plan is
the same as calculated for the Company's qualified pension plan. The
supplemental pension plan requires that before any executive officer can be
considered for participation, they must have completed at least 10 years of
service with the Company or its subsidiaries. The supplemental pension plan is
not a funded plan, and there is graduated vesting for participants. There is
immediate vesting of 50% at 10 years of service and 100% at 20 years of
service.
As of December 31, 1995, there are eight participants covered by the
supplemental pension plan, and all but two are projected to qualify for a
benefit upon retirement. The officers listed in the compensation table are
projected to receive a retirement benefit. Mr. Clifford A. Schmid and Mr. Joe
W. Gooch are projected to receive a full benefit and Mr. Arthur E. S. Schmid
will receive a partial benefit adjusted for less than 20 years of service.
Incentive Compensation Plan
The executive officers of the Company participate in a formal incentive
compensation plan (the Incentive Plan), which covers all officers of the
Company and selected officers of the Company's banking subsidiaries. The
Incentive Plan contemplates a determination of incentive compensation
entitlement annually based upon the factors summarized below.
In regards to the executive officers listed in the compensation table above, at
the beginning of each year a target bonus amount is determined equal to 25%
(Mr. A. E. S. Schmid and Mr. C. A. Schmid) and 22% (Mr. J. W. Gooch) of such
officer's annual base salary. Ultimate payment of any incentive compensation
to any such officer is dependent entirely upon the performance of the Company
and SEMO against a predeterminated criteria; such criteria are budgeted pretax
income and a return on equity goal set by the Company's Board of Directors for
the year in question. The minimum amount of incentive compensation can be
earned only if the Company's actual pretax income or return on equity for that
year represents 90% of the above criteria, in which case the minimum amount is
25% of the target bonus amount. For any year, the maximum amount of incentive
compensation earned is 100% of the target bonus amount, which in turn requires
that the Company's actual consolidated pretax income or return on equity for
such year equal or exceed 100% of the above criteria.
The Incentive Plan is supervised by the Compensation and Pension Committee of
the Company's Board of Directors. Even though the incentive compensation
amount for any Incentive Plan participant is based upon the steps outlined
above for such participant, the Company's Chairman, at his discretion, may
adjust that amount in the range between 75% and 125% of the amount computed in
such manner.
The current base salary for Incentive Plan purposes for each of the officers
listed in the compensation table are as follows:
<TABLE>
<S> <C>
Mr. Arthur E. S. Schmid $133,500
Mr. Clifford A. Schmid 121,500
Mr. Joe W. Gooch 125,000
========
</TABLE>
53
<PAGE> 141
Stock Option Plan
The Company has a nonqualified stock option plan under which 50,000 shares of
common stock are reserved. The plan provides for the granting to key employees
of the Company and its subsidiaries, by action of the Board of Directors'
Compensation Committee, of options to purchase shares of common stock of the
Company over a period of 10 years from the grant date, at a price not less than
the approximate market value of the shares at the date the options are granted.
As determined by the Compensation Committee using all available information,
the options become exercisable in the amount of 25% on each of the first four
anniversaries of the grant date. The options do not qualify as Incentive Stock
Options as defined by Section 422 of the Internal Revenue Code of 1986, as
amended. For the officers listed in the compensation table, the following
schedule summarizes the stock options.
<TABLE>
<CAPTION>
Average Option
Number of Shares Price Per Share
------------------ ------------------
Joe W. Joe W.
Gooch Others Gooch Others
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance at December 31, 1995:
Granted 15,000 - $ 26.00 -
Exercisable - - - -
======== ======== ======== ========
Changes in options outstanding:
Balance at December 31, 1994:
Granted 15,000 - $ 26.00 -
Exercised - - - -
Cancelled - - - -
-------- -------- -------- --------
Balance at December 31, 1995 15,000 - 26.00 -
======== ======== ======== ========
</TABLE>
Board Compensation Committee Report on Executive Compensation
The Compensation and Pension Committee (the Committee) of the Company's Board
of Directors is composed of three independent nonemployee directors. The three
independent directors on the Committee are not currently, nor have they ever
been, an officer or employee of the Company or any of its subsidiaries. The
Committee passes on all material issues relating to the compensation of the
Company's Chief Executive Officer (CEO) and advises the CEO on all executive
officer compensation matters.
The philosophy of the Committee as it relates to executive compensation is that
the CEO and other executive officers should be compensated at competitive
levels to attract, motivate, and retain talented executives who are capable of
leading the Company or its subsidiaries in achieving their business objectives
in an industry facing increasing regulation, competition, and change. Annual
compensation for the Company's senior officer management consists of base
salary and bonus compensation as described above.
Salary levels of Company executives are reviewed and may be adjusted annually.
In October 1995 the Committee reviewed the compensation levels of the executive
officers listed in the compensation table above. Compensation of all senior
management of the Company is reviewed annually in June of each year. Annually,
the Committee reviews statistical data provided by the Company and others
concerning compensation levels at other banks and bank holding companies in the
market areas where the Company and its subsidiaries operate. In determining
appropriate salaries, the Committee will consider: (1) the CEO's
recommendations as to compensation for all other executive officers; (2) the
scope of responsibility, experience, time in position, and individual
performance of each officer, including the CEO; and
54
<PAGE> 142
(3) compensation levels at other banking institutions in the relevant market
areas served by similar size of organizations. The Committee's analysis is a
subjective process which utilizes no specific weighing or formula of the
aforementioned factors in determining executives' base salaries.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following information is furnished about each person known by the
management of the Company to be the beneficial owner of more than 5% of the
issued and outstanding Company shares as of March 1, 1996:
<TABLE>
<CAPTION>
Amount and Percent
Name and address nature of bene- of
of beneficial owner ficial ownership class
-------------------------- ---------------- -------
<S> <C> <C>
Arthur E. S. Schmid 279,454(1)(2) 42.9
3805 S. Broadway
St. Louis, Missouri 63118
Clifford A. Schmid 274,096(1)(3) 42.1
3805 S. Broadway
St. Louis, Missouri 63118
Marian Schmid Logan 293,916(1)(4) 42.9
710 S. Hanley Road
Clayton, Missouri 63105
Edwine Schmid Mill 294,314(1)(5) 43.0
701 South Hanley Road
Clayton, Missouri 63105
Helen Schmid Hardy 293,916(1)(6) 42.9
2649 Shadlow Trail
Ada, Michigan 49301
All Executive Officers and
Directors as a group 312,527(7) 45.7
</TABLE>
- ------------------------------
(1) Includes 254,970 shares owned by family trusts and a family
company with respect to which the named beneficial owner has
shared voting and dispositive powers.
(2) Includes 348 shares owned by Mr. Schmid individually and
24,136 shares owned as trustee of a personal trust.
(3) Includes 18,292 shares owned by Mr. Schmid as trustee of a
personal trust and (without admission of beneficial ownership
by Mr. Schmid) 834 shares owned by Mr. Schmid's spouse, 634
as trustee and 200 as custodian for two of their children.
(4) Includes 24,914 shares owned by Mrs. Logan as trustee of a
personal trust.
55
<PAGE> 143
(5) Includes 11,984 shares owned by Mrs. Mill
as trustee of a personal trust, and (without admission
of beneficial ownership by Mrs. Mill) 13,328 shares
owned by Mrs. Mill's spouse as trustee of a personal
trust.
(6) Includes 24,914 shares owned by Mrs.
Hardy as co-trustee, along with her son, of a personal
trust.
(7) For information concerning shares
beneficially owned by directors, see Item 10,
"Directors and Executive Officers of the Company."
In the aggregate, the Schmid family owned beneficially and had the right to
vote and direct the disposition of an aggregate of 396,436 Company shares as of
March 1, 1996, constituting 57.9% of the 684,377 shares then outstanding.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Some of the directors and officers of the Company and members of their
immediate families are also customers of subsidiary banks of the Company in the
ordinary course of business or may also be indebted to such banks in respect of
loans of $60,000 or more, and it is anticipated that some of these persons,
corporations, and firms will continue to be customers of and indebted to such
banks on a similar basis in the future. All loans extended to such persons,
corporations, and firms have been made in the ordinary course of business, have
not involved more than a normal risk of collectibility or presented other
unfavorable features, and have been made on substantially the same terms,
including interest rates and collateral, as those prevailing at the same time
for comparable bank transactions with unaffiliated persons.
The aggregate amount of extensions of credit to directors and officers of the
Company (and companies or corporations with which one or more of the directors
is associated) as a group amounted to $7,492,000 at December 31, 1995, which
represented approximately 32% of the Company's consolidated stockholders'
equity at that date.
Except as described above, none of the directors or officers of the Company
currently maintains or has maintained, since at least the beginning of 1987,
any significant business or personal relationship with the Company or any of
its subsidiaries other than relationships which arise by virtue of his position
or ownership interest in the Company or such subsidiaries.
Ten of the executive officers of the Company and its subsidiaries, including
all of the Company's officers except for Arthur E. S. Schmid, have entered into
Management Continuity Agreements with the Company, which provide for the
continuation of the officer's salary and a proportionate part of his or her
last annual bonus in the event the officer's employment is terminated
involuntarily by the Company, other than for cause, within two years after a
change of control of the Company, or voluntarily by the officer within one year
after a change of control of the Company. The period during which the salary
is continued depends on the particular agreement, and ranges from 24 to 36
months. All of these agreements have been approved by the Company's Board of
Directors.
56
<PAGE> 144
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT
SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
1. Financial Statements
(See Index for Item 8, on page 29 of this report)
2. Financial Statement Schedules:
None
3. Exhibits:
(1) Consent of KPMG Peat Marwick LLP, Independent
Public Accountants
(b) Reports on Form 8-K
None
57
<PAGE> 145
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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.
FINANCIAL BANCSHARES, INC.
<TABLE>
<S> <C>
Date: March 28, 1996 By: Arthur E. S. Schmid
--------------------------------------
Arthur E. S. Schmid, Chairman
By: Edward J. Vega
--------------------------------------
Edward J. Vega, Senior Vice-President
and Chief Financial Officer
</TABLE>
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature and Title Date
-------------------------------- --------------
<S> <C>
James B. Becker March 28, 1996
--------------------------------
James B. Becker
Director
William C. Bollinger March 28, 1996
--------------------------------
William C. Bollinger
Director
David B. Brewer March 28, 1996
--------------------------------
David B. Brewer
Director
William L. Frein March 28, 1996
--------------------------------
William L. Frein
Director
Joe W. Gooch March 28, 1996
--------------------------------
Joe W. Gooch
Director
Arthur E. S. Schmid March 28, 1996
--------------------------------
Arthur E. S. Schmid
Director; Chairman and Principal
Executive Officer
Clifford A. Schmid March 28, 1996
--------------------------------
Clifford A. Schmid
Director; President
Joe E. Weber March 28, 1996
--------------------------------
Joe E. Weber
Director
</TABLE>
58
<PAGE> 146
APPENDIX A-2
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1996 Commission File Number 33-33940
FINANCIAL BANCSHARES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Missouri 43-1251071
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification number)
3805 South Broadway, St. Louis, Missouri 63118-4607
-----------------------------------------------------------
(Address of principal executive officer including Zip Code)
314-664-6250
--------------------------------------------------
Registrant's telephone number, including area code
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 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 the number of shares outstanding of each of the issuer's classes of
common stock - as of June 30, 1996 684,377 shares of common stock, par value
$.01 per share.
- --------------------------------------------------------------------------------
This document constitutes part of a prospectus covering securities that have
been registered under the Securities Act of 1933.
- --------------------------------------------------------------------------------
<PAGE> 147
Part I. Financial Information
Item I. Financial Statements
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
Interim Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands of dollars, except share and per share data)
<TABLE>
<CAPTION>
June 30, December 31,
Assets 1996 1995
------ -------- ------------
<S> <C> <C>
Cash and due from banks:
Noninterest-bearing $ 10,392 $ 13,329
Interest-bearing 613 1,394
Funds sold 2,300 9,365
Investment in debt securities available-
for-sale, at estimated fair value 100,812 102,565
Loans, net of unearned discount 195,712 187,064
Less: Reserve for possible
loan losses (4,498) (4,160)
-------- --------
Net loans 191,214 182,904
-------- --------
Premises and equipment, net 9,772 9,290
Accrued interest receivable 4,212 4,197
Other assets 3,518 2,879
-------- --------
Total assets $322,833 $325,923
======== ========
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing demand $ 38,646 $ 42,735
Interest-bearing 250,328 251,715
-------- --------
Total deposits 288,974 294,450
Short-term borrowings 4,188 1,250
Other liabilities 2,695 2,541
Note payable 3,794 4,019
-------- --------
Total liabilities 299,651 302,260
-------- --------
Stockholders' equity:
Common stock, $.01 par value; 3,000,000
shares authorized, 693,531 shares
issued and outstanding 7 7
Additional paid-in capital 9,925 9,925
Retained earnings 14,334 13,599
Treasury stock; 9,154 shares (261) (261)
Net unrealized holding gains (losses)
on securities available-for-sale,
net of tax (823) 393
-------- --------
Total stockholders' equity 23,182 23,663
-------- --------
Total liabilities and
stockholders' equity $322,833 $325,923
======== ========
Book value per share - based on common
shares outstanding at period-end $ 33.87 $ 34.58
-------- --------
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.
2
<PAGE> 148
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
Interim Condensed Consolidated Statement of Income
(Unaudited)
(In thousands of dollars, except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income:
Loans $4,344 $4,156 $ 8,493 $ 8,044
Investment securities:
Taxable 1,429 1,282 2,856 2,480
Exempt from Federal
income taxes 155 157 311 326
Interest-bearing due
from banks 16 23 39 48
Funds sold 98 136 299 275
------ ------ ------- -------
Total interest income 6,042 5,754 11,998 11,173
------ ------ ------- -------
Interest expense:
Deposits 2,775 2,585 5,605 4,836
Short-term borrowings 20 51 33 64
Notes payable 90 66 180 167
------ ------ ------- -------
Total interest expense 2,885 2,702 5,818 5,067
------ ------ ------- -------
Net interest income 3,157 3,052 6,180 6,106
Provision for possible
loan losses 183 297 366 474
------ ------ ------- -------
Net interest income after
provision for possible
loan losses 2,974 2,755 5,814 5,632
------ ------ ------- -------
Noninterest income:
Service charges on
deposit accounts 270 262 537 519
Securities gains
(losses), net (35) (1) (33) 1
Other noninterest income 66 72 177 210
------ ------ ------- -------
Total noninterest income 301 333 681 730
------ ------ ------- -------
Noninterest expense:
Salaries and employee
benefits 1,255 1,163 2,515 2,370
Occupancy 168 160 354 326
Equipment 257 181 465 369
FDIC and state assessment 27 183 53 367
Legal and professional 87 135 183 252
Other noninterest expense 615 530 1,106 1,103
------ ------ ------- -------
Total noninterest expense 2,409 2,352 4,676 4,787
------ ------ ------- -------
Income before applicable
income taxes 866 736 1,819 1,575
Applicable income taxes 302 241 656 468
------ ------ ------- -------
Net income $ 564 $ 495 $ 1,163 $ 1,107
====== ====== ======= =======
Net income per share (based
on average shares outstanding
of 684,377) $ 0.82 $ 0.73 $ 1.70 $ 1.62
====== ====== ======= =======
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.
3
<PAGE> 149
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
Interim Condensed Consolidated Statement Cash Flows
(Unaudited)
(In thousands of dollars)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,163 $ 1,107
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 689 497
Provision for possible loan losses 366 474
Increase in accrued interest
receivable (15) (77)
Other, net (27) 222
-------- --------
Net cash provided by operating
activities 2,176 2,223
-------- --------
Cash flows from investing activities:
Net decrease in interest-bearing due
from banks 781 606
Maturities, calls and principal payments:
Available-for-sale debt securities 15,830 8,910
Held-to-maturity debt securities --- 1,780
Sales of available-for-sale debt securities 12,660 4,437
Purchase of:
Available-for-sale debt securities (28,811) (12,574)
Held-to-maturity debt securities --- (540)
Net increase in loans (8,750) (9,444)
Purchases of premises, furniture and
equipment, net (876) (936)
Sale of other real estate and
repossessed property 179 209
-------- --------
Net cash used in investing activities (8,987) (7,552)
-------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits (5,476) 6,335
Net increase in short-term borrowings 2,938 202
Payments on notes payable (225) --
Dividends paid (428) (428)
-------- --------
Net cash provided by (used in)
financing activities (3,191) 6,109
-------- --------
Net increase (decrease) in cash and cash
equivalents (10,002) 780
Cash and cash equivalents at beginning
of period 22,694 15,912
-------- --------
Cash and cash equivalents at end of period $ 12,692 $ 16,692
======== ========
Supplemental information:
Interest paid $ 5,799 $ 4,578
======== ========
Income taxes paid $ 815 $ 182
======== ========
Noncash transactions:
Transfer to other real estate in
settlement of loans $ 74 $ 338
======== ========
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.
4
<PAGE> 150
FINANCIAL BANCSHARES, INC. AND SUBSIDIARIES
Notes to Interim Condensed Consolidated Financial Statements
June 30, 1996 and 1995
(Unaudited)
(1) Basis of Presentation
The interim condensed consolidated financial statements as of June 30, 1996
and for the three and six month periods ended June 30, 1996 and 1995
reflect all adjustments consisting of normal recurring accruals and
elimination of significant intercompany transactions, which in the opinion
of management, are necessary for the fair presentation of the results of
operations for the interim periods presented. Such condensed consolidated
financial statements have been prepared in accordance with the instructions
to Form 10-Q and Rule 10-01 of Regulations S-X of the Securities and
Exchange Commission. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
(2) Pending Merger
On June 27, 1996, the Company announced an agreement to merge with Union
Planters Corporation, a Memphis, Tennessee-based banking organization, in
which 100% of the common shares of the Company will be exchanged for
1,220,000 shares of Union Planters Corporation common stock. The merger,
which is subject to receipt of regulatory and shareholder approval, is
expected to be completed in the fourth quarter of 1996.
5
<PAGE> 151
Part I. Financial Information (continued)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis is intended to provide a review of
significant factors affecting the financial condition and results of operations
of Financial Bancshares, Inc. and its subsidiaries (the Company or FBI) for the
three and six months ended June 30, 1996 and 1995. This discussion should be
read in conjunction with the Company's interim condensed consolidated financial
statements and the notes thereto.
Overview
Financial Bancshares, Inc. (the Company) provides a full range of banking
services to individual and corporate customers through its five majority-owned
subsidiary banks located in eastern and southeastern Missouri.
Net income for the first six months of 1996 was $1,163,000, which represents a
5.06% increase over the net income of $1,107,000 earned during the first six
months of 1995. Earnings per common share for the first six months of 1996 was
$1.70, compared with $1.62 for the first six months of 1995. For the three
months ended June 30, 1996, the Company earned $564,000, or 82 cents per common
share, which represented a 13.94% increase over the second quarter 1995 amounts
of $495,000 and 73 cents per common share, respectively. These increases in net
income and per share income result primarily from the reduction in the level of
problem loans at the Company's St. Louis banking subsidiary, which has led to a
reduced level in the provision for possible loan losses in 1996, as compared
with the corresponding periods in 1995. Additionally, the Company experienced
increases in its consolidated tax equivalent net interest income in 1996 of
$105,000 for the second quarter and $66,000 for the first six months, as
compared with similar periods in 1995. These increases are a result of the
increased percentage of interest-earning assets to total assets. At June 30,
1996, interest-earning assets represented 92.8% of total assets, as compared
with 92.2% at December 31, 1995 and 92.7% at June 30, 1995. The increase in
interest-earning assets has occurred in the higher rate loan category, fueled by
strong loan demand from the agricultural sector of the Company's customer base
in southeastern Missouri. A third primary factor in the Company's increased
earnings in 1996 is the significant reduction in FDIC assessment charges levied
against the banking industry. Effective in the third quarter of 1995, the FDIC
dramatically reduced its assessments levied on banks, making the adjustment
retroactive to June 30, 1995. Accordingly, such fees have been dramatically
reduced in 1996 for the three and six months ended June 30, 1996, whereas
amounts expensed for the three and six months ended June 30, 1995 were still
being charged at the higher rates.
Table 1 summarizes the Company's statement of operations and the change in each
category for the periods presented.
6
<PAGE> 152
TABLE 1 - Comparative Statement of Operations
(in thousands of dollars)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------------------
Change
------------------
1996 1995 Amount Percent
---- ---- ------ -------
<S> <C> <C> <C> <C>
Total interest income
(fully tax equivalent) $6,122 $5,834 $ 288 4.94%
Total interest expense 2,885 2,702 183 6.77
------ ------ -----
Net interest income 3,237 3,132 105 3.35
Provision for possible
loan losses 183 297 (114) (38.38)
Noninterest income:
Service charges on deposits 270 262 8 3.05
Other noninterest income 66 72 (6) (8.33)
------ ------ -----
336 334 2 0.60
Securities gains
(losses), net (35) (1) (34) (3,400.00)
------ ------ -----
Total noninterest income 301 333 (32) (9.61)
------ ------ -----
Noninterest expense:
Salaries and employee
benefits 1,255 1,163 92 7.91
Occupancy and equipment
expense 425 341 84 24.63
FDIC and state assessment 27 183 (156) (85.25)
Other noninterest expense 702 665 37 5.56
------ ------ -----
Total noninterest expense 2,409 2,352 57 2.42
------ ------ -----
Income before income taxes 946 816 130 15.93
Tax equivalent adjustment (80) (80) --- --
Income tax expense 302 241 61 25.31
------ ------ -----
Net income $ 564 $ 495 $ 69 13.94
====== ====== ===== =========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------------------
Change
------------------
1996 1995 Amount Percent
---- ---- ------ -------
<S> <C> <C> <C> <C>
Total interest income
(fully tax equivalent) $12,158 $11,341 $ 817 7.20%
Total interest expense 5,818 5,067 751 14.82
------- ------- -----
Net interest income 6,340 6,274 66 1.05
Provision for possible
loan losses 366 474 (108) (22.78)
Noninterest income:
Service charges on deposits 537 519 18 3.47
Other noninterest income 177 210 (33) (15.71)
------- ------- -----
714 729 (15) (2.06)
Securities gains
(losses), net (33) 1 (34) (3,400.00)
------- ------- -----
Total noninterest income 681 730 (49) (6.71)
------- ------- -----
Noninterest expense:
Salaries and employee
benefits 2,515 2,370 145 6.12
Occupancy and equipment
expense 819 695 124 17.84
FDIC and state assessment 53 367 (314) (85.56)
Other noninterest expense 1,289 1,355 (66) (4.87)
------- ------- -----
Total noninterest expense 4,676 4,787 (111) (2.32)
------- ------- -----
Income before income taxes 1,979 1,743 236 13.54
Tax equivalent adjustment (160) (168) 8 4.76
Income tax expense 656 468 188 40.17
------- ------- -----
Net income $ 1,163 $ 1,107 $ 56 5.06
======= ======= ===== =========
</TABLE>
Nonperforming assets decreased 38.35% to $1,360,000 at June 30, 1996 from
$2,206,000 at December 31, 1995. The ratio of nonperforming loans to net
outstanding loans decreased to 0.34% at June 30, 1996 from 0.72% at December
31, 1995. The ratio of the reserve for possible loan losses to nonperforming
loans increased to 679.46% at June 30, 1996 from 309.06% at December 31, 1995,
primarily due to lower levels of nonperforming loans, coupled with a higher
reserve balance at June 30, 1996.
Results of Operations
The following paragraphs discuss more fully significant changes and trends as
they relate to the Company's consolidated results of operations during the
three and six-months periods ended June 30, 1996 and 1995.
Net Interest Income
Net interest income on a tax equivalent basis increased $105,000 and $66,000
for the three and six months ended June 30, 1996, respectively, when compared
with the corresponding periods for 1995. These increases in net interest
income occurred despite an overall reduction in the Company's net interest
margin. For the six months ended June 30, 1996, the Company's net interest
margin declined to 4.18% from the 4.45% margin for the first six months of
1995. Please refer to Table 2 below for a breakdown of the individual
components of the net interest margin for the first six months of 1996 and
1995.
7
<PAGE> 153
Average total loans increased $7,937,000 for the first six months of 1996 when
compared with the first six months of 1995. This loan increase resulted from
strong loan demand from agricultural borrowers in the Company's southeastern
Missouri banks. The average rate earned on these loans also increased in 1996,
from 8.95% for the first six months of 1995 to 9.05% for the first six months
of 1996. To fund this loan growth, however, the Company has had to increase
its deposit rates to obtain the necessary funding, primarily in the higher rate
time deposit category. Average time deposits of $100,000 or more and other
time deposits increased $10,084,000 and $10,045,000, respectively, for the six
months ended June 30, 1996, when compared with the first six months of 1995;
however, much of this increase occurred prior to year-end 1995. When comparing
deposit balances at June 30, 1996 with balances at December 31, 1995, total
deposits actually declined a total of $5,476,000. This decrease occurred
primarily in the transaction-type deposits, i.e., noninterest-bearing demand,
NOW and money market deposit accounts. Time deposits of $100,000 or more also
declined $87,000, while other time deposits increased approximately $4.5
million during the six months ended June 30, 1996. To obtain this deposit
growth, primarily in the very competitive market of southeastern Missouri, the
Company has had to competitively price such deposits. One of the Company's
southeastern Missouri banking subsidiaries offered a promotion on "jumbo" time
deposits at an attractive promotional rate in March 1995. The renewal rates on
these deposits, many of which have renewed, are at a lower market rate. The
average rates paid on time deposits of $100,000 or more actually declined
during the first six months of 1996 to 4.79% from the 5.24% paid during the
first six months of 1995; however, the average rates paid for other time
deposits during the first six months of 1996 increased to 5.76% from the 5.13%
paid during the first six months of 1995.
The excess deposit funds obtained during the last six months of 1996 were
primarily invested in the Company's investment portfolio. The average
investment portfolio (on an amortized cost basis) increased $12,537,000 for the
first six months of 1996, when compared with the first six months of 1995;
however, the overall rate obtained on such investments remained relatively flat
in the volatile bond market which has existed thusfar in 1996. The average tax
equivalent yield earned on the investment portfolio for the first six months of
1996 was 6.43%, compared with a yield earned for the same period of 1995 of
6.54%. The average investment portfolio (on an amortized cost basis) actually
remained relatively flat for the first six months of 1996. The growth in the
portfolio occurred in the second half of 1995.
The following Table 2 shows the condensed average balance sheets for the six
month periods ended June 30, 1996 and 1995, the average yield on each category
of interest-earning assets and the average rate paid on each category of
interest-bearing liabilities for each of the periods presented.
8
<PAGE> 154
TABLE 2 - Distribution of Assets, Liabilities and Stockholders' Equity,
Interest Rates and Interest Differential
<TABLE>
<CAPTION>
Six Months Ended June 30, 1996
------------------------------
Interest Average
Average income/ yield/
balance expense rate
------- ------- ----
(dollars in thousands)
<S> <C> <C> <C>
Assets:
Interest-earning assets:
Net loans (1) (3) $187,779 $ 8,493 9.05%
Investments in debt securities
(at amortized cost):
Taxable 93,141 2,856 6.13
Exempt from Federal income taxes (2) 10,401 471 9.06
Interest-bearing deposits in banks 1,015 39 7.68
Funds sold 11,169 299 5.35
-------- -------
Total interest-earning assets 303,505 12,158 8.01
-------
Noninterest-earning assets:
Cash and due from banks 10,196
Premises and equipment, net 9,413
Reserve for possible loan losses (4,340)
Other assets 6,483
Market valuation on available-for-sale
debt securities 191
--------
Total assets $325,448
========
Liabilities:
Interest-bearing liabilities:
Interest-bearing deposits:
NOW and money market
demand accounts 70,276 951 2.71
Savings 25,652 319 2.49
Time deposits $100,000 and over 41,499 994 4.79
Other time deposits 115,931 3,341 5.76
Federal funds purchased 329 7 4.26
Notes payable 4,015 180 8.97
Other short-term borrowings 889 26 5.85
-------- -------
Total interest-bearing
liabilities 258,591 5,818 4.50
------- ====
Noninterest-bearing deposits 40,380
Other liabilities 2,704
--------
Total liabilities 301,675
Stockholders' equity 23,773
--------
Total liabilities and
stockholders' equity $325,448
========
Net interest income/net yield on
earnings assets $ 6,340 4.18%
======= ====
</TABLE>
9 (Continued)
<PAGE> 155
<TABLE>
<CAPTION>
Six Months Ended June 30, 1995
------------------------------
Interest Average
Average income/ yield/
balance expense rate
------- ------- ----
(dollars in thousands)
<S> <C> <C> <C>
Assets:
Interest-earning assets:
Net loans (1) (3) $179,842 $ 8,044 8.95%
Investments in debt securities
(at amortized cost):
Taxable 80,540 2,480 6.16
Exempt from Federal income taxes (2) 10,465 494 9.44
Interest-bearing deposits in banks 1,448 48 6.63
Federal funds sold 9,524 275 5.77
-------- -------
Total interest-earning assets 281,819 11,341 8.05
-------
Noninterest-earning assets:
Cash and due from banks 11,062
Premises and equipment, net 8,296
Reserve for possible loan losses (3,960)
Other assets 8,494
Market valuation on available-
for-sale debt securities (1,829)
--------
Total assets $303,882
========
Liabilities:
Interest-bearing liabilities:
Interest-bearing deposits:
NOW and money market demand accounts 69,458 945 2.72
Savings 27,782 351 2.53
Time deposits $100,000 and over 31,415 823 5.24
Other time deposits 105,886 2,717 5.13
Federal funds purchased 421 11 5.23
Notes payable 4,019 167 8.31
Other short-term borrowings 2,314 53 4.58
-------- -------
Total interest-bearing
liabilities 241,295 5,067 4.20
------- ----
Noninterest-bearing deposits 39,302
Other liabilities 644
--------
Total liabilities 281,241
Stockholders' equity 22,641
--------
Total liabilities and
stockholders' equity $303,882
========
Net interest income/net yield
on earnings assets $ 6,274 4.45%
======= ====
</TABLE>
Notes:
(1) Average balances include nonaccrual loans. The recognition of interest
income is discontinued when, in management's judgment, the interest will
not be collectible in the normal course of business. Subsequent payments
received on such loans are applied to principal if any doubt exists as to
the collectibility of principal; otherwise, such receipts are recorded as
interest income. Loans are returned to accrual status when management
believes full collectibility of the principal and interest is expected.
(2) Interest yields are presented on a tax-equivalent basis. Nontaxable
income has been adjusted upward by the amount of Federal income tax that
would have been paid if the income had been taxable at a rate of 34%,
adjusted downward by the disallowance of the interest cost on any
nontaxable securities.
(3) Interest income includes loan fees, which are immaterial to the total
amount of loan income.
10
<PAGE> 156
Through the Company's asset/liability management procedures, interest rate
sensitivity is closely monitored. Following is Table 3 which reflects the
Company's interest rate gap (rate sensitive assets minus rate sensitive
liabilities) analysis at June 30, 1996, individually and cumulatively through
various time horizons.
TABLE 3 - Interest Rate Gap Analysis
<TABLE>
<CAPTION>
Remaining Maturity if Fixed Rate;
Earliest Possible Repricing Interval if Floating Rate
-----------------------------------------------------
Over
three Over
Three months one year Over
months or to twelve to five five
less months years years Total
---- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
Interest-Earning Assets
Loans $ 71,738 $ 48,647 $ 66,216 $ 9,111 $195,712
Investments in debt
securities (at fair
value) 14,933 5,174 21,041 59,664 100,812
Funds sold 2,300 -- -- -- 2,300
Interest-bearing deposits
in banks 46 -- 567 -- 613
-------- -------- -------- ------- --------
Total earning assets 89,017 53,821 87,824 68,775 299,437
-------- -------- -------- ------- --------
Interest-Bearing Liabilities
NOW and money market
demand accounts 67,991 -- -- -- 67,991
Savings 25,516 -- -- -- 25,516
Time deposits of $100,000
or more 14,360 16,719 2,901 714 34,694
Other time deposits 17,110 77,919 27,098 -- 122,127
Short-term borrowings 4,188 -- -- -- 4,188
Note payable 3,794 -- -- -- 3,794
-------- -------- -------- ------- --------
Total interest-bearing
liabilities 132,959 94,638 29,999 714 258,310
-------- -------- -------- ------- --------
Gap analysis:
Interest-sensitivity $(43,942) $(40,817) $ 57,825 $68,061 $ 41,127
======== ======== ======== ======= ========
Cumulative interest-
sensitivity gap $(43,942) $(84,759) $(26,934) $41,127 $ 41,127
======== ======== ======== ======= ========
Ratio of interest-
sensitive assets to
interest-sensitive
liabilities .67x .57x 2.93x 96.32x 1.16x
======== ======== ======== ======= ========
Cumulative ratio of
interest-sensitive
assets to interest-
sensitive liabilities .67x .63x .90x 1.16x 1.16x
======== ======== ======== ======= ========
</TABLE>
As indicated in the above table, the Company operates on a short-term basis
similar to most other financial institutions, as its liabilities, with savings
and NOW accounts included, could reprice more quickly than its assets.
However, the Company believes its asset/liability management program will allow
adequate reaction time for trends in the marketplace as they occur, allowing
maintenance of adequate net interest margins. Additionally, the Company's
historical analysis of customer savings and NOW accounts indicates that such
deposits have certain "core deposit" characteristics and are not susceptible to
changes in the marketplace.
11
<PAGE> 157
Provision for Possible Loan Losses
The provision for possible loan losses decreased $114,000 and $108,000 for the
three and six months ended June 30, 1996, respectively, when compared with the
same periods for 1995. The decrease in the provision for possible loan losses
resulted from a reduced level of net charge-offs experienced in 1996, as well
as the reduced level of nonperforming loans discussed above. Activity in the
reserve for possible loan losses and nonperforming loan data are presented and
discussed below under "Asset Quality."
Noninterest Income
Noninterest income declined $32,000 and $49,000 for the three and six months
ended June 30, 1996, respectively, when compared with the corresponding periods
of 1995. These decreases resulted primarily from net losses incurred on
security sales which occurred in the second quarter of 1996, totaling $35,000.
In December 1995, the Company took the opportunity provided by the Financial
Accounting Standards Board to make a one time transfer of approximately $24.5
million of held-to-maturity securities to the available-for-sale category, to
more effectively manage such assets and react to changes in interest rates. As
a result, the Company sold approximately $10 million of securities in the
second quarter of 1996 in anticipation of a rising rate environment. The
proceeds of such sales were primarily reinvested in debt securities.
Noninterest Expense
Noninterest expense totaled $2,409,000 and $4,676,000 for the three and six
months ended June 30, 1996, respectively, as compared with $2,352,000 and
$4,787,000 for the three and six months ended June 30, 1995, respectively.
Salaries and employee benefits increased 7.91% and 6.12% for the three and six-
months ended June 30, 1996, respectively, as compared with the same periods in
1995, primarily as a result of certain management changes at the Company's St.
Louis banking subsidiary during the second half of 1995.
Occupancy and equipment expense increased $84,000 and $124,000 for the three
and six months ended June 30, 1996, respectively, when compared with the
corresponding periods of 1995. These increases resulted primarily from the
completion of the Company's conversion to a new data processing operation
(which began in 1995) in May 1996 and the opening of a new facility by the
Company's Dexter, Missouri banking subsidiary.
As noted above, the most predominant change in noninterest expense between the
corresponding periods of 1996 and 1995 resulted from the FDIC's dramatic
reduction of assessments levied against banks in the third quarter of 1995.
This action resulted in decreased FDIC and state assessments of $156,000 and
$314,000 for the three and six months ended June 30, 1996, respectively, when
compared with the corresponding periods of 1995.
12
<PAGE> 158
Income Tax Expense
Income tax expense increased $61,000 and $188,000 for the three and six months
ended June 30, 1996, respectively, when compared with the corresponding periods
in 1995, resulting from a higher level of taxable income. The effective tax
rates paid for the three months ended June 30, 1996 and 1995 were 34.87% and
32.74%, respectively; and 36.06% and 29.71% for the six-months ended June 30,
1996 and 1995, respectively. The lower effective rates in 1995 resulted from
lower state taxes due to nonrecurring credits allowed for state income taxes.
Financial Condition
Selected categories of the Company's consolidated balance sheet at June 30,
1996, as compared with December 31, 1995 follows in Table 4.
TABLE 4 - Selected Comparative Balance Sheet Items
<TABLE>
<CAPTION>
Change
-----------------
June 30, December 31,
1996 1995 Amount Percent
-------- --------- ------ -------
(in thousands of dollars)
<S> <C> <C> <C> <C>
Total assets $322,833 $325,923 $(3,090) (0.95)%
Loans, net of unearned
discount 195,712 187,064 8,648 4.62
Investments in available-
for-sale debt securities
(at fair value) 100,812 102,565 (1,753) (1.71)
Deposits:
Noninterest-bearing 38,646 42,735 (4,089) (9.57)
NOW and money market
deposit accounts 67,991 73,763 (5,772) (7.83)
Savings accounts 25,516 25,579 (63) (0.25)
Time deposits of
$100,000 or more 34,694 34,781 (87) (0.25)
Other time deposits 122,127 117,592 4,535 3.86
-------- -------- ------- ------
Total deposits 288,974 294,450 (5,476) (1.86)
Short-term borrowings 4,188 1,250 2,938 235.04
Note payable 3,794 4,019 (225) (5.60)
Stockholders' equity 23,182 23,663 (481) (2.03)
======== ======== ======= ======
</TABLE>
Loans
Total loans, net of unearned discount, increased $8,648,000 or 4.62% during the
first six months of 1996 due to the strong loan growth experienced by the
Company's southeastern Missouri banks in the agricultural sector. At June 30,
1996, the Company had $41,731,000 of agricultural production loans, an increase
of $9,499,000 over $32,232,000 of such loans at December 31, 1995.
Additionally, the Company's banking subsidiaries had $22,571,000 of loans
secured by agricultural real estate at June 30, 1996, representing an $873,000
increase over the December 31, 1995 level of $21,698,000. The Company has made
a specific effort to make loans to profitable and financially strong
agricultural operations, as those operations become dissatisfied with
13
<PAGE> 159
government-sponsored lending programs, which are consolidating and becoming
more centralized. Additionally, the Company's banking subsidiaries have
generally experienced substantial paydowns and payoffs of agricultural
production loans on an annual basis, when crops are harvested. Such paydowns
generally occur in the first quarter of the year.
Investments
Total investments declined $1,753,000 or 1.71% from year-end 1995 to the June
30, 1996 balance of $100,812,000. The majority of this decrease however was
the result of the significant valuation decline in the bond market in June
1996, due to rising interest rates. As mentioned above, the Company
transferred approximately $24.5 million of held-to-maturity securities to the
available-for-sale category, resulting in the entire portfolio being included
in the available-for-sale category. With such a significant volume of the
portfolio in the available-for-sale category, the Company is vulnerable to
short-term market fluctuations such as those experienced in June of 1996. The
Company's valuation of the available-for-sale security portfolio declined
approximately $1.85 million from its level at December 31, 1995.
During the first six months of 1996, the Company's investment portfolio was
decreased by maturities, calls, or principal payments totaling $15,830,000 and
sales of $12,660,000, with reinvestment of $28,811,000 in the portfolio.
Company management continues to monitor the portfolio for valuation risk
resulting from changes in interest rates and will react accordingly to shifts
in longer-term interest rates. Ultimately, however, the Company attempts to
match its longer-term asset/liability maturity mix using the investment
portfolio.
Deposits
Overall, the Company's deposits decreased $5,476,000 or 1.86% from year-end
1995 to $288,974,000 at June 30, 1996. The higher than normal year end balance
at December 31, 1995 resulted from customers who experienced large amounts of
receipts just prior to year-end, particularly public entities and agricultural
customers. Accordingly, higher balances were maintained in transaction-type
accounts, such as noninterest-bearing checking accounts, NOW and money market
demand accounts at December 31, 1995. Time deposit balances at June 30, 1996
remained relatively flat from December 31, 1995 to June 30, 1996, as such
balances have grown only $4,448,000 or 2.92% from the December 31, 1995 levels.
Short-Term Borrowings
The slight reduction in deposits for the first six months of 1996 was partially
offset by seasonable short-term borrowings obtained by the Company's banking
subsidiaries. Short-term borrowings increased $2,938,000 during the first six
months of 1996. Certain of the Company's banking subsidiaries take advantage
annually of the Federal Reserve Bank's discount window loans offered for
financing agricultural-related activities. Certain of the Company's banking
subsidiaries are also members of the Federal Home Loan Bank and obtain short-
term financing therefrom as well, which the Company believes is an excellent
short-term liquidity source.
14
<PAGE> 160
Note Payable
During the second quarter of 1996, the Company made a principal payment of
$225,000 on its note payable to an unaffiliated financial institution, reducing
the outstanding balance on this term note to $3,794,000. The term note matures
in 1999.
Stockholders' Equity
The Company's stockholders' equity declined $481,000 or 2.03% for the first six
months of 1996, due primarily to the valuation adjustment required for
available for sale securities, which decreased stockholders' equity $1,216,000.
Asset Quality
The credit quality of the Company's loan portfolio continued to improve from
year-end 1995 to June 30, 1996, as evidenced by the significant reduction in
nonperforming assets, as presented in Table 5:
TABLE 5 - Nonperforming Assets
<TABLE>
<CAPTION>
Change
----------------
June 30, December 31,
1996 1995 Amount Percent
------- --------- ------ -------
(in thousands of dollars)
<S> <C> <C> <C> <C>
Loans:
Nonaccrual loans $ 459 $1,072 $(613) (57.18)%
Accruing loans past
due 90 days or more 203 274 (71) (25.91)
------ ------ ----- ------
Total nonperforming loans 662 1,346 (684) (50.82)
Foreclosed property 698 860 (162) (18.84)
------ ------ ----- ------
Total nonperforming
assets $1,360 $2,206 $(846) (38.35)%
====== ====== ===== ======
Nonperforming loans as a
percentage of net
outstanding loans 0.34% 0.72%
====== ------
Nonperforming assets as a
percentage of net
outstanding loans and
foreclosed property 0.69% 1.17%
====== ------
Reserve for possible loan
losses as a percentage of
nonperforming loans 679.46% 309.06%
====== ======
</TABLE>
15
<PAGE> 161
The improvement in the Company's level of nonperforming loans during the first
six months of 1996 has occurred without a corresponding increase in net charge-
offs experienced. The following Table 6 is a summary of activity in the
reserve for possible loan losses for the first six months of 1996:
TABLE 6 - Summary of Activity in Reserve for Possible Loan Losses
(in thousands of dollars)
<TABLE>
<S> <C>
Balance in reserve at
December 31, 1995 $4,160
------
Charge-offs:
Commercial loans 65
Real estate loans 73
Consumer loans 127
------
Total charge-offs 265
------
Recoveries:
Commercial loans 166
Real estate loans 5
Consumer loans 66
------
Total recoveries 237
------
Net charge-offs 28
------
Provision for possible loan
losses charged to
expense (1) 366
------
Balance in reserve at
June 30, 1996 $4,498
======
Net charge-offs to average
loans for the six months
ended June 30, 1996 0.01%
=====
Ending reserve to net outstanding
loans at June 30, 1996 2.30%
=====
</TABLE>
(1) Determinations of the adequacy of provisions for losses on loans and the
overall level of the reserve for possible loan losses are based on
analyses of historical loan loss experience in relation to loans
outstanding and on estimates of potential losses in the portfolio in
light of current and foreseeable economic conditions. These estimates
are made as a result of continuing management review of problem loans.
Loans are charged-off upon determination of uncollectibility by
management. This determination is based on factors such as the
borrower's failure to make payments, the borrower's financial condition,
the adequacy of underlying collateral, and the strength of any
guarantees of insurance claims.
16
<PAGE> 162
Capital Resources and Liquidity
At June 30, 1996, the Company's ratio of consolidated regulatory equity (total
stockholders' equity without the effect of the net unrealized gains (losses) on
available-for-sale securities) to adjusted consolidated assets (without the
effect of the unrealized gains (losses) on available-for-sale securities) was
7.41%, which represents an increase from the 7.15% level at December 31, 1995.
Company management believes its capital position is comfortably above the
regulatory minimum and continues to have more than adequate regulatory-required
tangible equity capital and risk-based capital on both a consolidated and
individual subsidiary level. As of June 30, 1996, the Company's consolidated
regulatory capital ratios compared to "Well Capitalized" minimums were as
follows:
<TABLE>
<CAPTION>
Total Tier 1
Risk-based Risk-based Leverage
Ratio Ratio Ratio
---------- ---------- --------
<S> <C> <C> <C>
Consolidated, June 30, 1996 11.88% 10.62% 7.17%
Well Capitalized Minimums 10.00% 6.00% 5.00%
</TABLE>
All of the Company's subsidiary banks are considered "well capitalized" for
regulatory purposes at June 30, 1996. Company management continues a policy of
attempting to maintain a level of capital it deems adequate in light of current
conditions. The Company's dividend policy, in management's opinion, should as
its major feature help maintain an adequate level of capital. This is
evidenced by the payment of a dividend during the second quarter of 1996 which
was exactly the amount per share paid at the same date in the prior year.
At June 30, 1996, there are no significant changes from December 31, 1995, in
the amount of available additional dividends from the Company's banking
subsidiaries.
The liquidity needs of the Company's subsidiary banks are met primarily through
the maturity of assets or acquisition of additional deposit funds. This is
indicated in the consolidated statements of cash flows. Investment in debt
securities, which are classified as available-for-sale, are purchased by the
banking subsidiaries for investment purposes and are maintained and managed as
a principal source of longer-term liquidity, but could be sold if liquidity
requirements dictate. Company management allows each subsidiary to manage its
own rate sensitivity and liquidity positions with some overall guidance from
the Company with regard to the consolidated rate sensitivity staying within a
certain range and adjustments to the portfolio based on the consolidated income
tax position. The consolidated rate sensitivity position, as outlined in Table
3 above, has been within the desired range for both 1996 and 1995.
The management of the Company, except as noted below, knows of no trends,
events, or uncertainties that will have or that are reasonably likely to have a
material effect on the Company's liquidity, capital resources, or operations.
The Company's banking subsidiary, First Financial Bank of Southeast Missouri,
in Sikeston,
17
<PAGE> 163
Missouri has begun the construction of a new and larger main banking office.
Normal liquidity will provide the funds for construction and there will be no
material effect on the consolidated financial position or earnings.
Effects of Inflation
Balance sheets of financial institutions such as the Company typically reflect
a net positive monetary position whereby monetary assets exceed monetary
liabilities. Monetary assets and liabilities are those which can be converted
to a fixed number of dollars, and include cash assets, investments, loans,
money market instruments, deposits, and short-term borrowings.
During periods of inflation, a net positive monetary position may result in an
overall decline in purchasing power of an institution. There is no clear
evidence establishing a relationship between the purchasing power of an
institution's net positive monetary position and its future earnings.
Moreover, the Company's ability to preserve the purchasing power of its net
positive monetary position will be reflected partially in the effectiveness of
its asset/liability management programs. The Company's management does not
believe that the effect of inflation of its nonmonetary assets (primarily bank
premises and equipment) is material.
18
<PAGE> 164
Part II. Other Information
Items 1, 2, 3, and 5.
These items have been omitted because their subject matters are not applicable
or the answer thereto are in the negative.
Item 4. Submission to Matters to a Vote of Security Holders
At registrant's annual meeting on April 24, 1996, the following individuals all
of whom were duly elected directors of the registrant by a vote of 537,318
shares in the affirmative and none in the negative: James B. Becker, David B.
Brewer, William C. Bollinger, William L. Frein, Joe W. Gooch, Arthur E. S.
Schmid, Clifford A. Schmid, and Joe Weber. All were directors prior to their
election.
Item 6. Reports on Form 8-K
A report on Form 8-K has been filed on July 11, 1996 regarding the Company's
pending merger with Union Planters Corporation.
FINANCIAL BANCSHARES, INC.
Date: August 14, 1996 /s/ Arthur E. S. Schmid
--------------------------
Arthur E. S. Schmid,
Chairman and
Chief Executive Officer
FINANCIAL BANCSHARES, INC.
Date: August 14, 1996 /s/ Edward J. Vega
--------------------------
Edward J. Vega,
Senior Vice President and
Chief Financial Officer
19
<PAGE> 165
APPENDIX B
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JUNE 27, 1996
BETWEEN
UNION PLANTERS CORPORATION and
CAPITAL BANCORPORATION, INC.
and
FINANCIAL BANCSHARES, INC.
<PAGE> 166
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT
ARTICLE 1
DEFINITIONS
<S> <C> <C>
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2
TERMS OF THE REORGANIZATION
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Charter, Bylaws, Directors, Officers and Name of the Surviving Corporation . . . . . . . . . . . . . 7
(a) Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Due Diligence Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4 Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 UPC's Right to Revise the Structure of the Transaction . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Holding Period of UPC Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.7 FBI Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Description of FBI Stock Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Continuation of the FBI Stock Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . 10
(c) Reclassification, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(d) Limited Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.8 FBI Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 3
DESCRIPTION OF THE MERGER
3.1 Terms of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(a) Satisfaction of Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(c) Shares of Capital to Remain Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(d) Conversion of Outstanding Shares of FBI . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(e) Conversion, Cancellation and Exchange of Shares of FBI Common Stock; Exchange Ratio . . . . 12
(f) Mechanics of Payment of Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(g) Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(h) Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(i) Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
i
<PAGE> 167
<TABLE>
<S> <C> <C>
(j) Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(k) Dissenters' Rights of FBI Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.2 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF UPC AND CAPITAL
4.1 Organization and Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2 Authorization, Execution and Delivery; Reorganization Agreement Not in Breach . . . . . . . . . . . 16
4.3 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.4 Government and Other Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.5 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.6 UPC Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.7 Exchange Act and Listing Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.8 The UPC Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.9 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.10 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.11 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.12 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF FBI
5.1 Organization and Qualification of FBI and Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 20
5.2 Authorization, Execution and Delivery; Reorganization Agreement Not in Breach . . . . . . . . . . . 21
5.3 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.4 Government and Other Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.5 Compliance With Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.6 Charter Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.7 FBI Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.8 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.9 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.10 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.11 FBI Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.12 Condition of Fixed Assets and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.13 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.14 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.15 Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.17 Labor and Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.18 Records and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.19 Capitalization of FBI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.20 Sole Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.21 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.22 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.23 Reserve for Possible Loan or ORE Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.24 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.25 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.26 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
ii
<PAGE> 168
<TABLE>
<S> <C> <C>
5.27 Material Contract Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.28 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.29 Exchange Act Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.30 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 6
COVENANTS OF UPC
6.1 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.2 Registration of UPC Common Stock under the Securities Laws . . . . . . . . . . . . . . . . . . . . . 37
6.3 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.4 Conduct of Business -- Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 7
COVENANTS OF FBI COMPANIES
7.1 Proxy Statement; FBI Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.2 Conduct of Business -- Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.3 Conduct of Business -- Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.4 Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 8
CONDITIONS TO CLOSING
8.1 Conditions to the Obligations of FBI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(a) Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(b) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(c) Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(d) Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(e) Opinion of UPC's and Capital's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(f) Inspections Permitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(g) No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(h) Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(i) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.2 Conditions to Obligations of UPC and Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(a) Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(b) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(c) Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(d) Destruction of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(e) Inspections Permitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(f) No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(g) Opinion of FBI's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(h) Other Business Combinations, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(i) Maintenance of Certain Covenants, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(j) Non-Compete Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(k) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(l) Receipt of Affiliate Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(m) Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>
iii
<PAGE> 169
<TABLE>
<S> <C> <C>
(n) Pooling of Interests Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.3 Conditions to Obligations of All Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(a) No Pending or Threatened Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(b) Government Approvals and Acquiescence Obtained . . . . . . . . . . . . . . . . . . . . . . 53
(c) Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(d) Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 9
TERMINATION
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 10
GENERAL PROVISIONS
10.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.2 Assignability and Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.5 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.6 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.9 Modifications, Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.10 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.11 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.12 Finders and Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.13 Equitable Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.14 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.15 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.16 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
PLAN OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
iv
<PAGE> 170
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Reorganization
Agreement") dated as of the 27th day of June, 1996, 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 as a savings and loan holding company and whose principal offices
are located at 7130 Goodlett Farms Parkway, Memphis, Shelby County, Tennessee
38018; FINANCIAL BANCSHARES, INC., ("FBI") a corporation chartered and
existing under the laws of the State of Missouri which is registered as a bank
holding company and whose principal offices are located at 3805 South Broadway,
St. Louis, Missouri 63118, and CAPITAL BANCORPORATION, INC. ("Capital" or the
"Surviving Corporation" as the context may require) a corporation chartered and
existing under the laws of the State of Tennessee which is a wholly-owned
subsidiary of UPC and whose principal offices are located at 7130 Goodlett
Farms Parkway, Memphis, Shelby County, Tennessee 38018.
UPC and Capital may sometimes be referred to herein collectively as
the "UPC Parties" and UPC, Capital and FBI are sometimes referred to herein
collectively as the "Parties."
Certain other capitalized terms used in this Reorganization Agreement
are defined below in ARTICLE 1.
RECITALS
A. FBI is the beneficial owner and holder of record of all or
substantially all of the issued and outstanding shares of capital stock of the
following financial institutions: First Financial Bank of St. Louis, St.
Louis, Missouri; First Financial Bank of Mississippi County, East Prairie,
Missouri; First Financial Bank of St. Genevieve, St. Genevieve, Missouri;
First Financial Bank of Southeast Missouri, Sikeston, Missouri; and Citizens
First Financial Bank, Dexter, Missouri (collectively, the "FBI Bank
Subsidiaries"), and FBI desires to have itself and, indirectly, all of its
assets, including the capital stock it owns of each of the FBI Bank
Subsidiaries, acquired by UPC on the terms and subject to the conditions set
forth in this Reorganization Agreement and the Plan of Merger annexed hereto as
Exhibit A (the "Plan of Merger").
B. UPC is the beneficial owner and holder of record of 1,000
shares of common stock having a par value of $1.00 per share of Capital (the
"Capital Common Stock") which constitute all of the shares of Capital Common
Stock which are issued and outstanding and UPC desires to acquire FBI and,
indirectly, FBI's assets, including the capital stock of the FBI Bank
Subsidiaries, on the terms and subject to the conditions set forth in this
Reorganization Agreement and the accompanying Plan of Merger.
C. The Board of Directors of FBI deems it desirable and in the
best interests of FBI, the FBI Bank Subsidiaries and the shareholders of FBI
(the "FBI Shareholders") that FBI be merged with and into Capital (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") and has directed that the Reorganization Agreement and
annexed Plan of Merger be submitted to the FBI Shareholders with the
recommendation that it be approved by them.
D. The Boards of Directors of UPC and Capital deem it desirable
and in the best interests of UPC and Capital and the shareholders of UPC that
FBI be merged with and into Capital on the terms and subject to the conditions
set forth in this Reorganization Agreement and in the manner provided in
REORGANIZATION AGREEMENT - PAGE 1
<PAGE> 171
this Reorganization Agreement and the Plan of Merger and have directed that the
Reorganization Agreement and annexed Plan of Merger be submitted to UPC as the
sole shareholder of Capital with the recommendation that it be approved.
E. The respective Boards of Directors of UPC, Capital and FBI
have each adopted (or will each adopt) resolutions setting forth and adopting
this Reorganization Agreement and the annexed Plan of Merger, and have directed
that this Reorganization Agreement and the annexed Plan of Merger and all
resolutions adopted by said Boards of Directors and by the FBI Shareholders and
Capital Shareholder 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 Division of Finance of the
Department of Consumer Affairs Regulation and Licensing of the State of
Missouri (the "Missouri Division"), and such other regulatory agencies or
authorities as may be necessary in order to obtain all prior 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:
"AFFILIATE" of a party means any person, partnership,
corporation, association, limited liability company, business trust, or other
legal entity directly or indirectly controlling, controlled by or under common
Control, as that term is defined herein, with that party.
"APPLICABLE ENVIRONMENTAL LAWS" shall have the meaning
assigned to such term in Section 5.15(a) of this Reorganization Agreement.
"AUDITED FINANCIAL STATEMENTS OF FBI" 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.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"BUSINESS DAY" shall mean any Monday, Tuesday, Wednesday,
Thursday or Friday that is not a federal or state holiday generally recognized
or observed by banks in the States of Missouri or Tennessee.
"CAPITAL" means Capital Bancorporation, Inc., a corporation
chartered and existing under the laws of the State of Tennessee which is
registered as a bank holding company under the
REORGANIZATION AGREEMENT - PAGE 2
<PAGE> 172
BHCA, which is a wholly-owned subsidiary of UPC, and whose principal offices
are located at 7130 Goodlett Farms Parkway, Memphis, Shelby County, Tennessee
38018.
"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 FBI
Record Holders in exchange for their shares of FBI Common Stock, such value to
be determined as provided in Article 3, Section 3.1(e), of this Reorganization
Agreement.
"CONTROL" shall have the meaning assigned to such term in
Section 2(a)(2) of the Bank Holding Company Act of 1956, as amended.
"DEPOSITS" shall mean all deposits (including, but not limited
to, certificates of deposit, savings accounts, NOW accounts and checking
accounts) of the FBI Bank Subsidiaries and other deposit-taking Affiliates.
"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, a wholly-owned subsidiary of UPC, 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.
"FBI BANK SUBSIDIARIES" has the meaning assigned to such term
in paragraph A of the Recitals to this Reorganization Agreement.
"FBI COMMON STOCK" has the meaning assigned to such term in
Section 3.1(d) of this Reorganization Agreement.
"FBI COMPANIES" shall mean FBI and all of its Subsidiaries,
whether direct or indirect.
REORGANIZATION AGREEMENT - PAGE 3
<PAGE> 173
"FBI 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 FBI or any FBI Subsidiary, to or for the benefit of the officers,
directors or employees of FBI or any FBI Subsidiary.
"FBI RECORD HOLDERS" means those Persons who shall be the
holders of record of all of the issued and outstanding shares of FBI Common
Stock immediately prior to the Effective Time of the Merger.
"FBI SHAREHOLDERS" shall have the meaning assigned to such
term in Recital C of this Reorganization Agreement.
"FBI STOCK OPTIONS" shall have the meaning assigned to such
term in Section 2.7 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
when acting under delegated authority.
"FIXED ASSETS" shall mean the furniture, fixtures and
equipment of the referenced Party.
"GAAP" shall mean generally accepted accounting principles as
in effect from time to time, consistently applied.
"GOVERNMENT 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.
"IRC" 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 FBI with and into Capital, in
which Capital shall survive the Merger as the Surviving Corporation.
"MISSOURI CODE" shall mean the Revised Statutes of the State
of Missouri 1994.
"MISSOURI DIVISION" shall mean the Division of Finance of the
Department of Consumer Affairs Regulation and Licensing of the State of
Missouri.
"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.
REORGANIZATION AGREEMENT - PAGE 4
<PAGE> 174
"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.
"ORE" shall mean real estate and other property acquired
through foreclosure, deed in lieu of foreclosure or similar procedures.
"OTS" shall mean the Office of Thrift Supervision, or any
successor thereto.
"PARTIES" shall mean FBI, UPC and Capital collectively; FBI on
the one hand or UPC and Capital 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
FBI, UPC and Capital and filed with the Tennessee Secretary of State along with
Articles of Merger prepared in accordance with Section 48-21-107 of the
Tennessee Code and providing for the Merger of FBI with and into Capital, the
Surviving Corporation, 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
FBI to solicit proxies with a view to securing the approval of the FBI
Shareholders of this Reorganization Agreement and the Plan of Merger.
"REALTY" means the real property of FBI or of any FBI
Subsidiary owned or leased by FBI or any FBI Subsidiary.
"RECORDS" means all available records, minutes of meetings of
the Board of Directors, committees and shareholders of FBI or any FBI
Subsidiary; original instruments and other documentation, pertaining to FBI or
any FBI Subsidiary, FBI's or any FBI Subsidiary's assets (including plans and
specifications relating to the Realty), FBI's or any FBI Subsidiary's
liabilities, the FBI Common Stock, the common stock of any FBI Subsidiary, the
Deposits and the loans; and all other business and financial records which are
necessary or customary for use in the conduct of FBI's or any FBI Subsidiary's
business by UPC or FBI 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 Missouri Division, the TDFI, the SEC, or any other state or
federal governmental or quasi-governmental entity which has, or may hereafter
have, jurisdiction over any aspect of any of the transactions described in this
Reorganization Agreement.
REORGANIZATION AGREEMENT - PAGE 5
<PAGE> 175
"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 of this Reorganization Agreement) and the ancillary transactions
contemplated in this Reorganization Agreement and the Plan of Merger annexed
hereto as Exhibit A.
"REORGANIZATION AGREEMENT" means collectively 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 except where the context indicates
otherwise.
"SEC" shall mean the United States Securities and Exchange
Commission, or any successor thereto.
"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 Missouri
Division, the TDFI, 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 or state bank Regulatory Authorities.
"SHAREHOLDERS MEETING" shall mean the Special Meeting of the
FBI Shareholders to be held pursuant to Section 7.1 of this Reorganization
Agreement, including any adjournment or adjournments thereof.
"SOCIAL ISSUES LETTER" shall have the meaning assigned to such
term in Section 10.7 of this Reorganization Agreement.
"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 Capital as the corporation
resulting from and surviving the consummation of the Merger as set forth in
Section 2.1(a) of this Reorganization Agreement.
"TENNESSEE CODE" shall mean the Tennessee Code Annotated, as
amended.
REORGANIZATION AGREEMENT - PAGE 6
<PAGE> 176
"TDFI" shall mean the Tennessee Department of Financial
Institutions.
"TENNESSEE COMMISSIONER" shall mean the Commissioner of
Financial Institutions of the State of Tennessee.
"UPC" means Union Planters Corporation, a corporation
chartered and existing under the laws of the State of Tennessee which is
registered both as a bank holding company and as a savings and loan holding
company and whose principal offices are located at 7130 Goodlett Farms Parkway,
Memphis, Shelby County, Tennessee 38018.
"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 as of December 31, 1995 and 1994 and the related
consolidated statements of earnings, of changes in shareholders' equity, and of
cash flows for the three years ended December 31, 1995 (including related
notes) of UPC and its Subsidiaries and as of each subsequent December 31 after
the date hereof and prior to the Effective Time of the Merger, and (ii) the
quarterly 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, 1996, 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.
"UPC REGISTRATION STATEMENT" shall have the meaning assigned
to such term in Section 6.2 of this Reorganization Agreement.
"UPC RIGHTS AGREEMENT" 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 the
lawful waiver) of all of the conditions to the obligations of each of the
Parties to this Reorganization Agreement, at the Effective Time of the Merger,
FBI shall be merged with and into Capital (the "Merger"). Capital shall
survive the Merger as the "Surviving Corporation."
2.2 Charter, Bylaws, Directors, Officers and Name of the Surviving
Corporation.
(a) Charter. At the Effective Time of the
Merger, the Charter of Capital as in effect immediately prior to the Effective
Time of the Merger, shall continue to be the Charter of Capital as the
Surviving Corporation unless and until the same shall be amended thereafter as
provided by law and the terms of such Charter.
(b) Bylaws. At the Effective Time of the Merger,
the Bylaws of Capital, as in effect immediately prior to the Effective Time of
the Merger, shall continue to be the Bylaws of Capital
REORGANIZATION AGREEMENT - PAGE 7
<PAGE> 177
as the Surviving Corporation unless and until amended or repealed as provided
by law, its Charter and such Bylaws.
(c) Directors and Officers. The directors and
officers of Capital in office immediately prior to the Effective Time of the
Merger shall continue to be the directors and officers of Capital as the
Surviving Corporation subsequent to the Effective Time of the Merger and to
hold such offices as provided in the Charter 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. At the Effective Time of the Merger,
the name of Capital as the Surviving Corporation of the Merger shall remain
unchanged and continue to be: CAPITAL BANCORPORATION, INC.
2.3 Due Diligence Review. Within 15 days after the date
of this Reorganization Agreement, each Party shall deliver to the opposite
Party(ies) any schedules of exceptions which it is required or may desire to
provide hereunder which have not been provided as of the date hereof. Upon
execution hereof, each Party shall be entitled forthwith to continue its due
diligence review of the books, records and operations of the other Party,
including, but not limited to, a review of the other Party's loan portfolios,
ORE and classified assets, investment portfolios and properties, to verify the
quality of such assets, the adequacy of any allowances or reserves which have
been provided against them and the reasonableness of the other Party's earnings
projections, growth projections and sustained earnings prospects after
consummation of the Merger at reasonable growth rates; provided, however, that
any review conducted by a Party pursuant to the provisions of this Section 2.3
shall be completed within thirty (30) days from the date of this Reorganization
Agreement or within fifteen (15) days of receipt of all schedules of exceptions
from the opposite Party, whichever shall be the longer period. Should, as a
result of such review, either Party find in good faith that the
allowances/reserves provided by the other Party are insufficient to absorb any
losses inherent in such other Party's assets or that the earnings projections,
growth projections or sustained earnings prospects provided by the other Party
are not likely to be achieved or maintained after consummation of the Merger,
it may, prior to the expiration of said due diligence review period (as
extended by failure of a Party to provide its schedules of exceptions on a
timely basis), terminate this Reorganization Agreement without penalty by
giving the other Party written notice of such termination in the manner
provided in Section 10.1. Nothing in this Section 2.3 shall be construed to
limit the right of any party to continue its due diligence review through the
Closing Date.
2.4 Availability of Information. Promptly after the
execution by the Parties of this Reorganization Agreement, each Party shall
provide to the other Party, its Officers, employees, agents, and
representatives access, on reasonable notice and during customary business
hours, to all of the books, records, properties and facilities of the Party and
shall use its best efforts to cause its Officers, employees, agents and
representatives to cooperate with any of the reviewing Party's reasonable
requests for information which would be customary in order to conduct the
review provided for in Section 2.3 of this Reorganization Agreement as well as
its ongoing review through Closing. Except as expressly permitted by the
disclosing Party, the receiving Party shall keep confidential all non-public
information received by the disclosing Party in connection with the provisions
of this Section 2.4, which covenant shall survive the Closing of this
Reorganization Agreement.
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
REORGANIZATION AGREEMENT - PAGE 8
<PAGE> 178
deem advisable; provided, however, that UPC shall not have the right, without
the approval of the Board of Directors of FBI, to make any revision to the
structure of the Reorganization which (i) changes the amount of the
Consideration which the FBI 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 effect of the Merger to UPC, Capital, FBI or
to any FBI Record Holder; or (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). UPC
may exercise this right of revision by giving written Notice to FBI 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. FBI hereby
acknowledges and agrees that, in order to qualify the Merger under the IRC as a
tax-free reorganization, any FBI Record Holder who would be deemed an Affiliate
of FBI at the time of Closing under the Securities Laws and who shall accept
shares of UPC Common Stock as Consideration for the cancellation, exchange and
conversion of his or her shares of FBI Common Stock pursuant to the terms and
conditions of this Reorganization Agreement, shall not pledge, assign, sell,
transfer, or 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 FBI Record Holder upon consummation of the Merger, nor shall
such Affiliate/FBI Record Holder enter into any formal or informal agreement to
pledge, assign, sell or transfer or otherwise alienate his right, title or
interest in any of the shares of UPC Common Stock to be delivered by UPC to
such Affiliate/FBI Record Holder pursuant to the terms and conditions of this
Reorganization Agreement, except in any such case in accordance with the
Securities Laws and consistently with the transaction being treated as one or
more tax-free "reorganizations" as defined in Section 368 of the IRC and in
accordance with Section 8.2(i) hereof. Moreover, no person who would be deemed
an Affiliate of FBI shall pledge, assign, sell, transfer, or 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 FBI Record Holder
upon consummation of the Merger or enter into any formal or informal agreement
to pledge, assign, sell or transfer or otherwise alienate his right, title or
interest in any of the shares of UPC Common Stock to be delivered by UPC to
such FBI Record Holder pursuant to the terms and conditions of this
Reorganization Agreement until there shall have been published financial
information which reflects the results of combined operations of UPC and FBI
for a period of not less than thirty (30) days in order to permit the Parties
to account for the acquisition of FBI by UPC as a "pooling of interests" under
Accounting Principles Bulletin No. 16 and GAAP.
FBI further acknowledges and agrees that any certificates representing
and evidencing UPC Common Stock issued in connection with the Merger to FBI
Record Holders who would be deemed Affiliates of FBI or UPC at the time of
Closing under the Securities Laws shall be subject to, and bear two restrictive
legends in substantially the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE SHALL NOT BE
PLEDGED, ASSIGNED, SOLD, TRANSFERRED, OR OTHERWISE ALIENATED NOR SHALL
THE HOLDER TAKE ANY ACTION WHICH WOULD ELIMINATE OR DIMINISH THE RISK
OF OWNING OR HOLDING SUCH SHARES OR ENTER INTO ANY FORMAL OR INFORMAL
AGREEMENT TO PLEDGE, ASSIGN, SELL, TRANSFER OR OTHERWISE ALIENATE THE
HOLDER'S RIGHT, TITLE OR INTEREST IN ANY OF THE SHARES OF STOCK
REPRESENTED BY THIS CERTIFICATE UNTIL THERE SHALL HAVE BEEN PUBLISHED
FINANCIAL INFORMATION CONCERNING UNION PLANTERS CORPORATION
("UPC")WHICH REFLECTS THE RESULTS OF THE COMBINED OPERATIONS OF UPC
AND FINANCIAL BANCSHARES, INC. FOR A PERIOD OF NOT LESS THAN 30 DAYS.
REORGANIZATION AGREEMENT - PAGE 9
<PAGE> 179
IN ADDITION, THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE
HELD SUBJECT TO ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THE RULES AND REGULATIONS
PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION ("SEC")
THEREUNDER. NO SALE, TRANSFER OR OTHER DISPOSITION OF ANY 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 AND 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.
2.7 FBI Stock Options.
(a) Description of FBI Stock Option Plan. FBI
has established the Financial Bancshares, Inc. 1995 Non-Qualified Stock Option
and Incentive Plan (the "FBI Stock Option Plan"). FBI has reserved 50,000
shares of FBI Common Stock for issuance upon the exercise of options ("FBI
Stock Options") issued from time to time under the FBI Stock Option Plan. As
of the date of this Reorganization Agreement, 15,000 FBI Stock Options have
been granted by FBI under the FBI Stock Option Plan, no such options have been
exercised,no such options have been forfeited, and FBI Stock Options to
acquire, in the aggregate, 15,000 shares of FBI Common Stock at an exercise
price of $26.00 per share, are outstanding.
FBI has not granted any FBI Stock Options in
1996 and FBI will not grant any additional FBI Stock Options after the date
hereof and prior to the termination of this Reorganization Agreement or the
Effective Time of the Merger.
As of the date of this Reorganization Agreement, there are no
other options, rights, warrants, scrip or similar rights of any nature issued
and outstanding by FBI to purchase shares of FBI Common Stock or any other
capital stock of FBI , or any other securities or instruments of any nature
which are convertible into or exchangeable for, shares of FBI Common Stock or
any other capital stock of FBI. Therefore, at the Effective Time of the Merger
there will be no issued and outstanding options, securities or instruments of
any nature whatsoever to purchase or otherwise acquire shares of FBI Common
Stock or any other capital stock of FBI, other than the FBI Stock Options
issued under the FBI Stock Option Plan, and the only options or similar rights
outstanding at the Effective Time of the Merger will be those FBI's Stock
Options issued and outstanding on the date hereof which have not been exercised
or forfeited prior to the Effective Time of the Merger.
(b) Continuation of the FBI Stock Option Plan.
After the Effective Time of the Merger, the FBI Stock Option Plan shall
continue in effect but no additional options shall be available for grant
thereunder. At the Effective Time of the Merger, each outstanding FBI Stock
Option shall continue outstanding as an option to purchase, in place of the
purchase of a share of FBI Common Stock, that number of shares (rounded down to
the nearest whole share) of UPC Common Stock that would have been received by
the optionee in connection with the Merger had such option been exercised in
full (without regard to any limitations contained thereon on exercise) for
shares of FBI Common Stock immediately prior to the Effective Time of the
Merger upon the same terms and conditions under the relevant option as were
applicable immediately prior to the Effective Time of the
REORGANIZATION AGREEMENT - PAGE 10
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Merger, except (i) that all such FBI Stock Options shall be immediately
exercisable and (ii) for appropriate pro rata adjustments as to the relevant
option price for shares of UPC Common Stock substituted therefor so that the
aggregate option exercise price of shares subject to an option immediately
following the assumption and substitution shall be the same as the aggregate
option exercise price for such shares immediately prior to such assumption and
substitution. UPC, Capital and FBI agree to take such actions as shall be
necessary to give effect to the foregoing. At all times after the Effective
Time of the Merger, UPC shall reserve for issuance such number of shares of UPC
Common Stock as necessary so as to permit the exercise of any FBI Stock Options
granted under the FBI Stock Option Plans and which were unexercised prior to
the Effective Time of the Merger in the manner contemplated by this
Reorganization Agreement and the instruments pursuant to which the FBI Stock
Options were granted. UPC shall make all filings required under the Securities
Laws so as to permit the exercise of such FBI Stock Options and the sale or
transfer of the shares of UPC Common Stock received by the optionee upon such
exercise.
(c) Reclassification, etc. In case of any
reclassification, reorganization, recapitalization, stock dividend or
distribution, subdivision, combination or exchange of the outstanding shares of
the UPC Common Stock or in case of any consolidation or merger of UPC with or
into any other corporation, or in the case of any sale or transfer of all or
substantially all of UPC's assets, then the rights of the optionees under the
FBI Stock Option Plan shall be appropriately adjusted so that the optionees
will be in the same position as if their options had been exercised immediately
before such corporate action or transaction. The provisions hereof shall
similarly apply to successive reclassifications, reorganizations,
recapitalizations, stock dividends or distributions, subdivisions, combinations
or exchanges, consolidations, mergers, sales or transfers.
(d) Limited Obligations. Nothing contained in
this Reorganization Agreement, the Plan of Merger, or in the other
documentation of the proposed transaction shall be deemed to have reduced,
contracted, enlarged, ratified, affirmed, undertaken, authorized, approved or
otherwise to have affected whatever contractual rights the holders of FBI Stock
Options may have under applicable documentation other than as expressly stated
in this Reorganization Agreement and the Plan of Merger with respect to the
outstanding FBI Stock Options identified herein which are validly issued and
outstanding under the FBI Stock Option Plan at the Effective Time of the
Merger.
2.8 FBI Treasury Stock. Except as described in schedule
2.8 hereto, within two (2) years prior to the date of this Reorganization
Agreement, FBI has not repurchased any shares of FBI Common Stock or FBI Stock
Options and FBI has not repurchased any other shares of its capital stock.
ARTICLE 3
DESCRIPTION OF THE MERGER
3.1 Terms of the Merger.
(a) Satisfaction of Conditions to Closing. After
the transactions contemplated herein shall have been approved by the
shareholders of FBI and Capital, 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) shall have been
satisfied or, if lawfully permitted, waived by the Party or Parties entitled to
the benefits thereof, a closing (the "Closing") shall 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
REORGANIZATION AGREEMENT - PAGE 11
<PAGE> 181
Party shall 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(ies) entitled to the benefits thereof, the
Parties shall, at the Closing, duly execute Articles of Merger for filing with
the Secretary of State of the States of Tennessee and Missouri, and with the
appropriate Regulatory Authorities. Promptly thereafter FBI, UPC and Capital
shall take all steps necessary or desirable to consummate the Merger in
accordance with all applicable laws, rules and regulations and the Plan of
Merger which is attached hereto as Exhibit A and incorporated by reference as
part of this Reorganization Agreement. The Parties shall thereupon take such
other and further actions as UPC shall 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, the Merger shall become effective
upon the filing of Articles of Merger and other required documentation with the
Secretary of State of the States of Tennessee and Missouri, or on such later
date and time as may be specified in such Articles of Merger (the "Effective
Time of the Merger").
(c) Shares of Capital to Remain Outstanding.
Each share of $1.00 par value common stock of Capital (the "Capital Common
Stock") which shall be issued and outstanding immediately prior to the
Effective Time of the Merger shall remain outstanding after the Effective Time
of the Merger as one share of the issued and outstanding common stock of
Capital as the Surviving Corporation.
(d) Conversion of Outstanding Shares of FBI
Common Stock. At the Effective Time of the Merger, each share of common stock
of FBI having a par value of one cent ($0.01) per share (the "FBI Common
Stock") which shall be 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, Cancellation and Exchange of
Shares of FBI Common Stock; Exchange Ratio. At the Effective Time of the
Merger, all outstanding shares of FBI Common Stock held by the FBI 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 FBI and shall, except for those shares
held by any FBI Record Holders who shall have properly perfected such Holders'
dissenters' rights and shall have maintained the perfected status of such
dissenters' rights through the Effective Time of the Merger, automatically be
converted exclusively into, and constitute only the right of each FBI Record
Holder to receive in exchange for such holder's shares of FBI Common Stock,
whole shares of UPC Common Stock and a cash payment in settlement of any
fractional share of UPC Common Stock which shall remain after aggregating all
whole and fractional shares of UPC Common Stock to which the FBI Record Holder
is entitled as provided in 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 FBI Record Holders pursuant to the terms of this
Reorganization Agreement are sometimes collectively referred to herein as the
"Consideration."
(1) THE EXCHANGE RATIO. Subject to any
adjustments which may be required by an event described in Subsection
3.1(e)(3) below, the number of shares of UPC Common Stock to be
exchanged for each share of FBI Common Stock which shall be issued and
outstanding immediately prior to the Effective Time of the Merger
shall be based on an exchange ratio (the "Exchange Ratio") of 1.7444
shares of UPC Common Stock for each share
REORGANIZATION AGREEMENT - PAGE 12
<PAGE> 182
of FBI Common Stock which shall be validly issued and outstanding
immediately prior to the Effective Time of the Merger. The Exchange
Ratio specified in this Section 3.1(e) is based upon there being no
more than an aggregate of 699,377 fully diluted shares of FBI Common
Stock validly issued and outstanding immediately prior to the
Effective Time of the Merger (which for the purposes of the Exchange
Ratio shall be determined by counting all FBI Stock Options issued and
outstanding immediately prior to the Effective Time of the Merger as
outstanding shares of FBI Common Stock). Therefore, assuming all FBI
Stock Options had been exercised prior to the Effective Time of the
Merger, the maximum aggregate number of shares of UPC Common Stock
which UPC would be required to issue in exchange for all outstanding
shares of FBI Common Stock would be 1,220,000 shares of UPC Common
Stock. FBI Common Stock held by any FBI Company, other than in a
fiduciary capacity or as a result of debts previously contracted,
shall not be considered as outstanding immediately prior to the
Effective Time of the Merger for purposes of the Exchange Ratio, and
at the Effective Time of the Merger such shares shall be cancelled and
retired and no Consideration shall be issued in exchange therefor.
Further, no fractional shares of UPC Common Stock shall be issued in
the Merger and if, after aggregating all of the whole and fractional
shares of UPC Common Stock to which a FBI Record Holder shall be
entitled based upon the Exchange Ratio, there should 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 3.1(f) hereof, which
cash settlement shall be based upon the Current Market Price Per Share
(as defined below) of one (1) full share of UPC Common Stock.
(2) DEFINITION OF "CURRENT MARKET PRICE PER
SHARE." The "Current Market Price Per Share" shall be the "last" real
time trade (i.e., the "closing price") per share of the UPC Common
Stock on the New York Stock Exchange ("NYSE") Consolidated Tape (the
information as published in The Wall Street Journal, Midwestern
Edition) on the last trading day prior to the Effective Date of the
Merger.
(3) EFFECT OF STOCK SPLITS, REVERSE STOCK SPLITS,
STOCK DIVIDENDS AND SIMILAR CHANGES IN THE CAPITAL OF FBI. Should FBI
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, or should there be more than 699,377 fully diluted
shares of FBI Common Stock outstanding immediately 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. Notwithstanding the foregoing, nothing in this
subparagraph(3) shall be deemed to be a waiver of the inaccuracy of
any representation or warranty or breach of any covenant by FBI or any
FBI Company set forth herein.
(f) Mechanics of Payment of Consideration. As
soon as reasonably practical after the Effective Time of the Merger and the
receipt by UPC of a certified list of all of the FBI Record Holders FBI's
exchange agent, the Corporate Trust Department of Union Planters National Bank,
Memphis, Tennessee (the "Exchange Agent") shall deliver to each of the FBI
Record Holders from such materials and information as may be deemed necessary
by the Exchange Agent to advise the FBI Record Holders of the procedures
required for proper surrender of their certificates formerly evidencing and
representing shares of the FBI Common Stock in order for the FBI Record Holders
to receive the Consideration. Such materials shall include, without
limitation, a Letter of Transmittal and Instruction Sheet (collectively the
"Shareholder Materials"). All Shareholder Materials shall be sent by First
Class United States mail to the FBI Record Holders at the addresses set forth
on a certified shareholder list to be delivered by FBI to UPC at the Closing
(the "Certified FBI Shareholder List"). As
REORGANIZATION AGREEMENT - PAGE 13
<PAGE> 183
soon as reasonably practicable thereafter, the FBI Record Holders of all of the
outstanding shares of FBI Common Stock, shall deliver, or cause to be
delivered, to the Exchange Agent, pursuant to the Shareholder Materials, the
certificates formerly evidencing and representing all of the shares of FBI
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 FBI
Common Stock received by it (including the prompt return of any defective
submissions with instructions as to those actions which the Exchange Agent may
deem necessary to remedy any defects). Upon receipt of the proper submission
of the certificate(s) formerly representing and evidencing ownership of the
shares of FBI Common Stock, the Exchange Agent shall mail to the former FBI
Record Holders in exchange for the certificate(s) surrendered by them, the
Consideration to be paid for each such FBI Record Holder's shares of FBI 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 FBI Common
Stock of a FBI 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 FBI Record Holder's shares of FBI
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 FBI
Record Holder's FBI Common Stock shall have been properly surrendered as
provided above, the Consideration payable to the FBI Record Holder(s) of the
cancelled shares as of any time after the Effective Date shall not be paid to
the FBI Record Holder(s) of such certificate(s) until such certificates shall
have been surrendered in the manner required. No dividends or other
distributions which shall otherwise be payable on the shares of UPC Common
Stock constituting the Consideration shall be paid to any FBI Record Holders
entitled to receive such shares until such persons shall have surrendered in
accordance with the Shareholder Materials their certificates formerly
representing shares of FBI Common Stock. Upon such proper surrender, there
shall be paid to such person in whose name the shares of UPC Common Stock shall
be issued any dividends or other distributions, the record date of which shall
have occurred between the Effective Time of the Merger and such surrender, with
respect to such shares of UPC Common Stock, without interest thereon. Each FBI
Record Holder will be responsible for all federal, state and local taxes which
may be incurred by him or her on account of his or her receipt of the
Consideration to be paid in the Merger. The FBI Record Holder(s) of any
certificate(s) which shall have been lost or destroyed may nevertheless,
subject to the provisions of this Section 3.1(f), receive the Consideration to
which each such FBI Record Holder is entitled, provided that each such FBI
Record Holder shall deliver to UPC and to the Exchange Agent: (i) a sworn
statement certifying the fact of 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 shall have 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 FBI
Record Holder.
(g) Stock Transfer Books. At the Effective Time
of the Merger, the stock transfer books of FBI shall be closed and no transfer
of shares of FBI Common Stock shall be made thereafter.
(h) Effects of the Merger. At the Effective Time
of the Merger, the separate existence of FBI shall cease, and FBI shall be
merged with and into Capital which, as the
REORGANIZATION AGREEMENT - PAGE 14
<PAGE> 184
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 FBI and Capital as provided in the applicable
sections of the Tennessee Code and the Missouri Code.
(i) Transfer of Assets. At the Effective Time of
the Merger, all rights, assets, licenses, permits, franchises and interests of
FBI and Capital 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 Capital as the Surviving Corporation by virtue of the Merger
having become effective and without any deed or other instrument or act of
transfer whatsoever as provided in Section 48-21-108(2) of the Tennessee Code.
(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 FBI as well as those of
Capital, 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 FBI or Capital as provided in Section 48-21-108(3) of the Tennessee
Code.
(k) Dissenters' Rights of FBI Shareholders. Any
FBI Record Holder of shares of FBI Common Stock who shall comply strictly with
the provisions of Sections 351.455, et seq. of the Missouri Code, shall be
entitled to dissent from the Merger and to seek those appraisal remedies
afforded by the Missouri Code. Such a FBI Shareholder is referred to herein as
a "FBI Dissenting Shareholder." However, UPC and Capital shall not be
obligated to consummate the Merger if FBI Record Holders holding or controlling
more than nine percent (9%) of the shares of the FBI Common Stock issued and
outstanding immediately prior to the Effective Time of the Merger shall have
perfected and maintained in perfected status their Dissenters' Rights in
accordance with the Missouri Code and the perfected status of said Dissenters'
Rights shall have continued to the time of Closing.
(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 having available such
shares for issuance to the FBI Record Holders of the Consideration to which
they shall become entitled under the provisions of this Reorganization
Agreement and for issuance to the holders of FBI Stock Options, upon the
exercise or conversion thereof.
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 respective chief executive officers, presidents
or chief financial officers, may mutually agree (the "Closing Date"). The place
of Closing shall be at the 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 or place as may be mutually agreed upon by the Parties.
REORGANIZATION AGREEMENT - PAGE 15
<PAGE> 185
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF UPC AND CAPITAL
As of the date hereof and as of the Effective Time of the
Merger, UPC and Capital represent and warrant to FBI as follows:
4.1 Organization and Corporate Authority. (a) UPC is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Tennessee. UPC and Capital are both registered with the
Federal Reserve under the BHCA as a bank holding company. Capital is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Tennessee. UPC and Capital (i) have, in all material
respects, all requisite corporate power and authority to own, operate and lease
their material properties and to carry on their businesses as they are
currently being conducted; (ii) are in good standing and are duly qualified to
do business in each jurisdiction where the character of their properties owned
or held under lease or the nature of their business makes such qualification
necessary; and (iii) have in effect all material federal, state, local and
foreign governmental authorizations, permits and licenses which are 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 Charter and Bylaws of Capital, as amended to date, are in
full force and effect.
(b) Each UPC Subsidiary is duly chartered, validly
existing and in good standing under the laws of the state or jurisdiction of
its incorporation and (i) has all requisite corporate power and authority to
own, operate and lease its properties and to carry on its business as it is
currently being conducted and (ii) 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. Each UPC Subsidiary has in effect all material federal, state,
local and foreign governmental authorizations, permits and licenses necessary
for it to own or its respective properties and assets and to carry on its
business as it is currently being conducted.
(c) UPC's bank and thrift Subsidiaries' deposit
accounts are insured by the Bank Insurance Fund (the "BIF") and the Savings
Association Insurance Fund ("SAIF"), respectively, as administered by the FDIC
to the fullest extent permitted under applicable law.
4.2 Authorization, Execution and Delivery; Reorganization
Agreement Not in Breach.
(a) UPC and Capital have all requisite corporate
power and authority to execute and deliver this Reorganization Agreement and
the Plan of Merger and to consummate the transactions contemplated hereby and
thereby. This Reorganization Agreement, and all other agreements contemplated
to be executed in connection herewith by UPC and/or Capital, have been (or upon
execution will have been) duly executed and delivered by UPC and/or Capital,
have been (or upon execution will have been) effectively authorized by all
necessary corporate action and, other than the approval of UPC as sole
shareholder of Capital and ratification by UPC's Board of Directors, no other
corporate proceedings on the part of UPC or Capital 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 Capital,
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.
REORGANIZATION AGREEMENT - PAGE 16
<PAGE> 186
(b) Except as described in schedule 4.2(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 violation or breach of any of the terms or provisions of,
or constitute a default under (or an event which, with the passage of time or
the giving of notice or both, would constitute a default under), or conflict
with, or permit the acceleration of any obligation under, any material
mortgage, lease, covenant, agreement, indenture or other instrument to which
UPC or Capital or any UPC Subsidiary is a party or by which they or their
property or any of their material assets are bound; the corporate Charter and
Bylaws of UPC or the Charter and Bylaws of Capital or any UPC Subsidiary; or
any material judgment, decree, order or award of any court, governmental body
or arbitrator by which UPC or Capital or any UPC Subsidiary is bound; or any
material permit, concession, grant, franchise, license, law, statute,
ordinance, rule or regulation applicable to UPC or Capital or any UPC
Subsidiary 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 Capital or any UPC
Subsidiary, except that the Government Approvals shall be required in order for
UPC and Capital to consummate the Merger.
4.3 No Legal Bar. Neither UPC nor Capital is a party to,
subject to or bound by any agreement, judgment, order, letter of understanding,
writ, prohibition, injunction or decree of any court or other governmental body
of competent jurisdiction, or any law which would prevent the execution of this
Reorganization Agreement by UPC or Capital or the Plan of Merger by Capital, or
the delivery thereof to FBI and the FBI Companies or the consummation of the
transactions contemplated hereby or thereby, and no action or proceeding is
pending, or to the best of the knowledge of UPC, Capital or any UPC Subsidiary,
threatened against UPC or Capital or any UPC Subsidiary in which the validity
of this Reorganization Agreement, any of the transactions contemplated hereby
or any action which has been taken by any of such parties in connection
herewith or in connection with any of the transactions contemplated hereby is
at issue.
4.4 Government and Other 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 Capital in connection with the execution and delivery of
this Reorganization Agreement or the consummation of the transactions
contemplated hereby by UPC or Capital, except for: (a) the prior approval of
the Board of Governors of the Federal Reserve System (the "Federal Reserve") of
the Merger under the Bank Holding Company Act of 1956, as amended; and (b) the
prior approval of the Director of Finance of the Missouri Division under
Sections 362.925, et seq of the Missouri Code and the regulations promulgated
by the Missouri Division thereunder (collectively, the "Government Approvals").
Neither UPC nor Capital is aware of any facts, circumstances or reasons why
such Government Approvals should not be forthcoming or which would prevent or
hinder such approvals from being obtained. Except as described in schedule
4.4, no consent or approval is required from any non-governmental party in
connection with the execution and delivery of this Reorganization Agreement or
the consummation of the transactions contemplated hereby.
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 100,000,000 shares of common stock having a par
value of $5.00 per share (the "UPC Common Stock"). As of May 31, 1996, UPC had
issued and outstanding: 3,496,419 shares of 8% Cumulative, Convertible
Preferred Stock, Series E (the "Series E Preferred Stock") and 46,094,480
shares of UPC Common Stock. Further, as of May 31, 1996, approximately
1,343,502 shares of UPC Common Stock were reserved for issuance through the
exercise of options granted pursuant to various UPC stock option plans and
other employee, officer or director benefit plans and UPC's dividend
reinvestment plan; approximately 501,358 shares of UPC Common Stock were
reserved for issuance pursuant to said employee,officer or director
REORGANIZATION AGREEMENT - PAGE 17
<PAGE> 187
plans but not yet subject to option grants or otherwise issued; approximately
4,361,670 shares of UPC Common Stock were reserved for issuance upon conversion
of then outstanding shares of UPC's Series E Preferred Stock; and approximately
18,112,447 shares of UPC Common Stock were reserved for issuance in connection
with the UPC's acquisition of other entities in transactions deemed to be
probable (such pending transaction referred to hereinafter as "Pending
Transactions"). In addition, as of May 31, 1996, approximately 317,458 shares
of Series E Preferred Stock were reserved for issuance in connection with a
Pending Transaction. 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"). All of the issued and outstanding shares of UPC Common Stock and
UPC Preferred Stock are duly and validly issued and outstanding and are
fully-paid and non-assessable. None of the outstanding shares of UPC Common
Stock or UPC Preferred Stock has been issued in violation of any preemptive
rights.
As of the date hereof, UPC is the holder, directly or indirectly, of
all of the outstanding capital stock of its Subsidiaries.
(b) The authorized capital stock of Capital consists
of 1,000 shares of common stock having a par value of $1.00 per share (the
"Capital Common Stock") and no preferred stock. As of the date hereof, Capital
had issued all 1,000 shares of the authorized Capital Common Stock to UPC.
Therefore, UPC is the record holder and beneficial owner of all of the Capital
Common Stock outstanding.
4.6 UPC Financial Statements. UPC has delivered and, to
the extent reference is made to financial statements not yet available or
capable of development, will deliver to FBI true and complete copies of: (i)
UPC's audited Consolidated Financial Statements for the calendar years ended
December 31, 1995 and 1994 (as originally issued, but without giving effect to
subsequently effected business combinations accounted for as poolings of
interests); (ii) UPC's Forms 10-K filed under the 1934 Act for the years ended
December 31, 1995 and 1994, including UPC's annual reports to shareholders
filed as Exhibits 13 thereto; and (iii) UPC's unaudited consolidated financial
statements for each of the calendar quarters ending in calendar year 1996 and
thereafter through the Closing Date; Such financial statements and the notes
thereto present fairly, or will present fairly when issued, in all material
respects, the consolidated financial position of UPC at the respective dates
thereof and the consolidated results of operations and consolidated cash flow
of UPC for the periods indicated, and in each case in conformity with GAAP
consistently applied and maintained.
4.7 Exchange Act and Listing Filings.
(a) The outstanding shares of UPC Common Stock are
registered with the SEC pursuant to Section 12(b) of the 1934 Act and UPC has
filed with the SEC all material forms and reports required by law to be filed
by UPC with the SEC, which forms and reports, taken as a whole, are true and
correct in all material respects, and do not misstate a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
(b) The outstanding shares of UPC Common Stock are
listed for trading on the NYSE (under the symbol "UPC") pursuant to the listing
rules of the NYSE and UPC has made all required filings with the NYSE and has
filed with the NYSE all reports required by the NYSE to be filed by UPC with
the NYSE, which filings 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
REORGANIZATION AGREEMENT - PAGE 18
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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 FBI Record Holders in exchange for all
of the FBI 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 which shall be outstanding immediately
prior to the Effective Time of the Merger.
4.9 Absence of Undisclosed Liabilities. Except as
described in schedule 4.9 hereto, neither UPC nor any UPC Subsidiary has any
obligation or liability (contingent or otherwise) that is material to the
financial condition or operations of UPC or any significant 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 material UPC
Subsidiary (i) except as disclosed in the UPC Financial Statements delivered to
FBI 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 is contemplated under this
Reorganization Agreement. Since December 31, 1995, neither UPC nor any UPC
Subsidiary has incurred or paid any obligation or liability or entered into any
transactions which would be material to the financial condition or operations
of UPC 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, and there has not been any material change in
the capital stock or long-term debt of UPC or any material adverse change in
the condition (financial or otherwise), net worth, business, affairs, prospects
or the results of operations of UPC.
4.10 Disclosure. The information concerning, and the
representations or warranties made by UPC and Capital as set forth in this
Reorganization Agreement or in the schedules of exceptions of UPC and Capital
hereto, or in any document, statement, certificate or other writing furnished
or to be furnished by UPC and Capital to FBI pursuant hereto, do not and will
not contain any untrue statement of a material fact and do not 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 FBI by UPC or Capital pursuant hereto were or will be complete and
accurate copies of such documents.
4.11 Reports. Since January 1, 1991, UPC and each UPC
Subsidiary 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 TDFI, (ii) the Federal Reserve, (iii) the Comptroller, (iv) the FDIC, (v)
the OTS or (vi) the SEC, including, but not limited to, Annual Reports on Form
10-K; Quarterly Reports on Form 10-Q; Current Reports on Form 8-K; Reports on
Form 2900 and FFIEC Forms 032, 033 and 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 which are not
material). As of their respective dates, each of such reports and documents,
including the financial statements, tables, exhibits, and schedules thereto,
complied in all material respects with all of the requirements of the
respective forms on which they were filed and with all of the statutes, rules,
and regulations enforced or promulgated by the Regulatory Authority with which
they were filed. All such reports were true and complete in all material
respects and did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light
REORGANIZATION AGREEMENT - PAGE 19
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of the circumstances under which they were made, not misleading. UPC will
provide to FBI true and correct copies of all such reports filed by UPC or by
any UPC Subsidiary after January 1, 1991.
4.12 Statements True and Correct. None of the information
prepared by, or on behalf of UPC or by any UPC Subsidiary regarding UPC, any
UPC Subsidiary or any Subsidiary of a UPC Subsidiary included or to be included
in the Proxy Statement to be mailed to FBI's shareholders in connection with
the Shareholders Meeting and any other documents to be filed with the SEC, or
any other Regulatory Authority in connection with the transaction contemplated
herein, will, at the respective times such documents are filed, and, with
respect to the Proxy Statement, when first mailed to the FBI Shareholders, 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 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 applicable law,
including applicable provisions of the Securities Laws and the rules and
regulations issued thereunder.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF FBI
Both as of the date hereof and as of the Effective Time of the Merger,
FBI represents and warrants to UPC and Capital as follows:
5.1 Organization and Qualification of FBI and
Subsidiaries.
(a) FBI is a corporation duly organized, validly
existing and in good standing under the laws of the State of Missouri and (i)
has all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as it is currently being conducted;
(ii) 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 (iii) is
registered with the Federal Reserve under the BHCA as a bank holding company.
(b) Each FBI Subsidiary is duly chartered, validly
existing and in good standing under the laws of the state or jurisdiction of
its incorporation and (i) has all requisite corporate power and authority to
own, operate and lease its properties and to carry on its business as it is
currently being conducted and (ii) 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. FBI and each of its Subsidiaries have in effect all material
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.
(c) FBI owns all of the outstanding shares of
capital stock of First Financial Bank of St. Louis, Missouri and First
Financial Bank of Mississippi, East Prairie, Missouri; 99.92% of the
outstanding shares of capital stock of Citizens First Financial Bank, Dexter,
Missouri; 99.41% of the outstanding shares of capital stock of First Financial
Bank of Southeast Missouri, Sikeston, Missouri; and 94.87% of the outstanding
capital stock of First Financial Bank of St. Genevieve, St. Genevieve,
REORGANIZATION AGREEMENT - PAGE 20
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Missouri. Except as described in schedule 5.1(c) hereof, all of the shares of
capital stock of the FBI Bank Subsidiaries owned by FBI are held free and clear
of any liens or encumbrances of any nature whatsoever. Each FBI Bank
Subsidiary is duly organized, validly existing and in good standing under the
laws of the State of its incorporation (or of the United States) and engages
only in activities (and holds properties only of the types) permitted by
applicable state and federal law and the rules and regulations promulgated
thereunder by the Missouri Division, the Federal Reserve, the FDIC and the
Comptroller. FBI's Bank Subsidiaries' deposit accounts are insured by the Bank
Insurance Fund (the "BIF") or 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) FBI has 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 [or, upon expiration of the
initial due diligence review period described in Section 2.3, will have been]
duly authorized by a majority of the entire Boards of Directors of FBI and,
except for the approval of the FBI Shareholders, no other corporate
authorizations on the part of FBI 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 FBI or any FBI Subsidiary have been (or upon
execution will have been) duly executed and delivered by FBI or such FBI
Subsidiary and constitute (or upon execution will constitute) legal, valid and
enforceable obligations of FBI or such FBI Subsidiary 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) Except as described in schedule 5.2(b)
hereto, the execution and delivery of this Reorganization Agreement and the
Plan of Merger, the consummation of the transactions contemplated hereby and
thereby, and the fulfillment of the terms hereof and thereof will not result in
a violation or breach of any of the terms or provisions of, or constitute a
default under (or an event which, with the passage of time or the giving of
notice, or both, would constitute a default under), or conflict with, or permit
the acceleration of, any obligation under any material mortgage, lease,
covenant, agreement, indenture or other instrument to which FBI or any FBI
Subsidiary is a party or by which FBI or any FBI Subsidiary is bound; the
Articles of Incorporation and Bylaws of FBI or the Articles of Incorporation
and Bylaws of any FBI Subsidiary; or any material judgment, decree, order,
regulatory letter of understanding or award of any court, governmental body,
authority or arbitrator by which FBI or any FBI Subsidiary is bound; or any
material permit, concession, grant, franchise, license, law, statute,
ordinance, rule or regulation applicable to FBI or any FBI 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 FBI or any FBI
Subsidiary.
5.3 No Legal Bar. Neither FBI nor any FBI Subsidiary 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 body of competent jurisdiction, or any law which would
prevent the execution and delivery of this Reorganization Agreement and the
Plan of Merger by FBI, or the consummation of the transactions contemplated
hereby and thereby, and no action or proceeding is pending against FBI or any
FBI Subsidiary in which the validity of this Reorganization Agreement, the
REORGANIZATION AGREEMENT - PAGE 21
<PAGE> 191
transaction contemplated hereby or any action which has been taken by any of
such 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 FBI
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 required from any landlord, licensor
or other non-governmental party in connection with the execution and delivery
of this Reorganization Agreement or the Plan of Merger or the consummation of
the transactions contemplated therein. FBI is not aware of any facts,
circumstances or reasons why such Government Approvals should not be
forthcoming or which would prevent or hinder such approvals from being
obtained.
5.5 Compliance With Law. FBI and all FBI Subsidiaries
hold all licenses, franchises, permits and authorizations necessary for the
lawful conduct of their respective businesses, and FBI and each FBI Subsidiary,
respectively, 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 FBI's or any FBI Subsidiary's
properties or over any other part of FBI's or any FBI Subsidiary's assets,
liabilities or operations. The benefits of all of such licenses, franchises,
permits and authorizations are in full force and effect and may continue to be
enjoyed by FBI and each FBI Subsidiary subsequent to the Closing of the
transactions contemplated herein without any consent or approval. Neither FBI
nor any FBI Subsidiary has received notice of any proceeding for the suspension
or revocation of any such license, franchise, permit, or authorization and no
such proceeding is pending or has been threatened by any governmental
authority.
5.6 Charter Documents. Included in schedule 5.6 hereto
are true and correct copies of the Articles of Incorporation and Bylaws of FBI
and the Articles of Incorporation or Articles of Association or Articles of
Agreement and Bylaws of each FBI Subsidiary, respectively. The Articles of
Incorporation and Bylaws of FBI and the Articles of Incorporation, Articles of
Association or Articles of Agreement and Bylaws of each FBI Subsidiary, as
amended to date, are in full force and effect.
5.7 FBI Financial Statements. Accompanying schedule 5.7
hereto are true copies of the audited Consolidated Balance Sheets of Financial
Bancshares, Inc. and Subsidiaries as of December 31, 1995 and 1994 together
with the related Consolidated Statements of Income, Consolidated Statements of
Changes in Stockholders' Equity and Consolidated Statements of Cash Flows of
FBI for the years ended December 31, 1995, 1994 and 1993 (the "Audited
Financial Statements of FBI") and the unaudited comparative interim (or annual)
consolidated financial statements of FBI for any subsequent quarter ending
after December 31, 1995 and prior to the Closing Date; the audited comparative
parent company only balance sheets of FBI as of December 31, 1995 and 1994;
certain unaudited Selected Consolidated Financial Data of Financial Bancshares,
Inc. and Subsidiaries for the years ended December 31, 1995, 1994, 1993, 1992
and 1991; and all Call Reports, including any amendments thereto, filed with
the federal bank regulatory authorities by each of FBI's Bank Subsidiaries for
the years ended December 31, 1995, 1994, 1993 and 1992 together with any
correspondence with the SEC or with any financial institution regulatory
authority concerning any of the aforesaid financial statements. Such financial
statements (i) were (or will be) prepared from the books and records of FBI
and/or each FBI Subsidiary; (ii) were (or will be) prepared in accordance with
GAAP (or, where applicable, regulatory accounting principles) consistently
applied; (iii) accurately present (or, when prepared, will present) FBI's and
each FBI Subsidiary's financial condition and the results of its
REORGANIZATION AGREEMENT - PAGE 22
<PAGE> 192
operations, changes in stockholders' equity and cash flows at the relevant
dates thereof and for the periods covered thereby; (iv) do contain or reflect
(or, when prepared, will contain and reflect) all necessary adjustments and
accruals for an accurate presentation of FBI's and each FBI Subsidiary's
financial condition and the results of FBI's and each FBI Subsidiary's
operations and cash flows for the periods covered by such Financial Statements;
(v) do contain and reflect (or, when prepared, 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) do contain and reflect (or, when
prepared, will contain and reflect) adequate provisions for all reasonably
anticipated liabilities for Post Retirement Benefits Other Than Pensions
("OPEB") pursuant to SFAS Nos. 106 and 112.
5.8 Absence of Certain Changes. Except as disclosed in
schedule 5.8 or as provided for or contemplated in this Reorganization
Agreement, since December 31, 1995 (the "Balance Sheet Date") there has not
been:
(a) any material transaction by FBI or any FBI
Subsidiary 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 FBI or of any FBI
Subsidiary;
(c) any loss of a key employee or any damage,
destruction or loss, whether or not covered by insurance, which has had or
which may be reasonably expected to result in a material adverse effect on any
of the properties, business or prospects of FBI or any FBI Subsidiary or their
future use and operation by FBI or any FBI Subsidiary;
(d) any acquisition or disposition by FBI or any
FBI Subsidiary of any property or asset of FBI or any FBI Subsidiary, whether
real or personal, having a fair market value, singularly or in the aggregate
for each FBI Company, in an amount greater than Fifty Thousand Dollars
($50,000), except in the ordinary course of business and in conformity with
past practice;
(e) any mortgage, pledge or subjection to lien,
charge or encumbrance of any kind on any of the respective properties or assets
of FBI or any FBI Subsidiary, except to secure extensions of credit in the
ordinary course of business and in conformity with past practice;
(f) any amendment, modification or termination of
any contract or agreement, relating to FBI or any FBI Subsidiary, to which FBI
or any FBI Subsidiary is a party which would have an adverse effect upon the
financial condition or operations of FBI or any FBI Subsidiary.
(g) any increase in, or commitment to increase,
the compensation payable or to become payable to any officer, director,
employee or agent of FBI or any FBI Subsidiary, 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 $5,000 for any of
them individually;
(h) any incurring of, assumption of, or taking
of, by FBI or any FBI Subsidiary, any property subject to, any liability,
except for liabilities incurred or assumed or property
REORGANIZATION AGREEMENT - PAGE 23
<PAGE> 193
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 FBI or of any FBI Subsidiary, or in
the accounting policies or practices therein reflected;
(j) any release or discharge (or partial release
or discharge) of any obligation or liability of any person or entity related to
or arising out of any loan made by FBI or any FBI Subsidiary of any nature
whatsoever, except in the ordinary course of business and in conformity with
past practice; or
(k) any loan or other extension of credit (except
credit card loans, loans secured by certificates of deposit, automobile loans,
passbook loans or home loans) by FBI or any FBI Subsidiary to any Officer,
director or 2% shareholder of FBI or of any FBI Subsidiary or to any Affiliate
of FBI or any FBI Subsidiary; or to any member of the immediate family of such
Officer, director or 2% shareholder of FBI or to any FBI Subsidiary or any
Affiliate of FBI; 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(k), "Officer" shall refer to a person
who holds the title of chairman, president, executive vice president, senior
vice president, controller, secretary, cashier or treasurer or who performs the
normal duties of such officer whether or not he or she is compensated for such
service or has an official title.
5.9 Deposits. None of the Deposits of any FBI Subsidiary
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 FBI or any FBI Subsidiary.
5.10 Properties. Except as described in schedule 5.10
hereto or adequately reserved against in the Audited Financial Statements of
FBI, FBI and each FBI 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 FBI as being owned by FBI or
any FBI Subsidiary as of the dates thereof. All buildings, and all fixtures,
equipment, and other property and assets which are material to the business of
FBI or any of its Subsidiaries held under leases or subleases by FBI or any FBI
Subsidiary, are held under valid instruments enforceable in accordance with
their respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other laws affecting the
enforcement of creditors' rights generally, and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be pending). The
policies of fire, theft, liability, and other insurance maintained with respect
to the properties, assets or businesses of the FBI Companies provide adequate
coverage against loss, and the fidelity bonds in effect as to which any of the
FBI Companies is a named insured are believed to be sufficient.
5.11 FBI Subsidiaries. Schedule 5.11 hereto lists all of
the active and inactive FBI Subsidiaries (including any Subsidiary of a FBI
Subsidiary) as of the date of this Reorganization Agreement and describes
generally the business activities conducted, or permitted to be conducted by
each FBI Subsidiary. Except as described in schedule 5.11 hereto, no equity
securities of any of the FBI Subsidiaries are, or may become required to be
issued (other than to FBI or any FBI Subsidiary) by
REORGANIZATION AGREEMENT - PAGE 24
<PAGE> 194
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 FBI
Subsidiary, and there are no contracts, commitments, understandings, or
arrangements by which any FBI Subsidiary is bound to issue (other than to FBI)
any additional shares of its capital stock or options, warrants, or rights to
purchase or acquire any additional shares of its capital stock. Except as
described in schedule 5.11 hereto, all of the shares of capital stock of each
FBI Subsidiary held by FBI or by any FBI Subsidiary are fully paid and
nonassessable and are owned by FBI or by such FBI 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 FBI's or any FBI Subsidiary's
fixed assets and equipment having a net book value in excess of Fifty Thousand
Dollars ($50,000) 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 FBI and each FBI 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 FBI or any FBI Subsidiary except as fully reserved for in
the Audited Financial Statements of FBI. All taxes, interest, additions, and
penalties due with respect to completed and settled examinations or concluded
litigation have been paid.
(b) Neither FBI nor any FBI 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 FBI and all FBI Subsidiaries
for all periods through and including December 31, 1995, has been made and is
reflected on the December 31, 1995 financial statements included in the Audited
Financial Statements of FBI, and have been, and will continue to be made with
respect to periods ending after December 31, 1995.
(d) Deferred taxes of FBI and each FBI Subsidiary
have been and will be provided for in accordance with GAAP.
(e) To the best knowledge of FBI and all FBI
Subsidiaries, neither the Internal Revenue Service nor any foreign, state,
local or other taxing authority is now asserting or threatening to assert
against FBI or any FBI 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 FBI 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 FBI or any FBI Subsidiary, either have been paid in full, or
have been properly accrued and reflected in the Audited Financial Statements of
FBI referred to in Section 5.7 of this Reorganization Agreement.
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<PAGE> 195
5.14 Litigation. Except as set forth in schedule 5.14
hereto, there is no action, suit or proceeding pending against FBI or any FBI
Subsidiary, or to the best knowledge of FBI or any FBI Subsidiary threatened
against or affecting FBI, any FBI Subsidiary or any of their assets, before any
court or arbitrator or before any governmental body, agency or official that
(i) would, if decided against FBI or the FBI Subsidiary, have a material
adverse impact on the business, properties, assets, liabilities, condition
(financial or other) or prospects of FBI or any FBI Subsidiary and that are not
fully reflected in the Audited Financial Statements of FBI or (ii) which has
been brought by or on behalf of any employee employed or formerly employed by
FBI or any FBI Subsidiary.
5.15 Hazardous Materials. The Parties agree that all
representations being made in this Section 5.15 are being made to the best
knowledge of FBI. UPC understands that FBI may not have made an investigation
of the environmental condition of each Property currently owned or operated, or
owned or operated in the past, by FBI or any FBI Subsidiary. This
Reorganization Agreement does not contemplate that FBI or any FBI Subsidiaries
undertake an environmental investigation in order for FBI to make the
representations contained in this Section 5.15.
(a) FBI and all FBI Subsidiaries have obtained
all material permits, licenses and other authorizations which are required to
be obtained by FBI or its Subsidiaries with respect to the Property (as defined
herein) under all Applicable Environmental Laws (as defined herein). All
Property controlled, directly or indirectly, by FBI or any FBI Subsidiary is in
material compliance with the terms and conditions of all of such permits,
licenses and authorizations, and is also in material 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. 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 Missouri Clean Water Law, Title XL Section 644.006 et seq. of the Missouri
Code; (n) the Air Quality Attainment Act, Title XL Section 643.300 et seq. of
the Missouri Code; (o) the "Missouri Air Conservation Law," Title XL Section
643.010 of the Missouri Code; (p) the "Missouri Hazardous Waste Management
Law," Title XVI Section 260.350 of the Missouri Code; (q) the Missouri statutes
dealing with "abandoned or uncontrolled" sites where hazardous waste has been
disposed of illegally or prior to regulation, Title XVI Section 260.435 of the
Missouri Code; (r) the Arkansas Water and Air Pollution Control Act, Section
8-4-101 et seq. of the Arkansas Code of 1987 Annotated; (s) the Arkansas Solid
Waste Management Act, Section 8-6-201 et seq. of the Arkansas Code of 1987
Annotated; (t) the Hazardous Waste Management Act of 1979, Section 8-7-301 et
seq. of the Arkansas Code of 1987 Annotated; (u) the Arkansas Resource
Reclamation Act of 1979, Section 8-7- 301 et seq. of the Arkansas Code of 1987
Annotated; (v) the Emergency Response Fund Act, Section 8-7-401 et seq. of the
Arkansas Code of 1987 Annotated; (w) Remedial Act Trust Fund Act, Section
8-7-501 et seq. of the
REORGANIZATION AGREEMENT - PAGE 26
<PAGE> 196
Arkansas Code of 1987 Annotated; (x) the Arkansas statute dealing with
Regulated Substance Storage Tanks, Sections 8-7- 801 et seq. of the Arkansas
Code of 1987 Annotated; (y) the Petroleum Storage Tank Trust Fund Act, Sections
8-7-901 et seq. of the Arkansas Code of 1987 Annotated; (z) any amendments to
the foregoing Acts and regulations as may be adopted from time to time on or
before the Closing; and (aa) any rule, regulation, order, injunction, judgment,
declaration or decree implementing or interpreting any of the foregoing Acts,
as amended.
"HAZARDOUS SUBSTANCES" shall mean any substance, material,
waste, or pollutant under Applicable Environmental Laws that is now (or prior
to the Closing) listed, defined, characterized or regulated as hazardous, toxic
or dangerous under or pursuant to any statute, law, ordinance, rule or
regulation of any federal, state, regional, county or local governmental
authority having jurisdiction over the Property of FBI or any FBI 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 FBI or a FBI
Subsidiary, in whole or in part, solely or in a joint venture or other business
arrangement, either for operational or investment purposes, and whether
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 FBI or any FBI Subsidiary to
have any permit, license or authorization required in connection with
the conduct of the business of FBI or any FBI 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 FBI or any Affiliate of FBI at the Property;
(ii) To the best knowledge of FBI or any
FBI Subsidiary, 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 FBI's or any FBI Subsidiary's
occupancy thereof, or during or, to the best knowledge of FBI or any
FBI Subsidiary, prior to the occupancy thereof by any assignee or
sublessee of FBI or any FBI Subsidiary, except in compliance with all
Applicable Environmental Laws;
(iii) There are no Hazardous Substances
being stored at any Property or located in, on or upon, any Property
(including the subsurface thereof) or installed or affixed to
structures or equipment on the Property; and there are no underground
storage tanks for Hazardous Substances, active or abandoned, at any
Property; and
(iv) No Hazardous Substances have been
Released during, or to the best knowledge of FBI or any FBI
Subsidiary, prior to FBI's or any FBI Subsidiary's
REORGANIZATION AGREEMENT - PAGE 27
<PAGE> 197
occupancy thereof, 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 FBI nor any Affiliate of FBI 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, FBI or any Affiliate of FBI 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 FBI or any Affiliate
of FBI 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 FBI, 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
FBI or any Affiliate of FBI in relation to any Property, which have not been
made available to UPC.
5.16 Insurance. FBI and each FBI Subsidiary have paid all
material amounts due and payable under any insurance policies and guaranties
applicable to FBI and any FBI Subsidiary and FBI's or any FBI Subsidiary's
assets and operations; all such insurance policies and guaranties are in full
force and effect; and FBI and each FBI Subsidiary and all of FBI's and each FBI
Subsidiary's material Realty and other material properties are insured against
fire, casualty, theft, loss, and such other hazards and occurrences against
which it is customary to insure, all such insurance policies being in amounts
that are considered by the directors of FBI to be adequate and consistent with
past practice and experience.
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 FBI or any FBI 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 FBI or any FBI 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 FBI or any
FBI 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
REORGANIZATION AGREEMENT - PAGE 28
<PAGE> 198
obligation of any party thereto. Neither FBI nor any FBI 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. FBI and
each FBI Subsidiary have complied in all material respects with all applicable
laws, rules and regulations relating to the employment of labor, including
those related to its employment practices, employee disabilities, wages, hours,
collective bargaining and the payment and withholding of taxes and other sums
as required by the appropriate governmental authorities and FBI and each FBI
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 FBI and each FBI 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 FBI or any FBI Subsidiary
pending before the National Labor Relations Board or any state or local agency;
pending labor strike or other labor trouble affecting FBI or any FBI
Subsidiary; labor grievance pending against FBI or any FBI Subsidiary; pending
representation question respecting the employees of FBI or any FBI Subsidiary;
pending arbitration proceedings arising out of or under any collective
bargaining agreement to which FBI or any FBI Subsidiary is a party, or to the
best knowledge of FBI, any basis for which a claim may be made under any
collective bargaining agreement to which FBI or any FBI Subsidiary is a party.
5.18 Records and Documents. The Records of FBI and of
each FBI Subsidiary are and will be sufficient to enable FBI and each such FBI
Subsidiary to continue conducting its business under similar standards as FBI
and each such FBI Subsidiary have heretofore conducted such business.
5.19 Capitalization of FBI. The authorized capital stock
of FBI consists of 3,000,000 shares of common stock having a par value of one
cent ($0.01) per share (the "FBI Common Stock"). There is no other class of
equity security of FBI. As of the date of this Reorganization Agreement,
684,377 shares of FBI Common Stock were issued and outstanding and 9,154 shares
of FBI Common Stock were held by FBI as treasury stock. All of the outstanding
FBI Common Stock is validly issued, fully-paid and nonassessable and has not
been issued in violation of any preemptive rights of any FBI Shareholder or
other Person. As of the date of this Reorganization Agreement, there are
options to purchase 15,000 shares of FBI Common Stock outstanding which have
been issued pursuant to the FBI Stock Option Plan, and there are no other
outstanding securities or obligations which are convertible into FBI Common
Stock or into any other equity or debt security of FBI, and there are no
outstanding options, warrants, rights, scrip, rights to subscribe to, calls,
puts or other commitments of any nature which would entitle the holder, upon
exercise thereof, to be issued FBI Common Stock or any other equity or debt
security of FBI, other than options to purchase in the aggregate 15,000 shares
of FBI Common Stock issued under the FBI Stock Option Plan. Immediately prior
to the Effective Time of the Merger, there will be not more than (nor less
than) 699,377 fully diluted shares of FBI Common Stock issued and outstanding.
Except as set forth in schedule 5.19 hereto, FBI is the beneficial owner and
record holder of, and has good and freely transferable title to, all of the
shares of each of the FBI Subsidiaries' Common Stock outstanding, which are
recorded on the books and Records of each FBI Subsidiary as being held in FBI's
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 affect the ability of FBI 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 FBI, nor
any FBI Subsidiary, nor any Subsidiary of either has been, is or will become a
party to: any letter of intent or agreement to merge, to consolidate,
REORGANIZATION AGREEMENT - PAGE 29
<PAGE> 199
to sell or purchase assets (other than in the normal course of its business) or
to any other agreement which contemplates the involvement of FBI or any FBI
Subsidiary or any Subsidiary of any FBI Subsidiary (or any of their assets) in
any business combination of any kind; or any agreement obligating FBI or any
FBI Subsidiary to issue or sell or authorize the sale or transfer of FBI Common
Stock or the capital stock of any FBI Subsidiary. There are no, and there will
not be at the Effective Time of the Merger, any shares of capital stock or
other equity securities of FBI outstanding, except for shares of FBI Common
Stock presently issued and outstanding and shares of FBI Common Stock which had
been issued upon proper exercise of a FBI Stock Option issued and outstanding,
but not exercised, as of the date of this Reorganization Agreement, and other
than FBI Stock Options issued and outstanding as of the date of this
Reorganization Agreement which have not been exercised prior to the Effective
Time of the Merger, 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 FBI Common Stock or any
other capital stock of FBI or any FBI Subsidiary, or contracts, commitments,
understandings, or arrangements by which FBI or any FBI Subsidiary is or may be
bound to issue additional shares of FBI Common Stock or any other 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 FBI or any FBI Subsidiary is or may be bound to transfer
or issue to any third party any shares of the capital stock of any FBI
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 FBI to vote or to dispose of any such shares.
5.21 Disclosure. The information concerning, and the
representations and warranties made by, FBI and each FBI Subsidiary set forth
in this Reorganization Agreement; or in the schedules of exceptions of FBI
hereto; or in any document, statement, certificate or other writing furnished
or to be furnished by FBI or by any FBI Subsidiary to UPC and Capital pursuant
hereto, does not and will not contain any untrue statement of a material fact
or omit and will not omit to state a material fact required to be stated herein
or therein necessary to make the statements and facts contained herein or
therein, in light of the circumstances in which they were or are made, not
false or misleading. Copies of all documents heretofore or hereafter delivered
or made available to UPC or Capital by FBI or any FBI Subsidiary 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, neither FBI nor any FBI Subsidiary has any
obligation or liability (contingent or otherwise) that is material to the
financial condition or operations of FBI or of any FBI Subsidiary, or that,
when combined with all similar obligations or liabilities, would be material to
the financial condition or operations of FBI or any FBI Subsidiary (i) except
as disclosed in the Audited Financial Statements of FBI 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, 1995, neither FBI nor any FBI Subsidiary has
incurred or paid any obligation or liability which would be material to the
financial condition or operations of FBI or such FBI 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 FBI or any FBI Subsidiary.
5.23 Reserve for Possible Loan or ORE Losses. The
"Reserve for Possible Loan Losses" reflected in the Audited Financial
Statements of FBI is (with respect to periods ended on or before December 31,
1995) and will be (with respect to periods ending subsequent to December 31,
1995) adequate in all respects to provide for anticipated losses inherent in
Loans outstanding and with
REORGANIZATION AGREEMENT - PAGE 30
<PAGE> 200
respect to 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 FBI nor any
FBI Subsidiary has any Loan or other extension of credit which has been
criticized or classified by the 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 net book value of FBI's assets acquired through foreclosure in
satisfaction of problem loans ("ORE") are carried on the Balance Sheet of the
Audited Financial Statements of FBI at fair value at the time of acquisition
less estimated selling costs which approximates the net realizable value of the
ORE in accordance with the American Institute of Certified Public Accountants'
Statement of Position 92-3.
5.24 Compliance with Laws. FBI and each FBI Subsidiary:
(a) Is in compliance in all material respects 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 FBI or of any FBI Subsidiary or which would or could reasonably
be expected to subject FBI, or any FBI Subsidiary or any of the directors or
officers of FBI or of a FBI Subsidiary to civil money penalties; and
(b) Has received no written 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 FBI or any FBI 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 FBI or on any FBI Subsidiary; (ii)
threatening to revoke any license, franchise, permit, or governmental
authorization which is material to the financial condition or operations of FBI
or any FBI Subsidiary; or (iii) requiring FBI or any FBI Subsidiary to enter
into a cease and desist order, consent, agreement, or memorandum of
understanding.
5.25 Employee Benefit Plans.
(a) FBI 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 FBI or any FBI Subsidiary or any other
entity which is a member of a controlled group or is under common control with
FBI or its Subsidiaries in the manner defined and further described in Section
414(b), (c), or (m) of the IRC of 1986 (the "Code"). Such plans are
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. FBI 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 FBI and its Subsidiaries,
each Employee Pension Benefit Plan which is intended to be qualified under
Section 401(a) of the IRC is so qualified and each trust forming a part thereof
is exempt from tax pursuant to Section 501(a) of the IRC. 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 IRC
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
REORGANIZATION AGREEMENT - PAGE 31
<PAGE> 201
Reduction Act of 1984, the Retirement Equity Act of 1984 and the IRC were
timely filed and have been received by FBI 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 knowledge of FBI and its Subsidiaries,
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 IRC, which are applicable to such Employee Pension Benefit Plans.
To the extent that the operation of an Employee Pension Benefit Plan shall have
materially deviated from the written provisions of the plan, such operational
deviations have been disclosed in schedule 5.25(a) hereto. In any event, a
violation with respect to the Employee Pension Benefit Plans, the consequences
of which shall not be material, shall not be deemed to constitute a breach of
this warranty and representation.
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 IRC 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 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 current summary plan descriptions as were required to be filed with
the Department of Labor and distributed to participants and beneficiaries have
been filed and distributed. Copies of all current 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 IRC, or both, has incurred an
"accumulated funding deficiency" within the meaning of IRC 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 FBI 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 IRC Section 415 have
not been exceeded with respect to any Employee Pension Benefit Plan or
combination of such plans to which such limitations apply.
To the best knowledge of FBI and its Subsidiaries, 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 IRC), has engaged in a "prohibited
transaction", as such term is defined in Section 4975 of the IRC, which could
subject such Employee Pension Benefit Plan, any such trust or any such
disqualified person (other than a person for whom neither FBI nor any FBI
Subsidiary is directly or indirectly responsible) to any material liability
under Title I of ERISA or to the imposition of any tax under Section 4975 of
the IRC.
REORGANIZATION AGREEMENT - PAGE 32
<PAGE> 202
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 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 FBI 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 IRC Section 1(a)
qualified Employee Pension Benefit Plan previously terminated by FBI or any FBI
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, FBI or its Subsidiaries, or any
disqualified person (as defined in IRC Section 4975) with respect to the
Employee Pension Benefit Plan.
No tax has been, will be, or is reasonably
anticipated to be imposed under IRC Section 4978, 4978B, or 4979A due to the
operation of an Employee Pension Benefit Plan sponsored by FBI or its
Subsidiaries which is an employee stock ownership plan ("ESOP").
Except as disclosed in schedule 5.25(a) hereto, all
Employee Pension Benefit Plans were in effect for substantially all of calendar
year 1994. 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 1994 for each such
Employee Pension Benefit Plan.
FBI 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 IRC, copies of financial statements or
reports containing information regarding the financial accounting expense of
maintaining any such Employee Pension Benefit Plan for the three (3) plan years
preceding the current date have been delivered to UPC.
FBI has provided to UPC copies of all filings
regarding the Employee Pension Benefit Plans which have been made with the
Securities and Exchange Commission for the three (3) plan years preceding the
date hereof.
(b) FBI 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 FBI or any FBI Subsidiary or
members of a controlled group or entities under common control with FBI or its
Subsidiaries in the manner defined and further described in Section 414(b),
(c), or (m) of the IRC. Such plans 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.
FBI 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
REORGANIZATION AGREEMENT - PAGE 33
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to, trust agreements, cafeteria plans (pursuant to IRC Section 125), and
voluntary employee beneficiary associations (pursuant to IRC Section
501(c)(9)). To the best knowledge of FBI and its Subsidiaries, 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 IRC, which
are applicable to such Employee Welfare Benefit Plans. In any event, a
violation with respect to the Employee Welfare Benefit Plans, the consequences
of which shall not be material, shall not be deemed to constitute a breach of
this warranty and representation. FBI 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 IRC 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 IRC 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 current
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 current summary plan descriptions for each plan
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 1994. Except as disclosed in schedule
5.25(b) hereto, there has been with respect to such Employee Welfare Benefit
Plans no material amendment thereof (except as may have been, or may be
required by applicable law) or material increase in the cost thereof or
benefits payable thereunder on or after January 1, 1995.
No Employee Welfare Benefit Plan or any 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 FBI nor any FBI 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 FBI or any of its Subsidiaries that such a
penalty may be imposed upon any Employee Welfare Benefit Plan.
Neither FBI nor any FBI Subsidiary has failed to make
any contribution to, or pay any amount due and owing by FBI or a FBI 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 FBI, constitute a liability for FBI or any FBI 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 FBI, no condition exists that
could subject any Employee Welfare Benefit Plan or any person (other than a
person for whom neither FBI or any FBI Subsidiary is directly or indirectly
responsible) to liabilities, damages, losses, taxes, or sanctions that arise
under Section 4980B of the IRC or Sections 601 through 608 of ERISA for failure
to comply with the continuation health care
REORGANIZATION AGREEMENT - PAGE 34
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coverage requirements of ERISA Sections 601 through 608 and IRC Section 4980B
with respect to any current or former employee of FBI or any FBI Subsidiary, or
the beneficiaries of such employee.
(c) FBI has furnished to UPC true and complete copies
and/or descriptions of each plan or arrangement maintained or otherwise
contributed to by FBI or any FBI 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 FBI or any FBI subsidiary. Such plans
and arrangements shall collectively be referred to herein as "Benefit
Arrangements" and all such Benefit Arrangements of FBI and FBI's Subsidiaries
are listed on schedule 5.25(c)(1) hereto. Except as disclosed in schedule
5.25(c)(1) hereto, there are no other benefit arrangements of the FBI companies
and all Benefit Arrangements which are in effect were in effect for
substantially all of calendar year 1995. Except as disclosed in schedule
5.25(c)(1) 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, 1995. There has been no material
increase in the base salary and wage levels of FBI or any FBI 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 1995. Except as disclosed in
schedule 5.25(c)(1) hereto, there has been no material increase in the
compensation of, or benefits payable to, any senior executive employee of FBI
or any FBI subsidiary on or after January 1, 1996, 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, 1996.
Except as disclosed in schedule 5.25(c)(2) hereto,
with respect to all Benefit Arrangements which are subject to the annual return
requirement of IRC 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 FBI or any FBI 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 FBI or any FBI 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 IRC 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 FBI (or by Capital 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 compensation for such
termination. To the best knowledge of FBI and its Subsidiaries, no limitation
on the right to terminate any such plan has been communicated by FBI or its
Subsidiaries to employees, former employees, or retirees who are or may be
participants in or beneficiaries of such plans or
REORGANIZATION AGREEMENT - PAGE 35
<PAGE> 205
arrangements. Each Employee Pension Benefit Plan which is qualified under
Section 401(a) of the IRC as a qualified defined benefit pension plan contains
language which 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 FBI nor any FBI 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 FBI, anticipated to be filed.
5.26 Material Contracts. Except as reflected in the
Audited Financial Statements of FBI or as described in schedule 5.26 hereto,
neither FBI nor any FBI Subsidiary, nor any of their respective assets,
businesses, or operations, is as of the date of this Reorganization Agreement a
party to, or is bound or affected by, or receives benefits under any contract
or agreement or amendment thereto that in each case would (assuming that 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 FBI as of the date of this Reorganization Agreement that has not
already been filed as an exhibit to FBI's Form 10-K filed for the fiscal year
ended December 31, 1995, or in any other SEC Document filed prior to the date
of this Reorganization Agreement.
5.27 Material Contract Defaults. Neither FBI nor any FBI
Subsidiary is in default in any material respect under any material contract,
agreement, commitment, arrangement, lease, insurance policy, or other
instrument to which it is a party or by which its respective assets, business,
or operations may be bound or affected or under which it or its respective
assets, business, or operations receives benefits, which default may be
reasonably expected to have either individually or in the aggregate a material
adverse effect on FBI or on any FBI Subsidiary and there has not occurred any
event which, with the lapse of time or the giving of notice or both, would
constitute such a default.
5.28 Reports. Since January 1, 1991, FBI and each FBI
Subsidiary 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 Missouri Division; (ii) the Federal Reserve; (iii) the Comptroller (if
applicable); (iv) the FDIC; OTS (if applicable); or (v) the SEC, including, but
not limited to, Annual Reports on SEC Form 10-K, Quarterly Reports on Form
10-Q, Current Reports on Form 8-K and proxy statements; (vi) reports on Forms
2900 and call reports (on FFIEC Forms 032, 033 and 034 and similar forms) and
(vii) any other applicable federal or state securities or banking authorities
(except, in the case of federal or state securities authorities, filings which
are not material). As of their respective dates, each of such reports and
documents, including the financial statements, tables, exhibits, and schedules
thereto, complied in all material respects with all of the requirements of the
respective forms on which they were filed and with all of the statutes, rules,
and regulations enforced or promulgated by the Regulatory Authority with which
they were filed. All such reports were true and complete in all material
respects and did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the
REORGANIZATION AGREEMENT - PAGE 36
<PAGE> 206
circumstances under which they were made, not misleading. FBI will provide to
UPC true and correct copies of all such reports filed by FBI or by any FBI
Subsidiary subsequent to January 1, 1991.
5.29 Exchange Act Filings. Since becoming subject to the
reporting requirements of the 1934 Act, FBI has filed all reports with the SEC
required of it pursuant to Section 15(d) of the 1934 Act.
5.30 Statements True and Correct. None of the information
prepared by, or on behalf of FBI or by any FBI Subsidiary regarding FBI, any
FBI Subsidiary or any Subsidiary of a FBI Subsidiary included or to be included
in the Proxy Statement to be mailed to FBI's shareholders in connection with
the Shareholders Meeting and any other documents to be filed with the SEC, or
any other Regulatory Authority in connection with the transaction contemplated
herein, will, at the respective times such documents are filed, and, with
respect to the Proxy Statement, when first mailed to the shareholders of FBI,
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 FBI or any FBI
Subsidiary is responsible for filing with the SEC or any other Regulatory
Authority in connection with the transactions contemplated hereby will comply
as to form in all material respects with the provisions of applicable law,
including applicable provisions of the Securities Laws and the rules and
regulations issued thereunder.
ARTICLE 6
COVENANTS OF UPC
6.1 Regulatory Approvals. Within a reasonable time after
completion of UPC's "due diligence review" described in Section 2.3 of this
Reorganization Agreement and its decision to proceed with the transaction as a
result thereof, UPC shall file any and all applications with the appropriate
government Regulatory Authorities in order to obtain the necessary prior
Government Approvals of the transactions contemplated in this Reorganization
Agreement and shall take such other actions as may be reasonably required to
consummate the transactions contemplated in this Reorganization Agreement and
the Plan of Merger with reasonable promptness. UPC shall pay all fees and
expenses arising in connection with such applications for regulatory approval.
UPC agrees to provide the appropriate Regulatory Authorities with the
information required by such authorities in connection with UPC's applications
for regulatory approval and UPC agrees to use its best efforts to obtain such
regulatory approvals and any other approvals and consents as may be required
for the Closing as promptly as practicable; provided, however, that nothing in
this Section 6.1 shall be construed to obligate UPC to take any action to meet
any condition required to obtain prior regulatory approval if UPC shall, in
UPC's sole discretion, deem such condition to be unreasonable or to constitute
a significant impediment upon UPC's ability to carry on its business or
acquisition programs or to require UPC to increase UPC's capital ratios to
amounts in excess of the Federal Reserve's minimum capital ratio guidelines
which may be in effect from time to time.
6.2 Registration of UPC Common Stock under the Securities
Laws. UPC shall cooperate with FBI in the preparation of the FBI 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 UPC Common Stock
as Consideration for the Merger) and shall cause a registration statement on
the
REORGANIZATION AGREEMENT - PAGE 37
<PAGE> 207
appropriate SEC Form (the "UPC Registration Statement") to be prepared and
filed so as to cause any shares of UPC Common Stock which may be delivered to
the FBI Record Holders in payment of the Consideration to be registered under
the 1933 Act and to be duly qualified under the appropriate state securities
laws. UPC shall also list for trading on the NYSE the UPC Common Stock to be
delivered in payment of the Consideration. Such registration, qualification
and listing shall be effected prior to the Closing.
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 FBI or
the FBI Subsidiaries and all employees of FBI and the FBI Subsidiaries
immediately prior to the Effective Time of the Merger who shall continue as
employees of Capital 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 FBI or with any FBI
Subsidiary prior to the Effective Time of the Merger by such former FBI Company
employees will be deemed service with UPC for purposes of determining
eligibility for participation, benefit accrual (including, but not limited to,
employer matching contributions in UPC's 401(k) plan), and vesting in such
employee benefit plans of UPC and its Subsidiaries.
6.4 Conduct of Business -- Affirmative Covenants. Unless
the prior written consent of FBI shall have been obtained and, except as
otherwise contemplated herein:
(a) At all times prior to the Closing, UPC shall
promptly inform FBI in writing of any developments, occurrences, events or
facts necessary to add to, amend or supplement the representations and
warranties made herein (including those made in the schedules of exceptions
attached hereto) as may be necessary to the end that the information contained
herein and therein will accurately reflect the current status of UPC and of
each UPC Subsidiary; provided, however, that any such updates to the 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 shall be deemed to have become and to constitute a part of, or an
amendment to, this Reorganization Agreement, FBI shall have agreed in writing
to each such amendment, supplement or update to the Reorganization Agreement
and/or schedules which initially shall have become a part of this
Reorganization Agreement;
(b) On and after the Closing Date, UPC and each UPC
Subsidiary shall give such further assistance to FBI and shall execute,
acknowledge and deliver all such documents and instruments as FBI may
reasonably request and take such further action as may be necessary or
appropriate effectively to consummate the transactions contemplated by this
Reorganization Agreement;
(c) Between the date of this Reorganization
Agreement and the Closing Date, UPC and each UPC Subsidiary shall afford FBI
and its authorized agents and representatives reasonable access during normal
business hours to the properties, operations, books, records, contracts,
documents, loan files and other information of, or relating to UPC and any UPC
Subsidiary. UPC and each UPC Subsidiary shall provide reasonable assistance to
FBI in its investigation of matters relating to UPC and any UPC Subsidiary; and
(d) Subject to the terms and conditions of this
Reorganization Agreement, UPC agrees 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
REORGANIZATION AGREEMENT - PAGE 38
<PAGE> 208
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 transactions
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.
ARTICLE 7
COVENANTS OF FBI COMPANIES
7.1 Proxy Statement; FBI Shareholder Approval. FBI shall
call a special meeting of its shareholders (the "Shareholders Meeting") to be
held as soon as reasonably practicable after the date of this Reorganization
Agreement and shall use its best efforts to ensure that such meeting is held no
later than November 30, 1996, 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) FBI shall, with UPC's assistance, prepare a Proxy Statement to be filed
with the SEC as part of UPC's registration statement on the appropriate SEC
Form and with any other appropriate Regulatory Authority; shall mail or cause
to be mailed such Proxy Statement to the FBI 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 FBI 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 FBI shall recommend (subject to compliance with
their legal and fiduciary duties as advised in writing by counsel) to the FBI
Shareholders the approval of this Reorganization Agreement and the Plan of
Merger; and (iv) FBI shall use its best efforts, subject to compliance with its
legal and fiduciary duty as advised by counsel, to obtain such FBI
Shareholders' approvals.
7.2 Conduct of Business -- Affirmative Covenants. Unless
the prior written consent of UPC shall have been obtained and, except as
otherwise contemplated herein:
(a) FBI shall, and FBI shall cause each FBI Subsidiary to:
(i) Operate its business only in the
usual, regular, and ordinary course;
(ii) Preserve intact its business
organization and assets and maintain in effect 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 of 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; and in such event, only after
giving UPC not less than ten (10) days prior written notice of such
action;
(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;
REORGANIZATION AGREEMENT - PAGE 39
<PAGE> 209
(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 FBI or the
FBI 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 consistent with
past practices to retain any FBI Subsidiary's present customer base
and to enhance the probability of the retention of such customer base
by each FBI Subsidiary 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 such that such
employees will continue to perform effectively and will be available
to FBI, any FBI Subsidiary 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 any FBI Subsidiary's customer relationships;
(b) FBI shall, and FBI agrees to cause each FBI
Subsidiary to, use their respective best efforts to assist UPC in obtaining the
Government Approvals necessary to complete the transactions contemplated hereby
and are not aware of any reason why such Government Approvals cannot be
obtained, and to provide to UPC or to the appropriate governmental authorities
all information required to be submitted in connection with obtaining such
approvals;
(c) FBI shall, and FBI agrees to cause each FBI
Subsidiary to, at their own cost and expense, use their respective best efforts
to secure all necessary consents and all consents and releases, if any, which
may be required of FBI or of any FBI Subsidiary or from any third parties and
shall comply with all applicable laws, regulations and rulings in connection
with this Reorganization Agreement and the consummation of the transactions
contemplated hereby;
(d) At all times prior to the Closing, FBI shall
promptly inform UPC in writing of any developments, occurrences, events or
facts necessary to add to, amend or supplement the representations and
warranties made herein (including those made in the schedules of exceptions
attached hereto) as may be necessary to the end that the information contained
herein and therein will accurately reflect the current status of FBI and of
each FBI Subsidiary; 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
shall be deemed to have become and to constitute a part of, or an amendment to,
this Reorganization Agreement, UPC shall have agreed in writing to each such
amendment, supplement or update to the Reorganization Agreement and/or
schedules which initially shall have become a part of this Reorganization
Agreement;
(e) On and after the Closing Date, FBI shall, and
FBI agrees to cause each FBI Subsidiary to, give such further assistance to UPC
and to 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;
REORGANIZATION AGREEMENT - PAGE 40
<PAGE> 210
(f) Between the date of this Reorganization
Agreement and the Closing Date, FBI shall, and FBI agrees to cause each FBI
Subsidiary to, 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 FBI and any FBI Subsidiary. FBI and each FBI Subsidiary shall
provide reasonable assistance to UPC in its investigation of matters relating
to FBI and any FBI Subsidiary; and
(g) Subject to the terms and conditions of this
Reorganization Agreement, FBI shall, and FBI agrees to cause each FBI
Subsidiary 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 transactions contemplated by this Reorganization
Agreement. FBI shall use, and shall cause each of its Subsidiaries to use, its
best efforts to assist UPC in obtaining the consents of all third parties and
Regulatory Authorities necessary or desirable for the consummation of each of
the transactions contemplated by this Reorganization Agreement.
(h) FBI shall, and FBI agrees to cause each FBI
Subsidiary to, promptly inform UPC and Capital when it becomes aware that any
person holding an office of Vice President or above is considering, has
determined, or indicated his or her intent, to terminate his or her employment
with FBI, or the particular FBI Subsidiary.
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, FBI
covenants and agrees that it will neither do, nor agree or commit to do, nor
permit any FBI 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:
(a) Except as expressly contemplated by this
Reorganization Agreement or the Plan of Merger, amend its Charter 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,
except for the lien on the FBI Bank Subsidiary Stock held by Mercantile Bank of
St. Louis, N.A. with a current balance of approximately $4,019,000; or
(c) (i) Repurchase, redeem, or otherwise acquire or
exchange, directly or indirectly, any shares of its capital stock or other
equity securities or any securities or instruments convertible into any shares
of its capital stock, or any rights or options to acquire any shares of its
capital stock or other equity securities except as expressly permitted by this
Reorganization Agreement or the Plan of Merger; or (ii) split or otherwise
subdivide its capital stock; or (iii) recapitalize in any way; or (iv) declare
a stock dividend on the FBI Common Stock; or (v) with the exception of its
regular semi-annual cash dividend of sixty two and one-half cents ($0.625) per
share for the semi- annual cash dividend declared and paid as the first
semi-annual cash dividend in a calendar year, and sixty seven and one-half
cents ($0.675) per share for the semi-annual cash dividend declared and paid as
the second semi-annual cash dividend in a calendar year, in both cases the
declaration date of which shall
REORGANIZATION AGREEMENT - PAGE 41
<PAGE> 211
be consistent with past practice, pay or declare any cash dividends or make or
declare any other type of distribution on the FBI Common Stock; or
(d) Except as expressly permitted by this
Reorganization Agreement, acquire direct or indirect control over any
corporation, association, firm, organization or other entity, other than in
connection with (i) mergers, acquisitions, or other transactions approved in
writing by UPC, (ii) internal reorganizations or consolidations involving
existing Subsidiaries, (iii) foreclosures in the ordinary course of business
and not knowingly exposing it to liability by reason of Hazardous Substances,
(iv) acquisitions of control in its fiduciary capacity, or (v) the creation of
new subsidiaries organized to conduct or continue activities otherwise
permitted by this Reorganization Agreement; or
(e) Except as expressly permitted by this
Reorganization Agreement or the Plan of Merger, to (i) issue, sell, agree to
sell, or otherwise dispose of or otherwise permit to become outstanding any
additional shares of FBI Common Stock, or any other capital stock of FBI or of
any FBI Subsidiary, or any stock appreciation rights, or any FBI Stock Option
or any other 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 should be directly sold or otherwise directly
transferred to FBI or any FBI Subsidiary, or (ii) sell, agree to sell, or
otherwise dispose of any substantial part of the assets or earning power of FBI
or of any FBI Subsidiary; or (iii) sell, agree to sell, or otherwise dispose of
any asset of FBI or any FBI 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 FBI 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 FBI or any FBI
Subsidiary to any FBI Subsidiary in excess of an aggregate of $50,000 (for FBI
and its Subsidiaries on a consolidated basis) except in the ordinary course of
the business of FBI or such FBI Subsidiary consistent with past practices (and
such ordinary course of business shall include, but shall not be limited to,
creation of deposit liabilities, entry into repurchase agreements or reverse
repurchase agreements, purchases or sales of federal funds, Federal Reserve
advances, and sales of certificates of deposit); or
(g) 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
or pursuant to an existing employment agreement; 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
FBI or of any FBI Subsidiary; or effect any change in retirement benefits for
any class of its employees or officers, unless such change shall be required by
applicable law; or
(h) Amend any existing employment contract between
it and any person having a salary thereunder in excess of $30,000 per year
(unless such amendment shall be 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 which
FBI or the applicable FBI Subsidiary (or their respective successors) shall 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
REORGANIZATION AGREEMENT - PAGE 42
<PAGE> 212
(i) Adopt any new employee benefit plan or terminate
or make any material change in or to any existing employee benefit plan other
than any change that shall be required by law or that, in the opinion of
counsel, shall be necessary or advisable to maintain the tax-qualified status
of any such plan; or
(j) Enter into any new service contract, purchase or
sale agreement or lease agreement which is material to FBI or to any FBI
Subsidiary; or
(k) Make any material capital expenditure except for
ordinary purchases, repairs, renewals or replacements; or
(l) Enter into any material transaction 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 holder of 2% or more of the outstanding FBI
Common Stock, or to any officer or director of a FBI Subsidiary, 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
$1,000,000, or amend in any material respect the terms of any such credit
outstanding on the date hereof.
7.4 Certain Actions. (a) Except to the extent
necessary to consummate the transactions specifically contemplated by this
Reorganization Agreement, FBI and the FBI Subsidiaries 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 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 corporation, partnership, person
or 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 FBI, based upon the written advice of
outside counsel, to be required in order to fulfill its fiduciary obligations.
FBI shall notify UPC immediately if any Acquisition Proposal shall have been,
or should hereafter be received by FBI or by any of the FBI Bank Subsidiaries,
such notice to contain, at a minimum, the identity of such persons, and,
subject to disclosure being consistent with the fiduciary obligations of FBI's
(or, if applicable, any FBI Subsidiary'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
requests, negotiations or expressions of interest. For purposes of this
Section, "Acquisition Proposal" means any tender offer, agreement,
understanding or other proposal of any nature 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 FBI or any of the FBI Bank Subsidiaries; (ii) acquire the right to
vote ten percent (10%) or more of the FBI Common Stock or any FBI Subsidiary's
Common Stock; (iii) acquire a significant portion of the assets or earning
power of FBI or of any FBI Financial Subsidiary; or (iv) acquire in excess of
ten percent (10%) of the outstanding FBI Common Stock or any FBI Subsidiary's
Common Stock.
(b) As a condition of, and as an inducement to UPC's entering into
this Reorganization Agreement, FBI and each of the FBI Bank Subsidiaries
covenant, acknowledge, and agree that it shall be a specific, absolute, and
unconditionally binding condition precedent to either FBI's or any of the FBI
Bank Subsidiaries' entering into a letter of intent, agreement in principle, or
definitive agreement
REORGANIZATION AGREEMENT - PAGE 43
<PAGE> 213
(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 FBI or the FBI Bank
Subsidiaries have otherwise complied with the provisions of Section 7.4(a)
hereof, that FBI or such third-party which is a party to the Acquisition
Proposal shall have paid to UPC the sum of Three Million Four Hundred
FortyThousand Dollars ($3,440,000 ), 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 Reorganization
Agreement and (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, FBI and the FBI Bank Subsidiaries hereby jointly and
severally stipulate and covenant that prior to FBI's or any one or more of the
FBI Bank Subsidiaries' 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 prior to supporting or indicating an intent to support
an Acquisition Proposal, either FBI 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. UPC and Capital each acknowledges that under no
circumstances shall any officer or director of FBI or the FBI Bank Subsidiaries
(unless such officer or director shall have an interest in a potential
acquiring party in an Acquisition Proposal) be held liable to any of them for
any amount of the foregoing payment. On payment of such amount to UPC, neither
UPC nor Capital shall have any cause of action or claim (either in law or
equity) whatsoever against FBI or any of the FBI Bank Subsidiaries, or against
any officer or director of FBI or the FBI Bank Subsidiaries, or the third
party, with respect to or in connection with such Acquisition Proposal, this
Reorganization Agreement or the Plan of Merger.
The requirements, conditions, and obligations imposed by this Section
7.4 shall continue in effect from the date of this Reorganization Agreement
until December 31, 1997, unless or until the earlier of any of the following
events shall occur, in which event, thereafter neither FBI, the FBI Bank
Subsidiaries nor any third party that is involved in an Acquisition Proposal
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)
by mutual consent of the Parties pursuant to Section 9.1(a) of
this Reorganization Agreement; (ii) by UPC, Capital or FBI
pursuant to Section 9.1(c) of this Reorganization Agreement;
(iii) by FBI pursuant to Section 9.1(d) of this Reorganization
Agreement; (iv) by FBI pursuant to Section 9.1(g) of this
Reorganization Agreement; (v) by UPC or FBI pursuant to
Section 9.1(j) of this Reorganization Agreement; (vi) by FBI
pursuant to Section 9.1(k) or (vii) by UPC or FBI pursuant to
Section 9.1(e) of this Reorganization Agreement, and in the
case of termination pursuant to Section 9.1(e), only then on
the basis of the failure to satisfy the conditions enumerated
in subparagraph (2) below; 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) Noncompliance by UPC or Capital with their
respective obligations as required by the provisions
of Section 8.1(a) of this Reorganization Agreement;
REORGANIZATION AGREEMENT - PAGE 44
<PAGE> 214
(ii) 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;
(iii) The failure by UPC or Capital to effect all
corporate action necessary on their respective parts
as required by the provisions of Section 8.1(c)(i) of
this Reorganization Agreement;
(iv) The occurrence of material legal proceedings
as contemplated by the provisions of Section 8.3(a)
of this Reorganization Agreement;
(v) 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 FBI or of any FBI Financial
Subsidiary;
(vi) 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), or
8.2(k).
(viii) The failure by UPC to deliver to FBI and the
FBI Bank Subsidiaries the certificates contemplated
by Section 8.3 of this Reorganization Agreement.
ARTICLE 8
CONDITIONS TO CLOSING
8.1 Conditions to the Obligations of FBI. Unless waived
in writing by FBI, the obligation of FBI 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 UPC and Capital to be performed at or prior to the Closing Date
pursuant to this Reorganization Agreement shall have been duly performed;
(b) Representations and Warranties. The
representations and warranties of UPC and Capital contained in Article 4 of
this Reorganization Agreement shall be true and complete, in all material
respects, on and as of the Effective Time of the Merger with the same effect as
though made on and as of the Effective Time of the Merger;
(c) Documents. In addition to the other
deliveries of UPC or Capital described elsewhere in this Reorganization
Agreement, FBI shall have received the following documents and instruments:
(i) a certificate signed by the
Secretary or an Assistant Secretary of UPC and Capital dated as of the
Closing Date certifying that:
REORGANIZATION AGREEMENT - PAGE 45
<PAGE> 215
(A) UPC's and Capital'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 Capital is an
officer of UPC or Capital, 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 Capital attached to such certificate remain in full force
and effect; and
(D) UPC and Capital are in good
standing under their respective corporate charters; and
(ii) a certificate signed respectively by
duly authorized officers of UPC and Capital 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. FBI 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 representing and evidencing shares of UPC
Common Stock and cash or other good funds sufficient to meet the obligation of
UPC to deliver to the FBI Record Holders the Consideration under this
Reorganization Agreement and the Plan of Merger; and
(e) Opinion of UPC's and Capital's Counsel. FBI
shall have been furnished with an opinion of counsel to UPC and Capital, dated
as of the Closing Date, addressed to and in form and substance satisfactory to
FBI, 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 Capital is a Tennessee corporation duly
organized, validly existing, and in good standing under the laws of
the State of Tennessee;
(ii) this Reorganization Agreement has
been duly and validly authorized, executed and delivered by UPC, and
Capital and (assuming this Reorganization Agreement is a binding
obligation of FBI) constitutes a valid and binding obligation of UPC
and Capital 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 subject to the application of equitable
principles and judicial discretion;
(iii) 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
REORGANIZATION AGREEMENT - PAGE 46
<PAGE> 216
execution and delivery by UPC and Capital of this Reorganization
Agreement or any of the documents to be executed and delivered by UPC
or Capital in connection herewith.
Such opinion may (i) expressly rely as to matters of fact upon certificates
furnished by appropriate officers of UPC or Capital or appropriate government
officials; and (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 other states and may be limited, in any
event, to Federal Law and the law of the State of Tennessee.
(f) Inspections Permitted. Between the date of
this Reorganization Agreement and the Closing Date, UPC and each UPC Subsidiary
shall have afforded FBI and its authorized agents and representatives
reasonable access during normal business hours to the properties, operations,
books, records, contracts, documents, loan files and other information of or
relating to UPC and each UPC Subsidiary. UPC and each UPC Subsidiary shall
have caused all UPC or any such UPC Subsidiary personnel to provide reasonable
assistance to FBI in its investigation of matters relating to UPC and any UPC
Subsidiary;
(g) No Material Adverse Change. No material
adverse change in the business, property, assets (including loan portfolios),
liabilities (whether absolute, contingent or otherwise), prospects, operations,
liquidity, income, or condition (financial or otherwise) of UPC or of any UPC
Subsidiary shall have occurred since the date of this Reorganization Agreement.
In the event of such a material adverse change with respect to UPC or any UPC
Subsidiary, 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;
(h) Fairness Opinion. FBI shall have received a
"fairness opinion" from its independent financial adviser to the effect that,
in the opinion of such adviser, the Consideration to be received by the FBI
Record Holders in exchange for their shares of FBI Common Stock pursuant to the
terms and conditions of this Reorganization Agreement is fair to the
shareholders of FBI from a financial point of view; such fairness opinion shall
not have been withdrawn prior to the Closing Date; and FBI shall have received
an updated "fairness opinion" letter from such advisers dated within five days
of the Closing Date confirming that, in the opinion of such adviser, such
Consideration to be received by the FBI Record Holders continues to be fair to
the FBI Shareholders from a financial point of view; and
(i) Tax Opinion. FBI shall have received a
written opinion from its legal counsel to the effect that, in the opinion of
such legal counsel, the transactions contemplated by this Reorganization
Agreement and the Plan of Merger will constitute one or more tax-free
reorganizations under IRC Section 368 and that the FBI Record Holders will not
recognize any gain or loss to the extent that such FBI Record Holders shall
exchange shares of FBI Common Stock for shares of UPC Common Stock (other than
any fractional share of UPC Common Stock which shall remain after aggregating
all shares of UPC Common Stock to which each FBI Record shall be entitled to
receive in the Merger) contemplated by this Reorganization Agreement assuming
that the shares of FBI Common Stock so exchanged by such FBI Record Holders
shall be held by them as capital assets at the Effective Time of the Merger;
(b) that the basis of the UPC Common Stock received will be the same as the
basis of the FBI Common Stock exchanged therefor; and (c) that the holding
period of the UPC Common Stock received will include the holding period of the
FBI Common Stock surrendered in the exchange.
REORGANIZATION AGREEMENT - PAGE 47
<PAGE> 217
8.2 Conditions to Obligations of UPC and Capital. Unless
waived in writing by UPC, the obligation of UPC and Capital 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 FBI and of each FBI Subsidiary to be performed at or before the
Closing Date pursuant to this Reorganization Agreement shall have been duly
performed;
(b) Representations and Warranties. The
representations and warranties of FBI and of each FBI Subsidiary contained in
Article 5 of this Reorganization Agreement shall be true and correct, in all
material respects, on and as of the Closing Date with the same effect as though
made on and as of the Closing Date;
(c) Documents. In addition to the documents
described elsewhere in this Reorganization Agreement, UPC shall have received
the following documents and instruments:
(i) a certificate signed by the
Secretary or Cashier or by an Assistant Secretary or Assistant Cashier
of FBI and each FBI Subsidiary dated as of the Closing Date certifying
that:
(A) FBI's Board 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 FBI is an officer of FBI
holding the office or offices specified therein, with full
power and authority to execute and deliver 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 FBI
and of each FBI Subsidiary attached to such certificate remain
in full force and effect; and
(D) FBI and all FBI Subsidiaries
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 FBI and each FBI Subsidiary stating that the
conditions set forth in Section 8.2(a), Section 8.2(b) and 8.2(f) of
this Reorganization Agreement, as to each of them, 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 any material real property, improvements or
personal property of FBI or of any FBI Subsidiary 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
REORGANIZATION AGREEMENT - PAGE 48
<PAGE> 218
prospects of FBI or any FBI Subsidiary; provided, however, that the
availability of insurance coverage shall be taken into account in determining
whether there shall have 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 Capital 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;
(e) Inspections Permitted. Between the date of
this Reorganization Agreement and the Closing Date, FBI and each FBI Subsidiary
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 FBI and each FBI Subsidiary. FBI and each FBI Subsidiary shall
have caused all FBI or any such FBI Subsidiary personnel to provide reasonable
assistance to UPC in its investigation of matters relating to FBI and any FBI
Subsidiary;
(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 FBI or of any FBI
Subsidiary shall have occurred since the date of this Reorganization Agreement.
In the event of such a material adverse change with respect to FBI or any FBI
Subsidiary, 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 FBI's Counsel. UPC shall have
been furnished with an opinion of legal counsel to FBI and the FBI
Subsidiaries, dated the Closing Date, addressed to UPC and in form and
substance satisfactory to UPC, to the effect that:
(i) FBI is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Missouri;
(ii) each FBI Subsidiary is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation;
(iii) this Reorganization Agreement has been
duly and validly authorized, executed and delivered by FBI and by each
FBI Financial Subsidiary and (assuming that this Reorganization
Agreement is a binding obligation of UPC and Capital and the Plan of
Merger is a binding obligation of UPC and Capital) constitutes a valid
and binding obligation of FBI, enforceable in accordance with its
terms, subject as to enforceability to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and to the application of
equitable principles and judicial discretion; and
(iv) to the knowledge of such counsel after
due inquiry, no consent or approval, which has not already been
obtained, by any governmental authority is required for execution and
delivery by FBI or any FBI Subsidiary of this Reorganization Agreement
or any of the documents to be executed and delivered by FBI and any
FBI Subsidiary in connection herewith and the consummation of the
Merger and ancillary transactions described in the Reorganization
Agreement.
REORGANIZATION AGREEMENT - PAGE 49
<PAGE> 219
Such opinion may (i) expressly rely as to matters of fact upon certificates
furnished by appropriate officers of FBI or of any FBI Subsidiary or
appropriate government officials; and (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 to the law of the State of Missouri.
(h) Other Business Combinations, Etc. Except as
otherwise provided in this Reorganization Agreement, neither FBI nor any FBI
Subsidiary shall have entered into any agreement, letter of intent,
understanding or other arrangement pursuant to which FBI or any FBI Subsidiary
would merge, consolidate with; effect a business combination with; sell any
substantial part of FBI's or any FBI Subsidiary'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 FBI or of any FBI Subsidiary or the benefits of acquiring the FBI Common
Stock;
(i) Maintenance of Certain Covenants, Etc. At
the time of Closing, (i) the total consolidated assets of FBI and Subsidiaries
shall be not less than $315,000,000; (ii) the total consolidated stockholders'
equity of FBI shall have been not less than $23,662,927 at December 31, 1995
and shall have increased since that date through earnings growth less any
dividends which shall have been declared as permitted hereunder; (iii) the
tangible equity capital of FBI shall be not less than its reported level as of
December 31, 1995, and shall have increased since that time through earnings
growth less any dividends which shall have been declared as permitted
hereunder; (iv) FBI shall not have issued, or incurred any obligation to issue,
or repurchased, or incurred any obligation to repurchase, 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 Reorganization
Agreement (such that there shall be not more than 684,377 shares of FBI Common
Stock validly issued and outstanding at the Effective Time of the Merger other
than those additional shares which shall have been issued by FBI subsequent to
December 31, 1995, incidental to the exercise of stock options granted under
the FBI Stock Option Plan which were issued and outstanding on that date and
which have been disclosed to UPC in this Reorganization Agreement); (v) FBI
shall own, free and clear of any liens or encumbrances of any nature
whatsoever, other than the lien of Mercantile Bank of St. Louis, N.A. referred
to in Section 7.3(b) of this Reorganization Agreement, not less than the
following percentages of the outstanding capital stock of the following FBI
Bank Subsidiaries: First Financial Bank of St. Louis, 100%; First Financial
Bank of Mississippi County, 100%; Citizens First Financial Bank, 99.92%; First
Financial Bank of St. Genevieve, 94.87%; and First Financial Bank of Southeast
Missouri, 99.41%; (vi) from December 31, 1995, there shall have been no
extraordinary sale of assets, nor any material investment portfolio
restructuring by either FBI or any FBI Subsidiary; (vii) neither FBI nor any
FBI Subsidiary shall have issued or granted, or incurred any obligation to
issue or grant, since December 31, 1995, through the Effective Date of the
Merger, any additional equity or debt securities, any FBI Stock Options, or any
other options, warrants, instruments or rights of any nature whatsoever to
acquire, either directly or upon conversion or exchange, any equity or debt
securities of FBI or any FBI Subsidiary, or any stock appreciation or similar
rights; (vii) from the date hereof, FBI shall not have declared or paid any
cash dividends or other distributions prior to Closing, except as permitted
hereunder; and (ix) the Merger shall qualify as one or more tax-free
reorganizations under Section 368 of the IRC of 1986, as amended. The
financial criteria and calculations set forth above shall be determined in
accordance with GAAP assuming that FBI and each FBI Subsidiary shall have been
operated consistently in the normal course of their respective businesses;
provided, however, that to the extent the application of FASB 115 would require
FBI to reduce stockholder's equity or tangible capital by an amount equal to
unrealized losses in FBI's available for sale securities portfolio, the amount
of such unrealized loss would not be counted
REORGANIZATION AGREEMENT - PAGE 50
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under subsections (ii) and (iii) above; and, provided further, 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 otherwise than in the ordinary course of business, 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 inside director of FBI
and each chairman of the board and each president or chief executive officer of
each FBI Bank Subsidiary shall have entered into a non-compete agreement with
UPC, FBI and each FBI Bank Subsidiary 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 two (2) years from Closing and covering
those Counties in the State of Missouri in which FBI and the FBI Bank
Subsidiaries shall maintain any of their banking offices, including branches,
on the Closing Date as well as those Counties which are contiguous to those
counties in which they operate banking offices or branches; and no such inside
director of FBI or chairman of the board, president or chief executive officer
of any FBI Bank Subsidiary shall be involved in any way with the formation or
organization of a new financial institution which would maintain banking
offices in any of such Counties;
(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 IRC and that neither UPC,
Capital nor FBI will recognize any gain or loss for federal income tax purposes
as a result of the consummation of the transactions contemplated by the
Reorganization Agreement;
(l) Receipt of Affiliate Letters. UPC shall have
received a written commitment (an "Affiliate Letter") from each FBI Record
Holder who would be deemed under the Securities Laws to be an "Affiliate" of
FBI at the time of the Shareholders Meeting and at the time of Closing and who
shall accept shares of UPC Common Stock as Consideration for the cancellation,
exchange and conversion of his or her shares of FBI Common Stock pursuant to
the terms and conditions of this Reorganization Agreement, committing to UPC
that such FBI Record Holder shall not pledge, assign, sell, transfer, 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 FBI
Record Holder upon consummation of the Merger nor enter into any formal or
informal agreement to pledge, assign, sell, transfer, or otherwise alienate
his right, title and interests in any of the shares of UPC Common Stock to be
delivered by UPC to such FBI Record Holder pursuant to the terms and conditions
of this Reorganization Agreement if such disposition of, commitment to dispose
of, or reduction of the risk of ownership of the shares of UPC Common Stock to
be received in the Merger (collectively, a "Disposition"):
(i) would require the Merger and other transactions
contemplated by the Reorganization Agreement to be accounted for under
the "purchase" method of accounting rather than under the "pooling-of-
interests" method of accounting; or
(ii) would constitute a sale or other disposition of
such shares of UPC Common Stock in violation of the Securities Laws;
or
(iii) would adversely affect the ability of the
Parties to treat the Merger and other transactions contemplated in the
Reorganization Agreement as one or more tax-free "reorganizations" in
the sense of Section 368 of the IRC such that the tax-free status of
the transactions might be jeopardized for federal income tax purposes.
REORGANIZATION AGREEMENT - PAGE 51
<PAGE> 221
Accordingly, no Affiliate shall effect a Disposition prior to the date on which
UPC shall have released to the public the financial results of the combined
operations of UPC and FBI for a period of not less than 30 days duration in
order to satisfy the requirements of clause (i). In addition, no Affiliate
shall effect a Disposition otherwise than by compliance with SEC Rules 144 or
145 or in a transaction which, in the opinion of counsel satisfactory to UPC,
shall be exempt from the registration requirements of the 1933 Act in order to
satisfy the requirements of clause (ii) above. Moreover, each Affiliate shall
represent and warrant to UPC that as of the Closing Date such Affiliate has no
present intention of disposing of any amount in excess of 45% of the shares of
UPC Common Stock to be received by such Affiliate as Consideration for the FBI
Common Stock surrendered in the transaction and shall undertake to make no
disposition of any of the remaining 55% of the UPC Common Stock received by
such Affiliate for a period of not less than 24 months (or, with the approval
of UPC, such shorter period as may be justified by material events, occurrences
or changes in circumstances which were not reasonably foreseeable or foreseen
on the Closing Date)in order to protect the ability of the Parties to treat the
Merger and other transactions contemplated in the Reorganization Agreement as
one or more tax- free "reorganizations" in the sense of Section 368 of the IRC;
(m) Fairness Opinion. UPC shall have received a
"fairness opinion" from its independent financial adviser to the effect that,
in the opinion of such adviser, the Consideration to be received by the FBI
Record Holders in exchange for their shares of FBI Common Stock pursuant to the
terms and conditions of this Reorganization Agreement is fair to the
shareholders of UPC from a financial point of view; 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 dated within five days
of the Closing Date confirming that, in the opinion of such adviser, such
Consideration to be received by the FBI Record Holders continues to be fair to
the UPC Shareholders from a financial point of view; provided, however, that
this shall not be a condition precedent to UPC's obligation to close the
transaction if UPC's financial adviser withholds, fails to deliver or withdraws
such "fairness opinion" on the basis of an increase in the price per share of
UPC Common Stock over its price per share on the date hereof; and
(n) Pooling of Interests Accounting Treatment. UPC shall
have received (i) from Price Waterhouse or other independent accountants
satisfactory to UPC, a letter dated within five 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 FBI's regularly retained
independent accountants or other accountants acceptable to UPC, a letter dated
within five days prior to the Closing Date stating that, upon a review of the
books and records of FBI, such accountants are aware of no reason why the
business combination described in this Reorganization Agreement to which FBI is
a Party should not be accounted for as a "pooling of interests" under generally
accepted accounting principles.
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; and
REORGANIZATION AGREEMENT - PAGE 52
<PAGE> 222
(b) Government Approvals and Acquiescence
Obtained. The Parties hereto shall have received all applicable Government
Approvals for the consummation of the transactions contemplated herein and all
waiting periods incidental to such approvals or notices given shall have
expired; and
(c) Shareholder Approval. The FBI Shareholders
shall have approved the Merger in accordance with the Missouri Code; and
(d) Registration Statement. UPC's Registration
Statement to be filed with the SEC shall have been declared effective by the
SEC and shall not be subject to a stop order issued by the SEC and, should the
offer and sale of the UPC Common Stock incidental to the Merger described in
this Reorganization Agreement be subject to the Blue Sky Laws of any state,
shall not be subject to any stop order of any state securities commission.
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 Capital, should FBI or any FBI
Subsidiary fail to conduct its business pursuant to FBI's and such FBI
Subsidiary's Covenants made in Article 7;
(c) By UPC, Capital or FBI in the event the Closing
shall not have occurred by June 24, 1997 (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, or a delay caused by a review of the UPC Registration Statement by
the SEC, then FBI and any FBI Subsidiary that is a party to this Reorganization
Agreement shall, upon UPC's written request, extend the Closing Date until such
time as all Government Approvals shall have been obtained and any statutory
waiting periods shall have expired; provided, however, the Closing Date shall
not be extended under the provisions of this Section 9.1(c) beyond August 31,
1997;
(d) By either UPC, Capital or FBI, 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 FBI may, upon written notice to the other, extend the term
of this Reorganization Agreement for only one 60-day period to prosecute
diligently and overturn such denial;
(e) By UPC or Capital in the event the conditions
set forth in Sections 8.2 or 8.3 shall not have been satisfied in all material
respects as of the Closing Date, or by FBI if the conditions set forth in
Section 8.1 or 8.3 shall not have been satisfied in all material respects as of
the Closing Date, and such failure shall not have been waived prior to the
Closing;
REORGANIZATION AGREEMENT - PAGE 53
<PAGE> 223
(f) By UPC or Capital in the event that there
shall have been, in UPC's good faith opinion, a material adverse change in the
business, property, assets (including loan portfolios), liabilities (whether
absolute, accrued, contingent or otherwise), prospects, operations, liquidity,
income, condition (financial or otherwise) or net worth of FBI or any FBI
Subsidiary 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 FBI
Common Stock which are the subject of the instant transaction;
(g) By UPC, Capital or FBI 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 Capital should FBI or any FBI
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 with 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 Capital should FBI or any FBI
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 FBI or any FBI Subsidiary to raise additional
capital or to sell a substantial portion of its assets;
(j) By either Party, without penalty, during the
"due diligence review" period described in Section 2.3 of this Reorganization
Agreement in the manner provided, and on the basis set forth in said Section
2.3; or
(k) By FBI in the event that there shall have
been, in FBI's good faith opinion, a material adverse change in the business,
property, assets (including loan portfolios), liabilities (whether absolute,
accrued, contingent or otherwise), prospects, operations, liquidity, income,
condition (financial or otherwise) or net worth of UPC.
If a Party should elect to terminate this Reorganization Agreement pursuant to
subsections (b), (c), (d), (e), (f), (g), (h), (i), (j) or (k) of this Section
9.1, it shall give notice to the other Party, in writing, of its election in
the manner prescribed in Section 10.1 ("Notices") of this Reorganization
Agreement.
9.2 Effect of Termination. In the event that this
Reorganization Agreement should be terminated pursuant to Section 9.1 hereof,
all further obligations of the Parties under this Reorganization Agreement
shall terminate without further liability of any Party to another; provided,
however, that a termination under Section 9.1 hereof shall not relieve any
Party of any liability for a breach of this Reorganization Agreement or for any
misstatement or misrepresentation made hereunder prior to such termination, or
be deemed to constitute a waiver of any available remedy for any such breach,
misstatement or misrepresentation.
REORGANIZATION AGREEMENT - PAGE 54
<PAGE> 224
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 UPC/Capital: Union Planters Corporation
Post Office Box 387 (for mailing)
. Memphis, Tennessee 38147
7130 Goodlett Farms Parkway (for deliveries)
Memphis, Tennessee 38018
Fax: (901) 383-2877
Attn: Mr. Jackson W. Moore, President
E. James House, Jr., Esquire, Secretary
With a copy to: Wyatt, Tarrant & Combs, P.L.C.
Post Office Box 775000 (for mailing)
Memphis, TN 38177-5000
6075 Poplar Avenue (Suite 650) (deliveries)
Memphis, TN 38119
Fax: (901) 537-1010
Attn: R. Nash Neyland, Esq.
If to FBI: Financial Bancshares, Inc.
3805 South Broadway
St. Louis, Missouri 63118
Fax: (314) 664-0426
Attn: Arthur E. S. Schmid
Chairman and C.E.O.
With a copy to: Armstrong, Teasdale, Schlafly & Davis
One Metropolitan Square
Suite 2600
St. Louis, Missouri 63102-2740
Fax: (314) 621-5065 or 5066
Attn: Bruce E. Woodruff, Esq.
</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.
10.2 Assignability and Successors. 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
REORGANIZATION AGREEMENT - PAGE 55
<PAGE> 225
binding only upon the Parties hereto and their respective successors and
permitted assigns and no other Persons.
10.3 Governing Law. This Reorganization Agreement and the
Plan of Merger 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.
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. FBI, on its own behalf and on behalf
of each FBI Subsidiary, and UPC and Capital, on their on behalves, each agrees
to use their respective best efforts to complete the transactions contemplated
by this Reorganization Agreement; provided, however, that the use of best
efforts by UPC and Capital shall not obligate UPC or Capital to obtain or to
provide FBI or any FBI Subsidiary additional capital in any amount, to divest
any Subsidiary or branch, or to meet any other condition which may be imposed
by any Regulatory Authority as a condition to approval which UPC or Capital
shall deem in good faith to be unreasonable in the circumstances.
10.6 Publicity. The Parties agree that press releases and
other public announcements to be made by any of them with respect to the
transactions contemplated hereby shall be subject to mutual agreement.
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, provided, however, that the Parties shall
mutually develop in advance, responses to anticipated inquiries by the press.
10.7 Entire Agreement. This Reorganization Agreement,
together with the Plan of Merger which is Exhibit A hereto, the schedules,
Annexes, Exhibits and certificates required to be delivered hereunder and any
amendments or addenda hereafter executed and delivered in accordance with
Section 10.9 hereof, and that certain letter of even date herewith from UPC to
FBI concerning certain "social issues" (the "Social Issues Letter"), constitute
the entire agreement of the Parties hereto pertaining to the transactions
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 or the Social Issues Letter 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 or the Social
Issues Letter invalid, illegal or unenforceable in any other jurisdiction.
REORGANIZATION AGREEMENT - PAGE 56
<PAGE> 226
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 or the
Social Issues Letter; and
(d) amend or add to any provision of this
Reorganization Agreement, the Plan of Merger or the Social Issues Letter;
provided, however, that, subject to the provisions of Section 2.5, no provision
of this Reorganization Agreement may be amended or added to except by an
agreement in writing signed by the Parties hereto or their respective
successors in interest and expressly stating that it is an amendment to this
Reorganization Agreement.
10.10 Interpretation. The headings contained in this
Reorganization Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Reorganization Agreement.
10.11 Payment of Expenses. Except as set forth herein, UPC,
Capital and FBI 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. Except as disclosed in schedule
10.12, UPC, Capital and FBI represent and warrant to each other that they have
employed no broker, investment banker 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, investment banker 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 FBI or any FBI
Subsidiary, UPC and Capital will be without an adequate remedy at law by reason
of the unique nature of FBI and each FBI Subsidiary. In recognition thereof,
in addition to (and not in lieu of) any remedies at law which may be available
to UPC and Capital, UPC and Capital 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 FBI or any FBI
Subsidiary, and no attempt on the part of UPC or Capital to obtain such
equitable relief shall be deemed to constitute an election of remedies by UPC
or Capital which would preclude UPC or Capital from obtaining any remedies at
law to which it would otherwise be entitled. FBI and each FBI Subsidiary
covenant that they shall not contend in any such proceeding that UPC or Capital
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),
REORGANIZATION AGREEMENT - PAGE 57
<PAGE> 227
EXHIBIT A
PLAN OF MERGER
SETTING FORTH THE PLAN OF MERGER
OF
FINANCIAL BANCSHARES, INC.
(A MISSOURI CORPORATION)
WITH AND INTO
CAPITAL BANCORPORATION, INC.
(A TENNESSEE CORPORATION)
THIS PLAN OF MERGER (the "Plan of Merger") is made and entered into as
of the 27th day of June, 1996, by and between FINANCIAL BANCSHARES, INC.
("FBI"), a corporation chartered and existing under the laws of the State of
Missouri which is a registered bank holding company and whose principal offices
are located at 3805 South Broadway, St. Louis, Missouri 63701; 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 of 1956; and CAPITAL
BANCORPORATION, INC.("Capital"), a corporation chartered and existing under the
laws of the State of Tennessee, whose principal place of business is located at
7130 Goodlett Farms Parkway, Memphis, Shelby County, Tennessee 38018. All of
the authorized, issued and outstanding shares of capital stock of Capital are
owned and held of record by UPC.
PREAMBLE
WHEREAS, UPC, Capital and FBI have entered into an Agreement and Plan
of Reorganization dated as of the 27th day of June, 1996 (the "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 FBI with and
into Capital (which would be the Surviving Corporation) and the acquisition of
all of the FBI Common Stock outstanding immediately prior to the Effective Time
of the Merger by UPC for the Consideration set forth in the Reorganization
Agreement and in this Plan of Merger; and
WHEREAS, As provided in the Reorganization Agreement, UPC has caused
Capital to join in this Plan of Merger by executing and delivering same; and
WHEREAS, The Boards of Directors of UPC, Capital and FBI are each of
the opinion that the interests of their respective corporations and their
corporations' respective shareholders would best be served if FBI were to be
merged with and into Capital (the "Surviving Corporation") which would survive
the Merger, on the terms and conditions provided in the Reorganization
Agreement and in this Plan of Merger and, upon such Merger becoming effective,
the Surviving Corporation would continue as a wholly-owned subsidiary of UPC.
NOW, THEREFORE, in consideration of the covenants and agreements of
the Parties contained herein, FBI, UPC and Capital hereby make, adopt and
approve this Plan of Merger in order to
REORGANIZATION AGREEMENT AND PLAN OF MERGER - Page 59
<PAGE> 228
set forth the terms and conditions for the merger of FBI with and into Capital,
the survivor thereof (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 CAPITAL BANCORPORATION, INC. The authorized capital stock of
Capital consists of 1,000 shares of common stock having a par value of $1.00
per share (the "Capital Common Stock") and no shares of preferred stock. As of
the date of this Plan of Merger, 1,000 shares of Capital Common Stock are
issued and outstanding and no shares of Capital Common Stock are held by it as
treasury stock. All of such issued and outstanding shares of Capital Common
Stock are owned beneficially and of record by UPC.
2.2 FINANCIAL BANCSHARES, INC. The authorized capital stock of
FBI consists of 3,000,000 shares of common stock having a par value of one cent
($0.01) per share (the "FBI Common Stock"). As of the date hereof, 684,377
shares of FBI Common Stock were issued and outstanding and 15,000 shares of FBI
Common Stock were reserved for issuance upon exercise of FBI Stock Options
issued and outstanding as of the date hereof in connection with FBI's Stock
Option Plan. 9,154 shares of FBI Common Stock were held by FBI as FBI Treasury
Stock
ARTICLE 3
PLAN OF MERGER
3.1 Constituent Corporations. The name of each constituent
corporation to the Merger is:
CAPITAL BANCORPORATION, INC.
and
FINANCIAL BANCSHARES, INC.
3.2 Surviving Corporation. The Surviving Corporation shall be:
CAPITAL BANCORPORATION, INC.
the name of which shall, at the Effective Time of the Merger, continue to be:
CAPITAL BANCORPORATION, INC.
3.3 Terms and Conditions of Merger. The Merger shall be
consummated only pursuant to, and in accordance with, this Plan of Merger and
the Reorganization Agreement. Conditioned upon the satisfaction or lawful
waiver (by the Party or Parties entitled to the benefit thereof) of all
conditions precedent to consummation of the Merger, the Merger shall become
effective on the date and at the time of filing of Articles of Merger and this
Plan of Merger with the Secretary of State of the State of Tennessee, or at
such later date and time as shall be specified in such Articles of Merger (the
"Effective Time of the Merger"). At the Effective Time of the Merger, FBI
shall be merged with and into Capital
REORGANIZATION AGREEMENT AND PLAN OF MERGER - Page 60
<PAGE> 229
which shall survive the Merger, whereupon the separate existence of FBI
shall cease and Capital and FBI shall become and be a single corporation with
Capital as the Surviving Corporation as provided in Section 48-21-108 of the
Tennessee Code Annotated (the "Tennessee Code"). Thereafter the Surviving
Corporation shall possess all of the assets, rights, privileges, appointments,
powers, licenses, permits and franchises of both FBI and Capital, whether of a
public or private nature, and shall be subject to all of the liabilities,
restrictions, disabilities, and duties of both FBI and Capital as more
particularly described in ARTICLE 4 below.
3.4 Charter. At the Effective Time of the Merger, the Charter of
Capital, as in effect immediately prior to the Effective Time of the Merger,
shall continue to be the Charter of Capital as the Surviving Corporation unless
and until the same shall be amended as provided by law and the terms of such
Charter.
3.5 Bylaws. At the Effective Time of the Merger, the Bylaws of
Capital, 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 provided by law, its Charter or such Bylaws.
3.6 Directors and Officers.
(a) The then current directors and officers of the Surviving
Corporation shall continue to serve in such capacities at the Effective Time of
the Merger, each to hold office as provided in the Charter and Bylaws of the
Surviving Corporation unless and until their respective successors shall have
been elected and shall have qualified or they shall be removed as provided
therein.
3.7 Name. At the Effective Time of the Merger, the name of
Capital as the Surviving Corporation shall remain:
CAPITAL BANCORPORATION, INC.
ARTICLE 4
DESCRIPTION OF THE TRANSACTION
4.1 Terms of the Merger.
(a) Satisfaction of Conditions to Closing. After the
transactions contemplated in the Reorganization Agreement shall have been
approved by the shareholders of FBI and Capital 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) shall have
been satisfied or, if lawfully permitted, waived by the Party or Parties
entitled to the benefits thereof, a closing (the "Closing") shall be held on
the date (the "Closing Date") and at the time of day and place referred to in
Section 3.2 of the Reorganization Agreement.
(b) Effective Time of the Merger. Upon the satisfaction
of all conditions to Closing, the Merger shall become effective on the date and
at the time of filing Articles of Merger and this Plan of Merger with the
Secretary of State of the States of Tennessee and Missouri, or at such later
date and time as shall be specified in such Articles of Merger (the "Effective
Time of the Merger").
(c) Shares of Capital to Remain Outstanding. At the
Effective Time of the Merger, each share of $1.00 par value common stock of
Capital (the "Capital Common Stock") which shall be issued and outstanding
immediately prior to the Effective Time of the Merger shall remain outstanding
as one share of the issued and outstanding common stock of the Surviving
Corporation.
REORGANIZATION AGREEEMENT AND PLAN OF MERGER - Page 61
<PAGE> 230
(d) Cancellation and Conversion of Outstanding Shares of
FBI Common Stock. At the Effective Time of the Merger, each share of common
stock of FBI having a par value of one cent ($0.01) per share (the "FBI Common
Stock") which shall be 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 4.1(e) hereof.
(e) Conversion and Exchange of Shares of FBI Common
Stock; Exchange Ratio. At the Effective Time of the Merger, all outstanding
shares of FBI Common Stock held by the FBI 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 FBI and shall, except for those shares held by any FBI Record Holders who
shall have properly perfected such Holders' dissenters' rights and shall have
maintained the perfected status of such dissenters' rights through the
Effective Time of the Merger, automatically be converted exclusively into, and
constitute only the right of each FBI Record Holder to receive in exchange for
such holder's shares of FBI Common Stock, whole shares of UPC Common Stock and
a cash payment in settlement of any fractional share of UPC Common Stock which
shall remain after aggregating all whole and fractional shares of UPC Common
Stock to which the FBI Record Holder is entitled as provided in this Section
4.1(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 FBI
Record Holders pursuant to the terms of the Reorganization Agreement and this
Plan of Merger are sometimes collectively referred to herein as the
"Consideration."
(1) THE EXCHANGE RATIO. Subject to any
adjustments which may be required by an event described in Subsection
4.1(e)(3) below, the number of shares of UPC Common Stock to be
exchanged for each share of FBI Common Stock which shall be issued and
outstanding immediately prior to the Effective Time of the Merger
shall be based on an exchange ratio (the "Exchange Ratio") of 1.7444
shares of UPC Common Stock for each share of FBI Common Stock which
shall be validly issued and outstanding immediately prior to the
Effective Time of the Merger. The Exchange Ratio specified in this
Section 4.1(e) is based upon there being no more than an aggregate of
699,377 fully diluted shares of FBI Common Stock validly issued and
outstanding immediately prior to the Effective Time of the Merger
(which for the purposes of the Exchange Ratio shall be determined by
counting all FBI Stock Options issued and outstanding immediately
prior to the Effective Time of the Merger as outstanding shares of FBI
Common Stock). Therefore, assuming all FBI Stock Options had been
exercised prior to the Effective Time of the Merger, the maximum
aggregate number of shares of UPC Common Stock which UPC would be
required to issue in exchange for all outstanding shares of FBI Common
Stock would be 1,220,000 shares of UPC Common Stock. FBI Common Stock
held by any FBI Company, other than in a fiduciary capacity or as a
result of debts previously contracted, shall not be considered as
outstanding immediately prior to the Effective Time of the Merger for
purposes of the Exchange Ratio, and at the Effective Time of the
Merger such shares shall be cancelled and retired and no Consideration
shall be issued in exchange therefor. Further, no fractional shares
of UPC Common Stock shall be issued in the Merger and if, after
aggregating all of the whole and fractional shares of UPC Common Stock
to which a FBI Record Holder shall be entitled based upon the Exchange
Ratio, there should 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 4.1(f) hereof, which cash settlement shall be based
upon the Current Market Price Per Share (as defined below) of one (1)
full share of UPC Common Stock.
REORGANIZATION AGREEMENT AND PLAN OF MERGER - Page 62
<PAGE> 231
(2) DEFINITION OF "CURRENT MARKET PRICE PER
SHARE." The "Current Market Price Per Share" shall be the "last" real
time trade (i.e., the "closing price") per share of the UPC Common
Stock on the New York Stock Exchange ("NYSE") Consolidated Tape (the
information as published in The Wall Street Journal, Midwestern
Edition) on the last trading date prior to the Effective Date of the
Merger.
(3) EFFECT OF STOCK SPLITS, REVERSE STOCK SPLITS,
STOCK DIVIDENDS AND SIMILAR CHANGES IN THE CAPITAL OF FBI. Should FBI
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, or should there be more than 699,377 fully diluted
shares of FBI Common Stock outstanding immediately 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. Notwithstanding the foregoing, nothing in this
subparagraph(3) shall be deemed to be a waiver of the inaccuracy of
any representation or warranty or breach of any covenant by FBI or any
FBI Company set forth herein.
(f) Mechanics of Payment of Consideration. As soon as
reasonably practicable after the Effective Time of the Merger and the receipt
by UPC of a certified list of all of the FBI Record Holders from FBI's exchange
agent, the Corporate Trust Department of Union Planters National Bank, Memphis,
Tennessee (the "Exchange Agent") shall deliver to each of the FBI Record
Holders such materials and information as may be deemed necessary by the
Exchange Agent to advise the FBI Record Holders of the procedures required for
proper surrender of their certificates formerly evidencing and representing
shares of the FBI Common Stock in order for the FBI Record Holders to receive
the Consideration. Such materials shall include, without limitation, a Letter
of Transmittal and an Instruction Sheet (collectively the "Shareholder
Materials"). All Shareholder Materials shall be sent by First Class United
States mail to the FBI Record Holders at the addresses set forth on a certified
shareholder list to be delivered by FBI to UPC at the Closing (the "Certified
FBI Shareholder List"). As soon as reasonably practicable thereafter, the FBI
Record Holders of all of the outstanding shares of FBI Common Stock, shall
deliver, or cause to be delivered, to the Exchange Agent, pursuant to the
Shareholder Materials, the certificates formerly evidencing and representing
all of the shares of FBI 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 FBI Common Stock received by it (including the prompt
return of any defective submissions with instructions as to those actions which
the Exchange Agent may deem necessary to remedy any defects). Upon receipt of
the proper submission of the certificate(s) formerly representing and
evidencing ownership of the shares of FBI Common Stock, the Exchange Agent
shall mail to the former FBI Record Holders in exchange for the certificate(s)
surrendered by them, the Consideration to be paid for each such FBI Record
Holder's shares of FBI 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 FBI Common Stock of a FBI 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 FBI Record Holder's shares of FBI 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 FBI Record Holder's
FBI Common Stock shall have been properly surrendered as provided above, the
Consideration payable to the FBI Record Holder(s) of the cancelled shares as of
any time after the Effective Date shall not be paid to the FBI Record Holder(s)
of such certificate(s) until such certificates shall have been surrendered in
the manner required. No dividends
REORGANIZATION AGREEMENT AND PLAN OF MERGER - Page 63
<PAGE> 232
or other distributions which shall otherwise be payable on the shares
of UPC Common Stock constituting the Consideration shall be paid to any FBI
Record Holders entitled to receive such shares until such persons shall have
surrendered in accordance with the Shareholder Materials their certificates
formerly representing shares of FBI Common Stock. Upon such proper surrender,
there shall be paid to such person in whose name the shares of UPC Common Stock
shall be issued any dividends or other distributions, the record date of which
shall have occurred between the Effective Time of the Merger and such
surrender, with respect to such shares of UPC Common Stock, without interest
thereon. Each FBI Record Holder will be responsible for all federal, state and
local taxes which may be incurred by him or her on account of his receipt of
the Consideration to be paid in the Merger. The FBI Record Holder(s) of any
certificate(s) which shall have been lost or destroyed may nevertheless,
subject to the provisions of this Section 4.1(f), receive the Consideration to
which each such FBI Record Holder is entitled, provided that each such FBI
Record Holder shall deliver to UPC and to the Exchange Agent: (i) a sworn
statement certifying the fact of 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 shall have 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 FBI
Record Holder.
4.2 Transfer of Assets. At the Effective Time of the Merger,
Capital, as the Surviving Corporation, shall thereupon and thereafter possess
all of the rights, assets, licenses, permits, privileges, immunities,
franchises and other similar interests, as well of a public as of a private
nature, of both of Capital and FBI; and all property, whether real personal, or
mixed, and whether tangible or intangible, and whether liquidated or
unliquidated, and whether real or contingent; and all debts due on whatever
account, including subscriptions to shares, and all other choses in action, and
all and every other interest, of or belonging to or due to each of Capital and
FBI, shall be taken and deemed to be transferred to, and vested in Capital as
the Surviving Corporation without further act, deed, conveyance, assignment or
other instrument of transfer, all as provided in Section 48-23-108(2) of the
Tennessee Code; and the title to any real estate, or any interest therein,
under the laws of the State of Missouri vested in Capital or FBI as the merging
corporations, shall not revert or be in any way impaired by reason of such
Merger as provided in Section 351.450(4) of the Missouri Code.
4.3 Assumption of Liabilities. Following the Effective Time of
the Merger, the Surviving Corporation shall thenceforth be responsible and
liable for all of the debts, liabilities, obligations and contracts of both
Capital and FBI, 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 Capital, or FBI; and any claim existing or action or
proceeding pending against either of such corporations may be prosecuted to
judgment as if such Merger had not taken place, or Capital as such Surviving
Corporation may be substituted in its place. Neither the rights of creditors
nor any liens upon the property of Capital or FBI shall be impaired by their
Merger, all as provided in Section 48-21-108(3) of the Tennessee Code.
4.4 Dissenters' Rights of FBI Shareholders. Any FBI Record Holder
of shares of FBI Common Stock who shall comply strictly with the provisions of
Section 351.455 of the Missouri Code, shall be entitled to dissent from the
Merger and to seek those appraisal remedies afforded by the Missouri Code. A
FBI Record Holder who shall have perfected such holder's "Dissenter's Rights"
is referred to herein as an "FBI Dissenting Shareholder." UPC and Capital
shall not be obligated to consummate the Merger if FBI Record Holders holding
or controlling more than ten percent (10%) of the shares of the FBI Common
Stock issued and outstanding immediately prior to the Effective Time of the
Merger shall have
REORGANIZATION AGREEMENT AND PLAN OF MERGER - Page 64
<PAGE> 233
perfected and maintained in perfected status their Dissenters' Rights
in accordance with the Missouri Code and the perfected status of said
Dissenters' Rights shall have continued to the time of Closing.
4.5 Approvals of Shareholders of FBI and Capital. In order to
become effective, the Merger must be approved by the respective shareholders of
FBI and of Capital 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 Missouri and Tennessee.
4.6 FBI Stock Options. At the Effective Time of the Merger,
the FBI Stock Option Plan and any FBI Stock Options issued and outstanding
shall be affected as follows:
(a) Continuation of the FBI Stock Option Plan.
The FBI Stock Option Plan shall continue in effect but no additional FBI Stock
Options shall be available for grant thereunder. At the Effective Time of the
Merger, each outstanding FBI Stock Option shall continue outstanding as an
option to purchase, in place of the purchase of a share of FBI Common Stock,
that number of shares (rounded down to the nearest whole share) of UPC Common
Stock that would have been received by the optionee in connection with the
Merger had such option been exercised in full (without regard to any
limitations contained thereon on exercise) for shares of FBI Common Stock
immediately prior to the Effective Time of the Merger upon the same terms and
conditions under the relevant option as were applicable immediately prior to
the Effective Time of the Merger, except (i) that all such FBI Stock Options
shall be immediately exercisable and (ii) for appropriate pro rata adjustments
as to the relevant option price for shares of UPC Common Stock substituted
therefor so that the aggregate option exercise price of shares subject to an
option immediately following the assumption and substitution shall be the same
as the aggregate option exercise price for such shares immediately prior to
such assumption and substitution. UPC, Capital and FBI agree to take such
actions as shall be necessary to give effect to the foregoing. At all times
after the Effective Time of the Merger, UPC shall reserve for issuance such
number of shares of UPC Common Stock as necessary so as to permit the exercise
of any FBI Stock Options granted under the FBI Stock Option Plans and which
were unexercised prior to the Effective Time of the Merger in the manner
contemplated by this Reorganization Agreement and the instruments pursuant to
which the FBI Stock Options were granted. UPC shall make all filings required
under the Securities Laws so as to permit the exercise of such FBI Stock
Options and the sale or transfer of the shares of UPC Common Stock received by
the optionee upon such exercise.
(b) Reclassification, etc. In case of any
reclassification, reorganization, recapitalization, stock dividend or
distribution, subdivision, combination or exchange of the outstanding shares of
the UPC Common Stock or in case of any consolidation or merger of UPC with or
into any other corporation, or in the case of any sale or transfer of all or
substantially all of UPC's assets, then the rights of the optionees under the
FBI Stock Option Plan shall be appropriately adjusted so that the optionees
will be in the same position as if their options had been exercised immediately
before such corporate action or transaction. The provisions hereof shall
similarly apply to successive reclassifications, reorganizations,
recapitalizations, stock dividends or distributions, subdivisions, combinations
or exchanges, consolidations, mergers, sales or transfers.
(c) Limited Obligations. Nothing contained in
the Reorganization Agreement, this Plan of Merger, or in the other
documentation of the proposed transaction shall be deemed to have reduced,
contracted, enlarged, ratified, affirmed, undertaken, authorized, approved or
otherwise to have affected whatever contractual rights the holders of FBI Stock
Options may have under applicable documentation other than as expressly stated
in the Reorganization Agreement and this Plan of Merger with respect to the
outstanding FBI Stock Options identified herein which are validly issued and
outstanding under the FBI Stock Option Plan at the Effective Time of the
Merger.
REORGANIZATION AGREEMENT AND PLAN OF MERGER - Page 65
<PAGE> 234
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 Capital as set forth in Sections
2.5 and 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 FBI 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 FBI
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
shares of UPC Common Stock and, with respect to any fractional share remaining
after aggregating all whole and fractional shares of a FBI Record Holder, cash
or good funds to make payment of the Consideration as provided in Section
3.1(e) of the Reorganization Agreement at any time after the Shareholders'
Meeting without the requisite approval (except as provided for in the
Reorganization Agreement) of the FBI Record Holders of the shares of FBI Common
Stock outstanding immediately prior to the Effective Time of the Merger 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. UPC shall have
the unilateral right to revise the structure of the corporate reorganization
contemplated by the Reorganization Agreement and this Plan of Merger 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 Board of Directors of FBI, to make any revision to the structure of the
Reorganization which (i) changes the amount of the Consideration which the FBI
Record Holders are entitled to receive [determined in the manner provided in
Section 3.1(e) of the Reorganization Agreement and Section 4.1(e) hereof]; (ii)
changes the intended tax-free effect of the Merger to UPC, Capital, FBI or to
any FBI Shareholder or FBI Subsidiary; (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 the Reorganization
Agreement); or (iv) materially adversely affects the economic benefits of the
transaction from the perspective of the FBI Record Holders. UPC may exercise
this right of revision by giving written Notice to FBI in the manner provided
in Section 10.1 of the Reorganization Agreement, which Notice shall be in the
form of an amendment to the Reorganization Agreement and/or this Plan of Merger
or in the form of an Amended and Restated Agreement and Plan of Reorganization
and/or Plan of Merger.
Prior to the Effective Time of the Merger, UPC and Capital, acting
through their respective Boards of Directors or chief executive officers or
presidents or other authorized officers, shall have the right to amend this
Plan of Merger to postpone the Effective Time of the Merger to a date and time
subsequent to the time of filing of the Plan of Merger with the Tennessee
Secretary of State, to waive any default in the performance of any term of this
Plan of Merger by FBI, to waive or extend the time for the compliance or
fulfillment by FBI 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 Capital 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, FBI, 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 Tennessee Secretary of State, to waive
any default in the performance of any term of this Plan of Merger by UPC or
Capital, to waive or extend the time for the compliance or fulfillment by UPC
or Capital 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 FBI under
this Plan of Merger except any
REORGANIZATION AGREEMENT AND PLAN OF MERGER - Page 66
<PAGE> 235
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:
<TABLE>
<S> <C>
If to UPC or Capital: Union Planters Corporation
Post Office Box 387 (for mailing)
Memphis, Tennessee 38147
7130 Goodlett Farms Parkway (for deliveries)
Memphis, Tennessee 38018
Fax: (901) 383-2877
Attn: Mr. Jackson W. Moore, President
E. James House, Jr., Esquire, Secretary
With a copy to: Wyatt, Tarrant & Combs, P.L.C.
Post Office Box 775000 (for mailing)
Memphis, TN 38177-5000
6075 Poplar Avenue (Suite 650) (deliveries)
Memphis, TN 38119
Fax: (901) 537-1010
Attn: R. Nash Neyland, Esq.
If to FBI: Financial Bancshares, Inc.
3805 South Broadway
St. Louis, Missouri 63118
Fax: (314) 664-0426
Attn: Arthur E. S. Schmid
Chairman and C.E.O.
With a copy to: Armstrong, Teasdale, Schlafly & Davis
One Metropolitan Square
Suite 2600
St. Louis, Missouri 63102-2740
Fax: (314) 621-5065 or 5066
Attn: Bruce E. Woodruff, Esq.
</TABLE>
or to such other address as any Party hereto may hereafter designate to the
other Parties in writing pursuant to this Section 6.1. 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.
6.2 Governing Law. The Reorganization Agreement and this
Plan of Merger shall be governed by, and construed and enforced in accordance
with, the internal laws, and not the laws
REORGANIZATION AGREEMENT AND PLAN OF MERGER - Page 67
<PAGE> 236
pertaining to choice or conflicts of laws, of the State of Tennessee, unless
and to the extent that federal law controls.
6.3 Captions. The Captions heading the Sections in this Plan
of Merger are for convenience only and shall not affect the construction or
interpretation of this Plan of Merger.
6.4 Counterparts. This Plan of Merger may be executed in two
or more counterparts, each of which shall be deemed an original instrument, but
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the Parties hereto has caused this Plan
of Merger to be executed and delivered in its name and on its behalf by its
representatives thereunto duly authorized, all as of the date first written
above.
FINANCIAL BANCSHARES, INC.
By: /s/ Clifford A. Schmid
------------------------------------
Clifford A. Schmid
Its: President
ATTEST:
/s/ Virginia A. Renz
- ---------------------------
- --------------------------------------, Secretary
UNION PLANTERS CORPORATION
By: /s/ Benjamin W. Rawlins
-------------------------------------
Benjamin W. Rawlins
Its: Chairman & CEO
ATTEST:
/s/ R. Nash Neyland
- ---------------------------
- --------------------------------------, Secretary
CAPITAL BANCORPORATION, INC.
By: /s/ Jackson W. Moore
------------------------------------
Jackson W. Moore
Its: President
ATTEST:
/s/ R. Nash Neyland
- ---------------------------
- --------------------------------------, Secretary
REORGANIZATION AGREEMENT AND PLAN OF MERGER - Page 68
<PAGE> 237
FIRST AMENDMENT
TO
AGREEMENT AND PLAN OF REORGANIZATION
and
PLAN OF MERGER
DATED AS OF JUNE 27, 1996
BETWEEN
UNION PLANTERS CORPORATION and
CAPITAL BANCORPORATION, INC.
AND
FINANCIAL BANCSHARES, INC
Dated as of the 6th day of September, 1996
<PAGE> 238
This First Amendment dated as of September 6, 1996 ("Amendment") to
the Agreement and Plan of Reorganization dated as of June 27, 1996
("Reorganization Agreement") between Union Planters Corporation ("UPC"),
Capital Bancorporation, Inc., a wholly-owned subsidiary of UPC ("Capital") and
Financial Bancshares, Inc. ("FBI") is being entered into and adopted for the
purpose of amending the Exchange Ratio set forth in Section 3.2(e) of the
Reorganization Agreement and Section 4.1(e) of the Plan of Merger attached as
Exhibit A to the Reorganization Agreement ("Plan of Merger"), and certain
related numbers contained in the Reorganization Agreement and Plan of Merger.
Capitalized terms used and not otherwise defined in this Agreement shall have
the same meanings as such terms are given in the Reorganization Agreement.
WHEREAS, pursuant to Section 3.2(e) of the Reorganization Agreement
and Section 4.1(e) of the Plan of Merger, the Exchange Ratio was initially
established at 1.7444 shares of UPC Common Stock for each share of FBI Common
Stock, based on the assumption that immediately prior to the Effective Time of
the Merger there would be no more than 699,377 fully diluted shares of FBI
Common Stock outstanding, counting shares of FBI Common Stock that were subject
to being issued under outstanding FBI Stock Options as being outstanding, and
that the maximum aggregate number of shares of UPC Common Stock that would be
issued in the Merger was limited to 1,220,000 shares; and
WHEREAS, the Parties have determined that the establishment of the
Exchange Ratio was based on a misunderstanding regarding certain facts relative
to stock based payments to be made under the FBI Stock Option Plan and that the
Exchange Ratio should be adjusted as hereinafter set forth, which in turn
requires an amendment to the number of fully diluted shares upon which the
Exchange Ratio was based and the maximum number of shares that could be issued
in the Merger.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties agree as follows:
ARTICLE 1
1.1 Authorization, Execution and Delivery; Amendment Not in Breach.
Each of UPC and Capital represents and warrants to
FBI, and FBI represents and warrants to UPC and Capital, that it has all
requisite corporate power and authority to execute and deliver this Amendment;
that this Amendment has been (or upon execution will have been) duly executed
and delivered by it and has been (or upon execution will have been) duly
authorized by all necessary action by it, corporate or otherwise, and no other
corporate proceedings on its part is (or will be) necessary to authorize such
execution and delivery; and that this Amendment constitutes (or upon execution
will constitute) its legal, valid and enforceable obligation subject, as to
<PAGE> 239
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.
1.2 Amendment to Sections 3.2(e) and 5.19 of Reorganization Agreement and
Section 4.1(e) of the Plan of Merger.
Sections 3.2(e) and 5.19 of the Reorganization Agreement and Section
4.1(e) of the Plan of Merger are each amended where necessary to reflect that
the Exchange Ratio shall be 1.7415 in the place and instead of 1.7444; that the
number of fully diluted shares which FBI may have issued and outstanding at the
Effective Time of the merger shall be 706,877 instead of 699,377; that the
determination of the number of fully diluted shares shall take into account the
7,500 stock appreciation rights granted under the FBI Stock Option Plan as if
they were FBI Stock Options; and that the maximum number of shares of UPC
Common Stock that UPC would be required to issued in the Merger shall be
1,231,000 instead of 1,220,000.
IN WITNESS WHEREOF, each of the Parties hereto has duly caused this
Amendment to be executed and delivered in its name and on its behalf by its
representative thereunto duly authorized, as of the 6th day of September, 1996.
FINANCIAL BANCSHARES, INC.
ATTEST:
by:/s/ Virginia A. Renz by:/s/ Clifford A. Schmid
------------------------- ---------------------------------
its: Secretary its: President
---------------------- -----------------------------
UNION PLANTERS CORPORATION
ATTEST:
/s/ E. James House /s/ Jackson W. Moore
- -------------------------- ---------------------------------
E. JAMES HOUSE, Secretary JACKSON W. MOORE
President and Chief Operating Officer
CAPITAL BANCORPORATION, INC.
ATTEST:
/s/ Lynn Lanigan /s/ Jackson W. Moore
- -------------------------- ----------------------------------
Lynn Lanigan, Secretary JACKSON W. MOORE
President
<PAGE> 240
APPENDIX C
[LOGO]
June 27, 1996
Financial Bancshares, Inc.
3805 South Broadway
St. Louis, MO 63118
Re: Social Issues relative to the Proposed Merger
Gentlemen:
We have today entered into an Agreement and Plan of Reorganization
(the"Agreement") between Union Planters Corporation, Capital Bancorporation,
Inc., a Tennessee corporation and wholly-owned subsidiary of Union Planters
Corporation (Union Planters and Capital Bancorporation, Inc. being collectively
referred to as UPC), and Financial Bancshares, Inc. ("FBI"). This letter
("Letter Agreement") sets forth certain additional agreements, commitments and
undertakings of each of the above parties and each of such parties agrees that
this Letter Agreement is an integral part of the Agreement. All terms used
herein without definition shall have the same meanings as ascribed to such
terms in the Agreement.
Accordingly, in consideration of the parties having entered into the
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is hereby further agreed that:
1. EMPLOYMENT/CONSULTING ISSUES.
a. Following the Effective Time of the Merger, UPC shall
either honor all existing Employment Agreements and Management Continuity
Agreements in force as of the date hereof at FBI, or cause the appropriate UPC
subsidiary to enter into new, mutually acceptable employment agreements with
those employees of FBI and its Subsidiaries who are parties to such Employment
Agreements and Management Continuity Agreements who remain with a UPC
Subsidiary and who choose to enter into the new agreements with the UPC
subsidiary.
b. At and after the Effective Time of the Merger, Arthur
E. S. Schmid and Cliff Schmid, at an annual fee of $45,000 and $42,000,
respectively, will retire from active employment, and the surviving corporation
in the Merger will enter into separate three year consulting agreements with
each of Arthur E. S. Schmid and Cliff Schmid containing the following terms and
such other provisions as are mutually agreed upon by the parties: (i) an
automobile allowance to be applied to the lease of an automobile mutually
agreed upon by the
<PAGE> 241
parties for a period of up to three years; (ii) reimbursement of expenses
related to membership in a country club or a luncheon club mutually agreed upon
by the parties; and (iii) group hospitalization, medical and other employee
benefits, including, but not limited to, the UPC Post-Retirement Benefit Plan,
as are available to employees of UPC holding comparable positions, all as more
particularly described in Paragraph 3c of the Letter Agreement. In the event
that the Effective Time of Merger occurs prior to December 31, 1996, UPC agrees
to allow Cliff Schmid to remain an active employee until December 31, 1996,
when he becomes fully vested in the Supplementary Plan (as hereinafter
defined), at which time Mr. Schmid shall retire.
c. Certain Executives. It is contemplated that after
the Effective Time of Merger, Joseph Gooch will become a senior executive of
UPC's subsidiary bank headquartered in Cape Girardeau, Missouri and that Ed
Vega will become the Chief Financial Officer, or similar financial executive,
at UPC's subsidiary headquartered in St. Louis, Missouri.
2. MANAGEMENT CONTINUITY AGREEMENTS. UPC hereby acknowledges the
existence of Management Continuity Agreements between FBI and each of Joseph
Gooch, Mike Pabst, Jack Huffman, Don Palish, Dave Brewer, Danny Griffin, Ginnie
Renz, Ed Vega and Edwin Schmid. At and after the Effective Time of Merger, UPC
will cause such contracts EITHER to be honored or cause the execution of
appropriate replacement agreements which are mutually agreeable to the parties.
3. BENEFIT PLANS.
a. Supplementary Pension Plan. To the extent not
prohibited by applicable law, after the Effective Time of the Merger FBI shall
establish a Rabbi Trust or similar funding arrangement and reserve and fund up
to $500,000 in the aggregate into such trust or funding arrangement for the
purpose of providing funding for FBI's Supplementary Pension Plan (the
"Supplementary Plan") which after the Effective Time of the Merger shall remain
in effect for the benefit of those individuals whose names are set out in
Exhibit A attached hereto, such individuals being all of the persons enrolled
in or entitled to benefits under such Supplementary Plan. Effective at the
Effective Time of the Merger, the accrual of all benefits and rights thereto
under the Supplementary Plan shall cease and become fixed in the amount equal
to the then existing value of such benefits. After the Effective Time of the
Merger, UPC will not amend the Supplementary Plan except to the extent
necessary to comply with applicable law or to give effect to the provisions of
this Letter Agreement. Prior to the Effective Time of the Merger, to the
extent not prohibited by applicable law, FBI shall take such steps as it deems
necessary or appropriate to amend the Supplementary Plan to conform to the
relative provisions of this Letter Agreement. UPC has agreed to allow the
Supplementary Plan to remain in existence after the Effective Time of the
Merger, subject to the terms hereof, based on representations made to it by FBI
that the aggregate funding obligation for the Supplementary Plan under the
circumstances would not exceed $500,000 based on an assumed discount rate of
seven percent (7%) on funds invested under the Supplementary Plan and the
present value of the benefits to be paid under the Supplementary Plan. UPC
understands that the aggregate amount of benefit payments under the
Supplementary Plan may ultimately exceed the $500,000 currently necessary to
cover the present value of accrual of benefits under the Supplementary Plan.
UPC further agrees that for purposes of determining FBI's compliance with
Section 8.2(i) of the
<PAGE> 242
Agreement, the funding of up to $500,000 for the Supplementary Plan shall not
be taken into account.
b. Pension Plan. After the Effective Time of Merger,
there shall be no further accrual of benefits under FBI's Pension Plan as in
effect on the date hereof (the "Pension Plan"), and FBI shall take such steps
as are necessary or practicable to terminate the Pension Plan as soon as
reasonably practicable after the Effective Time of the Merger. Prior to the
Effective Time of the Merger, FBI shall take such steps as are appropriate or
necessary to determine the costs of terminating the Pension Plan, including,
but not limited to, the amount needed to fully fund the Pension Plan in the
event of the anticipated termination and any penalties or termination fees
associated therewith or in connection with the assets held therein. FBI shall
coordinate with the Human Resources Department of UPC to ascertain, as close as
reasonably practicable, the costs of terminating the Pension Plan and prior to
the Effective Date of the Merger, FBI shall fully reserve for all such
anticipated costs and expenses prior to the Effective Date of the Merger. Upon
termination of the FBI Pension Plan, employees of FBI who are participants in
such Pension Plan will, to the extent provided under such plan and by
applicable law, become fully vested in and eligible to receive benefits under
such plan to the extent required therein and by applicable law. To the extent
permitted by the Pension Plan and applicable law, FBI shall distribute all
vested accrued benefits to plan participants as soon as reasonably practicable
following the termination of the Pension Plan in the manner required by
applicable law. FBI shall obtain such regulatory determinations regarding the
termination of the Pension Plan as may be appropriate to insure the qualified
status of such plan (and related trust) under the Internal Revenue Code. Upon
the election of any participant, any vested accrued benefit under the Pension
Plan may be transferred to UPC' 401(k) retirement savings plan.
c. Medical, Life and Related Employee Welfare Benefits.
After the Effective Time of the Merger, the continuing employees of FBI shall
be immediately 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. UPC shall provide full
coverage under its group medical, dental, flex benefits, severance, disability,
and life insurance plans. For purposes of eligibility, benefit accrual and
vesting, FBI employees shall receive full service credit for service at FBI
prior to the Effective Date of the Merger. After the Effective Time of Merger,
FBI, in coordination with UPC's Human Resources Department, shall take such
steps as are necessary to terminate all such employee welfare benefits plans it
maintained for its employees immediately prior to the Effective Time of the
Merger. Prior to the Effective Time of the Merger, FBI shall fully reserve for
all costs and expenses related to such employee welfare benefit plans, and the
termination thereof, as well as for all costs related thereto which would
continue after the Effective Time of Merger, including, but not limited to,
costs arising under or pursuant to the Consolidated Omnibus Budget
Reconciliation Act and reserves required for post-termination benefits.
d. Accrued Vacation and Sick Leave. Notwithstanding
anything to the contrary above, beginning with the calendar first year
following the Effective Time of the Merger, FBI employees shall become subject
to Union Planters' policies and procedures relative to accrued vacation, sick
leave and other paid time-off benefits. For the remainder of the calendar year
in which the Effective Time of the Merger occurs, however, all existing FBI
<PAGE> 243
vacation, sick leave and other paid time-off benefits will remain in force and
effect as to the then former FBI employees and shall be administered in
accordance with the terms of such plans and consistent with past practices. On
January 1st next following the Effective Time of the Merger, the FBI vacation,
sick leave and other paid time-off benefit plans and arrangements shall
terminate. In their place UPC's vacation, sick leave and other paid time-off
benefit plans, arrangements and policies shall become effective and applicable
to the then former FBI employees who are still employed by UPC or any of its
Subsidiaries. The applicable then former FBI employees will be given full
credit for prior service at FBI or any FBI subsidiary for purposes of
participation, vesting and benefit accrual under the terms of the UPC plans,
arrangements and policies; however, the applicable then former FBI employees
shall not be allowed to carryover or carryforward any accrued vacation, sick
leave or other paid time-off benefits under the former FBI plans and neither
FBI, any FBI Subsidiary, UPC nor any UPC Subsidiary shall pay for any of the
accrued vacation, sick leave other paid time-off days or benefits under the FBI
plans unless payment for lost accrued days or benefits is specifically provided
for in the respective plans as they exist on the date hereof. The agreement of
UPC to provide FBI employees with credit for prior service is based on the
representation by FBI that its vacation, sick leave and other paid time-off
benefit plans do not provide for payment of unused days or benefits upon
termination of the plans or should the employee's employment with FBI or any
FBI Subsidiary be terminated for any reason.
e. Incentive Compensation Plan. UPC acknowledges the
existence of FBI's incentive bonus plan arrangement and agrees that FBI shall
be able to pay the benefits under such plan so long as FBI or the applicable
FBI Subsidiaries fully reserve for such payments prior to the Effective Time of
the Merger and the plan is interpreted and implemented in accordance and
consistent with past practices, including, but not limited to, timing of
payments thereunder. To the extent any such payments thereunder would be made
after the Effective Time of the Merger, UPC will cause to appropriate payments
to be made by the entity surviving the Merger. Notwithstanding anything herein
or in the Agreement to the contrary, the total aggregate amount of bonuses that
may be granted or paid shall not exceed $365,110.
f. General/Pooling of Interests Concerns.
Notwithstanding anything in this Letter Agreement to the contrary, the rights
granted by UPC to FBI employees in connection with the Merger shall not in and
of themselves be construed in any way to be an employment contract with, or
right of employment by, FBI, UPC or any other subsidiary of UPC after the
Effective Time of the Merger. In addition, no rights or vesting in any stock,
pension, welfare, benefit or other benefit or welfare plan of FBI, including
the FBI Stock Option Plan, shall be accelerated or modified in contravention of
the accounting rules necessary to account for the Merger under the "pooling of
interest" method of accounting. To the extent that any employee benefit or
welfare benefit plan of FBI or the FBI Stock Option Plan provides for
acceleration of vesting rights upon consummation of the Merger, FBI shall take
such steps as are appropriate or necessary to amend such plan or arrangement if
such amendment were determined to be necessary to allow the Merger to be
accounted for under the "pooling of interests" method of accounting.
4. TIMING. Notwithstanding any other provision herein or in the
Agreement, FBI may take such actions on or before the Effective Time as are
necessary or appropriate to
<PAGE> 244
effectuate the purposes of this letter, including but not limited to (i) the
adoption and execution of agreements of agreements and amendments relating to
the plans, programs and agreements referenced herein, and (ii) the adoption and
execution of any amendment required by applicable law.
Upon execution of this Letter Agreement (or counterparts thereof) by
the parties hereto this Letter Agreement shall constitute an agreement between
the parties to be enforceable following the Effective Time of the Merger by
either party hereto or by any other party who is intended to be benefitted
hereunder.
UNION PLANTERS CORPORATION
By:/s/ Jackson W. Moore
-------------------------------
CAPITAL BANCORPORATION, INC.
By: /s/ Jackson W. Moore
-------------------------------
FINANCIAL BANCSHARES, INC.
By: /s/ Clifford A. Schmid
-------------------------------
<PAGE> 245
APPENDIX D
[LOGO]
September 12, 1996
The Board of Directors
c/o Mr. Arthur E. S. Schmid
Chairman of the Board of Directors
Financial Bancshares, Inc.
3805 South Broadway
St. Louis, Missouri 63118
Re: Fairness Opinion Regarding the Proposed Acquisition of Financial
Bancshares, Inc. by Union Planters Corporation
Dear Directors:
Mercer Capital Management, Inc. ("Mercer Capital") has been retained by the
Board of Directors of Financial Bancshares, Inc. ("FBI") to issue a fairness
opinion for the proposed merger between FBI and Union Planters Corporation
("UPC"). A representative of Mercer Capital previously presented an oral,
preliminary fairness opinion to the Board of Directors on June 18, 1996. The
fairness opinion is issued from a financial point of view on behalf of FBI
shareholders.
Under the terms of the Agreement and Plan of Reorganization among Union
Planters Corporation, Capital Bancorporation, Inc. and Financial Bancshares,
Inc. ("the Agreement"), dated June 27, 1996, FBI will be merged into Capital
Bancorporation, Inc., a wholly owned subsidiary of UPC. FBI shareholders will
receive 1.7415 shares of UPC for each share of FBI.(1) Given FBI's 706,877
outstanding common share equivalents, UPC will issue 1,231,000 common shares to
FBI shareholders.(2) The Agreement includes a "fixed" exchange ratio;
accordingly, the exchange ratio of 1.7415 UPC shares per each FBI share will
not be adjusted for fluctuations in UPC's stock price prior to closing.
- --------------------
(1)The original exchange ratio was 1.7444 based upon a maximum issuance
of 1,220,000 UPC shares; however, the exchange ratio was lowered to 1.7415 UPC
shares per FBI share upon completion of UPC's due diligence.
(2)FBI presently has 684,377 shares outstanding, plus options which are
execrable for 15,000 FBI shares. In addition, FBI has 7,500 stock appreciation
rights ("SARs") outstanding. As a result of separate negotiations with the
holder of these rights, the SARs have effectively been considered common stock
equivalents by UPC. Accordingly, the proxy/prospectus refers to 706,877
common stock equivalents rather than 699,377 common stock equivalents
considered in our previous opinions.
<PAGE> 246
The Board of Directors
c/o Mr. Arthur E. S. Schmid
September 12, 1996
Page 2
At the date of the announcement, UPC was trading in the vicinity of $30.00 per
share, which implied that FBI shareholders would receive an aggregate
consideration of $36.6 million, or $52.33 per share. The implied price/book
("P/B") ratio was about 150% of fully diluted book value per share as of March
31, 1996, while the price/earnings ("P/E") ratio was about 20x based upon fully
diluted earnings per share for the twelve month period ended March 31, 1996.
Since then, UPC's shares have trended up to a recent high of $34.75 per share.
The current implied aggregate consideration is approximately $42.8 million, or
$60.52 per share, based upon UPC's recent price of $34.75 per share. The
current implied P/B ratio is 180%, and the P/E ratio is about 22x fully diluted
earnings per share for the trailing twelve months ended June 30, 1996.
Given the fixed exchange ratio, the actual consideration received at closing
will differ from the current implied pricing if UPC's stock price increases or
decreases. Among other things, the transaction is subject to an affirmation of
this opinion based upon the price of UPC's shares at closing, general market
conditions, and the operating positions of both UPC and FBI at that time.
As part of the engagement, representatives of Mercer Capital visited with FBI
management in St. Louis, Missouri on several occasions and with UPC management
in Memphis, Tennessee. Mercer Capital also assisted in negotiating the primary
financial terms of the Agreement. Factors considered in rendering the opinion
include:
1. Terms of the Agreement;
2. The process by which the Agreement was negotiated;
3. The valuation analysis of FBI presented by Mercer Capital to
the Board of Directors at the June 18, 1996 meeting;
4. An analysis of the estimated pro-forma changes in book value
per share, earnings per share, and dividends per share from
the perspective of the FBI shareholders;
5. A review of UPC's historical financial performance, historical
stock pricing, the liquidity of its shares and current pricing
in relation to other publicly traded bank holding companies
based in the U.S.;
6. Tax consequences of the merger for FBI shareholders; and,
7. Restrictions placed on UPC shares received in the merger.
<PAGE> 247
The Board of Directors
c/o Mr. Arthur E. S. Schmid
September 12, 1996
Page 3
Mercer Capital did not compile nor audit FBI's or UPC's financial statements,
nor have we independently verified the information reviewed. We have relied
upon such information as being complete and accurate in all material respects.
We have not made an independent valuation of the loan portfolio, adequacy of
the loan loss reserve or other assets or liabilities of either institution.
Our opinion does not constitute a recommendation to any shareholder as to how
the shareholder should vote on the proposed merger; nor have we expressed any
opinion as to the prices at which any security of UPC or FBI might trade in the
future.
Based upon our analysis of the proposed transaction, it is our opinion that the
acquisition of Financial Bancshares, Inc. by Union Planters Corporation is fair
from a financial point of view for the shareholders of FBI.
Sincerely yours,
MERCER CAPITAL MANAGEMENT, INC.
/s/ Z. Christopher Mercer
Z. Christopher Mercer, ASA, CFA
President
<PAGE> 248
APPENDIX E
MISSOURI DISSENTERS' RIGHTS
351.455. SHAREHOLDER WHO OBJECTS TO MERGER MAY DEMAND VALUE OF
SHARES, WHEN
1. If a shareholder of a corporation which is a party to a merger
or consolidation shall file with such corporation, prior to or at the meeting
of shareholders at which the plan of merger or consolidation is submitted to a
vote, a written objection to such plan of merger or consolidation, and shall
not vote in favor thereof, and such shareholder, within twenty days after the
merger or consolidation is effected, shall make written demand on the surviving
or new corporation for payment of the fair value of his shares as of the day
prior to the date on which the vote was taken approving the merger or
consolidation, the surviving or new corporation shall pay to such shareholder,
upon surrender of his certificate or certificates representing said shares, the
fair value thereof. Such demand shall state the number and class of the shares
owned by such dissenting shareholder. Any shareholder failing to make demand
within the twenty day period shall be conclusively presumed to have consented
to the merger or consolidation and shall be bound by the terms thereof.
2. If within thirty days after the date on which such merger or
consolidation was effected the value of such shares is agreed upon between the
dissenting shareholder and the surviving or new corporation, payment therefor
shall be made within ninety days after the date on which such merger or
consolidation was effected, upon the surrender of his certificate or
certificates representing said shares. Upon payment of the agreed value the
dissenting shareholder shall cease to have any interest in such shares or in
the corporation.
3. If within such period of thirty days the shareholder and the
surviving or new corporation do not so agree, then the dissenting shareholder
may, within sixty days after the expiration of the thirty day period, file a
petition in any court of competent jurisdiction within the county in which the
registered office of the surviving or new corporation is situated, asking for a
finding and determination of the fair value of such shares, and shall be
entitled to judgment against the surviving or new corporation for the amount of
such fair value as of the day prior to the date on which such vote was taken
approving such merger or consolidation, together with interest thereon to the
date of such judgment. The judgment shall be payable only upon and
simultaneously with the surrender to the surviving or new corporation of the
certificate or certificates representing said shares. Upon the payment of the
judgment, the dissenting shareholder shall cease to have any interest in such
shares, or in the surviving or new corporation. Such shares may be held and
disposed of by the surviving or new corporation as it may see fit. Unless the
dissenting shareholder shall file such petition within the time herein limited,
such shareholder and all persons claiming under him shall be conclusively
presumed to have approved and ratified the merger or consolidation, and shall
be bound by the terms thereof.
4. The right of a dissenting shareholder to be paid the fair
value of his shares as herein provided shall cease if and when the corporation
shall abandon the merger or consolidation. (L.1943, p. 410, Section 71.)
<PAGE> 249
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Restated Charter of the Registrant provides as follows:
TWELFTH: INDEMNIFICATION OF CERTAIN PERSONS:
To the fullest extent permitted by Tennessee law, the Corporation may indemnify
or purchase and maintain insurance to indemnify any of its directors, officers,
employees or agents and any persons who may serve at the request of the
Corporation as directors, officers, employees, trustees or agents of any other
corporation, firm, association, national banking association, state-chartered
bank, trust company, business trust, organization or any other type of entity
whether or not the Corporation shall have any ownership interest in such
entity. Such indemnification(s) may be provided for in the Bylaws, or by
resolution of the Board of Directors or by appropriate contract with the person
involved.
Article V, INDEMNIFICATION, of the Registrant's Bylaws provides as follows:
The Corporation does hereby indemnify its directors and officers to the fullest
extent permitted by the laws of the State of Tennessee and by ARTICLE TWELFTH
of its Charter. The Corporation may indemnify any other person to the extent
permitted by the Charter and by applicable law.
Indemnification of corporate directors and officers is governed by Sections
48-18-501 through 48-18-509 of the Tennessee Business Corporation Act (the
"Act"). Under the Act, a person may be indemnified by a corporation against
judgments, fines, amounts paid in settlement and reasonable expenses (including
attorneys' fees) actually and necessarily incurred by him in connection with
any threatened or pending suit or proceeding or any appeal thereof (other than
an action by or in the right of the corporation), whether civil or criminal, by
reason of the fact that he is or was a director or officer of the corporation
or is or was serving at the request of the corporation as a director or
officer, employee or agent of another corporation of any type or kind, domestic
or foreign, if such director or officer acted in good faith for a purpose which
he reasonably believed to be in the best interest of the corporation and, in
criminal actions or proceedings only, in addition, had no reasonable cause to
believe that his conduct was unlawful. A Tennessee corporation may indemnify a
director or officer thereof in a suit by or in the right of the corporation
against amounts paid in settlement and reasonable expenses, including
attorneys' fees, actually and necessarily incurred as a result of such suit
unless such director or officer did not act in good faith or with the degree of
diligence, care and skill which ordinarily prudent men exercise under similar
circumstances and in like positions.
II-1
<PAGE> 250
A person who has been wholly successful, on the merits or otherwise, in the
defense of any of the foregoing types of suits or proceedings is entitled to
indemnification for the foregoing amounts. A person who has not been wholly
successful in any such suit or proceeding may be indemnified only upon the
order of a court or a finding that the director or officer met the required
statutory standard of conduct by (i) a majority vote of a disinterested quorum
of the board of Directors, (ii) the Board of Directors based upon the written
opinion of independent legal counsel to such effect, or (iii) a vote of the
shareholders.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
------------------------------------------
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
2 -- Agreement and Plan of Reorganization dated as of June 27, 1996, by and between Union Planters
Corporation, Capital Bancorporation, Inc. and Financial Bancshares, Inc. along with the Plan of
Merger annexed thereto as Exhibit A and the First Amendment to Agreement and Plan of
Reorganization and Plan of Merger dated as of September 6, 1996 (included as Appendix B to
the Prospectus)
5 -- Opinion of E. James House, Jr., Esquire, Secretary and Manager of the Legal Department of Union
Planters Corporation, regarding legality of the Union Planters Corporation Common Stock
8 -- Opinion of Armstrong, Teasdale, Schlafly & Davis regarding tax matters and consequences to
shareholders
23(a) -- Consent of E. James House, Jr., Esq. (included in Exhibit 5)
23(b) -- Consent of Armstrong, Teasdale, Schlafly & Davis (included in Exhibit 8)
23(c) -- Consent of Price Waterhouse LLP
23(d) -- Consent of KPMG Peat Marwick LLP
23(e) -- Consent of KPMG Peat Marwick LLP
23(f) -- Consent of Mercer Capital Management, Inc.
24 -- Power of Attorney (included in signature pages)
99(a) -- Form of Proxy
</TABLE>
II-2
<PAGE> 251
<TABLE>
<S> <C> <C>
99(b) -- FBI's Annual Report on Form 10-K for the year ended December 31, 1995 (included in Appendix A-
1)
99(c) -- FBI's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996 (included in
Appendix A-2)
</TABLE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under
the Securities Act of 1933, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(2) That for purposes of determining any liability under
the Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(3) That for the purpose of determining any liability
under the Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(4) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
II-3
<PAGE> 252
(5) To respond to requests for information that is
incorporated by reference into the prospectus pursuant to Items 4,
10(b), 11, or 13 of this Form S-4, within one business day of receipt
of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(6) To supply by means of a post-effective amendment all
information concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in the
registration statement when it became effective.
(7) That prior to any public reoffering of the securities
registered hereunder through the use of a prospectus which is a part
of this registration statement, by any person or party who is deemed
to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the
applicable form.
(8) That every prospectus: (i) that is filed pursuant to
Paragraph (7) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used on connection
with and offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-4
<PAGE> 253
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Memphis, State of Tennessee, on the 12th day of September, 1996.
DATE: September 12, 1996
UNION PLANTERS CORPORATION
By: /s/ Benjamin W. Rawlins, Jr.
-------------------------------
Benjamin W. Rawlins, Jr.
Chairman of the Board and
Chief Executive Officer
We, the undersigned directors and officers of Union Planters Corporation do
hereby constitute and appoint E. James House, Jr. and M. Kirk Walters, and each
of them, our true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for us and in our name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, and we do
hereby ratify and confirm all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Name Capacity Date
<S> <C> <C>
/s/ Benjamin W. Rawlins, Jr. Chairman of the Board, September 12, 1996
- -------------------------------- Chief Executive Officer,
Benjamin W. Rawlins, Jr. Director (Principal
Executive Officer)
/s/ John W. Parker Executive Vice President September 12, 1996
- -------------------------------- and Chief Financial
John H. Parker Officer (Principal
Financial Officer)
/s/ M. Kirk Walters Senior Vice President, September 12, 1996
- -------------------------------- Treasurer and Chief
M.Kirk Walters Accounting Officer
/s/ Albert M. Austin Director September 12, 1996
- --------------------------------
Albert M. Austin
</TABLE>
II-5
<PAGE> 254
<TABLE>
<S> <C> <C>
/s/ Marvin E. Bruce Director September 12, 1996
- --------------------------------
Marvin E. Bruce
/s/ George W. Bryan Director September 12, 1996
- --------------------------------
George W. Bryan
/s/ Robert B. Colbert, Jr. Director September 12, 1996
- --------------------------------
Robert B. Colbert, Jr.
/s/ C. J. Lowrance, III Director September 12, 1996
- --------------------------------
C. J. Lowrance, III
/s/ Jackson W. Moore President and Director September 12, 1996
- --------------------------------
Jackson W. Moore
- -------------------------------- Director --------------------------------
Stanley D. Overton
/s/ V. Lane Rawlins Director September 12, 1996
- --------------------------------
V. Lane Rawlins
- -------------------------------- Director --------------------------------
Mike P. Sturdivant
- -------------------------------- Director --------------------------------
Richard A. Trippeer, Jr.
- -------------------------------- Director --------------------------------
Milton J. Womack
</TABLE>
II-6
<PAGE> 255
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
2 -- Agreement and Plan of Reorganization dated as of June 27, 1996, by and between Union Planters
Corporation, Capital Bancorporation, Inc. and Financial Bancshares, Inc. along with the Plan of
Merger annexed thereto as Exhibit A and the First Amendment to Agreement and Plan of
Reorganization and Plan of Merger dated as of September 6, 1996 (included as Appendix B to the
Prospectus)
5 -- Opinion of E. James House, Jr., Esquire, Secretary and Manager of the Legal Department of Union
Planters Corporation, regarding legality of the Union Planters Corporation Common Stock
8 -- Opinion of Armstrong, Teasdale, Schlafly & Davis regarding tax matters and consequences to
shareholders
23(a) -- Consent of E. James House, Jr., Esq. (included in Exhibit 5)
23(b) -- Consent of Armstrong, Teasdale, Schlafly & Davis (included in Exhibit 8)
23(c) -- Consent of Price Waterhouse LLP
23(d) -- Consent of KPMG Peat Marwick LLP
23(e) -- Consent of KPMG Peat Marwick LLP
23(f) -- Consent of Mercer Capital Management, Inc.
24 -- Power of Attorney (included in signature pages)
99(a) -- Form of Proxy
99(b) -- FBI's Annual Report on Form 10-K for the year ended December 31, 1995 (included in Appendix A-
1)
99(c) -- FBI's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996 (included in
Appendix A-2)
</TABLE>
II-7
<PAGE> 256
EXHIBIT 5
LEGAL OPINION OF E. JAMES HOUSE, JR.
AS TO VALIDITY OF SHARES OF UPC COMMON STOCK
<PAGE> 257
LOGO EXHIBIT 5
UNION PLANTERS CORPORATION
September 12 , 1996
Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Re: 1,231,000 Shares of the Common Stock, $5.00 Par Value Per
Share of Union Planters Corporation, a Tennessee Corporation
("UPC")
Gentlemen:
The undersigned has participated in the preparation of a registration statement
on Form S-4 (the "Registration Statement") for filing with the Securities and
Exchange Commission in respect to not more than 1,231,000 shares of UPC's
common stock, $5.00 par value per share ("UPC Common Stock") which may be
issued by UPC pursuant to an Agreement and Plan of Reorganization dated as of
June 27, 1996, by and between UPC, Capital Bancorporation, Inc.("Capital") and
Financial Bancshares, Inc. ("FBI"), as amended by the First Amendment to
Agreement and Plan of Reorganization dated as of September 6, 1996, between
UPC, Capital and FBI (the "Agreement").
For purposes of rendering the opinion expressed herein, the undersigned has
examined UPC's corporate charter and all amendments thereto; UPC's bylaws and
amendments thereto; the Agreement and such of UPC's corporate records as the
undersigned has deemed necessary and material to rendering the undersigned's
opinion. The undersigned has relied upon certificates of public officials and
representations of UPC officials, and has assumed that all documents examined
by the undersigned as originals are authentic, that all documents submitted to
the undersigned as photocopies are exact duplicates of original documents, and
that all signatures on all documents are genuine.
Further, the undersigned is familiar with and has supervised all corporate
action taken in connection with the authorization of the issuance and offering
of the subject securities.
Based upon and subject to the foregoing and subsequent assumptions,
qualifications and exceptions, it is the undersigned's opinion that:
1. UPC is a duly organized and validly existing corporation in good
standing under the laws of the State of Tennessee and has all requisite power
and authority to issue, sell and deliver the subject securities, and to carry
on its business and own its property; and
<PAGE> 258
Union Planters Corporation
September 12, 1996
Page 2
2. The shares of UPC Common Stock to be issued by UPC pursuant to the
Merger have been duly authorized and when issued by UPC in accordance
therewith, such shares of UPC Common Stock will be fully paid and
nonassessable.
The opinion expressed above is limited by the following assumptions,
qualifications and exceptions.
(a) The undersigned is licensed to practice law only in the State
of Tennessee and expresses no opinion with respect to the effect of any laws
other than those of the State of Tennessee and of the United States of America.
(b) The opinion stated herein is based upon statutes, regulations,
rules, court decisions and other authorities existing and effective as of the
date of this opinion, and the undersigned undertakes no responsibility to
update or supplement said opinion in the event of or in response to any
subsequent changes in the law or said authorities, or upon the occurrence after
the date hereof of events or circumstances that, if occurring prior to the date
hereof, might have resulted in a different opinion.
(c) This opinion has been rendered solely for the benefit of Union
Planters Corporation and no other person or entity shall be entitled to rely
hereon without the express written consent of the undersigned.
(d) This opinion is limited to the legal matters expressly set
forth herein, and no opinion is to be implied or inferred beyond the legal
matters expressly so addressed.
The undersigned hereby consents to the undersigned being named as a party
rendering a legal opinion under the caption "Legal Opinions" in the Prospectus
constituting part of the Registration Statement and to the filing of this
opinion with the Securities and Exchange Commission as well as all state
regulatory bodies and jurisdictions where qualification is sought for the sale
of the subject securities.
The undersigned is an officer of, and receives compensation from UPC and
therefore is not independent from UPC.
Very truly yours,
UNION PLANTERS CORPORATION
By: /s/ E. James House, Jr.
--------------------------------------
E. James House, Jr.
<PAGE> 259
EXHIBIT 8
ARMSTRONG, TEASDALE, SCHLAFLY & DAVIS
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
ATTORNEYS AND COUNSELORS
ONE METROPOLITAN SQUARE, SUITE 2600
ST. LOUIS, MISSOURI 63102-2740
(314) 621-5070
FAX (314) 621-5065
KANSAS CITY, MISSOURI
BELLEVILLE, ILLINOIS
OLATHE, KANSAS
September 13, 1996
Financial Bancshares, Inc.
3805 South Broadway
St. Louis, Missouri 63118
Re: Agreement and Plan of Reorganization between Union Planters
Corporation and Capital Bancorporation, Inc. and Financial
Bancshares, Inc.
Gentlemen:
We have acted as counsel to Financial Bancshares, Inc. ("FBI"), a
corporation chartered and existing under the laws of the State of Missouri,
in connection with the proposed merger (the "Merger") of FBI with and into
Capital Bancorporation, Inc. ("Capital"), a corporation chartered and existing
under the laws of the State of Tennessee, pursuant to the terms of the
Agreement and Plan of Reorganization dated as of June 27, 1996 by and between
Union Planters Corporation ("UPC"), a corporation chartered and existing under
the laws of the State of Tennessee, FBI and Capital, together with all Exhibits
and Schedules annexed thereto, as amended by the First Amendment to Agreement
and Plan of Reorganization and Plan of Merger dated as of September 6, 1996 (the
"Reorganization Agreement"), all as described in the Registration Statement on
Form S-4 to be filed by UPC with the Securities and Exchange Commission on or
about September 13, 1996 (the "Registration Statement"). This opinion is being
rendered pursuant to your request. All capitalized terms, unless otherwise
specified, have the meanings assigned to them in the Registration Statement.
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(i) the Reorganization Agreement, (ii) the Registration Statement and (iii)
such other documents as we have deemed necessary or appropriate in order to
enable us to render the opinions below. In our examination, we have assumed
the genuineness of all signatures, the legal capacity of all natural persons,
the authenticity of all documents submitted to us as originals, the conformity
to original documents of all documents submitted to us as certified, conformed
or photostatic copies and the authenticity of the originals of such copies.
In rendering the opinion set forth below, we have relied upon certain written
certificates, representations and covenants of FBI, UPC and affiliated
shareholders.
<PAGE> 260
ARMSTRONG, TEASDALE, SCHLAFLY & DAVIS
Financial Bancshares, Inc.
September 13, 1996
Page 2
In rendering our opinion, we have considered the applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, pertinent judicial authorities, interpretive rulings of the
Internal Revenue Service and such other authorities as we have considered
relevant.
Based upon and subject to the foregoing, we are of the opinion that the
Merger will, under current law, constitute a tax-free reorganization under
Section 368(a) of the Code.
As a tax-free reorganization, the Merger will have the following Federal
income tax consequences for FBI Record Holders who hold their shares of FBI
Common Stock as capital assets (within the meaning of Section 1221 of the
Code) at the Effective Time of the Merger:
1. FBI Record Holders will recognize no gain or loss as a result of
the exchange of their FBI Common Stock solely for shares of UPC Common Stock
pursuant to the Merger, except with respect to cash received in lieu of
fractional shares, if any.
2. The aggregate adjusted tax basis of the shares of UPC Common Stock
received by each FBI Record Holder in the Merger (including any fractional
share of UPC Common Stock deemed to have been received) will be equal to the
aggregate adjusted tax basis of the shares of FBI Common Stock.
3. The holding period of the shares of UPC Common Stock received by
each FBI Record Holder in the Merger (including any fractional share of UPC
Common Stock deemed to have been received) will include the holding period of
the shares of FBI Common Stock exchange therefor.
Except as set forth above, we express no opinion as to the tax consequences
to any party, whether Federal, state, local or foreign, of the Merger or of any
transactions related to the Merger or contemplated by the Agreements. This
opinion is being furnished only to you in connection with the Merger and solely
for your benefit in connection therewith and may not be used or relied upon for
any other purpose and may not be circulated, quoted or otherwise referred to
for any other purpose without our express written consent.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the
undersigned being named as a party rendering a legal opinion under the caption
"Legal Opinions" in the Prospectus/Proxy Statement constituting part of the
Registration Statement.
Very truly yours,
/s/ARMSTRONG, TEASDALE, SCHLAFLY
& DAVIS
<PAGE> 261
EXHIBIT 23(C)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference into the Prospectus/Proxy
Statement constituting part of this Registration Statement on Form S-4 of Union
Planters Corporation of our report dated January 18, 1996, which appears on
page 33 of Union Planters Corporation's 1995 Annual Report to Shareholders,
which is incorporated by reference in its Annual Report on Form 10-K for the
year ended December 31, 1995. We also consent to the reference to us under the
heading "Experts" in such Prospectus/Proxy Statement.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Memphis, Tennessee
September 12, 1996
<PAGE> 262
EXHIBIT 23(D)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference into the Registration Statement on
Form S-4 of Union Planters Corporation of our report dated February 23, 1996,
which appears on page 30 of Financial Bancshares, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1995 and to the reference to our firm
under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
September 12, 1996
<PAGE> 263
EXHIBIT 23(e)
ACCOUNTANTS' CONSENT
We consent to incorporation by reference in the registration statement (No.
333-_______) on Form S-4 of Union Planters Corporation of our report dated
February 2, 1996, to the consolidated statements of financial position of
Leader Financial Corporation and subsidiary as of December 31, 1995 and 1994,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1995, which report appears in the Current Report on Form 8-K dated April 1,
1996 of Union Planters Corporation.
Our report refers to changes in accounting principles related to the adoption
in 1994 of the provisions of the American Institute of Certified Public
Accountants' Statement of Position 93-6, Employers' Accounting for Employee
Stock Ownership Plans, and in 1993 of the provisions of the Financial
Accounting Standards Board's Statements of Financial Accounting Standards No.
106, Employers' Accounting for Postretirement Benefits Other than Pensions, and
No. 115, Accounting for Certain Investments in Debt and Equity Securities.
/s/ KPMG Peat Marwick LLP
Memphis, Tennessee
September 11, 1996
<PAGE> 264
EXHIBIT 23(F)
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the use of our Fairness Opinion dated September
12, 1996 relating to the proposed merger between Union Planters Corporation and
Financial Bancshares, Inc. included in the Registration Statement on Form S-4
and to the reference to our Firm under the caption "Fairness Opinion of
Financial Advisor" in the Prospectus.
September 12, 1996 MERGER CAPITAL MANAGEMENT, INC.
By: /s/ Mercer Capital Management, Inc.
-----------------------------------------
Z. Christopher Mercer, ASA, CFA
President
<PAGE> 265
PROXY
EXHIBIT 99(a)
REVOCABLE PROXY
FINANCIAL BANCSHARES, INC.
- --------------------------------------------------------------------------------
SPECIAL MEETING OF SHAREHOLDERS
OCTOBER __, 1996
- --------------------------------------------------------------------------------
The undersigned hereby appoints Arthur E.S. Schmid and Clifford A.
Schmid, with full powers of substitution, to act as proxies for the undersigned,
to vote all shares of Common Stock of Financial Bancshares, Inc. ("FBI" ) which
the undersigned is entitled to vote at a Special Meeting of Shareholders
("Special Meeting"), to be held at Westborough Country Club, 631 South Berry
Road, Kirkwood , Missouri, on ________, October __, 1996 at 9:30 a.m., local
time, and at any and all adjournments thereof, as follows:
FOR AGAINST ABSTAIN
1. The approval of the Agreement and Plan
of Reorganization (the "Reorganization Agreement")
dated June 27, 1996, between Union Planters Corporation
("UPC"), Capital Bancorporation, Inc. ("Capital")
and Financial Bancshares, Inc, ("FBI"), including the
Plan of Merger attached thereto as Exhibit A, as
amended by the First Amendment to Agreement
and Plan of Reorganization and Plan of Merger dated as
of September 6, 1996, pursuant to which FBI would be
merged with and into Capital (the "Merger") with
Capital surviving the Merger as a wholly-owned ---- ---- ----
subsidiary of UPC. ---- ---- ----
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED OR
ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED FOR
EACH OF THE PROPOSITION STATED. IF ANY OTHER BUSINESS IS PRESENTED AT THE
SPECIAL MEETING, THIS PROXY WILL BE VOTED AS DETERMINED BY A MAJORITY OF THE
BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO
OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
- --------------------------------------------------------------------------------
<PAGE> 266
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Special
Meeting or at any adjournment thereof and after notification to the Secretary
of the Company at the Meeting of the shareholder's decision to terminate this
proxy, then the power of said attorneys and proxies shall be deemed terminated
and of no further force and effect.
The undersigned acknowledges receipt from FBI prior to the
execution of this proxy, a notice of the Meeting, and a Prospectus/Proxy
Statement dated September __, 1996.
Dated:
-----------
- ---------------------------- ----------------------------
PRINT NAME OF SHAREHOLDER PRINT NAME OF SHAREHOLDER
- ---------------------------- ----------------------------
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
Please sign exactly as your name appears on the envelope in which this card was
mailed. When signing as attorney, executor, administrator, trustee or guardian,
please give your full title. If shares are held jointly, each holder should
sign.
- -------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- -------------------------------------------------------------------------------
<PAGE> 267
APPENDIX A
REVOCABLE PROXY
FINANCIAL BANCSHARES, INC.
SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 23, 1996
The undersigned hereby appoints Arthur E.S. Schmid and Clifford A. Schmid,
with full powers of substitution, to act as proxies for the undersigned, to vote
all shares of Common Stock of Financial Bancshares, Inc. ("FBI") which the
undersigned is entitled to vote at a Special Meeting of Shareholders ("Special
Meeting"), to be held at Westborough Country Club, 631 South Berry Road,
Kirkwood, Missouri, on Wednesday, October 23, 1996 at 9:30 a.m., local time, and
at any and all adjournments thereof, as follows:
1. The approval of the Agreement and Plan of Reorganization (the
"Reorganization Agreement") dated June 27, 1996, between Union Planters
Corporation ("UPC"), Capital Bancorporation, Inc. ("Capital") and Financial
Bancshares, Inc. ("FBI"), including the Plan of Merger attached thereto as
Exhibit A, as amended by the First Amendment to Agreement and Plan of
Reorganization and Plan of Merger dated as of September 6, 1996, pursuant to
which FBI would be merged with and into Capital (the "Merger") with Capital
surviving the Merger as a wholly-owned subsidiary of UPC.
/ / FOR / / AGAINST / / ABSTAIN
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED OR
ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED FOR
THE PROPOSITION STATED. IF ANY OTHER BUSINESS IS PRESENTED AT THE SPECIAL
MEETING, THIS PROXY WILL BE VOTED AS DETERMINED BY A MAJORITY OF THE BOARD OF
DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE MEETING.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Special Meeting
or at any adjournment thereof and after notification to the Secretary of the
Company at the Meeting of the shareholder's decision to terminate this proxy,
then the power of said attorneys and proxies shall be deemed terminated and of
no further force and effect.
The undersigned acknowledges receipt from FBI prior to the execution of this
proxy, of a notice of the Meeting, and a Prospectus/Proxy Statement dated
September 20, 1996.
Dated: , 1996
------------------------
-------------------------------------
Print Name of Shareholder
-------------------------------------
Signature of Shareholder
-------------------------------------
Print Name of Shareholder
-------------------------------------
Signature of Shareholder
Please sign exactly as your name
appears on the envelope in which this
card was mailed. When signing as
attorney, executor, administrator,
trustee or guardian, please give your
full title. If shares are held
jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
