<PAGE> 1
As filed with the Securities and Exchange Commission on October 22, 1997
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
UNION PLANTERS CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
TENNESSEE 6712 62-0859007
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Identification No.)
Classification Code Number)
</TABLE>
7130 GOODLETT FARMS PARKWAY
MEMPHIS, TENNESSEE 38018
(901) 580-6000
(Address, including zip code, and telephone number of
registrant's principal executive offices)
E. JAMES HOUSE, JR, ESQ.,
SECRETARY AND MANAGER OF THE LEGAL DEPARTMENT OF
UNION PLANTERS CORPORATION
7130 GOODLETT FARMS PARKWAY
MEMPHIS, TENNESSEE 38018
(901) 580-6495
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
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R. NASH NEYLAND, ESQ. GARLAND W. BINNS, JR.
Wyatt, Tarrant & Combs Horne, Hollingsworth & Parker
6075 Poplar Avenue, Suite 650 401 West Capitol, Suite 501
Memphis, Tennessee 38119 Little Rock, Arkansas 72202
(901) 537-1000 (501) 376-4731
</TABLE>
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
CALCULATION OF REGISTRATION FEE
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- ----------------------------------------------------------------------------------------------------------------------------
Proposed Maximum Proposed Maximum
Title of Each Class of Securities to be Amount to be Offering Price Aggregate Amount of
Registered Registered (1) Per Unit (2) Offering Price (2) Registration Fee
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $5.00, par value per share, 491,000 $34.74 $17,057,340 $5,168.89
(and associated Preferred Share Rights) Shares (with
Preferred Share Rights)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This Registration Statement covers the maximum number of shares of
common stock of the Registrant which is expected to be issued in
connection with the merger described herein.
(2) Estimated solely for the purpose of calculating the registration fee
and based, pursuant to Rule 457(f)(2) under the Securities Act of
1933, as amended, on the book value per share of the Common Stock of
Security Bancshares, Inc. as of the latest practicable date prior to
filing this Registration Statement.
<PAGE> 2
DELAYING AMENDMENT
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 3
UNION PLANTERS CORPORATION
CROSS REFERENCE OF ITEMS IN FORM S-4 TO PROSPECTUS
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ITEMS IN PART I OF FORM S-4 PROSPECTUS CAPTION OR LOCATION
- --------------------------- ------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Facing Page, Cross Reference Sheet and
Outside Front Cover Page of Prospectus Outside Front Cover Page
2. Inside Front and Outside Back Cover Inside Front Cover and TABLE OF CONTENTS
Pages of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed *
Charges and Other Information
4. Terms of the Transaction SUMMARY and DESCRIPTION OF THE
TRANSACTION
5. Pro Forma Financial Information SUMMARY
6. Material Contracts with the Company *
Being Acquired
7. Additional Information Required for *
Reoffering by Persons and Parties Deemed
to be Underwriters
8. Interests of Named Experts and Counsel LEGAL OPINIONS and EXPERTS
9. Disclosure of Commission Position on *
Indemnification for Securities Act
Liabilities
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
ITEMS IN PART I OF FORM S-4 PROSPECTUS CAPTION OR LOCATION
- --------------------------- ------------------------------
<S> <C> <C>
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 INCORPORATION OF CERTAIN DOCUMENTS BY
Registrants REFERENCE, SUMMARY, EFFECT OF THE
MERGER ON RIGHTS OF STOCKHOLDERS,
COMPARATIVE MARKET PRICES AND DIVIDENDS,
BUSINESS OF UPC, CERTAIN REGULATORY
CONSIDERATIONS, DESCRIPTION OF THE UPC
CAPITAL STOCK, and STOCKHOLDER PROPOSALS
11. Incorporation of Certain Information by INCORPORATION OF CERTAIN DOCUMENTS BY
Reference REFERENCE
12. Information with Respect to S-2 or S-3 *
Registrants
13. Incorporation of Certain Information by *
Reference
14. Information with Respect to Registrants *
Other Than S-3 or S-2 Registrants
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 *
Companies
16. Information with Respect to S-2 or S-3 *
Companies
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
ITEMS IN PART I OF FORM S-4 PROSPECTUS CAPTION OR LOCATION
- --------------------------- ------------------------------
<S> <C> <C>
17. Information with Respect to Companies INCORPORATION OF CERTAIN DOCUMENTS BY
Other Than S-3 or S-2 Companies REFERENCE, SUMMARY, DESCRIPTION OF
TRANSACTION, EFFECT OF THE MERGER ON THE
RIGHTS OF STOCKHOLDERS, COMPARATIVE
MARKET PRICES AND DIVIDENDS, BUSINESS OF
SBI, MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION OF SBI
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or SPECIAL MEETING OF SBI STOCKHOLDERS,
Authorizations are to be Solicited DESCRIPTION OF THE TRANSACTION, REASONS
FOR AND BACKGROUND OF THE MERGER,
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT OF SBI and EFFECT
OF THE MERGER ON RIGHTS OF STOCKHOLDERS
19. Information if Proxies, Consents or *
Authorizations are not to be Solicited
or in an Exchange Offer
</TABLE>
* Omitted because the answer is negative or the item is inapplicable.
<PAGE> 6
[SECURITY BANCSHARES, INC. LOGO]
October 29, 1997
TO THE STOCKHOLDERS OF SECURITY BANCSHARES, INC.:
You are cordially invited to attend a special meeting of the
stockholders (the "Special Meeting") of Security Bancshares, Inc. ("SBI") to be
held at the main offices of Farmers & Merchants Bank, 110 S. Third, Des Arc,
Arkansas 72040, at 2:00 p.m., local time, on Wednesday, December 10, 1997,
notice of which is enclosed.
At the Special Meeting, you will be asked to consider and vote on a
proposal to adopt the Agreement and Plan of Reorganization (the "Agreement") by
and between SBI, Union Planters Corporation ("UPC") and its wholly-owned
subsidiary Security Acquisition Corporation ("Acquisition") and a related Plan
of Merger (the "Plan of Merger"). Acquisition has assigned all of its rights
under the Agreement and the Plan of Merger to Union Planters Holding
Corporation ("UP Holding"), which is also a wholly-owned subsidiary of UPC.
Pursuant to the Agreement and Plan of Merger, as amended and assigned, SBI will
merge (the "Merger") with UP Holding with UP Holding surviving the Merger and
the two bank subsidiaries of SBI thereby becoming wholly-owned subsidiaries of
UP Holding. Upon consummation of the Merger, each share of SBI common stock
issued and outstanding (except for certain shares held by SBI or UPC, or their
respective subsidiaries, in each case other than shares held in a fiduciary
capacity or as a result of debts previously contracted) will be converted into
3.5777 shares of UPC common stock (subject to possible adjustment as described
in the accompanying Proxy Statement/Prospectus). UPC will pay cash in lieu of
issuing fractional shares of UPC common stock.
Enclosed are the (i) Notice of Special Meeting, (ii) Proxy
Statement/Prospectus, (iii) proxy card for the Special Meeting and (iv)
pre-addressed return envelope for the proxy card. The Proxy
Statement/Prospectus describes in more detail the Agreement and the proposed
Merger, including a description of the conditions to consummation of the
Merger, your right to dissent to the Merger and to receive in cash the "fair
value" of your shares of SBI Common Stock, and the effects of the Merger on the
rights of SBI stockholders. Please read these materials carefully and consider
thoughtfully the information set forth in them.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND ADOPTED THE
AGREEMENT AND THE PLAN OF MERGER AND CONSUMMATION OF THE MERGER CONTEMPLATED
THEREBY, AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ADOPTION OF THE AGREEMENT
AND THE PLAN OF MERGER.
Approval of the Agreement and the Plan of Merger will require the
affirmative vote of the holders of at least two-thirds of the issued and
outstanding shares of SBI common stock entitled to be voted at the Special
Meeting. Members of the SBI Board of Directors and management own or control
approximately 90% of the outstanding shares of SBI common stock, and each has
advised that they intend to vote "FOR" approval of the Agreement and the Plan
of Merger, in which case the requisite stockholder approval will be achieved.
Notwithstanding such fact, whether or not you plan to attend the Special
Meeting, you are urged to complete, sign, and return promptly the enclosed
proxy card. If you attend the Special Meeting, you may vote in person even if
you previously have returned your proxy card. However, stockholders wishing to
exercise statutory dissenter's rights should review the information with
respect thereto contained in the accompanying Proxy Statement/Prospectus before
voting, in person or by proxy, at the Special Meeting. Certain specific steps
must be taken to properly "perfect" statutory dissenters' rights and a vote
"FOR" the Agreement and Plan of Merger will cause the dissenter's rights of
such stockholder to be lost.
ON BEHALF OF THE SBI BOARD OF DIRECTORS, I URGE YOU TO VOTE FOR
ADOPTION OF THE AGREEMENT AND THE PLAN OF MERGER BY MARKING THE ENCLOSED PROXY
CARD "FOR" ITEM ONE.
We look forward to seeing you at the Special Meeting.
Sincerely,
/s/HENRY L. NICHOLS
---------------------
Henry L. Nichols
Chairman of the Board
<PAGE> 7
[SECURITY BANCSHARES, INC. LOGO]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AT 2:00 P.M. ON WEDNESDAY, DECEMBER 10, 1997
NOTICE IS HEREBY GIVEN that a special meeting of the stockholders (the
"Special Meeting") of Security Bancshares, Inc. ("SBI") will be held at the
main offices of Farmers & Merchants Bank, 110 S. Third, Des Arc, Arkansas
72040, on Wednesday, December 10, 1997, at 2:00 p.m., local time, for the
following purposes:
1. MERGER. To consider and vote upon a proposal to adopt the
Agreement and Plan of Reorganization dated as of August 20, 1997, as amended,
(the "Agreement"), by and between SBI and Union Planters Corporation, a
Tennessee corporation ("UPC") and the related Plan of Merger (the "Plan of
Merger"), pursuant to which (i) SBI will merge (the "Merger") with and into
Union Planters Holding Corporation ("UP Holding"), with UP Holding surviving
the Merger, and (ii) each share of the $10.00 par value common stock of SBI
("SBI Common Stock") issued and outstanding at the effective time of the Merger
(except for certain shares held by SBI or UPC, or their respective
subsidiaries, in each case other than shares held in a fiduciary capacity or as
a result of debts previously contracted) will be converted into 3.5777 shares
of the $5.00 par value common stock of UPC, and the associated "Preferred Share
Rights" (as defined in the accompanying Proxy Statement/Prospectus), subject to
possible adjustment dependent upon, among other things, the net recovery
received by SBI in connection with a defaulted loan made by a SBI bank
subsidiary, and cash in lieu of issuing any fractional shares, all as more
fully described in the accompanying Proxy Statement/Prospectus. A copy of each
of the Agreement and the Plan of Merger, as amended, is set forth as Appendix A
to the accompanying Proxy Statement/Prospectus and is incorporated by reference
herein.
2. OTHER BUSINESS. To transact such other business as may come
properly before the Special Meeting or any adjournments or postponements of the
Special Meeting.
Only SBI stockholders of record at the close of business on October
13, 1997, will be entitled to receive notice of and to vote at the Special
Meeting or any adjournment or postponement thereof. Adoption of the Agreement
and the Plan of Merger requires the affirmative vote of the holders of at least
two-thirds of the issued and outstanding shares of SBI Common Stock entitled to
be voted at the Special Meeting. Henry L. Nichols and other members of the
management of SBI and its bank subsidiaries own or control approximately 90% of
the outstanding shares of SBI Common Stock, and each has advised that they
intend to vote "FOR" the Agreement and Plan of Merger. Assuming that occurs,
then approval of the Agreement and Plan of Merger is assured. Notwithstanding
such fact, your vote is important and SBI stockholders are urged to vote, in
person or by proxy, at the Special Meeting.
SBI stockholders have the right to dissent to the Merger and to
receive the "fair value" of their shares of SBI Common Stock in cash, provided
the proper steps are taken to properly "perfect" statutory dissenters' rights.
Statutory dissenters' rights are more fully discussed in various sections of
the accompanying Proxy Statement/Prospectus, and a copy of the Arkansas
statutes governing statutory dissenters' rights is attached thereto as Appendix
D. SBI stockholders considering the exercise of their dissenters' rights
should carefully review these materials and information before voting with
respect to the Agreement and Plan of Merger.
THE BOARD OF DIRECTORS OF SECURITY BANCSHARES, INC. UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS VOTE FOR ADOPTION OF THE AGREEMENT AND THE PLAN OF
MERGER.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ FAYE A. SMITH
-------------------
Faye A. Smith
Secretary
Des Arc, Arkansas
October 29, 1997
<PAGE> 8
PROSPECTUS
Common Stock, $5.00 par value
Union Planters Corporation
PROXY STATEMENT
For Special Meeting of Stockholders of
Security Bancshares, Inc.
This Prospectus of Union Planters Corporation, a bank holding company
organized and existing under the laws of the State of Tennessee ("UPC"),
relates to up to 491,000 shares of common stock, $5.00 par value, of UPC
(together with associated "Preferred Share Rights" (as defined herein), "UPC
Common Stock"), which are issuable to the stockholders of Security Bancshares,
Inc., a bank holding company organized and existing under the laws of the State
of Arkansas ("SBI"), upon consummation of the proposed merger (the "Merger") of
SBI with and into Union Planters Holding Corporation ("UP Holding"), a
wholly-owned subsidiary of UPC. UP Holding will survive the Merger. The Merger
will be consummated pursuant to the terms of the Agreement and Plan of
Reorganization, dated as of August 20, 1997, as amended, (the "Agreement"), by
and between UPC and SBI and the related Plan of Merger, as amended, (the "Plan
of Merger").
At the effective time of the Merger (the "Effective Time"), except as
described herein, each issued and outstanding share of common stock, par value
$10.00 per share, of SBI ("SBI Common Stock") will be converted into 3.5777
shares of UPC Common Stock, subject to certain possible adjustments described
herein (the "Exchange Ratio").
The Exchange Ratio is adjustable upward only if certain conditions are
met concerning the collection of proceeds prior to Closing of the Merger from
the sale of collateral taken upon the default of a loan made by a bank
subsidiary of SBI. See "DESCRIPTION OF THE TRANSACTION -- Possible Adjustment of
Exchange Ratio."
This Prospectus also serves as the Proxy Statement of SBI, and is
being furnished to the stockholders of SBI in connection with the solicitation
of proxies by the Board of Directors of SBI for use at its special meeting of
stockholders (including any adjournment or postponement thereof, the "Special
Meeting"), to be held on Wednesday, December 10, 1997, to consider and vote
upon the Agreement and the Plan of Merger and the transactions contemplated
therein. This Proxy Statement/Prospectus ("Proxy Statement") and related
materials enclosed herewith are being mailed to stockholders of SBI on or about
October 29, 1997.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_______________
THE SECURITIES 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 OR INSTRUMENTALITY.
_______________
The date of this Proxy Statement is October 29, 1997.
<PAGE> 9
AVAILABLE INFORMATION
UPC is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, is required to file reports, proxy and information statements, and
other information with the Securities and Exchange Commission (the "SEC").
Copies of such reports, proxy and information statements, and other information
can be obtained, at prescribed rates, from the SEC by addressing written
requests for such copies to the Public Reference Section at the SEC at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. In addition, such
reports, proxy and information statements, and other information can be
inspected at the public reference facilities referred to above and at the
regional offices of the SEC at 7 World Trade Center, 13th Floor, New York, New
York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. The SEC also maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
In addition, the shares of UPC Common Stock are listed and traded on the New
York Stock Exchange (the "NYSE") under the symbol "UPC," and reports, proxy and
information statements, and other information concerning UPC also may be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
The shares of SBI Common Stock are not traded on any exchange or
system and SBI is not required to, and does not, file reports or any
information with the SEC.
This Proxy Statement constitutes part of the Registration Statement on
Form S-4 of UPC (including any exhibits and amendments thereto, the
"Registration Statement") filed with the SEC under the Securities Act of 1933,
as amended (the "Securities Act"), relating to the securities offered hereby.
This Proxy Statement does not include all of the information in the
Registration Statement, certain portions of which have been omitted pursuant to
the rules and regulations of the SEC. 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
SEC's public reference facilities at the addresses set forth above.
All information contained in this Proxy Statement or incorporated
herein by reference with respect to UPC was supplied by UPC, and all
information contained in this Proxy Statement with respect to SBI was supplied
by SBI.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE
SECURITIES OFFERED BY THIS 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 PROXY STATEMENT NOR ANY DISTRIBUTION
OF THE SECURITIES BEING OFFERED PURSUANT TO THIS PROXY STATEMENT SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF UPC OR SBI OR THE INFORMATION SET FORTH OR INCORPORATED BY REFERENCE
HEREIN SINCE THE DATE OF THIS PROXY STATEMENT.
THIS PROXY STATEMENT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITH
RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF UPC
FOLLOWING THE CONSUMMATION OF THE VARIOUS ACQUISITIONS AND MERGERS DISCUSSED
HEREIN (REFERRED TO HEREIN AS THE "OTHER PENDING ACQUISITIONS"), INCLUDING
STATEMENTS RELATING TO THE COST SAVINGS AND REVENUE ENHANCEMENTS THAT ARE
EXPECTED TO BE REALIZED FROM THOSE ACQUISITIONS AND THE EXPECTED IMPACT OF THE
ACQUISITIONS ON UPC'S FINANCIAL PERFORMANCE. THESE FORWARD-LOOKING STATEMENTS
INVOLVE CERTAIN RISKS AND UNCERTAINTIES. FACTORS THAT MAY CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS
INCLUDE, AMONG OTHER THINGS, THE FOLLOWING POSSIBILITIES: (I) EXPECTED COST
SAVINGS FROM THE ACQUISITIONS CANNOT BE FULLY REALIZED; (II) DEPOSIT ATTRITION,
CUSTOMER LOSS OR REVENUE LOSS FOLLOWING THE PENDING ACQUISITIONS IS GREATER
THAN EXPECTED; (III) COMPETITIVE PRESSURE IN THE BANKING INDUSTRY INCREASES
SIGNIFICANTLY; (IV) COSTS OR DIFFICULTIES RELATED TO THE INTEGRATION OF THE
BUSINESSES OF UPC AND THE INSTITUTIONS TO BE ACQUIRED ARE GREATER THAN
EXPECTED; (V) CHANGES IN THE INTEREST RATE ENVIRONMENT REDUCE MARGINS; (VI)
GENERAL ECONOMIC CONDITIONS, EITHER NATIONALLY OR REGIONALLY, ARE LESS
FAVORABLE THAN EXPECTED, RESULTING IN, AMONG OTHER THINGS, A DETERIORATION IN
CREDIT QUALITY; (VII) CHANGES OCCUR IN THE REGULATORY ENVIRONMENT; (VIII)
CHANGES OCCUR IN BUSINESS CONDITIONS AND INFLATION; AND (IX) CHANGES OCCUR IN
THE SECURITIES MARKETS. THE FORWARD-LOOKING EARNINGS ESTIMATES INCLUDED IN OR
INCORPORATED BY REFERENCE INTO THIS PROXY STATEMENT HAVE NOT BEEN EXAMINED OR
COMPILED BY THE INDEPENDENT PUBLIC ACCOUNTANTS OF UPC AND SBI, NOR HAVE SUCH
ACCOUNTANTS APPLIED ANY PROCEDURES THERETO. ACCORDINGLY, SUCH ACCOUNTANTS DO
NOT EXPRESS AN OPINION OR
2
<PAGE> 10
ANY OTHER FORM OF ASSURANCE ON THEM. FURTHER INFORMATION ON OTHER FACTORS THAT
COULD AFFECT THE FINANCIAL RESULTS OF UPC AFTER THE ACQUISITIONS IS INCLUDED IN
THE SEC FILINGS INCORPORATED BY REFERENCE HEREIN.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the SEC by UPC pursuant
to the Exchange Act are hereby incorporated by reference herein (SEC File No.
1-10160):
(a) UPC's Annual Report on Form 10-K for the year ended December
31, 1996 (provided that any information included or
incorporated by reference in response to Items 402(a)(8), (i),
(k), or (1) of Regulation S-K of the SEC shall not be deemed
to be incorporated herein and is not part of the Registration
Statement);
(b) UPC's Quarterly Reports on Form 10-Q for the quarters ended
March 31, and June 30, 1997;
(c) UPC's Current Reports on Form 8-K dated January 16, 1997,
April 17, 1997, July 17, 1997, August 12, 1997 and October 16,
1997;
(d) The description of the current management and Board of
Directors of UPC contained in the UPC Proxy Statement filed
pursuant to Section 14(a) of the Exchange Act for UPC's Annual
Meeting of Stockholders held on April 17, 1997;
(e) UPC's Registration Statement on Form 8-A dated January 19,
1989, filed on February 1, 1989; (SEC File No. 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.
All documents filed by UPC pursuant to Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act after the date of this Proxy Statement and prior to
final adjournment of the Special Meeting shall be deemed to be incorporated by
reference in this 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.
UPC will provide without charge, upon the written or oral request of
any person, including any beneficial owner, to whom this Proxy Statement is
delivered, a copy of any and all information (excluding certain exhibits)
relating to UPC that has been incorporated by reference in the Registration
Statement. Such requests should be directed to E. James House, Jr., Secretary
and Manager of the Legal Department, Union Planters Corporation, 7130 Goodlett
Farms Parkway, Memphis, Tennessee 38018 (telephone (901) 580-6584). In order to
ensure timely delivery of the documents, any request should be made by December
1, 1997.
3
<PAGE> 11
TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
SUMMARY ............................................................................ 6
The Parties ................................................................... 6
Meeting of Stockholders ....................................................... 7
The Merger .................................................................... 8
Management After the Merger ................................................... 10
Market Prices of Common Stock ................................................. 11
Equivalent and Pro Forma Per Share Data ....................................... 11
Selected Financial Data ....................................................... 13
SPECIAL MEETING OF SBI STOCKHOLDERS ................................................ 17
Date, Place, Time, and Purpose ................................................ 17
Record Date, Voting Rights, Required Vote and Revocability of Proxies ......... 17
Solicitation of Proxies ....................................................... 18
Dissenters' Rights ............................................................ 18
Recommendation ................................................................ 18
DESCRIPTION OF TRANSACTION ......................................................... 18
General ....................................................................... 18
Possible Adjustment of Exchange Ratio ......................................... 19
Background of and Reasons for the Merger ...................................... 19
Effective Time of the Merger .................................................. 21
Dissenters' Rights ............................................................ 21
Distribution of UPC Stock Certificates ........................................ 22
Conditions to Consummation of the Merger ...................................... 23
Regulatory Approval ........................................................... 23
Waiver, Amendment, and Termination ............................................ 24
Conduct of Business Pending the Merger ........................................ 25
Limitation on Negotiations .................................................... 26
Management and Operations After the Merger .................................... 26
Interests of Certain Persons in the Merger .................................... 26
Certain Federal Income Tax Consequences ....................................... 27
Accounting Treatment .......................................................... 28
Expenses and Fees ............................................................. 28
Resales of UPC Common Stock ................................................... 28
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS ..................................... 29
Anti-takeover Provisions Generally ............................................ 29
Authorized Capital Stock ...................................................... 30
Amendment of Charter and Bylaws ............................................... 31
Classified Board of Directors and Absence of Cumulative Voting ................ 31
Director Removal and Vacancies ................................................ 32
Indemnification ............................................................... 32
Special Meeting of Stockholders ............................................... 33
Actions by Stockholders Without a Meeting ..................................... 33
Business Combinations ......................................................... 33
Dissenters' Rights of Appraisal ............................................... 35
Stockholders' Rights to Examine Books and Records ............................. 35
</TABLE>
4
<PAGE> 12
<TABLE>
<S> <C>
Dividends...................................................................... 36
COMPARATIVE MARKET PRICES AND DIVIDENDS ............................................ 36
BUSINESS OF UPC .................................................................... 37
General ....................................................................... 37
Recent Developments ........................................................... 38
BUSINESS OF SBI .................................................................... 39
General........................................................................ 39
Lending Activities............................................................. 39
Property....................................................................... 39
Competition.................................................................... 39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION OF SBI ................................ 40
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT OF SBI ............................................ 49
CERTAIN REGULATORY CONSIDERATIONS .................................................. 50
General ....................................................................... 50
Payment of Dividends .......................................................... 51
Capital Adequacy .............................................................. 52
Support of Subsidiary Institutions ............................................ 52
Prompt Corrective Action ...................................................... 53
DESCRIPTION OF UPC CAPITAL STOCK ................................................... 54
UPC Common Stock .............................................................. 54
UPC Preferred Stock ........................................................... 55
OTHER MATTERS ...................................................................... 55
STOCKHOLDER PROPOSALS .............................................................. 55
EXPERTS ............................................................................ 55
OPINIONS ........................................................................... 56
INDEX TO APPENDICES................................................................. 63
</TABLE>
APPENDIX A - Agreement and Plan of Reorganization, as amended, between
Union Planters Corporation and Security Bancshares, Inc. dated
as of August 20, 1997, together with the related Plan of
Merger annexed thereto as Exhibit 1
APPENDIX B - Audited Consolidated Financial Statements of Security
Bancshares, Inc. as of and for the years ended December 31,
1996 and 1995 (and notes thereto)
APPENDIX C - Unaudited Interim Consolidated Financial Statements of
Security Bancshares, Inc. as of and for the six months ended
June 30, 1997 (and notes thereto)
APPENDIX D - Ark. Code Ann.ss.4-26-1007 of the Arkansas Business
Corporation Act, pertaining to applicable dissenters' rights
provisions
5
<PAGE> 13
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS
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
PROXY STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT. SBI STOCKHOLDERS ARE URGED TO READ CAREFULLY THE ENTIRE PROXY
STATEMENT, INCLUDING THE APPENDICES. AS USED IN THIS PROXY STATEMENT, THE TERMS
"UPC" AND "SBI" REFER TO THOSE ENTITIES, RESPECTIVELY, AND, WHERE THE CONTEXT
REQUIRES, TO THOSE ENTITIES AND THEIR RESPECTIVE SUBSIDIARIES.
THE PARTIES
SBI. SBI, an Arkansas corporation, is a bank holding company
registered with the Board of Governors of the Federal Reserve System ("Federal
Reserve") under the Bank Holding Company Act of 1956, as amended (the "BHC
Act"). Through its two wholly-owned bank subsidiaries, Farmers & Merchants
Bank, Des Arc, Arkansas ("Des Arc Bank") and Merchants & Farmers Bank, West
Helena, Arkansas ("West Helena Bank"), SBI provides traditional deposit and
lending services to individual and corporate customers. As of June 30, 1997,
SBI had total consolidated assets of approximately $ 162.2 million, total
consolidated deposits of approximately $ 134.8 million, and total consolidated
stockholders' equity of approximately $ 16.9 million. The principal executive
offices of SBI are located at 110 South Third, Des Arc, Arkansas 72040, and its
telephone number at such address is (870) 256-4191. Additional information with
respect to SBI and its bank subsidiaries is included elsewhere herein under
various headings, including, but not limited to, "BUSINESS OF SBI" and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION OF SBI," and in the audited consolidated financial statements (and
notes thereto) of SBI for the years ended December 31, 1996 and 1995, and the
unaudited consolidated financial statements (and notes thereto) of SBI as of
and for the six months ended June 30, 1997, copies of which are attached hereto
as Appendices B and C, respectively.
UPC. UPC, a Tennessee corporation, is a bank holding company
registered with the Federal Reserve under the BHC Act. As of June 30, 1997, UPC
had total consolidated assets of approximately $14.8 billion, total
consolidated loans of approximately $10.4 billion, total consolidated deposits
of approximately $11.2 billion, and total consolidated stockholders' equity of
approximately $1.4 billion.
UPC currently conducts its business activities through its principal
bank subsidiary, the $5.5 billion asset Union Planters National Bank ("UPNB"),
founded in 1869 and headquartered in Memphis, Tennessee, and 32 other bank
subsidiaries and one savings bank subsidiary 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
currently operates and maintains approximately 432 banking offices and 564
automated teller machines ("ATMs"). UPC's total assets at June 30, 1997 are
allocable by state (before consolidating adjustments) approximately as follows:
$9.7 billion in Tennessee; $2.3 billion in Mississippi; $1.2 billion in
Missouri; $800 million in Arkansas; $609 million in Louisiana; $440 million in
Alabama; and $113 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 12
acquisitions in 1993, 13 in 1994, three in 1995 and seven in 1996, adding
approximately $1.7 billion in total assets in 1993, $3.8 billion in 1994, $1.3
billion in 1995, and $4.2 billion in 1996. Thus far in 1997, UPC has acquired
two financial institutions with aggregate total assets of approximately $167
million. Additionally, UPC has entered into definitive agreements to acquire
four financial institutions, not including SBI, which had aggregate total
assets of approximately $3.7 billion at June 30, 1997 (collectively these
recently completed and pending acquisitions are referred to as the "Other
Acquisitions"). For additional information, see "BUSINESS OF UPC -- Recent
Developments." 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, 1996, 1995, and 1994 (on pages 45 and 46) 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, 1996, which Exhibit 13 is
incorporated by reference herein to the extent indicated herein.
6
<PAGE> 14
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 and entities engaged in lines of business
permissible for banks or bank holding companies. Future acquisitions may entail
the payment by UPC of consideration in excess of the book value of the
underlying net assets acquired, most likely would result in the issuance of
additional shares of UPC Common Stock, may result in the incurrence 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 the recently completed acquisitions as well as those which are
currently pending, see "BUSINESS OF UPC -- Recent Developments."
The principal executive offices of UPC are located at 7130 Goodlett
Farms Parkway, Memphis, Tennessee 38018, and its telephone number at such
address is (901) 580-6000. Additional information with respect to UPC and its
subsidiaries, including UP Holding, is included elsewhere herein and in
documents incorporated by reference in this Proxy Statement. See "AVAILABLE
INFORMATION," "DOCUMENTS INCORPORATED BY REFERENCE" and "BUSINESS OF UPC."
UP HOLDING. UP Holding, a Tennessee corporation, is a wholly-owned
subsidiary of UPC. UP Holding is a bank holding company itself which owns all
of the common stock of UPNB and other permissible investments. The directors and
officers of UP Holding are executive officers of UPC. Subsequent to the
execution of the Agreement and Plan of Merger, Acquisition assigned all of its
rights under the Agreement and Plan of Merger to UP Holding in order to better
facilitate the mergers of the two bank subsidiaries of SBI with and into UPNB,
as discussed in more detail herein. An amendment was then made to the Agreement
and Plan of Merger to provide for the merger of SBI with and into UP Holding to
properly reflect the intent of the parties as to the structure of the
transaction. These amendments do not otherwise affect the Agreement or Plan of
Merger.
MEETING OF STOCKHOLDERS
This Proxy Statement is being furnished to the holders of SBI Common
Stock in connection with the solicitation by the SBI Board of Directors of
proxies for use at the Special Meeting at which SBI stockholders will be asked
to vote upon (i) a proposal to adopt the Agreement and the Plan of Merger and
(ii) such other business as may properly come before the meeting. The Special
Meeting will be held at the corporate office of SBI located at 110 South Third,
Des Arc, Arkansas, at 2:00 p.m. local time, on Wednesday, December 10, 1997. See
"SPECIAL MEETING OF SBI STOCKHOLDERS -- Date, Place, Time, and Purpose."
SBI's Board of Directors has fixed the close of business on October
13, 1997, as the record date (the "SBI Record Date") for determination of the
stockholders entitled to notice of and to vote at the Special Meeting. Only
holders of record of shares of SBI Common Stock on the SBI Record Date will be
entitled to notice of and to vote at the Special Meeting. Each share of SBI
Common Stock is entitled to one vote. Stockholders who execute proxies retain
the right to revoke them at any time prior to the proxies being voted at the
Special Meeting. On the SBI Record Date, there were 136,289 shares of SBI
Common Stock issued and outstanding. See "SPECIAL MEETING OF SBI STOCKHOLDERS
- -- Record Date, Voting Rights, Required Vote and Revocability of Proxies."
Adoption of the Agreement and the Plan of Merger and the transactions
contemplated thereby requires the affirmative vote of the holders of at least
two-thirds of the issued and outstanding shares of SBI Common Stock entitled to
be voted at the Special Meeting. Directors and executive officers of SBI and
its bank subsidiaries, and their affiliates ("SBI Management Group") are
entitled to vote approximately 90% of the outstanding shares of SBI Common
Stock. Henry L. Nichols is co-trustee of various trusts holding, in the
aggregate, 113,407 shares of SBI Common Stock. The members of the SBI
Management Group have advised that they intend to vote all shares of SBI Common
Stock they own or control "FOR" approval of the Agreement and the Plan of
Merger. Assuming this occurs, then the requisite SBI stockholder approval of
the Merger is assured. Notwithstanding that fact, your vote is important and
all SBI stockholders are urged to vote, in person or by proxy, at the Special
Meeting. However, SBI stockholders wishing to exercise their statutory
dissenter's rights should carefully review the sections of this Proxy
Statement describing the steps which must be taken to properly "perfect"
dissenters' rights before determining whether, or how, to vote with respect to
the Merger. See "SPECIAL MEETING OF SBI STOCKHOLDERS -- Record Date, Voting
Rights, Required Vote and Revocability of Proxies, "REASONS FOR AND BACKGROUND
OF THE MERGER" and "SECURITY OWNERSHIP FOR CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF SBI."For information relative to dissenters' rights, see
"--Dissenters' Rights," "DESCRIPTION OF TRANSACTION -- Dissenters' Rights" and
Appendix D hereto, which is a copy of the Arkansas statutes governing
dissenters' rights.
7
<PAGE> 15
THE MERGER
GENERAL. The Agreement provides for the acquisition of SBI by UPC
pursuant to the merger of SBI with and into UP Holding, with UP Holding
surviving the Merger and the two bank subsidiaries of SBI, Farmers and
Merchants Bank, Des Arc, AR ("Des Arc Bank") and Merchants and Farmers Bank,
West Helena, AR ("West Helena Bank") becoming wholly-owned subsidiaries of UP
Holding. At the Effective Time, each share of SBI Common Stock then issued and
outstanding (excluding shares held by SBI, UPC, or their respective
subsidiaries, in each case other than shares held in a fiduciary capacity or as
a result of debts previously contracted) will be converted into 3.5777 shares
of UPC Common Stock, subject to possible adjustment as described below (the
"Exchange Ratio").
The Exchange Ratio will be adjusted upward pursuant to the Agreement
because SBI has recovered more than $500,000, net of expenses, from the sale of
collateral taken upon the default of a loan made by an SBI bank subsidiary.
The amount by which the net recovery exceeded $500,000 is believed to be
approximately $165,000. Assuming the net recovery is $165,000, then the
Exchange Ratio would be adjusted from 3.5777 to 3.6016. SBI is reviewing its
records to determine the actual amount of the net recovery, and believes that
should there be any difference between the actual net recovery and $165,000,
the difference will not be material. See "DESCRIPTION OF THE TRANSACTION --
Possible Adjustment of the Exchange Ratio."
No fractional shares of UPC Common Stock will be issued. Rather, cash
(without interest) will be paid in lieu of any fractional share interest to
which any SBI stockholder would be entitled upon consummation of the Merger, in
an amount equal to such fractional part of a share of UPC Common Stock
multiplied by the market value of one share of UPC Common Stock at the
Effective Time. The market value of one share of UPC Common Stock at the
Effective Time shall be the closing price of such common stock on the
NYSE-Composite Transactions List (as reported by The Wall Street Journal or, if
not reported thereby, another authoritative source as selected by UPC) on the
trading day that the Effective Time occurs. See "DESCRIPTION OF TRANSACTION --
General."
As of the SBI Record Date, SBI had 136,289 shares of SBI Common Stock
issued and outstanding. Based upon an Exchange Ratio of 3.6016 (the 3.5777
Exchange Ratio plus a .02395 adjustment based on a $165,000 recovery) and no
further adjustments to the Exchange Ratio, upon consummation of the Merger, UPC
would issue approximately 490,858 shares of UPC Common Stock in the Merger.
Accordingly, UPC would then have issued and outstanding approximately
68,525,158 shares of UPC Common Stock based on the number of shares of UPC
Common Stock issued and outstanding on October 1, 1997 (and excluding shares to
be issued pursuant to Other Pending Acquisitions and shares to be issued
pursuant to the exercise of stock options and for other purposes). The actual
adjustment factor to the Exchange Ratio may be more or less than .02395 as the
actual net recovery on the loan may be more or less than $165,000, although SBI
believes that any difference would be immaterial.
REASONS FOR THE MERGER, RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF
SBI. The Board of Directors of SBI believes that the Agreement, the Plan of
Merger, and the Merger are in the best interests of SBI and its stockholders.
THE SBI DIRECTORS UNANIMOUSLY RECOMMEND THAT SBI STOCKHOLDERS VOTE FOR ADOPTION
OF THE AGREEMENT AND THE PLAN OF MERGER. The Board of Directors of SBI
believes that the Merger will result in a company with expanded opportunities
for profitable growth and that the combined resources and capital of SBI and
UPC will provide an enhanced ability to compete in the changing and competitive
financial services industry. Furthermore, SBI stockholders will achieve
liquidity in the investment in that the shares of UPC Common Stock to be
received in the Merger will be listed for trading on the NYSE. See
"DESCRIPTION OF TRANSACTION -- Background of and Reasons for the Merger" and
"--Interests of Certain Persons in the Merger."
In unanimously approving the Agreement and the Plan of Merger, SBI's
directors also considered, among other things, SBI's and UPC's financial
condition, the financial terms and income tax consequences of the Merger, the
likelihood of the Merger being approved by regulatory authorities without undue
conditions or delay, legal advice concerning the proposed Merger, and their
perception as to the fairness of the terms of the Merger to SBI stockholders
based on their opinions and without obtaining a fairness opinion from an
independent financial advisor. See "DESCRIPTION OF TRANSACTION -- Background of
and Reasons for the Merger."
EFFECTIVE TIME. Subject to the conditions to the obligations of the
parties to effect the Merger, the Effective Time will occur on the date and at
the time that the Articles of Merger become effective with the Arkansas
Secretary of State and the Tennessee Secretary of State. Unless otherwise
agreed upon by SBI and UPC, and subject to the conditions to the obligations of
the parties to effect the Merger, the parties will use their reasonable efforts
to cause the Effective Time to occur in the first quarter of 1998. See
8
<PAGE> 16
"DESCRIPTION OF TRANSACTION -- Effective Time of the Merger," "--Conditions to
Consummation of the Merger," and "--Waiver, Amendment, and Termination."
NO ASSURANCE CAN BE PROVIDED THAT THE NECESSARY STOCKHOLDER AND
REGULATORY APPROVALS CAN BE OBTAINED OR THAT THE OTHER CONDITIONS PRECEDENT TO
THE MERGER CAN OR WILL BE SATISFIED. SBI AND UPC ANTICIPATE THAT ALL CONDITIONS
TO THE CONSUMMATION OF THE MERGER WILL BE SATISFIED SO THAT THE MERGER CAN BE
CONSUMMATED DURING THE FIRST QUARTER OF 1998. HOWEVER, DELAYS IN THE
CONSUMMATION OF THE MERGER COULD OCCUR.
EXCHANGE OF STOCK CERTIFICATES. Promptly after the Effective Time,
UPC will cause Union Planters National Bank, Memphis, Tennessee, acting in its
capacity as exchange agent for UPC (the "Exchange Agent"), to mail to each
holder of record of a certificate or certificates (collectively, the
"Certificates") which, immediately prior to the Effective Time, represented
outstanding shares of SBI Common Stock, a letter of transmittal and
instructions for use in effecting the surrender and cancellation of the
Certificates in exchange for certificates representing shares of UPC Common
Stock. Cash will be paid to the holders of SBI Common Stock in lieu of the
issuance of any fractional shares of UPC Common Stock. In no event will the
holder of any surrendered Certificate(s) be entitled to receive interest on any
cash to be issued to such holder, and in no event will SBI, UPC, or the
Exchange Agent be liable to any holder of SBI Common Stock for any UPC Common
Stock or dividends thereon or cash delivered in good faith to a public official
pursuant to any applicable abandoned property, escheat, or similar law.
REGULATORY APPROVAL AND OTHER CONDITIONS. The Merger is subject to
the prior approval of the Federal Reserve and the Arkansas State Bank
Department ("Arkansas Department"). The mergers of the Des Arc Bank and the
West Helena Bank into UPNB (the "Affiliate Bank Mergers") are subject to the
prior approval of the Office of the Comptroller of the Currency ("OCC").
Applications for the prior approvals of the Federal Reserve, OCC and Arkansas
Department are expected to be filed in November. There can be no assurance
that such regulatory approvals will be obtained or as to the timing of any such
approvals.
Consummation of the Merger is subject to various other conditions,
including receipt of the required approval of SBI stockholders, receipt of an
opinion of counsel as to the tax-free nature of certain aspects of the Merger,
receipt of an opinion of Price Waterhouse LLP that the merger qualifies as a
pooling of interests, SBI continues to meet certain operating parameters, and
certain other conditions. See "DESCRIPTION OF TRANSACTION -- Regulatory
Approval" and "--Conditions to Consummation of the Merger."
WAIVER, AMENDMENT, AND TERMINATION. The Agreement may be terminated
and the Merger abandoned at any time prior to the Effective Time by mutual
consent of the Boards of Directors of SBI and UPC, or by the action of the
Board of Directors of either company under certain circumstances, including,
but not limited to, if the Merger is not consummated by June 30, 1998, unless
the failure to consummate by such date is due to a willful breach of the
Agreement by the party seeking to terminate. To the extent permitted by law,
the Agreement may be amended upon the written agreement of UPC and SBI without
the approval of SBI stockholders, whether before or after adoption of the
Agreement and the Plan of Merger by SBI stockholders; provided, that after such
adoption, there shall be made no amendment that modifies in any material
respect the consideration to be received by SBI stockholders, without the
approval of such SBI stockholders. See "DESCRIPTION OF TRANSACTION -- Waiver,
Amendment, and Termination."
DISSENTERS' RIGHTS. Pursuant to Section 4-26-1007 of the Arkansas
Business Corporation Act ("ABCA"), the holders of SBI Common Stock have the
right to dissent to the Merger and to receive in cash the fair value of their
shares of SBI Common Stock if the Merger is actually consummated. A SBI
stockholder exercising dissenters' rights must take certain specific actions in
order to properly "perfect" his or her statutory dissenters' rights. Any SBI
stockholder who considers exercising dissenters' rights with respect to the
Merger should carefully review the sections of this Proxy Statement relative to
dissenters' rights, as well as Appendix D hereto which is a copy of Section
4-26-1007 of the ABCA. See "DESCRIPTION OF TRANSACTION -- Dissenters' Rights"
and Appendix D hereto.
INTERESTS OF CERTAIN PERSONS IN THE MERGER. Certain members of SBI's
management and Board of Directors have interests in the Merger in addition to
their interests as stockholders of SBI generally. These interests relate to the
payment of annual bonuses of up to $450,000 in the aggregate to certain
officers of SBI and the eligibility of those employees of SBI who become
employees of UPC for certain employee benefits under UPC employee benefit
plans. See "DESCRIPTION OF TRANSACTION -- Interests of Certain Persons in the
Merger."
9
<PAGE> 17
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. 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 will be recognized by a SBI stockholder upon the
exchange of such stockholder's shares of SBI Common Stock solely for shares of
UPC Common Stock (including any associated UPC Rights). 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. Gain
recognition, if any, will not be in excess of the amount of cash received.
Consummation of the Merger is conditioned upon receipt by UPC of an opinion of
Wyatt, Tarrant & Combs, Memphis, Tennessee, as to the tax effect of the Merger.
TAX CONSEQUENCES OF THE MERGER FOR INDIVIDUAL TAXPAYERS CAN VARY, HOWEVER, AND
ALL SBI STOCKHOLDERS 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 "DESCRIPTION OF TRANSACTION -- Certain Federal Income Tax
Consequences."
ACCOUNTING TREATMENT. It is intended that the Merger will be
accounted for as a pooling of interests for accounting and financial reporting
purposes. See "DESCRIPTION OF TRANSACTION -- Accounting Treatment."
CERTAIN DIFFERENCES IN STOCKHOLDERS' RIGHTS. At the Effective Time,
SBI stockholders, whose rights are governed by SBI's Articles of Incorporation
and Bylaws and by the ABCA, will automatically become UPC stockholders, and
their rights as UPC stockholders will be governed by UPC's Restated Charter and
Bylaws and the Tennessee Business Corporation Act (the "TBCA"). The rights of
UPC stockholders differ from the rights of SBI stockholders in certain
important respects, including with respect to certain anti-takeover provisions
provided for in UPC's Restated Charter and Bylaws. See "EFFECT OF THE MERGER ON
RIGHTS OF STOCKHOLDERS."
LIMITATION ON NEGOTIATIONS. Pursuant to Section 6.3 of the Merger
Agreement, SBI is prohibited from soliciting or knowingly encouraging any
"Acquisition Proposal" (defined generally as any tender offer, exchange offer
or other proposal for a merger, consolidation, acquisition of all the stock,
assets or earning power of, or other business combination involving SBI). As
protection against possible violation of this limitation, SBI has agreed to pay
to UPC the sum of $1,150,000 in immediately available funds in the event and at
the time that SBI enters into a letter of intent or agreement with respect to
an Acquisition Proposal or supports or indicates an intent to support an
Acquisition Proposal other than pursuant to the Agreement. In addition,
Henry L. Nichols joined in the Agreement in his individual capacity and as
trustee or co-trustee of various trusts which own SBI Common Stock, agreeing
not to sell or offer to sell SBI Common Stock except pursuant to the Agreement.
These provisions would survive the termination of the Agreement under
certain circumstances. See "DESCRIPTION OF TRANSACTION -- Limitation on
Negotiations".
CONDUCT OF BUSINESS PENDING THE MERGER. Each party has agreed in the
Agreement to, among other things, operate its business and to take no action
that would materially adversely affect the ability of any party to perform its
covenants and agreements under the Agreement. In addition, SBI has agreed not
to take certain actions relating to the operation of SBI pending consummation
of the Merger without the prior written consent of UPC, except as otherwise
permitted by the Agreement, including, among other things: (i) becoming
responsible for any obligation for borrowed money in excess of an aggregate of
$100,000, except in the ordinary course of business consistent with past
practices; (ii) paying any dividends, or, subject to certain exceptions,
exchanging any shares of its capital stock, issuing any additional shares of
its capital stock or giving any person the right to acquire any such shares;
(iii) acquiring control over any other entity; (iv) subject to certain
exceptions, granting any increase in compensation or benefits, or paying any
bonus, to any of its directors, officers, or employees; or (v) except as
previously disclosed to UPC, modifying or adopting any employee benefit plans,
including any employment contract. See "DESCRIPTION OF TRANSACTION -- Conduct of
Business Pending the Merger", and "--Interests of Certain Persons in the
Merger".
MANAGEMENT AFTER THE MERGER
At the Effective Time, SBI will be merged into UP Holding and UP
Holding would be the surviving corporation. The directors and officers of UP
Holding will remain its directors and officers after the Effective Time. It is
also anticipated that immediately after the Effective Time both the Des Arc
Bank and the West Helena Bank will be merged with and into UPNB. UPNB would
survive those mergers and the main offices and branches of Des Arc Bank and
West Helena Bank would become branches of UPNB.
10
<PAGE> 18
MARKET PRICES OF COMMON STOCK
The UPC Common Stock is listed on the NYSE under the symbol "UPC."It
is anticipated that the shares of UPC Common Stock issuable in the Merger in
exchange for SBI Common Stock would be approved for listing on the NYSE at or
prior to the Effective Time of the Merger.
On August 19, 1997, the business day prior to the date the Merger was
initially publicly announced, the last reported sale price of the UPC Common
Stock on the NYSE was $49.63 per share. On October 17, 1997, the last sale
price of UPC Common Stock as reported on the NYSE was $60.25 per share.
SBI Common Stock has never been listed or publicly traded on any
securities exchange or actively traded in the over-the-counter market.
Management of SBI is aware of only a very few transfers of SBI Common Stock
since January 1, 1996. In most instances SBI is not aware of the prices at
which the shares traded, but in recent transactions of which SBI management is
aware, the price was $95.00 per share.
In the Merger, SBI stockholders would receive at least 3.5777 shares
of UPC Common Stock for each of their shares of SBI Common Stock; therefore,
based on the closing price of UPC Common Stock on the NYSE on October 17, 1997,
SBI stockholders would receive at least $215.55 worth of UPC Common Stock for
each of their shares of SBI Common Stock. If the Exchange Ratio is adjusted to
reflect a $165,000 net recovery on the loan, the Exchange Ratio would be
adjusted by .02395 to 3.6016. See "DESCRIPTION OF THE TRANSACTION -- Possible
Adjustment of Exchange Ratio."Based on the closing price of UPC Common Stock
on the NYSE on October 17, 1997, if the Exchange Ratio were to be 3.6016, then
SBI stockholders would receive $217 worth of UPC Common Stock for each of their
shares of SBI Common Stock. However, SBI stockholders should clearly
understand that the Exchange Ratio may not be adjusted by .02395. as the actual
net recovery on the loan has not been determined as of the date of this Proxy
Statement, and the actual value of the UPC Common Stock received as a result of
the Merger may be more or less than $60.25 per share, its closing price on
October 17, 1997. SEE "COMPARATIVE MARKET PRICES AND DIVIDENDS."
There can be no assurance as to what the market price of the UPC
Common Stock will be if and when the Merger is consummated, or at any time
thereafter.
EQUIVALENT AND PRO FORMA PER SHARE DATA
The following table sets forth certain comparative per share data
relating to earnings before extraordinary items and accounting changes, cash
dividends, and book value on (i) a historical basis for UPC and SBI; (ii) a pro
forma combined basis per share of UPC Common Stock, giving effect to the
Merger, the "Recently Completed Acquisitions" and the "Other Pending
Acquisitions" (as defined under "BUSINESS OF UPC -- Recent Developments"); and
(iii) an equivalent pro forma basis per share of SBI Common Stock, giving
effect to the Merger, the Recently Completed Acquisitions and the Other Pending
Acquisitions. Pro forma data is not presented separately for SBI because it
would not be significantly different from UPC's results. The UPC pro forma
combined information and the SBI equivalent pro forma information give effect
to the Merger, the Recently Completed Acquisitions and the Other Pending
Acquisitions and reflect an Exchange Ratio of 3.5777. Any adjustment to the
Exchange Ratio, as previously discussed, would be immaterial to the data
presented. The Merger, the Recently Completed Acquisitions and the Other
Pending Acquisitions, except for the acquisition of Sho-Me Financial Corp.,
have been or are expected to be accounted for using the pooling-of-interests
method of accounting. The acquisition of Sho-Me Financial Corp. is expected to
be accounted for using the purchase method of accounting. The pro forma
information for 1996 and the six months ended June 30, 1997 reflect the
acquisition of SBI, the recently Completed Acquisitions and the Other Pending
Acquisitions as of January 1, 1996. The pro forma information for 1995 and 1994
reflect only the assumed acquisitions of Magna Bancorp and Capital Bancorp
because the Merger, the Recently Completed Acquisitions and the Other Pending
Acquisitions (excluding Magna Bancorp and Capital Bancorp) are not
considered significant to UPC from a financial statement presentation
standpoint. The pro forma data are presented for information purposes only and
are not necessarily indicative of the results of operations or combined
financial position that would have resulted had the Merger, the Recently
Completed Acquisitions or the Other Pending Acquisitions been consummated at
the dates or during the periods indicated, nor are they necessarily indicative
of future results of operations or combined financial position.
11
<PAGE> 19
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical consolidated financial statements
of UPC and SBI, including the respective notes thereto. See "DOCUMENTS
INCORPORATED BY REFERENCE," "--Selected Financial Data," and "BUSINESS OF UPC--
Recent Developments," and the financial statements (and notes thereto) of SBI
attached hereto as Exhibits B and C.
UNION PLANTERS CORPORATION
SECURITY BANCSHARES, INC.
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED Years Ended December 31, (1)
June 30, -----------------------------
1997 1996 1995 1994
----------- ------ ------ -------
<S> <C> <C> <C> <C>
EARNINGS BEFORE EXTRAORDINARY ITEMS
AND ACCOUNTING CHANGES
UPC
Primary . . . . . . . . . . . . . . . 1.73 $1.95 $ 2.72 $1.52
Fully Diluted . . . . . . . . . . . . 1.68 1.92 2.64 1.52
SBI . . . . . . . . . . . . . . . . . . . . 6.76 13.90 13.24 8.10
UPC pro forma (all Other Acquisitions,
including SBI)
Primary . . . . . . . . . . . . . . . 1.71 2.29 2.73 1.63
Fully diluted . . . . . . . . . . . . 1.66 2.25 2.66 1.63
SBI equivalent pro forma (UPC only) (1)
Primary . . . . . . . . . . . . . . . 6.19 6.98 9.73 5.44
Fully diluted . . . . . . . . . . . . 6.01 6.87 9.45 5.44
SBI equivalent pro forma (all Other
Acquisitions, including SBI) (1)
Primary . . . . . . . . . . . . . . . 6.12 8.19 9.77 5.83
Fully diluted . . . . . . . . . . . . 5.94 8.05 9.52 5.83
CASH DIVIDENDS PER SHARE
UPC . . . . . . . . . . . . . . . . . . . . .695 1.08 .98 .88
SBI . . . . . . . . . . . . . . . . . . . . -- -- -- --
SBI equivalent pro forma (1) . . . . . . . . 2.49 3.86 3.51 3.15
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ------------
<S> <C> <C>
BOOK VALUE PER COMMON SHARE
UPC . . . . . . . . . . . . . . . . . . . . $ 20.69 $ 19.55
SBI . . . . . . . . . . . . . . . . . . . . 124.10 124.79
UPC pro forma (all Other Acquisitions,
including SBI) . . . . . . . . . 20.87 19.71
SBI equivalent pro forma (UPC only) (1). . . 74.02 69.94
SBI equivalent pro forma (all Other
Acquisitions, including SBI) (1) . . . 74.67 70.52
</TABLE>
- ----------
(1) The equivalent pro forma per share data for SBI is computed by
multiplying UPC's pro forma information (UPC data for dividends per
share) by an Exchange Ratio of 3.5777.
SELECTED FINANCIAL DATA
The following tables present for both UPC and SBI, selected
consolidated financial data for the five-year period ended December 31, 1996
and for the six-month periods ended June 30, 1997 and June 30, 1996, and for
SBI, selected consolidated financial data for
12
<PAGE> 20
the five-year period ended December 31, 1996 and for the six-month periods
ended June 30, 1997 and June 30, 1996. The information for UPC has been derived
from the consolidated financial statements of UPC, including the audited
consolidated financial statements of UPC incorporated in this Proxy Statement
by reference to UPC's 1996 Annual Report on Form 10-K for the year ended
December 31, 1996 and UPC's Quarterly Reports on Form 10-Q for the quarters
ended June 30, 1997 and June 30, 1996, and should be read in conjunction
therewith and with the notes thereto. See "DOCUMENTS INCORPORATED BY
REFERENCE." The information for SBI has been derived from the audited
consolidated financial statements of SBI as of and for the year ended December
31, 1996 and 1995, and the unaudited interim financial statements of SBI as of
and for the six months ended June 30, 1997, copies of which are attached to
this Proxy Statement as Appendices B and C, 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 opinion of
the respective managements of UPC and SBI, all adjustments (which include
normal recurring adjustments and those related to the adoption of new
accounting principles) necessary to arrive at a fair statement of interim
results of operations of UPC and SBI, respectively, have been included. With
respect to UPC and SBI, results for the six months ended June 30, 1997 are not
necessarily indicative of results which may be expected for any other interim
period or for the year as a whole. See "BUSINESS OF UPC--Recent Developments"
for information concerning UPC's Other Acquisitions as defined therein.
13
<PAGE> 21
UNION PLANTERS CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,(1) YEARS ENDED DECEMBER 31,(1)
------------------- ---------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net Interest income $312,950 $299,542 $605,962 $535,997 $504,500 $439,290 $357,365
Provision for losses on loans 25,001 25,669 57,395 27,381 9,661 22,660 37,367
Investment securities gains (losses) 9 32 4,081 409 (22,515) 3,508 11,880
Other noninterest income 111,982 109,285 222,250 203,014 160,109 154,254 136,162
Noninterest expense 219,302 238,245 570,634 452,635 486,836 408,888 362,028
-------- -------- -------- -------- -------- -------- --------
Earnings before income taxes,
extraordinary item, and
accounting changes 180,638 144,945 204,264 259,404 145,597 165,504 106,012
Applicable income taxes 61,593 49,169 70,526 86,648 45,174 51,864 30,219
-------- -------- -------- -------- -------- -------- --------
Earnings before extraordinary item and
accounting changes 119,045 95,776 133,738 172,756 100,423 113,640 75,793
Extraordinary item and accounting
changes, net of taxes -- -- -- -- -- 637 2,847
-------- -------- -------- -------- -------- -------- --------
Net earnings $119,045 $ 95,776 $133,738 $172,756 $100,423 $114,277 $ 78,640
======== ======== ======== ======== ======== ======== ========
PER COMMON SHARE DATA(2)&(5)
Primary
Earnings before extraordinary item and
accounting changes $ 1.73 $ 1.42 $ 1.95 $ 2.72 $ 1.52 $ 2.19 $ 1.75
Net earnings 1.73 1.42 1.95 2.72 1.52 2.20 1.75
Fully diluted
Earnings before extraordinary item and
accounting changes 1.68 1.38 1.92 2.64 1.52 2.14 1.73
Net earnings 1.68 1.38 1.92 2.64 1.52 2.15 1.73
Cash dividends 0.695 0.54 1.08 0.98 0.88 0.72 0.60
Book value 20.69 19.19 19.55 18.52 15.42 14.80 14.08
</TABLE>
(continued on following page)
14
<PAGE> 22
UNION PLANTERS CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,(1) YEARS ENDED DECEMBER 31,(1)
------------------------ ---------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END)
Total assets $14,770,346 $15,273,145 $15,222,563 $14,383,222 $13,425,063 $11,866,609 $10,180,375
Loans, net of unearned income 10,402,408 9,607,778 10,434,070 9,041,059 8,436,650 6,615,884 5,364,377
Allowance for losses on loans 161,159 167,987 166,853 156,388 154,131 141,999 114,130
Investment securities 2,832,726 4,111,207 2,956,234 3,573,054 3,592,482 3,854,767 3,370,321
Deposits 11,238,399 11,593,444 11,490,262 11,074,722 10,702,569 9,879,780 8,714,306
Short-term borrowings 534,068 1,076,781 714,146 838,283 699,838 300,414 343,452
Long-term debt(3)
Parent company 373,478 213,453 373,459 214,758 114,790 114,729 74,292
Subsidiary banks 943,582 869,525 1,035,257 811,819 693,002 463,055 202,847
Total shareholders' equity 1,444,929 1,316,114 1,352,874 1,213,162 1,008,594 935,730 670,267
Average assets 14,877,498 15,138,068 15,274,782 13,661,748 13,105,179 11,565,505 9,475,049
Average shareholders' equity 1,368,627 1,254,354 1,283,575 1,119,232 1,042,990 813,140 623,869
Average shares outstanding
(in thousands)
Primary 67,249 64,300 64,987 60,385 59,587 43,192 35,463
Fully Diluted 71,028 68,919 69,518 64,995 59,929 47,422 38,307
PROFITABILITY AND CAPITAL RATIOS
Return on average assets 1.61% 1.27% 0.88% 1.26% 0.77% 0.99% 0.83%
Return on average common equity 18.12 15.93 10.61 16.16 9.76 14.92 13.15
Net interest income
(taxable-equivalent)/
average earning assets(4) 4.73 4.42 4.41 4.38 4.31 4.29 4.26
Loans/deposits 92.56 82.87 90.81 81.64 78.83 66.96 61.56
Common and preferred dividend
payout ratio 40.75 33.53 50.64 32.74 40.99 28.34 32.95
Equity/assets (period end) 9.78 8.62 8.89 8.43 7.51 7.89 6.58
Average shareholders' equity/
average total assets 9.20 8.29 8.40 8.19 7.96 7.03 6.58
Leverage ratio 10.64 8.34 9.61 8.08 7.53 7.62 6.36
Tier 1 capital/risk-weighted assets 16.76 13.93 15.29 13.39 12.75 14.07 11.70
Total capital/risk-weighted assets 19.86 17.09 18.32 16.68 14.97 16.51 13.64
ASSET QUALITY RATIOS(6)
Allowance/period end loans 1.80 1.98 1.86 1.92 1.98 2.27 2.20
Nonperforming loans/total loans 0.61 0.74 0.74 0.56 0.44 0.65 1.16
Allowance/nonperforming loans 295 268 253 344 444 346 189
Nonperforming assets/loans and
foreclosed properties 0.80 0.87 0.92 0.67 0.58 0.96 1.83
Provision/average loans 0.56 0.60 0.66 0.34 0.14 0.37 0.74
Net charge-offs/average loans 0.69 0.48 0.60 0.34 0.09 0.27 0.52
</TABLE>
- ----------------------------------------------------------------
(1) Reference is made to "Basis of Presentation" in Note 1 to UPC's
consolidated financial statements contained in the 1996 Annual Report to
Shareholders.
(2) Share and per share amounts have been retroactively restated for
significant acquisitions accounted for as poolings of interests.
(3) Long-term debt includes Medium-Term Bank Notes, Federal Home Loan Bank
(FHLB) advances, subordinated notes and debentures, obligations under
capital leases, mortgage indebtedness,Trust Preferred Securities, and
notes payable with maturities greater than one year.
(4) Average balances and calculations do not include the impact of the net
unrealized gain or loss on available for sale securities.
(5) Leader Financial Corporation (Leader) was organized as a holding company
on March 18, 1993 in connection with the conversion of its principal
subsidiary, Leader Federal Bank for Savings, from a federal mutual savings
bank to a federally-chartered capital stock savings bank (See Note 2 to
UPC's consolidated financial statements contained in the 1996 Annual
Report to Shareholders). Accordingly, earnings per share for the year
ended December 31, 1992 is calculated using only UPC's historical net
earnings and the calculation of earnings per share for the year ended
December 31, 1993 is based on UPC's historical net earnings for 1993 plus
Leader's fourth quarter net earnings, since the stock conversion occurred
on September 30, 1993.
(6) FHA/VA government-insured/guaranteed loans have been excluded, since they
represent minimal credit risk to UPC.
15
<PAGE> 23
SECURITY BANCSHARES, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,(1)(2) YEARS ENDED DECEMBER 31,(1)
-------------------- --------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------------------- --------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income $ 3,367 $ 2,913 $ 6,078 $ 5,558 $ 5,115 $ 5,144 $ 2,861
Provision for loan losses 168 110 365 140 490 385 --
Investment securities gains (losses) (21) (19) (24) (12) (37) 11 181
Other noninterest income 511 462 881 796 778 849 434
Noninterest expense 2,285 2,103 4,131 4,148 4,264 4,438 2,097
-------------------- --------------------------------------------------------
Earnings before income taxes 1,404 1,143 2,439 2,054 1,102 1,181 1,379
Applicable income taxes 491 355 657 447 168 216 514
-------------------- --------------------------------------------------------
Net earnings $ 913 $ 788 $ 1,782 $ 1,607 $ 934 $ 965 $ 865
==================== ========================================================
PER COMMON SHARE DATA
Primary earnings per share $ 6.76 $ 6.18 $ 13.90 $ 13.24 $ 8.10 $ 8.83 $ 8.34
Book value 124.10 114.97 124.79 114.73 100.05 105.05 106.00
BALANCE SHEET DATA
Total assets $162,173 $158,978 $167,073 $159,273 $133,635 $142,807 $136,243
Loans, net of unearned income 109,673 103,416 92,994 85,543 73,594 70,018 66,658
Allowance for losses on loans 1,322 1,220 1,268 1,218 1,196 1,294 1,098
Investment Securities 40,535 42,745 53,277 47,240 44,865 46,891 44,474
Deposits 134,795 136,210 146,747 140,418 118,012 126,276 120,410
Total shareholder's equity 16,913 14,760 16,065 14,429 11,889 11,791 11,015
Average assets 161,272 158,739 162,285 143,104 132,385 130,341 61,986
Average shareholder's equity 16,551 14,728 15,081 13,313 12,097 11,385 8,277
Average shares outstanding 135,078 127,589 128,174 121,327 115,256 109,292 103,674
PROFITABILITY AND CAPITAL RATIOS
Return on average assets 1.13% 0.99% 1.10% 1.12% 0.71% 0.74% 1.40%
Return on average common equity 11.03% 10.70% 11.82% 12.07% 7.72% 8.48% 10.45%
Efficiency ratio 58.92% 62.31% 59.36% 65.28% 72.36% 74.05% 63.64%
Net interest income margin(3) 4.45% 4.62% 4.07% 4.25% 4.42% 4.37% 5.09%
Loans/deposits 81.36% 75.92% 63.37% 60.92% 62.36% 55.45% 55.36%
Equity/assets 10.43% 9.28% 9.62% 9.06% 8.90% 8.26% 8.08%
Average shareholder's equity/average
assets 10.26% 9.28% 9.29% 9.30% 9.14% 8.73% 13.35%
Leverage ratio 10.54% 9.44% 9.82% 9.91% 9.57% 9.05% 8.15%
Tier 1 Capital to risk-weighted assets 13.78% 12.47% 14.30% 13.70% 14.45% 13.79% 13.46%
Total Capital to risk-weighted assets 14.85% 13.49% 15.44% 14.88% 15.70% 15.05% 14.71%
ASSET QUALITY RATIOS
Allowance/period end loans, net of
unearned income 1.21% 1.18% 1.36% 1.42% 1.63% 1.85% 1.65%
Nonperforming loans/total loans, net
of unearned income 2.40% 2.44% 2.26% 2.14% 2.32% 1.07% 0.79%
Allowance/nonperforming loans 50% 48% 60% 67% 70% 172% 208%
Nonperforming assets/loans and
foreclosed properties 2.42% 2.51% 2.43% 2.27% 2.43% 1.10% 0.94%
Provision/average loans, net of
unearned income 0.35% 0.24% 0.39% 0.17% 0.66% 0.56% --
Net charge-offs/average loans, net of
unearned income 0.23% 0.24% 0.33% 0.14% 0.79% 0.28% 0.57%
</TABLE>
(1) Reference is made to "Principles of Consolidation" in Note 1 to the audited
consolidated financial statements.
(2) Income amounts have been annualized for calculation of ratios, if
applicable.
(3) Calculated as net interest income divided by average earning assets.
16
<PAGE> 24
SPECIAL MEETING OF SBI STOCKHOLDERS
DATE, PLACE, TIME, AND PURPOSE
This Proxy Statement is being furnished to the holders of SBI Common
Stock in connection with the solicitation by the SBI Board of Directors of
proxies for use at the Special Meeting, and at any and all adjournments or
postponements thereof, at which SBI stockholders will be asked to vote upon a
proposal to approve the adoption of the Agreement and the Plan of Merger. The
Special Meeting will be held at the main offices of Farmers & Merchants Bank,
110 South Third, Des Arc, Arkansas, at 2:00 p.m., local time, on Wednesday,
December 10, 1997. See "DESCRIPTION OF TRANSACTION."
RECORD DATE, VOTING RIGHTS, REQUIRED VOTE AND REVOCABILITY OF PROXIES
The close of business on October 13, 1997, has been fixed as the SBI
Record Date for determining holders of outstanding shares of SBI Common Stock
entitled to notice of and to vote at the Special Meeting. Only holders of SBI
Common Stock of record on the books of SBI at the close of business on the SBI
Record Date are entitled to notice of and to vote at the Special Meeting. As of
the SBI Record Date, there were 136,289 shares of SBI Common Stock issued and
outstanding held by 78 holders of record. Henry L. Nichols, Chairman of SBI's
Board of Directors, is co-trustee of various trusts which hold, in the
aggregate, 113,407 or approximately 83% of the outstanding shares of SBI Common
Stock. Other members of the management group of SBI and its bank subsidiaries
own or control another 7% of the outstanding shares of SBI Common Stock.
Holders of SBI Common Stock are entitled to one vote on each matter
considered and voted upon at the Special Meeting for each share of SBI Common
Stock held of record as of the SBI Record Date. To hold a vote on any proposal,
a quorum must be assembled, which requires that at least one-half of the shares
of SBI Common Stock issued and outstanding and entitled to vote be present in
person or represented by proxy. In determining whether a quorum exists at the
Special Meeting for purposes of all matters to be voted on, all votes "for" or
"against," as well as all abstentions, with respect to the proposal receiving
the most such votes, will be counted. Adoption of the Agreement and the Plan of
Merger requires an affirmative vote of the holders of at least two-thirds of
the issued and outstanding shares of SBI Common Stock entitled to be voted at
the Special Meeting. As noted in the previous paragraph, Henry L. Nichols and
other members of the management of SBI and its bank subsidiaries (the "SBI
Management Group") collectively own or control approximately 90% of all
outstanding shares of SBI Common Stock. The members of the SBI Management
Group have advised that they intend to vote "FOR" approval of the Agreement and
Plan of Merger. Assuming such occurs, then the requisite shareholder approval
will be achieved. Notwithstanding that fact, all SBI stockholders are urged to
vote, in person or by proxy, at the Special Meeting. SEE, "--DESCRIPTION OF
TRANSACTION --Interests of Certain Persons in the Merger" and "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF SBI."
Shares of SBI Common Stock represented by properly executed proxies,
if such proxies are received in time for exercise and not revoked, will be
voted in accordance with the instructions indicated on the proxies. IF NO
INSTRUCTIONS ARE INDICATED, SUCH PROXIES WILL BE VOTED FOR THE PROPOSAL TO
ADOPT THE AGREEMENT AND THE PLAN OF MERGER AND, IN THE DISCRETION OF THE PROXY
HOLDER, AS TO ANY OTHER MATTER WHICH MAY COME PROPERLY BEFORE THE SPECIAL
MEETING. IF NECESSARY, THE PROXY HOLDER MAY VOTE IN FAVOR OF A PROPOSAL TO
ADJOURN THE SPECIAL MEETING IN ORDER TO PERMIT FURTHER SOLICITATION OF PROXIES
IN THE EVENT THERE ARE NOT SUFFICIENT VOTES TO APPROVE THE FOREGOING PROPOSAL
AT THE TIME OF THE SPECIAL MEETING. HOWEVER, NO PROXY HOLDER WILL VOTE ANY
PROXIES VOTED "AGAINST" ADOPTION OF THE AGREEMENT AND THE PLAN OF MERGER "FOR"
A PROPOSAL TO ADJOURN THE SPECIAL MEETING.
FAILURE BOTH TO RETURN THE PROXY CARD AND TO VOTE IN PERSON AT THE
SPECIAL MEETING WILL HAVE THE EFFECT OF A VOTE CAST AGAINST THE PROPOSAL TO
ADOPT THE AGREEMENT AND THE PLAN OF MERGER.
A SBI stockholder who has given a proxy may revoke it at any time
prior to its exercise at the Special Meeting by (i) giving written notice of
revocation to the Secretary of SBI, (ii) properly submitting to SBI a duly
executed proxy bearing a later date, or (iii) attending the Special Meeting and
voting in person. All written notices of revocation and other communications
with respect to revocation of proxies should be addressed as follows: Security
Bancshares, Inc., 110 S. Third, Des Arc, Arkansas 72040; Attention: Faye A.
Smith, Corporate Secretary.
17
<PAGE> 25
SOLICITATION OF PROXIES
Proxies may be solicited by the directors, officers, and employees of
SBI by mail, in person, or by telephone or telegraph. Such persons will receive
no additional compensation for such services. SBI may make arrangements with
brokerage firms and other custodians, nominees, and fiduciaries, if any, for
the forwarding of solicitation materials to the beneficial owners of SBI Common
Stock held of record by such persons. Any such brokers, custodians, nominees,
and fiduciaries will be reimbursed for the reasonable out-of-pocket expenses
incurred by them for such services. All expenses associated with the
solicitation of proxies, other expenses associated with the Special Meeting,
and expenses related to the printing and mailing of this Proxy Statement, will
be shared by UPC and SBI as provided in the Agreement. SBI does not intend to
use the services of a proxy soliciting firm in connection with the solicitation
of proxies for the Special Meeting. See "DESCRIPTION OF TRANSACTION --Expenses
and Fees."
DISSENTERS' RIGHTS
Holders of SBI Common Stock have the right to dissent to the Merger
and, assuming the Merger is consummated, to receive in cash an amount
determined to be the "fair value" of their shares of SBI Common Stock. In
order to be entitled to fully exercise dissenters' rights, a SBI stockholder
choosing to dissent (a "Dissenting Stockholder") must NOT vote for the
Agreement and Plan of Merger and must take certain other procedural steps to
"perfect" such Dissenting Stockholder's rights under the Arkansas dissenters'
rights statutes. See "DESCRIPTION OF TRANSACTION --Dissenters' Rights" and
Appendix D hereto, which is a copy of Section 4-26-1007 of the ABCA governing
dissenters' rights.
RECOMMENDATION
THE BOARD OF DIRECTORS OF SBI HAS UNANIMOUSLY APPROVED THE AGREEMENT,
THE PLAN OF MERGER, AND THE MERGER CONTEMPLATED THEREBY, BELIEVES THAT THE
PROPOSAL TO ADOPT THE AGREEMENT AND THE PLAN OF MERGER IS IN THE BEST INTERESTS
OF SBI AND ITS STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT THE SBI
STOCKHOLDERS VOTE FOR APPROVAL OF THE PROPOSAL TO ADOPT THE AGREEMENT AND THE
PLAN OF MERGER.
DESCRIPTION OF TRANSACTION
The following information describes 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 Agreement and the
Plan of Merger, which are attached as Appendix A to this Proxy Statement and
incorporated herein by reference. All SBI stockholders are urge to read the
Appendices in their entirety.
GENERAL
The Agreement, as assigned and amended, provides for the acquisition of
SBI by UPC pursuant to the merger of SBI with and into UP Holding. UP Holding
is now, and immediately after the Effective Time will be, a wholly-owned
subsidiary of UPC. At the Effective Time, each share of SBI Common Stock then
issued and outstanding (excluding shares held by SBI, UPC, or their respective
subsidiaries, in each case other than shares held in a fiduciary capacity or as
a result of debts previously contracted) will be converted into and exchanged
for 3.5777 shares of UPC Common Stock, subject to possible adjustment as
described below (the "Exchange Ratio"). It is anticipated that immediately
following the Merger, both the Des Arc Bank and the West Helena Bank will be
merged with and into UPNB with UPNB as the surviving association. As a
result thereof, the former main offices and branches of the Des Arc Bank and
the West Helena Bank will become branches of UPNB.
No fractional shares of UPC Common Stock will be issued. Rather, cash
(without interest) will be paid in lieu of any fractional share interest to
which any SBI stockholder would be entitled upon consummation of the Merger, in
an amount equal to such fractional part of a share of UPC Common Stock
multiplied by the closing price of such common stock on the NYSE-Composite
Transactions List (as reported by The Wall Street Journal or, if not reported
thereby, another authoritative source as selected by UPC) on the date the
Effective Time occurs.
18
<PAGE> 26
POSSIBLE ADJUSTMENT OF EXCHANGE RATIO
The Exchange Ratio may be adjusted, in UPC's sole discretion, if SBI
effects any stock split, reverse stock split, stock dividend or similar change
in the number of outstanding shares of any of its capital stock, or should
there be more than 136,289 shares of SBI Common Stock outstanding prior to the
Effective Time. Any such adjustment elected by UPC must be made in good faith
and be fair and reasonable in giving effect to such change in SBI's capital
account. SBI has agreed not to: (1) issue, sell, pledge or encumber any
shares of SBI Common Stock or any other capital stock of SBI; or (2) adjust,
split, combine or reclassify any capital stock of SBI.
In addition, the Agreement provides that the Exchange Ratio may be
adjusted upward if, prior to the Effective Time, SBI recovers more than
$500,000, net of expenses, from the sale of collateral taken by a SBI bank
subsidiary upon default of a loan previously made. Should the net recovery
exceed $500,000, then the excess amount would be divided by $50.538, and the
quotient thereof would be divided by the number of outstanding shares of SBI
Common Stock to determine how much the Exchange Ratio would be adjusted. On
October 29, 1997, SBI sold the collateral for $750,000. Based on current
information, which is being reviewed, it is believed that SBI incurred
approximately $85,000 of expenses related to such loan. Assuming that to be
the case, then SBI's net recovery over $500,000 would be $165,000. If the net
recovery ultimately proves to be $165,000, the Exchange Ratio would be adjusted
by .02395 to 3.6016. ($165,000 / $50.538 = 3,265 / 136,289 = .02395 and 3.5777
+ .02395 = 3.6016). The expenses associated with carrying the collateral and
its sale are being reviewed to determine the actual amount that the net
recovery exceeds $500,000. SBI does not expect the actual net recovery to
materially differ from $165,000.
BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER. On April 21, 1997, management of SBI
contacted their attorney, Garland W. Binns, Jr., regarding a tax-free exchange
of the outstanding stock of SBI with a publicly traded bank holding company.
Subsequent thereto, on May 16, 1997, Garland W. Binns, Jr. called Jackson W.
Moore, the President of UPC to discuss possible transaction in which shares of
SBI Common Stock could be exchanged for shares of UPC Common Stock in a
tax-free transaction. Mr. Moore reviewed information publicly available
regarding SBI and had several additional telephone conversations with Mr. Binns
regarding a potential transaction, how such a transaction could be structured,
and financial terms. Based upon these conversations UPC presented a draft
reorganization agreement to Mr. Binns in July, 1997. UPC received comments on
this draft and negotiations continued between Mr. Binns and UPC over the actual
terms of the transaction. During this time Mr. Binns kept Mr. Nichols and the
SBI Board advised regarding the proposed terms and conditions.
On August 20, 1997, the Board of Directors of SBI met to consider the
UPC offer. The Board of Directors of SBI determined that the proposed
acquisition by UPC represented a desirable economic and strategic alternative
for SBI and its stockholders. Various factors were considered in reaching this
conclusion including, among other things, the indicated and potential long term
value of the stock consideration to be received in the Merger, prevailing
economic, market and monetary conditions, the future financial and operating
prospects of UPC and SBI, and the fact that the shares of UPC Common Stock to
be received by SBI stockholders in the Merger would be NYSE listed and freely
tradeable, thereby providing liquidity for the SBI stockholders. Based on the
fact that the financial terms of the Agreement would provide SBI stockholders
with over $150 worth of UPC Common Stock for each of their shares of SBI Common
Stock, based on the range in which UPC Common Stock was trading at that time on
the NYSE, and other considerations, the SBI Board of Directors decided not to
engage an investment banker or financial adviser to opine as to fairness of the
terms of the Agreement from a financial point of view. The SBI Board of
Directors unanimously approved and adopted the Agreement and the Plan of Merger
at the August 20, 1997 Board meeting.
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SBI'S REASONS FOR THE MERGER. The terms of the Agreement, including
the consideration to be paid to SBI stockholders, were the result of arm's
length negotiations between the representatives of UPC and SBI. Among the
factors considered by the Board of Directors of SBI in deciding to approve,
adopt and recommend the Agreement, the Plan of Merger and the transactions
contemplated thereby were:
(a) the consideration to be paid to SBI stockholders in relation
to the book value, earnings per share and dividend rates of
SBI Common Stock and UPC Common Stock;
(b) information concerning the financial condition, results of
operations, capital levels, asset quality and prospects of SBI
and UPC;
(c) the short-term and long-term impact the Merger will have on
the UPC consolidated results of operations, including
anticipated cost savings resulting from consolidations in
certain areas;
(d) the general structure of the transaction;
(e) the compatibility of management and business philosophy;
(f) the likelihood of receiving the requisite regulatory approvals
in a timely manner;
(g) the general tax-free nature of the Merger to stockholders of
SBI;
(h) the ability of the combined enterprise to compete in relevant
banking and non-banking markets;
(i) industry and economic conditions, including trends in the
consolidation of the financial services industry;
(j) the impact of the Merger on the depositors, employees,
customers of and communities served by SBI through expanded
consumer lending and retail banking products and services; and
(k) the fact that the UPC Common Stock to be received in the
merger is listed and freely tradeable on the NYSE giving SBI
stockholders liquidity in their investment.
In adopting the Agreement and the Plan of Merger and approving the
transactions contemplated thereby, SBI's Board of Directors was aware that the
Agreement contains certain provisions prohibiting SBI from soliciting other
offers to acquire SBI (see "--Conduct of Business Pending the Merger"). The SBI
Board of Directors was also aware that such provision was specifically
bargained for and insisted upon by UPC as an inducement to enter into the
Agreement, and that the obligations of the SBI Board of Directors under the
Agreement to recommend that SBI stockholders adopt the Agreement and the Plan
of Merger and to use its reasonable efforts to obtain such adoption were
explicitly made subject to the fiduciary duties of the SBI Board of Directors
as advised by counsel to SBI. Accordingly, the Agreement expressly permits the
SBI Board of Directors, in the exercise of its fiduciary duties, to withdraw or
change its recommendation of the Agreement and the Plan of the Merger and to
suspend or terminate its efforts to obtain stockholder adoption of the
Agreement and the Plan of Merger at the Special Meeting (in such circumstances,
however, UPC may still be entitled to significant fees) and Henry L. Nichols
would be prevented from selling, or allowing to be sold, any shares of SBI
Common Stock he owns personally or controls as a trustee or co-trustee until
after December 31, 1998.
The foregoing discussion of the information and factors considered by
SBI's Board of Directors is not intended to be exhaustive but includes all
material factors considered by SBI's Board of Directors. In reaching its
determination to approve the Merger, SBI's Board of Directors did not assign
any relative or specific weights to different factors. After deliberating with
respect to the Merger and the other transactions contemplated thereby, and
considering, among other things, the matters discussed above, SBI's Board of
Directors unanimously approved the Agreement, the Plan of Merger and the
transactions contemplated thereby, as being in the best interests of SBI and
its stockholders.
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SBI'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SBI STOCKHOLDERS VOTE FOR
ADOPTION OF THE AGREEMENT AND THE PLAN OF MERGER.
UPC'S REASONS FOR THE MERGER. In adopting the Agreement, the Plan of
Merger, and the Merger, the UPC Board of Directors considered a number of
additional factors concerning the benefits of the Merger. Without assigning any
relative or specific weights to the factors, the UPC Board of Directors
considered the following additional material factors:
(a) a review, based in part on a presentation by UPC's
management, of (i) the business, operations, earnings, and financial
condition, including the capital levels and asset quality, of SBI on
an historical, prospective, and pro forma basis and in comparison to
other financial institutions in the area, (ii) the demographic,
economic, and financial characteristics of the markets in which SBI
operates, including existing competition, history of the market areas
with respect to financial institutions, and average demand for credit,
on an historical and prospective basis, and (iii) the results of UPC's
due diligence review of SBI; and
(b) a variety of factors affecting and relating to the overall
strategic focus of UPC, including UPC's desire to expand into markets
in the general vicinity of SBI's core markets.
EFFECTIVE TIME OF THE MERGER
Subject to the conditions to the obligations of the parties to effect
the Merger, the Effective Time will occur on the date and at the time that the
Articles of Merger reflecting the Merger becomes effective with the Secretary
of State of Arkansas and the Secretary of State of Tennessee. No assurance can
be provided that the necessary stockholder and regulatory approvals can be
obtained or that other conditions precedent to the Merger can or will be
satisfied. SBI and UPC anticipate that all conditions to consummation of the
Merger will be satisfied so that the Merger can be consummated during the first
quarter of 1998. However, delays in the consummation of the Merger could occur.
The Board of Directors of either SBI or UPC generally may terminate
the Agreement and the Plan of Merger if the Merger is not consummated by June
30, 1998, unless the failure to consummate the transactions contemplated by the
Agreement on or before such date is caused by any willful breach of the
Agreement by the party seeking termination or an extension is necessary to
satisfy any regulatory approval waiting requirements. See "--Conditions to
Consummation of the Merger" and "--Waiver, Amendment, and Termination."
DISSENTERS' RIGHTS
Any stockholder of SBI entitled to vote on the Agreement and Plan of
Merger has the right to receive in cash, the "fair market value" of his or her
shares of SBI Common Stock upon compliance with Section 4-26-1007 of the ABCA
(the "Dissenters' Rights Statute") a copy of which is attached hereto as
Appendix D. A SBI stockholder may not dissent as to less than all of the
shares which he or she beneficially owns. A nominee or fiduciary may not
dissent on behalf of a beneficial owner as to less than all of the shares of
such beneficial owner held of record by such nominee or fiduciary.
Any SBI stockholder wishing to exercise dissenters' rights
("Dissenting Stockholder") may enforce his or her dissenters' rights either (i)
by voting against the Agreement (either personally or by proxy) or (ii) by
giving notice in writing (the "Objection Notice") to the Corporate Secretary of
SBI at, or prior to the Special Meeting, that he or she dissents from the
Merger. Within 10 days after the Special Meeting authorizing the Merger is
concluded, the Dissenting Stockholder must deliver written demand for payment
(the "Demand Letter") to SBI, which Demand Letter must state the number and the
class of shares owned by the Dissenting Stockholder. Any Dissenting
Stockholder failing to make the demand shall be bound by the terms of the
Agreement and Plan of Merger. Consequently, any SBI stockholder desiring to
exercise his or her dissenters' rights and rights to payment for his or her
shares of SBI Common Stock is urged to consult his or her legal advisers before
attempting to exercise such rights.
If the Agreement and Plan of Merger should be approved by the SBI
stockholders and the Merger should be consummated, each SBI stockholder who
voted against the Merger or who properly filed an Objection Notice and who
timely delivered a Demand Letter
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to SBI will be notified within ten days after consummation of the Merger by UP
Holding (as the Resulting Corporation) that the Merger was consummated and
offering to pay the fair market value of the Dissenting Stockholder's shares.
Any Dissenting Stockholder may accept the amount offered by UP
Holding, in lieu of pursuing the appraisal remedy described below, by
delivering to UP Holding, within the following 30 days, written acceptance of
UP Holding's offer.
If, within such 30-day period the Dissenting Stockholder shall not
have accepted UP Holding's offer, the value of the shares held by such
Dissenting Stockholder shall be determined as of the date prior to the date of
the Special Meeting upon the filing of a petition by the Dissenting
Stockholder(s) in the Pulaski County Circuit Court. Such petition must be
filed within sixty (60) days after the expiration of the thirty (30) day offer
period, or the right to a court determined fair value would be lost.
Dissenting Stockholders would be entitled to the payment, in cash, of the fair
value of the shares, as determined by the court, together with interest thereon
to the date of judgment, upon surrender to UP Holding of the certificates
representing SBI Common Stock owned by the Dissenting Stockholder.
The foregoing summary of the applicable provisions of the Dissenters'
Rights Statute 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 attached to this Proxy Statement as Appendix D. FAILURE TO COMPLY WITH
THESE PROCEDURES WILL CAUSE THE SBI STOCKHOLDER TO LOSE HIS OR HER DISSENTERS'
RIGHTS TO RECEIVE CASH PAYMENT FOR SHARES OF SBI COMMON STOCK. CONSEQUENTLY,
ANY SBI STOCKHOLDER WHO DESIRES TO EXERCISE HIS OR HER RIGHTS TO PAYMENT FOR
HIS OR HER SHARES IS URGED TO CONSULT HIS OR HER LEGAL ADVISER BEFORE
ATTEMPTING TO EXERCISE SUCH RIGHTS.
For a discussion of certain federal income tax consequences in
connection with exercising dissenters' rights, see "DESCRIPTION OF THE MERGER--
Certain Federal Income Tax Consequences."
DISTRIBUTION OF UPC STOCK CERTIFICATES
Promptly after the Effective Time, UPC and SBI will cause UPNB, acting
in its capacity as Exchange Agent, to mail to the former stockholders of SBI a
letter of transmittal, together with instructions for the exchange of the
Certificates representing shares of SBI Common Stock for certificates
representing shares of UPC Common Stock.
SBI STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS.
Upon surrender to the Exchange Agent of Certificates for SBI Common
Stock, together with a properly completed letter of transmittal, there will be
issued and mailed to each holder of SBI Common Stock surrendering such items a
certificate or certificates representing the number of shares of UPC Common
Stock to which such holder is entitled and a check for the amount to be paid in
lieu of any fractional share (without interest), if any, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon), if any. UPC will not be obligated to deliver the
consideration to which any former holder of SBI Common Stock is entitled as a
result of the Merger until the holder surrenders such holder's Certificates
representing the shares of SBI Common Stock. Whenever a dividend or other
distribution is declared by UPC on UPC Common Stock, the record date for which
is at or after the Effective Time, the declaration will include dividends or
other distributions on all shares issuable pursuant to the Agreement, but no
dividend or other distribution payable after the Effective Time with respect to
UPC Common Stock will be paid to the holder of any unsurrendered SBI Common
Stock Certificate until the holder duly surrenders such Certificate. Upon
surrender of such SBI Common Stock Certificate, however, both the UPC Common
Stock certificate, together with all undelivered dividends or other
distributions (without interest) and any undelivered cash payment to be paid in
lieu of a fractional share (without interest), will be delivered and paid with
respect to the shares represented by such Certificate.
At the Effective Time, the stock transfer books of SBI will be closed
to holders of SBI Common Stock immediately prior to the Effective Time and
there will be no transfer of shares of SBI Common Stock on SBI's stock transfer
books. If Certificates representing shares of SBI Common Stock are presented
for transfer after the Effective Time, they will be canceled and exchanged for
the shares of UPC Common Stock and a check for the amount due in lieu of
fractional shares and undelivered dividends, if any, deliverable in respect
thereof.
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CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to various conditions, including (i)
receipt of the approval of the stockholders of SBI of the Agreement and the Plan
of Merger, and the consummation of the transactions contemplated thereby,
including the Merger as and to the extent required by the law or by the
provisions of any governing instrument, (ii) receipt of certain regulatory
approvals required for consummation of the Merger, (iii) receipt of a written
opinion of counsel from Wyatt, Tarrant & Combs as to the tax-free nature of the
Merger (except to the extent of cash received), (iv) receipt of approval of the
shares of UPC Common Stock issuable pursuant to the Merger for listing on the
NYSE, subject to official notice of issuance, (v) the Registration Statement
being declared effective under the Securities Act, (vi) the accuracy, as of the
date of the Agreement and as of the Effective Time, of the representations and
warranties of SBI and UPC as set forth in the Agreement, (vii) the performance
of all agreements and the compliance with all covenants of SBI and UPC as set
forth in the Agreement, (viii) receipt of all consents required for
consummation of the Merger or for the preventing of any default under any
contract or permit which, if not obtained or made, is reasonably likely to
have, individually or in the aggregate, a material adverse effect on SBI or
UPC; (ix) the absence of any law or order or any action taken by any court,
governmental, or regulatory authority prohibiting, restricting, or making
illegal the consummation of the transaction; (x) receipt by UPC of agreements
from each affiliate of SBI; and (xi) satisfaction of certain other conditions,
including the receipt of certain legal opinions and various certificates from
the officers of SBI and UPC. See "-- Regulatory Approvals" and "--Waiver,
Amendment, and Termination."
No assurance can be provided as to when or if all of the conditions
precedent to the Merger can or will be satisfied or waived by the party
permitted to do so. In the event the Merger is not effected on or before June
30, 1998, the Agreement may be terminated and the Merger abandoned by a vote of
a majority of the Board of Directors of either SBI or UPC. See "--Waiver,
Amendment, and Termination."
REGULATORY APPROVAL
THE MERGER MAY NOT PROCEED IN THE ABSENCE OF RECEIPT OF THE REQUISITE
REGULATORY APPROVALS. THERE CAN BE NO ASSURANCE THAT SUCH REGULATORY APPROVALS
WILL BE OBTAINED OR AS TO THE TIMING OF SUCH APPROVALS. APPLICATIONS FOR THE
APPROVALS DESCRIBED BELOW ARE EXPECTED TO BE SUBMITTED TO THE APPROPRIATE
REGULATORY AUTHORITIES IN NOVEMBER, 1997.
It is a condition to the consummation of the Merger that UPC and SBI
shall have received all applicable regulatory approvals to consummate the
transactions contemplated by the Agreement, without the imposition of any
condition which in the reasonable judgment of the Board of Directors of UPC
would so materially adversely impact the financial or economic benefits of the
transactions contemplated by the Agreement that, had such condition or
requirement been known, UPC would not, in its reasonable judgment, have entered
into the Agreement. There can be no assurance that such approvals will not
contain terms, conditions or requirements which cause such approvals to fail to
satisfy such condition to the consummation of the Merger.
SBI and UPC are not aware of any material governmental approvals or
actions that are required for consummation of the Merger, except as described
below. Should any other approval or action be required, it presently is
contemplated that such approval or action would be sought.
The Merger is subject to the prior approval of the Federal Reserve,
pursuant to Section 3 of the BHC Act and by the Arkansas Department. However,
since it is contemplated that immediately after the Effective Time the bank
subsidiaries of SBI (Des Arc Bank and West Helena Bank) will be merged into
UPNB with UPNB surviving these "Affiliate Bank Mergers," it is expected that
the Federal Reserve will waive the obligation of UPC to file an application for
prior approval to acquire SBI. Instead, Federal Reserve approval of the Merger
would be granted subject to the receipt of the approval of the Office of the
Comptroller of the Currency ("OCC") to the Affiliate Bank Mergers. UPNB, as
the national bank surviving the Affiliate Bank Mergers must file an application
with the OCC for prior approval to consummate the Affiliate Bank Mergers. In
evaluating the Affiliate Bank Mergers, the OCC must consider, 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
relevant statutes prohibit the OCC from approving the Affiliate Bank Mergers if
(i) they would result in a monopoly or be in furtherance of any combination or
conspiracy to monopolize or attempt to monopolize the business of banking in
any part of the United States or (ii) their effect in any section of the
country may be to substantially lessen competition or to tend to create a
monopoly, or if they would result in a restraint of trade in any other manner,
unless the OCC should find that
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any anticompetitive effects are outweighed clearly by the public interest and
the probable effect of the transaction in meeting the convenience and needs of
the communities to be served. The Affiliate Bank Mergers, and therefore the
Merger may not be consummated until the 30th day (which the OCC may reduce to
15 days) following the date of the OCC approval, during which time the United
States Department of Justice would be afforded the opportunity to challenge the
transaction on antitrust grounds. The commencement of any antitrust action
would stay the effectiveness of the approval of the agencies, unless a court of
competent jurisdiction should specifically order otherwise.
UPC has not yet filed a request for a waiver from the application
process with the Federal Reserve, nor has it filed the applicable applications
with the OCC for approval to consummate the Affiliate Bank Mergers. It is
anticipated that all required notices and applications will be filed with the
appropriate regulatory authorities in November, 1997.
WAIVER, AMENDMENT, AND TERMINATION
To the extent permitted by law, the Agreement may be amended by a
subsequent writing signed by each of the parties upon the approval of the
Boards of Directors of each of the parties, whether before or after SBI
stockholder adoption of the Agreement and the Plan of Merger has been obtained;
provided, that after any such adoption by the holders of SBI Common Stock,
there shall be made no amendment that modifies in any material respect the
consideration to be received by the holders of SBI Common Stock without the
further approval of such stockholders. In addition, prior to or at the
Effective Time, either SBI or UPC, or both, acting through their respective
Boards of Directors, chief executive officers, or other authorized officers may
waive any default in the performance of any term of the Agreement by the other
party, may waive or extend the time for the compliance or fulfillment by the
other party of any and all of its obligations under the Agreement, and may
waive any of the conditions precedent to the obligations of such party under
the Agreement, except any condition that, if not satisfied, would result in the
violation of any applicable law or governmental regulation. No such waiver will
be effective unless written and unless executed by a duly authorized officer of
SBI or UPC, as the case may be.
The Agreement and the Plan of Merger may be terminated and the Merger
abandoned at any time prior to the Effective Time (i) by the mutual consent of
the Boards of Directors of SBI and UPC; (ii) by the Board of Directors of SBI
or UPC (a) in the event of any inaccuracy of any representation or warranty of
the other party contained in the Agreement which cannot be or has not been
cured within 30 days after giving written notice to the breaching party of such
inaccuracy and which inaccuracy would provide the terminating party the ability
to refuse to consummate the Merger under the applicable standards set forth in
the Agreement (provided that the terminating party is not then in breach of any
representation or warranty contained in the Agreement under the applicable
standards set forth in the Agreement or in material breach of any covenant or
other agreement contained in the Agreement), (b) in the event of a material
breach by the other party of any covenant or agreement contained in the
Agreement which cannot be or has not been cured within 30 days after the giving
of written notice to the breaching party of such breach (provided that the
terminating party is not then in breach of any representation or warranty
contained in the Agreement under the applicable standards set forth in the
Agreement or in material breach of any covenant or other agreement contained in
the Agreement), (c) if the Merger is not consummated by June 30, 1998, provided
that the failure to consummate is not caused by any willful breach of the
Agreement by the party electing to terminate, (d) if (1) any consent of any
regulatory authority required for consummation of the Merger and the other
transactions contemplated by the Agreement has been denied by final
nonappealable action, or if any action taken by such authority is not appealed
within the time limit for appeal or (2) the stockholders of SBI fail to vote
their approval of the matters submitted for the approval by such stockholders
at the Special Meeting, or (e) if any of the conditions precedent to the
obligations of such party to consummate the Merger cannot be satisfied,
fulfilled, or waived by the appropriate party by June 30, 1998 (provided that
the terminating party is not then in breach of any representation or warranty
contained in the Agreement under the applicable standards set forth in the
Agreement or in material breach of any covenant or other agreement contained in
the Agreement).
If the Merger is terminated as described above, the Agreement and the
Plan of Merger will become void and have no effect, except that certain
provisions of the Agreement, including those relating to the obligations to
share certain expenses, maintain the confidentiality of certain information
obtained, and return all documents obtained from the other party under the
Agreement, will survive as will, in certain circumstances, the provisions of
Section 6.3 of the Agreement limiting SBI's ability to negotiate or enter into
an agreement to be acquired by any institution other than UPC until at least
December 31, 1998 without having to pay $1,150,000 to UPC. In addition,
termination of the Agreement will not relieve any breaching party from
liability for any uncured willful breach of
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a representation, warranty, covenant, or agreement giving rise to such
termination. The Option Agreement will be governed by its own terms as to its
termination. See "--Expenses and Fees" and "--Limitation on Negotiations."
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Agreement, SBI has agreed that unless the prior
written consent of UPC has been obtained, and except as otherwise expressly
contemplated in the Agreement each of SBI and its subsidiaries will (i) operate
its business only in the usual, regular, and ordinary course, (ii) preserve
intact its business organization and assets and maintain its rights and
franchises, and (iii) take no action which would (a) materially adversely
affect the ability of any party to obtain any consents required for the
transactions contemplated by the Agreement without imposition of a condition or
restriction of the type referred to in the Agreement or prevent the
transactions contemplated by the Agreement, including the Merger, from
qualifying as a reorganization within the meaning of Section 368(a) of the Code
(see "--Certain Federal Income Tax Consequences"), or (b) materially adversely
affect the ability of any party to perform its covenants and agreements under
the Agreement.
In addition, SBI has agreed that, except as specifically contemplated
by the Agreement or other documents or instruments executed in connection with
the Agreement, prior to the earlier of the Effective Time or termination of the
Agreement, SBI will not, except with the prior written consent of the chief
executive officer, president, or chief financial officer of UPC (which consent
shall not be unreasonably withheld), agree or commit to do, or permit any of
its subsidiaries to agree or commit to do, any of the following: (i) amend the
Charter, Bylaws, or other governing instruments of SBI or any SBI subsidiary
(each a "SBI company" and together, the "SBI companies"); (ii) incur any
additional debt obligation or other obligation for borrowed money (other than
indebtedness of a SBI company to another SBI company) in excess of an aggregate
of $100,000 (for the SBI companies on a consolidated basis) except in the
ordinary course of business of the SBI subsidiaries consistent with past
practices (which shall include, for SBI subsidiaries that are depository
institutions, the creation of deposit liabilities, purchases of federal funds,
advances from the Federal Reserve Bank or the Federal Home Loan Bank, and entry
into repurchase agreements fully secured by U.S. government or agency
securities), or impose, or suffer the imposition, on any asset of any SBI
company of any lien or permit any such lien to exist (other than in connection
with deposits, repurchase agreements, bankers acceptances, advances from the
Federal Reserve Board or Federal Home Loan Bank, "treasury tax and loan"
accounts established in the ordinary course of business, the satisfaction of
legal requirements in the exercise of trust powers, and liens in effect as of
the date of the Agreement that were previously disclosed to UPC by SBI); (iii)
repurchase, redeem, or otherwise acquire or exchange (other than exchanges in
the ordinary course under employee benefit plans), directly or indirectly, any
shares, or any securities convertible into any shares, of the capital stock of
any SBI company, or declare or pay any dividend or make any other distribution
in respect of any SBI capital stock; (iv) issue, sell, pledge, encumber, or
authorize the issuance of, or otherwise permit to become outstanding, any
additional shares of SBI Common Stock, or any other capital stock of any SBI
company, or any stock appreciation rights, or any option, warrant, conversion,
or other right to acquire any such stock, or any security convertible into any
such stock; (v) adjust, split, combine, or reclassify any capital stock of any
SBI company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of SBI Common Stock or sell, lease,
mortgage, or otherwise dispose of or otherwise encumber any shares of capital
stock of any SBI subsidiary other than in the ordinary course of business for
reasonable and adequate consideration; (vi) except for purchases of U.S.
Treasury securities, U.S. Government agency securities, municipal bands, local
tax exempt securities, or other securities which in any case have maturities of
five years or less, which purchases are consistent with past practices, or
Federal Home Loan Bank stock, purchase any securities or make any material
investment, either by purchase of stock or securities, contributions to
capital, asset transfers, or purchase of any assets, in any person other than a
wholly-owned SBI subsidiary, or otherwise acquire direct or indirect control
over any person, with certain exceptions; or (vii) grant any increase in
compensation or benefits to the employees or officers of any SBI company,
except in accordance with past practices as previously disclosed to UPC by SBI
or as required by law; pay any severance or termination pay or any bonus other
than pursuant to written policies or written contracts in effect on the date of
the Agreement and previously disclosed to UPC by SBI, provided, however, that
the Board of Directors of SBI may pay bonuses of up to $450,000 in the
aggregate and SBI is to establish and fully fund a rabbi trust or similar
arrangement in order to set aside funds sufficient to satisfy all obligations
of SBI and its bank subsidiaries under deferred compensation arrangements
currently in place (see "--Interests of Certain Persons in the Merger); enter
into or amend any severance agreements with officers of any SBI company; or
grant any material increase in fees or other increases in compensation or other
benefits to directors of any SBI company except in accordance with past
practices as previously disclosed to UPC by SBI.
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The Agreement also provides that from the date of the Agreement until
the earlier of the Effective Time or the termination of the Agreement, UPC
covenants and agrees that it will (i) continue to conduct its business and the
business of its subsidiaries in a manner designed in its reasonable judgment,
to enhance the long-term value of the UPC Common Stock and the business
prospects of UPC or its subsidiaries and (ii) take no action which would (a)
materially adversely affect the ability of any party to obtain any consents
required for the transactions contemplated by the Agreement without imposition
of a condition or restriction of the type referred to in the Agreement or
prevent the transactions contemplated by the Agreement, including the Merger,
from qualifying as a reorganization within the meaning of Section 368(a) of the
Code (see "--Certain Federal Income Tax Consequences"), or (b) materially
adversely affect the ability of any party to perform its covenants and
agreements under the Agreement.
LIMITATION ON NEGOTIATIONS
Section 6.3 of the Agreement provides that SBI shall not solicit or
knowingly encourage any Acquisition Proposal by any person. Furthermore,
except to the extent necessary to comply with the fiduciary duties of the Board
of Directors of SBI, as advised by legal counsel, SBI is prohibited from
furnishing any non-public information that it is not legally obligated to
furnish, negotiating with respect to or entering into any agreement with
respect to, any Acquisition Proposal. SBI must promptly notify UPC immediately
following receipt of any Acquisition Proposal. As protection against possible
violation of this limitation, SBI has agreed to pay to UPC the sum of
$1,150,000 in immediately available funds in the event and at the time that SBI
enters into a letter of intent or agreement with respect to an Acquisition
Proposal or supports or indicates an intent to support an Acquisition Proposal
other than pursuant to the Agreement. The limitation would survive termination
of the Merger Agreement in certain circumstances, and remain active until
December 31, 1998. This provision for the $1,150,000 fee may have the effect,
or may have had the effect, of discouraging competing offers to acquire or
merge with SBI. Henry L. Nichols, Chairman of SBI's Board of Directors, also
joined in the Agreement in his individual capacity as and co-trustee of various
trusts which own, in the aggregate, approximately 83% of the outstanding shares
of SBI Common Stock, agreeing that he would not sell, offer to sell or allow
the sale of any shares of SBI Common Stock, other than pursuant to the
Agreement. This provision would remain in effect until December 31, 1998,
except in certain circumstances. This provision may have, or may have had, the
effect of discouraging competing offers to acquire or merge with SBI.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Consummation of the Merger will not alter the present management team
or Board of Directors of UPC or UP Holding. Information concerning the
management of UPC is included in the documents incorporated herein by
reference. See "DOCUMENTS INCORPORATED BY REFERENCE." For additional
information regarding the interests of certain persons in the Merger, see "--
Interests of Certain Persons in the Merger."UP Holding's directors and
executive officers are all officers of UPC.
UPNB will be the survivor of the Affiliate Bank Mergers, which are to
be consummated virtually simultaneously with the Merger. As a result of the
Affiliate Bank Mergers, the main office and branches of Des Arc Bank and West
Helena Bank will become branches of UPNB. The directors and executive officers
of UPNB will not be affected by the Affiliate Bank Mergers.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
GENERAL. Certain members of SBI's management and SBI's Board of
Directors have interests in the Merger that are in addition to any interests
they may have as stockholders of SBI generally. As more fully described below,
these interests relate to, among other things, provisions in the Agreement
regarding bonuses and eligibility for certain employee benefits at UPC for
employees who continue to be employed by UPNB after the Merger.
BONUSES. Pursuant to Section 6.2(g) of the Agreement, the Board of
Directors of SBI may pay bonuses in 1997 to employees, including officers, of
SBI and its bank subsidiaries up to $450,000 in the aggregate. It is
anticipated that most, if not all, of the bonuses would be paid to Sherod S.
White, James Thomason, L.A. Richmond and William Simmons. See "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF SBI."
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OTHER MATTERS RELATING TO SBI EMPLOYEE BENEFIT PLANS. The Agreement
also provides that, after the Effective Time, UPC will provide to officers and
employees of the SBI companies who, at or after the Effective Time, become
officers or employees of a UPC company, employee benefits under UPC employee
benefit and welfare plans, on terms and conditions which when taken as a whole
are substantially similar to those currently provided by the UPC companies to
their similarly situated officers and employees. For purposes of participation,
but not vesting and benefit accrual, under such employee benefit plans, the
service of the employees of SBI prior to the Effective Time shall be treated as
service with a UPC company participating in such employee benefit plans.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A SUMMARY OF THE MATERIAL ANTICIPATED FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER TO SBI STOCKHOLDERS. THIS SUMMARY IS BASED ON
THE FEDERAL INCOME TAX LAWS AS NOW IN EFFECT AND AS CURRENTLY INTERPRETED; IT
DOES NOT TAKE INTO ACCOUNT POSSIBLE CHANGES IN SUCH LAWS OR INTERPRETATIONS,
INCLUDING AMENDMENTS TO APPLICABLE STATUTES OR REGULATIONS OR CHANGES IN
JUDICIAL OR ADMINISTRATIVE RULINGS, SOME OF WHICH MAY HAVE RETROACTIVE EFFECT.
THIS SUMMARY DOES NOT PURPORT TO ADDRESS ALL ASPECTS OF THE POSSIBLE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND IS NOT INTENDED AS TAX ADVICE TO ANY
PERSON. IN PARTICULAR, AND WITHOUT LIMITING THE FOREGOING, THIS SUMMARY DOES
NOT ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO SBI
STOCKHOLDERS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES OR STATUS (FOR EXAMPLE,
AS FOREIGN PERSONS, TAX-EXEMPT ENTITIES, DEALERS IN SECURITIES, INSURANCE
COMPANIES, AND CORPORATIONS, AMONG OTHERS). NOR DOES THIS SUMMARY ADDRESS ANY
CONSEQUENCES OF THE MERGER UNDER ANY STATE, LOCAL, ESTATE, OR FOREIGN TAX LAWS.
SBI STOCKHOLDERS, THEREFORE, ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO
THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN
REPORTING REQUIREMENTS, THE APPLICATION AND EFFECT OF FEDERAL, FOREIGN, STATE,
LOCAL, AND OTHER TAX LAWS, AND THE IMPLICATIONS OF ANY PROPOSED CHANGES IN THE
TAX LAWS.
A federal income tax ruling with respect to this transaction has not
been, and will not be, requested from the Internal Revenue Service ("IRS").
Instead, Wyatt, Tarrant & Combs, counsel to UPC, has rendered an opinion ("Tax
Opinion") to UPC concerning certain federal income tax consequences of the
proposed Merger under federal income tax law. It is such firm's opinion that,
based upon the assumption that the Merger is consummated in accordance with
Arkansas and Tennessee law and the Agreement and in conformity with certain
factual representations made by the managements of SBI and UPC, the
transaction will have the following federal income tax consequences:
(a) The Merger will constitute a reorganization within the meaning
of Section 368(a).
(b) SBI, UPC and UP Holding will each be "a party to a
reorganization" within the meaning of Section 368(b) of the
Code.
(c) No gain or loss will be recognized by SBI as a result of the
Merger.
(d) No gain or loss will be recognized by UPC or UP Holding as a
result of the Merger.
(e) The tax basis of the assets of SBI received by UP Holding in
the Merger will be the same as the tax basis of those assets
of SBI immediately prior to the transaction.
(f) The holding period of the assets of SBI received by UP Holding
in the Merger will include the period during which such assets
were held by SBI.
(g) No gain or loss will be recognized by a SBI stockholder upon
the receipt of UPC Common Stock (including any associated UPC
Rights) solely in exchange for his or her shares of SBI Common
Stock.
(h) The tax basis of the UPC Common Stock received by a SBI
stockholder in the transaction will be the same as the tax
basis of the SBI Common Stock surrendered in exchange therefor
less the basis allocated to any fractional share of UPC Common
Stock settled by cash payment.
(i) The holding period of the UPC Common Stock received by a SBI
stockholder (including the holding period of any fractional
share interest) will include the holding period of the SBI
Common Stock surrendered in exchange therefor, provided
the SBI Common Stock was held as a capital asset on the date
of the exchange.
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(j) The payment of cash in lieu of fractional shares of UPC Common
Stock will be treated as if the fractional shares were issued
as part of the exchange and then redeemed by UPC. These cash
payments will be treated as having been received as
distributions in full payment in exchange for the fractional
shares of UPC Common Stock redeemed as provided in Section
302(a). Generally, any gain or loss recognized upon such
exchange will be capital gain or loss, provided the
fractional share would constitute a capital asset in the hands
of the exchanging stockholder.
(k) A SBI stockholder who perfects dissenters' rights and who
receives payment of the fair market value of his shares of SBI
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.
The Tax Opinion does not address any state, local, or other tax
consequences of the Merger. The Tax Opinion does not bind the IRS nor preclude
the IRS from adopting a contrary position. In addition, the Tax Opinion will be
subject to certain assumptions and qualifications and will be based on the
truth and accuracy of certain representations made by the management of SBI and
UPC, as to, among other things, the fact that there is no plan or intention by
any of the stockholders of SBI who own 5% or more of the outstanding SBI Common
Stock, and to the best of the knowledge of the management of SBI, the remaining
SBI stockholders have no plan or intention, to sell, exchange, or otherwise
dispose of a number of shares of UPC Common Stock that they will receive in the
Merger that will reduce on the part of the SBI stockholders such stockholders'
ownership of UPC Common Stock to a number of shares having an aggregate value
as of the date of the Merger of less than 50% of the aggregate value of all of
the stock of SBI outstanding immediately prior to the Merger.
A successful IRS challenge to the "reorganization" status of the
Merger would result in a SBI stockholder recognizing gain or loss with respect
to each share of SBI Common Stock surrendered equal to the difference between
the stockholder's adjusted tax basis in such share and the fair market value,
as of the Effective Time of the Merger, of the UPC Common Stock received in
exchange therefor. In such event, a SBI stockholder's aggregate basis in the
UPC Common Stock received would equal its fair market value and his or her
holding period for such UPC Common Stock would begin the day after the Merger.
ACCOUNTING TREATMENT
Consummation of the Merger is conditioned upon the eligibility of the
Merger to be accounted for as a pooling of interests. Under the pooling of
interests method of accounting, the recorded amounts of the assets and
liabilities of SBI would be carried forward at their previously recorded
amounts. Since the Merger is not considered significant to UPC from a
financial statement presentation standpoint, the operating results will be
included in UPC's results from the Effective Time forward.
In order for the Merger to qualify for pooling of interests accounting
treatment, substantially all (90% or more) of the outstanding shares of SBI
Common Stock must be exchanged for UPC Common Stock with substantially similar
terms. There are certain other criteria that must be satisfied in order for
the Merger to qualify for pooling of interests accounting treatment.
For information concerning certain conditions to be imposed on the
exchange of SBI Common Stock for UPC Common Stock in the Merger by persons
deemed to be "affiliates" of SBI and certain restrictions to be imposed on the
transferability of the UPC Common Stock received by those affiliates in the
Merger in order, among other things, to ensure the availability of pooling of
interests accounting treatment, see "--Resales of UPC Common Stock."
EXPENSES AND FEES
The Agreement provides that each of the parties will bear and pay its
own expenses in the transactions contemplated by the Agreement, including fees
and expenses of its own consultants, accountants, and counsel, except that UPC
will bear and pay the filing fees payable in connection with the Registration
Statement and this Proxy Statement and the printing and mailing costs related
thereto.
RESALES OF UPC COMMON STOCK
UPC Common Stock to be issued to stockholders of SBI in connection
with the Merger will be registered under the Securities Act. All shares of UPC
Common Stock received by holders of SBI Common Stock and all shares of UPC
Common Stock issued and outstanding immediately prior to the Effective Time,
will be freely transferable upon consummation of the Merger by those
stockholders of SBI not deemed to be "Affiliates" of SBI or UPC. "Affiliates"
generally are defined as persons or entities who control,
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are controlled by, or are under common control with SBI or UPC at the time of
the Special Meeting (generally, executive officers, directors and 10%
stockholders).
Rule 145 promulgated under the Securities Act restricts the sale of
UPC Common Stock received in the Merger by Affiliates and certain of their
family members and related interests. Under the Rule, during the one year
following the Effective Time, Affiliates of SBI or UPC may resell publicly the
UPC Common Stock received by them in the Merger within certain limitations as
to the amount of UPC Common Stock sold in any three-month period and as to the
manner of sale. After the one-year period, such Affiliates of SBI who are not
Affiliates of UPC may resell their shares without restriction. The ability of
Affiliates to resell shares of UPC Common Stock received in the Merger under
Rule 145 will be subject to UPC having satisfied its Exchange Act reporting
requirements for specified periods prior to the time of sale. Affiliates will
receive additional information regarding the effect of Rule 145 on their
ability to resell UPC Common Stock received in the Merger. Affiliates also
would be permitted to resell UPC Common Stock received in the Merger pursuant
to an effective registration statement under the Securities Act or an available
exemption from the Securities Act registration requirements. This Proxy
Statement does not cover any resales of UPC Common Stock received by persons
who may be deemed to be Affiliates of SBI or UPC.
SBI has agreed to use its reasonable efforts to cause each person who
may be deemed to be an Affiliate of SBI to execute and deliver to UPC not later
than 30 days prior to the Effective Time, an agreement (each, an "Affiliate
Agreement") providing that such Affiliate will not sell, pledge, transfer, or
otherwise dispose of any SBI Common Stock held by such Affiliate except as
contemplated by the Agreement or the Affiliate Agreement, and will not sell,
pledge, transfer or otherwise dispose of any UPC Common Stock received by such
Affiliate upon consummation of the Merger, except (i) in compliance with the
Securities Act and the rules and regulations thereunder and (ii) in any case,
until such time as financial results covering at least 30 days of post-merger
combined business operations of UPC and SBI shall have been published. The
stock certificates representing shares of UPC Common Stock issued in the Merger
to persons who qualify as an Affiliate of SBI will bear a legend summarizing
the foregoing restrictions. See "--Conditions to Consummation of the Merger."
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the Merger, holders of SBI Common Stock will be
exchanging their shares of an Arkansas corporation governed by the ABCA and
SBI's Articles and Bylaws, for shares of UPC, a Tennessee corporation governed
by the TBCA and UPC's Charter of Incorporation, as amended (the "Charter"), and
Bylaws. Certain significant differences exist between the rights of SBI
stockholders and those of UPC stockholders. In particular, UPC's Charter and
Bylaws contain several provisions that may be deemed to have an anti-takeover
effect in that they could impede or prevent an acquisition of UPC unless the
potential acquirer has obtained the approval of UPC's Board of Directors. The
following discussion is necessarily general; it is not intended to be a
complete statement of all differences affecting the rights of stockholders and
their respective entities, and it is qualified in its entirety by reference to
the ABCA and the TBCA as well as to UPC's Charter and Bylaws and SBI's
Certificate and Bylaws.
ANTI-TAKEOVER PROVISIONS GENERALLY
The provisions of UPC's Charter and Bylaws described below under the
headings, "--Authorized Capital Stock," "--Amendment of Charter and Bylaws,"
"--Classified Board of Directors and Absence of Cumulative Voting," "-- Director
Removal and Vacancies," "--Limitations on Director Liability," "--
Indemnification, "--Special Meeting of Stockholders," "--Actions by
Stockholders Without a Meeting," "--Stockholder Nominations and Proposals" and
"--Business Combinations" are referred to herein as the "Protective
Provisions." In general, one purpose of the Protective Provisions is to assist
UPC's Board of Directors in playing a role if any group or person attempts to
acquire control of UPC, so that the Board of Directors of UPC can further
protect the interests of UPC and its stockholders as appropriate under the
circumstances, including, if the Board of Directors of UPC determines that a
sale of control is in their best interests, by enhancing the Board of Directors
of UPC's ability to maximize the value to be received by the stockholders upon
such a sale.
Although UPC's management believes the Protective Provisions are,
therefore, beneficial to UPC's stockholders, the Protective Provisions also may
tend to discourage some takeover bids. 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. On the other hand, defeating
undesirable
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acquisition offers can be a very expensive and time-consuming process. To the
extent that the Protective Provisions discourage undesirable proposals, UPC may
be able to avoid those expenditures of time and money.
The Protective Provisions also may discourage open market purchases by
a potential acquirer. Such purchases may increase the market price of UPC
Common Stock temporarily, enabling stockholders to sell their shares at a price
higher than that which otherwise would prevail. In addition, the Protective
Provisions may decrease the market price of UPC Common Stock by making the
stock less attractive to persons who invest in securities in anticipation of
price increases from potential acquisition attempts. The Protective Provisions
also may make it more difficult and time consuming for a potential acquirer to
obtain control of UPC through replacing the Board of Directors and management.
Furthermore, the Protective Provisions may make it more difficult for UPC's
stockholders to replace the Board of Directors or management, even if a
majority of the stockholders believe such replacement is in the best interests
of UPC. As a result, the Protective Provisions may tend to perpetuate the
incumbent Board of Directors and management.
AUTHORIZED CAPITAL STOCK
UPC. UPC's Charter authorizes the issuance of up to (i) 100,000,000
shares of UPC Common Stock, of which 68,034,300 shares were issued and
outstanding as of October 1, 1997, and (ii) 10,000,000 shares of no par value
preferred stock ("UPC Preferred Stock"), of which no shares of UPC Series A
Preferred Stock, and 2,289,594 shares of UPC Series E Preferred Stock were
issued and outstanding as of October 1, 1997. UPC's Board of Directors may
authorize the issuance of additional shares of UPC Common Stock without further
action by UPC's stockholders, unless such action is required in a particular
case by applicable laws or regulations or by any stock exchange upon which
UPC's capital stock may be listed.
Similarly, with certain exceptions, UPC's Board of Directors may
issue, without any further action by the stockholders, shares of UPC Preferred
Stock, in one or more classes or series, with such voting, conversion,
dividend, and liquidation rights as specified in UPC's Charter. In providing
for the issuance of such shares, UPC's Board of Directors may determine, among
other things, the distinctive designation and number of shares comprising a
series of preferred stock, the dividend rate or rates on the shares of such
series and the relation of such dividends to the dividends payable on other
classes of stock, whether the shares of such series shall be convertible into
or exchangeable for shares of any other class or series of UPC capital stock,
the voting powers if any of such series, and any other preferences, privileges,
and powers of such series.
In the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets or winding up of UPC, the holders of any series of UPC
Preferred Stock will have priority over holders of UPC Common Stock.
The authority to issue additional shares of UPC Common Stock or
Preferred Stock provides UPC with the flexibility necessary to meet its future
needs without the delay resulting from seeking stockholder approval. The
authorized but unissued shares of UPC Common Stock and UPC Preferred Stock will
be issuable from time to time for any corporate purpose, including, without
limitation, stock splits, stock dividends, employee benefit and compensation
plans, acquisitions, and public or private sales for cash as a means of raising
capital. Such shares could be used to dilute the stock ownership of persons
seeking to obtain control of UPC. In addition, the sale of a substantial number
of shares of UPC voting stock to persons who have an understanding with UPC
concerning the voting of such shares, or the distribution or declaration of a
dividend of shares of UPC voting stock (or the right to receive UPC voting
stock) to UPC stockholders, may have the effect of discouraging or increasing
the cost of unsolicited attempts to acquire control of UPC.
In 1989, the UPC Board of Directors adopted a Share Purchase Rights
Plan ("Preferred Share Rights Plan") and distributed a dividend of one
Preferred Share Unit Purchase Right ("Preferred Share Right") for each
outstanding share of UPC Common Stock. In addition, under the Preferred Share
Rights Plan, one Preferred Share Right is to be automatically, and without
further action by UPC, distributed in respect to each share of UPC Common Stock
issued after adoption of the Preferred Share Rights Plan. 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 of UPC at prices below their market value. UPC has authorized
750,000 shares of Series A Preferred Stock for issuance under the Preferred
Share Rights Plan and no shares
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have been issued as of the date of this Proxy Statement. Until a Preferred
Share Right is exercised, the holder thereof, as such, has no rights of a
stockholder of UPC, including the right to vote or receive dividends.
SBI. SBI's Articles authorize the issuance of up to 200,000 shares of
SBI Common Stock, of which 136,289 shares were issued and outstanding as of the
SBI Record Date. SBI's Board of Directors may authorize the issuance of
additional authorized shares of SBI Common Stock without further action by
SBI's stockholders, unless such action is required in a particular case by
applicable laws or regulations.
AMENDMENT OF CHARTER AND BYLAWS
UPC. The Charter of UPC provides that amendments thereto may be
adopted in any manner permitted by the TBCA. The TBCA provides that a
corporation's charter may be amended by a majority of votes entitled to be cast
on the amendment, subject to any condition the board of directors may place on
its submission of the amendment to the stockholders. The Charter requires a
vote of two-thirds or more of the shares of capital stock entitled to vote in
an election of directors to amend the articles of the Charter governing
directors and to remove a director from office whether with or without cause. A
two-thirds vote is also required to amend, alter or repeal the article of the
Charter relating to business combinations.
The Board of Directors may adopt, amend, or repeal the Bylaws by a
majority vote of the entire Board of Directors. The Bylaws may also be amended
or repealed by action of UPC's stockholders.
UPC's Charter provides that all corporate powers of UPC shall be
exercised by the Board of Directors except as otherwise provided by law. The
Board of Directors may designate an executive committee consisting of five or
more directors and may authorize such committee to exercise all of the
authority of the Board of Directors, including the authority to adopt, amend
and repeal the Bylaws, to submit any action to the stockholders, to fill
vacancies on the Board of Directors or any committee, to declare dividends or
other corporate distributions, and to issue or reissue any capital stock or any
warrant, right or option to acquire capital stock of the corporation.
SBI. The ABCA provides that an Arkansas corporation's Articles may be
amended or repealed by the affirmative vote of two-thirds of the shares
entitled to vote thereon at a duly constituted meeting of stockholders called
for such purpose. SBI's Articles provide the same.
SBI's Articles provide that the Board of Directors has the power to
make, amend, alter, change, add to or repeal the Bylaws of SBI. Any adoption,
amendment, or repeal of the Bylaws of SBI by the Board of Directors must be
approved by a majority of the Board of Directors. Bylaws may also be amended
by the majority vote of the stockholders.
CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING
UPC. The Charter of UPC provides that UPC's Board of Directors is
divided into three classes, with each class to be as nearly equal in number as
possible. The directors in each class serve three-year terms of office. The
effect of UPC's having a classified Board of Directors is that only
approximately one-third of the members of the Board are elected each year,
which effectively requires two annual meetings for UPC's stockholders to change
a majority of the members of the Board. The purpose of dividing UPC's Board of
Directors into classes is to facilitate continuity and stability of leadership
of UPC by ensuring that experienced personnel familiar with UPC will be
represented on UPC's Board of Directors at all times, and to permit UPC's
management to plan for the future for a reasonable time. However, by
potentially delaying the time within which an acquirer could obtain working
control of the Board, this provision may discourage some potential mergers,
tender offers, or takeover attempts.
Pursuant to the Charter of UPC, each stockholder is entitled to one
vote for each share of UPC Common Stock held and is not entitled to cumulative
voting rights in the election of directors. With cumulative voting, a
stockholder has the right to cast a number of votes equal to the total number
of such holder's shares multiplied by the number of directors to be elected.
The stockholder has the right to distribute all of his votes in any manner
among any number of candidates or to accumulate such shares in favor of one
candidate. Directors are elected by a plurality of the total votes cast by all
stockholders. With cumulative voting, it may be possible
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for minority stockholders to obtain representation on the Board of Directors.
Without cumulative voting, the holders of more than 50% of the shares of UPC
Common Stock generally have the ability to elect 100% of the directors. As a
result, the holders of the remaining UPC Common Stock effectively may not be
able to elect any person to the Board of Directors. The absence of cumulative
voting thus could make it more difficult for a stockholder who acquires less
than a majority of the shares of UPC Common Stock to obtain representation on
UPC's Board of Directors.
SBI. SBI's Articles do not contain a provision similar to the
provision in the Bylaws of UPC that requires that the Board of Directors shall
be divided into three classes serving staggered three-year terms, with the term
of one class of directors to expire each year. Pursuant to the ABCA, each
stockholder is entitled to one vote for each share of SBI Common Stock held and
is also entitled to cumulative voting rights in the election of directors.
DIRECTOR REMOVAL AND VACANCIES
UPC. UPC's Charter provides that a director may be removed by the
stockholders only upon the affirmative vote of the holders of two-thirds of the
voting power of all shares of capital stock entitled to vote generally in the
election of directors. The purpose of this provision is to prevent a majority
stockholder from circumventing the classified board system by removing
directors and filling the vacancies with new individuals selected by that
stockholder. Accordingly, the provision may have the effect of impeding efforts
to gain control of the Board of Directors by anyone who obtains a controlling
interest in UPC Common Stock. Vacancies on the board of directors may be filled
by the board of directors or stockholders, as provided under the UPC Bylaws and
the TBCA. The term of a director appointed to fill a vacancy expires at the
next meeting of stockholders at which directors are elected.
SBI. The ABCA provides that the stockholders of a corporation may
remove a director or the entire board, with or without cause. Directors may be
removed by the holders of a majority of the shares then entitled to vote in the
election of such directors; provided, however, that if less than the entire
board is removed, no one of the directors may be removed if the votes cast
against removal would be sufficient to elect the director if then cumulatively
voted at an election of the entire board.
INDEMNIFICATION
UPC. Under the TBCA, subject to certain exceptions, a corporation may
indemnify an individual made a party to a proceeding, because he is or was a
director, against liability incurred in the proceeding if (i) he conducted
himself in good faith; (ii) he reasonably believed (a) in the case of conduct
in his official capacity with the corporation, that his conduct was in the best
interests of the corporation, and (b) in all other cases, that his conduct was
at least not opposed to the corporation's best interests; and (iii) in the case
of any criminal proceeding, he had no reasonable cause to believe his conduct
was unlawful (the "Standard of Conduct"). Moreover, unless limited by its
articles of incorporation, a corporation must indemnify a director who was
wholly successful, on the merits or otherwise, in the defense of any proceeding
to which he was a party because he is or was a director of the corporation
against reasonable expenses incurred by him in connection with the proceeding.
Expenses incurred by a director in defending a proceeding may be paid by the
corporation in advance of the final disposition of such proceeding upon receipt
of a written affirmation by the director of his good faith belief that he or
she has met the Standard of Conduct and an undertaking by or on behalf of a
director to repay such amount unless it shall ultimately be determined that he
is entitled to be indemnified by the corporation against such expenses. Before
any such indemnification is made, it must be determined that such
indemnification would not be precluded by Part 5 of the TBCA.
A director may also apply for court-ordered indemnification under
certain circumstances. Unless a corporation's articles of incorporation provide
otherwise, (i) an officer of a corporation is entitled to mandatory
indemnification and is entitled to apply for court-ordered indemnification to
the same extent as a director; (ii) the corporation may indemnify and advance
expenses to an officer, employee, or agent of the corporation to the same
extent as to a director; and (iii) a corporation may also indemnify and advance
expenses to an officer, employee, or agent who is not a director to the extent,
consistent with public policy, that may be provided by its articles of
incorporation, bylaws, general or specific action of its board of directors, or
contract.
UPC's Charter and Bylaws provide for the indemnification of its
directors and officers, to the fullest extent permitted by Tennessee law.
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Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers, or persons controlling UPC pursuant to the
foregoing provisions, UPC has been informed that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities
Act and is therefore unenforceable.
SBI. SBI's Articles provides that each person who is or is made a
party or is threatened to be made a party to, or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, because of the fact that he or she was a director or an officer
of SBI or is or was serving at the request of SBI as an officer or director of
another corporation, including, without limitation, any subsidiary,
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan, whether the allegations are based on his
or her action in an official capacity as a director or officer, will be
indemnified and held harmless by SBI to the fullest extent authorized by the
ABCA, against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties in amounts paid in the
settlement) reasonably incurred or suffered; provided, that such
indemnification shall only apply in connection with proceedings initiated by
the indemnitee if such proceeding was authorized by the Board of Directors of
SBI.
SPECIAL MEETING OF STOCKHOLDERS
UPC. UPC's Bylaws provide that special meetings of stockholders may
be called, unless otherwise prescribed by law, for any purpose or purposes
whatever at any time by the Chairman of the Board, the President, the
Secretary, or the holders of not less than one-tenth of the shares entitled to
vote at such meeting.
SBI. The ABCA provides that special meetings of stockholders may be
called by the President, the Board, the holders of not less than one-tenth of
all the shares entitled to vote at the meeting or by such other persons as may
be authorized by a corporation's articles of incorporation or bylaws. SBI's
Bylaws provide that special meetings of stockholders of SBI may be called by
the Chairman of the Board, the President, the Secretary, the Board of Directors
or three or more shareholders owning at least 25% of the outstanding SBI Common
Stock.
ACTIONS BY STOCKHOLDERS WITHOUT A MEETING
UPC. The Charter and Bylaws of UPC provide that any action required
or permitted to be taken by UPC stockholders at a duly called meeting of
stockholders may be effected by the unanimous written consent of the
stockholders entitled to vote on such action.
SBI. Although SBI's Articles do not address actions without a
meeting, the ABCA contains provisions substantially similar to the Charter and
Bylaws of UPC.
BUSINESS COMBINATIONS
UPC. The Charter of UPC requires the affirmative vote of the holders
of two-thirds of UPC's outstanding Common Stock for approval of a merger,
consolidation, or a sale or lease of all or substantially all of the assets of
UPC if the other party to the transaction is a beneficial owner of 10% or more
of the outstanding shares of UPC. A two-thirds vote is not required for any
merger or consolidation of UPC with or into any corporation or entity of which
a majority of the outstanding shares of all classes of capital stock entitled
to vote in the election of directors is owned by UPC or any UPC company.
The requirement of a supermajority vote of stockholders to approve
certain business transactions, as described above, may discourage a change in
control of UPC by allowing a minority of UPC's stockholders to prevent a
transaction favored by the majority of the stockholders. Also, in some
circumstances, the Board of Directors could cause a two-thirds vote to be
required to approve a transaction thereby enabling management to retain control
over the affairs of UPC and their positions with UPC. The primary purpose of
the supermajority vote requirement, however, is to encourage negotiations with
UPC's management by groups or corporations interested in acquiring control of
UPC and to reduce the danger of a forced merger or sale of assets.
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<PAGE> 41
As a Tennessee corporation, UPC is or could be subject to various
legislative acts set forth in Chapter 35 of Title 48 of the Tennessee Code,
which imposes certain restrictions on business combinations, including, but not
limited to, combinations with interested stockholders similar to those
described above.
The Tennessee Business Combination Act generally prohibits a "business
combination" (generally defined to include mergers, share exchanges, sales and
leases of assets, issuances of securities, and similar transactions) by UPC or
a subsidiary with an "interested stockholder" (generally defined as any person
or entity which beneficially owns 10% or more of the voting power of any class
or series of UPC's stock then outstanding) within five years after the person
or entity becomes an interested stockholder, unless the business combination or
the transaction pursuant to which the interested stockholder became such was
approved by the UPC Board of Directors before the interested stockholder became
such, and the business combination satisfies any other applicable requirements
imposed by law or by UPC's Charter or Bylaws. The Tennessee Business
Combination Act also severely limits the extent to which UPC or any of its
officers or directors could be held liable for resisting any business
combination.
The Tennessee Control Share Acquisition Act (the "Tennessee CSAA")
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 Tennessee 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 stockholder approval is required when a stockholder seeks to acquire
the power to vote shares at the next level. In the absence of such approval,
the additional shares acquired by the stockholder 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. UPC's Charter and Bylaws do not
currently contain such an express declaration.
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 SEC 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 TBCA provides that no Tennessee corporation having any class of
voting stock registered or traded on a national securities exchange or
registered with the SEC 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 stockholder
on or before the date such stockholder became an interested stockholder, or for
seeking to enforce or implement the provisions of the Tennessee Business
Combination Act or the Tennessee CSAA, or 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.
The acts described above along with the provisions of UPC's Charter
regarding business combinations might be deemed to make UPC less attractive as
a candidate for acquisition by another company than would otherwise be the case
in the absence of such provisions. For example, if another company should seek
to acquire a controlling interest of less than 66-2/3% of the outstanding
shares of UPC Common Stock, the acquirer would not thereby obtain the ability
to replace a majority of the UPC Board of Directors until
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<PAGE> 42
at least the second annual meeting of stockholders following the acquisition,
and furthermore the acquirer would not obtain the ability immediately to effect
a merger, consolidation, or other similar business combination unless the
described conditions were met.
As a result, UPC's stockholders may be deprived of opportunities to
sell some or all of their shares at prices that represent a premium over
prevailing market prices in a takeover context. The provisions described above
also may make it more difficult for UPC's stockholders to replace the UPC Board
of Directors or management, even if the holders of a majority of the UPC Common
Stock should believe that such replacement is in the interests of UPC. As a
result, such provisions may tend to perpetuate the incumbent UPC Board of
Directors and management.
SBI. The ABCA and SBI's Articles require the approval of the Board of
Directors and the holders of two-thirds of the outstanding stock of SBI
entitled to vote thereon for mergers or consolidations, and for sales, leases,
or exchanges of substantially all of SBI's property and assets.
DISSENTERS' RIGHTS OF APPRAISAL
UPC. Under the TBCA, a stockholder is generally entitled to dissent
from a corporate action, and obtain payment of the fair value of his shares in
the event of: (i) consummation of a plan of merger to which the corporation is
a party, unless stockholder approval is not required by the TBCA; (ii)
consummation of a plan of share exchange to which the corporation is a party as
the corporation whose shares will be acquired if the stockholder is entitled to
vote on the Plan; (iii) consummation of a sale or exchange of substantially all
of the corporation's property other than in the usual and regular course of
business, if the stockholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or to a plan by which substantially all of the net proceeds of the sale
will be distributed in cash to the stockholders within one year after the date
of sale; (iv) an amendment of the charter that materially and adversely affects
rights in respect of a dissenter's shares because it (a) alters or abolishes a
preferential right of the shares, (b) creates, alters, or abolishes a right in
respect of redemption of the shares, including a provision respecting a sinking
fund for the redemption or repurchase of the shares, (c) alters or abolishes a
preemptive right of the holder of the shares to acquire shares or other
securities, (d) excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights, or (e)
reduces the number of shares owned by the stockholder to a fraction of a share
if the fractional share so created is to be acquired for cash under the TBCA;
or (v) any corporate action taken pursuant to a stockholder vote, to the extent
the charter, bylaws, or a resolution of the board of directors provide that
voting or nonvoting stockholders are entitled to dissent and obtain payment for
their shares. UPC's Charter and Bylaws do not provide for any such additional
dissenters' rights.
SBI. The rights of dissenting stockholders of SBI are governed by
Section 4-26-1007 of the ABCA, a copy of which is attached hereto as Appendix
D. For a discussion of dissenters' rights, see "DESCRIPTION OF TRANSACTION--
Dissenters' Rights."
STOCKHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS
UPC. The TBCA provides that a stockholder may inspect and copy books
and records during regular business hours, if he or she gives the corporation
written notice of his or her demand at least five business days before the date
of the inspection. The written demand must be made in good faith and for a
proper purpose and must describe with reasonable particularity the purpose of
the request and the records the stockholder desires to inspect.
SBI. The ABCA provides that a stockholder may inspect books and
records upon written demand stating the purpose of the inspection.
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<PAGE> 43
DIVIDENDS
UPC. UPC's ability to pay dividends on UPC Common Stock is governed
by Tennessee corporate law. Under Tennessee corporate law, dividends may be
paid so long as the corporation would be able to pay its debts as they become
due in the ordinary course of business and the corporation's total assets would
not be less than the sum of its total liabilities plus the amount that would be
needed, if the corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution to
stockholders whose preferential rights are superior to those receiving the
distribution.
There are various statutory limitations on the ability of UPC's Banking
Subsidiaries to pay dividends to UPC. See "CERTAIN REGULATORY CONSIDERATIONS--
Payment of Dividends."
SBI. The ABCA provides that the board of directors may declare
dividends payable in cash, property or shares of the corporation's stock.
Generally, no dividends may be declared if the liabilities of the corporation
would exceed its assets or if the corporation would be unable to pay its
obligations in the ordinary course of business. Substantially all of the funds
available for the payment of dividends by SBI are derived from its subsidiary
depository institutions. There are various statutory limitations on the ability
of SBI's subsidiary depository institutions to pay dividends to SBI. See
"CERTAIN REGULATORY CONSIDERATIONS--Payment of Dividends."
COMPARATIVE MARKET PRICES AND DIVIDENDS
UPC Common Stock is traded on the NYSE under the symbol "UPC." SBI
Common Stock is not quoted or traded on any exchange or market system. The
following table sets forth, for the indicated periods, the high and low closing
sale prices for the UPC Common Stock as reported by the NYSE, and the cash
dividends declared per share of UPC Common Stock for the indicated periods. The
stock prices do not include retail mark-ups, mark-downs or commissions.
<TABLE>
<CAPTION>
UPC
---
CASH
DIVIDENDS
Price Range DECLARED
PER
HIGH LOW SHARE
---- --- -----
<S> <C> <C> <C>
1997
First Quarter . . . . . . . $47.75 $ 38.38 $ .32
Second Quarter . . . . . . 52.13 41.25 .375
Third Quarter 56.50 49.25 .40
Fourth Quarter (through
Oct. 17, 1997) . . . . . 62.56 57.00 .40
-----
Total . . . . . . . . . $ 1,495
=====
1996
First Quarter . . . . . . . $31.75 $ 29.00 $ .27
Second Quarter . . . . . . 31.25 29.63 .27
Third Quarter . . . . . . . 36.25 28.63 .27
Fourth Quarter . . . . . . 41.38 34.63 .27
----
Total . . . . . . . . . $ 1.08
====
1995
First Quarter . . . . . . . $24.50 $ 20.88 $ .23
Second Quarter . . . . . . 28.13 23.13 .25
Third Quarter . . . . . . . 30.75 26.13 .25
Fourth Quarter . . . . . . 32.25 29.63 .25
----
Total . . . . . . . . . $ .98
====
</TABLE>
Management of SBI is only aware of a few instances in the last few
years that SBI Common Stock has traded hands. Generally, it is believed that
the most recent transfers were for approximately $95.00 per share.
On October 17, 1997, the last sale price of UPC Common Stock as
reported on the NYSE was $60.25 per share. On
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<PAGE> 44
August 19,1997, the last business day prior to public announcement of the
proposed Merger, the last sale price of the UPC Common Stock as reported by the
NYSE was 49.63.
The holders of UPC Common Stock are entitled to receive dividends when
and if declared by the Board of Directors 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, operating results, capital and reserve requirements, and the Board
of Directors' consideration of other relevant factors. The Agreement provides
that SBI may not declare and pay cash dividends on the shares of SBI Common
Stock.
UPC and SBI are each legal entities separate and distinct from their
subsidiaries and their revenues depend in significant part on the payment of
dividends from their subsidiary depository institutions. UPC's and SBI'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."
BUSINESS OF UPC
GENERAL
UPC, a Tennessee corporation, is a bank holding company registered
with the Federal Reserve under the BHC Act. As of June 30, 1997, UPC had total
consolidated assets of approximately $14.8 billion, total consolidated loans of
approximately $10.4 billion, total consolidated deposits of approximately $11.2
billion, and total consolidated stockholders' equity of approximately $1.4
billion.
UPC conducts its business activities through its principal bank
subsidiary, the $5.5 billion asset Union Planters National Bank, founded in
1869 and headquartered in Memphis, Tennessee, 32 other bank subsidiaries and
one savings bank subsidiary located in Tennessee, Mississippi, Missouri,
Arkansas, Louisiana, Alabama, and Kentucky. 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 other financial
services traditionally furnished by full-service financial institutions. UPC
also is engaged in mortgage origination and servicing, investment management
and trust services, the issuance and servicing of credit and debit cards, the
origination, packaging, and securitization of loans, primarily the
government-guaranteed portions of Small Business Administration loans; the
purchase of delinquent FHA/VA government-insured/guaranteed loans from third
parties and from GNMA pools serviced for others; full service and discount
brokerage; and the sale of annuities and bank-eligible insurance products.
Through the UPC Banking Subsidiaries, UPC operates approximately 432
banking offices and 564 ATMs. UPC's total assets at June 30, 1997 are allocable
by state to its banking offices (before consolidating adjustments)
approximately as follows: $9.7 billion in Tennessee, $2.3 billion in
Mississippi, $1.2 billion in Missouri, $800 million in Arkansas, $609 million
in Louisiana, $440 million in Alabama and $113 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 twelve
acquisitions in 1993, thirteen in 1994, three in 1995 and seven in 1996, adding
approximately $1.7 billion in total assets in 1993, $3.8 billion in 1994, $1.3
billion in 1995 and $4.2 billion in 1996. Thus far in 1997, UPC has acquired
two financial institutions with aggregate total assets of approximately $167
million. UPC also has entered into definitive agreements to acquire four
financial institutions in addition to SBI, which had aggregate total assets of
approximately $3.7 billion at June 30, 1997. For information with respect to
these acquisitions see "--Recent Developments." 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, 1996, 1995, and 1994 (on
pages 45 and 46) contained in UPC's Annual Report to Stockholders which is
Exhibit 13 to UPC's Annual Report on Form 10-K for the year ended December 31,
1996, which Exhibit 13 is incorporated by reference herein to the extent
indicated herein.
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, most likely would result in the issuance of additional
shares of UPC Common Stock, may result in the incurrance 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 have been recently completed or which are currently
pending, see "--Recent Developments."
The principal executive offices of UPC are located at 7130 Goodlett
Farms Parkway, Memphis, Tennessee 38018, and its telephone
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<PAGE> 45
number at such address is (901) 580-6000. Additional information with respect
to UPC and its subsidiary is included in documents incorporated by reference in
this Proxy Statement. See "AVAILABLE INFORMATION" and "DOCUMENTS INCORPORATED
BY REFERENCE."
RECENT DEVELOPMENTS
RECENTLY COMPLETED ACQUISITIONS. UPC has completed the acquisition of
the following two financial institutions (the "Recently Completed
Acquisitions").
<TABLE>
<CAPTION>
Institution Asset Size(1) Consideration
----------- ------------- -------------
(IN MILLIONS)
-------------
<S> <C> <C>
SBT Bancshares, Inc., Selmer, $ 102 Approximately 612,138 shares
Tennessee, and its subsidiary, of UPC Common Stock
Selmer Bank & Trust Co.
Approximately 210,520 shares
Citizens of Hardeman County 65 of UPC Common Stock
--------------
Financial Services Inc.,
Whiteville, Tennessee, and its
subsidiary, The Whiteville Bank $ 167
==============
TOTAL
</TABLE>
- -------------
(1) Approximate total assets at June 30, 1997.
OTHER PENDING ACQUISITIONS. Thus far in 1997, UPC has entered into
definitive agreements to acquire the following financial institutions in
addition to SBI (collectively, the Other Pending Acquisitions and the Recently
Completed Acquisitions,are referred to as the Other Acquisitions) which UPC's
management considers probable of consummation for financial reporting purposes
and each which are expected to close in 1997.
<TABLE>
<CAPTION>
INSTITUTION ASSET SIZE(1) Consideration
----------- ------------- -------------
(IN MILLIONS)
<S> <C> <C>
First Acadian Bancshares, Inc., $ 83 Approximately 335,000 shares
Thibodaux, LA, and its subsidiary, of UPC Common Stock
Acadian Bank
Sho-Me Financial Corp., Mt. Vernon, 329 Approximately 1,048,000 shares of
Missouri, and its subsidiary, First UPC Common Stock
Savings Bank, F.S.B.
Capital Bancorp, Miami FL, and its 1,910 Approximately 7,100,000 shares of
subsidiaries, including Capital UPC Common Stock
Bank, Miami FL
Magna Bancorp, Inc., Hattiesburg, 1,353 Approximately 7,100,000 shares of
MS, and its subsidiaries, including UPC Common Stock
Magnolia Federal Bank for Savings
==========
TOTAL $ 3,675
==========
</TABLE>
- ---------------------------
(1) Approximate total assets at June 30, 1997.
EARNINGS CONSIDERATIONS RELATED TO OTHER ACQUISITIONS. It is expected
that either UPC or the institutions to be acquired in connection with the
Merger and the Other Acquisitions will incur charges arising from such
acquisitions and from the assimilation of those institutions into the UPC
organization. Most of the charges are expected to relate to the Magna Bancorp
and Capital Bancorp acquisitions. 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 elimination of duplicate facilities and branch
consolidations, data processing
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<PAGE> 46
charges, cancellation of vendor contracts, and the potential for additional
provisions for loan losses and similar costs which normally arise from the
consolidation of operational activities.
With the exception of the acquisition of Sho-Me Financial Corp., each
of the Other Acquisitions is expected to be accounted for as a pooling of
interests. UPC currently estimates incurring aggregate charges in the range of
$25 million to $35 million after taxes in connection with the consummation of
the Merger and the Other Acquisitions. 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. 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.
CONSOLIDATION OF SUBSIDIARY BANK CHARTERS. UPC management has
announced plans to consolidate substantially all of its separate banking
subsidiaries into UPNB. Implementation of this plan will likely result in UPC
incurring changes in the fourth quarter of 1997. Management is developing the
plan to consolidate the subsidiaries and is seeking required regulatory
approvals. The exact charges and future savings cannot be quantified at this
time.
BUSINESS OF SBI
GENERAL
SBI is subject to regulation and examination by the Federal
Reserve, the FDIC and the State of Arkansas. SBI operates two subsidiary
banks, Farmers & Merchants Bank, Des Arc, Arkansas (the "Des Arc Bank") and
Merchants and Farmers Bank, West Helena, Arkansas (the "West Helena Bank")
(collectively, the "SBI Subsidiary Banks"). The SBI Subsidiary Banks are state
chartered banks. The Des Arc Bank's main office is located at 110 S. Third
Street, Des Arc, Arkansas and it operates a branch at Lonoke, Arkansas. The
main office of the West Helena Bank is located at 425 East Plaza, West Helena,
Arkansas and it operates two branches in West Helena, Arkansas. The Des Arc
Bank has operated in Des Arc, Arkansas since 1901 and the West Helena Bank has
operated in West Helena, Arkansas since 1948.
As of June 30, 1997, SBI had total consolidated assets of
approximately $162.2 million, total consolidated deposits of approximately
$134.8 million, and total consolidated stockholder's equity of approximately
$16.9 million.
SBI is engaged in the business of soliciting deposits from the general
public and using such deposits to originate loans or invest in residential and
other mortgage loans, commercial loans, consumer loans, agricultural loans, and
other assets.
LENDING ACTIVITIES
The principal lending activity of SBI historically has been the origination of
agricultural loans and conventional first mortgage single-family loans. SBI
also makes consumer/commercial loans and commercial real estate loans. See
Table 3 on page 49 hereof for the composition of SBI's loan portfolio.
PROPERTY
SBI owns, free and clear of any encumbrances, the property on which
its main office of the Des Arc Bank is located and the main office and branches
of the West Helena Bank. SBI also holds, from time to time, real estate
acquired through foreclosure.
COMPETITION
SBI competes with numerous other commercial banks and other financial
institutions in Prairie County and Phillips County, Arkansas.
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<PAGE> 47
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION OF SBI
The following narrative discussion and tabular data provides an
analysis of major factors and trends regarding the consolidated financial
condition of SBI and its subsidiaries as of June 30, 1997 and as of December
31, 1996 and 1995, and the consolidated results of operations of SBI and its
subsidiaries for the six months ended June 30, 1997 and 1996 and for each of
the years ended December 31, 1996, 1995, and 1994. This discussion should be
read in conjunction with the audited consolidated financial statements, and the
notes thereto, as of and for the years ended December 31, 1996 and 1995 and the
unaudited consolidated financial statements as of June 30,1997 and for the six
months ended June 30, 1997 and 1996 as presented in Appendices B and C of this
Proxy Statement.
Certain of the information included in this discussion contains
forward-looking statements and information that are based on management's
belief as well as certain assumptions made by, and information currently
available to management. When used in this discussion, the words "anticipate,"
"project," "expect," and similar expressions are intended to identify
forward-looking statements. Although management of SBI believes that the
expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations and projections will prove to have
been correct. Such forward-looking statements are subject to certain risks,
uncertainties, and assumptions. Should one or more of these risks materialize,
or should any such underlying assumptions prove to be incorrect, actual results
may vary materially from those anticipated, estimated, projected or expected.
Among key factors that may have a direct bearing on SBI's operation results are
fluctuations in the economy; the actions taken by the Federal Reserve for the
purpose of influencing the economy; the continued growth of the markets in
which SBI operates consistent with recent historical experience;and the
enactment of federal legislation impacting the operations of SBI.
OVERVIEW
For a summary of selected consolidated financial data as of and for
the years ended December 31, 1992 through 1996 and as of and for the six months
ended June 30, 1997 and 1996, see page 23 of this Proxy Statement. Since
December 31, 1992, total assets have grown from $136.2 million to $162.2
million at June 30, 1997.
SBI's net earnings for the year ended December 31, 1996 were $1.78
million, representing the highest level of earnings for the five year period
ended December 31, 1996. Net earnings were $1.61 million and $934,000 for each
of the years ended December 31, 1995 and 1994, respectively. The increase in
net earnings from 1995 to 1996 was primarily attributable to the increase in
interest income as a result of continued growth in SBI's loan portfolio. The
significant increase in earnings from 1994 to 1995 was attributable to the
substantial increase in interest income directly related to the increase in the
loan portfolio as well as a $350,000 decrease in the provision for losses on
loans. See additional detailed discussions below.
Management expects modest growth to continue in both assets and
earnings; however, such growth is dependent upon the economies of the markets
served by SBI, its relative competitiveness in its local market and other
factors which are discussed below.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NET EARNINGS - Net earnings for 1996 were $1.78 million, an increase
of $175,000 over 1995 net earnings of $1.61 million. 1995 earnings increased
$673,000 as compared to 1994. Earnings per share were $13.90 in 1996, compared
to $13.25 in 1995 and $8.10 in 1994. A more detailed analysis of the
individual components of net earnings and the changes in such components is
included under the appropriate captions below.
The return on average assets for the year ended December 31, 1996 was
1.10% compared to 1.12% for 1995 and .71% for 1994. The return on average
stockholders' equity for 1996 was 11.82% compared to 12.07% for the year ended
December 31, 1995 and 7.72% for the year ended December 31, 1994. SBI's
efficiency ratio improved to 59.36% during 1996, as compared to 65.28% in 1995
and 72.36% in 1994. SBI declared and paid a 6% stock dividend to stockholders
for each of the years ended December 31, 1996, 1995 and 1994.
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<PAGE> 48
NET INTEREST INCOME - Net interest income is the principal source of
earnings for SBI. Net interest income is the amount by which interest income
and loan-related fees generated by earning assets exceeds interest expense.
Net interest income is affected by a number of factors including the level,
pricing, mix and maturity of earning assets and interest-bearing liabilities;
interest rate fluctuations; and asset quality. Net interest income was $6.1
million for the year ended December 31, 1996 compared to $5.6 million for the
year ended December 31, 1995 and $5.1 million for the year ended December 31,
1994. The continuous improvement in net interest income is attributable to
significant growth in the loan portfolio as offset by a slight decrease in the
net interest margin from 4.42% in 1994 to 4.07% in 1996.
PROVISION FOR LOSSES ON LOANS - The allowance for losses on loans has
been, in the opinion of management, maintained at a level sufficient to provide
for losses inherent in the loan portfolio. The level of provisions for losses
on loans is based on past loan experience, growth and composition of the loan
portfolio, as well as current economic conditions. SBI recorded provisions for
losses on loans in the amount of $365,000 for the year ended December 31, 1996
compared to $140,000 and $490,000 for the years ended December 31, 1995 and
1994, respectively. The $350,000 decrease in the provision for loan losses
from 1994 to 1995 was attributable to a decrease in net charge-offs in the
agricultural and commercial loans for 1995. The 1996 provision is consistent
with other previous years (excluding 1995) and was .39% of average loans. Only
modest provisions consistent with 1996 are expected in the near future. SBI
experienced net charge-offs of $315,000, $118,000 and $588,000 for the years
ended December 31, 1996, 1995 and 1994, respectively. See "Allowance for
Losses on Loans" for additional information regarding the provision for losses
on loans.
Table 2, which follows this discussion, presents a Summary of Loan
Loss Experience for the six months ended June 30, 1997 and 1996 and for the
years ended December 31, 1992 through 1996 while Table 1 presents Nonperforming
Assets for the same periods. The amount of nonperforming assets has increased
constantly over the last five years as the loan portfolio has continued to
grow; however, management expects no significant increases. Non-performing
assets as a percentage of loans and foreclosed properties has remained
relatively constant as a result of the increase in the loan portfolio. The
loan-to-deposit ratio increased constantly from 55.36% in 1992 to 63.37% in
1996 (except for a slight decrease in 1995) as the demand for quality loans
increased. Management expects future loan demand to remain fairly constant at
current levels. Future provisions for losses on loans are dependent upon
various factors, including the economy, loan growth and composition, levels of
nonperforming assets and loan loss experience. The amounts of nonperforming
loans represent risks in the loan portfolio; however, a major portion of such
loans are collateralized to various degrees and should not be interpreted as
losses.
NONINTEREST INCOME - Noninterest income is primarily related to
service charges and various fees on deposits, trust operations, and other
commissions as well as net investment securities gains and losses. Total
noninterest income for 1996 was $857,000, a $73,000 increase from the $784,000
reported for 1995. The increase in 1996 was primarily attributable to a
$41,000 increase in service charge fees received on deposits and an increase of
$12,000 in net investment security losses. The 1995 noninterest income
represented a $43,000 increase from $741,000 during 1994. The increase was
primarily attributed to a $69,000 increase in service fees on deposits in 1994
and a decrease of $25,000 in net investment security losses, offset by a
decrease of $71,000 in FDIC insurance premiums. Other changes in noninterest
income from 1994 to 1996 were not attributable to any significant individual
items.
Management continues to seek new sources of noninterest income;
however, no significant growth or the maintenance of current levels of
noninterest income can be assured.
NONINTEREST EXPENSE - Total noninterest expense for 1996 was $4.13
million or $17,000 less than the $4.15 million reported for 1995. Noninterest
expense for 1995 represents a $116,000 decrease from $4.26 million in 1994. The
overall decreases in noninterest expense from 1994 to 1995 are primarily
attributable to decreases in FDIC insurance premiums, a $15,000 decrease in
professional fees offset by other increases as noted below. The overall
decrease in noninterest expense from 1995 to 1996 was not attributable to any
significant individual items. Other changes in non- interest expenses also are
not attributable to any other significant individual items.
Salaries, wages and benefits totaled $2.2 million for the year ended
December 31, 1996 compared to $2.1 million and $2.0 million for the years ended
December 31, 1995 and 1994, respectively. Management does not project any
significant changes in the amounts of these expenses.
Occupancy and equipment expense totaled $662,000 for the year ended
December 31, 1996 compared to $714,000 and $718,000 for the years ended
December 31, 1995 and 1994, respectively. The decrease in expense from 1994 to
1996 are not attributable to any significant individual items. Management does
not expect any other significant increases for capital expenditures.
41
<PAGE> 49
Management continues to monitor the level of noninterest expense to
identify cost reductions where applicable; however, no significant reductions
are expected.
INCOME TAXES - Income tax expense totaled $657,000, $447,000 and
$168,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
These amounts represent effective tax rates of 26.95%, 21.78% and 14.93% for
the years ended December 31, 1996, 1995 and 1994, respectively. The increase
in the effective tax rate from 1994 to 1996 was a result of decreases in the
amount of tax-exempt income from investment securities and loans and the effect
of state and deferred income taxes. Management expects that future effective
tax rates will remain at levels commensurate with that of 1996.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1997 AND 1996
NET EARNINGS - Net earnings for the six months ended June 30, 1997
were $913,000, an increase of $125,000 from net earnings of $788,000 reported
for the same period in 1996. The increase in net earnings is primarily
attributable to an increase in net interest income, coupled with only a slight
increase in noninterest expense. The decrease in net interest margin from
4.62% to 4.45% offset the increase attributable to loan growth and the increase
in interest income. A more detailed analysis of the components of net earnings
is included below.
The annualized return on average assets for the six months ended June
30, 1997 was 1.13% versus 1.15% for the same period in 1996 and 1.10% for the
year ended December 31, 1996. The annualized return on average shareholders'
equity for the six months ended June 30, 1997 was 11.03% compared to 12.40% for
the same period in 1996 and 11.82% for the year ended December 31, 1996.
NET INTEREST INCOME - Net interest income was $3.37 million and $2.91
million for the six months ended June 30, 1997 and 1996, respectively. Total
interest income increased to $6.15 million for the six months ended June 30,
1997 from $5.87 million for the same period in 1996. Total interest expense
decreased to $2.78 million for the six months ended June 30, 1997 from $2.96
million for the same period in 1996. The increases in total interest income
are attributable to increases in the volume of interest-bearing assets
(primarily loans), and the decrease in interest expense is due to decreases in
volumes and rates of interest-bearing liabilities (primarily deposits). The
increase is a result of increased charge-offs from commercial and agricultural
loans.
PROVISION FOR LOSSES ON LOANS - The provision for losses on loans was
$168,000 and $110,000 for the six months ended June 30, 1997, and 1996,
respectively. The allowance for losses on loans, which was $1.3 million at
June 30, 1997 has been, in management's opinion, sufficient to absorb any
losses inherent in the loan portfolio. Future provisions for losses on loans,
if any, will be based upon past loan experience, growth and composition of the
loan portfolio, as well as the current and anticipated future economic
conditions. The allowance for losses on loans at June 30, 1997 represented
1.21% of loans, net of unearned income, as of that date and 1.18% as of June
30, 1996.
A summary of the activity in the allowance for losses on loans for the
six months ended June 30, 1997 and 1996 is set forth as follows (in 000's):
<TABLE>
<CAPTION>
JUNE 30,
--------
1997 1996
---- ----
<S> <C> <C>
Balance - January 1 $ 1,268 $ 1,218
Provision charged to expense 168 110
Net loans charged-off (114) (108)
--------- ---------
Balance at June 30 $ 1,322 $ 1,220
========= =========
</TABLE>
Loans past due 90 days or more and still accruing interest were
$347,000 and $374,000 at June 30, 1997 and December 31, 1996, respectively. At
June 30, 1997 and December 31, 1996, SBI had $2.6 million and $2.5 million,
respectively, in loans on nonaccrual status. Loans are placed on nonaccrual
status when they become past due 90 days or more as to principal or interest,
and in the opinion of management, are not in the process of collection or
otherwise well-secured.
42
<PAGE> 50
Management has reviewed in detail all loans outstanding as of June 30,
1997 and believes there are no loans outstanding which are past due or on
nonaccrual status as of June 30, 1997, which would cause management to have
serious doubts as to the ability of such borrowers to comply with the present
loan repayment terms (except as discussed under "Loans" below).
SBI's renewal policy consists of an item-by-item review of maturing
loans, including a review of the number of times each loan has been renewed in
the past. Each maturing loan is evaluated to determine if such loan will be
renewed and if so, at what amount, rate and maturity. Generally, SBI's loan
maturities are of a short duration for the purpose of interest rate risk
management.
NONINTEREST INCOME - The primary sources of noninterest income are
service charges and various fees on deposits, trust operations, net investment
securities gains (losses) and other commissions. Noninterest income for the
six months ended June 30, 1997 was $490,000, an increase of $47,000 from
$443,000 for the same period in 1996. The increase is primarily attributable
to income derived from service charges on deposits.
NONINTEREST EXPENSE - The primary components of noninterest expense
are salaries and wages, occupancy and equipment expenses and other
miscellaneous operating expenses. Total noninterest expense for the six months
ended June 30, 1997 was $2.29 million, a $182,000 increase from the $2.10
million reported for the same period in 1996. The increase is primarily a
result of salary and wages of new employees, and legal fees incurred due to the
Merger, which is discussed in the notes to the audited consolidated financial
statements. Other changes in non-interest income are not attributable to any
other significant individual items.
FINANCIAL CONDITION
Total assets have decreased from $167.1 million at December 31, 1996
to $162.2 million at June 30, 1997. The overall decrease during the six-months
ended June 30, 1997 in total assets is a result of liquid assets, such as
available-for-sale investment securities and federal funds sold, being used to
fund the high loan volume (due to seasonality of agricultural loans) and also
to fund the decrease in agricultural related deposit accounts. The increase in
total assets from $159.2 million at December 31, 1995 to $167.1 million at
December 31, 1996 was primarily attributable to loan growth. Specific
components of SBI's balance sheet are further discussed below.
LOANS - Total loans, net of unearned income, at June 30, 1997 were
$109.7 million, an increase of $16.7 million as compared to $93.0 million at
December 31, 1996. This increase is attributable to fluctuations in the
overall loan demand for agricultural and commercial loans. Loans are at their
peak in the second and third quarters of the year due to the agricultural
market. Total loans, net of unearned income, at December 31, 1995 were $85.54
million. The composition of the portfolio continues to be focused in
agricultural and commercial loans with real estate loans following.
Management expects loan growth to continue to increase at moderate levels.
The largest concentration of loans are agricultural, commercial and
real estate mortgage loans. See Table 3 - Composition of Loan Portfolio for
the amount of individual loan types in the loan portfolio.
Table 1 - Nonperforming Assets sets forth information on the
nonperforming loans within the loan portfolio as of June 30, 1997 and 1996 and
for the years ending December 31, 1992 through 1996. Although the amounts shown
represent risks in the loan portfolio, the major portion of the loans are
collateralized to various degrees and should not be interpreted as losses.
All potential problem loans have been disclosed in Table 1. Potential
problem loans are those loans for which management has obtained information of
possible credit problems of the borrower, resulting in serious doubts as to the
ability of the borrower to comply with the present loan repayment terms.
Subsequent to June 30, 1997, SBI transferred $1.5 million related
party impaired loans to other real estate and recorded a pre-tax loss of
approximately $835,000. See additional discussion in Note 17 to SBI's audited
consolidated financial statements, a copy of which is attached hereto as
Appendix B.
ALLOWANCE FOR LOSSES ON LOANS - In determining the amount of the
provisions for losses on loans and allowance for losses on loans, management
considers past loan charge-offs, the level of past due and nonaccrual loans,
the size and mix of the portfolio, loan growth trends, adverse classifications
at recent regulatory examinations, general economic conditions in the market
area, and a review of individual loans to identify potential credit problems.
The allowance for losses on loans is maintained at a level considered adequate
by management to provide for potential losses in the existing loan portfolio.
In evaluating the adequacy of the allowance, management makes certain estimates
and assumptions which are susceptible to change in the near term. While
management uses available
43
<PAGE> 51
information to recognize losses on loans, future additions to the allowance may
be necessary based upon changes in economic conditions. Management believes
the level of the allowance for losses on loans is adequate in relation to the
size, mix and quality of the loan portfolio at June 30, 1997.
Table 3 - Composition of Loan Portfolio details the types of loans in
the loan portfolio as of June 30, 1997 and 1996 and for each of the years
ending December 31, 1992 through 1996. SBI's loan portfolio primarily consists
of agricultural, commercial and real estate mortgage loans.
During 1995, SBI adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 114, Accounting by Creditors for Impairment
of a Loan (effective for fiscal years beginning after December 15, 1994), as
amended by SFAS No. 118, Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures. This standard prescribes a valuation
methodology for impaired loans as defined by the standard. Generally, a loan
is considered impaired if management believes that it is probable that all
amounts due will not be collected according to the contractual terms stipulated
in the loan agreement. An impaired loan must be valued using the present value
of expected future cash flows discounted at the loan's effective interest rate,
the loan's observable market price or fair value of the loan's underlying
collateral. SBI adopted the provisions of SFAS No. 114 prospectively in 1995.
The adoption of SFAS No. 114 did not have a material effect on SBI's financial
condition, results of operations or liquidity.
INVESTMENT SECURITIES - Investment securities totaled $40.5 million at
June 30, 1997, compared to $53.2 million and $47.2 million at December 31, 1996
and 1995, respectively. The decrease in 1997 is primarily attributable to
decreases in the available-for-sale investment securities which were liquidated
in order to fund the high seasonal agricultural loan volume and the low deposit
balances. The increase from 1995 to 1996 was a result of excess funds being
invested due to a significant increase in overall total deposits. Investments
in securities are generally made as an alternative deployment of available
funds. Accordingly, the level of investment securities in the future and their
classification as available-for-sale or held-to-maturity will depend on various
factors, including loan demand and management's ability to attract loans and
deposits. The contractual maturities and amortized cost and fair value by
investment category of the investment securities portfolio are presented in
Note 4 to the audited consolidated financial statements as of December 31, 1996
and 1995, which are presented in Appendix B.
Investment securities classified as available-for-sale are carried at
fair value, and held-to-maturity securities are carried at amortized cost. As
of June 30, 1997, the fair value of total investment securities exceeded the
amortized cost by $145,000 or .04%.
MONEY MARKET ASSETS - Federal funds sold totaled $0 at June 30, 1997,
compared to $8.1 million at December 31, 1996, a decrease of $8.1 million.
Federal funds sold totaled $ 10.7 million at December 31, 1995. The
significant decrease is attributed to SBI using their excess cash to fund their
loan portfolio which is at increased levels due to the seasonality of
agricultural loans and increased loan demand. The level of federal funds sold
is a function of SBI's liquidity position and the overall level of loan demand.
FORECLOSED ASSETS - Foreclosed assets totaled $30,000 at June 30, 1997
compared to $158,000 at December 31, 1996. The decrease of $128,000 was due to
several properties being sold in 1997. No significant gains or losses were
realized on the sale of these properties. Foreclosed assets total $121,000 at
December 31, 1995. Subsequent to June 30, 1997, $1.5 million of impaired loans
were transferred to foreclosed assets. Additionally, SBI recorded a pre-tax
write down of such properties of approximately $835,000.
DEPOSITS - Total deposits totaled $134.8 million as of June 30, 1997,
a $11.9 million decrease over total deposits of $146.7 million as of December
31, 1996. The decrease is primarily related to the seasonal inverse
relationship to the increased loan demand. Deposits are seasonably low during
the agricultural season. Total deposits at December 31, 1995 were $140.4
million. While the level of deposits fluctuates daily, management expects the
level of deposits to continue to increase (from year to year) at moderate
levels.
Included in deposits are $21.8 million of time deposits greater than
or equal to $100,000 at June 30, 1997, $20.0 million and $19.0 million at
December 31, 1996 and 1995, respectively. At June 30, 1997, SBI's loan to
deposit ratio was 81.36%, compared to 63.37% and 60.92% at December 31, 1996
and 1995, respectively. The increase in the loan to deposit ratio is a result
of the seasonality of loans and the inverse relationship of deposits to loans
during this period and is considered temporary.
CAPITAL - Total stockholders' equity as of June 30, 1997 was $16.91
million, compared to $16.07 million at December 31, 1996 and $14.43 million at
December 31, 1995. The 1997 net increase is due to net earnings of $913,000
offset by a reduction in the unrealized gain on available-for-sale investment
securities of $48,000. The 1996 net increase is due to net earnings of $1.78
million offset by a reduction in the unrealized gain on available-for-sale
investment securities of $119,000.
44
<PAGE> 52
The key to the continued growth and profitability of SBI is to
maintain adequate levels of capital. The capital adequacy of a bank is
determined based upon the level of capital as well as asset quality, liquidity,
asset mix, earnings history and economic conditions. Management's goal is to
maintain its bank in the "well-capitalized" category for regulatory capital. At
June 30, 1997, SBI and the SBI Bank subsidiaries were in this category.
The regulatory capital guidelines divide capital into two tiers, Tier
1 capital and Tier 2 capital. Tier 1 capital of SBI consists of stockholders'
equity, excluding the unrealized gain on available-for-sale investment
securities. Tier 2 capital includes the allowance for loan losses, with
certain limitations. In determining the risk-based capital requirements,
assets are assigned risk weights of 0% to 100%, depending upon the regulatory
assigned levels of credit risk associated with such assets. Off-balance-sheet
items are included in the calculation of risk-adjusted assets through
conversion factors established by regulatory agencies. SBI's off-balance-sheet
items include unused commitments, credit card lines and standby letters of
credit.
SBI's Tier 1 and total capital risk-weighted assets ratios were 13.78%
and 14.85%, respectively at June 30, 1997. At December 31, 1996, SBI's Tier 1
and total capital to risk-weighted assets ratios were 14.30% and 15.44%,
respectively, compared to 13.67% and 14.84%, respectively at year end 1995.
The regulatory agencies require "well-capitalized" institutions to have Tier 1
and Total capital ratios of 6% and 10%, respectively. The SBI Bank
Subsidiaries' ratios are also above "well-capitalized" guidelines at the end of
each applicable period.
In addition to the risk-based capital requirements, the regulatory
agencies have established leverage capital requirements. This ratio is
computed by dividing Tier 1 capital by unadjusted (not risk-weighted) average
total assets. SBI's leverage ratio at June 30, 1997 was 10.54% compared to
9.82% and 9.91% at December 31, 1996 and 1995, respectively, and compared to
the regulatory guideline of 5% for "well-capitalized" institutions. The SBI
Bank Subsidiaries' ratios are also above "well-capitalized" guidelines at the
end of each applicable period.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT - SBI views liquidity and
asset/liability management as the ability to assure that funds are available to
support bank requirements; that is, the ability to allow depositors ready
access to their monies and credit customers available funds to meet their
credit needs. It is also the process by which SBI monitors and attempts to
control the mix and maturities of its assets and liabilities in order to
maximize net interest income. Management maintains balances of federal funds
sold and available-for-sale investment securities in amounts it believes
necessary to meet SBI's daily cash needs. With the available-for-sale
investment securities portfolio, management can, at its discretion, manage the
liquidity and interest rate risk of SBI. Management does not foresee any
particular matters which might immediately threaten its ability to remain
liquid.
For the six months ended June 30, 1997, SBI had cash flows from
operating activities of $1.2 million. For the year ended December 31, 1996,
SBI had a net decrease of $6.0 million in cash flow as compared to the same
period in 1995. SBI generated cash flows of $11.1 million and had a net
decrease of $11.5 in the years ended December 31, 1995 and 1994 respectively.
Management expects future operating cash flows to be sufficient to allow SBI
to meet its obligations.
INTEREST RATE RISK - One of the most important aspects of management's
efforts to sustain long-term profitability for SBI is the management of
interest rate risk. Management's goal is to maximize net interest income
within acceptable levels of interest rate risk and liquidity. To achieve this
goal, a proper balance must be maintained between assets and liabilities with
respect to size, maturity, repricing date, rate of return, and degree of risk.
SOURCES AND USES OF FUNDS - SBI's primary source of funds has
historically been the taking of deposits from customers, both individual and
business. SBI's deposit acquisition strategy is to rely on a core deposit base
of demand deposits, as well as savings and time deposits under $100,000. Next,
SBI utilizes time deposits $100,000 and over and public deposits for additional
sources of funds. At June 30, 1997, the percentage of time deposits $100,000
and over to total deposits was 16.15%. At December 31, 1996, the percentage of
time deposits $100,000 and over to total deposits was 13.66% compared to 13.50%
at December 31, 1995. The acquisition of deposits are from customers,
individuals and businesses within SBI's market area. The net decrease in
deposits was $11.95 million for the six months ended June 30, 1997, and net
increases were $6.3 million in 1996 and $22.4 million in 1995. The current
year decrease is a result of the low loan deposit balances maintained by
agricultural account holders during the first six months of the year.
Management believes that the rates offered for deposits are competitive with
other financial institutions in the SBI's market area. SBI does not
gather deposits through any brokered means.
SBI also derives funds from maturities, prepayments and calls of
investment securities, which totaled $16.9 million for the six months ended
June 30, 1997, and $16.9 million and $11.4 million in 1996 and 1995,
respectively.
45
<PAGE> 53
SBI's primary use of funds is the making of loans to customers. The
loan-to-deposit ratio was 81.36% at June 30, 1997 as compared to 63.37% at
December 31, 1996. The loan-to-deposit ratio was 60.92% at December 31, 1995.
The current loan to deposit ratio has increased due to seasonality of both
loans and deposits as previously discussed. The table of SBI Selected
Consolidated Financial Data on page 23 indicates that SBI's overall relative
loan portfolio size has tended to increase, as evidenced by the trend of
increases in the loan to deposit ratio. SBI's loan portfolio is comprised of
loans to individuals and businesses secured by various collateral, and in few
circumstances the loans are extended on an unsecured basis. The composition of
the loan portfolio is presented in Note 4 to the audited consolidated financial
statements at December 31, 1996 and 1995, which is presented in Appendix B. At
June 30, 1997 the agricultural and commercial loan portfolio increased $16.8
million due to the seasonality of agricultural loans.
A secondary use of funds is the purchasing of debt securities for
investment purposes. At June 30, 1997, the investment portfolio represented
26.8% of total earnings assets. During 1996, the investment portfolio averaged
35.6% of total earning assets compared to 36.06% in 1995. The composition of
the investment securities portfolio at December 31, 1996 is presented in Note 4
to the SBI financial statements a copy of which is annexed hereto as Appendix
B. The portfolio is comprised of obligations of U.S. Government Agencies and
obligations of states and local governments. While SBI may continue to upgrade
or reposition the portfolio, management has not in the past nor does it intend
to in the future, trade securities for profit or to depend upon securities
gains as a regular source of income. At June 30, 1997, the fair value of the
investment portfolio exceeded the amortized cost by approximately $145,000. In
comparison, the fair value exceeded the amortized cost by approximately
$245,000 at December 31, 1996 and $398,000 at December 31, 1995.
Effective January 1, 1994, SBI adopted SFAS No. 115 Accounting for
Certain Investments in Debt and Equity Securities. This standard addresses the
accounting for investments in equity securities that have readily determinable
fair values and for all investments in debt securities. The investment
securities covered by this standard are to be classified in one of three
categories: (i) debt securities for which the institution has a positive intent
and ability to hold to maturity are classified as "held-to-maturity" and
reported at amortized cost; (ii) debt and equity securities that are bought and
held principally for the purpose of selling them in the near term are
classified as "trading" and reported at fair value, with the unrealized gains
and losses included in earnings; and (iii) debt and equity securities not
classified as either held-to-maturity securities or trading securities are
classified as "available-for-sale" and reported at fair value, with unrealized
gains and losses excluded from earnings and reported net of deferred taxes as a
separate component of stockholders' equity.
In connection with the adoption of SFAS No. 115, approximately $43.02
million of securities were transferred to the available-for-sale category at
fair value, with a net unrealized gain of $483,000, net of deferred income
taxes, which was reflected as a separate component of stockholders' equity.
The remaining securities were classified as held- to-maturity which will
continue to be carried at amortized cost, adjusted for amortization of premiums
and accretion of discounts. Management has the intent and ability to hold until
maturity those securities classified as such.
On November 15, 1995, the Financial Accounting Standards Board
("FASB") issued a special report pertaining to the implementation of SFAS No.
115. Concurrent with the issuance of the report but no later than December 31,
1995, the FASB allowed for a reassessment of the appropriateness of the
classification of securities held at that time and to account for any resulting
reclassification at fair value. Reclassification from the held-to-maturity
category that were a result of this one-time assessment would not call into
question the intent of SBI to hold other debt securities until maturity in the
future. Based upon this guidance, the Bank did not elect to transfer any
held-to-maturity investment securities to the available-for-sale portfolio.
REGULATORY ASSESSMENTS - The SBI Bank Subsidiaries are required to pay
certain fees to the Federal Deposit Insurance Corporation ("FDIC") and the
Arkansas State Bank Department. The FDIC monitors risk-based capital
requirements and requires weaker institutions to pay higher deposit insurance
premiums, while allowing well-capitalized institutions to pay less. The
deposit insurance assessments currently range from zero for "well-capitalized"
institutions to 23 cents per $100 deposits for the weakest institutions. These
premiums were reduced for Bank Insurance Fund institutions during 1995 and
1996, as well as a refund to certain institutions during 1995. The SBI Bank
Subsidiaries received refunds of approximately $71,000 during 1995. For 1996,
the SBI Bank Subsidiaries paid approximately $9,500 for FDIC deposit insurance
and are expected to pay approximately $9,000 in 1997.
EFFECTS OF INFLATION - A bank's asset and liability structure is
primarily monetary in nature, that is, fixed in terms of monetary amounts.
Consequently, the impact of inflation on a bank differs significantly from an
industrial company. Factors such as interest rates have a more significant
impact on a bank's performance than does general inflation. Interest rates do
not necessarily move in the same direction, or at the same magnitude, as the
prices of other goods and services.
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<PAGE> 54
IMPACT OF ACCOUNTING STANDARDS TO BE ADOPTED
SFAS NO. 128.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128 Earnings Per Share.
The Statement establishes standards for computing and presenting earnings per
share (EPS). The Statement simplifies the standards for computing EPS
previously found in APB No. 15, Earnings Per Share, and makes them comparable
to international EPS standards. It replaces the presentation of primary EPS
with a presentation of basic EPS. The Statement requires dual presentation of
basis and diluted EPS on the face of the statement of earnings and requires a
reconciliation between basic EPS and diluted EPS. The adoption is not expected
to have a significant effect on SBI or its EPS calculations.
<TABLE>
<CAPTION>
TABLE 1
NONPERFORMING ASSETS
(DOLLARS IN THOUSANDS)
June 30, December 31,
------------------- ----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Nonaccrual loans $ 2,627 $ 2,524 $ 2,102 $ 1,827 $ 1,715 $ 753 $ 529
Other real estate owned and foreclosed assets 30(1) 76 158 121 82 20 100
-------- ------- -------- ------- ------- ------ -------
Total nonperforming assets $ 2,657 $ 2,600 $ 2,260 $ 1,948 $ 1,797 $ 773 $ 629
-------- ------- -------- ------- ------- ------ -------
Loans past due 90 days or more and still accruing
interest $ 347 $ 212 $ 374 $ 451 $ 396 $ 205 $ 94
======== ======= ======== ======= ======= ====== =======
</TABLE>
(1) Subsequent to June 30, 1997, $1.5 million of impaired loans were
transferred to Foreclosed Assets.
47
<PAGE> 55
TABLE 2
SUMMARY OF LOSS EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months
Ended Years Ended
June 30 December 31,
--------------------- ---------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning balance $ 1,268 $ 1,218 $ 1,218 $ 1,196 $ 1,294 $ 1,098 $ 1,029
Provision for loan losses 168 110 365 140 490 3852 239
Loans charged-off: 197 50 371 150 122
Commercial, agricultural, and industrial 186 53
Real estate - mortgage 44 - 5 5 322 7 56
Consumer 49 64 194 76 44 74 41
-------- ------- ------- -------- ------- ------- -------
Total charge-off 279 117 395 131 737 231 219
-------- ------- ------- -------- ------- ------- -------
Recoveries:
Commercial, agricultural, and industrial 115 - 28 2 134 26 28
Real estate - mortgage 38 - 11 - 1 - 9
Consumer 12 9 41 11 14 16 12
-------- ------- ------- ------- ------- ------- -------
Total recoveries 159 9 80 13 149 42 49
-------- ------- ------- -------- ------- ------- -------
Net recoveries (charge-offs) (114) (108) (315) (118) (588) (189) (170)
Ending balance $ 1,322 $ 1,220 $1, 268 $ 1,218 $ 1,196 $ 1,294 $ 1,098
========= ======= ======= ======== ======= ======= =======
Loans, net of unearned income:
Period end $ 109,673 103,416 92,994 85,543 73,594 70,018 66,658
Average during year 97,356 89,993 94,994 83,265 74,496 68,579 29,824
Allowance for losses on loans to period
end loans, net of unearned interest 1.21% 1.18% 1.36% 1.42% 1.63% 1.85% 1.65%
Allowance for losses on loans to average
loans, net of unearned interest 1.36% 1.36% 1.35% 1.46% 1.61% 1.89% 3.68%
Net charge-offs to average loans, net of
unearned income 0.23% 0.24% 0.33% 0.14% 0.79% 0.28% 0.57%
</TABLE>
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<PAGE> 56
TABLE 3
COMPOSITION OF LOAN PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
--------------------- ------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial, agricultural and financial $ 53,967 $ 49,998 $ 37,140 $ 34,960 $ 29,861 $ 30,733 $ 28,944
Real estate-
Mortgage 27,036 25,431 25,777 23,243 21,122 20,257 17,565
Construction and other 8,323 8,322 8,217 7,783 6,123 4,541 5,116
Consumer 19,509 18,851 20,810 18,838 15,994 14,280 14,681
Other 839 832 1,056 766 718 753 813
-------- --------- -------- -------- -------- -------- --------
TOTAL $109,674 $ 103,434 $ 93,000 $ 85,590 $ 73,818 $ 70,564 $ 67,119
Unearned interest (1) (18) (6) (47) (224) (546) (461)
-------- --------- -------- -------- -------- -------- --------
Net Loans $109,673 $ 103,416 $ 92,994 $ 85,543 $ 73,594 $ 70,018 $ 66,658
======== ========= ======== ======== ======== ======== ========
</TABLE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT OF SBI
Security ownership information with respect to all persons known to SBI to be
the beneficial owners of five percent (5%) or more of the outstanding shares of
SBI Common Stock and all directors and executive officers of SBI is shown in
the following table.
<TABLE>
<CAPTION>
Name & Address of Beneficial Owner (1) Amount & Nature of Beneficial Ownership Percent of Class
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Henry L. Nichols, Chairman 121,886 (2) 89.43%
Sherod S. White, Director, President 56 *
James N. Thomason, Director, Vice Pres. 80 *
William D. Simmons, Director 67 *
L.A. Richmond, Director 80 *
Scott Mitchell, Director 80 *
V.O. Calhoun, Jr., Director 98 *
Donald Guess, Director 98 *
George Ford, Director 183 *
John Stephens, III, Director 59 *
--------- ---------
All Directors and Executive Officers as a Group 122,687 90.01%
(10 persons)
- -------------------------------------
</TABLE>
* less than 1%
(1) The address of all persons shown in the table above is 110 South Third
Street, Des Arc, AR 72040.
(2) Includes 113,407 shares of SBI Common Stock held by various trusts for
which Mr. Nichols serves as a co-trustee.
49
<PAGE> 57
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. A more complete
discussion as it relates to UPC is included in UPC's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996. See "AVAILABLE INFORMATION" and
"DOCUMENTS INCORPORATED BY REFERENCE."
GENERAL
UPC and SBI are both bank holding companies registered with the Federal
Reserve under the BHC Act. As such, UPC and SBI, and their respective 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 also registered with
the OTS and is subject to the 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 which is discussed below, and consideration of convenience and needs
issues includes the parties' performance under the Community Reinvestment Act
of 1977.
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 in September 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 Tennessee may lawfully acquire any
Tennessee-based bank, regardless of state law to the contrary, in either case
subject to certain deposit-percentage limitations, 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 "opt in" and accelerate the date
after which interstate branching is permissible or "opt out" and prohibit
interstate branching altogether. None of the states in which the banking
subsidiaries of UPC or SBI are located has either moved up the date after which
interstate branching will be permissible or "opted out." Accordingly, UPC is
able to consolidate all of its bank subsidiaries into a single bank with
interstate branches.
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 nonbanking 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
50
<PAGE> 58
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 subsidiary depository institutions of UPC and SBI is a member of
the FDIC, and as such, its deposits are insured by the FDIC to the extent
provided by law. Each subsidiary of UPC and SBI 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.
The regulatory agencies having supervisory jurisdiction over the respective
subsidiary institutions of UPC and SBI (the FDIC and the applicable state
authority in the case of state-chartered nonmember banks, the OTS in the case
of federally chartered thrift institutions, the Federal Reserve in the case of
state-chartered member banks, and the OCC in the case of national banks)
regularly examine the operations of such institutions and have 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 SBI are legal entities separate and distinct from their respective
banking, thrift, and other subsidiaries. The principal sources of cash flow of
UPC, including cash flow to pay dividends to its stockholders, are dividends
from its subsidiary depository institutions. The principal sources of cash flow
of SBI, including cash flow to pay dividends to its stockholders, are dividends
from the Des Arc Bank and the West Helena Bank. There are statutory and
regulatory limitations on the payment of dividends by these subsidiary
depository institutions to UPC or SBI, as the case may be, as well as by UPC
and SBI to their respective stockholders.
As to the payment of dividends, each of the state-chartered banking
subsidiaries is subject to the respective laws and regulations of the state in
which such bank is located, and to the regulations of the bank's primary
federal regulator. UPC's subsidiaries that are thrift institutions are subject
to the OTS' capital distributions regulation, and those that are national banks
are subject to the regulations of the OCC. The Des Arc Bank and West Helena
Bank are, of course, subject to the laws of Arkansas and regulations of the
FDIC and the Arkansas Banking Commission.
If, in the opinion of the federal banking regulator, a depository institution
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 agency 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, 1997, under dividend restrictions imposed under federal and state
laws, the subsidiary depository institutions of UPC, without obtaining
governmental approvals, could declare aggregate dividends to UPC of
approximately $142.4 million.
At June 30, 1997, under dividend restrictions imposed under federal and state
laws, the subsidiary depository institutions of SBI,without obtaining
governmental approvals, could declare aggregate dividends to SBI of
approximately $_____________________.
The payment of dividends by UPC and its banking subsidiaries may also be
affected or limited by other factors, such as the requirement to maintain
adequate capital above regulatory guidelines.
51
<PAGE> 59
CAPITAL ADEQUACY
UPC, SBI and their respective subsidiary depository institutions are required
to comply with the capital adequacy standards established by the Federal
Reserve in the case of UPC and SBI, and the appropriate federal banking
regulator in the case of each of the subsidiary depository institutions. There
are two basic measures of capital adequacy for bank holding companies and their
subsidiary depository institutions that have been promulgated by the Federal
Reserve and each of the federal bank regulatory agencies: a risk-based measure
and a leverage measure. All applicable capital standards must be satisfied for
a bank holding company to be considered in compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among depository
institutions 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 weights. 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 ("Total 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 half of Total
Capital must be composed of common equity, undivided profits, 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, 1997, UPC's consolidated Total Capital Ratio and its Tier 1 Capital Ratio
(i.e., the ratio of Tier 1 Capital to risk-weighted assets) were 19.86% and
16.76%, respectively. At June 30, 1997, SBI's consolidated Total Capital Ratio
and its Tier 1 Capital Ratio (i.e., the ratio of Tier 1 Capital to
risk-weighted assets) were 19.86% and 16.76%, 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 Leverage Ratio at June 30, 1997, was 10.64%. 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" (deducting all
intangibles) and other indicia of capital strength in evaluating proposals for
expansion or new activities.
Each of UPC's and SBI's subsidiary depository institutions is subject to
risk-based and leverage capital requirements adopted by its federal banking
regulatory, which are substantially similar to those adopted by the Federal
Reserve for bank holding companies. Each of the subsidiary depository
institutions was in compliance with applicable minimum capital requirements as
of June 30, 1997. Neither UPC, SBI nor any of their respective subsidiary
depository institutions 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 FDIC and the OCC 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 INSTITUTIONS
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
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<PAGE> 60
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 will be assumed by the bankruptcy trustee and entitled to a priority
of payment.
Under the Federal Deposit Insurance Act (the "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 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
stockholders 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 subsidiary depository institutions of UPC 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 depository institution's banking or thrift affiliates, and a
potential loss of UPC's respective investments in such other subsidiary
depository institutions.
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 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 Total Capital Ratio of 10% or
greater, a Tier 1 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 Total Capital Ratio of 8.0% or greater, a Tier 1 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 Total Capital
Ratio of less than 8.0%, a Tier 1 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 Total Capital Ratio of less than 6.0%, a Tier
1 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.
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 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
53
<PAGE> 61
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, 1997, all of the subsidiary depository institutions of UPC and
SBI had the requisite capital levels to qualify as well capitalized.
DESCRIPTION OF UPC CAPITAL STOCK
UPC's Charter currently authorizes the issuance of 100,000,000 shares of UPC
Common Stock and 10,000,000 shares of UPC Preferred Stock. As of October 1,
1997, 68,034,300 shares of UPC Common Stock were issued and outstanding and
approximately 2,883,000 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 3,236,000 shares
were authorized for issuance pursuant to said plans but not yet subject to
option grants or otherwise issued; and approximately 2,861,993 shares were
authorized for issuance and reserved for conversion of certain outstanding
shares of UPC Preferred Stock. In addition, as of October 1, 1997, 2,289,594,
shares of UPC's 8% Cumulative, Convertible Preferred Stock, Series E (the
"Series E Preferred Stock") were issued and outstanding. As of October 1,1997
none of UPC's 750,000 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 BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR
ANY GOVERNMENTAL AGENCY.
UPC COMMON STOCK
GENERAL. Shares of UPC Common Stock may be issued at such time or times and
for such consideration (not less than the par value thereof) as the UPC Board
of Directors may deem advisable, subject to such limitations as may be set
forth in the laws of the State of Tennessee, UPC's Charter or Bylaws or the
rules of the NYSE. Union Planters National Bank, a wholly-owned, first-tier
subsidiary of UPC, is the Registrar, Transfer Agent and Dividend Disbursing
Agent for shares of UPC Common Stock. Its 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 of Directors.
UPC has the right to, and may from time to time, enter into borrowing
arrangements or issue other debt instruments, the provisions of which may
contain restrictions on payment of dividends and other distributions on UPC
Common Stock and UPC Preferred Stock; 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 of Directors may distribute
in kind to the holders of UPC Common Stock such remaining assets of UPC or may
sell, transfer or otherwise dispose of all or any part of such remaining assets
to any other person or entity and receive payment therefor in cash, stock or
obligations of such other person or entity, and may sell all or any part of the
consideration so received and distribute any balance thereof in kind to holders
of
54
<PAGE> 62
UPC Common Stock. Neither the merger or consolidation of UPC into or with any
other corporation, nor the merger of any other corporation into UPC, nor any
purchase or redemption of shares of stock of UPC of any class, shall be deemed
to be a dissolution, liquidation or winding-up of UPC for purposes of this
paragraph.
Because UPC is a holding company, its right and the rights of its creditors
and stockholders, including the holders of UPC Preferred Stock and UPC Common
Stock, to participate in the distribution of assets of a subsidiary on its
liquidation or recapitalization may be subject to prior claims of such
subsidiary's creditors except to the extent that UPC itself may be a creditor
having recognized claims against such subsidiary.
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 Directors)
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 (SEC
File No. 0-6919) which is incorporated by reference herein.
SERIES E PREFERRED STOCK. 2,289,594 shares of Series E Preferred Stock were
outstanding as of October 1, 1997. 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 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 at a redemption price of
$25.00 per share plus any unpaid dividends. Holders of Series E Preferred Stock
have no voting rights except as required by law and in certain other limited
circumstances. See "CERTAIN REGULATORY CONSIDERATIONS -- Payment of Dividends."
For a further description of UPC Common Stock, See "EFFECT OF THE MERGER ON
RIGHTS OF STOCKHOLDERS."
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of SBI knows
of no matters that will be presented for consideration at the Special Meeting
other than as described in this Proxy Statement. However, if any other matters
shall properly come before the Special Meeting or any adjournment or
postponement thereof and be voted upon, the enclosed proxy shall be deemed to
confer discretionary authority to the individuals named as proxies therein to
vote the shares represented by such proxy as to any such matters.
STOCKHOLDER PROPOSALS
UPC expects to hold its next annual meeting of stockholders after the Merger
on April 16, 1998. Under SEC rules, proposals of UPC stockholders intended to
be presented at that meeting must be received by UPC at its principal executive
offices no later than the date specified in UPC's 1998 annual meeting proxy
statement. It is not currently anticipated that SBI will hold its 1997 annual
meeting unless the Merger should not be consummated. In the event the Merger is
not consummated, proposals of SBI stockholders intended to be presented at that
meeting must be received by SBI at its principal executive offices no later
than November 22, 1997.
EXPERTS
The consolidated financial statements of Union Planters Corporation and
subsidiaries incorporated in this Proxy Statement by reference to UPC's Annual
Report on Form 10-K for the year ended December 31, 1996, 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.
The consolidated financial statements of SBI and its subsidiaries as of
December 31, 1996 and 1995, and for each of the years in the two-year period
ended December 31, 1996, have been included in this Proxy Statement in reliance
upon the report of Kemp & Company, Little Rock, Arkansas independent certified
public accountants, given on the authority of said firm as experts in accounting
and auditing.
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OPINIONS
The legality of the shares of UPC Common Stock to be issued in the Merger
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.
Certain tax consequences of the transaction have been passed upon by Wyatt,
Tarrant & Combs, Memphis, Tennessee.
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UNION PLANTERS CORPORATION
INDEX TO APPENDICES
Appendix
A Agreement and Plan of Reorganization between Union Planters Corporation,
Union Planters Holding Corporation, Inc. and Security Bancshares, Inc.
dated as of August 20, 1997, as amended, together with the related Plan of
Merger annexed thereto as Exhibit 1.
B Audited Consolidated Financial Statements of Security Bancshares, Inc., as
of and for the years ended December 31, 1996 and 1995 (and notes thereto).
C Unaudited Consolidated Financial Statements of Security Bancshares, Inc.
as of and for the six months ended June 30, 1997 (and notes thereto).
D Section 4-26-1007 of the Arkansas Business Corporation Act, pertaining to
applicable dissenters' rights provisions.
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APPENDIX A
Agreement and Plan of Reorganization, as amended, between Union Planters
Corporation, Union Planters Holding Corporation, Inc., and Security Bancshares,
Inc., dated as of August 20, 1997, together with related Plan of Merger annexed
thereto as Exhibit 1
<PAGE> 66
Appendix A
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF AUGUST 20, 1997
BETWEEN
UNION PLANTERS CORPORATION,
SECURITY ACQUISITION CORPORATION, INC.,
SECURITY BANCSHARES, INC.
AND
HENRY L. NICHOLS (INDIVIDUALLY AND
AS A TRUSTEE OF VARIOUS TRUSTS)
<PAGE> 67
<TABLE>
<S> <C>
RECITALS.................................................................... 1
ARTICLE 1
TERMS OF THE MERGER
1.1 Merger............................................................. 2
1.2 Time and Place of Closing.......................................... 2
1.3 Effective Time..................................................... 3
1.4 Charter............................................................ 3
1.5 Bylaws............................................................. 3
1.6 Name............................................................... 3
1.7 Directors and Officers............................................. 3
1.8 UPC's Right to Revise the Structure of the Transaction............. 3
1.9 Post Signing Due Diligence Review.................................. 3
ARTICLE 2
MANNER OF CONVERTING SHARES AND OPTIONS; EXCHANGE RATIO
2.1 Conversion; Cancellation and Exchange of Shares; Exchange Ratio.... 4
2.2 No Stock Options................................................... 6
2.3 Anti-Dilution Provisions........................................... 6
ARTICLE 3
EXCHANGE OF SHARES
3.1 Exchange Procedures................................................ 6
3.2 Rights of Former SBI Record Holders................................ 7
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SBI
4.1 Organization, Standing, and Power.................................. 8
4.2 Authority; No Breach By Agreement.................................. 8
4.3 Capital Stock...................................................... 9
4.4 SBI Subsidiaries................................................... 10
4.5 SBI Financial Statements........................................... 11
4.6 Absence of Undisclosed Liabilities................................. 12
4.7 Absence of Certain Changes or Events............................... 12
4.8 Tax Matters........................................................ 13
4.9 Allowance for Possible Loan Losses................................. 14
4.10 Assets............................................................. 15
</TABLE>
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<TABLE>
<S> <C>
4.11 Intellectual Property.............................................. 15
4.12 Environmental Matters.............................................. 16
4.13 Compliance with Laws............................................... 16
4.14 Labor Relations.................................................... 17
4.15 Employee Benefit Plans............................................. 17
4.16 Material Contracts................................................. 19
4.17 Legal Proceedings.................................................. 20
4.18 Reports............................................................ 20
4.19 Statements True and Correct........................................ 20
4.20 Accounting, Tax, and Regulatory Matters............................ 21
4.21 State Takeover Laws................................................ 21
4.22 Charter Provisions................................................. 21
4.23 Charter Documents.................................................. 21
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF UPC
5.1 Organization, Standing, and Power.................................. 22
5.2 Authority: No Breach By Agreement.................................. 22
5.3 CAPITAL STOCK...................................................... 23
5.4 SEC Filings: Financial Statements.................................. 23
5.5 ABSENCE OF UNDISCLOSED LIABILITIES................................. 24
5.6 Absence of Certain Changes or Events............................... 24
5.7 Compliance with Laws............................................... 24
5.8 LEGAL PROCEEDINGS.................................................. 24
5.9 Reports............................................................ 25
5.10 Statements True and Correct........................................ 25
5.11 Accounting, Tax, and Regulatory Matters............................ 25
ARTICLE 6
CONDUCT OF BUSINESS PENDING CONSUMMATION
6.1 Affirmative Covenants of SBI....................................... 26
6.2 Negative Covenants of SBI.......................................... 26
6.3 CERTAIN ACTIONS.................................................... 28
6.4 Covenants of UPC................................................... 30
6.5 Adverse Changes in Condition....................................... 30
6.6 Reports............................................................ 30
ARTICLE 7
ADDITIONAL AGREEMENTS
7.1 Registration Statement: Proxy Statement: Shareholder Approvals..... 31
7.2 Exchange Listing................................................... 31
</TABLE>
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<TABLE>
<S> <C>
7.3 Applications....................................................... 32
7.4 Filings with State Offices......................................... 32
7.5 Agreement as to Efforts to Consummate.............................. 32
7.6 Investigation and Confidentiality.................................. 32
7.7 PRESS RELEASES..................................................... 33
7.8 Accounting and Tax Treatment....................................... 33
7.9 State Takeover Laws................................................ 33
7.10 Charter Provisions................................................. 33
7.11 Agreement of Affiliates............................................ 34
7.12 Employee Benefits and Contracts.................................... 34
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
8.1 Conditions to Obligations of Each Party............................ 34
8.2 CONDITIONS TO OBLIGATIONS OF UPC................................... 36
8.3 CONDITIONS TO OBLIGATIONS OF SBI................................... 38
ARTICLE 9
TERMINATION
9.1 Termination........................................................ 39
9.2 EFFECT OF TERMINATION.............................................. 41
9.3 Non-Survival of Representations and Covenants...................... 41
ARTICLE 10
GENERAL PROVISIONS
10.1 Definitions........................................................ 41
10.2 EXPENSES........................................................... 51
10.3 BROKERS AND FINDERS................................................ 51
10.4 ENTIRE AGREEMENT................................................... 51
10.5 AMENDMENTS......................................................... 52
10.6 WAIVERS............................................................ 52
10.7 ASSIGNMENT......................................................... 52
10.8 NOTICES............................................................ 53
10.9 GOVERNING LAW...................................................... 54
10.10 COUNTERPARTS....................................................... 54
10.11 CAPTIONS........................................................... 54
10.12 Interpretation..................................................... 54
10.13 ENFORCEMENT OF AGREEMENT........................................... 54
10.14 Attorneys' Fees.................................................... 54
10.16 Remedies Cumulative................................................ 55
</TABLE>
iii
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of the
20th day of August, 1997, (the "Agreement") by and between UNION PLANTERS
CORPORATION ("UPC"), a corporation chartered and existing under the laws of the
State of Tennessee and whose principal office is located at 7130 Goodlett Farms
Parkway, Memphis, Shelby County, Tennessee 38018; SECURITY BANCSHARES, INC.
("SBI"), a corporation chartered and existing under the laws of the State of
Arkansas and whose principal office is located at 110 South 3rd Street, Des Arc,
Arkansas 72040, and SECURITY ACQUISITION CORPORATION, INC. ("Merger
Subsidiary"), a corporation chartered and existing under the laws of the State
of Tennessee, which is a wholly-owned subsidiary of UPC and whose principal
office is located at 7130 Goodlett Farms Parkway, Memphis, Shelby County,
Tennessee 38018. HENRY L. NICHOLS joins in this Agreement in his individual
capacity, as a trustee of the various trusts set forth on the signature page
hereof, solely for the purposes of making the covenants and agreements set forth
in Section 6.3 hereof. Certain other capitalized terms used in this Agreement
and in the Plan of Merger are defined below in Section 10.1
RECITALS
A. SBI is the beneficial owner and holder of record of all of the
issued and outstanding shares of capital stock of a state bank organized under
the laws of the State of Arkansas having its main office located at 110 South
3rd Street, Des Arc, Arkansas 72040, and of a state bank organized under the
laws of the State of Arkansas having its main office located at 425 East Plaza,
West Helena, Arkansas 72390, (the "Bank Subsidiaries"), and SBI desires to have
itself and, indirectly, all of its assets, including the capital stock it owns
in each of the Bank Subsidiaries, acquired by UPC on the terms and subject to
the conditions set forth in this Agreement and the Plan of Merger annexed hereto
as Exhibit 1.
B. UPC desires to acquire SBI and, indirectly, SBI's assets,
including but not limited to, the capital stock of each of the Bank
Subsidiaries, on the terms and subject to the conditions set forth in this
Agreement and the Plan of Merger.
C. The Board of Directors of SBI deems it desirable and in the
best interests of SBI, the Bank Subsidiaries and the shareholders of SBI that
Merger Subsidiary be merged with and into SBI (which would survive the merger as
the Surviving Corporation, as defined herein) on the terms and subject to the
conditions set forth in this Agreement and in the manner provided in this
Agreement and the Plan of Merger (the "Merger"), and has directed that this
Agreement and the Plan of Merger be submitted to the shareholders of SBI with
the recommendation that they be approved by said shareholders.
D. The Board of Directors of UPC, as a party to the Merger and as
the sole shareholder of Merger Subsidiary, and Merger Subsidiary deem it
desirable and in the
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best interests of UPC and Merger Subsidiary and the shareholders of UPC that
Merger Subsidiary be merged with and into SBI on the terms and subject to the
conditions set forth in this Agreement and in the manner provided in this
Agreement and the Plan of Merger.
E. The respective Boards of Directors of UPC, Merger Subsidiary
and SBI have each adopted or will adopt resolutions setting forth and adopting
this Agreement and the Plan of Merger, and have directed that this Agreement and
the annexed Plan of Merger and all resolutions adopted by said Boards of
Directors and by the SBI Shareholders related to this Agreement, be submitted
with appropriate applications to, and filed with all applicable Regulatory
Authorities as may be necessary in order to obtain all Consents required to
consummate the proposed Merger and the transactions contemplated in this
Agreement in accordance with this 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:
ARTICLE 1
TERMS OF THE MERGER
1.1 MERGER. Subject to the terms and conditions of this Agreement
and the satisfaction (or lawful waiver) of all of the conditions to the
obligations of each of the Parties to this Agreement, at the Effective Time,
Merger Subsidiary shall be merged with and into SBI in accordance with the
applicable provisions of the Tennessee Code and the Arkansas Code, with the
effect provided in the applicable provisions of the Tennessee Code and the
Arkansas Code (the "Merger"). SBI shall be the Surviving Corporation resulting
from the Merger and shall continue to be governed by the Laws of the State of
Arkansas. The Merger shall be consummated pursuant to the terms of this
Agreement, which has been approved and adopted by the respective Boards of
Directors of UPC, SBI, and Merger Subsidiary, and the Plan of Merger, in
substantially the form of Exhibit 1 which has been approved and adopted by the
Board of Directors of SBI and Merger Subsidiary and has or will be approved and
adopted by the Board of Directors of UPC (in its capacity as sole shareholder of
Merger Subsidiary).
1.2 TIME AND PLACE OF CLOSING. The Closing will take place at 9:00
a.m. on the date that the Effective Time occurs (or the immediately preceding
day if the Effective Time is earlier than 9:00 a.m.) or at such other time as
the Parties, acting through their chief executive officers or chief operating
officers, may mutually agree. The Closing shall be held at the Union Planters
Administrative Center, Union Planters Corporation Executive Offices (Fourth
Floor), 7130 Goodlett Farms Parkway, Memphis, Shelby County, Tennessee 38018, or
at such other place as the Parties, acting through their chief executive
officers or chief operating officers, may mutually agree.
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1.3 EFFECTIVE TIME. The Merger and other transactions contemplated
by this Agreement shall become effective on the date and at the time the
Articles of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Tennessee and the Secretary of State of the
State of Arkansas (the "Effective Time").
1.4 CHARTER. The Charter of the SBI in effect immediately prior to
the Effective Time shall be the Charter of the Surviving Corporation until
otherwise amended or repealed.
1.5 BYLAWS. The Bylaws of the SBI in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporation until
otherwise amended or repealed.
1.6 NAME. The name of the SBI shall remain unchanged after the
Effective Time, unless and until otherwise renamed.
1.7 DIRECTORS AND OFFICERS. The directors and officers of SBI in
office immediately prior to the Effective Time, together with such additional
persons as may thereafter be elected or appointed, shall serve as the directors
and officers of the Surviving Corporation from and after the Effective Time in
accordance with the 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.
1.8 UPC'S RIGHT TO REVISE THE STRUCTURE OF THE TRANSACTION. UPC
shall have the unilateral right to revise the structure of the 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 SBI, to make any revision to the structure of the
Merger which (i) changes the amount of the Consideration which the SBI Record
Holders are to receive as determined in the manner provided in 2.1(c) of this
Agreement; (ii) changes the intended tax-free effect of the Merger to UPC,
Merger Subsidiary, SBI to any SBI 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 7.1 of this
Agreement). UPC may exercise this right of revision by giving written notice to
SBI in the manner provided in Section 10.8 of this Agreement, which notice shall
be in the form of an amendment to this Agreement and the Plan of Merger or in
the form of an Amended and Restated Agreement and Amended and Restated Plan of
Merger.
1.9 POST SIGNING DUE DILIGENCE REVIEW. Within 15 days of this
Agreement, each Party shall deliver to the opposite Party any amendments to or
updates of their respective Disclosure Memorandum, and the Disclosure
Memorandum, as so amended or updated within that 15 day time period, shall be
deemed to have been delivered as of the date of this Agreement. Upon execution
hereof, each Party shall be entitled forthwith
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to continue its due diligence review of the Records and operations of the other
Party, including, but not limited to, a review of the other Party's Assets,
including its loan portfolios, ORE and classified assets, investment portfolios
and properties, to verify the quality of such Assets, the adequacy of the
Allowances 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 1.9 shall be completed within fifteen (15) days from the date of this
Agreement. Should, as a result of such review, either Party find in good faith
that the Allowances and other 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, or that any other event has been determined to have
a Material Adverse Effect on the other Party, the Party discovering such fact
may, prior to the expiration of said post signing due diligence review period,
terminate this Agreement without penalty by giving the other Party written
notice of such termination in the manner provided in Section 10.8. Nothing in
this Section 1.9 shall be construed to limit the right of any Party to continue
its due diligence review through the Closing Date or to release any Party from
its obligation to provide updates or amendments to their respective Disclosure
Memorandum after the expiration of such 15 day time period and prior to the
Effective Time.
ARTICLE 2
MANNER OF CONVERTING SHARES AND OPTIONS; EXCHANGE RATIO
2.1 CONVERSION; CANCELLATION AND EXCHANGE OF SHARES; EXCHANGE
RATIO. At the Effective Time, by virtue of the Merger becoming effective and
without any action on the part of UPC, Merger Subsidiary, SBI, or the
shareholders of any of the foregoing, the shares of the constituent corporations
shall be converted as follows:
(a) UPC CAPITAL STOCK. Each share of UPC Capital Stock,
including any associated UPC Rights, issued and outstanding immediately prior to
the Effective Time shall remain issued and outstanding from and after the
Effective Time.
(b) MERGER SUBSIDIARY COMMON STOCK. Each share of Merger
Subsidiary common stock issued and outstanding immediately prior to the
Effective Time shall be converted into and shall represent all of the issued and
outstanding capital stock of SBI as the Surviving Corporation at and after the
Effective Time of the Merger.
(c) SBI COMMON STOCK. Each share of SBI Common Stock
issued and outstanding at the Effective Time shall cease to represent any
interest (equity, shareholder or otherwise) in SBI and shall automatically be
converted exclusively into, and constitute only the right of each SBI Record
Holder to receive in exchange for such holder's shares of SBI Common Stock, the
Consideration to which the SBI Record Holder
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is entitled as provided in this Section 2.1(c); provided, however, SBI
Dissenting Shareholders (as defined below) shall have such rights as afforded by
the applicable provisions of the Arkansas Code.
(i) THE EXCHANGE RATIO. Subject to any adjustments which
may be required by an event described in Subsection 2.1(c)(iii), the number of
shares of UPC Common Stock to be exchanged for each share of SBI Common Stock
which shall be validly issued and outstanding immediately prior to the Effective
Time shall be based on an exchange ratio (the "Exchange Ratio") of 3.5777 shares
of UPC Common Stock for each share of SBI Common Stock which shall be validly
issued and outstanding immediately prior to the Effective Time; provided,
however, that should the Net Realized Amount received by SBI prior to the
Closing from the XYZ Loan exceed $500,000, then the Exchange Ratio shall be
increased by the Adjustment Factor. For purposes hereof, the Adjustment Factor
shall be determined by the following formula: the amount by which the Net
Realized Amount exceeds $500,000 shall be divided by $50.538, and the quotient
thereof shall be divided by the number of outstanding shares of SBI Common Stock
validly issued and outstanding immediately prior to the Effective Time.
Therefore, the maximum aggregate number of shares of UPC Common Stock which UPC
would be required to issue in exchange for all outstanding shares of SBI Common
Stock, based on the Exchange Ratio and without consideration of the Adjustment
Factor, would be 487,595 shares of UPC Common Stock. SBI Common Stock held by
any SBI 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 for purposes of the Exchange Ratio. 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 SBI 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 Article 3 of this Agreement,
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.
(ii) DEFINITION OF "CURRENT MARKET PRICE PER SHARE." The
"Current Market Price Per Share" shall be the closing price per share of UPC
Common Stock on the NYSE Composite Transaction List (as reported by The Wall
Street Journal or, if not reported thereby, any other authoritative source
selected by UPC) on the Effective Date of the Merger.
(iii) EFFECT OF STOCK SPLITS, REVERSE STOCK SPLITS, STOCK
DIVIDENDS AND SIMILAR CHANGES IN THE CAPITAL OF SBI. Should SBI effect any stock
splits, reverse stock splits, stock dividends or similar changes in its
respective capital accounts subsequent to the date of this Agreement but prior
to the Effective Time, or should there be more than 136,289 fully diluted shares
of SBI Common Stock outstanding immediately prior to the Effective Time, the
Exchange Ratio may, in UPC's sole discretion if such change in the capital
accounts constitutes a breach of any of SBI's
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representations, warranties or covenants, 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 (iii) shall be deemed to be a waiver of the inaccuracy of any
representation or warranty or breach of any covenant by SBI set forth herein.
(d) SHARES HELD BY SBI OR UPC. Each of the shares of SBI
Common Stock held by any SBI Company or by any UPC Company, in each case other
than in a fiduciary capacity or as a result of debts previously contracted,
shall be canceled and retired at the Effective Time and no Consideration shall
be issued in exchange therefor.
(e) DISSENTERS' RIGHTS OF SBI SHAREHOLDERS. Any SBI
Record Holder who shall comply strictly with the provisions of the applicable
sections of the Business Corporation Law of Arkansas regarding dissenters'
rights ("SBI Dissenting Shareholders"), shall be entitled to dissent from the
Merger and to seek those appraisal remedies afforded by such Business
Corporation Law.
2.2 NO STOCK OPTIONS. As of the date of this Agreement, there are
no options, Rights, warrants, scrip or similar rights of any nature, including
stock option, stock appreciation or similar rights, issued and outstanding by
SBI or any SBI Company to purchase shares of SBI Common Stock, any other capital
stock of SBI, or any other securities or instruments of any nature which are
convertible into or exchangeable for, or which derive their value, in whole or
in part from, shares of SBI Common Stock or any other capital stock of SBI or
any SBI Company. Therefore, at the Effective Time there will be no issued and
outstanding options, securities, Rights or instruments of any nature whatsoever
to purchase or otherwise acquire shares of SBI Common Stock or any other capital
stock of SBI or any SBI Company, or which derive their value, in whole or in
part from SBI Common Stock or any other capital stock of any SBI Company.
2.3 ANTI-DILUTION PROVISIONS. In the event UPC changes the number
of shares of UPC Common Stock issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend, or similar recapitalization with
respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, the Exchange Ratio shall be proportionately adjusted.
ARTICLE 3
EXCHANGE OF SHARES
3.1 EXCHANGE PROCEDURES. As soon as reasonably practical after the
Effective Time, UPC and SBI shall cause the Exchange Agent to mail to the SBI
Record Holders appropriate transmittal materials (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
theretofore representing shares of SBI Common Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent).
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The Exchange Agent may establish reasonable and customary rules and procedures
in connection with its duties. After the Effective Time, each SBI Record Holder
of SBI Common Stock (other than shares to be canceled pursuant to Section 2.1(d)
of this Agreement) issued and outstanding at the Effective Time shall surrender
the certificate or certificates representing such shares to the Exchange Agent
and shall promptly upon surrender thereof receive in exchange therefor the
Consideration provided in Section 2.1(c) of this Agreement, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon) pursuant to Section 3.2 of this Agreement. To the extent
required by Section 2.1(c) of this Agreement, each SBI Record Holder also shall
receive, upon surrender of the certificate or certificates representing his or
her shares of SBI Common Stock outstanding immediately prior to the Effective
Time, cash in lieu of any fractional share of UPC Common Stock to which such
holder may be otherwise entitled (without interest). UPC shall not be obligated
to deliver the Consideration to which any SBI Record Holder is entitled as a
result of the Merger until such SBI Record Holder surrenders such holder's
certificate or certificates representing the shares of SBI Common Stock for
exchange as provided in this Section 3.1. The certificate or certificates of SBI
Common Stock so surrendered shall be duly endorsed as the Exchange Agent may
require. Any other provision of this Agreement notwithstanding, neither UPC nor
the Exchange Agent shall be liable to a SBI Record Holder for any amounts paid
or property delivered in good faith to a public official pursuant to any
applicable abandoned property Law. Approval of this Agreement and the Plan of
Merger by the shareholders of SBI shall constitute all shareholders'
ratification of the appointment of the Exchange Agent.
3.2 RIGHTS OF FORMER SBI RECORD HOLDERS. At the Effective Time,
the stock transfer books of SBI shall be closed as to holders of SBI Common
Stock outstanding immediately prior to the Effective Time, and no transfer of
SBI Common Stock by any SBI Record Holder shall thereafter be made or
recognized. Until surrendered for exchange in accordance with the provisions of
Section 3.1 of this Agreement, each certificate theretofore representing shares
of SBI Common Stock (other than shares to be canceled pursuant to Section 2.1(d)
of this Agreement) shall from and after the Effective Time represent for all
purposes only the right to receive the Consideration provided in Section 2.1(c)
of this Agreement in exchange therefor, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time which have been declared or made
by SBI in respect of such shares of SBI Common Stock in accordance with the
terms of this Agreement and which remain unpaid at the Effective Time. Whenever
a dividend or other distribution is declared by UPC on the UPC Common Stock, the
record date for which is on or after the Effective Date, the declaration shall
include dividends or other distributions on all shares of UPC Common Stock
issuable pursuant to this Agreement, but no dividend or other distribution
payable to the holders of record of UPC Common Stock as of any time subsequent
to the Effective Time shall be delivered to a SBI Record Holder until such SBI
Record Holder surrenders his or her certificate or certificates evidencing SBI
Common Stock for exchange as provided in Section 3.1 of this Agreement. However,
upon
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surrender of such SBI Common Stock certificate, both the UPC Common Stock
certificate (together with all such undelivered dividends or other
distributions, without interest) and any undelivered dividends and cash payments
payable hereunder (without interest), shall be delivered and paid with respect
to each share represented by such certificate.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SBI
Except as disclosed in the SBI Disclosure Memorandum, SBI hereby
represents and warrants to UPC as follows:
4.1 ORGANIZATION, STANDING, AND POWER. SBI is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Arkansas and has the corporate power and authority to carry on its business as
now conducted and to own, lease, and operate its Assets. SBI is duly qualified
or licensed to transact business as a foreign corporation in good standing in
the States of the United States and foreign jurisdictions where the character of
its Assets or the conduct of its business requires it to be so qualified or
licensed, except for such jurisdictions in which the failure to be so qualified
or licensed is not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on SBI.
4.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) SBI has the corporate power and authority necessary
to execute, deliver, and perform its obligations under this Agreement and the
Plan of Merger and to consummate the transactions contemplated hereby and
thereby. The execution, delivery, and performance of this Agreement and the Plan
of Merger, as appropriate, and the consummation of the transactions contemplated
herein and therein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of SBI, subject
to the approval of this Agreement and the Plan of Merger by the holders of a
majority (or such greater percentage as may be required by the Charter of SBI or
other applicable Law) of the outstanding shares of SBI Common Stock, which is
the only shareholder vote required for approval of this Agreement and the Plan
of Merger, and consummation of the Merger by SBI. Subject to the receipt of such
requisite shareholder approval, this Agreement and the Plan of Merger represent
legal, valid, and binding obligations of SBI, enforceable against SBI in
accordance with their respective terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance of injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought).
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(b) Neither the execution and delivery of this Agreement or the
Plan of Merger, as appropriate, by SBI, nor the consummation by SBI of the
transactions contemplated hereby or thereby, nor compliance by SBI with any of
the provisions hereof or thereof will (i) conflict with or result in a breach of
any provision of SBI's Charter or Bylaws, or (ii) constitute or result in a
Default under, or require any Consent pursuant to or result in the creation of
any Lien on any material Asset of any SBI Company under, any Contract or Permits
of any SBI Company, or (iii) subject to receipt of the requisite Consents
referred to in Section 7.3 of this Agreement, violate any Law or Order
applicable to any SBI Company or any of their respective Material Assets.
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate Laws, other than Consents
required from Regulatory Authorities and other than notices to or filings with
the Internal Revenue Service or the Pension Benefit Guaranty Corporation with
respect to any SBI Employee Plans or under the HSR Act, and other than Consents,
filings, or notifications which, if not obtained or made, are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
SBI, no notice to, filing with, or Consent of, any public body or authority is
necessary for the consummation by SBI of the Merger and the other transactions
contemplated in this Agreement and the Plan of Merger.
(d) No SBI Company 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
Agreement and the Plan of Merger by SBI, or the consummation of the transactions
contemplated hereby and thereby, and no action or proceeding is pending against
SBI Company in which the validity of this Agreement, the transactions
contemplated hereby or any other action which has been taken by any other of
such Parties in connection herewith or in connection with the transaction
contemplated hereby is at issue.
4.3 CAPITAL STOCK.
(a) The authorized capital stock of SBI consists of (i)
200,000 shares of SBI Common Stock, $10.00 par value, of which 136,289 are
issued and outstanding as of the date of the original Agreement, and not more
than 136,289 shares will be issued and outstanding at the Effective Time, and
(ii) zero (0) shares of preferred stock of which no shares are, or will be,
issued and outstanding as of the date of the original Agreement or at the
Effective Time, respectively. All of the issued and outstanding shares of
capital stock of SBI are duly and validly issued and outstanding and are fully
paid and nonassessable under the Laws of the State of Arkansas and SBI's
Charter. None of the outstanding shares of capital stock of SBI has been issued
in violation of any preemptive rights of the current or past shareholders of
SBI or any of its predecessors.
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(b) As of the date of this Agreement, there are no
options, Rights, warrants, scrip or similar rights of any nature, including
stock options, stock appreciation or similar rights, issued and outstanding by
SBI or any SBI Company to purchase shares of SBI Common Stock, any other capital
stock of SBI, or any other securities or instruments of any nature which are
convertible into or exchangeable for, or which derive their value, in whole or
in part from, shares of SBI Common Stock or any other capital stock of SBI or
any SBI Company. Therefore, at the Effective Time there will be no issued and
outstanding options, securities, Rights or instruments of any nature whatsoever
to purchase or otherwise acquire shares of SBI Common Stock or any other capital
stock of SBI or any SBI Company, or which derive their value, in whole or in
part from SBI Common Stock or any other capital stock of any SBI Company.
4.4 SBI SUBSIDIARIES. SBI has disclosed in Section 4.4 of the SBI
Disclosure Memorandum all of the SBI Subsidiaries that are corporations
(identifying its jurisdiction of incorporation, each jurisdiction in which the
character of its Assets or the nature or conduct of its business requires it to
be qualified and/or licensed to transact business, and the number of shares
owned and percentage ownership interest represented by such share ownership) and
all of the SBI Subsidiaries that are general or limited partnerships or other
non-corporate entities, including limited liability companies (identifying the
Law under which such entity is organized, each jurisdiction in which the
character of its Assets or the nature or conduct of its business requires it to
be qualified and/or licensed to business, and the amount and nature of the
ownership interest therein of all SBI Companies). SBI or one of its wholly owned
Subsidiaries owns all of the issued and outstanding shares of capital stock (or
other equity interests) of each SBI Subsidiary. No capital stock (or other
equity interest) of any SBI Subsidiary is or may become required to be issued
(other than to another SBI Company) by reason of any Rights, and there are no
Contracts by which any SBI Subsidiary is bound to issue (other than to another
SBI Company) additional shares of its capital stock (or other equity interests)
or Rights or by which any SBI Company is or may be bound to transfer any shares
of the capital stock (or other equity interests) of any SBI Subsidiary (other
than to another SBI Company). There are no Contracts relating to the rights of
any SBI Company to vote or to dispose of any shares of the capital stock (or
other equity interests) of any SBI Subsidiary. Except as disclosed in Section
4.4 of the SBI Disclosure Memorandum, all of the shares of capital stock (or
other equity interests) of each SBI Subsidiary held by a SBI Company are fully
paid and nonassessable under the applicable corporation or similar Law of the
jurisdiction in which such Subsidiary is incorporated or organized and are owned
by the SBI Company free and clear of any Lien. Each SBI Subsidiary is either a
bank, a savings association, partnership, limited liability corporation, or a
corporation, and each such Subsidiary is duly organized, validly existing, and
(as to corporations) in good standing under the Laws of the jurisdiction in
which it is incorporated or organized, and has the corporate power and authority
necessary for it to own, lease, and operate its Assets and to carry on its
business as now conducted. Each SBI Subsidiary is duly qualified or licensed to
transact business as a foreign corporation in good standing in the States of the
United States and foreign jurisdictions where the character of its Assets or the
nature
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or conduct of its business requires it to be so qualified or licensed, except
for such jurisdictions in which the failure to be so qualified or licensed is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on SBI. Each of the SBI Bank Subsidiaries is an "insured
institution" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder, and the Deposits in which are insured by the Bank
Insurance Fund. The minute book and other organizational documents and Records
for each SBI Subsidiary have been made available to UPC for its review, and are
true and complete as in effect as of the date of this Agreement and accurately
reflect all amendments thereto and all proceedings of the Board of Directors and
shareholders thereof.
4.5 SBI FINANCIAL STATEMENTS.
(a) SBI FINANCIAL STATEMENTS. As disclosed in Section 4.5
of the SBI Disclosure Memorandum, SBI has delivered to UPC (or will deliver,
when available, with respect to periods ended after the date of the original
Agreement) true, correct and complete copies of (i) the consolidated statements
of financial position (including related notes and schedules, if any) of SBI as
of June 30, 1997, and as of December 31, 1996, and December 31, 1995, and the
related statements of operations, stockholders' equity, and cash flows
(including related notes and schedules, if any) for the six months ended June
30, 1997, and for each of the three fiscal years ended December 31, 1996, 1995,
and 1994, (ii) the consolidated statements of financial position of SBI
(including related notes and schedules, if any) and related statements of
operations, stockholders' equity, and cash flows (including related notes and
schedules, if any) with respect to any period ending subsequent to June 30,
1997, and prior to the Closing Date, and (iii) all Call Reports, including any
amendments thereto, filed with any Regulatory Authorities by SBI and each of the
Bank Subsidiaries for the years ended December 31, 1996, 1995, and 1994,
together with any correspondence with the SEC or with any other Regulatory
Authorities concerning any of the aforesaid financial statements and Reports
(the "SBI Financial Statements"). Such SBI Financial Statements (i) were (or
will be) prepared from the Records of SBI and/or each SBI 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) SBI's and each SBI Subsidiary's financial condition and
the results of its operations, changes in stockholders' equity and cash flows at
the relevant dates thereof and for the periods covered thereby, except that the
unaudited interim Financial Statements were or are subject to normal and
recurring year-end adjustments which were not expected to be material in amount
or effect; (iv) do contain or reflect (or, when prepared, will contain and
reflect) all necessary adjustments and accruals for an accurate presentation of
SBI's and each SBI Subsidiary's financial condition and the results of SBI's and
each SBI 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 or Allowances for loan losses, for ORE
reserves and for all reasonably anticipatable Liabilities and Taxes, with
respect to the periods then ended; and
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(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.
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. No SBI Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on SBI, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of SBI as of June
30, 1997, and December 31, 1996, included in the SBI Financial Statements or
reflected in the notes or schedules, if any, thereto, and delivered with the SBI
Disclosure Memorandum prior to the date of this Agreement. No SBI Company has
incurred or paid any Liability since December 31, 1996, except for such
Liabilities incurred or paid in the ordinary course of business consistent with
past business practice and which are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on SBI.
4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance Sheet
Date there has not been:
(a) any material transaction by any SBI Company which was
not undertaken in the ordinary course of business and in conformity with past
practice.
(b) 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 have a Material Adverse Effect on any SBI Company.
(c) any acquisition or disposition by any SBI Company of
any Asset having a fair market value, singularly or in the aggregate for each
SBI Company, in an amount greater than Fifty Thousand Dollars ($50,000), except
in the ordinary course of business and in conformity with past practice.
(d) any mortgage, pledge or subjection to Lien, of any
kind on any of the Assets of any SBI Company, except to secure extensions of
credit in the ordinary course of business and in conformity with past practice.
(e) any amendment, modification or termination of any
Contract relating to any SBI Company or to which any SBI Company is a party
which would or may be reasonably expected to have a Material Adverse Effect on
SBI.
(f) other than as described in Section 4.7(f) of the SBI
Disclosure Memorandum, any increase in, or commitment to increase, the
compensation payable or to become payable to any officer, director, employee or
agent of any SBI Company, 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
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business not exceeding the greater of ten percent (10%) per annum or $5,000 for
any of them individually.
(g) any incurring of, assumption of, or taking of, by any
SBI Company, any Asset subject to any Liability, except for Liabilities incurred
or assumed or Assets taken subsequent to the Balance Sheet Date in the ordinary
course of business and in conformity with past practice.
(h) any material alteration in the manner of keeping the
books, accounts or Records of any SBI Company, or in the accounting policies or
practices therein reflected.
(i) other than as described in Section 4.7(i) of the SBI
Disclosure Memorandum, any release or discharge (or partial release or
discharge) of any obligation or Liability of any Person related to or arising
out of any loan made by any SBI Company, except in the ordinary course of
business and in conformity with past practice.
4.8 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf
of any of the SBI Companies have been timely filed or requests for extensions
have been timely filed, granted, and have not expired for periods ended on or
before December 31, 1996, and on or before the date of the most recent fiscal
year end immediately preceding the Effective Time, and all Tax Returns filed are
complete and accurate. All Taxes shown on filed Tax Returns have been paid.
There is no audit examination, deficiency, or refund Litigation with respect to
any Taxes, except as fully reserved against in the SBI Financial Statements made
available prior to the date of this Agreement. All Taxes and other Liabilities
due with respect to completed and settled examinations or concluded Litigation
have been paid. There are no Liens with respect to Taxes upon any of the Assets
of the SBI Companies.
(b) None of the SBI Companies has executed an extension
or waiver of any statute of limitations on the assessment or collection of any
Tax due (excluding such statutes that relate to years currently under
examination by the Internal Revenue Service or other applicable taxing
authorities) that is currently in effect.
(c) Adequate provision for any Taxes due or to become due
for any of the SBI Companies for the period or periods through and including the
date of the respective SBI Financial Statements has been made and is reflected
on such SBI Financial Statements.
(d) Deferred Taxes of the SBI Companies have been
provided for in accordance with GAAP.
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(e) Each of the SBI Companies is in compliance with, and
its Records contain all information and documents (including properly completed
IRS Forms W-9) necessary to comply with, all applicable information reporting
and Tax withholding requirements under federal, state, and local tax Laws, and
such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the IRC.
(f) None of the SBI Companies has made any payments, is
obligated to make any payments, or is a party to any Contract that could
obligate it to make any payments that would be disallowed as a deduction under
Section 28OG or 162(m) of the Internal Revenue Code.
(g) There has not been an ownership change, as defined in
the IRC Section 382(g), of any of the SBI Companies that occurred during or
after any Taxable Period in which the Companies incurred a net operating loss
that carries over to any Taxable Period ending after December 31, 1996.
(h) None of the SBI Companies is a party to any tax
allocation or sharing agreement and none of the SBI Companies has been a member
of an affiliated group filing a consolidated federal income tax return (other
than a group the common parent of which was SBI) has any Liability for taxes of
any Person (other than SBI and its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local, or foreign law) as a
transferee or successor or by Contract or otherwise.
4.9 ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible
loan or credit losses, including any allowances or reserves for losses on ORE
and other collateral taken in satisfaction, or partial satisfaction of a debt
previously contracted, (the "Allowance") shown on the consolidated balance
sheets of SBI included in the most recent SBI Financial Statements dated prior
to the date of this Agreement was, and the Allowance shown on the consolidated
balance sheets of SBI included in the SBI Financial Statements as of dates
subsequent to the execution of this Agreement will be, as of the dates thereof,
in the reasonable opinion of management of SBI adequate (within the meaning of
GAAP and applicable regulatory requirements or guidelines) to provide for all
known and reasonably anticipated losses relating to or inherent in the loan and
lease portfolios (including accrued interest receivables and ORE reserves) of
the SBI Companies and other extensions of credit (including letters of credit
and commitments to make loans or extend credit) by the SBI Companies as of the
dates thereof. Except as described in Section 4.9 of the SBI Disclosure
Memorandum (by loan type, loan number, classification and outstanding balance)
which includes all Loans or extensions of credit which are listed on SBI's or
any SBI Company's watch list, no SBI Company has any Loan or other extension of
credit which has been (or should have been in management's reasonable opinion)
classified by SBI management as "Other Assets Especially Mentioned,"
"Substandard," "Doubtful" or "Loss", or similar classifications, that were not
classified in SBI's or any SBI Company's most recent report of examination or
most current watch list, copies of which have been made available to UPC for
review prior to
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the date of this Agreement. The net book value of any SBI Company's assets
acquired through foreclosure in satisfaction of problem loans ("ORE") are
carried on the balance sheet of the SBI Financial Statements 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.
4.10 ASSETS. Except as disclosed or reserved against in the SBI
Financial Statements made available prior to the date of this Agreement, the SBI
Companies have good and marketable title, free and clear of all Liens, to all of
their respective Assets. All tangible Assets used in the businesses of the SBI
Companies are in good condition, reasonable wear and tear excepted, and are
usable in the ordinary course of business consistent with SBI's past practices.
All Assets which are material to SBI's business on a consolidated basis, held
under leases or subleases by any of the SBI Companies, are held under valid
Contracts 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 brought), and each such
Contract is in full force and effect. The SBI Companies currently maintain
insurance similar in amounts, scope, and coverage to that maintained by other
peer banking organizations. None of the SBI Companies has received notice from
any insurance carrier that (i) such insurance would be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect to
such policies of insurance will be substantially increased. There are presently
no claims pending under any such policies of insurance and no notices have been
given by any SBI Company under such policies.
4.11 INTELLECTUAL PROPERTY. All of the Intellectual Property rights
of the SBI Companies are in full force and effect and constitute legal, valid,
and binding obligations of the respective parties thereto, and there have not
been, and, to the Knowledge of SBI, there currently are not, any Defaults
thereunder by any SBI Company. A SBI Company owns or is the valid licensee of
all such Intellectual Property rights free and clear of all Liens or claims of
infringement. None of the SBI Companies or, to the Knowledge of SBI, their
respective predecessors, has misused the Intellectual Property rights of others
and none of the Intellectual Property rights as used in the business conducted
by any such SBI Company infringes upon or otherwise violates the rights of any
Person, nor has any Person asserted a claim of such infringement. No SBI Company
is obligated to pay any royalties to any Person with respect to any such
Intellectual Property. Each SBI Company owns or has the valid right to use all
of the Intellectual Property rights which it is presently using, or in
connection with performance of any material Contract to which it is a party. No
officer, director, or employee of any SBI Company is party to any Contract which
requires such officer, director or employee to assign any interest in any
Intellectual Property or keep confidential any trade secrets, proprietary data,
customer
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information, or other business information or which restricts or prohibits such
officer, director, or employee from engaging in activities competitive with any
Person, including any SBI Company.
4.12 ENVIRONMENTAL MATTERS.
(a) To the Knowledge of SBI, each SBI Company, its
Participation Facilities, and its Operating Properties are, and have been, in
compliance with an Environmental Laws, except for violations which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on SBI.
(b) To the Knowledge of SBI, there is no Litigation
pending or threatened before any court, governmental agency, or authority or
other forum in which any SBI Company or any of its Operating Properties or
Participation Facilities (or SBI in respect of such Operating Property or
Participation Facility) has been or, with respect to threatened Litigation, may
be named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material, whether or not occurring at, on, under,
adjacent to, or affecting (or potentially affecting) a site owned, leased, or
operated by any SBI Company or any of its Operating Properties or Participation
Facilities, except for such Litigation pending or threatened that is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on SBI, nor is there any reasonable basis for any Litigation of a type
described in this sentence.
(c) During the period of (i) any SBI Company's ownership
or operation of any of their respective current properties, (ii) any SBI
Company's participation in the management of any Participation Facility, or
(iii) any SBI Company's holding of a security interest in an Operating Property,
to the Knowledge of SBI, there have been no releases of Hazardous Material in,
on, under, adjacent to, or affecting (or potentially affecting) such properties,
except such as are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on SBI. Prior to the period of (i) any SBI
Company's ownership or operation of any of their respective current properties,
(ii) any SBI Company's participation in the management of any Participation
Facility, or (iii) any SBI Company's holding of a security interest in an
Operating Property, to the Knowledge of SBI, there were no releases of Hazardous
Material in, on, under, or affecting any such property, Participation Facility
or Operating Property, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on SBI.
4.13 COMPLIANCE WITH LAWS. SBI is duly registered as a bank holding
company under the BHC Act. Each SBI Company has in effect all Permits necessary
for it to own, lease, or operate its material Assets and to carry on its
business as now conducted, and there has occurred no Default under any such
Permit. None of the SBI Companies:
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(a) is in violation of any Laws, Orders, or Permits applicable to
its business or employees conducting its business; and
(b) has received any notification or communication from any agency
or department of federal, state, or local government or any Regulatory Authority
or the staff thereof (i) asserting that any SBI Company is not in compliance
with any of the Laws or Orders which such governmental authority or Regulatory
Authority enforces, (ii) threatening to revoke any Permits, or (iii) requiring
any SBI Company to enter into or consent to the issuance of a cease and desist
order, formal agreement, directive, or memorandum of understanding, or to adopt
any Board resolution or similar undertaking, which restricts materially the
conduct of its business, or in any manner relates to its capital adequacy, its
credit or reserve policies, its management, or the payment of dividends.
4.14 LABOR RELATIONS. No SBI Company is the subject of any Litigation
asserting that it or any other SBI Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other SBI Company to bargain with any
labor organization as to wages or conditions of employment, nor is there any
strike or other labor dispute involving any SBI Company, pending or threatened,
or to the Knowledge of SBI, is there any activity involving any SBI Company's
employees seeking to certify a collective bargaining unit or engaging in any
other organization activity.
4.15 EMPLOYEE BENEFIT PLANS.
(a) SBI has disclosed in Section 4.15(a) of the SBI Disclosure
Memorandum, and has delivered or made available to UPC prior to the date of the
Agreement copies in each case of, all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus, or other incentive plan, all other written employee programs,
arrangements, or agreements, all medical, vision, dental, or other health
plans, all life insurance plans, and all other employee benefit plans or fringe
benefit plans, including "employee benefit plans" as that term is defined in
Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole or
in part by, or contributed to by any SBI Company or ERISA Affiliate thereof for
the benefit of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate (collectively, the "SBI Benefit Plans"). Any of the
SBI Benefit Plans which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, is referred to herein as a "SBI ERISA Plan."
Each SBI ERISA Plan which is also a "defined benefit plan" (as defined in
Section 414(j) of the Internal Revenue Code) is referred to herein as a "SBI
Pension Plan." No SBI Pension Plan is or has been a multiemployer plan within
the meaning of Section 3(37) of ERISA.
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(b) All SBI Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on SBI. Each SBI
ERISA Plan which is intended to be qualified under Section 401(a) of the
Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and SBI is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. No SBI Company
has engaged in a transaction with respect to any SBI Benefit Plan that, assuming
the taxable period of such on expired as of the date hereof, would subject any
SBI Company to a Tax imposed by either Section 4975 of the Internal Revenue Code
or Section 502(i) of ERISA.
(c) No SBI Pension Plan has any "unfunded current
liability," as that term is defined in Section 302(d)(8)(A) of ERISA, and the
fair market value of the assets of any such plan exceeds the plan's "benefit
liabilities," as that term is defined in Section 4001(a)(16) of ERISA, when
determined under actuarial factors that would apply if the plan terminated in
accordance with all applicable legal requirements. Since the date of the most
recent actuarial evaluation, there has been (i) no material change in the
financial position of any SBI Pension Plan, (ii) no change in the actuarial
assumptions with respect to any SBI Pension Plan, and (iii) no increase in
benefits under any SBI Pension Plan as a result of plan amendments or changes in
applicable Law which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on SBI or materially adversely affect the
funding status of any such plan. Neither any SBI Pension Plan nor any "single-
employer plan," within the meaning of Section 4001(a)(15) of ERISA, currently or
formerly maintained by any SBI Company, or the single-employer plan of any
entity which is considered one employer with SBI under Section 4001 of ERISA or
Section 414 of the Internal Revenue Code or Section 302 of ERISA (whether or not
waived) (an "ERISA Affiliate") has an "accumulated funding deficiency" within
the meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA.
No SBI Company has provided, or is required to provide, security to a SBI
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Internal Revenue Code.
(d) Within the six-year period preceding the Effective
Time, no Liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by any SBI Company with respect to any ongoing, frozen,
or terminated single-employer plan or the single-employer plan of any ERISA
Affiliate. No SBI Company has incurred any withdrawal Liability with respect to
a multiemployer plan under Subtitle B of Title IV of ERISA (regardless of
whether based on contributions of an ERISA Affiliate). No notice of a
"reportable event," within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been required to be filed
for any SBI Pension Plan or by any ERISA Affiliate within the 12-month period
ending on the date hereof.
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(e) No SBI Company has any Liability for retiree health
and life benefits under any of the SBI Benefit Plans and there are no
restrictions on the rights of such SBI Company to amend or terminate any such
retiree health or benefit Plan without incurring Liability thereunder.
(f) Except as disclosed in Section 4.15(f) of the SBI
Disclosure Memorandum, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any SBI Company from
any SBI Company under any SBI Benefit Plan or otherwise, (ii) increase any
benefits otherwise payable under any SBI Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of any SBI Company and their respective beneficiaries, other
than entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the SBI Financial Statements to the extent required
by and in accordance with GAAP.
4.16 MATERIAL CONTRACTS. Except as disclosed in Section 4.16 of the
SBI Disclosure Memorandum, none of the SBI Companies, nor any of their
respective Assets, businesses, or operations, is a party to, or is bound or
affected by, or receives benefits under, (i) any employment, severance,
termination, consulting, or retirement Contract, (ii) any Contract relating to
the borrowing of money by any SBI Company, other than as specifically disclosed
on the SBI Financial Statements, or the guarantee by any SBI Company of any such
obligation (other than Contracts evidencing deposit liabilities, purchases of
federal funds, fully-secured repurchase agreements, and Federal Home Loan Bank
advances of depository institution Subsidiaries, trade payables, and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
(iii) any Contracts which prohibit or restrict any SBI Company from engaging in
any business activities in any geographic area, line of business, or otherwise
in competition with any other Person, (iv) any Contracts between or among SBI
Companies, (v) any exchange-traded or over-the-counter swap, forward, future,
option, cap, floor, or collar financial Contract, or any other interest rate or
foreign currency protection Contract (not disclosed in the SBI Financial
Statements delivered prior to the date of this Agreement) which is a financial
derivative Contract (including various combinations thereof), and (vi) any other
Contract or amendment thereto that would be required to be filed as an exhibit
to a SBI SEC Report (whether or not SBI is subject to the filing requirements of
the SEC) filed (or which would have been filed if SBI were subject to the SEC
reporting requirements) by SBI with the SEC prior to the date of the
Agreement(together with all Contracts referred to in Sections 4.10 and 4.15(a)
of this Agreement, (the "SBI Contracts"). With respect to
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each SBI Contract: (i) the Contract is in full force and effect; (ii) no SBI
Company is in Default thereunder, (iii) no SBI Company has repudiated or waived
any material provision of any such Contract; and (iv) no other party to any such
Contract is, to the Knowledge of SBI, in Default in any respect or has
repudiated or waived any material provision thereunder. Except as set forth in
Section 4.16 of the SBI Disclosure Memorandum all of the indebtedness of any SBI
Company for money borrowed is prepayable at any time by such SBI Company without
penalty or premium.
4.17 LEGAL PROCEEDINGS. There is no Litigation instituted or
pending, or, to the Knowledge of SBI, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against any SBI Company, or against any
Asset, employee benefit plan, interest, or right of any of them that is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on SBI, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any SBI Company.
4.18 REPORTS. Since January 1, 1992, or the date of organization if
later, each SBI Company has timely 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 SEC, if applicable, including Forms 10-K, Forms
10-Q, Forms 8-K, and proxy statements, (ii) other Regulatory Authorities, and
(iii) any applicable state securities or banking authorities (except, in the
case of state securities authorities, failures to file which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
SBI). As of their respective dates, each of such reports and documents,
including the financial statements, exhibits, and schedules thereto, complied in
all material respects with all applicable Laws. As of its respective date, each
such report and document did not, in all material respects, 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 made therein light of the
circumstances under which they were made, not misleading.
4.19 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument, or other writing furnished or to be furnished by any SBI Company to
UPC pursuant to this Agreement or any other document, agreement, or instrument
referred to therein or herein contains, or will contain, any untrue statement of
material fact or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the information supplied or to be supplied by any SBI
Company or any Affiliate thereof for inclusion in the Registration Statement to
be filed by UPC with the SEC will, when the Registration Statement becomes
effective, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein not misleading.
None of the information supplied or to be supplied by any SBI Company or any
Affiliate thereof for inclusion in the Proxy Statement to be mailed to SBI's
shareholders in connection with the Shareholders' Meeting, and any other
documents to be filed by a SBI Company or any Affiliate thereof with the SEC or
any other Regulatory Authority in connection with the
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transactions contemplated hereby, will, at the respective time such documents
are filed, and with respect to the Proxy Statement, when first mailed to the
shareholders of SBI 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 that any SBI Company or any
Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
4.20 ACCOUNTING, TAX, AND REGULATORY MATTERS. No SBI Company or any
Affiliate thereof has taken any action or has any Knowledge of any fact or
circumstance relating to SBI that is reasonably likely to (i) prevent the
transactions contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the IRC, or (ii) materially impede or delay receipt
of any Consents of Regulatory Authorities referred to in Section 8.1(b) of this
Agreement or result in the imposition of a condition or restriction of the type
referred to in the last sentence of such section.
4.21 STATE TAKEOVER LAWS. Each SBI Company has taken all necessary
action to exempt the transactions contemplated by this Agreement and the Plan of
Merger from, or if necessary challenge the validity or applicability of any
applicable "moratorium," "fair price," "business combination," "control share,"
or other anti-takeover Laws (collectively, "Takeover Laws"), including any
applicable sections of the Business Corporation Law of the State of Arkansas.
4.22 CHARTER PROVISIONS. Each SBI Company has taken all action so
that the entering into of this Agreement and the Plan of Merger and the
consummation of the Merger and the other transactions contemplated by this
Agreement and the Plan of Merger do not and will not result in the grant of any
rights to any Person under the Charter, Bylaws or other governing instruments of
any SBI Company or restrict or impair the ability of UPC or any of its
Subsidiaries to vote, or otherwise to exercise the rights of a shareholder with
respect to, shares of any SBI Company that my be directly or indirectly
acquired or controlled by it.
4.23 CHARTER DOCUMENTS. SBI has previously provided UPC true and
correct copies of the Articles of Incorporation and Bylaws of SBI and the
Articles of Incorporation or Articles of Association or Articles of Agreement
and Bylaws of each SBI Company, as amended to date, and each are in full force
and effect.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF UPC
Except as disclosed in the UPC Disclosure Memorandum, UPC hereby
represents and warrants to SBI as follows:
5.1 ORGANIZATION, STANDING, AND POWER. UPC and Merger Subsidiary
are both corporations duly organized, validly existing, and in good standing
under the Laws of the State of Tennessee, and each has the corporate power and
authority to carry on its business as now conducted and to own, lease and
operate its material Assets. UPC is duly qualified or licensed to transact
business as a foreign corporation in good standing in the States of the United
States and foreign jurisdictions where the character of its Assets or the nature
or conduct of its business requires it to be so qualified or licensed, except
for such jurisdictions in which the failure to be so qualified or licensed is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on UPC.
5.2 AUTHORITY: NO BREACH BY AGREEMENT.
(a) UPC and Merger Subsidiary each has the corporate
power and authority necessary to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the Plan of Merger (as
to Merger Subsidiary) and the consummation of the transactions contemplated
herein, including the Merger, have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of UPC and Merger
Subsidiary including the approval of UPC in its capacity as the sole shareholder
of Merger Subsidiary. This Agreement represents a legal, valid, and binding
obligation of UPC, enforceable against UPC in accordance with its terms (except
in all cases as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar 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 proceeding may be brought).
(b) Neither the execution and delivery of this Agreement
by UPC, nor the consummation by UPC, and Merger Subsidiary of the transactions
contemplated hereby, nor compliance by UPC and Merger Subsidiary with any of the
provisions hereof will (i) conflict with or result in a breach of any provision
of any UPC Company's Charter (or similar governing instrument) or Bylaws, or
(ii) constitute or result in a Default under, or require any Consent pursuant
to, or result in the creation of any Lien on any Asset of any UPC Company under
any Contract or Permit of any UPC Company, or (iii) subject to receipt of the
requisite approvals referred to in Section 8.1(b) of this Agreement, violate any
Law or Order applicable to any UPC Company or any of their respective material
Assets.
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(c) Other than in connection or compliance with the
provisions of the Securities Laws, applicable state corporate and the rules of
the NYSE, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, and other than Consents, filings, or notifications which,
if not obtained or made, are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on UPC, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
UPC and Merger Subsidiary of the Merger and the other transactions contemplated
in this Agreement.
5.3 CAPITAL STOCK. The authorized capital stock of UPC consists of
(i) 100,000,000 shares of UPC Common Stock, of which 66,790,144 shares are
issued and outstanding as of June 30, 1997, and (ii) 10,000,000 shares of UPC
Preferred Stock, of which zero (0) shares of UPC Series A Preferred Stock and
2,533,236 shares of UPC Series E Preferred Stock are issued and outstanding. All
of the issued and outstanding shares of UPC Capital Stock are, and all of the
shares of UPC Common Stock to be issued in exchange for shares of SBI Common
Stock upon consummation of the Merger, when issued in accordance with the terms
of this Agreement, will be, duly and validly issued and outstanding and fully
paid and nonassessable under the Tennessee Code and the UPC Charter. None of the
outstanding shares of UPC Capital Stock has been, and none of the shares of UPC
Common Stock to be issued in exchange for shares of SBI Common Stock upon
consummation of the Merger will be, issued in violation of any preemptive rights
of the current or past shareholders of UPC. UPC has reserved for issuance a
sufficient number of shares of UPC Common Stock for the purpose of issuing
shares of UPC Common Stock in accordance with the provisions of Sections 2.1(c)
and 2.2 of this Agreement.
5.4 SEC FILINGS: FINANCIAL STATEMENTS.
(a) UPC has filed and made available to SBI all SEC
documents required to be filed by UPC since December 31, 1994 (the "UPC SEC
Reports"). The UPC SEC Reports (i) at the time filed, complied in all material
respects with the applicable requirements of the Securities Laws and (ii) did
not, at the time they were filed (or, if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact required to
be stated in such UPC SEC Reports or necessary in order to make the statements
in such UPC SEC Reports, in light of the circumstances under which they were
made, not misleading. Except for UPC Subsidiaries that are registered as a
broker, dealer or investment advisor, no UPC Subsidiary is required to file any
SEC Documents.
(b) Each of the UPC Financial Statements (including, in
each case, any related notes) contained in the UPC SEC Reports, including any
UPC SEC Reports filed after the date of this Agreement until the Effective Time,
complied as to form in all
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material respects with the applicable published rules and regulations of the SEC
with respect thereto, was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements or, in the case of unaudited interim
statements, as permitted by Form 10-Q of the SEC), and fairly presented in all
material respects the consolidated financial position of UPC and its
Subsidiaries as at the respective dates and the consolidated results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in amount
or effect.
5.5 ABSENCE OF UNDISCLOSED LIABILITIES. No UPC Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on UPC, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of UPC as of June
30, 1997, included in the UPC Financial Statements made available prior to the
date of this Agreement or reflected in the notes thereto. No UPC Company has
incurred or paid any liability since June 30, 1997, except for such Liabilities
incurred or paid (i) in the ordinary course of business consistent with past
business practice and which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on UPC or (ii) in connection with
the transactions contemplated by this Agreement.
5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1996,
except as disclosed in the UPC Financial Statements delivered prior to the date
of this Agreement or contemplated by pending federal legislation applicable to
financial institutions generally, (i) there have been no events, changes, or
occurrences which have had, or are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on UPC, and (ii) the UPC Companies have
not taken any action, or failed to take any action, prior to the date of this
Agreement, which action or failure, if taken after the date of this Agreement,
would represent or result in a material breach or violation of any of the
covenants and agreements of UPC provided in Article 6 of this Agreement.
5.7 COMPLIANCE WITH LAWS. UPC is duly registered as a bank holding
company under the BHC Act and as a savings and loan holding company under the
HOLA. Each UPC Company has in effect all Permits necessary for it to own, lease,
or operate its material Assets and to carry on its business as now conducted,
and there has occurred no Default under any such Permit.
5.8 LEGAL PROCEEDINGS. There is no Litigation instituted or
pending, or, to the Knowledge of UPC, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against any UPC Company, or against any
Asset, interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on UPC.
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5.9 REPORTS. Since January 1, 1996, UPC has 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 SEC, including, but not
limited to, Forms 10-K, Forms 10-Q, Forms 8-K, and proxy statements, (ii) other
Regulatory Authorities, and (iii) any applicable state securities or banking
authorities (except, in the case of state securities authorities, failures to
file which are not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on UPC). As of their respective dates, each of such
reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all material respects with all applicable Laws.
As of its respective date, each such report and document did not, in all
material respects, 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 made therein, in light of the circumstances under which they were
made, not misleading.
5.10 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument or other writing furnished or to be furnished by any UPC Company or
any Affiliate thereof to SBI pursuant to this Agreement or any other document,
agreement, or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by any
UPC Company or any Affiliate thereof for inclusion in the Registration Statement
to be filed by UPC with the SEC, will, when the Registration Statement becomes
effective, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein not misleading.
None of the information supplied or to be supplied by any UPC Company or any
Affiliate thereof for inclusion in the Proxy Statement to be mailed to SBI's
Shareholders in connection with the Shareholders' Meetings, and any other
documents to be filed by any UPC Company or any Affiliate thereof with the SEC
or any other Regulatory Authority in connection with the transactions
contemplated hereby, will, at the respective time such documents are filed, and
with respect to the Joint Proxy Statement, when first mailed to the shareholders
of SBI, 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' Meetings, 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' Meetings. All documents that any UPC Company or any
Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
5.11 ACCOUNTING, TAX, AND REGULATORY MATTERS. No UPC Company or any
Affiliate thereof has taken any action or has any Knowledge of any fact or
circumstance relating to UPC or Merger Subsidiary that is reasonably likely to
(i) prevent the
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transactions contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 8.1(b) of this Agreement or result in the imposition of a condition or
restriction of the type referred to in the last sentence of such Section.
ARTICLE 6
CONDUCT OF BUSINESS PENDING CONSUMMATION
6.1 AFFIRMATIVE COVENANTS OF SBI. Unless the prior written consent
of UPC shall have been obtained, and except as otherwise expressly contemplated
herein, SBI shall, and shall cause each of its Subsidiaries to: (i) operate its
business only in the usual, regular, and ordinary course, (ii) preserve intact
its business organization and Assets and maintain its rights and franchises,
(iii) use its reasonable best efforts to pay off any indebtedness secured by
stock or assets of any of its Subsidiaries; and (iv) take no action which would
(a) materially adversely affect the ability of any Party to obtain any Consents
required for the transactions contemplated hereby without imposition of a
condition or restriction of the type referred to in the last sentence of Section
8.1(b) of this Agreement or prevent the transactions contemplated hereby,
including the Merger, from qualifying for pooling-of-interests accounting
treatment or as a reorganization within the meaning of Section 368(a) of the IRC
or (b) materially adversely affect the ability of any Party to perform its
covenants and agreements under this Agreement.
6.2 NEGATIVE COVENANTS OF SBI. Except as specifically permitted by
this Agreement from the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement, SBI covenants and agrees
that it will not do or agree or commit to do, or permit any of its Subsidiaries
to do or agree or commit to do, any of the following without the prior written
consent of the chief executive officer or chief operating officer of UPC, which
consent shall not be unreasonably withheld:
(a) amend the Charter, Bylaws, or other governing
instruments of any SBI Company; or
(b) incur any additional debt obligation or other
obligation for borrowed money (other than indebtedness of a SBI Company to
another SBI Company) in excess of an aggregate of $100,000 (for the SBI
Companies on a consolidated basis) except in the ordinary course of the business
of SBI Subsidiaries consistent with past practices (which shall include, for SBI
Subsidiaries that are depository institutions, creation of deposit liabilities,
purchases of federal funds, advances from the Federal Reserve Bank or Federal
Home Loan Bank, and entry into repurchase agreements fully secured by U.S.
government or agency securities), or impose, or suffer the imposition on any
Asset of any SBI Company of any Lien or permit any such Lien to exist (other
than in connection with deposits, repurchase agreements, bankers acceptances,
"treasury tax and loan" accounts
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established in the ordinary course of business, the satisfaction of legal
requirements in the exercise of trust powers, and Liens in effect as of the date
hereof that have been previously disclosed); or
(c) declare or pay any dividend or make any other
distribution in respect of SBI's capital stock, repurchase, redeem, or otherwise
acquire or exchange (other than exchanges in the ordinary course under employee
benefit plans), directly or indirectly, any shares, or any securities
convertible into any shares, of the capital stock of any SBI Company; or
(d) except pursuant to this Agreement, issue, sell,
pledge, encumber, authorize the issuance of, enter into any Contract to issue,
sell, pledge, encumber, or authorize the issuance of or otherwise permit to
become outstanding, any additional shares of SBI Common Stock or any other
capital stock of any SBI Company, or any stock appreciation rights, or any
option, warrant, conversion, or other Right to acquire any such stock, or any
security convertible into any such stock or any stock equivalent type rights; or
(e) adjust, split, combine or reclassify any capital
stock of any SBI Company or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of SBI Common Stock, or
sell, lease, mortgage or otherwise dispose of or otherwise encumber any shares
of capital stock of any SBI Subsidiary, or any Asset, other than in the ordinary
course of business for reasonable and adequate consideration; or
(f) except for purchases of U.S. Treasury securities or
U.S. Government agency securities, which in either case have maturities of three
years or less or Federal Home Loan Bank Stock, purchase any securities or make
any Material investment, either by purchase of stock or securities,
contributions to capital, Asset transfers, or purchase of any Assets, in any
Person other than a wholly owned SBI Subsidiary, or otherwise acquire direct or
indirect control over any Person, other than in connection with (i) foreclosures
in the ordinary course of business, (ii) acquisitions of control by a depository
institution Subsidiary in its fiduciary capacity, or (iii) the creation of new
wholly owned Subsidiaries organized to conduct or continue activities otherwise
permitted by this Agreement; or
(g) grant any increase in compensation or benefits to the
employees or officers of any SBI Company, except in accordance with past
practice disclosed in Section 6.2(g) of the SBI Disclosure Memorandum or as
required by Law; pay any severance or termination pay or any bonus other than
pursuant to written policies or written Contracts in effect on the date of this
Agreement and disclosed in Section 6.2(g) of the SBI Disclosure Memorandum; and
enter into or amend any severance agreements with officers of any SBI Company;
grant any material increase in fees or other increases in compensation or other
benefits to directors of any SBI Company except in accordance
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with past practice disclosed in Section 6.2(g) of the SBI Disclosure Memorandum;
or voluntarily accelerate the vesting of any stock options or other stock-based
compensation or employee benefits (other than the acceleration of vesting which
occurs under a benefit plan upon a change of control of SBI). Notwithstanding
the foregoing and provided such payments have been fully accrued on SBI's
financial statements prior to the Effective Time, SBI (i) shall be entitled to
pay bonuses for 1997 in an aggregate amount not to exceed Four Hundred and Fifty
Thousand Dollars ($450,000), if so determined by the SBI directors; and (ii) to
the extent not prohibited by applicable law, prior to the Effective Time of the
Merger SBI shall establish a rabbi trust or similar funding arrangement and make
contributions thereto in an amount necessary to fully fund all amounts accrued
through January, 1998, under all non-qualified deferred compensation
arrangements maintained by any SBI Company. After the Effective Time of the
Merger, each of the deferred compensation arrangements shall remain in effect
for the benefit of those persons who are parties thereto. Prior to the Effective
Time of the Merger, SBI (or the appropriate SBI Bank Subsidiary) shall take such
steps as are necessary to amend the deferred compensation arrangements to
provide that immediately prior to the Effective Time of the Merger, compensation
deferrals pursuant to Section 2 of the deferred compensation arrangements shall
cease, and no future deferrals shall be made under such arrangements. After the
Effective Time of the Merger, UPC will not amend the deferred compensation
arrangements, except to the extent necessary to comply with applicable law or to
give effect to the provisions of this Section of the Agreement; or
6.3 CERTAIN ACTIONS.
(a) Except to the extent necessary to consummate the
transactions specifically contemplated by this Agreement, SBI shall not, and
shall use its best efforts to ensure that its respective directors, officers,
employees, and advisors do not, directly or indirectly, institute, solicit, or
knowingly encourage (including by way of furnishing any information not legally
required to be furnished) any inquiry, discussion, or proposal, or participate
in any discussions or negotiations with, or provide any confidential or
non-public information to, any corporation, partnership, person or other entity
or group (other than to UPC or any UPC Subsidiary) concerning any "Acquisition
Proposal" (as defined in Section 10.1 hereof), except for actions reasonably
considered by the Board of Directors of SBI, based upon the advice of outside
legal counsel, to be required in order for the Board of Directors to fulfill its
fiduciary obligations. SBI shall notify UPC immediately if any Acquisition
Proposal has been or should hereafter be received by SBI, such notice to
contain, at a minimum, the identity of such persons, and, subject to disclosure
being consistent with the fiduciary obligations of SBI's Board of Directors, a
copy of any written inquiry, the terms of any proposal or inquiry, any
information requested or discussions sought to be initiated, and the status of
any reports, negotiations or expressions of interest.
(b) As a condition of and as an inducement to UPC's
entering into this Agreement, SBI covenants, acknowledges, and agrees that it
shall be a specific, absolute,
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and unconditionally binding condition precedent to SBI's entering into a letter
of intent, agreement in principle, or definitive agreement (whether or not
considered binding, non-binding, conditional or unconditional) with any third
party with respect to an Acquisition Proposal, or supporting or indicating an
intent to support an Acquisition Proposal, other than this Agreement and the
transactions contemplated in this Agreement, regardless of whether SBI has
otherwise complied with the provisions of Section 6.3(a) hereof, that SBI or
such third party which is a party of the Acquisition Proposal shall have paid
UPC, as liquidated damages, the sum of One Million One Hundred Fifty Thousand
Dollars ($1,150,000), which sum represents the (i) direct costs and expenses
(including, but not limited to, fees and expenses incurred by UPC's financial or
other consultants, printing costs, investment bankers, accountants, and counsel)
incurred by or on behalf of UPC in negotiating and undertaking to carry out the
transactions contemplated by this Agreement; and (ii) indirect costs and
expenses of UPC in connection with the transactions contemplated by this
Agreement, including UPC's management time devoted to negotiation and
preparation for the transactions contemplated by this Agreement; and (iii) UPC's
loss as a result of the transactions contemplated by this Agreement not being
consummated. Accordingly, SBI hereby stipulates and covenants that prior to
SBI's entering into a letter of intent, agreement in principle, or definitive
agreement, (whether binding or non-binding, conditional or unconditional) with
any third party with respect to an Acquisition Proposal or supporting or
indicating an intent to support an Acquisition Proposal, either SBI 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 6.3. Notwithstanding anything to the
contrary in this Section 6.3(b), in the event such Acquisition Proposal should
be the result of a hostile takeover of SBI, any sums due UPC hereunder shall be
paid only at the closing of the transactions set forth in such Acquisition
Proposal. UPC acknowledges that under no circumstances shall any officer or
director of SBI) (unless such officer or director shall have an interest in a
potential acquiring party in any Acquisition Proposal) be held personally liable
to UPC for any amount of the foregoing payment. On payment of such amount to
UPC, UPC shall have no cause of action or claim (either in law or equity)
whatsoever against SBI, or any officer of director of SBI, with respect to or in
connection with such Acquisition Proposal or this Agreement.
(c) Henry L. Nichols ("Stockholder"), acting in his
individual capacity as a Trustee or Co-Trustee of various trusts identified on
the signature page hereof, and any other trusts of which he is a trustee or
co-trustee, if any, and which owns or controls any SBI Common Stock, covenants
and agrees that he will not, directly or indirectly, sell, transfer or exchange,
offer to sell, transfer or exchange, or authorize any trust or similar entity to
sell, transfer or exchange, any shares of SBI Common Stock he owns or controls,
or is owned or controlled by any trust of which he serves as a trustee or
co-trustee, to any person or entity except pursuant to this Agreement or
pursuant to a valid last will and testament or the laws of descent and
distribution. Stockholder's obligations under this paragraph shall terminate in
accordance with Section 6.3(d).
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(d) The requirements, conditions, and obligations imposed
by this Section 6.3 shall continue in full force and effect from the date of
this Agreement until the earlier of (i) the Effective Time or (ii) December 31,
1998; or (iii) the date on which this Agreement shall have been terminated (i)
mutually by the Parties pursuant to Section 9.1(a) of this Agreement; (ii) by
SBI pursuant to Section 9.1(b) of this Agreement; (iii) by either Party pursuant
to Section 9.1(d)(i) of this Agreement; (iv) by SBI pursuant to Section 9.1(f)
of this Agreement, other than due to the failure to satisfy Section 8.1(a) of
this Agreement; or (v) by SBI pursuant to Section 9.1(c) of this Agreement, but
in such event only on the basis of (a) material inaccuracy (without waiver
thereof) of representations and warranties of UPC as contemplated by the
provisions of Section 8.3(a) of this Agreement; (b) noncompliance by UPC with
its obligations as required by the provisions of Section 8.3(b) of this
Agreement; or (c) the failure of UPC to deliver all certificates as required by
the provisions of Section 8.3(c) of this Agreement, or to satisfy the conditions
set forth in Section 8.3(d) of this Agreement; or (v) by either Party pursuant
to Section 9.1(g) of this Agreement.
6.4 COVENANTS OF UPC. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, UPC
covenants and agrees that it shall (i) continue to conduct its business and the
business of its Subsidiaries in a manner designed in its reasonable judgment to
enhance the long-term value of the UPC Common Stock and the business prospects
of the UPC Companies, and (ii) take no action which would (a) materially
adversely affect the ability of any Party to obtain any Consents required for
the transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentence of Section 8.1(b) of
this Agreement or prevent the transactions contemplated hereby, including the
Merger, from qualifying for pooling-of-interests accounting treatment or as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (b) materially adversely affect the ability of any Party to perform its
covenants and agreements under this Agreement, provided, that the foregoing
shall not prevent any UPC Company from acquiring any other Assets or businesses
or from discontinuing or disposing of any of its Assets or business if such
action is, in the judgment of UPC, desirable in the conduct of the business of
UPC and its Subsidiaries and would not, in the judgment of UPC, likely delay the
Effective Time to a date subsequent to the date set forth in Section 9.1(e) of
this Agreement.
6.5 ADVERSE CHANGES IN CONDITION. Each Party agrees to give
written notice promptly to the other Party upon becoming aware of the occurrence
or impending occurrence of any event or circumstance relating to it or any of
its Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
6.6 REPORTS. Each Party and its Subsidiaries shall file all
reports required to be filed by it with Regulatory Authorities between the date
of this Agreement and the
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Effective Time and shall deliver to the other Party copies of all such reports
promptly after the same are filed. If financial statements are contained in any
such reports filed with the SEC or any other Regulatory Authority pursuant to
the Securities Laws, such financial statements will fairly present the
consolidated financial position of the entity filing such statements as of the
dates indicated and the consolidated results of operations, changes in
shareholders' equity, and cash flows for the periods then ended in accordance
with GAAP (subject in the case of interim financial statements to normal
recurring year-end adjustments that are not material). As of their respective
dates, such reports filed with the SEC or other Regulatory Authorities pursuant
to the Securities Laws will comply in all material respects with the Securities
Laws and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Any financial statements contained in any other reports to
another Regulatory Authority shall be prepared in accordance with Laws
applicable to such reports.
ARTICLE 7
ADDITIONAL AGREEMENTS
7.1 REGISTRATION STATEMENT: PROXY STATEMENT: SHAREHOLDER
APPROVALS. UPC shall file the Registration Statement with the SEC, and shall use
its reasonable efforts to cause the Registration Statement to become effective
under the 1933 Act and take any action required to be taken under the applicable
state Blue Sky or securities Laws in connection with the issuance of the shares
of UPC Common Stock upon consummation of the Merger. SBI shall furnish all
information concerning it and the holders of its capital stock as UPC may
reasonably request in connection with such action. SBI shall call a
Shareholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement and the Plan of Merger and such other
related matters as it deems appropriate. In connection with the Shareholders'
Meeting, (i) UPC and SBI shall prepare and file with the SEC a Proxy Statement
and mail such Proxy Statement to the shareholders of SBI, (ii) the Parties shall
furnish to each other all information concerning them that they may reasonably
request in connection with such Proxy Statement, (iii) the Board of Directors of
SBI shall recommend (subject to compliance with their fiduciary duties as
advised by counsel) to their shareholders the approval of the matters submitted
for approval, and (iv) the Board of Directors and officers of SBI shall (subject
to compliance with their fiduciary duties as advised by counsel) use their
reasonable efforts to obtain such shareholders' approvals.
7.2 EXCHANGE LISTING. UPC shall use its reasonable efforts to
list, prior to the Effective Time, on the NYSE, subject to official notice of
issuance, the shares of UPC Common Stock to be issued to the holders of SBI
Common Stock or SBI Stock Options,
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if any, pursuant to the Merger, and UPC shall give all notices and make all
filings with the NYSE required in connection with the transactions contemplated
herein.
7.3 APPLICATIONS. UPC shall prepare and file, and SBI shall
cooperate in the preparation and, where appropriate, filing of applications with
all Regulatory Authorities having jurisdiction over the transactions
contemplated by this Agreement seeking the requisite Consents necessary to
consummate the transactions contemplated by this Agreement. At least five
business days prior to filing UPC shall use its reasonable best efforts to
provide SBI and its counsel with copies of such applications. The Parties shall
deliver to each other copies of all filings, correspondence and orders to and
from, all Regulatory Authorities in connection with the transactions
contemplated hereby as soon as practicable upon their becoming available.
7.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
conditions of this Agreement, UPC and SBI shall duly certify, execute,
acknowledge and file the Articles of Merger with the Secretary of State of the
State of Tennessee and with the Secretary of State of the State of Arkansas, as
applicable, in connection with the Closing.
7.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms
and conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement, including using its reasonable efforts to lift or rescind any
Order adversely affecting its ability to consummate the transactions
contemplated herein and to cause to be satisfied the conditions referred to in
Article 8 of this Agreement; provided, however, that nothing herein shall
preclude either Party from exercising its rights under this Agreement. Each
Party shall use, and shall cause each of its Subsidiaries to use, its reasonable
efforts to obtain all Consents necessary or desirable for the consummation of
the transactions contemplated by this Agreement; provided, however, that nothing
in this Section 7.5 shall be construed to obligate UPC or Merger Subsidiary to
take any action to meet any condition required to obtain and Consent if UPC
shall, in its 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 to require UPC to increase its capital ratios to amounts
in excess of the Federal Reserves minimum capital ratio guidelines which may
from time to time be in effect.
7.6 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Effective Time, each Party shall keep
the other Party advised of all material developments relevant to its business
and to consummation of the Merger and shall permit the other Party to make or
cause to be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial
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and legal conditions as the other Party reasonably requests, provided that such
investigation shall be reasonably related to the transactions contemplated
hereby and shall not interfere unnecessarily with normal operations. No
investigation by a Party shall affect the representations and warranties of the
other Party.
(b) Each Party shall, and shall cause its advisers and
agents to, maintain the confidentiality of all confidential information
furnished to it by the other Party concerning its and its Subsidiaries'
businesses, operations, and financial positions and shall not use such
information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Time, each Party shall promptly return or certify the destruction of
all documents and copies thereof, and all work papers containing confidential
information received from the other Party.
(c) SBI shall use its reasonable efforts to exercise its
rights under confidentiality agreements entered into with Persons which are
considering an Acquisition Proposal with SBI to preserve the confidentiality of
the information relating to SBI provided to such Persons and their Affiliates
and Representatives.
7.7 PRESS RELEASES. Prior to the Effective Time, SBI and UPC shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 7.7
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
7.8 ACCOUNTING AND TAX TREATMENT. Each of the Parties undertakes
and agrees to use its reasonable efforts to cause the Merger, and to take no
action which would cause the Merger not, to qualify for pooling-of-interests
accounting treatment and treatment as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code for federal income tax purposes.
7.9 STATE TAKEOVER LAWS. Each SBI Company shall take all necessary
steps to exempt the transactions contemplated by this Agreement from, or if
necessary challenge the validity or applicability of any applicable, Takeover
Law.
7.10 CHARTER PROVISIONS. Each SBI Company shall take all necessary
action to ensure that the entering into of this Agreement and the Plan of Merger
and the consummation of the Merger and the other transactions contemplated
hereby and thereby do not and will not result in the grant of any rights to any
Person under the Charter, Bylaws, or other governing instruments of any SBI
Company or restrict or impair the ability of UPC or any of its Subsidiaries to
vote, or otherwise to exercise the rights of a shareholder with respect to,
shares of any SBI Company that may be directly or indirectly acquired or
controlled by it.
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7.11 AGREEMENT OF AFFILIATES. SBI has disclosed in Section 7.11 of
the SBI Disclosure Memorandum all Persons whom it reasonably believes is an
"affiliate" of SBI for purposes of Rule 145 under the 1933 Act. SBI shall use
its reasonable efforts to cause each such Person to deliver to UPC not later
than 30 days prior to the Effective Time, a written agreement, substantially in
the form of Exhibit 3, providing that such Person will not sell, pledge,
transfer, or otherwise dispose of the shares of SBI Common Stock held by such
Person except as contemplated by such agreement or by this Agreement and will
not sell, pledge, transfer, or otherwise dispose of the shares of UPC Common
Stock to be received by such Person upon consummation of the Merger except in
compliance with applicable provisions of the 1933 Act and the rules and
regulations thereunder and until such time as financial results covering at
least 30 days of combined operations of UPC and SBI have been published within
the meaning of Section 201.01 of the SEC's Codification of Financial Reporting
Policies. If the Merger will qualify for pooling-of-interests accounting
treatment, shares of UPC Common Stock issued to such affiliates of SBI in
exchange for shares of SBI Common Stock shall not be transferable until such
time as financial results covering at least 30 days of combined operations of
UPC and SBI have been published within the meaning of Section 201.01 of the
SEC's Codification of Financial Reporting Policies, regardless of whether each
such affiliate has provided the written agreement referred to in this Section
7.11 (and UPC shall be entitled to place restrictive legends upon certificates
for shares of UPC Common Stock issued to affiliates of SBI pursuant to this
Agreement to enforce the provisions of this Section 7.11). UPC shall not be
required to maintain the effectiveness of the Registration Statement under the
1933 Act for the purposes of resale of UPC Common Stock by such affiliates.
7.12 EMPLOYEE BENEFITS AND CONTRACTS. Following the Effective Time,
UPC shall provide to officers and employees of the SBI Companies employee
benefits under employee benefit and welfare plans, on terms and conditions which
when taken as a whole are substantially similar to those currently provided by
the UPC Companies to their similarly situated officers and employees. For
purposes of participation, but not vesting and benefit accrual, under any such
UPC employee benefit plans, the service of the employees of the SBI Companies
prior to the Effective Time shall be treated as service with a UPC Company
participating in such employee benefit plan. Nothing herein shall be deemed to
have reduced, contracted, enlarged, undertaken, authorized, approved or
otherwise to have affected whatever contractual rights the officers or employees
of SBI may have under existing documentation other than as expressly stated
herein, and nothing herein shall be deemed to be an employment contract,
agreement or understanding, or offer of employment by UPC or any of its direct
or indirect Subsidiaries after the Effective Time.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
8.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each Party to perform this Agreement and consummate the Merger
and the other
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transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 10.6 of
this Agreement:
(a) SHAREHOLDER APPROVALS. The shareholders of SBI shall have
approved this Agreement and the Plan of Merger, and the consummation of the
transactions contemplated hereby and thereby, including the Merger, as and to
the extent required by Law, by the provisions of any governing instruments.
(b) REGULATORY APPROVALS. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities required
for consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is necessary to
consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner, which in the reasonable judgment of the Board of
Directors of UPC would so materially adversely impact the financial or economic
benefits of the transactions contemplated by this Agreement that, had such
condition or requirement been known, UPC would not, in its reasonable judgment,
have entered into this Agreement.
(c) CONSENTS AND APPROVALS. Each Party shall have obtained any and
all Consents required for consummation of the Merger (other than those referred
to in Section 8.1(b) of this Agreement) or for the preventing of any Default
under any Contract or Permit of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on such Party.
(d) LEGAL PROCEEDINGS. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced, or entered any Law or Order (whether temporary, preliminary, or
permanent) or taken any other action which prohibits, restricts, or makes
illegal consummation of the transactions contemplated by this Agreement and the
Plan of Merger.
(e) REGISTRATION STATEMENT. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding, or
investigation by the SEC to the effectiveness thereof shall have been initiated
and be continuing, and all necessary approvals under state securities Laws or
the 1933 Act or 1934 Act relating to the issuance or trading of the shares of
UPC Common Stock issuable pursuant to the Merger shall have been received.
(f) EXCHANGE LISTING. The shares of UPC Common Stock issuable
pursuant to the Merger shall have been approved for listing on the NYSE, subject
to official notice of issuance.
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(g) POOLING LETTERS. UPC shall have received a copy of
the letter, dated as of the date of filing of the Registration Statement with
the SEC and as of the Effective Time, from Price Waterhouse LLP to the effect
that the Merger will qualify for pooling-of-interests accounting treatment.
(h) TAX MATTERS. UPC shall have received a written
opinion of counsel from Wyatt, Tarrant & Combs in form reasonably satisfactory
to such Parties (the "Tax Opinion"), to the effect that (i) the Merger would
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code, (ii) the exchange in the Merger of SBI Common Stock for UPC Common
Stock will not give rise to gain or loss to the shareholders of SBI with respect
to such exchange (except to the extent of any cash received), and (ii) none of
SBI or UPC will recognize gain or loss as a consequence of the Merger (except
for the inclusion in income of the amount of the bad-debt reserve maintained by
SBI and any other amounts resulting from any required change in accounting
methods and any income and deferred gain recognized pursuant to Treasury
regulations issued under Section 1502 of the Internal Revenue Code). In
rendering such Tax Opinion, such counsel shall be entitled to rely upon
representations of officers of SBI and UPC reasonably satisfactory in form and
substance to such counsel.
8.2 CONDITIONS TO OBLIGATIONS OF UPC. The obligations of UPC to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by UPC pursuant to Section 10.6(a) of this Agreement:
(a) REPRESENTATIONS AND WARRANTIES. For purposes of this
Section 8.2(a), the accuracy of the representations and warranties of SBI set
forth in this Agreement shall be assessed as of the date of this Agreement and
as of the Effective Time with the same effect as though all such representations
and warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of SBI set forth
in Section 4.3 of this Agreement shall be true and correct. The representations
and warranties of SBI set forth in Sections 4.20, 4.21, and 4.22 of this
Agreement shall be true and correct in all material respects. There shall not
exist inaccuracies in the representations and warranties of SBI set forth in
this Agreement (including the representations and warranties set forth in
Sections 4.3, 4.20, 4.21, and 4.22) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a Material Adverse Effect on
SBI.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all
of the agreements and covenants of SBI to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby prior to
the Effective Time shall have been duly performed and complied with in all
material respects.
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(c) CERTIFICATES. SBI shall have delivered to UPC (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief operating officer, to the effect that the
conditions of its obligations set forth in Section 8.2(a) and 8.2(b) of this
Agreement have been satisfied, and (ii) certified copies of resolutions duly
adopted by SBI's Board of Directors and shareholders evidencing the taking of
all corporate action necessary to authorize the execution, delivery, and
performance of this Agreement and the Plan of Merger, and the consummation of
the transactions contemplated hereby and hereby, all in such reasonable detail
as UPC and its counsel shall request.
(d) AFFILIATES AGREEMENTS. UPC shall have received from
each affiliate of SBI the affiliates letter referred to in Section 7.12 of this
Agreement, to the extent necessary to assure in the reasonable judgment of UPC
that the transactions contemplated hereby will qualify for pooling-of-interests
accounting treatment.
(e) LEGAL OPINION. SBI shall have delivered to UPC an
opinion of counsel, dated as of the Closing Date, addressed to and in form and
substance satisfactory to UPC, to the effect that:
(i) SBI is a Arkansas corporation duly
organized, validly existing, and in good standing under the laws of the State of
Arkansas.
(ii) This Agreement, has been duly and validly
authorized, executed and delivered on behalf of SBI by a duly authorized officer
or representative of SBI, and (assuming this Agreement is a binding obligation
of UPC) constitute a valid and binding obligation of SBI 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) The execution, delivery and performance of
this Agreement and the Plan of Merger, as appropriate, and the consummation of
the transactions contemplated herein and therein, including the Merger, have
been duly and validly authorized by all necessary corporate and shareholder
action in respect thereof on the part of SBI.
(f) MAINTENANCE OF CERTAIN COVENANTS, ETC. At the time
of Closing, (i) the total consolidated assets of SBI shall be not less than
$162 million (ii) the total consolidated stockholders' equity of SBI shall have
been not less than $16.9 million at June 30, 1997, and shall have increased
since that date through normal earnings growth; (iii) the tangible equity
capital of SBI shall be not less than its reported level as of June 30, 1997,
and shall have increased since that time through normal earnings growth (less
approved dividends); (iv) SBI shall own, free and clear of any Liens, all of
the outstanding capital stock of Bank Subsidiaries; and (vi) from December 31,
1996, there shall have
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been no extraordinary sale of assets, nor any material investment portfolio
restructuring by any SBI Company. The financial criteria and calculations set
forth above shall be determined in accordance with GAAP assuming that SBI and
each other SBI Company shall have been operated consistently in the normal
course of their respective businesses; provided, however, that the effects of
any balance sheet expansion through abnormal, unusual, nonrecurring or
out-of-the-ordinary borrowings or by the realization of extraordinary or
nonrecurring gains 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;
8.3 CONDITIONS TO OBLIGATIONS OF SBI. The obligations of SBI to
perform this Agreement and the Plan of Merger and consummate the Merger and the
other transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by SBI pursuant to Section 10.6(b) of this
Agreement:
(a) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
8.3(a), the accuracy of the representations and warranties of UPC set forth in
this Agreement shall be assessed as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of UPC set forth
in Section 5.3 of this Agreement shall be true and correct (except for
inaccuracies which are de minimus in amount). The representations and warranties
of UPC set forth in Section 5.11 of this Agreement shall be true and correct in
all material respects. There shall not exist inaccuracies in the representations
and warranties of UPC set forth in this Agreement (including the representations
and warranties set forth in Sections 5.3 and 5.11) such that the aggregate
effect of such inaccuracies has, or is reasonably likely to have, a Material
Adverse Effect on UPC.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of UPC to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(c) CERTIFICATES. UPC shall have delivered to SBI (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief operating officer, to the effect that the
conditions of its obligations set forth in Section 8.3(a) and 8.3(b) of this
Agreement have been satisfied, and (ii) certified copies of resolutions duly
adopted by UPC's Board of Directors evidencing the taking of all corporate
action necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all in
such reasonable detail as SBI and its counsel shall request.
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(d) LEGAL OPINION. UPC shall have delivered to SBI an opinion of
counsel, which may be in-house counsel of UPC, dated as of the Closing Date,
addressed to and in form and substance satisfactory to SBI, to the effect that:
(i) UPC and Merger Subsidiary are Tennessee corporations
duly organized, validly existing, and in good standing under the laws of the
State of Tennessee;
(ii) This Agreement and Plan of Merger has been duly and
validly authorized, executed and delivered on behalf of UPC and Merger
Subsidiary by a duly authorized officer or representative thereof, and (assuming
this Agreement is a binding obligation of SBI) constitutes a valid and binding
obligation of UPC and Merger Subsidiary 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) The execution, delivery and performance of this
Agreement and the Plan of Merger, as appropriate, and the consummation of the
transactions contemplated herein and therein, including the Merger, have been
duly and validly authorized by all necessary corporate and shareholder action in
respect thereof on the part of UPC and Merger Subsidiary.
ARTICLE 9
TERMINATION
9.1 TERMINATION. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement by the
shareholders of SBI, this Agreement and the Plan of Merger may be terminated and
the Merger abandoned at any time prior to the Effective Time, as follows:
(a) By mutual consent of the Board of Directors of UPC
and the Board of Directors of SBI, or
(b) By the Board of Directors of either Party (provided
that the terminating Party is not then in breach of any representation or
warranty contained in this Agreement under the applicable standard set forth in
Section 8.2(a) of this Agreement in the case of SBI and Section 8.3(a) in the
case of UPC or in material breach of any covenant or other agreement contained
in this Agreement) in the event of an inaccuracy of any representation or
warranty of the other Party contained in this Agreement which cannot be or has
not been cured within 30 days after the giving of written notice to the
breaching Party of such inaccuracy and which inaccuracy would provide the
terminating Party the ability to terminate the Merger under the applicable
standard set forth in Section 8.2(a)
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of this Agreement in the case of SBI and Section 8.3(a) of this Agreement in the
case of UPC; or
(c) By the Board of Directors of either Party (provided
that the terminating Party is not then in breach of any representation or
warranty contained in this Agreement under the applicable standard set forth in
Section 8.2(a) of this Agreement in the case of SBI and Section 8.3(a) in the
case of UPC or in material breach of any covenant or other agreement contained
in this Agreement) in the event of a material breach by the other Party of any
covenant or agreement contained in this Agreement which cannot be or has not
been cured within 30 days after the giving of written notice to the breaching
Party of such breach; or
(d) By the Board of Directors of either Party in the
event (i) any Consent of any Regulatory Authority required for consummation of
the Merger shall have been denied by final nonappealable action of such
Regulatory Authority or if any action taken by such Regulatory Authority is not
appealed within the time limit for appeal or (ii) the shareholders SBI fail to
vote their approval of this Agreement and the transactions contemplated hereby
as required by Arkansas Law and SBI's Charter and Bylaws, and the rules of the
NYSE or National Association of Securities Dealers, if applicable, at the
Shareholders' Meeting where this Agreement and the Plan of Merger were presented
to such shareholders for approval and voted upon; or
(e) By the Board of Directors of either Party in the
event that the Merger shall not have been consummated by June 30, 1998, if the
failure to consummate the transactions contemplated hereby on or before such
date is not caused by any willful breach of this Agreement by the Party electing
to terminate pursuant to this Section 9.1 (e); and further, if UPC shall have
filed all applications to obtain the necessary Consents of banking Regulatory
Authorities within sixty (60) days of the date hereof, and if the Closing shall
not have occurred because of a delay caused by a bank Regulatory Authority in
its review of the application before it, or by the SEC in its review of the
Registration Statement to be filed by UPC, then SBI shall, upon UPC's written
request, extend the June 30, 1998 date for a reasonable time, in no event less
than thirty (30) days in order for UPC to obtain all Consents of bank Regulatory
Authorities required and/or all Consents of the SEC and any other securities
Regulatory Authorities, and for the expiration of any stipulated waiting
periods; or
(f) By the Board of Directors of either Party (provided
that the terminating Party is not then in breach of any representation or
warranty contained in this Agreement under the applicable standard set forth in
Section 8.2(a) of this Agreement in the case of SBI and Section 8.3(a) in the
case of UPC or in material breach of any covenant or other agreement contained
in this Agreement) in the event that any of the conditions precedent to the
obligations of such Party to consummate the Merger cannot be satisfied or
fulfilled by the date specified in Section 9.1(e) of this Agreement; or
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(g) by the Board of Directors of either Party should
there by an occurrence of the conditions set forth in Section 1.9 of this
Agreement.
9.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 9.1 of this Agreement, this
Agreement and the Plan of Merger shall become void and have no effect, except
that (i) the provisions of this Section 9.2, Section 6.3, Section 7.6(b) and
Article 10 of this Agreement shall survive any such termination and abandonment,
(ii) a termination pursuant to Sections 9.1(b), 9.1(c), 9.1(f) or 9.1(g) of this
Agreement shall not relieve the breaching Party from Liability for an uncured
willful breach of a representation, warranty, covenant, or agreement giving rise
to such termination.
9.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 9.3, Articles
1, 2, 3 and 10, and Sections 6.3, 7.8, and 7.12 of this Agreement.
ARTICLE 10
GENERAL PROVISIONS
10.1 DEFINITIONS.
(a) Except as otherwise provided herein, the capitalized
terms set forth below shall have the following meanings:
"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 SBI; (ii) acquire the right to vote ten percent (10%) or more of SBI
Common Stock; or (iii) acquire a significant portion of the assets or earning
power of SBI.
"ADJUSTMENT FACTOR" means the amount by which the
Exchange Ratio may increase in accordance with Section 2.1(a)(i) hereof.
"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, with that Party.
"AGREEMENT" shall mean this Agreement, the Plan of
Merger, and the Exhibits delivered pursuant hereto and incorporated herein by
reference.
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"ALLOWANCES" shall mean the allowances for loan,
lease and other credit losses, including losses in connection with ORE, of any
Person.
"ARKANSAS CODE" shall mean the Arkansas Code of 1987
Annotated, as amended
"ARTICLES OF MERGER" shall mean the Articles of
Merger to be executed by UPC, Merger Subsidiary and SBI and filed with the
Secretary of State of the State of Tennessee and the Secretary of State of the
State of Arkansas pursuant to Section 48-21- 107 of the Tennessee Code and the
applicable provisions of the Arkansas Code relating to the merger of SBI with
and into Merger Subsidiary as contemplated by this Agreement and the Plan of
Merger.
"ASSETS" of a Person shall mean all of the assets,
properties, businesses, and rights of such Person of every kind, nature,
character and description, whether real, personal or mixed, tangible or
intangible, accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or not
carried on the books and records of such Person, and whether or not owned in the
name of such Person or any Affiliate of such Person and wherever located.
"BALANCE SHEET DATE" shall mean December 31, 1996.
"BANK SUBSIDIARIES" shall mean Farmers & Merchants
Bank and Merchants & Farmers Bank, collectively.
"BHC ACT" 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 State of Tennessee and in the State of
Arkansas.
"CONSIDERATION" shall mean the shares of UPC Common
Stock and the cash settlement of any remaining fractional share of UPC Common
Stock deliverable to the SBI Record Holders pursuant to Section 2.1(c) of this
Agreement.
"CLOSING" shall mean the consummation of the Merger.
"CLOSING DATE" shall mean the date on which the
Closing occurs.
"CONSENT" shall mean any consent, approval,
authorization, clearance, exemption, waiver, or affirmation by any Person
pursuant to any Contract, Law, Order, or Permit.
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"CONTRACT" shall mean any written or oral agreement,
arrangement, authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of any
kind or character, or other document to which any Person is a party or that is
binding on any Person or its capital stock, Assets, or business.
"CONTROL" shall have the meaning assigned to such
term in Section 2(a)(2) of the Bank Holding Company Act of 1956, as amended.
"DEFAULT" shall mean (i) any breach or violation of
or default under any Contract, Order, or Permit, (ii) any occurrence of any
event that with the passage of time or the giving of notice or both would
constitute a breach or violation of or default under any Contract, Order, or
Permit, or (iii) any occurrence or any event that with or without the passage of
time or the giving of notice would give rise to a right to terminate or revoke,
change the current terms of or renegotiate, or to accelerate, increase, or
impose any Liability under, any Contract, Order or Permit.
"DEPOSITS" shall mean all deposits (including, but
not limited to, certificates of deposit, savings accounts, NOW accounts and
checking accounts) of each of the Bank Subsidiaries and other deposit-taking
Affiliates.
"EFFECTIVE DATE" shall mean that date on which the
Effective Time of the Merger shall have occurred.
"EFFECTIVE TIME" shall mean the date and time that '
the Articles of Merger shall become effective with the Secretary of State of the
State of Tennessee and with the Secretary of State of the State of Arkansas.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to
pollution or protection of human health or the environment (including ambient
air, surface water, ground water, land surface or subsurface strata) and which
are administered, interpreted or enforced by the United States Environmental
Protection Agency and any state and local agencies with jurisdiction over, and
including common law in respect of, pollution or protection of the environment,
including the Comprehensive Environmental Response Compensation and Liability
Act, as amended, 42 U.S. C. 9601 et seq. ("CERCLA"), the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and other Laws
relating to emissions, discharges, releases, or threatened releases of any
Hazardous Material, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of any
Hazardous Material.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
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"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 mean the number of shares of
UPC Common Stock, and fractions thereof, to be exchanged for each share of SBI
Common Stock pursuant to Section 2.1(c) of this Agreement, subject to such
adjustments as may be provided in this Agreement and the Plan of Merger.
"EXHIBITS" 1 through 4, inclusive, shall mean the
Exhibits so marked, copies of which are attached to this Agreement. Such
Exhibits are hereby incorporated by reference herein and made a part hereof, and
may be referred to in this Agreement and any other related instrument or
document without being attached hereto or thereto.
"FDIC" shall mean the Federal Deposit Insurance
Corporation.
"FEDERAL RESERVE" shall mean the Board of Governors
of the Federal Reserve System and shall include the Federal Reserve Bank of St.
Louis when acting under delegated authority.
"GAAP" shall mean generally accepted accounting
principles as in effect from time to time, consistently applied.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous
substance, hazardous material, hazardous waste, regulated substance, or toxic
substance (as those terms are defined by any applicable Environmental Laws) and
(ii) any chemicals, pollutants, contaminants, petroleum, petroleum products, or
oil (and specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and any
polychlorinated biphenyls).
"HSR ACT" shall mean Section 7A of the Clayton Act,
as added by Title Ill of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"INTELLECTUAL PROPERTY" shall mean copyrights,
patents, trademarks, service marks, service names, trade names, applications
therefor, technology rights and licenses, computer software (including any
source or object codes therefor or documentation relating thereto), trade
secrets, franchises, know-how, inventions, and other intellectual property
rights.
"IRC" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
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"KNOWLEDGE" as used with respect to a Person
(including references to such Person being aware of a particular matter) shall
mean those facts that are known by the Chairman, Chief Executive Officer,
President, Chief Administrative Officer, Chief Operating Officer, Chief
Financial Officer, Chief Accounting Officer, Chief Credit Officer or General
Counsel of such Person, or such other officer of such Person, regardless of
title, charged with or responsible for the oversight of a particular area,
department or function to which the subject matter relates.
"LAW" shall mean any code, law, ordinance,
regulation, reporting or licensing requirement, rule, or statute applicable to a
Person or its Assets, Liabilities or business, including those promulgated,
interpreted, or enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect,
primary or secondary, liability, indebtedness, obligation, penalty, cost, or
expense (including costs of investigation, collection, and defense), claim,
deficiency, guaranty, or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented for collection or
deposit in the ordinary course of business) of any type, whether accrued,
absolute or contingent, liquidated or unliquidated, matured or unmatured, or
otherwise.
"LIEN" shall mean any conditional sale agreement,
default of title, easement, encroachment, encumbrance, hypothecation,
infringement, lien, mortgage, pledge, reservation, restriction, security
interest, title retention, or other security arrangement, or any adverse right
or interest, charge, or claim of any nature whatsoever of, on, or with respect
to any property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, and (ii) for depository institution Subsidiaries
of a Party, pledges to secure deposits and other Liens incurred in the ordinary
course of the banking business.
"LITIGATION" shall mean any action, arbitration,
cause of action, claim, complaint, criminal prosecution, demand letter,
governmental or other examination or investigation, hearing, inquiry,
administrative or other proceeding, or notice (written or oral) by any Person
alleging potential Liability or requesting information relating to or affecting
a Party, its business, its Assets (including Contracts related to it), or the
transactions contemplated by this Agreement, but shall not include regular,
periodic routine examinations of depository institutions and their Affiliates by
Regulatory Authorities.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an
event, change, or occurrence which, individually or together with any other
event, change, or occurrence, has a material adverse impact on (i) the financial
position, business, or results of operations of such Party and its Subsidiaries,
taken as a whole, or (ii) the ability of such Party to perform its obligations
under this Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement.
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"MERGER" shall mean the merger of Merger Subsidiary
with and into Sbi as described in Section 1.1 of this Agreement.
"MERGER SUBSIDIARY" shall mean Security Acquisition
Corporation, Inc., a wholly-owned subsidiary of UPC.
"NET REALIZED AMOUNT" shall mean the amount remaining
after subtracting from (x) the sum of (i) the gross proceeds received from the
sale of collateral securing the XYZ Loan, or from the sale or other disposition
of the XYZ Loan, and (ii) any other recoveries actually received with respect to
the XYZ Loan after June 30, 1997, and prior to the Closing (such sum hereinafter
referred to as the Gross Recovery Proceeds), (y) the aggregate amount of all
costs and expenses incurred in connection with the XYZ Loan after June 30, 1997,
including, but not limited to, attorneys, accountant and appraisal fees,
foreclosure costs, repairs to premises, brokers fees and expenses, points paid
and closing costs (but only to the extent such costs and expenses were not paid
prior to June 30, 1997). For purposes hereof, Gross Recovery Proceeds shall not
include the amounts received with respect to the XYZ Loan which have been
financed by any SBI Company; therefore, should a third party finance the
purchase of the collateral with a loan from a SBI Company, the amount financed
would not be included in Gross Recovery Proceeds for purposes of determining the
Net Realized Amount.
"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, and the rules and regulations promulgated thereunder.
"1934 ACT" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
"OPERATING PROPERTY" shall mean any property owned by
the Party in question or by any of its Subsidiaries or in which such Party or
Subsidiary holds a security interest, and, where required by the context,
includes the owner or operator of such property, but only with respect to such
property.
"ORDER" shall mean any administrative decision or
award, decree, injunction, judgment, order, quasi-judicial decision or award,
ruling, or writ of any federal, state, local, or foreign or other court,
arbitrator, mediator, tribunal, administrative agency, or Regulatory Authority.
"ORE" shall mean real estate and other property
acquired through foreclosure, deed in lieu of foreclosure or similar procedures.
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"PARTICIPATION FACILITY" shall mean any facility or
property in which the Party in question or any of its Subsidiaries participates
in the management and, where required by the context, said term means the owner
or operator of such facility or property, but only with respect to such facility
or property.
"PARTY" shall mean either UPC and Merger Subsidiary
or SBI, and "Parties" shall mean UPC, Merger Subsidiary and SBI.
"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.
"PERMIT" shall mean any federal, state, local, and
foreign governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party or
that is or may be binding upon or inure to the benefit of any Person or its
securities, Assets or business.
"PERSON" shall mean a natural person or any legal,
commercial, or governmental entity, such as, but not limited to, a corporation,
general partnership, joint venture, limited partnership, limited liability
company, trust, business association, group acting in concert, or any person
acting in a representative capacity.
"PLAN OF MERGER" shall mean the plan of merger
providing for the Merger, in substantially the form of Exhibit 1.
"PROXY STATEMENT" shall mean the proxy statement to
be used by SBI to solicit proxies with a view to securing the approval of the
SBI shareholders of this Agreement and the Plan of Merger.
"RECORDS" means all available records, minutes of
meetings of the Board of Directors, committees and shareholders of a Party;
original instruments and other documentation, pertaining to a Party or any of
its Subsidiaries' or assets (including plans and specifications relating to any
realty), Liabilities, Deposits, Contracts, capital stock, and loans; and all
other business and financial records which are necessary or customary for use in
the conduct of such Person or any of such person's Subsidiary businesses on and
after the Effective Time as it was conducted prior to the Effective Time.
"REGISTRATION STATEMENT" shall mean the Registration
Statement on Form S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by UPC
under the 1933 Act with respect to the shares of UPC Common Stock to be issued
to the shareholders of SBI in connection with the transactions contemplated by
this Agreement.
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"REGULATORY AUTHORITIES" shall mean, collectively,
the Federal Trade Commission, the United States Department of Justice, the
Federal Reserve, the Office of Thrift Supervision (including its predecessor,
the Federal Home Loan Bank Board), the Office of the Comptroller of the
Currency, the FDIC, all state regulatory agencies having jurisdiction over the
Parties and their respective Subsidiaries, the NYSE, the National Association of
Securities Dealers and the SEC, or any respective successor thereto.
"REPRESENTATIVE" shall mean any investment banker,
financial advisor, attorney, accountant, consultant, or other representative of
a Person.
"RIGHTS" shall mean all arrangements, calls,
commitments, Contracts, options, rights to subscribe to, scrip, understandings,
warrants, or other binding obligations of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for shares of the
capital stock of a Person, or which derive their value in whole or in part from
shares of the capital stock of a Person, including stock appreciation rights and
phantom stock, or by which a Person is or may be bound to issue additional
shares of its capital stock or other Rights.
"SBI COMMON STOCK" shall mean the common stock of
SBI, $10.00 par value per share.
"SBI COMPANY(IES)" shall mean SBI and all of its
Subsidiaries, whether direct or indirect.
"SBI DISCLOSURE MEMORANDUM" shall mean the written
information entitled "SBI Holding Company Disclosure Memorandum" delivered prior
to the date of this Agreement in accordance with Section 1.9 to UPC describing
in reasonable detail the matters contained therein and, with respect to each
disclosure made therein, specifically referencing each Section of this Agreement
under which such disclosure is being made. Information disclosed with respect to
one Section shall not be deemed to be disclosed for purposes of any other
Section not specifically referenced with respect thereto.
"SBI 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 SBI or any SBI Subsidiary, to or for the benefit of the officers,
directors, employees, independent contractors or consultants of SBI or any SBI
Subsidiary.
"SBI RECORD HOLDERS" means those Persons who shall be
the holders of record of any of the issued and outstanding shares of SBI Common
Stock immediately prior to the Effective Time.
"SEC DOCUMENTS" shall mean all forms, proxy
statements, registration statements, reports, schedules, and other documents
filed, or required to be
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filed, by a Party or any of its Subsidiaries with any Regulatory Authority
pursuant to the Securities Laws.
"SEC" shall mean the United States Securities and
Exchange Commission, or any successor thereto.
"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 shareholders of SBI to be held pursuant to Section 7.1 of this Agreement,
including any adjournment or adjournments thereof.
"SUBSIDIARIES" shall mean all of those Persons of
which the entity in question owns or controls 5% or more of the outstanding
voting equity securities or equity interest, either directly or through an
unbroken chain of entities as to each of which 5% or more of the outstanding
equity securities or equity interest is owned directly or indirectly by its
parent; provided, however, that there shall not be included any Person 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, or any such Person the equity securities or equity interest
of which are owned or controlled in a fiduciary capacity or through a small
business development corporation.
"SURVIVING CORPORATION" shall mean Security
Bancshares, Inc., as the corporation resulting from and surviving the
consummation of the Merger as set forth in Section 1.1 of this Agreement.
"TANGIBLE SBI ASSETS" shall mean all assets of SBI
and all its Subsidiaries, consolidated in accordance with generally accepted
accounting principles, excluding the effects of all intangible assets, whether
identifiable or unidentifiable; including, but not limited to, goodwill,
copyrights, brand names, patents, franchises and trademarks.
"TAX" or "TAXES" shall mean any federal, state,
county, local, or foreign income, profits, franchise, gross receipts, payroll,
sales, employment, use, property, withholding, excise, occupancy, and other
taxes, assessments, charges, fares, or impositions, including interest,
penalties, and additions imposed thereon or with respect thereto
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"TENNESSEE CODE" shall mean the Tennessee Code
Annotated, as amended.
"UPC" shall mean 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 CAPITAL STOCK" shall mean, collectively, the UPC
Common Stock, the UPC Preferred Stock and any other class or series of capital
stock of UPC.
"UPC COMMON STOCK" shall mean the $5.00 par value
common stock of UPC.
"UPC COMPANIES" shall mean, collectively, UPC and all
UPC Subsidiaries.
"UPC DISCLOSURE MEMORANDUM" shall mean the written
information entitled "Union Planters Corporation Disclosure Memorandum"
delivered prior to the date of this Agreement pursuant to Section 1.9
(post-signing due diligence period) to SBI describing in reasonable detail the
matters contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made. Information disclosed with respect to one Section
shall be deemed to be disclosed for purposes of any other Section not
specifically referenced with respect thereto.
"UPC FINANCIAL STATEMENTS" shall mean (i) the
consolidated balance sheets (including related notes and schedules, if any) of
UPC as of June 30, 1997, and as of December 31, 1996, and 1995, and the related
statements of earnings, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the nine months ended June
30, 1997, and for each of the three years ended December 31, 1996, 1995, and
1994, as filed by UPC in SEC Documents, (ii) the consolidated balance sheets of
UPC (including related notes and schedules, if any) and related statements of
earnings, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) included in SEC Documents filed with respect to
periods ended subsequent to June 30, 1997.
"UPC PREFERRED STOCK" shall mean the no par value
preferred stock of UPC and shall include the (i) Series A Preferred Stock, and
(ii) Series E, 8% Cumulative, Convertible Preferred Stock, of UPC ("UPC Series E
Preferred Stock").
"UPC RIGHTS" shall mean the preferred stock purchase
rights issued pursuant to the UPC Rights Agreement.
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"UPC RIGHTS AGREEMENT" shall mean that certain Rights
Agreement dated January 19, 1989, between UPC and UPNB, as Rights Agent.
"UPC SUBSIDIARIES" shall mean the Subsidiaries of
UPC.
"XYZ LOAN" shall collectively mean those loan numbers
35600, 2787, and 19966521 on the books and records of Farmers and Merchants
Bank, Des Arc, Arkansas.
(b) Any singular term in this Agreement shall be deemed to include the
plural and any plural term the singular. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
10.2 EXPENSES.
(a) Except as otherwise provided in this Section
10.2, each of the Parties shall bear and pay all direct costs and expenses
incurred by it or on its behalf in connection with the ones contemplated
hereunder, including filing, registration and application fees, printing fees,
and fees and expenses of its own financial or other consultants, investment
bankers, accountants, and counsel, except that UPC shall bear and pay the filing
fees payable in connection with the Registration Statement and the Proxy
Statement and the costs incurred in connection with the printing and mailing of
the Proxy Statement.
(b) Nothing contained in this Section 10.2 shall
constitute or shall be deemed to constitute liquidated damages for the willful
breach by a Party of the terms of this Agreement or otherwise limit the rights
of the non-breaching Party.
10.3 BROKERS AND FINDERS. Except as identified and described in
Section 10.3 of the SBI Disclosure Memorandum as to SBI, each of the Parties
represents and warrants that neither it nor any of its officers, directors,
employees, or Affiliates has employed any broker or finder or incurred any
Liability for any financial advisory fees, investment bankers' fees, brokerage
fees, commissions, or finders' fees in connection with this Agreement or the
ones contemplated hereby. In the event of a claim by any broker or finder based
upon his or its representing or being retained by or allegedly representing or
being retained by SBI or UPC, each of SBI and UPC, as the case may be, agrees to
indemnify and hold the other Party harmless of and from any Liability in respect
of any such claim.
10.4 ENTIRE AGREEMENT. Except as otherwise expressly provided
herein, this Agreement (including the other documents and instruments
incorporated by reference herein) constitutes the entire agreement between the
Parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereto, written or oral.
Nothing in this Agreement expressed
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or implied, is intended to confer upon any Person, other than the Parties or
their respective successors, any rights, remedies, obligations, or liabilities
under or by reason of this Agreement.
10.5 AMENDMENTS. To the extent permitted by Law, this Agreement may
be amended by a subsequent writing signed by each of the Parties upon the
approval of the Boards of Directors of each of the Parties, whether before or
after shareholder approval of this Agreement and the Plan of Merger has been
obtained; provided, that after any such approval by the holders of SBI Common
Stock, there shall be made no amendment that modifies in any material respect
the Consideration to be received by the SBI Record Holders without the
appropriate SBI shareholder approval.
10.6 WAIVERS.
(a) Prior to or at the Effective Time, UPC, acting
through its Board of Directors, chief executive officer, or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by SBI, to waive or extend the time for the compliance or
fulfillment by SBI of any and all of its obligations under this Agreement, and
to waive any or all of the conditions precedent to the obligations of UPC under
this Agreement, except any condition which, if not satisfied, would result in
the violation of any Law. No such waiver shall be effective unless in writing
signed by a duly authorized officer of UPC.
(b) Prior to or at the Effective Time, SBI, acting
through its Board of Directors, chief executive officer, or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by UPC, to waive or extend the time for the compliance or
fulfillment by UPC of any and all of its obligations under this Agreement, and
to waive any or all of the conditions precedent to the obligations of SBI
under this Agreement, except any condition which, if not satisfied, would result
in the violation of any Law. No such waiver shall be effective unless in writing
signed by a duly authorized officer of SBI.
(c) The failure of any Party at any time or times to
require performance of any provision hereof shall in no manner affect the right
of such Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
10.7 ASSIGNMENT. Except as expressly contemplated hereby, neither
this Agreement nor any of the rights, interests, or obligations hereunder shall
be assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party; provided, however, UPC
and/or UPC Merger Subsidiary may
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assign all of their rights hereunder to any other wholly-owned Subsidiary of UPC
whether now existing or hereinafter acquired or organized. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the Parties and their respective successors and assigns.
10.8 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, by registered or certified mail, postage
prepaid, or by courier or overnight carrier, to the persons at the addresses set
forth below (or at such other address as may be provided hereunder), and shall
be deemed to have been delivered as of the date so delivered:
If to UPC/Merger Sub: Union Planters Corporation
Post Office Box 387 (for mailing)
Memphis, Tennessee 38147
7130 Goodlett Farms Parkway (for deliveries)
Memphis, Tennessee 38018
Attn: Mr. Jackson W. Moore, President
Telephone (901) 580-6093
Fax: (901) 580-2877
With copy to: E. James House, Jr., Esquire, Corporate Secretary
P.O. Box 387 (for mailing)
Memphis, Tennessee 38147
7130 Goodlett Farms Parkway (for deliveries)
Memphis, Tennessee 38018
Telephone (901) 580-6596
Fax: (901) 580-2939
If to SBI: Security Bancshares, Inc.
P.O. Box 369
Des Arc, Arkansas 72040-0369
110 South 3rd Street (for deliveries)
Des Arc, Arkansas 72040
Attn: Henry Nichols, Chairman
Telephone: (501) 256-4191
Fax: (501) 256-4582
With copy to: Garland W. Binns, Jr.
Horne, Hollingsworth & Parker
401 West Capitol, Suite 501
Little Rock, Arkansas 72203-3363
Telephone: (501) 376-4731
Fax: (501) 372-7142
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10.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Tennessee, without regard
to any applicable conflicts of Laws.
10.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same document.
10.11 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
10.12 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any Party, whether under
any rule of construction or otherwise. No Party to this Agreement shall be
considered the draftsman. The Parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all Parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all Parties
hereto.
10.13 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
10.14 ATTORNEYS' FEES. If any Party hereto shall bring an action at
law or in equity to enforce its rights under this Agreement (including an action
based upon a misrepresentation or the breach of any warranty, covenant,
agreement or obligation contained herein), the prevailing Party in such action
shall be entitled to recover from the other Party its reasonable costs and
expenses necessarily incurred in connection with such action (including fees,
disbursements and expenses of attorneys and costs of investigation).
10.15 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability, without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
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10.16 REMEDIES CUMULATIVE. All remedies provided in this Agreement,
by Law or otherwise, shall be cumulative and not alternative.
IN WITNESS WHEREOF, each of the Parties hereto has duly
executed and delivered this Agreement or has caused this Agreement 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.
SECURITY BANCSHARES, INC.
By: /s/ Henry L. Nichols
------------------------------
Henry L. Nichols
Its: Chairman
ATTEST:
/s/ Faye A. Smith
- -------------------------------
Faye A. Smith, Secretary
UNION PLANTERS CORPORATION
By: /s/ Jackson W. Moore
------------------------------
Jackson W. Moore
Its: President and Chief Operating
Officer
ATTEST:
/s/ E. James House
- -------------------------------
E. James House, Jr., Secretary
SECURITY ACQUISITION CORPORATION, INC.
By: /s/ Jackson W. Moore
------------------------------
Jackson W. Moore
Its: Chairman and President
ATTEST:
/s/ Lynn L. Lanigan
- -------------------------------
Lynn L. Lanigan, Secretary
By: /s/ Henry L. Nichols
------------------------------
HENRY L. NICHOLS, as Trustee or
Co-Trustee of The Security Trust, The Guaranty Trust, The Old-River Trust, The
Fidelity Trust, The Robinson Trust, The Laura P. Nichols Trust, The Lyons
(Arkansas) College Trust, The Anne R. Nichols Trust, The Mark A. Nichols Trust,
The Lance H. Nichols Trust, The Alpha Trust, The Anne E. Orsi Trust, The Susan
P. Orsi Trust, and The Trinity Trust
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EXHIBIT 1
PLAN OF MERGER
OF
SECURITY BANCSHARES, INC.
WITH AND INTO
UNION PLANTERS HOLDING CORPORATION
Pursuant to this Plan of Merger ("Plan of Merger"), Security Bancshares
Inc. ("SBI"), a corporation organized and existing under the laws of the State
of Arkansas, shall be merged with and into Union Planters Holding Corporation
("UPHC"), a corporation organized and existing under the laws of the State of
Tennessee and which is a wholly-owned subsidiary of Union Planters Corporation
("UPC").
ARTICLE 1
TERMS OF MERGER
1.1 The Merger. Subject to the terms and conditions of the Merger
Agreement and this Plan of Merger, at the Effective Time, SBI shall be merged
with and into UPHC in accordance with the provisions of the Tennessee Code and
the Arkansas Code and with the effect provided in the Tennessee Code and the
Arkansas Code (the "Merger"). UPHC shall be the Surviving Corporation resulting
from the Merger and shall continue to be governed by the Laws of the State of
Tennessee. The Merger shall be consummated pursuant to the terms of the Merger
Agreement and this Plan of Merger.
1.2 Time and Place of Closing. The Closing will take place at 9:00
A.M. on the date that the Effective Time occurs (or the immediately preceding
day if the Effective Time is earlier than 9:00 A.M.), or at such other time as
the Parties, acting through their chief executive officers or chief financial
officers, may mutually agree. The Closing shall be held at the Union Planters
Administrative Center, Union Planters Corporation Executive Offices (Fourth
Floor), 7130 Goodlett Farms Parkway, Memphis, Shelby County, Tennessee 38018, or
at such other place as the Parties, acting through their chief executive
officers or chief financial officers, may mutually agree.
1.3 Effective Time. The Merger and other transactions contemplated by
the Merger Agreement and this Plan of Merger shall become effective on the date
and at the time Articles of Merger reflecting the Merger shall become effective
with the Secretary of State of the States of Tennessee and Arkansas (the
"Effective Time").
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1.4 Charter. The Charter of UPHC in effect immediately prior to the
Effective Time shall be the Charter of the Surviving Corporation until otherwise
amended or repealed.
1.5 Bylaws. The Bylaws of UPHC in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until otherwise
amended or repealed.
1.6 Name. The name of UPHC shall remain unchanged after the Effective
Time, unless and until otherwise renamed.
1.7 Directors and Officers. The directors and officers of UPHC in
office immediately prior to the Effective Time, together with such additional
persons as may thereafter be elected or appointed, shall serve as the directors
and officers of the Surviving Corporation from and after the Effective Time in
accordance with the 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.
ARTICLE 2
MANNER OF CONVERTING SHARES AND OPTIONS; EXCHANGE RATIO
2.1 Conversion; Cancellation and Exchange of Shares; Exchange Ratio.
At the Effective Time, by virtue of the Merger becoming effective and without
any action on the part of UPC, UPHC, SBI, or the shareholders of any of the
foregoing, the shares of the constituent corporations shall be converted as
follows:
(a) UPC Capital Stock. Each share of UPC Capital Stock,
including any associated UPC Rights, issued and outstanding immediately prior to
the Effective Time shall remain issued and outstanding from and after the
Effective Time.
(b) UPHC Common Stock. Each share of UPHC common stock issued
and outstanding immediately prior to the Effective Time shall continue to
represent all of the issued and outstanding capital stock of UPHC as the
Surviving Corporation at and after the Effective Time.
(c) SBI Common Stock. Each share of SBI Common Stock issued and
outstanding at the Effective Time shall cease to represent any interest (equity,
shareholder or otherwise) in SBI and shall automatically be converted
exclusively into, and constitute only the right of each SBI Record Holder to
receive in exchange for such holder's shares of SBI Common Stock, the
Consideration to which the SBI Record Holder is entitled as provided in this
Section 2.1(c), with the following exceptions:
(1) Shares held by any SBI Company or any UPC Company, in each
case other than in a fiduciary capacity or as a result of
debts previously contracted; and
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(2) Shares held by any SBI 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 ("SBI
Dissenting Shareholders") whose rights shall be governed by
the provisions of the applicable sections of Arkansas Code
regarding dissenters' rights.
(i) The Exchange Ratio. Subject to any adjustments which
may be required by an event described in Subsection 2.1(c)(iii), the number of
shares of UPC Common Stock to be exchanged for each share of SBI Common Stock
which shall be validly issued and outstanding immediately prior to the Effective
Time shall be based on an exchange ratio (the "Exchange Ratio") of 3.5777 shares
of UPC Common Stock for each share of SBI Common Stock which shall be validly
issued and outstanding immediately prior to the Effective Time; provided,
however, that should the Net Realized Amount received by SBI prior to the
Closing from the XYZ Loan exceed $500,000, then the Exchange Ratio shall be
increased by the Adjustment Factor. For purposes hereof, the Adjustment Factor
shall be determined by the following formula: the amount by which the Net
Realized Amount exceeds $500,000 shall be divided by $50.538, and the quotient
thereof shall be divided by the number of outstanding shares of SBI Common Stock
validly issued and outstanding immediately prior to the Effective Time.
Therefore, the maximum aggregate number of shares of UPC Common Stock which UPC
would be required to issue in exchange for all outstanding shares of SBI Common
Stock, based on the Exchange Ratio and without consideration of the Adjustment
Factor, would be 487,595 shares of UPC Common Stock. SBI Common Stock held by
any SBI 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 for purposes of the Exchange Ratio. 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 SBI 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 Article 3 of this Agreement,
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.
(ii) Definition of "Current Market Price Per Share." The
"Current Market Price Per Share" shall be the closing price per share of UPC
Common Stock on the NYSE Composite Transaction List (as reported by The Wall
Street Journal or, if not reported thereby, any other authoritative source
selected by UPC) on the Effective Date of the Merger.
(iii) Effect of Stock Splits, Reverse Stock Splits, Stock
Dividends and Similar Changes in the Capital of SBI. Should SBI effect any stock
splits, reverse stock splits, stock dividends or similar changes in its
respective capital accounts subsequent to the date of this Agreement but prior
to the Effective Time, or should there be more than 136,289 fully diluted shares
of SBI Common Stock outstanding immediately prior to the Effective Time, the
Exchange Ratio may, in UPC's sole discretion if such change in the capital
accounts constitutes a breach of any of SBI's representations, warranties or
covenants, 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
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such changes. Notwithstanding the foregoing, nothing in this subparagraph (iii)
shall be deemed to be a waiver of the inaccuracy of any representation or
warranty or breach of any covenant by SBI set forth herein.
(d) Shares Held by SBI or UPC. Each of the shares of SBI Common
Stock held by any SBI Company or by any UPC Company, in each case other than in
a fiduciary capacity or as a result of debts previously contracted, shall be
canceled and retired at the Effective Time and no Consideration shall be issued
in exchange therefor.
(d) Dissenters' Rights of SBI Shareholders. Any SBI Record
Holder who shall comply strictly with the provisions of the applicable sections
of the Arkansas Code regarding dissenters' rights ("SBI Dissenting
Shareholders"), shall be entitled to dissent from the Merger and to seek those
appraisal remedies afforded by such Arkansas Code.
2.2 Anti-Dilution Provisions. In the event UPC changes the number of
shares of UPC Common Stock issued and outstanding prior to the Effective Time as
a result of a stock split, stock dividend, or similar recapitalization with
respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, the Exchange Ratio shall be proportionately adjusted. The
Parties hereto acknowledge and agree that UPC's issuance of additional shares of
UPC Common Stock, or any other Capital Stock, for what the Board of Directors of
UPC determines to be adequate consideration, including but not limited to, the
issuance of additional shares in connection with other acquisitions, dividend
reinvestment plans or employee benefit plans, would not give rise to an
adjustment to the Exchange Ratio pursuant to this Section 2.2.
ARTICLE 3
EXCHANGE OF SHARES
3.1 Exchange Procedures. As soon as reasonably practical after the
Effective Time, UPC and SBI shall cause the Exchange Agent to mail to the SBI
Record Holders appropriate transmittal materials (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
theretofore representing shares of SBI Common Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent). The Exchange Agent may
establish reasonable and customary rules and procedures in connection with its
duties. After the Effective Time, each SBI Record Holder of SBI Common Stock
(other than shares to be canceled pursuant to Section 2.1(d) of this Agreement)
issued and outstanding at the Effective Time shall surrender the certificate or
certificates representing such shares to the Exchange Agent and shall promptly
upon surrender thereof receive in exchange therefor the Consideration provided
in Section 2.1(c) of this Agreement, together with all undelivered dividends or
distributions in respect of such shares (without interest thereon) pursuant to
Section 3.2 of this Agreement. To the extent required by Section 2.1(c) of this
Agreement, each SBI Record Holder also shall receive, upon surrender of the
certificate or certificates representing his or her shares of SBI Common Stock
outstanding
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immediately prior to the Effective Time, cash in lieu of any fractional share of
UPC Common Stock to which such holder may be otherwise entitled (without
interest). UPC shall not be obligated to deliver the Consideration to which any
SBI Record Holder is entitled as a result of the Merger until such SBI Record
Holder surrenders such holder's certificate or certificates representing the
shares of SBI Common Stock for exchange as provided in this Section 3.1. The
certificate or certificates of SBI Common Stock so surrendered shall be duly
endorsed as the Exchange Agent may require. Any other provision of this
Agreement notwithstanding, neither UPC nor the Exchange Agent shall be liable to
a SBI Record Holder for any amounts paid or property delivered in good faith to
a public official pursuant to any applicable abandoned property Law. Approval of
this Agreement and the Plan of Merger by the shareholders of SBI shall
constitute all shareholders' ratification of the appointment of the Exchange
Agent.
3.2 Rights of Former SBI Record Holders. At the Effective Time, the
stock transfer books of SBI shall be closed as to holders of SBI Common Stock
outstanding immediately prior to the Effective Time, and no transfer of SBI
Common Stock by any SBI Record Holder shall thereafter be made or recognized.
Until surrendered for exchange in accordance with the provisions of Section 3.1
of this Agreement, each certificate theretofore representing shares of SBI
Common Stock (other than shares to be canceled pursuant to Section 2.1(d) of
this Agreement) shall from and after the Effective Time represent for all
purposes only the right to receive the Consideration provided in Section 2.1(c)
of this Agreement in exchange therefor, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time which have been declared or made
by SBI in respect of such shares of SBI Common Stock in accordance with the
terms of this Agreement and which remain unpaid at the Effective Time. Whenever
a dividend or other distribution is declared by UPC on the UPC Common Stock, the
record date for which is on or after the Effective Date, the declaration shall
include dividends or other distributions on all shares of UPC Common Stock
issuable pursuant to this Agreement, but no dividend or other distribution
payable to the holders of record of UPC Common Stock as of any time subsequent
to the Effective Time shall be delivered to a SBI Record Holder until such SBI
Record Holder surrenders his or her certificate or certificates evidencing SBI
Common Stock for exchange as provided in Section 3.1 of this Agreement. However,
upon surrender of such SBI Common Stock certificate, both the UPC Common Stock
certificate (together with all such undelivered dividends or other
distributions, without interest) and any undelivered dividends and cash payments
payable hereunder (without interest), shall be delivered and paid with respect
to each share represented by such certificate.
ARTICLE 4
MISCELLANEOUS
4.1 Conditions Precedent. Consummation of the Merger by UPHC shall be
conditioned on the satisfaction of or waiver by UPC of the conditions precedent
to the Merger set forth in Sections 8.1 and 8.2 of the Merger Agreement.
Consummation of the Merger by SBI shall be conditioned on the satisfaction of,
or waiver by SBI of, of the conditions precedent to the Merger set forth in
Sections 8.1 and 8.3 of the Merger Agreement.
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4.2 Termination. This Plan of Merger may be terminated at any time
prior to the Effective Time by the Parties hereto as provided in Article 9 of
the Merger Agreement.
4.3 Amendments. To the extent permitted by Law, this Plan of Merger
may be amended by a subsequent writing signed by each of the Parties upon the
approval of the Boards of Directors of each of the Parties, whether before or
after shareholder approval of the Merger Agreement and this Plan of Merger has
been obtained; provided, that after any such approval by the holders of SBI
Common Stock, there shall be made no amendment that modifies in any material
respect the Consideration to be received by the SBI Record Holders.
4.4 Assignment. Except as expressly contemplated hereby, neither this
Plan of Merger nor the Merger Agreement, nor any of the rights, interests, or
obligations hereunder or thereunder shall be assigned by any Party hereto
(whether by operation of Law or otherwise) without the prior written consent of
the other Party. Subject to the preceding sentence, the Merger Agreement and
this Plan of Merger will be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.
4.5 Governing Law. This Plan of Merger shall be governed by and
construed in accordance with the Laws of the State of Tennessee, without regard
to any applicable conflicts of Laws.
4.6 Counterparts. This Plan of Merger may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same document.
4.7 Captions. The captions contained in this Plan of Merger are for
reference purposes only and are not part of this Plan of Merger.
4.8 Definitions. Except as otherwise specifically provided herein,
capitalized terms set forth below shall have the following meanings:
"Articles of Merger" shall mean the Articles of Merger to be
executed by UPC, UPHC, and SBI and filed with the Secretary of State of the
State of Tennessee relating to the merger of SBI with and into UPHC as
contemplated by Section 1.1 of this Plan of Merger.
"Effective Time" shall mean the date and time on which the Merger
becomes effective pursuant to the Laws of the State of Tennessee as defined in
Section 1.2 of this Plan of Merger.
"Exchange Agent" shall mean Union Planters National Bank, Memphis,
Tennessee, acting through its corporate trust department.
"Law" shall mean any code, law, ordinance, regulation, reporting
or licensing requirement, rule, or statute applicable to a person or its assets,
liabilities, or business, including
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those promulgated, interpreted, or enforced by any federal or state regulatory
agencies having jurisdiction over a person or its Subsidiaries.
"SBI Common Stock" shall mean the $10.00 par value common stock of
SBI.
"Merger" shall mean the merger of SBI with and into UPHC as
provided in Section 1.1 of this Plan of Merger.
"Merger Agreement" shall mean the Agreement and Plan of
Reorganization as amended by Amendment No. 1, dated as of August 20, 1997, by
and between UPC, SBI, and UPHC.
"Subsidiaries" shall mean all those corporations, banks,
associations, or other entities of which the entity in question owns or controls
5% or more of the outstanding equity securities or equity interests, either
directly or through an unbroken chain of entities as to each of which 5% or more
of the outstanding equity securities or equity interest is owned directly or
indirectly by its parent; provided, there shall not be included any such entity
acquired through foreclosure or any such entity the equity securities or
interests of which are owned or controlled in a fiduciary capacity.
"Surviving Corporation" shall refer to UPHC as the surviving
corporation resulting from the Merger.
"UPC Common Stock" shall mean the $5.00 par value common stock of
UPC.
"UPC Capital Stock" shall mean, collectively, the UPC Common
Stock, the UPC Preferred Stock, and any other class or series of capital stock
of UPC.
"UPC Preferred Stock" shall mean the no par value preferred stock
of UPC and shall include the (i) Series A Preferred Stock, and (ii) Series E, 8%
Cumulative, Convertible Preferred Stock, of UPC.
"UPC Rights" shall mean the preferred stock purchase rights issued
pursuant to the UPC Rights Agreement.
"UPC Rights Agreement" shall mean that certain Rights Agreement,
dated January 19, 1989, between UPC and UPNB, as Rights Agent.
"UPHC Common Stock" shall mean the $1.00 par value common stock of
UPHC.
IN WITNESS WHEREOF, each of the Parties hereto has duly executed
and delivered this Plan of Merger or 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.
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SECURITY BANCSHARES, INC.
By /s/ Henry L. Nichols
------------------------
Henry L. Nichols
Its: Chairman
ATTEST:
/s/ Faye A. Smith
- ---------------------------------
Faye A. Smith, Secretary
UNION PLANTERS CORPORATION
By: /s/ Jackson W. Moore
------------------------
Jackson W. Moore
Its: President
ATTEST:
/s/ E. James House, Jr.
- ---------------------------------
E. James House, Jr.
Secretary
8
<PAGE> 133
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF AUGUST 20, 1997
BETWEEN
UNION PLANTERS CORPORATION
SECURITY ACQUISITION CORPORATION, INC.
SECURITY BANCSHARES, INC.
AND
HENRY L. NICHOLS
This Amendment No. 1 to that certain Agreement and Plan of Reorganization
dated as of August 20, 1997 between Union Planters Corporation ("UPC"), Security
Acquisition Corporation, Inc. ("Acquisition"), Security Bancshares, Inc.,
("SBI") and Henry L. Nichols (the "Agreement") is made and entered into as of
August 20, 1997. This Amendment to the Agreement is being undertaken by the
parties so that the Agreement and related Plan of Merger, as revised, will
properly reflect the structure of the proposed transaction and to replace
Acquisition as a party to the Agreement and the Plan of Merger with Union
Planters Holding Corporation ("UP Holding"), a wholly-owned subsidiary of UPC.
The parties hereto acknowledge UPC's right to revise the structure of the
transactions contemplated by the Agreement and the Plan of Merger pursuant to
Section 1.8 of the Agreement and enter into this Amendment for the purpose of
documenting such revision and consent. Capitalized terms used herein, unless
otherwise specifically defined, shall have the same meaning as in the Agreement.
NOW, THEREFORE, the parties hereto agree that the Agreement shall be amended as
follows:
1. Whenever in the Agreement reference is made to Acquisition (Security
Acquisition Corporation, Inc.), such reference shall hereafter be deemed to be
referring to Union Planters Holding Corporation.
2. Whenever in the Agreement reference is made to the structure of the Merger,
including but not limited to Section 1.1 where it states that "Merger Subsidiary
shall be merged with and into SBI", those sections shall hereafter be deemed to
reflect that in the Merger SBI shall be merged with and into UP Holding, with UP
Holding surviving the Merger.
3. Section 1.4 shall hereafter be deemed to reflect that the charter of UP
Holding shall be the Charter of the Surviving Corporation.
4. Section 1.5 shall hereafter be deemed to reflect that the Bylaws of UP
Holding shall be the Bylaws of the Surviving Corporation.
<PAGE> 134
5. Section 1.6 shall hereafter be deemed to reflect that the name of UP Holding
shall remain unchanged after the Effective Time of the Merger.
6. Section 1.7 shall hereafter be deemed to reflect that the officers and
directors of UP Holding immediately prior to the Effective Time of the Merger
shall remain the officers and directors of UP Holding as the Surviving
Corporation at and after the Effective Time of the Merger, in accordance with
the Bylaws of the Surviving Corporation and 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 in the Bylaws.
Section 2.1(b) shall hereafter be deemed to reflect that each share of UP
Holding common stock issued and outstanding immediately prior to the Effective
Time of the Merger shall be unaffected by the Merger and at and after the
Effective Time of the Merger shall continue to represent all of the issued and
outstanding capital stock of UP Holding as the Surviving Corporation.
This Amendment No.1 to the Agreement executed this __ day of October, 1997.
Union Planters Corporation
/s/ Jackson W. Moore
-------------------------------
By: Jackson W. Moore
President and COO
Union Planters Holding Corporation
/s/ Jackson W. Moore
-------------------------------
By: Jackson W. Moore
President and COO
Security Bancshares, Inc.
/s/ Henry L. Nichols
-------------------------------
By: Henry L. Nichols
Chairman
/s/ Henry L. Nichols
-------------------------------
Henry L. Nichols, Individually and a Co-
Trustee
<PAGE> 135
APPENDIX B
Audited Consolidated Financial Statements of Security Bancshares, Inc.
as of and for the years ended December 31, 1996 and 1995
<PAGE> 136
Appendix B
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
WITH
INDEPENDENT AUDITORS' REPORT
<PAGE> 137
INDEPENDENT AUDITORS' REPORT
Board of Directors
Security Bancshares, Inc. and Subsidiaries
Des Arc, Arkansas
We have audited the consolidated balance sheets of Security Bancshares, Inc. and
Subsidiaries (the "Company") as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Security
Bancshares, Inc. and Subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/ Kemp & Company, Inc.
- ------------------------
Little Rock, Arkansas
April 26, 1997, except as to Note 17 for which the date is September 30, 1997
<PAGE> 138
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
------
1996 1995
---- ----
<S> <C> <C>
Cash and cash equivalents
Cash and due from banks (Note 3) $ 6,307,042 $ 6,346,756
Interest-bearing deposits in banks 2,094,728 5,437,115
Federal funds sold 8,110,000 10,690,000
------------- -------------
16,511,770 22,473,871
Investment securities (Note 4)
Available-for-sale (amortized cost of $46,520,584
and $40,659,987, respectively) 46,723,103 41,055,636
Held-to-maturity (approximate market values of $6,470,613
and $6,065,456, respectively) 6,427,847 6,063,248
Federal Home Loan Bank Stock 126,000 120,800
Loans, net of unearned income (Notes 5 and 18) 92,994,275 85,543,367
Allowance for loan losses (Note 6) (1,267,641) (1,218,368)
------------- -------------
Loans, net 91,726,634 84,324,999
Premises and equipment, net (Note 7) 1,885,884 1,840,398
Accrued interest receivable 2,217,734 2,195,568
Other assets 1,454,285 1,198,450
------------- -------------
Total assets $ 167,073,257 $ 159,272,970
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits
Non-interest-bearing $ 22,149,129 $ 20,725,085
Interest-bearing (Note 8) 124,597,894 119,692,948
------------- -------------
146,747,023 140,418,033
Note payable (Note 10) 2,819,000 3,000,000
Accrued interest payable 784,525 781,810
Other liabilities (Note 13) 657,516 643,688
------------- -------------
Total liabilities 151,008,064 144,843,531
Commitments and contingencies (Note 12)
Stockholders' equity Common stock, $10 par value:
Authorized 200,000 shares
Issued 128,740 and 125,764 shares, respectively
Outstanding 128,740 and 121,718 shares, respectively 1,287,400 1,257,640
Additional paid-in-capital 5,115,820 5,474,630
Retained earnings (Notes 9 and 17) 9,536,999 7,828,228
Unrealized gains on available-for-sale
securities, net of tax 124,974 244,156
Treasury stock - at cost -- (375,215)
------------- -------------
Total stockholders' equity 16,065,193 14,429,439
------------- -------------
Total liabilities and stockholders' equity $ 167,073,257 $ 159,272,970
============= =============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 139
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Interest income:
Loans, including fees $ 8,900,803 $ 7,724,527
Investment securities:
Taxable 1,996,622 1,818,881
Tax-exempt 733,063 705,494
Federal funds sold 244,806 228,827
Deposits in banks 210,267 70,071
------------ ------------
12,085,561 10,547,800
Interest expense:
Deposits 5,704,952 4,742,526
Note payable 234,841 202,566
Federal funds purchased 68,128 44,883
------------ ------------
6,007,921 4,989,975
Net interest income 6,077,640 5,557,825
Provision for loan losses (Note 6) 365,000 140,000
------------ ------------
Net interest income after provision for loan losses 5,712,640 5,417,825
Other income:
Service charges on deposit accounts 285,496 243,673
Security losses, net (24,240) (12,004)
Other (Note 15) 595,383 551,968
------------ ------------
856,639 783,637
Other expense:
Salaries and employee benefits 2,224,511 2,080,938
Occupancy and equipment 662,085 714,323
Professional fees (Note 13) 182,534 191,350
Other (Note 15) 1,060,966 1,160,936
------------ ------------
4,130,096 4,147,547
------------ ------------
Income before income taxes 2,439,183 2,053,915
Provision for income taxes (Note 11) 657,362 447,396
------------ ------------
Net income $ 1,781,821 $ 1,606,519
============ ============
Per share (based on weighted average number of
shares outstanding of 128,174 and 121,327,
respectively) $ 13.90 $ 13.24
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 140
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS) ON
AVAILABLE-
COMMON STOCK ADDITIONAL FOR-SALE TREASURY STOCK
------------------- PAID-IN RETAINED SECURITIES, -----------------
SHARES AMOUNT CAPITAL EARNINGS NET OF TAX SHARES AMOUNT TOTAL
------ ------ ------- -------- ---------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1994 - as
restated (Note 2) 118,826 $1,188,260 $5,474,630 $6,291,089 $(777,790) 3,118 $(287,055) $11,889,134
Purchase of treasury stock 980 (93,100) (93,100)
Sale of treasury shares (52) 4,940 4,940
Issuance of stock dividend 6,938 69,380 (69,380)
Net income 1,606,519 1,606,519
Net change in unrealized
loss on available-for-sale
securities, net of deferred
taxes of $634,113 1,021,946 1,021,946
------- ---------- ---------- ---------- -------- ----- --------- -----------
Balance - December 31, 1995 125,764 $1,257,640 $5,474,630 $7,828,228 $244,156 4,046 $(375,215) $14,429,439
======= ========== ========== ========== ========== ===== ========= ===========
</TABLE>
(CONTINUED)
<PAGE> 141
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS) ON
AVAILABLE-
COMMON STOCK ADDITIONAL FOR-SALE TREASURY STOCK
----------------- PAID-IN RETAINED SECURITIES, -----------------
SHARES AMOUNT CAPITAL EARNINGS NET OF TAX SHARES AMOUNT TOTAL
------ ------ ------- -------- ---------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1995 125,764 $1,257,640 $5,474,630 $7,828,228 $244,156 4,046 $(375,215) $14,429,439
Purchase of treasury stock 281 (26,695) (26,695)
Retirement of treasury stock (4,327) (43,270) (358,640) (4,327) 401,910
Issuance of stock dividend 7,305 73,050 (73,050)
Retirement of common stock (52) (520) (4,420) (4,940)
Issuance of common stock 50 500 4,250 4,750
Net income 1,781,821 1,781,821
Net change in unrealized
loss on available-for-sale
securities, net of deferred
taxes of $73,982 (119,182) (119,182)
------- ---------- ---------- ---------- -------- ------ --------- -----------
Balance - December 31, 1996 128,740 $1,287,400 $5,115,820 $9,536,999 $124,974 -0- -0- $16,065,193
======= ========== ========== ========== ======== ====== ========= ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 142
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,781,821 $ 1,606,519
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 365,000 140,000
Depreciation 294,419 376,390
Deferred income tax (benefit) expense (9,884) 10,168
Amortization of premium on investment
securities, net of discount accretion 61,416 106,899
Net loss on sales of securities 24,240 12,004
Change in operating assets and liabilities:
Accrued interest receivable and other assets (209,499) (103,937)
Accrued expenses and other liabilities 34,945 (454,739)
------------ ------------
Net cash provided by operating activities 2,342,458 1,693,304
INVESTING ACTIVITIES:
Purchase of equipment (339,905) (40,079)
Purchase of investment securities designated
as held-to-maturity (1,030,200) (722,450)
Purchase of investment securities designated
as available-for-sale (32,159,209) (16,667,367)
Loan originations, net of repayments (7,766,635) (11,948,400)
Proceeds from maturities and calls of investment
securities - held-to-maturity 664,424 265,000
Proceeds from maturities and calls of investment
securities - available-for-sale 16,198,538 11,103,110
Proceeds from sales of investment securities -
available-for-sale 10,007,323 5,135,000
------------ ------------
Net cash used in investing activities (14,425,664) (12,875,186)
FINANCING ACTIVITIES:
Proceeds from sale of treasury stock 4,750 4,940
Purchase of treasury stock (31,635) (93,100)
Note payable payments (181,000) --
Net increase in deposits 6,328,990 22,405,449
------------ ------------
Net cash provided by financing activities 6,121,105 22,317,289
------------ ------------
CASH AND CASH EQUIVALENTS:
Net (decrease) increase (5,962,101) 11,135,407
Balance - January 1 22,473,871 11,338,464
------------ ------------
Balance - December 31 $ 16,511,770 $ 22,473,871
============ ============
SUPPLEMENTAL DISCLOSURES
Issuance of stock dividend $ 73,050 $ 69,380
Retirement of treasury stock 401,910 --
Income taxes paid 599,378 438,000
Interest paid 6,025,874 4,721,837
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 143
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Security Bancshares, Inc. ("Security") is a multibank holding company which owns
all of the outstanding common stock of Farmers & Merchants Bank, Des Arc (F&M
Bank) and Merchants & Farmers Bank, West Helena (M&F Bank) (the "Banks").
Security and the Banks are referred to as the "Company". The Company is subject
to regulation by the Federal Reserve Bank, the Federal Deposit Insurance
Corporation and the Arkansas State Bank Department.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions 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.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Security and
its wholly-owned subsidiaries. All material intercompany transactions have been
eliminated.
INVESTMENTS IN SECURITIES
The Company's investment securities are classified as available-for-sale and
held-to-maturity securities (see Note 4). Available-for-sale securities consist
of debt and equity securities not classified as held-to-maturity and are
reported at fair value. Debt securities for which the Company has the positive
intent and ability to hold until maturity are classified as held-to-maturity
securities and are reported at cost, adjusted for amortization of premiums and
accretion of discounts. Unrealized holding gains and losses, net of income tax,
on available-for-sale securities are reported as a net amount in a separate
component of stockholder's equity, until realized.
Amortization of premiums and accretion of discounts is computed by the
level-yield method. Sales of investment securities are computed on the basis of
specific identification of each security sold.
<PAGE> 144
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS
The allowance is maintained at a level adequate to absorb probable losses.
Management determines the adequacy of the allowance based upon reviews of
individual loans, recent loss experience, current economic conditions, the risk
characteristics of the various categories of loans, and other pertinent factors.
Loans deemed uncollectible are charged to the allowance. Provisions for loan
losses and recoveries on loans previously charged off are added to the
allowance. Since this allowance is based on estimates, ultimate losses may vary
from the current estimates. These estimates are reviewed periodically and, as
adjustments become necessary, they are reported in earnings in the period in
which they become known.
INTEREST ON LOANS
Interest on loans is recognized based on the principal amounts outstanding. The
accrual of interest on a loan is discontinued when, in the opinion of
management, there is doubt about the ability of the borrower to pay interest or
principal. Interest previously accrued but uncollected on such loans is written
off against current income. Subsequent interest on such loans is recognized as
income when collected.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated depreciation.
Depreciation of buildings and related improvements is computed using the
straight-line method and accelerated methods based on estimated useful lives.
Depreciation of furniture and equipment is computed using accelerated methods.
OTHER REAL ESTATE
Other real estate consists of properties acquired through foreclosure
proceedings, acceptance of a deed in lieu of foreclosure, or through
in-substance foreclosure. These properties are carried at the lower of cost or
fair market value based on appraised value at the date acquired. Fair value is
the estimated sales price based on appraisal values less estimated costs of
disposal. Loan losses arising from the acquisition of such properties are
charged against the allowance for loan losses. Subsequent valuation adjustments,
if any, are charged to operating expenses.
INCOME TAXES
The liability method is used in accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse. A valuation allowance is established, if necessary, to
reduce the deferred tax asset to the amount that is more likely than not to be
realized.
<PAGE> 145
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES (CONTINUED)
The Company files consolidated income tax returns with its wholly-owned
subsidiaries. The separate income tax provision of the Company and its
subsidiaries is determined in accordance with an allocation agreement which
provides that such provision will essentially be determined on a separate return
basis.
CASH EQUIVALENTS
For the purpose of the statement of cash flows, the Company has defined cash and
cash equivalents as those amounts included in the balance sheet captions "Cash
and due from banks", "Interest-bearing deposits in banks" and "Federal funds
sold". Generally, federal funds are sold for one day periods.
RETIREMENT PLAN
The Company provides a 401(k) retirement plan for its employees and matches up
to 5% of employees' contributions. Plan expenses were $64,478 and $70,751 for
the years ended December 31, 1996 and 1995, respectively.
STOCK DIVIDENDS
The Company follows the practice of capitalizing stock dividends to the extent
of legal requirements (par value) since the Company's stock is closely held.
INTEREST RATE RISK
The Company's asset base is exposed to risk resulting from changes in interest
rates and changes in the timing of cash flows. The Company monitors the effect
of such risks by considering the mismatch of the maturities of its assets and
liabilities in the current interest rate environment and the sensitivity of
assets and liabilities to changes in interest rates. The Company's management
has considered the effect of significant increases and decreased in interest
rates and believes such changes, if they occurred, would be manageable and would
not affect the ability of the Company to hold its assets to maturity. However,
the Company is exposed to significant market risk in the unlikely event of
significant and prolonged interest rate changes.
<PAGE> 146
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 2: RESTATEMENT
The December 31, 1994 balance of retained earnings, as previously reported, has
been restated to reflect the effect of the following prior period adjustments:
<TABLE>
<S> <C>
Balance as previously reported $6,316,962
Restatements (decrease)
Depreciation (182,693)
Income taxes - current 101,382
- deferred 55,438
----------
(25,873)
----------
Balance as restated $6,291,089
==========
</TABLE>
NOTE 3: CASH AND DUE FROM BANKS
The Company is required to maintain certain minimum cash reserves based upon
liabilities to depositors. The minimum cash reserve requirement at December 31,
1996 was approximately $780,000.
NOTE 4: INVESTMENT SECURITIES
The amortized cost and estimated market values of investments securities are as
follows:
<TABLE>
<CAPTION>
1996
-----------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE
U.S. government $11,570,879 $148,965 $ 58,772 $11,661,072
Federal agencies
and corporations 23,131,439 51,511 88,646 23,094,304
State and political
subdivisions 7,474,118 146,053 13,428 7,606,743
Mortgage-backed 869,334 16,910 886,244
Other securities 3,449,814 3,120 3,194 3,449,740
Equity securities 25,000 25,000
----------- -------- -------- -----------
$46,520,584 $366,559 $164,040 $46,723,103
=========== ======== ======== ===========
HELD-TO-MATURITY
State and political
subdivisions $ 6,427,847 $ 66,007 $ 23,241 $ 6,470,613
=========== ======== ======== ===========
</TABLE>
<PAGE> 147
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 4: INVESTMENT SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
1995
-----------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE
U.S. government $11,634,664 $234,312 $ 36,904 $11,832,072
Federal agencies
and corporations 16,050,882 46,101 98,863 15,998,120
State and political
subdivisions 8,167,283 271,354 32,670 8,405,967
Mortgage-backed 2,613,718 19,677 2,633,395
Other securities 2,168,440 7,358 2,161,082
Equity securities 25,000 25,000
----------- -------- -------- -----------
$40,659,987 $571,444 $175,795 $41,055,636
=========== ======== ======== ===========
HELD-TO-MATURITY
State and political
subdivisions $ 6,063,248 $ 87,639 $ 85,431 $ 6,065,456
=========== ======== ======== ===========
</TABLE>
The amortized cost and estimated market value of debt securities at December 31,
1996, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<PAGE> 148
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 4: INVESTMENT SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE HELD-TO-MATURITY
------------------------- -----------------------
ESTIMATED ESTIMATED
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Due in one year $ 9,868,260 $ 9,873,161 $ 513,867 $ 514,397
Due after one year
through five years 30,422,832 30,568,223 5,368,392 5,397,740
Due after five years
through ten years 4,077,431 4,082,403 123,588 121,685
Due after ten years 1,257,727 1,288,072 45,000 48,606
Mortgage-backed
securities 869,334 886,244 377,000 388,185
Equity securities 25,000 25,000
----------- ----------- ---------- ----------
$46,520,584 $46,723,103 $6,427,847 $6,470,613
=========== =========== ========== ==========
</TABLE>
Proceeds from sales of investments in debt securities totaled $10,007,323 and
$5,135,000 in 1996 and 1995, respectively. Gross gains of $12,608 and $3,143 and
gross losses of $36,848 and $15,147 were realized on the sales in 1996 and 1995,
respectively.
Assets, principally investment securities with carrying values of $23,432,000
and $22,803,000, were pledged to secure public deposits and for other purposes,
at December 31, 1996 and 1995, respectively.
NOTE 5: LOANS
The following is a summary of loans at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Real estate - construction $ 676,000 $ 706,000
- mortgage 33,317,001 30,311,400
Commercial and industrial 37,140,609 34,469,439
Loans to individuals for household,
family and other consumer expenditures 20,809,906 18,838,406
Other 1,056,049 1,265,094
------------ ------------
92,999,565 85,590,339
Unearned income (5,290) (46,972)
------------ ------------
$ 92,994,275 $ 85,543,367
============ ============
</TABLE>
<PAGE> 149
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 6: ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS
Transactions in the allowance for loan losses were as follows at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Balance - January 1 $ 1,218,368 $ 1,196,690
Provision charged to operating expense 365,000 140,000
Recoveries of loans previously written off 79,332 13,065
Loans written off (395,059) (131,387)
----------- -----------
Balance - December 31 $ 1,267,641 $ 1,218,368
=========== ===========
</TABLE>
During 1995, the Company adopted statement of Financial Accounting Standards
("SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan", as amended
by SFAS No. 118. The Statement requires that impaired loans, which management of
the Company considers to be nonaccrual loans, be measured based on the present
value of expected future cash flows discounted at the loan's effective interest
rate, or as a practical expedient, at the loan's observable market price or the
fair value of the collateral if the loan is collateral dependent. The effect of
the adoption of this Statement on the Company's 1995 financial statements was
not significant.
Loans on which the accrual of interest has been discontinued amounted to
approximately $2,102,000 and $1,827,000 as of December 31, 1996 and 1995,
respectively. Average impaired loans for the years ended December 31, 1996 and
1995 amounted to approximately $1,965,000 and $1,833,000, respectively. Interest
income that would have been recorded under the original terms on nonaccrual
loans during the years ended December 31, 1996 and 1995 amounted to
approximately $170,000 and $113,000, respectively. Interest income collected on
impaired loans during the years ended December 31, 1996 and 1995 was
insignificant.
NOTE 7: PREMISES AND EQUIPMENT, NET
Bank premises and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land $ 446,474 $ 321,474
Buildings and improvements 2,667,184 2,643,112
Furniture and equipment 2,763,593 2,667,873
---------- ----------
5,877,251 5,632,459
Less accumulated depreciation 3,991,367 3,792,061
---------- ----------
$1,885,884 $1,840,398
========== ==========
</TABLE>
<PAGE> 150
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 8: DEPOSITS
Interest-bearing deposits consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Interest-bearing transaction $ 17,183,397 $ 16,666,413
Savings 27,350,956 21,982,891
Time, $100,000 and over 20,044,812 18,953,013
Other time 60,018,729 62,090,631
------------ ------------
$124,597,894 $119,692,948
============ ============
</TABLE>
At December 31, 1996, the scheduled maturities of interest-bearing deposits are
summarized as follows:
<TABLE>
<S> <C> <C>
1997 $ 71,116,621
1998 6,787,774
1999 1,143,250
2000 769,193
2001 279,409
------------
Total time deposits 80,096,247
Interest-bearing deposits with no stated maturity 44,501,647
------------
$124,597,894
============
</TABLE>
NOTE 9: REGULATORY MATTERS
The Corporation and Banks are subject to various regulatory capital requirements
administered by the federal and Arkansas state banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Corporation's or the Banks' financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Corporation and the Banks must meet specific capital
guidelines that involve quantitative measures of the Corporation's and the
Banks' assets, liabilities and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Corporation's and the Banks' capital
amounts and classifications are also subject to qualitative judgments by the
regulators about components, risk weightings and other factors.
<PAGE> 151
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 9: REGULATORY MATTERS (CONTINUED)
Quantitative measures established by regulation to ensure capital adequacy
require the Company and Banks to maintain minimum amounts and ratios (set forth
in the table below) of total and Tier I capital (as defined in the regulations)
to risk-weighted assets (as defined), and Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1996, that the
Company and the Banks met all capital adequacy requirements to which they are
subject.
As of December 31, 1996, the most recent notification from the Federal Deposit
Insurance Corporation ("FDIC") categorized the Banks as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as well
capitalized the Banks must maintain minimum total risk-based, Tier I risk-based
and Tier I leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the Banks'
category.
The Company's and the Banks' actual capital amounts and ratios are presented in
the table below. No amount was deducted from capital for interest-rate risk.
<TABLE>
<CAPTION>
MINIMUM
FOR MINIMUM TO BE WELL
ACTUAL CAPITAL ADEQUACY CAPITALIZED(1)
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ----- ------ ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1996
- -----------------------
LEVERAGE (TIER I CAPITAL TO
AVERAGE ASSETS)
Company $15,941 9.82% $6,493 4.00% N/A N/A
F & M Bank 8,721 20.25 1,723 4.00 $2,153 5.00%
M & F Bank 9,401 7.93 4,742 4.00 5,958 5.00
TIER I CAPITAL (TO RISK-
WEIGHTED ASSETS)
Company 15,941 14.30 4,459 4.00 N/A N/A
F & M Bank 8,721 27.36 1,275 4.00 1,913 6.00
M & F Bank 9,401 28.61 1,314 4.00 1,971 6.00
TOTAL CAPITAL (TO RISK-
WEIGHTED ASSETS)
Company 17,209 15.44 8,917 8.00 N/A N/A
F & M Bank 9,120 28.61 2,550 8.00 3,188 10.00
M & F Bank 10,223 12.98 6,301 8.00 7,876 10.00
AS OF DECEMBER 31, 1995
- -----------------------
LEVERAGE (TIER I CAPITAL TO
AVERAGE ASSETS)
Company $14,185 9.91% 5,726 4.00% N/A N/A
F & M Bank 7,962 20.44 1,558 4.00 $1,948 5.00%
M & F Bank 8,641 8.34 4,144 4.00 5,181 5.00
</TABLE>
<PAGE> 152
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 9: REGULATORY MATTERS (CONTINUED)
<TABLE>
<CAPTION>
MINIMUM
FOR MINIMUM TO BE WELL
ACTUAL CAPITAL ADEQUACY CAPITALIZED(1)
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ----- ------ ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1995
- -----------------------
(CONTINUED)
TIER I CAPITAL (TO RISK-
WEIGHTED ASSETS)
Company $14,185 13.70% $4,142 4.00% N/A N/A
F & M Bank 7,962 28.03 1,136 4.00 $1,420 6.00%
M & F Bank 8,641 11.57 2,987 4.00 3,734 6.00
TOTAL CAPITAL (TO RISK-
WEIGHTED ASSETS)
Company 15,403 14.88 8,281 8.00 N/A N/A
F & M Bank 8,317 29.28 2,272 8.00 2,841 10.00
M & F Bank 9,475 12.68 5,978 8.00 7,472 10.00
</TABLE>
(1) Not applicable (N/A) for bank holding companies such as the Company.
The amount of dividends which the Banks may pay to the Company is limited by
applicable laws and regulations. The Banks are incorporated under the laws of
the state of Arkansas and may pay dividends, without prior approval, to the
extent of 50% of net income. The FDIC imposes no dollar limit on dividends paid
by state-charted banks but requires maintenance of certain capital levels. The
Banks, at a minimum, must maintain total risk-based capital greater that or
equal to eight percent (8%) of risk adjusted total assets (as defined). Under
the current Arkansas state bank capital guidelines, the Banks could pay
approximately $1,083,000 in dividends for the year ended December 31, 1996. The
above amounts may be paid but, as a practical matter, other considerations,
including past dividend levels, may affect management's decision with respect to
the payment of dividends.
NOTE 10: NOTE PAYABLE
The Company's note payable to an unrelated bank is payable in annual
installments through January 31, 2004. The note bears interest, payable
quarterly, at the lender's "Index Rate" (8.25% at December 31, 1996) which
changes from time to time. Such interest rate was fixed at 6.45% throughout 1995
by a modification agreement which expired April 30, 1996. The note is
collateralized by the capital stock in Merchants and Farmers Bank, West Helena
and is payable as follows:
<TABLE>
<S> <C>
1997 $ 267,000
1998 291,000
1999 316,000
2000 341,000
2001 366,000
Thereafter 1,238,000
----------
$2,819,000
==========
</TABLE>
<PAGE> 153
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 10: NOTE PAYABLE (CONTINUED)
The loan agreement places restrictions on the amount of additional borrowings,
changes in the group's corporate structure and requires that certain
consolidated and "bank only" financial ratios be maintained.
NOTE 11: INCOME TAXES
The income tax provisions are composed of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Currently payable
Federal $ 601,196 $396,462
State 66,050 40,766
--------- --------
667,246 437,228
Deferred
Federal (8,217) 8,442
State (1,667) 1,726
--------- --------
(9,884) 10,168
--------- --------
$ 657,362 $447,396
========= ========
</TABLE>
The reason for the differences between income tax expense and the amount
computed by applying the statutory federal income tax rate to income before
taxes are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Federal income taxes at statutory rate $ 829,322 $ 698,331
Add (deduct):
State income taxes, net of federal
benefit 43,593 24,169
Tax exempt interest income (218,149) (219,043)
Accretion of purchase discount (32,409) (4,230)
Alternative minimum tax credit -- (74,666)
Other 35,005 22,835
--------- ---------
$ 657,362 $ 447,396
========= =========
</TABLE>
<PAGE> 154
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 11: INCOME TAXES (CONTINUED)
As of December 31, the Company's net deferred tax asset was comprised of the
following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $315,450 $294,003
Bank premises and equipment 215,479 246,450
Other 43,030 59,808
573,959 600,261
-------- --------
Deferred tax liabilities:
Investment securities 77,544 151,509
Other -- 16,418
-------- --------
77,544 167,927
-------- --------
Net deferred tax asset $496,415 $432,334
======== ========
</TABLE>
NOTE 12: OFF-BALANCE SHEET AND CREDIT RISK
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instruments for commitments to extend credit and
standby letters of credit is represented by the contractual terms of those
instruments. The Company uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments. The total
amounts of financial instruments with off-balance-sheet risk at December 31 are
as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Commitments to extend credit $9,354,000 $5,647,000
Standby letters of credit 242,000 230,000
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is not violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.
The credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. Standby letters of
credit are conditional commitments issued by the Company to guarantee the
performance of customers to third parties. Those guarantees are primarily issued
to support private borrowing arrangements.
<PAGE> 155
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 12: OFF-BALANCE SHEET AND CREDIT RISK (CONTINUED)
Each customer's credit worthiness is evaluated on a case-by-case basis. The
amount of collateral obtained, if deemed necessary, upon extension of credit is
based on management's credit evaluation of the counter party. Collateral held
varies but may include accounts receivable, inventory, property, plant and
equipment, commercial real estate, and residential real estate.
Most of the Company's lending activity is with customers located within Prairie
and Phillips County, Arkansas and surrounding counties. The concentrations of
credit by major category of loan type are set forth in Note 5. The Company does
not extend credit to any single borrower or group of related borrowers in excess
of amounts allowable under regulatory limits of loans to such borrowers. The
Company's loan policy provides for loan to value ratios by type of loans.
NOTE 13: RELATED PARTY TRANSACTIONS
Certain of the directors, employees and officers of the Company and the entities
in which they have a significant interest were customers of and had transactions
with the Company in the ordinary course of business. In the opinion of
management, all loans and commitments to loan included in such transactions were
made on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with other persons
and did not involve more than a normal risk of collectibility or any unfavorable
features. The aggregate amount of loans to these directors, officers and their
affiliates totaled approximately $8,576,000 and $8,961,000 at December 31, 1996
and 1995, respectively. At December 31, 1996 and 1995, $1,500,000 of these loans
were impaired. See Note 17.
The Company paid a shareholder $115,000 and $110,000 in consulting fees during
the years ended December 31, 1996 and 1995, respectively.
The Company maintains deferred compensation agreements with certain of its
executive officers. At December 31, 1996 and 1995, the deferred compensation
liabilities of $164,821 and $90,996, respectively are included in other
liabilities in the accompanying financial statements.
NOTE 14: FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash, due from banks, and federal funds sold: The carrying amounts for
these assets reported in the balance sheet approximate their fair
values.
Investment securities: Fair values for investment securities are based
on quoted market prices, where available. If quoted market prices are
not available, fair values are based on quoted market prices of
comparable instruments, where available.
<PAGE> 156
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 14: FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
Loans: The fair values for loans are generally estimated using
discounted cash flow analyses, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
quality or using quoted market prices for securities backed by similar
loans, adjusted for differences in loan characteristics.
Deposits: The fair values of noninterest bearing deposits, interest
bearing transaction accounts and savings accounts are, by definition,
equal to the amount payable on demand at the reporting date (i.e.,
their carrying amounts). Fair values for certificates of deposit are
estimated using discounted cash flow calculations that apply interest
rates currently being offered on certificates to a schedule of
aggregated expected monthly maturities of such deposits.
Note payable: Fair value on the note payable approximates the amount
payable at the reporting date.
Commitments to extend credit and standby letters of credit: The fair
values of commitments are estimated using the fees currently charged to
enter into similar agreements, taking into account the remaining terms
of the agreements and the present credit worthiness of the
counterparties. The fair values of standby letters of credit are based
on fees currently charged for similar agreements or on the estimated
cost to terminate them or otherwise settle the obligations with the
counterparties at the reporting date. Due to the insignificance of the
fees that would be currently charged for such agreements and the
short-term nature of the current agreements, no fair value estimates
have been made for commitments to extend credit and standby letters of
credit.
The estimated fair values of the Company's financial instruments at December 31,
were as follows:
<TABLE>
<CAPTION>
1996
-------------------------------
ESTIMATED
CARRYING FAIR
AMOUNT VALUE
------ -----
<S> <C> <C>
FINANCIAL ASSETS
Cash and cash equivalents $ 16,511,770 $ 16,511,770
Available-for-sale securities 46,723,103 46,723,103
Held-to-maturity securities 6,427,847 6,470,613
Federal Home Loan Bank Stock 126,000 126,000
Loans - total 92,994,275 92,244,940
FINANCIAL LIABILITIES
Deposits $146,747,023 $146,644,095
Note payable 2,819,000 2,819,000
</TABLE>
<PAGE> 157
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 14: FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
<TABLE>
<CAPTION>
1995
-------------------------------
ESTIMATED
CARRYING FAIR
AMOUNT VALUE
------ -----
<S> <C> <C>
FINANCIAL ASSETS
Cash and cash equivalents $ 22,473,871 $ 22,473,871
Available-for-sale securities 41,055,636 41,055,636
Held-to-maturity securities 6,063,248 6,065,456
Federal Home Loan Bank Stock 120,800 120,800
Loans - total 85,543,367 84,669,540
FINANCIAL LIABILITIES
Deposits $140,418,033 $140,626,724
Note payable 3,000,000 3,000,000
</TABLE>
NOTE 15: SUPPLEMENTAL INCOME STATEMENT INFORMATION
The following categories of other income and other expenses exceeded one percent
of the aggregate of total interest income and other income for the years
indicated: Other income - overdraft charges: $211,789 and $204,064 in 1996 and
1995, respectively. Other expenses - regulatory agency assessments: $177,851 in
1996.
NOTE 16: SECURITY BANCSHARES, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
Assets:
Cash in bank subsidiaries $ 96,870 $ 342,991
Receivables from bank subsidiaries 194,074 104,967
Investment securities 300,000 --
Investment in bank subsidiaries 18,247,474 16,855,332
Premises and equipment 80,118 82,134
Other 223,403 197,731
----------- -----------
Total assets $19,141,939 $17,583,155
=========== ===========
</TABLE>
<PAGE> 158
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 16: SECURITY BANCSHARES, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
(CONTINUED)
BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
Liabilities:
Note payable $ 2,819,000 $ 3,000,000
Deferred compensation payable 143,600 81,141
Other 114,146 72,575
------------ ------------
Total liabilities 3,076,746 3,153,716
Stockholders' equity 16,065,193 14,429,439
------------ ------------
Total liabilities and
stockholders' equity $ 19,141,939 $ 17,583,155
============ ============
STATEMENTS OF INCOME
<CAPTION>
YEARS ENDED DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
Income:
Dividends from subsidiaries $ 483,650 $ 336,162
Investment interest 7,877 6,454
Other 18,329 13,726
------------ ------------
509,856 356,342
Expenses:
Salaries and benefits 199,456 174,497
Interest on borrowings 233,475 202,186
Other 174,822 153,380
------------ ------------
607,753 530,063
------------ ------------
Loss before income taxes and
equity in undistributed net income
of bank subsidiaries (97,897) (173,721)
Income taxes (credit) (196,747) (205,091)
------------ ------------
98,850 31,370
Equity in undistributed income
of bank subsidiaries 1,682,971 1,575,149
------------ ------------
Net income $ 1,781,821 $ 1,606,519
============ ============
</TABLE>
<PAGE> 159
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
DES ARC, ARKANSAS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 16: SECURITY BANCSHARES, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
(CONTINUED)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,781,821 $ 1,606,519
Adjustments to reconcile net cash
provided by operating activities:
Equity in undistributed income
of bank subsidiaries (1,682,971) (1,575,149)
Other - net 162,914 85,394
----------- -----------
Net cash provided by operating
activities 261,764 116,764
INVESTING ACTIVITIES:
Purchases of investment securities (300,000) --
----------- -----------
Net cash used by investing activities (300,000) --
FINANCING ACTIVITIES
Note payable payments (181,000) --
Purchase of treasury stock (26,695) (88,160)
Retirement of common stock (4,940) --
Issuance of common stock 4,750 --
----------- -----------
Net cash used in financing activities (207,885) (88,160)
----------- -----------
Increase (decrease) in cash (246,121) 28,604
Cash at beginning of year 342,991 314,387
----------- -----------
Cash at end of year $ 96,870 $ 342,991
=========== ===========
</TABLE>
Supplemental disclosures - The parent company paid $213,633 and $196,188 in
interest during 1996 and 1995, respectively.
NOTE 17: SUBSEQUENT EVENTS
In July of 1997, the Company transferred related party impaired loans of
$1,500,000 to other real estate.
In August 1997, the Board of Directors of the Company approved an Agreement and
Plan of Reorganization ("Merger Agreement") with another bank holding company
whereby the two parties intend to effectuate a merger of the Company with and
into a subsidiary of the other bank holding company. The merger is dependent
upon the approval of the stockholders of the Company and various regulatory
agencies. Additionally, the Company is restricted from certain activities prior
to the consummation of the transaction, including payment of extraordinary
dividends.
In connection with the planned reorganization, the Merger Agreement discussed
above, provided for a substantial discount to the value of the real estate
mentioned above. Subsequently, the Company accepted an offer for the sale of the
real estate at a more favorable price than contemplated in the Merger Agreement
and in recognition of the foregoing events, recorded a third quarter 1997
pre-tax financial statement valuation loss of approximately $835,000.
<PAGE> 160
APPENDIX C
Unaudited Consolidated Financial Statements of Security Bancshares, Inc.
as of and for the six months ended June 30, 1997 (and notes thereto)
<PAGE> 161
Appendix C
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1997
<PAGE> 162
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<S> <C>
ASSETS
- ------
Cash and due from banks $ 7,256
Interest-bearing deposits at financial institutions 504
Investment securities:
Available-for-sale (Amortized cost: $34,155) 34,339
Held-to-maturity (Fair value: $6,157) 6,196
Loans, net of unearned interest 109,673
Less: Allowance for losses on loans (1,322)
--------
Net loans 108,351
Premises and equipment, net 2,097
Accrued interest receivable 2,484
Other assets 946
--------
TOTAL ASSETS $162,173
========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits
Noninterest-bearing $ 20,576
Certificates of deposit of $100,000 and over 21,774
Other interest-bearing, including NOW accounts of $16,607 92,445
--------
Total deposits 134,795
--------
Note payable 2,552
Short-term borrowings 6,750
Accrued interest payable 696
Other liabilities 467
--------
TOTAL LIABILITIES 145,260
--------
Stockholders' equity
Common stock, $10 par value; 200,000 shares authorized, 136,467
issued and 136,289 outstanding 1,363
Additional paid-in capital 5,116
Retained earnings 10,372
Unrealized gain on available-for-sale securities, net 77
Treasury stock, at cost, 178 shares (17)
--------
TOTAL STOCKHOLDERS' EQUITY 16,913
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $162,173
========
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
1
<PAGE> 163
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30,
1997 1996
---- ----
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 4,626 $ 4,292
Interest on investment securities
Taxable 1,002 1,039
Nontaxable 362 373
Interest on deposits 72 77
Interest on federal funds sold 86 90
--------- ---------
Total interest income 6,148 5,871
--------- ---------
INTEREST EXPENSE
Interest on deposits 2,626 2,810
Interest on short-term borrowings 24 34
Interest on long-term borrowings 131 114
--------- ---------
Total interest expense 2,781 2,958
Net interest income 3,367 2,913
Provision for losses on loans 168 110
--------- ---------
Net interest income after provision for losses on loans 3,199 2,803
--------- ---------
NONINTEREST INCOME
Service charges on deposit accounts 268 227
Investment securities losses, net (21) (19)
Other 243 235
--------- ---------
Total noninterest income 490 443
--------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits 1,186 1,121
Occupancy and equipment 321 357
Other 778 625
--------- ---------
Total noninterest expense 2,285 2,103
--------- ---------
EARNINGS BEFORE INCOME TAXES 1,404 1,143
Income taxes 491 355
--------- ---------
NET EARNINGS $ 913 $ 788
========= =========
EARNINGS PER SHARE $ 6.76 $ 6.18
========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 135,078 127,589
========= =========
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
2
<PAGE> 164
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30,
--------
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 913 $ 788
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for losses on loans 168 110
Depreciation 126 185
Investment securities gains, net 21 19
Net (accretion) amortization of investment securities (26) 59
Decrease (increase) in assets:
Accrued interest receivable (266) (237)
Other assets 585 (44)
Decrease in liabilities:
Accrued interest payable and other liabilities (279) (351)
-------- --------
Net cash provided by operating activities 1,242 529
-------- --------
INVESTING ACTIVITIES
Proceeds from sales of available-for-sale investment securities 11,022 5,915
Purchases of available-for-sale investment securities (14,988) (13,085)
Purchases of held-to-maturity investment securities (349) (737)
Proceeds from maturities, calls and prepayments of available-for-sale
investment securities 16,660 11,383
Proceeds from maturities, calls and prepayments of held-to-maturity
investment securities 277 697
Net decrease in loans (16,793) (17,981)
Purchases of premises and equipment (377) (72)
-------- --------
Net cash used by investing activities (4,508) (13,880)
-------- --------
FINANCING ACTIVITIES
Net decrease in deposits (11,952) (4,208)
Payments of note payable (267) (181)
Increase in short-term borrowings 6,750 4,115
Net purchases of treasury stock (17) (27)
-------- --------
Net cash used by financing activities (5,486) (301)
-------- --------
CASH AND CASH EQUIVALENTS
Net decrease (8,752) (13,652)
Beginning of the period 16,512 22,474
-------- --------
End of the period $ 7,760 $ 8,822
======== ========
SUPPLEMENTAL DISCLOSURES
Cash paid for interest $ 475 $ 492
======== ========
Cash (received) paid for income taxes $ 398 $ 202
======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
3
<PAGE> 165
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
AVAILABLE-
COMMON STOCK ADDITIONAL FOR-SALE TREASURY STOCK
------------ PAID-IN RETAINED SECURITIES, --------------
SHARE AMOUNT CAPITAL EARNINGS NET SHARES AMOUNT TOTAL
----- ------ ------- -------- --- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 128,740 $1,287 $5,116 $ 9,537 $125 -- -- $16,065
Net earnings -- -- 913 -- -- -- 913
Issuance of stock dividend 7,727 78 -- (78) -- -- -- --
Purchase of treasury stock -- -- -- -- 410 (39) (39)
Sale of treasury stock -- -- -- -- 232 22 22
Change in unrealized gain
on available-for-sale
investment securities,
net of applicable taxes -- -- -- -- (48) -- -- (48)
------- ------ ------ ------- ---- ---- --- -------
BALANCE AT JUNE 30, 1997 136,467 $1,365 $5,101 $10,372 $ 77 178 (17) $16,913
======= ====== ====== ======= ==== ==== === =======
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
4
<PAGE> 166
SECURITY BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented. The statements
should be read in conjunction with the summary of accounting policies and notes
to financial statements included in the Company's financial statements for the
years ended December 31, 1996 and 1995. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted in accordance
with the rules of the Securities and Exchange Commission.
NOTE 2 - ACCOUNTING POLICIES
Reference is made to the accounting policies of the Company described in the
notes to consolidated financial statements for the years ended December 31, 1996
and 1995. The Company has consistently followed those policies in preparing this
report.
NOTE 3 - SUBSEQUENT EVENTS
In July of 1997, the Company transferred related party impaired loans of
$1,500,0000 to other real estate.
In August of 1997, the Board of Directors of the Company approved an Agreement
and Plan of Reorganization ("Merger Agreement") with another bank holding
company whereby the two parties intend to effectuate a merger of the Company
with and into a subsidiary of the other bank holding company. The merger is
dependent upon the approval of the stockholders of the Company and various
regulatory agencies. Additionally, the Company is restricted from certain
activities prior to the consummation of the transaction, including payment of
extraordinary dividends.
In connection with the planned reorganization, the Merger Agreement discussed
above, provided for a substantial discount to the value of the real estate
mentioned above. Subsequently, the Company accepted an offer for the sale of
the real estate at a more favorable price than contemplated in the Merger
Agreement and in recognition of the foregoing events, recorded a third quarter
1997 pre-tax financial statement valuation loss of approximately $835,000.
5
<PAGE> 167
APPENDIX D
ARKANSAS DISSENTERS' RIGHTS STATUTE
<PAGE> 168
4-26-1007. RIGHTS OF DISSENTING SHAREHOLDERS.
(a) If a shareholder of a corporation which is a party to a merger or
consolidation files with the corporation, prior to or at the meeting of
shareholders at which the plan of merger or consolidation is submitted to a
vote, a written objection to the plan of merger or consolidation and does not
vote in favor thereof, and the shareholder within ten (10) days after the date
on which the vote was taken makes written demand on the surviving or new
domestic or foreign corporation for payment of the fair value of his shares as
of the day prior to the date on which the vote was taken approving the merger or
consolidation, then, if the merger or consolidation is effected, the surviving
or new corporation shall pay to the shareholder, upon surrender of his
certificate or certificates representing the shares, the fair value thereof.
(b) The demand shall state the number and class of the shares owned by the
dissenting shareholder.
(c) Any shareholder failing to make demand within the ten-day period shall be
bound by the terms of the merger or consolidation.
(d) Within ten (10) days after the merger or consolidation is effected, the
surviving or new corporation, as the case may be, shall give notice to each
dissenting shareholder who has made demand as herein provided for the payment of
the fair value of his shares.
(e) (1) If within thirty (30) days after the date on which the merger or
consolidation was effected the value of such shares is agreed upon between the
dissenting shareholder and the surviving or new corporation, payment shall be
made within ninety (90) days after the date on which such merger or
consolidation was effected, upon the surrender of his certificate or
certificates representing those shares.
(2) Upon payment of the agreed value, the dissenting shareholder shall
cease to have any interest in those shares or in the corporation.
(f) (1) If within the period of thirty (30) days the shareholder and the
surviving or new corporation do not so agree, then the dissenting shareholder,
within sixty (60) days after the expiration of the thirty-day period, may file a
petition in the circuit court of the county in which the registered office of
the surviving corporation is located, if the surviving corporation is a domestic
corporation or in the Pulaski County Circuit Court if the surviving corporation
is a foreign corporation, asking for a finding and determination of the fair
value of the shares and shall be entitled to judgment against the surviving or
new corporation for the amount of the fair value as of the day prior to the date
on which the vote was taken approving such merger or consolidation, together
with interest thereon to the date of the judgment.
(2) The judgment shall be payable only upon and simultaneously with the
surrender to the surviving or new corporation of the certificate or certificates
representing the shares.
(3) Upon payment of the judgment, the dissenting shareholder shall
cease to have any interest in the shares or in the surviving or new corporation.
(4) Unless the dissenting shareholder files the petition within the
time herein limited, the shareholder and all persons claiming under him shall be
bound by the terms of the merger or consolidation.
(g) Shares acquired by the surviving or new corporation pursuant to the
payment of the agreed value thereof or to payment of the judgment entered, as in
this section provided, may be held and disposed of by the corporation as in the
case of other treasury shares.
(h) The provisions of this section shall not apply to a merger if, on the
date of the filing of the articles of merger, the surviving corporation is the
owner of all the outstanding shares of the other domestic or foreign
corporations that are parties to the merger.
<PAGE> 169
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.
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.
<PAGE> 170
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------
<S> <C>
2.1 Agreement and Plan of Reorganization dated as of August 20, 1997, by and between Union Planters
Corporation, Union Planters Holding Corporation, Inc., and Security Bancshares, Inc., along with Amendment No.
1 thereto (included as Appendix A to the Proxy Statement included as part of this Registration Statement.).
2.2 Plan of Merger of Security Bancshares, Inc. into and with Union Planters Holding Corporation. (Included as
Appendix B to the Proxy Statement included as part of this Registration Statement).
4.1 Restated Charter of Union Planters Corporation. (Incorporated by reference to Exhibit 3(a) to the Annual Report
on Form 10-K of UPC for the fiscal year ended December 31, 1996).
4.2 Amended and Restated Bylaws of Union Planters Corporation. (Incorporated by reference to exhibit 3(d) to the
Annual Report on Form 10-K of UPC for the fiscal year ended December 31. 1996 (File No. 0-6919).
5.1 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
8.1 Opinion of Wyatt, Tarrant & Combs regarding tax matters and consequences to shareholders
23.1 Consent of E. James House, Jr., Esq. (included in Exhibit 5.1)
23.2 Consent of Wyatt, Tarrant & Combs (included in Exhibit 8.1)
23.3 Consent of Price Waterhouse LLP
23.4 Consent of Kemp & Company, Inc.
24.1 Power of Attorney (included in signature pages)
99.1 Form of Proxy
</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
II-2
<PAGE> 171
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.
(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-3
<PAGE> 172
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 this the 16th day of October, 1997.
DATE: October 16, 1997
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, October 16, 1997
- ------------------------------------ Chief Executive Officer,
Benjamin W. Rawlins, Jr. Director (Principal
Executive Officer)
/s/ John W. Parker Executive Vice President October 16, 1997
- ------------------------------------ and Chief Financial
John W. Parker Officer (Principal
Financial Officer)
/s/ M. Kirk Walters Senior Vice President October 16, 1997
- ------------------------------------ Treasurer and Chief
M. Kirk Walters Accounting Officer
/s/ Albert M. Austin Director October 16, 1997
- ------------------------------------
Albert M. Austin
/s/ Edgar H. Bailey Vice Chairman of the Board October 16, 1997
- ------------------------------------ and Director
Edgar H. Bailey
/s/ Marvin E. Bruce Director October 16, 1997
- ------------------------------------
Marvin E. Bruce
</TABLE>
II-4
<PAGE> 173
<TABLE>
<S> <C> <C>
/s/ George W. Bryan Director October 16, 1997
- ------------------------------------------
George W. Bryan
/s/ James E. Harwood Director October 16, 1997
- ------------------------------------------
James E. Harwood
/s/ Parnell S. Lewis, Jr. Director October 16, 1997
- ------------------------------------------
Parnell S. Lewis, Jr.
/s/ C. J. Lowrance Director October 16, 1997
- ------------------------------------------
C. J. Lowrance
/s/ Jackson W. Moore President, Chief Operating October 16, 1997
- ------------------------------------------ Officer and Director
Jackson W. Moore
/s/ Stanley D. Overton Director October 16, 1997
- ------------------------------------------
Stanley D. Overton
Director
- ------------------------------------------
Dr. V. Lane Rawlins
/s/ Donald F. Schuppe Director October 16, 1997
- ------------------------------------------
Donald F. Schuppe
/s/ Mike P. Sturdivant Director October 16, 1997
- ------------------------------------------
Mike P. Sturdivant
/s/ Richard A. Trippeer, Jr. Director October 16, 1997
- ------------------------------------------
Richard A. Trippeer, Jr.
/s/ Spence L. Wilson Director October 16, 1997
- ------------------------------------------
Spence L. Wilson
</TABLE>
II-5
<PAGE> 174
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ------------
<S> <C>
2.1 Agreement and Plan of Reorganization dated as of August 20, 1997, by and between Union Planters
Corporation, Union Planters Holding Corporation, Inc., and Security Bancshares, Inc., along with
Amendment No. 1 thereto (includes Appendix A to the Proxy Statement included as part of this Registration
Statement).
2.2 Plan of Merger of Security Bancshares, Inc. into and with Union Planters Holding Corporation. (Included
as Appendix B to the Proxy Statement included as part of this Registration Statement).
4.1 Restated Charter of Union Planters Corporation. (Incorporated by reference to Exhibit 3(a) to the Annual
Report on Form 10-K of the UPC for the fiscal year ended December 31, 1996.)
4.2 Amended and Restated Bylaws of Union Planters Corporation. (Incorporated by reference to exhibit 3(d)
to the Annual Report on Form 10-K of UPC for the fiscal year ended December 31. 1996 (File No. 0-6919).
5.1 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
8.1 Opinion of Wyatt, Tarrant & Combs regarding tax matters and consequences to shareholders
23.1 Consent of E. James House, Jr., Esq. (included in Exhibit 5.1)
23.2 Consent of Wyatt, Tarrant & Combs (included in Exhibit 8.1)
23.3 Consent of Price Waterhouse LLP
23.4 Consent of Kemp & Company, Inc.
24.1 Power of Attorney (included in signature pages)
99.1 Form of Proxy
</TABLE>
II-6
<PAGE> 1
EXHIBIT 5.1
LEGAL OPINION OF E. JAMES HOUSE, JR.
AS TO VALIDITY OF SHARES OF UPC COMMON STOCK
<PAGE> 2
LOGO EXHIBIT 5.1
UNION PLANTERS CORPORATION
October 17, 1997
Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Re: 491,000 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 491,000 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, as amended, dated as of
August 20, 1997, by and between UPC, Union Planters Holding Corporation, Inc.
and Security Bancshares, Inc. ("SBI") (the "Agreement").
For purposes of rendering the opinion expressed herein, the undersigned has
examined UPC's Charter and all amendments thereto; UPC's Bylaws and amendments
thereto; the Merger 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
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.
<PAGE> 3
Union Planters Corporation
October 21, 1997
Page 2
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.
Manager, Legal Department
<PAGE> 1
EXHIBIT 8.1
TAX OPINION OF WYATT, TARRANT & COMBS
<PAGE> 2
EXHIBIT 8.1
LOGO
WYATT, TARRANT & COMBS
502 562-7278 October 21, 1997
Board of Directors
Union Planters Corporation
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Gentlemen:
We have acted as counsel to Union Planters Corporation, a Tennessee corporation
("UPC"), in connection with (i) the proposed merger (the "Merger") of Security
Bancshares, Inc., an Arkansas corporation ("SBI"), with and into Union Planters
Holding Corporation, a Tennessee corporation and a wholly-owned subsidiary of
UPC ("UP Holding"), pursuant to the terms of the Agreement and Plan of
Reorganization by and among UPC, UP Holding and SBI dated August 20, 1997 (the
"Merger Agreement") and related Plan of Merger between UPC, UP Holding and SBI
(collectively, the "Plan of Reorganization"), and (ii) the filing of the
registration statement by UPC on Form S-4 (together with all amendments and
exhibits thereto through the date hereof, the "Registration Statement"), under
the Securities Act of 1933, as amended (the "Act"), covering the shares of UPC
Common Stock to be issued pursuant to the Plan of Reorganization. Capitalized
terms used but not defined herein shall have the meanings assigned to them in
the Registration Statement.
In rendering this opinion we have examined such documents as we have deemed
relevant or necessary, including without limitation, the Plan of Reorganization
and the Registration Statement. In our examination, we have assumed the
genuineness of all signatures, the due execution and delivery of all documents,
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 copies, and the
authenticity of the originals of such copies.
As to factual matters, in rendering this opinion, we have relied solely on and
have assumed the present and continuing truth and accuracy of (i) the
description of the facts relating to the Merger contained in the Plan of
Reorganization and Registration Statement, (ii) the factual representations and
warranties contained in the Plan of Reorganization and Registration Statement
and related documents and agreements, and (iii) the factual matters addressed by
representations from certain executive officers of UPC, UP Holding and SBI
contained in letters to us dated October 21, 1997, copies of which are attached
as Exhibit A and Exhibit B to this opinion (the "Representation Letters"). The
Representation Letters address various factual matters relevant to the
qualification of the Merger as a tax-deferred reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). The
initial and continuing truth and accuracy of all such factual matters
constitutes an integral basis for, and a material condition to, this opinion.
The scope of this opinion is limited strictly to the matters set forth below and
no other opinion may be implied or inferred beyond such matters. Without
limiting the foregoing sentence, we express no opinion as to (i) any of the
local, state, foreign or other federal tax consequences resulting from the
Merger, (ii) the federal income tax consequences to shareholders of SBI subject
to special rules under the Code, such as foreign persons, tax-exempt
organizations, insurance companies, financial institutions, dealers in stocks
and securities, and persons who do not own such stock as a capital asset, (iii)
the federal income tax consequences affecting shares of SBI Common Stock
acquired upon exercise of stock options, stock purchase plan rights or otherwise
as compensation; (iv) the tax consequences to holders of warrants, options or
other rights to acquire shares of SBI Common Stock; (v) the tax consequences of
the parties to the Merger Agreement of the inclusion in income of the amount of
the bad-debt reserve maintained by SBI and/or its subsidiaries and any other
amounts resulting from any required change in accounting methods; and (vi) the
tax consequences of the parties to the Merger Agreement of any income and
deferred gain recognized pursuant to Treasury Regulations issued under Section
1502 of the Code.
Subject to the qualifications, assumptions and conditions provided herein, we
are of the opinion that:
i. The acquisition by UP Holding of substantially all of the assets of SBI in
exchange for shares of UPC Common Stock and the assumption of liabilities of SBI
pursuant to the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code.
ii. SBI, UPC and UP Holding will each be "a party to a reorganization" within
the meaning of Section 368(b) of the Code.
iii. No gain or loss will be recognized by SBI as a result of the Merger.
<PAGE> 3
iv. No gain or loss will be recognized by UP Holding or UPC as a result of the
Merger.
v. The tax basis of the assets received by UP Holding will be the same as the
tax basis of such assets of SBI immediately prior to the Merger.
vi. The holding period of the assets of SBI received by UP Holding will in
each instance include the period for which such assets were held by SBI.
vii. No gain or loss will be recognized by the shareholders of SBI as a result
of the exchange of SBI Common Stock for UPC Common Stock pursuant to the Merger,
except that a gain or loss will be recognized on the receipt of any cash in lieu
of a fractional share. Assuming that the SBI Common Stock is a capital asset in
the hands of the respective SBI shareholders, any gain or loss recognized as a
result of the receipt of cash in lieu of a fractional share will be a capital
gain or loss equal to the difference between the cash received and that portion
of the holder's tax basis in the SBI Common Stock allocable to the fractional
share.
viii. The tax basis of UPC Common Stock to be received by the shareholders of
SBI will be the same as the tax basis of the SBI Common Stock surrendered in
exchange therefor (reduced by any amount allocable to a fractional share
interest for which cash is received).
ix. The holding period of the UPC Common Stock to be received by shareholders
of SBI will include the holding period of the SBI Common Stock surrendered in
exchange therefor, provided the SBI shares were held as a capital asset by the
shareholders of SBI on the date of the exchange.
x. A shareholder of SBI who perfects his dissenter's rights and who receives
payment of the fair market value of his shares of SBI 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.
This opinion is based on the Code, the Treasury Regulations promulgated
thereunder, judicial decisions and administrative pronouncements of the Internal
Revenue Service ("IRS"), all existing and in effect on the date of this opinion
and all of which are subject to change at any time, possibly retroactively. Any
such change could materially alter the conclusions reached in this opinion. We
undertake no obligation to you or any other person to give notice of any such
change. As noted above, this opinion is limited strictly to the matters
expressly stated herein and no other opinion may be implied or inferred beyond
such matters. You should realize that this opinion is not binding on the IRS
or the courts.
This opinion is provided to you solely for purposes of complying with the
requirements of Item 21(a) of Form S-4 under the Act and Section 8.1(h) of the
Merger Agreement. We hereby consent to the use of this opinion as an exhibit to
the Registration Statement and to the reference to this Firm in the Registration
Statement under the caption "Legal Matters." In giving this consent we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder. Without our prior
written consent, this opinion may not otherwise be quoted or referred to in
whole or in part in any report or document or furnished to any other person or
entity other than your counsel, your accountants or your employees, except in
response to a valid subpoena or other lawful process.
Very truly yours,
\s\ WYATT, TARRANT & COMBS
--------------------------------------
WYATT, TARRANT & COMBS
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of Union Planters Corporation of our report dated January 16, 1997, which
appears on page 37 of Union Planters Corporation's 1996 Annual Report to
Shareholders, which is incorporated by reference in its Annual Report on Form
10-K for the year ended December 31, 1996. We also consent to the reference to
us under the heading "Experts" in such Proxy Statement/Prospectus.
/s/ PRICE WATERHOUSE LLP
- ---------------------------------
PRICE WATERHOUSE LLP
Memphis, Tennessee
October 21, 1997
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Proxy Statement/Prospectus constituting
part of this Registration Statement on Form S-4 of Union Planters Corporation
of our report dated April 26, 1997, except as to Note 17 for which the date is
September 30, 1997, relating to the financial statements of Security
Bancshares, Inc. as of and for the years ended December 31, 1996 and 1995,
which appear in such Proxy Statement/Prospectus. We also consent to the
reference to us under the heading "Experts" in such Proxy Statement/Prospectus.
/s/ Kemp & Company
Little Rock, Arkansas
October 22, 1997
<PAGE> 1
PROXY EXHIBIT 99.1
REVOCABLE PROXY
SECURITY BANCSHARES, INC.
_______________________________________________________________________________
SPECIAL MEETING OF STOCKHOLDERS
WEDNESDAY, DECEMBER 10, 1997
_______________________________________________________________________________
The undersigned hereby appoints ________________ and _____________
with full powers of substitution, to act as proxies for the undersigned, to
vote all shares of common stock of Security Bancshares, Inc. ("SBI") which the
undersigned is entitled to vote at a Special Meeting of Stockholders ("Special
Meeting"), to be held at the main office of Farmers & Merchants Bank, 110 South
Third, Des Arc, Arkansas, at 2:00 p.m., local time, on Wednesday, December 10,
1997, and at any and all adjournments thereof, as follows:
FOR AGAINST ABSTAIN
--- ------- -------
1. Approval of the Agreement and Plan of
Reorganization dated as of August 20, 1997,
as amended (the "Agreement") by and
between SBI, Union Planters Corporation
("UPC") and Union Planters Holding Corporation
("UP Holding"), and related Plan of Merger
attached thereto as Exhibit 1, pursuant to which
SBI would be acquired by UPC when it is merged
with and into UP Holding.
2. To transact such other business as may properly
come before the Special Meeting.
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.
_______________________________________________________________________________
<PAGE> 2
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 SBI at the Special Meeting of the stockholder'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 SBI prior to the
execution of this proxy, of a notice of the Special Meeting and a
Prospectus/Proxy Statement dated October 29, 1997.
Dated: ___________________
__________________________________ _________________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
__________________________________ _________________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
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.
_______________________________________________________________________________
