As filed with the Securities and Exchange Commission on March 13, 1997
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
FIRST COMMERCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Arkansas 6711 71-0540166
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or organization) Industrial Classi- Identification
fication Code No.) No.)
400 West Capitol Avenue, Little Rock, Arkansas 72201
(501) 371-7000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Barnett Grace, Chairman of the Board
First Commercial Corporation
400 West Capitol Avenue
Little Rock, Arkansas 72201
(501) 371-7000
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copy to:
John Clayton Randolph
Friday, Eldredge & Clark
400 West Capitol Avenue, Suite 2000
Little Rock, Arkansas 72201-3493
Approximate date of commencement of proposed sale of the
securities to the public: Upon the effective date of the
merger described in this registration statement.
<PAGE>
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
Proposed
Title of Each Proposed Maximum
Class of Maximum Aggregate Amount
Securities to Amount to be Offering Price Offering Registration
be Registered Registered Per Unit Price Fee*
- -----------------------------------------------------------------------------
Common Stock,
par value $3.00
per share 3,412,457 $15.79 $53,882,696.03 $16,328.09
- ------------------------------------------------------------------------------
*Calculated pursuant to Rule 457(f)(2) on the basis of the book value, as
of February 28, 1997, of 245,275 shares of common stock of
Southwest Bancshares, Inc. to be received by the registrant pursuant to
the merger described in this registration statement. On that date, the
book value of such common stock was $219.66 per share.
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
Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
[Southwest Bancshares, Inc. Letterhead]
Dear Stockholder:
The Annual Meeting of the Stockholders of Southwest
Bancshares, Inc. ("Southwest Bancshares") will be held on
__________, 1997, at _____ a.m., local time, at
________________________________________ ___________________,
Jonesboro, Arkansas. You are cordially invited to attend.
This is an important meeting for Southwest Bancshares and its
shareholders as the principal purpose of the meeting is to
ask you to approve the merger of Southwest Bancshares into
First Commercial Corporation, Little Rock, Arkansas ("First
Commercial") (the "Merger"). The Merger has been unanimously
approved by the Board of Directors of Southwest Bancshares and
is subject, among other things, to the approval of the holders
of a majority of the outstanding shares of common stock of
Southwest Bancshares ("Southwest Bancshares Stock"). If the
Merger is consummated, each holder of Southwest Bancshares
Stock will receive 13.91278 shares of First Commercial common
stock (with cash payments in lieu of fractional shares) for
each outstanding share of Southwest Bancshares Stock held
at the effective date of the Merger.
SOUTHWEST BANCSHARES'S BOARD OF DIRECTORS AND MANAGEMENT
RECOMMEND APPROVAL OF THE MERGER.
Enclosed with this letter are a Notice of Annual Meeting, a
Proxy Form and return envelope and a Joint Proxy
Statement/Prospectus, which contains a detailed description
of the entire transaction. Please read the enclosed material
carefully. Because your vote is important, we urge you to
complete, date, sign and return the Proxy Form in the
enclosed postage paid, addressed envelope. No additional
postage is required if mailed in the United States.
Sincerely,
Jonesboro, Arkansas
____________, 1997
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To The Stockholders of Southwest Bancshares, Inc.:
Notice is hereby given that the Annual Meeting of the
Stockholders of Southwest Bancshares, Inc. ("Southwest
Bancshares") will be held on ________, 1997, at _____ a.m.,
local time, at _____________________, Jonesboro, Arkansas,
for the following purposes:
1. To consider and vote upon a proposal to approve
a plan of merger providing for the merger of
Southwest Bancshares into First Commercial
Corporation, Little Rock, Arkansas ("First
Commercial") (the "Merger"), with First Commer-
cial being the surviving corporation, as a result
of which each outstanding share of common stock
of Southwest Bancshares ("Southwest Bancshares
Stock") will be converted into 13.91278 shares
of First Commercial common stock (with cash
payments in lieu of fractional shares). Such
approval, if voted, shall be deemed to
constitute the ratification, confirmation and
approval of the execution and delivery by
Southwest Bancshares of the Plan and Agreement
of Merger ("Agreement") dated December 20,
1996, between First Commercial and Southwest
Bancshares.
2. To elect directors for the ensuing year.
Management has unanimously recommended the number
of directors be set at seven (7) and that the
existing directors, Wallace W. Fowler, Jama M.
Fowler, Phil Jones, Mark Fowler, Lloyd McCracken,
Jr., Roy Reaves and Charles Green, be re-elected.
3. To transact such other business as may
properly be brought before the Annual Meeting
or at any adjournment thereof.
The Board of Directors is not aware of any other business to come
before the meeting.
Information regarding the matters to be acted upon at the
meeting is contained in the accompanying Joint Proxy
Statement/Prospectus.
<PAGE>
Consummation of the Merger is conditioned upon approval by
the holders of a majority of the outstanding shares of
Southwest Bancshares Stock. Only those holders of Southwest
Bancshares Stock of record at the close of business on
_______________, 1997, are entitled to notice of, and to vote
at, the Annual Meeting and any adjournment thereof.
Dissenting shareholders who comply with the procedural
requirements of Sections 4-27-1301 to -31 of the Arkansas
Business Corporation Act will be entitled to receive payment
of the cash value of their shares if the Merger is approved.
A copy of those sections is attached as Attachment II to the
accompanying Joint Proxy Statement/Prospectus.
Your vote is important regardless of the number of shares you
own. Whether or not you plan to attend the Annual Meeting,
please mark, date and sign the enclosed Proxy and return it
promptly in the stamped return envelope in order to ensure that
your shares will be represented at the meeting.
By Order of the Board of Directors
____________________________________
Secretary
Jonesboro, Arkansas
____________, 1997
<PAGE>
JOINT PROXY STATEMENT/PROSPECTUS
PROSPECTUS FOR
FIRST COMMERCIAL CORPORATION
3,412,457 Shares
Common Stock
($3.00 par value per share)
PROXY STATEMENT FOR
SOUTHWEST BANCSHARES, INC.
First Commercial Corporation ("First Commercial") has filed a
registration statement pursuant to the Securities Act of
1933, as amended, covering 3,412,457 shares of First Commer-
cial Common Stock, $3.00 par value per share, to be offered
in connection with a proposed transaction in which Southwest
Bancshares, Inc. ("Southwest Bancshares") will be merged
into First Commercial, with the result that First Bank of
Arkansas, Jonesboro; First Bank of Arkansas, Russellville;
First Bank of Arkansas, Searcy; and First Bank of Arkansas,
Wynne will be wholly-owned subsidiaries of First Commercial.
An application is pending with the applicable bank
regulatory authorities to merge First Bank of Arkansas,
Wynne with and into First Bank of Arkansas, Jonesboro. This
merger may be effected on or before the consummation of the
merger of Southwest Bancshares into First Commercial if
regulatory approval is received before then. This document
constitutes a proxy statement of Southwest Bancshares in con-
nection with the proposed transaction described herein and a
prospectus of First Commercial with respect to the offering of
its shares of common stock.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT
ACCOUNTS AND ARE NOT INSURED BY THE SAVINGS ASSOCIATION
INSURANCE FUND OR THE FEDERAL DEPOSIT INSURANCE CORPORATION.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Joint Proxy Statement/Prospectus is
_________, 1997.
<PAGE>
No person is authorized to give any information or to make
any representation not contained in this Prospectus and, if
given or made, such information or representation should not
be relied upon as having been authorized. This Prospectus
does not constitute an offer to sell, or a solicitation of an
offer to purchase, the securities offered hereby, or the
solicitation of a proxy, in any jurisdiction in which, or to
any person to whom, it is unlawful to make such offer or
solicitation of an offer or proxy solicitation. Neither the
delivery of this Prospectus nor any distribution of the
securities offered hereby shall, under any circumstances,
create an implication that there has been no change in the
affairs of First Commercial or Southwest Bancshares since the
date hereof.
AVAILABLE INFORMATION
First Commercial is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in accordance therewith files reports
and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and
other information concerning First Commercial may be
inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Chicago Regional Office, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511, and New York Regional Office, Seven
World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates.
Additionally, such material may be accessed at the
Commission's Web site (http://www.sec.gov).
First Commercial has filed with the Commission a registration
statement on Form S-4 (herein, together with all amendments
and exhibits, referred to as the "Registration Statement")
under the Securities Act of 1933, as amended. This Joint
Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information,
reference is hereby made to the Registration Statement.
__________
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
AS IS MORE FULLY SET FORTH UNDER "INFORMATION CONCERNING
FIRST COMMERCIAL" ELSEWHERE HEREIN, THIS JOINT PROXY
STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. FIRST
COMMERCIAL HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO
EACH PERSON TO WHOM A COPY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS HAS BEEN DELIVERED, UPON THE WRITTEN OR
<PAGE>
ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE
DOCUMENTS RELATING TO FIRST COMMERCIAL THAT HAVE BEEN
INCORPORATED BY REFERENCE HEREIN, OTHER THAN EXHIBITS TO SUCH
DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE THEREIN. REQUESTS FOR DOCUMENTS RELATING TO
FIRST COMMERCIAL SHOULD BE DIRECTED TO J. LYNN WRIGHT, CHIEF
FINANCIAL OFFICER, FIRST COMMERCIAL CORPORATION, POST OFFICE
BOX 1471, LITTLE ROCK, ARKANSAS 72203, TELEPHONE (501) 371-
7000. IN ORDER TO INSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE MADE BY [5 BUSINESS DAYS PRIOR TO
SHAREHOLDER MEETING DATE], 1997.
<PAGE>
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE i
SUMMARY v
The Companies v
The Annual Meeting v
Purpose of the Annual Meeting v
Vote Required vi
Reasons for the Merger vi
Regulatory Approval vi
Dissenting Stockholders vi
Federal Income Tax Consequences vii
Selected Financial Data - First Commercial viii
Pro Forma Selected Financial Data - First Commercial ix
Comparative Per Share Data x
INTRODUCTORY STATEMENT 1
General 1
Purpose of the Annual Meeting 1
Shares Entitled to Vote; Vote Required 2
Solicitation, Voting and Revocation of Proxies 2
THE MERGER 2
General 2
Background and Reasons of Southwest
Bancshares for the Merger 3
Opinion of Southwest Bancshares's Financial Advisor 4
Federal Income Tax Consequences 4
Rights of Dissenting Southwest Bancshares Stockholders 5
Conditions of the Merger 6
Regulatory Approval 7
Termination of the Merger 8
Effective Date 8
Distribution of First Commercial Stock Certificates 8
Fractional Shares 9
Dilution 9
Accounting Treatment 9
Registration of First Commercial Stock
Under the Securities Act 10
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION 12
INFORMATION CONCERNING SOUTHWEST BANCSHARES
Selected Financial Data
Management's Discussion and Analysis of
Financial Conditions and Results
of Operations
<PAGE>
INFORMATION CONCERNING FIRST COMMERCIAL
Information Incorporated by Reference
Management and Additional Information
COMPARATIVE RIGHTS OF SHAREHOLDERS
General
Voting Rights
Voting Requirements for Extraordinary Corporate Matters
Voting for Election of Directors
Amendment of Articles of Incorporation
Amendment of Bylaws
Removal of Directors
Limitation of Director Liability
Filling Vacancies on the Board of Directors
Nomination of Director Candidates and Advance
Notice of Matters to be Brought Before an
Annual Meeting by Stockholders
Fair Price Provision
Shareholder Rights Plan
LEGAL OPINIONS
EXPERTS
CONSOLIDATED FINANCIAL STATEMENTS OF SOUTHWEST BANCSHARES F-1
Attachment I - Opinion of Southwest Bancshares's Financial
Advisor
Attachment II - Sections 4-27-1301 to -31 of the Arkansas
Business Corporation Act
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the
more detailed information appearing elsewhere herein and in
the appendices hereto.
The Companies
First Commercial Corporation ("First Commercial") is a multi-
bank holding company headquartered in Little Rock, Arkansas.
The Company offers a broad range of bank and bank-related
services through 15 commercial banking institutions in
Arkansas, seven in Texas, one in each of Louisiana and
Tennessee, and a 50% interest in a commercial banking
institution in Oklahoma. In addition, subsidiaries of the
Company provide trust and fiduciary services, discount
brokerage services, offer first mortgage loans and perform
mortgage loan servicing operations. First Commercial is
incorporated under the laws of the State of Arkansas. The
executive offices of the Company are located at 400 West
Capitol Avenue, Little Rock, Arkansas 72201, telephone
number: (501) 371-7000. See "Information Concerning First
Commercial."
Southwest Bancshares, Inc. ("Southwest Bancshares"), is a
multi-bank holding company headquartered in Jonesboro,
Arkansas. Southwest Bancshares's subsidiaries are First Bank
of Arkansas, Jonesboro; First Bank of Arkansas, Russellville;
First Bank of Arkansas, Searcy; and First Bank of Arkansas,
Wynne (collectively, the "Subsidiary Banks"). An application
is pending with the applicable regulatory authorities to merge
First Bank of Arkansas, Wynne with and into First Bank of
Arkansas, Jonesboro. Southwest Bancshares is incorporated
under the laws of the State of Arkansas. Executive offices of
Southwest Bancshares are located at 2400 East Highland Drive,
Jonesboro, Arkansas 72401, telephone number: (501) 972-9093.
See "Information Concerning Southwest Bancshares."
The Annual Meeting
An annual meeting of the stockholders of Southwest Bancshares
(the "Annual Meeting") will be held on ________, 1997, at
the time and place set forth in the accompanying Notice of
Annual Meeting of Stockholders. Only record holders of the
common stock, $1.00 par value per share, of Southwest
Bancshares (the "Southwest Bancshares Stock"), on
____________, 1997 are entitled to notice of and to vote at
the Annual Meeting. On that date there were 245,275 shares
of Southwest Bancshares Stock outstanding, each of which is
entitled to one vote at the Annual Meeting.
Purposes of the Annual Meeting
The primary purpose of the Annual Meeting is to consider and vote
upon a proposal to approve the merger of Southwest Bancshares
with and into First Commercial (the "Merger") pursuant to the
terms of a Plan and Agreement of Merger between First
<PAGE>
Commercial and Southwest Bancshares dated December 20, 1996
(the "Merger Agreement"). As a result of the Merger, the
Subsidiary Banks will become wholly-owned subsidiaries of
First Commercial. Under the terms of the Merger Agreement,
each outstanding share of Southwest Bancshares Stock will be
converted into a right to receive 13.91278 shares of common
stock, $3.00 par value per share, of First Commercial (the
"First Commercial Stock"). Cash will be paid by First
Commercial in lieu of issuing fractional shares. The First
Commercial Stock and cash to be delivered to the Southwest
Bancshares stockholders are hereinafter referred to as the
"Merger Consideration." Southwest Bancshares will have the
right to terminate the Merger Agreement in the event the
price of a share of First Commercial Stock drops below $29.50
for a period of time and if First Commercial does not agree
to amend the Merger Agreement so that the Merger
Consideration will include a number of shares of First
Commercial Stock having a value equal to $100,667,482. The
other purpose of the Annual Meeting is to elect directors for
the ensuing year. Management has recommended the number of
directors be set at seven and that the existing
directors, Wallace W. Fowler, Jama M. Fowler, Phil Jones,
Mark Fowler, Lloyd McCracken, Jr., Roy Reaves and
Charles Green be re-elected as directors. If the Merger is
approved by the stockholders, the directors will only serve
until the Merger becomes effective. See "Introductory
Statement - Purposes of the Annual Meeting."
Vote Required
The affirmative vote of the holders of a majority of the
outstanding shares of Southwest Bancshares Stock is required
to approve the Merger. Directors, executive officers and
their affiliates who own or control approximately 37% of the
outstanding shares of Southwest Bancshares Stock entitled to
vote at the Annual Meeting have indicated that they will
vote in favor of the Merger. See "Introductory Statement -
Shares Entitled to Vote; Vote Required."
Stockholders of First Commercial are not required to vote on
the Merger.
Reasons for the Merger
The Boards of Directors of First Commercial and Southwest
Bancshares have unanimously determined that the Merger,
pursuant to the terms of the Merger Agreement, is desirable
and in the best interest of each organization and its
respective stockholders.
The Board of Directors of Southwest Bancshares has
recommended that Southwest Bancshares stockholders vote for
the approval, ratification and confirmation of the Merger.
See "The Merger - Background and Reasons of Southwest Bancshares
for the Merger."
<PAGE>
Regulatory Approval
Consummation of the Merger requires the prior approval of the
Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") and the Arkansas State Bank
Department. Applications for such regulatory approval were
filed on January 30, 1997 and __________, 1997, respectively.
The Department of Justice will have the opportunity, within
30 days after approval of the Merger by the Federal Reserve
Board, to commence litigation against First Commercial and
Southwest Bancshares under the antitrust laws of the United
States to enjoin the Merger, in the event it shall elect to
do so. See "The Merger - Regulatory Approval."
Dissenting Stockholders
Stockholders of Southwest Bancshares who comply with the
specific procedures required by Sections 4-27-1301 to -31 of
the Arkansas Business Corporation Act, which are described
elsewhere herein, will have the right to dissent from the
Merger, in which event, if the Merger is consummated, they
may be entitled to receive in cash the fair value of their
shares of Southwest Bancshares Stock. See "The Merger -
Rights of Dissenting Southwest Bancshares Stockholders."
Federal Income Tax Consequences
The Merger will qualify as a tax-free corporate
reorganization for federal income tax purposes if it
satisfies the specific requirements of the Internal Revenue
Code of 1986, as amended, the Treasury regulations
promulgated thereunder and pertinent judicial decisions. The
most important of these requirements are that: (i) the
transaction must qualify as a merger under applicable state
or federal law and (ii) the stockholders of Southwest
Bancshares must maintain a "continuity of interest" in First
Commercial after the Merger. The Internal Revenue Service
takes the position that this "continuity of interest" test
will be satisfied if the former Southwest Bancshares
stockholders receive, in the Merger, a number of shares of
common stock of First Commercial having a value, as of the
effective date, equal to at least fifty percent (50%) of the
value of all the outstanding stock of Southwest Bancshares as
of such date. In general this requires the stockholders of
Southwest Bancshares to collectively surrender at least 50%
of their Southwest Bancshares Stock in exchange for First
Commercial Stock in the Merger. Based upon the
representation that these requirements will be satisfied in
connection with the Merger, and subject to certain other
assumptions and representations set forth in its opinion,
Friday, Eldredge & Clark, special tax counsel to First
<PAGE>
Commercial, will render its opinion to the effect that, among
other things, no taxable gain or loss will be recognized for
federal income tax purposes by the stockholders of Southwest
Bancshares solely upon receipt of First Commercial Stock in
exchange for their shares of Southwest Bancshares Stock in
connection with the Merger. However, no ruling will be
sought from the Internal Revenue Service regarding the federal
income tax consequences of the Merger, and the tax opinion of
counsel referenced above is not binding on the Internal
Revenue Service or any court. See "The Merger - Certain
Federal Income Tax Consequences."
<PAGE>
Selected Financial Data - First Commercial
The following selected financial data should be read in conjunction
with the more detailed information and financial statements, including
the notes thereto, set forth in this document and incorporated herein
by reference. See "Information Concerning First Commercial."
FIRST COMMERCIAL CONSOLIDATED SELECTED FINANCIAL DATA
(In thousands, except per share data)
Year Ended December 31,
------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Period Ended:
Net Interest Income $217,208 $184,550 $159,445 $144,574 $133,408
Provision for
Possible
Loan and Lease
Losses 7,452 3,059 (3,092) 4,416 8,941
Net Income 68,562 56,910 50,308 45,965 39,967
Per Common Share
Data(1):
Net Income 2.37 2.07 1.87 1.66 1.44
Cash Dividends .84 .74 .64 .51 .40
Book Value 16.49 15.06 12.85 12.06 10.65
Average Assets 5,283,525 4,652,368 4,235,586 3,812,409 3,313,162
Average Common Equity 454,299 378,807 337,557 310,252 271,598
Average Total Equity 454,299 378,807 339,244 320,872 282,218
Ratios(%)
Return on:
Average Assets 1.30 1.22 1.19 1.21 1.21
Average Common Equity 15.09 15.02 14.87 14.43 14.27
Average Total Equity
to Average Assets 8.60 8.14 8.01 8.42 8.52
(1) All per share data has been restated to reflect the 3 for 2 stock split
declared November 1993, the 5% stock dividend declared November 1994,
the 7% stock dividend declared November 1995, and the 5% stock dividend
declared October 1996.
<PAGE>
Pro Forma Selected Financial Data - First Commercial
The following table summarizes on a pro forma basis the effect
of the Merger, accounted for as a pooling of interests, as if it
had been consummated during the period ended December 31, 1996.
Due to market concentration issues, partial divestiture of
Southwest Bancshares, Inc. will be required by banking
regulators. Specific information regarding the divestiture has
not been determined; therefore, the following information does
not reflect the effect of the divestiture.
Years Ended December 31,
---------------------------
1996 1995 1994
---- ---- ----
Period Ended:
Net Interest Income $242,567 $201,866 $172,928
Provision for Possible
Loan and Lease Losses 13,033 4,223 (2,098)
Net Income 74,292 61,522 53,331
Per Common Share Data(1):
Net Income 2.30 1.99 1.76
(1) All per share data has been restated to reflect the 7% stock dividend
declared November 1995 and the 5% stock dividend declared October 1996.
<PAGE>
Comparative Per Share Data
Information presented below may not be indicative of the results
that actually would have occurred if the combination had been in effect
on the dates indicated or indicative of future results. Due to
market concentration issues, partial divestiture of Southwest Bancshares,
Inc. will be required by banking regulators. Specific information
regarding the divestiture has not been determined; therefore, the
following information does not reflect the effect of the divestiture.
Years Ended December 31,
---------------------------
1996 1995 1994
---- ---- ----
Earnings Per Common Share
Historical:
First Commercial(1) $ 2.37 $ 2.07 $ 1.87
Southwest Bancshares 23.36 21.22 16.08
Pro Forma - First Commercial 2.30 1.99 1.76
Pro Forma Equivalent Share Basis -
Southwest Bancshares (2) 32.00 27.69 24.49
Cash Dividends Per Common Share:
Historical:
First Commercial (1) .84 .74 .64
Southwest Bancshares 0 0 0
Pro Forma - First Commercial .75 .66 .56
Pro Forma Equivalent Share Basis -
Southwest Bancshares (2) 10.43 9.18 7.79
Book Value Per Common Share (period
end):
Historical:
First Commercial (1) 16.49 - -
Southwest Bancshares 218.23
Pro Forma - First Commercial 16.41
Pro Forma Equivalent Share Basis -
Southwest Bancshares (2) 228.31
(1) All First Commercial Corporation historical and pro forma per share
data has been restated to reflect the 7% stock dividend declared
November 1995 and the 5% stock dividend declared October 1996.
(2) The pro forma equivalent share amounts are computed by multiplying
First Commercial's pro forma share information by 13.91278.
<PAGE>
INTRODUCTORY STATEMENT
General
This Joint Proxy Statement/Prospectus is furnished to the
stockholders of Southwest Bancshares, Inc. ("Southwest
Bancshares") in connection with the solicitation of proxies
on behalf of its Board of Directors for use at the annual
meeting of stockholders of Southwest Bancshares (the "Annual
Meeting") to be held on the date and at the time and place
specified in the accompanying Notice of Annual Meeting of
Stockholders or any adjournment thereof.
Southwest Bancshares and First Commercial Corporation ("First
Commercial") have each supplied all information included
herein with respect to itself. As used in this Joint Proxy
Statement/Prospectus, the term "Southwest Bancshares" means
Southwest Bancshares, Inc. and its consolidated subsidiaries
and the term "First Commercial" means First Commercial
Corporation and its consolidated subsidiaries.
This Joint Proxy Statement/Prospectus was first mailed to
shareholders of Southwest Bancshares on ___________, 1997.
Purposes of the Annual Meeting
The primary purpose of the Annual Meeting is to consider and
vote upon a proposal to approve the merger of Southwest Banc-
shares with and into First Commercial (the "Merger") pursuant
to the terms of a Plan and Agreement of Merger between First
Commercial and Southwest Bancshares dated December 20, 1996
(the "Merger Agreement"). As a result of the Merger, the
Subsidiary Banks (as defined herein) of Southwest Bancshares
will become wholly-owned subsidiaries of First Commercial.
Under the terms of the Merger Agreement, each outstanding
share of common stock of Southwest Bancshares, $1.00 par
value per share ("Southwest Bancshares Stock"), will be
canceled and converted into the right to receive 13.91278
shares of First Commercial common stock, $3.00 par value per
share ("First Commercial Stock"), with cash payment due in
lieu of any fractional shares. The First Commercial Stock
and cash in lieu of fractional shares to be delivered to
Southwest Bancshares stockholders are hereinafter referred to
as the "Merger Consideration." See "The Merger -
Distribution of First Commercial Stock Certificates."
Southwest Bancshares may terminate the Merger Agreement if
the average of the individual averages of the bid and asked
prices for shares of First Commercial Stock as reported on
the Nasdaq National Market as of the close of business on
each of the twenty (20) trading days immediately preceding
the Closing Date (the "Pre-Closing Period Average Price")
shall be less than $29.50 per share and if First Commercial
does not agree to amend the Merger Agreement so that the
<PAGE>
Merger Consideration will include a number of shares of First
Commercial Stock having a value, based on the Pre-Closing
Period Average Price, equal to $100,667,482. The average of
the bid and asked price of a share of First Commercial Stock
on _________, 1997, was $_____.
The other purpose of the Annual Meeting is to elect
directors. Management has recommended that the number of
directors be set at seven for the ensuing year and that the
existing directors, Wallace W. Fowler, Jama M. Fowler, Phil
Jones, Mark Fowler, Lloyd McCracken, Jr., Roy Reaves and
Charles Green be re-elected as directors. All of them other
than Messrs. Mark Fowler, Reaves and Green have been
directors of Southwest Bancshares since it was organized and
Messrs. Mark Fowler, Reaves and Green have been directors
since January 1991, September 1992 and June 1994,
respectively. If the Merger is approved, the directors will
only serve until the Merger becomes effective.
Shares Entitled to Vote; Vote Required
Only holders of record of Southwest Bancshares Stock at the
close of business on _________, 1997 (the "Record Date") are
entitled to notice of and to vote at the Annual Meeting. On
that date, the number of outstanding shares of Southwest
Bancshares Stock was 245,275, each of which is entitled to
one vote on each matter to come before the Annual Meeting.
Under Southwest Bancshares's Articles of Incorporation and
the Arkansas Business Corporation Act of 1987, approval of
the Merger requires the affirmative vote of the holders of a
majority of the outstanding shares of Southwest Bancshares
Stock. Abstentions will not be counted as affirmative votes.
Directors, executive officers and their affiliates who own or
control approximately 37% of the outstanding shares of
Southwest Bancshares Stock entitled to vote have indicated
that they will vote in favor of the Merger. No cumulative
voting for the election of directors is permitted by Southwest
Bancshares's Articles of Incorporation.
Solicitation, Voting and Revocation of Proxies
In addition to soliciting proxies by mail, directors,
officers and employees of Southwest Bancshares, without
receiving additional compensation therefor, may solicit
proxies by telephone and in person. Arrangements will also
be made with brokerage firms and other custodians, nominees
and fiduciaries to forward solicitation materials to the
beneficial owners of Southwest Bancshares Stock, and
Southwest Bancshares will reimburse such parties for
reasonable out-of-pocket expenses incurred in connection
therewith. The cost of soliciting proxies is being paid by
Southwest Bancshares.
<PAGE>
The proxies that accompany this Joint Proxy
Statement/Prospectus permit each holder of Southwest
Bancshares Stock on the Record Date to vote on all matters
that come before the Annual Meeting. When a stockholder
specifies his choice on the proxy with respect to a matter
being voted upon, the shares represented by the proxy will be
voted in accordance with such specification. If no such
specification is made, the shares will be voted in favor of
approval of the Merger and for the re-election of the existing
directors. A proxy may be revoked by (i) giving written notice
of revocation at any time before its exercise to Lloyd
McCracken, Jr., Secretary, Treasurer and Chief Financial
Officerr, Southwest Bancshares, Inc., 2400 East Highland Drive,
Jonesboro, Arkansas 72401, (ii) executing and delivering to
Lloyd McCracken, Jr. at any time before its exercise a
proxy bearing a subsequent date or (iii) attending the
Annual Meeting and voting in person.
The Board of Directors of Southwest Bancshares is not aware
of any business to be acted upon at the Annual Meeting other
than election of directors and consideration of the Merger.
If, however, other proper matters are brought before the Annual
Meeting, or any adjournments thereof, the persons appointed as
proxies will have discretion to vote or abstain from voting
thereon according to their best judgment.
THE MERGER
General
On December 17, 1996, and December 20, 1996, the Boards of
Directors of First Commercial and Southwest Bancshares,
respectively, approved the Merger Agreement. The description
of the Merger Agreement herein does not purport to be
complete and is qualified in its entirety by reference to the
Merger Agreement, which is made an exhibit to the
Registration Statement of which this Joint Proxy
Statement/Prospectus is a part and is incorporated herein by
reference.
Under the Merger Agreement, Southwest Bancshares will be
merged into First Commercial, and each share of Southwest
Bancshares Stock outstanding on the Effective Date, as
defined in "The Merger - Effective Date," will be converted
into the right to receive 13.91278 shares of First Commercial
Stock. The exchange ratio was based upon historical and
projected earnings of Southwest Bancshares, the amounts of
Southwest Bancshares assets and liabilities, and the market
value of First Commercial Stock. Projected earnings were
based primarily on historical trends. The Merger Agreement
requires that upon the closing of the Merger, the Board of
Directors of First Commercial will elect Wallace W. Fowler as
a member of such Board of Directors and of its Executive
Committee.
<PAGE>
First Commercial is an Arkansas corporation and a multi-bank
holding company registered under the Bank Holding Company Act
of 1956, as amended ("BHCA"). Southwest Bancshares is an
Arkansas corporation and a multi-bank holding company
registered under the BHCA.
Stockholders of Southwest Bancshares will exchange their
stock certificates for new certificates evidencing shares of
First Commercial Stock. After the Merger, and until so
exchanged, the shares of Southwest Bancshares Stock will
represent the right to receive the number of shares of First
Commercial Stock into which such shares of Southwest
Bancshares Stock will be converted. See "The Merger -
Distribution of First Commercial Stock Certificates."
Background and Reasons of Southwest Bancshares for the Merger
During 1996, management and the Board of Southwest
Bancshares had discussions with Stephens Inc. ("Stephens"),
as well as other professional advisors, for the purpose of
considering the possibilities of an initial public offering,
or a sale or merger transaction. At a meeting on November 12,
1996, the Southwest Bancshares Board voted to retain Stephens
to assist the Board in analyzing the potential value which
shareholders should be able to receive in a sale or merger
transaction. Stephens also agreed, if requested by
Southwest Bancshares, to assist in any negotiations, and
give its written opinion as to whether any proposed
transaction would be fair, from a financial point of view,
to Southwest Bancshares shareholders.
Following Stephens engagement, Southwest Bancshares
entered into negotiations with First Commercial which led
to the proposed Merger Agreement. On December 20, 1996, the
Southwest Bancshares Board met for the purpose of
considering and acting on the proposed Merger Agreement. At
this meeting, the Southwest Bancshares Board received the
written opinion of Stephens setting forth its opinion that
the terms of the Merger Agreement were fair to the Southwest
Bancshares shareholders from a financial point of view. See
"Opinion of Southwest Bancshares's Financial Advisor."
In considering whether to approve the Merger Agreement
and the transactions contemplated thereby, the Southwest
Bancshares Board took into account, among others, the
following factors:
<PAGE>
(1) The Southwest Bancshares Board considered the
terms of the Merger Agreement. It also considered the
historical trading ranges for the First Commercial Stock,
the number of shares of First Commercial Stock to be issued
for each share of Southwest Bancshares stock (the "Exchange
Ratio"), and the pro forma earnings, dividends, and book
value per share for shareholders of Southwest Bancshares,
as of and for the last nine months ended September 30,
1996. The Southwest Bancshares Board further considered that
under the Merger Agreement, it would have the right to
terminate the Agreement in the event of a specified
significant decline in the price of First Commercial
Stock prior to the consummation of the Merger unless First
Commercial then elected to increase the Exchange Ratio
in the amount necessary to achieve a specified minimum
aggregate market value of the First Commercial Stock issued
in the Merger.
(2) The Southwest Bancshares Board considered the fact
that First Commercial's stock is actively traded on the
Nasdaq National Market, thereby providing a degree of
liquidity to Southwest Bancshares's shareholders.
(3) The Southwest Bancshares Board considered the
advice of its financial advisor, Stephens, and reviewed the
detailed financial analysis and other information presented
by Stephens. The Southwest Bancshares Board took into account
the multiples of earnings and book value presented by the
Exchange Ratio. The Southwest Bancshares Board considered the
opinion of Stephens (including the assumptions and financial
information relied upon by it in arriving at such opinion)
that, as of December 20, 1996 and based upon the matters set
forth in its written opinion as of that date, the con-
sideration to be received in the Merger by holders of
Southwest Bancshares Common Stock was fair to such holders.
(4) The Southwest Bancshares Board considered that the
combination of Southwest Bancshares with First Commercial
would further strengthen First Commercial s significant
position in Arkansas in terms of assets and deposits. The
Southwest Bancshares Board recognized that, as a result, the
combined company would be more likely than Southwest
Bancshares alone to possess the financial resources to
compete more effectively in the rapidly changing marketplace
for banking and financial services and more effective in
fulfilling Southwest Bancshares long-term objective of
increasing its overall size and enhancing its market
presence, while maintaining its asset quality and credit
standards.
(5) The Southwest Bancshares Board took into account
that Mr. Wallace W. Fowler would be elected or appointed to
the First Commercial Board and that Mr. Fowler would become
a member of the Executive Committee of the First Commercial
Board following consummation of the Merger.
<PAGE>
(6) Southwest Bancshares Board considered First
Commercial s commitment to make each of its affiliates an
independent community bank responsive to the local
communities' needs.
(7) The Southwest Bancshares Board considered
information with respect to, among other things, the
historical financial results of First Commercial, including,
among other things, assessments of First Commercial s asset
quality, diversity of income, adequacy of loan loss reserves
and interest rate risk.
(8) The Southwest Bancshares Board considered that the
Merger is expected to be tax-free for federal income tax
purposes to Southwest Bancshares shareholders. See "Summary
Federal Income Tax Consequences."
(9) The Southwest Bancshares Board took into account
the current and prospective economic and competitive
environment facing the financial services industry generally
and of Southwest Bancshares and First Commercial in
particular.
In reaching its determination to approve the Merger
Agreement, and the transactions contemplated thereby, the
Southwest Bancshares Board did not assign any relative or
specific weights to the various factors considered by it,
and individual directors may have given differing weights to
different factors. The foregoing discussion of the
information and factors considered by the Southwest
Bancshares Board is not intended to be exhaustive but
includes all material factors considered by the Southwest
Bancshares Board.
BASED UPON THE OPINION OF STEPHENS, THE RECOMMENDATION
OF MANAGEMENT AND THE OTHER FACTORS HEREIN DESCRIBED, THE
BOARD OF SOUTHWEST BANCSHARES UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND BELIEVES THE MERGER IS FAIR TO, AND IS
IN THE BEST INTEREST OF, ITS SHAREHOLDERS. ACCORDINGLY, THE
SOUTHWEST BANCSHARES BOARD UNANIMOUSLY RECOMMENDS THAT
HOLDERS OF SOUTHWEST BANCSHARES COMMON STOCK VOTE FOR
APPROVAL OF THE AGREEMENT.
Opinion of Southwest Bancshares's Financial Advisor
Stephens has acted as financial advisor to Southwest
Bancshares in connection with the Merger. As part of its
engagement, Stephens agreed, if requested by Southwest
Bancshares, to render an opinion with respect to the
fairness to the disinterested shareholders of Southwest Banc-
shares from a financial point of view of the consideration
proposed to be received by Southwest Bancshares in the Merger.
For purposes of this opinion, the term "disinterested share-
holders" was defined to exclude (1) directors, officers, and
employees, (2) any holder of five percent (5%) or more of the
outstanding stock, and (3) Southwest Bancshares and its affi-
liates. Stephens is a nationally recognized investment
banking firm and, as part of its investment activities, is
<PAGE>
regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, nego-
tiated underwritings, competitive biddings, secondary distri-
butions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes.
Southwest Bancshares selected Stephens as its financial
advisor on the basis of its experience and expertise in
merger transactions, and its reputation in the banking and
investment communities.
In connection with its engagement, a written opinion
dated December 20, 1996 was delivered by Stephens to the
Board of Southwest Bancshares that, based upon and subject
to certain assumptions and matters considered, and
limitations set out therein, the consideration to be
received by Southwest Bancshares in the Merger was fair to
the disinterested shareholders of Southwest Bancshares from a
financial point of view.
THE FULL TEXT OF STEPHENS'S WRITTEN OPINION TO THE SOUTHWEST
BANCSHARES'S BOARD DATED DECEMBER 20, 1996, WHICH SETS FORTH
THE ASSUMPTIONS, MATTERS CONSIDERED AND LIMITATIONS IS
ATTACHED HERETO AS ATTACHMENT 1 AND IS INCORPORATED HEREIN
BY REFERENCE AND SHOULD BE READ CAREFULLY AND IN ITS
ENTIRETY IN CONNECTION WITH THIS JOINT PROXY STATEMENT-
PROSPECTUS. THE FOLLOWING SUMMARY OF STEPHENS'S OPINION IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF
THE OPINION. STEPHENS'S OPINION, WHICH IS ADDRESSED TO THE
SOUTHWEST BANCSHARES'S BOARD, IS DIRECTED ONLY TO THE
FAIRNESS FROM A FINANCIAL POINT OF VIEW TO SOUTHWEST
BANCSHARES OF THE CONSIDERATION TO BE RECEIVED BY SOUTHWEST
BANCSHARES IN THE MERGER, DOES NOT ADDRESS ANY OTHER ASPECT
OF THE PROPOSED MERGER OR ANY RELATED TRANSACTIONS AND DOES
NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW
SUCH SHAREHOLDER SHOULD VOTE AT THE SOUTHWEST BANCSHARES
ANNUAL MEETING WHERE THE PROPOSED MERGER WILL BE CONSIDERED.
In connection with its review, Stephens did not assume
any obligation independently to verify any of the
information utilized in its analyses and relied on all such
information being complete and accurate in all material
respects. Stephens also assumed, with Southwest Bancshares
consent, that there were no material changes in Southwest
Bancshares or First Commercial's assets, financial
condition, results of operations, business or prospects
since the respective dates of their last financial
statements reviewed by Stephens and that any off-balance-
sheet activities of Southwest Bancshares and First
Commercial, including derivatives and other similar
financial instruments, if any, will not materially and
adversely affect the future financial position or results of
operations of Southwest Bancshares or First Commercial.
Stephens further assumed, with Southwest Bancshares's consent,
that in the course of obtaining the necessary regulatory and
third party consents for the Merger, no restrictions will be
imposed that will have a material adverse effect on the
<PAGE>
contemplated benefits of the Merger or the transactions
contemplated thereby. Stephens further assumed, with
Southwest Bancshares's consent, that the Merger will be
consummated in accordance with the terms and provisions of
the Merger Agreement, without any amendments to, and without
any waiver by Southwest Bancshares of, any of the material
conditions to its obligations thereunder. Stephens noted
that it is not an expert in the evaluation of loan
portfolios for purposes of assessing the adequacy of the
allowances for losses with respect thereto and Stephens
assumed, with Southwest Bancshares's consent, that such
allowances for each of Southwest Bancshares and First
Commercial are in the aggregate adequate to cover such
possible losses. In addition, Stephens did not assume
responsibility for reviewing any individual credit files or
making an independent evaluation, appraisal or physical
inspection of the assets or individual properties of
Southwest Bancshares or First Commercial, nor was Stephens
furnished with any such evaluations or appraisals. Finally,
Stephens opinion was based on economic, monetary and market
and other conditions as in effect on, and the information
made available to Stephens as of the dates thereof. No
other limitations were imposed by Southwest Bancshares on
Stephens with respect to the investigations made or
procedures followed by in rendering its opinion.
Set forth below is a summary of the material analysis
performed be Stephens in connection with its opinion
delivered to the Southwest Bancshares Board on December 20,
1996.
Pro Forma Contribution Analysis. Stephens computed
the contribution of First Commercial and Southwest
Bancshares to the combined entity s pro forma balance sheet
and income statement at and for the nine months ended
September 30, 1996. The computation showed, among other
things, that First Commercial and Southwest Bancshares
contributed to the combined entity approximately 87.2% and
12.8%, respectively, of total assets; 84.6% and 15.4%,
respectively, of total loans; 87.2% and 12.8%,
respectively, of total deposits; 89.2% and 10.8%,
respectively, of net interest income (after provision for
loan losses); 95.1% and 4.9%, respectively, of noninterest
income; 89.0% and 11.0%, respectively, of net income; and
89.4% and 10.6%, respectively, of pro forma ownership of the
combined company based on the Merger Consideration.
<PAGE>
Pro Forma Dilution Analysis. Stephens reviewed the pro
forma impact of the Merger on Southwest Bancshares'
historical earnings per share and recent book value per
share, as of and through September 30, 1996. Based on
discussion with Southwest Bancshares management, Stephens
did not assume any cost savings (or revenue enhancements) by
First Commercial resulting from the proposed merger. This
analysis showed that the Merger was accretive (dilutive) to
Southwest Bancshares historical earnings per share for
1993, 1994, 1995, and the nine months ended September 30,
1996, by 36.6%, 56.0%, 32.0%, and (3.0%), respectively. The
analysis also showed that the Merger was accretive to
Southwest Bancshares' book value per share as of December
31, 1993, 1994, 1995, and as of September 30, 1996, by 8.6%,
4.4%, 6.5% and 1.0%, respectively.
Analysis of Selected Comparable Bank Merger Transactions.
Stephens reviewed the consideration paid in 27 transactions
announced since January 1, 1994 with transaction values between
$50 million and $250 million and involving acquired banks
located in Arkansas or its contiguous states (the
"Comparable Transactions"). For each company merged or to
be merged in such transactions, Stephens compiled figures
illustrating, among other things, transaction price to
latest twelve months earnings per share, transaction price
to book value and transaction price to tangible book value.
The figures for the Comparable Transactions announced
since 1994 are as follows: (i) a mean and median ratio of
transaction price to latest twelve month s adjusted earnings
per share of 17.4x and 16.4x, respectively; (ii) a mean and
median ratio of transaction price to book value of 2.3x and
2.4x, respectively; and (iii) a mean and median ratio of
transaction price to tangible book value of 2.4x and 2.4x,
respectively. In comparison, based upon a price per share
of $37.50 for First Commercial (the last reported price on
December 19, 1996) and an implied offer value of $128.0
million, the consideration to be paid to the holders of
Southwest Bancshares Common Stock represented a ratio of
transaction price to latest twelve months earnings per share
(through September 30, 1996) of 16.5x, a ratio of
transaction price to book value of 2.4x, and ratio of
transaction price to tangible book value of 2.5x.
No other company or transaction used in the above
analysis as a comparison is identical to First Commercial ,
Southwest Bancshares or the proposed Merger. Accordingly,
an analysis of the results of the foregoing is not
mathematical; rather, it involves complex considerations and
judgments concerning differences in financial and operating
characteristics of the companies and other factors that
could affect the acquisition or public trading multiples of
<PAGE>
the companies to which First Commercial, Southwest
Bancshares and the proposed Merger are being compared.
Potential Merger Valuation Range. Stephens prepared an
analysis of the potential value which selected potential merger
partners including First Commercial might be expected to offer
to acquire Southwest Bancshares in a competitive bidding
process. The analysis showed that based on closing stock
market prices on December 18, 1996, the selected potential
merger partners might be expected to offer between $103.1
million and $140.6 million in a merger transaction, based
upon management's assumption of potential cost savings of 0%
to 5% of Southwest Bancshares noninterest expense. The poten-
tial merger partners selected for this analysis included ten
publicly-traded bank holding companies headquartered in
Arkansas, Louisiana, Mississippi, Missouri and Tennessee with
greater than $1 billion in assets. This analysis was predi-
cated on the assumption that each potential merger partner
would be willing to issue that number of shares which would
cause no dilution to analysts consensus estimates of their
expected 1996 earnings per share, and based on Southwest
Bancshares then expected 1996 earnings.
In rendering its opinion, Stephens considered certain
other factors and comparative analysis, including, among
other things, analyses of: (i) the historical financial
results of First Commercial and Southwest Bancshares, (ii)
the historical trading prices and volume of the stock of
First Commercial, (iii) the market share ranking of First
Commercial, (iv) the stock prices and trading multiples of
First Commercial and Southwest Bancshares relative to those
of selected peer groups of publicly traded banking companies
and (v) the pro forma share ownership of the combined com-
pany by current Southwest Bancshares stockholders.
The foregoing is a summary of the material analysis
performed by Stephens in connection with its opinion
delivered to the Board of Southwest Bancshares on
December 20, 1996. The summary set forth above does not
purport to be a complete description of the analysis
performed by Stephens. The preparation of a fairness
opinion is not necessarily susceptible to partial analysis
or summary description. Stephens believes that its analyses
and the summary set forth above must be considered as a
whole and that selecting portions of its analyses and of the
factors considered, without considering all analyses and
factors, would create an incomplete view of the process
underlying the analyses. In addition, Stephens may have
<PAGE>
given various analyses more or less weight than other
analyses, and may have deemed various assumptions more or
less probable than other assumptions, so that the ranges of
valuations resulting from any particular analysis described
above should not be taken to be Stephens view of the actual
values of Southwest Bancshares, First Commercial, or the
combined company. The fact that any specific analysis has
been referred to in the summary above is not meant to
indicate that such analysis was given greater weight than
any other analysis.
In performing its analyses, Stephens made numerous
assumptions with respect to industry performance,
regulatory, general business and economic conditions and
other matters, many of which are beyond the control of
Southwest Bancshares and First Commercial. The analyses
performed by Stephens are not necessarily indicative of
actual values or actual future results, which may be
significantly more or less favorable than those suggested by
such analyses. Such analyses were prepared solely as part
of Stephens analysis of the fairness of the consideration
to be received from a financial point of view in connection
with the delivery of Stephens opinion. The analyses do not
purport to be appraisals or to reflect the prices at which a
company might actually be sold or the prices at which any
securities may trade at the present time or at any time in
the future.
Pursuant to the terms of Stephens engagement as
financial advisor (including rendering its opinion as to the
fairness of the proposed transaction), Southwest Bancshares
has agreed to pay Stephens a fee equal to 0.70% of the
transaction value (defined to be all consideration payable
to Southwest Bancshares shareholders), of which $100,000 was
payable upon signing of the Merger Agreement, the balance of
which is contingent and payable on completion of the Merger.
Southwest Bancshares also has agreed to reimburse Stephens
for its reasonable out-of-pocket expenses, including fees
and expenses of Stephens legal counsel, subject to a
certain limit. Southwest Bancshares has also agreed to
indemnify Stephens, its affiliates, and their respective
partners, directors, officers, agents, consultants,
employees and controlling persons against certain
liabilities, including liabilities under federal securities
law.
<PAGE>
Federal Income Tax Consequences
The following is a discussion of certain material federal
income tax considerations in connection with the Merger and
of the tax opinion of Friday, Eldredge & Clark, special tax
counsel to First Commercial. This discussion does not address
all aspects of federal income taxation that may be relevant to
particular shareholders of Southwest Bancshares and may not be
applicable to shareholders who are not citizens or residents
of the United States, or who may acquire First Commercial
common stock pursuant to the exercise or termination of
employee stock options or otherwise as compensation, nor does
the discussion address the effect of any applicable foreign,
state, local or other tax laws. This discussion assumes that
the Southwest Bancshares shareholders hold their Southwest
Bancshares common stock as capital assets within the meaning
of Section 1221 of the Internal Revenue Code of 1986, as
amended (the "Code"). EACH SOUTHWEST BANCSHARES SHAREHOLDER
SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES TO HIM OR HER OF THE MERGER, INCLUDING THE
APPLICABILITY AND EFFECT OF FOREIGN, STATE, LOCAL AND OTHER
TAX LAWS.
The Merger will qualify as a tax-free corporate
reorganization for federal income tax purposes under Section
368(a)(1)(A) of the Code, if it satisfies the specific re-
quirements of the Code, the regulations promulgated thereunder,
and pertinent judicial decisions. The most important of these
requirements are (i) the transaction must qualify as a merger
under applicable state or federal law and (ii) the
stockholders of Southwest Bancshares must maintain a
"continuity of interest" in the surviving corporation after
the Merger. The Internal Revenue Service takes the position
that this "continuity of interest" test will be satisfied if
the former Southwest Bancshares stockholders receive, in the
Merger, a number of shares of common stock of First
Commercial having a value, as of the Effective Date (as
defined herein), equal to at least fifty percent (50%) of the
value of all the outstanding stock of Southwest Bancshares as
of such date, and acquire such stock without a present in-
tent to sell, transfer or otherwise dispose of such stock in
a manner that would cause the fifty percent (50%) continuity
of interest threshold to be violated. In general, this
requires the stockholders of Southwest Bancshares to collec-
tively surrender at least 50% of their Southwest Bancshares
Stock in exchange for First Commercial Stock in the Merger,
without a present intent to sell, transfer, or otherwise dis-
pose of such stock in violation of the 50% continuity of
interest requirement.
<PAGE>
The Merger has been structured in a manner to qualify as a
statutory merger under the law of the State of Arkansas. In
addition, it is expected that the stockholders of Southwest
Bancshares will collectively exchange a sufficient number of
shares of Southwest Bancshares Stock for First Commercial
Stock so that the 50% "continuity of interest" test initially
should be satisfied in connection with the Merger.
Accordingly, assuming these tests are satisfied, and provided
other specific requirements contained in the Code, the
regulations promulgated thereunder, and pertinent judicial
decisions are met, the transaction should qualify as a tax-
free corporate reorganization for federal income tax purposes
pursuant to the provisions of Section 368(a)(1)(A) of the
Code.
If the Merger qualifies as a tax-free corporate
reorganization, the material federal income tax consequences
of the Merger will be as follows: (i) no material gain or
loss will be recognized by Southwest Bancshares or First
Commercial as a result of the Merger; (ii) no gain or loss
will be recognized by the stockholders of Southwest
Bancshares upon the receipt of First Commercial Stock
received solely in exchange for their shares of Southwest
Bancshares Stock in connection with the Merger; (iii) the tax
basis of the shares of First Commercial stock received by the
stockholders of Southwest Bancshares in the Merger will, in
each instance, be the same as the basis of the shares of
Southwest Bancshares Stock surrendered in exchange therefor;
(iv) the holding period of the shares of First Commercial
Stock received by the stockholders of Southwest Bancshares in
the Merger will, in each instance, include the holding period
of the shares of Southwest Bancshares Stock exchanged
therefor, provided that the shares of Southwest Bancshares
Stock were held as capital assets on the date of the Merger;
and (v) the payment of cash to stockholders of Southwest
Bancshares in lieu of fractional shares of First Commercial
Stock will be a taxable transaction and will be treated as
if the fractional shares were distributed as part of the
exchange and then redeemed by First Commercial for cash, and
any such cash payments will be treated as having been received
by the stockholder as a distribution in redemption of the
fractional share interest, subject to the provisions of
Section 302 of the Code.
Stockholders of Southwest Bancshares who exercise dissenters'
rights and receive cash for their shares of Southwest
Bancshares Stock will have engaged in a taxable transaction and
will be treated as having received such cash as a distribution
in redemption of such stockholders' Southwest Bancshares Stock,
subject to the conditions and limitations of Section 302 of the
Code.
<PAGE>
If the Merger does not qualify as a tax-free corporate
reorganization for federal income tax purposes, it will
constitute a taxable transaction to the stockholders of
Southwest Bancshares. In such circumstances, gain or loss
will be recognized by the stockholders of Southwest
Bancshares to the extent of the difference between the fair
market value, on the Effective Date, of the shares of First
Commercial Stock received in connection with the Merger, and
the adjusted basis of the shares of Southwest Bancshares
Stock surrendered in the transaction. The fair market value
of the First Commercial Stock on the Effective Date may be
determined on the basis of the average high and low selling
prices of such stock on the day of the transaction. If the
transaction is taxable, the holding period for the shares of
First Commercial Stock to be received by the stockholders of
Southwest Bancshares will commence on the day following the
date of the transaction.
Because the tax consequences to any particular stockholder
may be affected by matters not pertaining to the Merger, it
is recommended that each stockholder of Southwest Bancshares
consult his or her own personal tax advisor concerning the
specific income tax consequences of the Merger, including the
applicability and effect of foreign, state, local and other
tax laws.
Rights of Dissenting Southwest Bancshares Stockholders
Pursuant to Sections 5-27-1301 to -31 of the Arkansas
Business Corporation Act of 1987, any stockholder of
Southwest Bancshares may dissent from the Merger only by
delivering to Southwest Bancshares before the vote is taken
on the proposed Merger by the Southwest Bancshares
stockholders written notice of his intent to demand payment
for his shares if the proposed Merger is effectuated and he
must not vote his shares in favor of the proposed Merger .
A stockholder of Southwest Bancshares who does not satisfy
these requirements as well as the other requirements of
Sections 4-27-1301 to -31 of the Arkansas Business
Corporation Act of 1987 is not entitled to payment for his
shares under the Arkansas Business Corporation Act of 1987.
Southwest Bancshares shall, within ten days after the Merger
is effective as provided, deliver to such dissenting stock-
holder a form for demanding payment and a written notice
setting forth where the payment demand must be sent and where
and when certificates representing such dissenting stockholder
shares must be deposited. The written notice shall also set
forth a date by which Southwest Bancshares must receive the
payment demand, which date may not be fewer than thirty (30)
nor more than sixty (60) days after the date the payment
<PAGE>
demand notice is required to be delivered by Southwest
Bancshares. A stockholder who has received a payment demand
notice must then demand payment and deposit his share certifi-
cates pursuant to the terms of and within the deadlines set
forth in the payment demand notice. A stockholder who does not
comply with such requirements will not be entitled to payment
for his shares under the dissenters' rights statutes.
As soon as the Merger is effective, or upon receipt of a
payment demand, Southwest Bancshares shall pay each dissenter
who complied with the payment demand notice requirements the
amount Southwest Bancshares estimates to be the fair value of
the shares, plus accrued interest. Such payment must be
accompanied by current Southwest Bancshares financial
statements, a statement of Southwest Bancshares's estimate of
the fair value of the shares, an explanation of how the
interest was calculated, a statement of a dissenter's right
to demand payment under Section 4-27-1328 of the Arkansas
Business Corporation Act, and a copy of Section 4-27-1325 of
the Arkansas Business Corporation Act.
If a dissenter believes that the amount paid by Southwest
Bancshares is less than the fair value of his shares or that
the interest has been incorrectly calculated, or Southwest
Bancshares fails to make payment within sixty (60) days after
the date set for demanding payment, the dissenter may notify
Southwest Bancshares in writing of his own estimate of the
fair value of the shares and amount of interest due, and
demand payment of his estimate (less any payment previously
made). A dissenter waives his right to make such demand
unless he notifies Southwest Bancshares of such demand in
writing within thirty (30) days after Southwest Bancshares
has made payment for his shares.
If a demand for payment as set forth in the preceding
paragraph remains unsettled, Southwest Bancshares shall
commence a proceeding in Circuit Court of Craighead County,
Arkansas, within sixty (60) days after receiving the payment
demand and petition such court to determine the fair value of
the shares and accrued interest. If Southwest Bancshares
fails to commence the proceeding within the sixty (60) day
period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
The foregoing summary of the rights of dissenting
stockholders is qualified in its entirety by reference to
Attachment I which sets forth in full the provisions of
Sections 4-27-1301 to -31 of the Arkansas Business
Corporation Act of 1987.
<PAGE>
Conditions of the Merger
Consummation of the Merger is conditioned upon the occurrence
of certain events on or prior to the Effective Date
including, among other things, the following: (i) approval of
the Merger by the stockholders of Southwest Bancshares; (ii)
confirmation by First Commercial and Southwest Bancshares of
the truth of their respective representations and warranties
and compliance with their respective covenants as set forth
in the Merger Agreement; (iii) the absence of any court or
governmental proceeding undertaken or threatened to restrain,
enjoin, prohibit, or obtain damages for the transaction
contemplated by the Merger Agreement which, in the opinion of
either First Commercial or Southwest Bancshares, would make
the consummation of the Merger inadvisable; (iv) the absence
of any suit, action or proceedings pending or threatened
against First Commercial or Southwest Bancshares or any of
each other's officers or directors which, if successful,
would, in the reasonable judgment of Southwest Bancshares or
First Commercial, have a material adverse effect on the
financial condition of First Commercial or Southwest
Bancshares, respectively; (v) receipt by First Commercial of
an opinion from Ernst & Young LLP that the pooling of interests
method of accounting applies to the Merger; (vi) receipt by
First Commercial and Southwest Bancshares of certain opinions
from Southwest Bancshares's and First Commercial's counsel,
respectively; (vii) receipt by First Commercial from affiliates
of Southwest Bancshares of an agreement restricting disposi-
tion of First Commercial Stock for a certain period of time;
(viii) receipt by First Commercial, Southwest Bancshares and
Southwest Bancshares's stockholders of an opinion from tax
counsel addressing the tax consequences of the contemplated
Merger; and (ix) the absence of any material adverse
change in the financial condition, business or operations
of either First Commercial or Southwest Bancshares.
All of these conditions are expected to be met.
Any of the conditions set forth above may be waived at the
discretion of the respective institutions except as otherwise
provided by law. However, neither First Commercial nor
Southwest Bancshares will waive any condition if such waiver,
in the judgment of its Board of Directors, would result in
materially adverse consequences to it or its stockholders.
Regulatory Approval
Consummation of the Merger requires the prior written
approval of the Federal Reserve Board and the Arkansas State
Bank Department. Applications for such approval were filed
on January 30, 1997 and _________,1997 respectively. Under
<PAGE>
the BHCA, subsequent to approval of the Merger by the Federal
Reserve Board, the United States Department of Justice will
have the opportunity, within 30 days after such approval, to
commence litigation against First Commercial and Southwest
Bancshares under the antitrust laws of the United States to
enjoin the Merger, in the event it shall elect to do so.
Although no assurance can be provided, First Commercial and
Southwest Bancshares currently expect the Merger to be
consummated on or before May 31, 1997. See "The Merger -
Termination of the Merger."
Termination of the Merger
The Merger Agreement provides that it may be terminated by
mutual consent of the Boards of Directors of First Commercial
and Southwest Bancshares at any time before the Closing (as
defined in the Merger Agreement). Either First Commercial or
Southwest Bancshares, at its option, may terminate the Merger
Agreement (unless such terminating party has breached a
covenant under the Merger Agreement) if the Closing Date
shall not have occurred on or before September 30, 1997, or
such later date agreed to in writing by the parties. Either
First Commercial or Southwest Bancshares may terminate the
Merger Agreement if any of the conditions precedent to their
obligation to consummate the Merger have not been met at or
prior to the Closing. See "The Merger - Conditions of the
Merger." Under certain circumstances, Southwest Bancshares
may terminate the Merger Agreement following a drop in the
price of a share of First Commercial Stock. See
"Introductory Statement - Purpose of the Special Meeting."
Southwest Bancshares may terminate the Merger Agreement in
the event that prior to the Effective Date First Commercial
enters into a letter of intent or comparable document or a
definitive agreement in which it either will be acquired
or will be merged out of existence or another person publicly
announces the intent to acquire 25% or more of the
outstanding equity securities of First Commercial.
Effective Date
The Merger Agreement provides that the Merger shall become
effective at 5:00 p.m. on the date of filing appropriate
Articles of Merger with the Secretary of State of the State
of Arkansas (the "Effective Date"). Although no assurance
can be given, the Effective Date is expected to be on or
before May 31, 1997.
<PAGE>
Distribution of First Commercial Stock Certificates
After the Effective Date, each holder of certificates
previously evidencing shares of Southwest Bancshares Stock
will be required to surrender such certificates for transfer
and cancellation. Upon surrender each holder will receive
certificate(s) representing the number of shares of First
Commercial Stock which the holder of such shares of Southwest
Bancshares Stock will have the right to receive (except for
any fractional share interests as described in "The Merger -
Fractional Shares"), together with any dividends which have
been declared on such shares of First Commercial Stock and to
which such holder is entitled.
Holders of Southwest Bancshares Stock on the Effective Date
shall be entitled to receive dividends declared by First
Commercial subsequent to the Effective Date, but payment of
such dividends will not be required of First Commercial until
such persons have delivered their certificates representing
shares of Southwest Bancshares Stock in exchange for
certificates representing shares of First Commercial Stock.
Upon delivery of certificates representing shares of
Southwest Bancshares Stock to First Commercial's transfer
agent, including shares delivered at Closing, provided the
transfer agent has been given at least ten (10) days' notice
of the intent to make such delivery, First Commercial shall
cause the transfer agent to issue certificates representing
the requisite number of shares of First Commercial stock for
each share of Southwest Bancshares Stock represented by the
certificates therefor properly delivered, and First
Commercial shall pay by certified or cashier's check the
amount entitled to be received in lieu of fractional shares.
As soon as practicable after consummation of the Merger,
transmittal forms will be sent to all stockholders of Southwest
Bancshares, other than those who previously have properly
delivered their Certificates, for use in forwarding to First
Commercial's transfer agent certificates previously evidencing
Southwest Bancshares Stock for surrender and exchange for
certificates evidencing First Commercial Stock. Until so sur-
rendered, certificates formerly evidencing Southwest Banc-
shares Stock will be deemed for all corporate purposes (except
for payment of dividends to Southwest Bancshares stockholders
which may be withheld pending exchange of certificates) to
evidence the right to receive the number of whole shares of
First Commercial Stock and the right to receive cash in lieu of
fractional shares which the holder thereof would be entitled
to receive upon surrender. Stockholders of Southwest
Bancshares are requested not to submit stock certificates for
exchange until they have received written instructions to do
so.
<PAGE>
If outstanding certificates for shares of Southwest
Bancshares Stock are not surrendered, or if payment for them
is not claimed prior to such date on which such payment would
otherwise escheat to or become the property of any
governmental unit or agency, the unclaimed item shall, to the
extent permitted by the abandoned property and/or any other
applicable law, become the property of First Commercial (and
to the extent not in its possession shall be paid over to
it), free and clear of all claims or interests of any person
previously entitled to such items. Notwithstanding the
foregoing, neither First Commercial's transfer agent nor any
party to the Merger shall be liable to any holder of
Southwest Bancshares Stock for any amount paid to any
governmental unit or agency having jurisdiction of such
unclaimed items pursuant to the abandoned property or other
applicable law of such jurisdiction.
Fractional Shares
No fractional shares of First Commercial Stock will be issued
for shares of Southwest Bancshares Stock. In lieu of
fractional interests, First Commercial shall pay to such
persons who would otherwise receive fractional shares cash in
an amount equal to the market value of such fractional shares
based on the average of the bid and asked prices for a share
of First Commercial Stock on the Closing Date. See "The
Merger - Federal Income Tax Consequences."
Dilution
Each common stockholder of Southwest Bancshares who exchanges
his stock will receive a voting interest exactly in
proportion to his relative voting common stock interest in
relation to other Southwest Bancshares stockholders before
the combination is effected. Each share of Southwest
Bancshares Stock presently held by Southwest Bancshares
stockholders will represent less of a percentage voting
interest in the total number of outstanding shares of First
Commercial (subsequent to the Merger) than it now represents
as a percentage of the total outstanding shares of Southwest
Bancshares.
Accounting Treatment
The Merger will be accounted for as a pooling of interests
under generally accepted accounting principles. Upon effec-
tiveness of the Merger, the assets and liabilities of Southwest
Bancshares will be reflected in the consolidated financial
statements of First Commercial at their book value as
reflected in Southwest Bancshares's financial statements and
expenses incurred in connection with the Merger will be
considered as an expense of First Commercial.
A condition of consummating the Merger is that First
Commercial receive an opinion from Ernst & Young LLP that the
pooling of interests method of accounting applies to the
Merger. Management of First Commercial expects this
condition to be met.
<PAGE>
Registration of First Commercial Stock Under the Securities
Act
The shares of First Commercial Stock to be issued to
Southwest Bancshares stockholders in the Merger have been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), thereby allowing such shares to be freely
traded without restriction by persons who were not affiliates
of Southwest Bancshares, as that term is defined in the
Securities Act.
Directors and certain officers and stockholders of Southwest
Bancshares may be deemed to be "affiliates" of Southwest
Bancshares within the meaning of the Securities Act.
Accordingly, resales by such persons of any shares of First
Commercial Stock received by them in the Merger are
restricted and may be made only if such stock is registered
under the Securities Act or an exemption from the
registration requirements of the Securities Act is available.
All such persons should carefully consider the limitations
imposed by Rules 144 and 145 promulgated under the Securities
Act ("Rule 144" and "Rule 145") prior to effecting any
resales of such First Commercial Stock.
Pursuant to Rule 145, the sale of First Commercial Stock held
by those persons who are affiliates of Southwest Bancshares
will be subject to certain restrictions. For one year
following the Effective Date, such persons may sell the First
Commercial Stock only if (i) First Commercial has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), during the preceding twelve months, (ii) such First
Commercial Stock is sold in "brokers' transactions" as that
term is defined in Section 4(4) of the Securities Act, (iii)
the person selling such First Commercial Stock does not
solicit or arrange for the solicitation of orders to buy such
First Commercial Stock in anticipation of or in connection
with such transaction nor make any payment in connection with
the offer or sale of such First Commercial Stock to any
person other than the broker who executes the order to sell,
and (iv) sales made by such person within the preceding three
months do not exceed 1% of the outstanding shares of that
class. Such shares of First Commercial Stock held for more
than one year but less than two years after the Effective
Date may be sold freely if First Commercial is in compliance
with the above discussed Exchange Act reporting requirements.
Once the shares of such First Commercial Stock have been held
for two years after the Effective Date, they may be sold
free from the restrictions of Rules 144 and 145.
It is a condition to First Commercial's obligation to
consummate the Merger that First Commercial shall have
received an agreement in form and substance satisfactory to
it, executed and delivered by each holder of Southwest
<PAGE>
Bancshares Stock who is determined to be an affiliate of
Southwest Bancshares, providing, among other things, that
such holder will not sell, transfer or in any way reduce his
risk with respect to his shares of First Commercial Stock
until such time as First Commercial shall have published
financial results covering at least 30 days of post-Merger
combined operations. In addition to the above, each
Southwest Bancshares stockholder who owns more than five
percent (5%) of the Southwest Bancshares Stock shall deliver
an agreement to First Commercial representing that he has no
present intent to sell any of the First Commercial Stock to
be received by him, nor will he sell more than fifty percent
(50%) of such stock for a period of at least one (1) year
following the Closing.
<PAGE>
INFORMATION CONCERNING SOUTHWEST BANCSHARES
Business of Southwest Bancshares
Southwest Bancshares, an Arkansas corporation, is a
bank holding company which was organized in 1990 to acquire
(the Acquisition ) all of the issued and outstanding and
capital stock of First National Bank of Poinsett County,
Trumann, Arkansas (the Trumann Bank ). The Trumann Bank
first began operations in 1952 and was renamed First Bank of
Arkansas following the Acquisition. Since 1990, Southwest
Bancshares has acquired four other banks, whose main offices
are located in Russellville, Jonesboro, Wynne, and Searcy,
Arkansas, respectively, and all of whom s names are First
Bank of Arkansas. On July 31, 1995, the Trumann Bank was
merged with and into First Bank of Arkansas, Jonesboro. An
application is pending with the applicable regulatory
authorities to merge First Bank of Arkansas, Wynne with and
into First Bank of Arkansas, Jonesboro. This merger may be
effected on or before the consummation of the merger of
Southwest Bancshares into First Commercial if regulatory
approval is received before then. Through its four
subsidiary banks, Southwest Bancshares conducts a general
commercial banking business in Craighead, Pope, Johnson,
Poinsett, White and Cross Counties in Arkansas. As of
December 31, 1996, Southwest Bancshares had total assets of
approximately $819,808,000, total deposits of approximately
$716,247,000 and total shareholders equity of approximately
$53,527,000. Southwest Bancshares principal office is
located at 2400 East Highland Drive, Jonesboro, Arkansas
72401, telephone number (501) 972-9093.
Southwest Bancshares Stock
General
As of February 28, 1997, there were 245,275 outstanding
shares of Southwest Bancshares Stock. The approximate number
of holders of Southwest Bancshares Stock on that date was 422.
There is no established public trading market for shares of
Southwest Bancshares Stock. On December 19, 1996, the date
preceding the announcement of the Merger, there was no
independent basis for establishing a per-share cash market
price for Southwest Bancshares Stock. Book value of Southwest
Bancshares Stock equaled $226 per share on November 30, 1996,
the month end preceding that date.
<PAGE>
Dividends paid on the Southwest Bancshares Stock for
the first three months of 1997 and the last two fiscal years
ended December 31, 1996, are as follows:
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Dividend
Dividend Dividend Dividend Dividend Declared
1997:
Per share $ 5 $ - $ - $ - $
Total Declared 1,226,375 - - - 1,226,375
1996:
Per share $ 0 $ 0 $ 0 $ 0 $ 0
Total Declared 0 0 0 0 0
1995:
Per share $ 0 $ 0 $ 0 $ 0 $ 0
Total Declared 0 0 0 0 0
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of February 28, 1997, the identity
and total number of shares of Southwest Bancshares common stock owned
by persons known by management of Southwest Bancshares to own more
than five percent (5%) of the total outstanding shares.
First Commercial
Southwest Bancshares Common Stock to
Common Stock be Owned Upon
Name and Address of Beneficially Owned Consumation of
Beneficial Owner on February 28, 1997 the Merger
------------------- ------------------ -------------
Shares % of Class Shares % of Class
------ ---------- ------- ----------
Wallace W. Fowler 49,769 (1) 20.29 692,425 (1)
2729 South Culberhouse
Jonesboro, AR 72401
Jama M. Fowler 45,194 (2) 18.43 628,774 (2)
2729 South Culberhouse
Jonesboro, AR 72401
H. T. Loberg 21,900 8.93 304,690
2309 Hazeltine
Jonesboro, AR 72404
Phyllis Lamberth 20,435 (3) 8.33 284,308 (3)
1013 Fairway Circle
Jonesboro, AR 72401
___________________________
(1) Includes 12,372 shares held by Fowler Family Investments Partnership,
of which Mr. Fowler is a general partner; 4,500 shares held by Fowler
Foods, Inc., of which Mr. Fowler is Chairman and a director; and 3,000
shares held by Town & Country Insurance Agency, Inc., of which Mr.
Fowler is a director.
(2) Includes 12,372 shares which are held by Fowler Family Investments
Partnership, of which Mrs. Fowler is a general partner; and 4,500 shares
held by Fowler Foods, Inc., of which Mrs. Fowler is Secretary and a
director.
(3) Includes 20,144 shares of stock owned by Lamco Limited Partnership II,
of which Mrs. Lamberth is a general partner.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of shares of
Southwest Bancshares Common Stock by each director of Southwest
Bancshares and by all directors and executive officers of Southwest
Bancshares as a group as of February 28, 1997. The number of shares
shown as being beneficially owned by each director are those over
which he or she has either sole or shared voting and/or investment
powers.
First Commercial
Southwest Bancshares Common Stock to
Common Stock be Owned Upon
Name and Address of Beneficially Owned Consumation of
Beneficial Owner on February 28, 1997 the Merger
------------------ -------------------- --------------
Shares % of Class Shares % of Class
------ ---------- ------ --------
Wallace W. Fowler 49,769 (1) 20.29 692,425 (1)
Jama M. Fowler 45,194 (2) 18.43 628,774 (2)
Phil Jones 5,421 (3) 2.21 75,421 (3)
Mark Fowler 3,563 1.45 49,571
Roy Reaves 3,395 1.38 47,233
Lloyd McCracken, Jr. 1,305 (4) .53 18,156 (4)
Charles Green 15 .01 208
All Directors and Executive
Officers as a Group (a total
of seven individuals) 91,790 37.42 1,277,054
_________________________
(1) Includes 12,372 shares held by Fowler Family Investments Partnership,
of which Mr. Fowler is a general partner; 4,500 shares held by Fowler
Foods, Inc., of which Mr. Fowler is Chairman and a director; and 3,000
shares held by Town & Country Insurance Agency, Inc., of which Mr.
Fowler is a director.
(2) Includes 12,372 shares which are held by Fowler Family Investments
Partnership, of which Mrs. Fowler is a general partner; and 4,500 shares
held by Fowler Foods, Inc., of which Mrs. Fowler is Secretary and a
director.
(3) Includes 3,036 shares which are held in trusts of which Mr. Jones is
the trustee.
(4) Includes 700 shares held by Haven Partnership, of which Mr. McCracken
is a general partner.
<PAGE>
SELECTED FINANCIAL DATA OF SOUTHWEST BANCSHARES
The following selected financial data should be read in conjunction
with the financial statements, including the notes thereto set forth
in this document. (See Consolidated Financial Statements of Southwest
Bancshares.)
SOUTHWEST BANCSHARES
(in thousands, except per share data)
Year Ended December 31,
----------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- -----
Summary of Operating
Results:
Year Ended December 31,
Net Interest Income $ 25,359 $ 17,317 $ 13,484 $ 8,692 $ 4,614
Provision for Loan
Losses 5,581 1,164 994 542 224
Net Income 5,730 4,612 3,023 2,127 1,109
Period End Balance
Sheet Data:
Total Assets 819,808 686,218 538,651 358,909 193,887
Total Deposits 716,247 599,325 470,862 321,360 171,307
Long-Term Debt 23,644 18,567 14,123 8,369 5,254
Stockholders Equity 53,527 47,904 35,448 25,245 15,621
Per Common Share
Data:
Net Income 23.36 21.22 16.08 17.04 16.85
Cash Dividends 0.00 0.00 0.00 0.00 0.00
Book Value 218.23 195.31 170.28 153.40 133.72
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial
Condition and Results of Operations of Southwest Bancshares
analyzes the major elements of Southwest Bancshares's
consolidated balance sheets and statements of income. This
section should be read in conjunction with Southwest
Bancshares's consolidated financial statements and
accompanying notes and other detailed information appearing
elsewhere.
Summary of Operations
Southwest Bancshares is a multi-bank holding company
which owns four commercial banking subsidiaries which
function primarily as a financial intermediary, investing
funds obtained through deposits, borrowings, and other
sources in a variety of loans and investments.
Southwest Bancshares's operations commenced upon its
acquisition of First National Bank of Poinsett County,
Trumann, Arkansas (the Trumann Bank ) in November 1990.
Southwest Bancshares subsequently acquired banks in
Russellville in January 1992, in Jonesboro in November 1992,
in Wynne in August 1993, and in Searcy in April 1994. All
banks are now named First Bank of Arkansas. On August 1,
1995, the Trumann Bank was merged with and into First Bank of
Arkansas, Jonesboro.
Southwest Bancshares has total assets of $819.8 million
as of December 31, 1996. This was an increase of $133.6
million or 19.5% as compared to December 31, 1995.
Southwest Bancshares reported earnings of $5.7 million
for 1996, an increase of $1.1 million or 24.2% over 1995's
net income of $4.6 million. Return on average assets was
.76% in 1996, compared to .75% in 1995 and .67% in 1994.
Return on average equity was 11.10% in 1996, compared to
11.63% in 1995 and 9.80% in 1994. On a per share basis, net
income for 1996 was $23.36, compared to $21.22 in 1995 and
$16.08 in 1994. From inception through December 31, 1996,
Southwest Bancshares paid no dividends to stockholders. In
January 1997, Southwest Bancshares paid dividend to
stockholders of $1.2 million ($5.00 per common share).
The following table shows Southwest Bancshares's return
on average assets and equity for the past five years.
<PAGE>
RETURN ON AVERAGE EQUITY AND ASSETS
FOR THE YEAR ENDED DECEMBER 31
-------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Return on Average Assets 0.76% 0.75% 0.67% 0.77% 0.79%
Return on Average Equity 11.10% 11.63% 9.80% 11.48% 13.645
Dividend Payout Ratio 0.00% 0.00% 0.00% 0.00% 0.00%
Equity to Assets Ratio 6.88% 6.48% 6.81% 7.94% 5.76%
COMPOSITION OF LOAN PORTFOLIO
(DOLLARS IN THOUSANDS)
December 31
-----------------------
1996 1995 1994
---------- ----------- -----------
AMOUNT % AMOUNT % AMOUNT %
------ -- ------ -- ------ --
Commercial, Financial
and Agricultural $186,687 30.82% $159,651 31.17% $120,768 31.57%
Real Estate - Construction 59,856 9.88% 50,224 9.81% 29,661 7.75%
Real Estate - Mortgage 316,867 52.31% 265,289 51.79% 200,438 52.40%
Consumer Loans 42,377 6.99% 37,027 7.23% 31,665 8.28%
-------- ------ -------- ------ -------- -----
TOTAL $605,787 100.00% $512,191 100.00% $382,532 100.00%
======== ====== ======== ======= ======= ======
<PAGE>
COMPOSITION OF LOAN PORTFOLIO
(DOLLARS IN THOUSANDS)
December 31
-------------------------------
1993 1992
------ ------
AMOUNT % AMOUNT %
------ -- ------ --
Commercial, Financial and
Agricultural $80,200 32.76% $20,466 19.12%
Real Estate - Construction 16,621 6.79% 9,703 9.07%
Real Estate - Mortgage 130,751 53.40% 60,942 56.95%
Consumer Loans 17,259 7.05% 15,902 14.86%
------- ----- ------ ------
TOTAL $244,831 100.0% $107,013 100.0%
======== ===== ======== ======
<PAGE>
MATURITIES OF LOANS
(EXCLUDING RESIDENTIAL MORTGAGE LOANS OF 1-4 FAMILY RESIDENCES,
INSTALLMENT LOANS, AND LEASE FINANCING)
(DOLLARS IN THOUSANDS)
LOANS AT DECEMBER 31, 1996, MATURING
---------------------------------------
WITHIN AFTER ONE BUT AFTER
ONE YEAR WITHIN FIVE YEARS FIVE YEARS TOTAL
---------- --------------- -------- -----
Commercial, Financial
and Agricultural $142,951 $41,135 $2,601 $186,687
Real Estate - Construction 48,094 11,762 0 59,856
------- ------ ------ -------
$191,045 $52,897 $2,601 $246,543
======== ======= ====== ========
Loans Maturing After One Year With:
Fixed Interest Rates $44,934 $1,407
Variable Interest Rates 7,963 1,194
------- ------
$52,897 $2,601
======= ======
Asset Quality
Nonperforming loans includes nonaccrual loans and loans whose
terms have been restructured to provide a reduction or deferral
of interest or principal because of a deterioration in the financial
condition of the borrower. Loans are placed on non-accrual status
when (1) payment in full of principal or interest is not expected
(2) when payment of interest or principal is 90 days or more past
due and is either it is not both well secured and in the process of
collection. If a loan is determined by management to be uncollectible,
the portion of the loan deemed uncollectible is charged to the
allowance for loan losses.
As of December 31, 1996 and 1995, Southwest Bancshares had non-
accrual loans of $2,660,000 and $286,000, respectively. The increase
during 1996 was principally attributable to loans to a single borrower
which aggregated $1,672,000. Southwest Bancshares did not have any
restructured loans at December 31, 1996 and 1995.
<PAGE>
Shown in the table below is a recap of non-performing loans.
NON-PERFORMING LOANS
(DOLLARS IN THOUSANDS)
DECEMBER 31
-----------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Nonaccrual Loans $2,660 $286 $598 $19 $126
Restructured Loans 0 0 0 0 0
Non-Performing Loans $2,660 $286 $598 $19 $126
Accruing Loans Past Due 90
Days or More $134 $178 $64 $10 $253
Allowance for Loan Losses
The amount of provision for loan losses for each year is based upon
subsidiary bank management's judgment after giving consideration to
the composition of the loan portfolio, reviews of individual loans,
recent loan loss experience, past due loans, current economic
conditions, as well as any other factors deemed relevant to the
consideration. On a quarterly basis, each bank's Board of Directors
conducts an evaluation of the adequacy of the allowance for loan
losses. Based upon these procedures, Company management believes
that the allowance for loan losses at December 31, 1996, is adequate.
See "Income Statement Review for the years 1996, 1995 and 1994 -
Provision for Loan Losses" for discussion of the significant increase
in the allowance for loan losses during 1996.
<PAGE>
A summary of the changes in the allowance for loan losses including
loan loss experience by major category is shown in the table below.
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
(DOLLARS IN THOUSANDS)
DECEMBER 31
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Beginning Balance of
Allowance for Loan Losses $4,077 $3,215 $2,221 $1,460 $308
Loans Charged Off:
Real Estate - Mortgage 87 68 0 0 97
Commercial, Financial and
Agricultural 384 154 120 421 26
Consumer 285 135 44 24 2
---- ---- ---- ---- ----
Total Charge-Offs 756 357 164 66 225
---- ---- ---- ---- ----
Recoveries on Loans Previously
Charged Off:
Real Estate - Mortgage 0 5 15 52 17
Commercial, Financial and
Agricultural 126 21 13 27 17
Consumer 23 29 24 27 2
---- ---- ---- ---- ----
Total Recoveries 149 55 52 75 26
---- ---- ---- ---- ----
Net Charge-Offs 607 302 112 (9) 199
Additions to Allowance
Charged to Expense 5,581 1,164 994 542 224
Allowance of Acquired
Subsidiaries 0 0 112 210 1,127
----- ----- ----- ----- -----
Ending Balance of Allowance
for Loan Losses $9,051 $4,077 $3,215 $2,221 $1,460
====== ===== ===== ===== =====
Percentage of Net Charge-Offs
to Average Loans 0.11% 0.07% 0.04% -0.01% 0.26%
==== ==== ==== ===== =====
<PAGE>
The allocation of the allowance for loan losses as of December 31, 1996
is shown in the table below.
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
(DOLLARS IN THOUSANDS)
December 31
-------------------------------
1996 1995 1994
------ ------ ------
AMOUNT % AMOUNT % AMOUNT %
------ --- ------ --- ------ ---
Commercial, Financial
and Agricultural $2,515 27.8% $1,664 40.8% $1,218 37.9%
Real Estate - Construction 748 8.3% 377 9.2% 222 6.9%
Real Estate - Mortgage 3,873 42.8% 1,410 34.6% 1,191 37.1%
Consumer 688 7.6% 387 9.5% 355 11.0%
General Risk 1,227 13.5% 239 5.9% 229 7.1%
------ ----- ----- ----- ----- ------
TOTAL $9,051 100.0% $4,077 100.0% $3,215 100.0%
<PAGE>
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
(DOLLARS IN THOUSANDS)
December 31
----------------------------
1993 1992
------ ------
AMOUNT % AMOUNT %
-------- --- ------ ---
Commercial, Financial and
and Agricultural $850 38.3% $346 23.7%
Real Estate - Construction 125 5.6% 73 5.0%
Real Estate - Mortgage 668 30.1% 514 35.2%
Consumer Loans 182 8.2% 259 17.7%
General Risk 396 17.8% 268 18.4%
----- ------ ------ ------
TOTAL $2,221 100.0% $1,460 100.0%
===== ====== ===== ======
<PAGE>
Investment Securities
Investment securities comprise the second largest use of funds by
Southwest Bancshares. Investment securities total $144.0 million at
December 31, 1996, as compared to $1 17.2 million at December 31,
1995. Average securities outstanding for 1996 were $126.7 million as
compared to $114.5 million in 1995. Southwest Bancshares's subsidiaries
utilize securities as a source of interest earning assets, as well as
to collateralize certain deposit accounts and to provide a level of
reserves in the event of unanticipated loan demand or deposit
withdrawals.
U.S. Treasury and Agency securities are the major component of the
investment securities portfolio. As of December 31, 1996, U.S. Treasury
and Agency obligations total $124.0 million which was approximately
86.1% of total securities. The remaining amount of investments securities
is comprised principally of obligations of state and political
subdivisions. A significant portion of Southwest Bancshares's securities
portfolio is utilized to secure public fund deposits, for issuance of
repurchase agreements, and for other purposes. At December 31, 1996,
investment securities with a carrying value of approximately $122.1
million were pledged to collateralize public deposits and for other
purposes.
The tables below contain additional information concerning the
composition, carrying value, and maturity distribution of investment
securities.
INVESTMENT SECURITIES
(DOLLARS IN THOUSANDS)
DECEMBER 31
-------------------------
1996 1995 1994
------ ------ ------
Held to Maturity:
U.S. Treasuries and Government
Agencies $ 99,228 $ 76,075 $ 74,456
State and Political Subdivisions 11,261 11,524 15,980
Other Securities 488 1,754 1,721
Total Debt Securities 110,977 89,353 92,157
Equity Securities 0 0 0
------- ------ ------
Total Held to Maturity Investment
Securities 110,977 89,353 92,157
======= ====== ======
<PAGE>
Available for Sale:
U.S. Treasuries and Government
Agencies 24,297 18,279 14,311
State and Political Subdivisions 3,121 3,997 0
Other Securities 1,001 1,783 5,711
------ ------ ------
Total Debt Securities 28,419 24,059 20,022
Equity Securities 4,577 3,760 2,556
Total Available for Sale Investment
Securities 32,996 27,819 22,578
------- ------- -------
Total Investment Securities $143,973 $117,172 $114,735
======== ======== ========
<PAGE>
INVESTMENT SECURITIES PORTFOLIO ANALYSIS
(DOLLARS IN THOUSANDS)
INVESTMENT SECURITIES AT DECEMBER 31, 1996, MATURING
--------------------------------------------------------
AFTER ONE AFTER FIVE
WITHIN BUT WITHIN BUT WITHIN AFTER
ONE YEAR FIVE YEARS TEN YEARS TEN YEARS
-------- ---------- --------- --------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
U.S. Treasury
and Other U.S.
Government
Agencies $13,449 6.12% $80,660 6.15% $3,992 6.40% $1,127 7.13%
State and
Political
Subdivisions 315 7.03 1,693 6.25 5,394 5.31 4,347 5.70
Other 0 0.00 0 0.00 0 0.00 0 0.00
------- ---- ----- ---- ----- ---- ---- ----
Total 13,764 6.14 82,353 6.15 9,386 5.77 5,474 6.00
Available for Sale:
U.S. Treasury
and Other U.S.
Government
Agencies $ 1,005 7.45% $22,806 6.41% $ 0 0.00% $ 486 7.48%
State and
Political
Subdivisions 0 0.00 0 0.00 291 5.58 2,830 5.39
Other 5,578 5.73 0 0.00 0 0.00 0 0.00
------ ---- ------- ---- ---- ---- ------ ----
Total 6,583 5.99 22,806 6.41 291 5.58 3,316 5.70
Total Investment
Securities $20,347 $105,159 $9,677 $8,790
======= ======== ====== ======
<PAGE>
Deposits
As of December 31, 1996, total deposits were $716.2 million as compared
to $599.3 million at December 31, 1995. Average deposits outstanding for
1996 were $654.1 million as compared to $539.6 million during 1995.
Certificates of deposit of $100,000 or more comprise $189.6 million, or
26.5% of Southwest Bancshares's total deposits.
The table below presents information concerning the maturities of
certificates of deposit of $100,000 or more as of December 31, 1996.
MATURITIES OF TIME DEPOSITS OF $100,000 OR MORE
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1996
-----------------------------
CERTIFICATES OTHER TIME
OF DEPOSIT DEPOSITS TOTAL
---------- -------- -------
3 Months or Less $ 58,076 $ 6,644 $ 64,720
Over 3 Through 6 Months 49,540 433 49,973
Over 6 through 12 Months 53,849 1,917 55,766
Over 12 Months 28,116 4,308 32,424
------- ------ -------
Total $189,581 $13,302 $202,883
Revolving Credit Loan
Southwest Bancshares's outstanding indebtedness under its Credit Loan
was $9.25 million at December 31, 1996, as compared to $7.0 million at
December 31, 1995. Interest on the Credit Loan is payable quarterly
with annual principal reductions through January 2003. The note bears
interest at the lender's prime rate, which was 8.25% at December 31,
1996, and 8.5% at December 31, 1995.
Capital
Southwest Bancshares's total stockholders' equity as of December 31,
1996, was $53.5 million as compared to $47.9 million at December 31,
1995. The increase in stockholders' equity during 1996 was the result
of net income of approximately $5.7 million, which was partially
offset by the net unrealized losses on available-for-sale securities.
<PAGE>
Federal banking regulators have adopted a set of three capital ratio
guidelines which are applicable to Southwest Bancshares's consolidated
capital position. As of December 31, 1996, Southwest Bancshares's
consolidated leverage ratio was 6.78%, as compared to a regulatory
minimum guideline of 3.00%. Southwest Bancshares's consolidated
risk-based capital tier one ratio was 8.51% as compared to a regulatory
minimum guideline of 4.0%. Southwest Bancshares's consolidated
risk-based total capital ratio was 9.66% as compared to a regulatory
minimum guideline of 8.0%.
Each of the three capital ratios for Southwest Bancshares show
reductions during 1996, primarily due to significant increases in
the total assets of Southwest Bancshares.
For additional information concerning Southwest Bancshares's
risk-based capital ratios at December 31, 1996 and 1995, and the
capital ratios of each of Southwest Bancshares's subsidiary banks,
see "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Capital Resources."
Income Statement Review for the Years 1996, 1995 and 1994
Net Income
In 1996, Southwest Bancshares reported net income of $5.7 million,
as compared to $4.6 million in 1995 and $3.0 million in 1994. Earnings
per share were $23.36 for 1996, $21.22 for 1995 and $ 16.08 for 1994.
Net Interest Income
Net interest income, which is Southwest Bancshares's principal source
of earnings, is the difference between income generated by earning assets
and interest costs on deposits and borrowings obtained to fund those
assets. Factors that impact the level of net income include the volume
of earning assets and interest-bearing liabilities, yields earned and
rates paid, the level of non-performing loans, and the amount of
non-interest bearing liabilities supporting earning assets. The
increase of $ 130.9 million in the amount of average earning assets
and of $ 116.2 million in average interest-bearing liabilities in 1996,
as compared to 1995, was due principally to the substantial growth in
asset size of both the Jonesboro and Russellville Banks, and growth of
the Searcy Bank. The increase of $155.3 million in the amount of
earning assets and of $141.2 million in average interest-bearing
liabilities in 1995, as compared to 1994, was due principally
to the substantial growth in the asset size of the Jonesboro, Searcy
and Russellville Banks during 1995.
For the year ended December 31, 1996, net interest income was $25.4
million, an increase of $8.0 million or 46.4% from 1995. Net interest
income for 1995 increased by $3.8 million or 28.4% over 1994. The
increase in net interest income is principally attributable to a
significant increase in the volume of earning assets and interest-
bearing liabilities. The average amount of loans for 1996 was $566.9
million, as compared to $452.9 million in 1995, and $306.9 million
in 1994. Total interest-bearing liabilities averaged $648.1 million
in 1996, $531.9 million in 1995, and $390.8 million in 1994.
<PAGE>
The following tables present information on average balances and
average interest rates and an analysis of changes in net interest
income.
<TABLE>
<CAPTION>
AVERAGE BALANCES AND INTEREST RATES
(DOLLARS IN THOUSANDS)
1996 1995 1994
-------------------------- ------------------------- --------------------------
AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/
BALANCE EXPENSE COST BALANCE EXPENSE COST BALANCE EXPENSE COST
-------------------------- ------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-Earning
Assets:
Federal Funds $ 12,503 $ 678 5.42% $ 7,823 $ 434 5.55% $ 6,644 $ 252 3.79%
Investment
Securities 126,723 7,626 6.02% 114,533 6,662 5.82% 106,272 5,656 5.32%
Loans 566,862 52,924 9.34% 452,874 40,161 8.87% 306,947 24,002 7.82%
Other 156 12 7.69% 154 15 9.74% 256 7 2.73%
Earning Assets 706,244 61,240 8.67% 575,384 47,272 8.22% 420,119 29,917 7.12%
Non-Earning
Assets 44,261 38,032 32,570
------- ------- -------
Total Assets $750,505 $613,416 $452,689
======== ======== ========
Interest-Bearing
Liabilities:
Demand and
Savings 114,440 3,045 2.66% 95,732 2,598 2.71% 85,429 2,285 2.67%
Time Deposits 495,557 30,368 6.13% 409,460 25,323 6.18% 286,700 13,034 4.55%
Short-Term
Borrowings 16,528 967 5.85% 9,413 593 6.30% 6,452 294 4.56%
Long-Term
Borrowings 21,589 1,501 6.95% 17,327 1,441 8.32% 12,179 820 6.73%
------- ----- ----- ------ ----- ----- ------ ----- ----
<PAGE>
Total Interest-
Bearing
Liabilities 648,114 35,881 5.54% 531,932 29,955 5.63% 390,760 16,433 4.21%
Non-Interest-
Bearing Demand
Deposits 44,100 34,424 30,142
Other
Liabilities 6,686 7,386 938
Shareholder's
Equity 51,605 39,674 30,849
Total Non-
Interest 102,391 81,484 61,929
Total
Liabilities
and Equity $750,505 $613,416 $452,689
======== ======== ========
Net Interest
Earnings $25,359 $17,317 13,484
======= ======= ======
Net Yield on
Interest-
Earning
Assets 3.59% 3.01% 3.21%
==== ==== ====
</TABLE>
<PAGE>
ANALYSIS OF CHANGES IN NET INTEREST INCOME FROM EARNING ASSETS
CHANGE FROM 1995 TO 1996 CHANGE FROM 1994 TO 1995
YIELD/ YIELD/
VOLUME RATE NET VOLUME RATE NET
Interest Earned On:
Federal Funds Sold $ 254 $ (10) $ 244 $ 51 $ 131 $ 182
Investment Securities 729 235 964 455 551 1,006
Loans 10,541 2,222 12,763 12,599 3,560 16,159
Other 0 (3) (3) (1) 9 8
Change in Interest
Income 11,524 2,444 13,968 13,104 4,251 17,355
Interest Paid On:
Demand and Savings
Deposits 494 (47) 447 278 35 313
Time Deposits 5,248 (203) 5,045 6,689 5,600 12,289
Short-Term Borrowings 413 (39) 374 163 136 299
Long-Term Borrowings 178 (118) 60 398 223 621
----- ----- ------ ----- ----- ------
Change in Interest
Expense 6,333 (407) 5,926 7,528 5,994 13.522
----- ----- ----- ----- ----- ------
Changes in Net
Interest Income
From Earning Assets $5,191 $2,851 $8,042 $5,576 ($1,743) $3,833
====== ====== ====== ====== ====== ======
<PAGE>
Provision for Loan Losses
The provision for loan losses represents management's
determination of the amount necessary to be charged
against the current earnings in order to maintain the
allowance for loan losses at a level that is considered
adequate in relation to the estimated risk inherent in
the loan portfolio. The provision for 1996 was $5.6
million, 1995 was $1.2 million, and 1994 was $1.0 million.
The increase during 1996 was attributable to a decision by
management to increase the allowance for loan losses to a
level commensurate with peer group reserve levels.
Nonperforming and other problem loans have remained at
low levels during the periods of loan growth. Nonperforming
loans at December 31, 1996, amounted to $2,660,000.
In May 1993, the FASB issued SFAS No. 114, "Accounting
by Creditors for Impairment of a Loan," which was adopted
in 1995. SFAS No. 114 requires that certain impaired loans
be measured based on the present value of expected future
cash flows discounted at the loan's effective interest rate
or the fair value of the collateral if the loan is
collateral dependent. The adoption of this statement did
not have a material effect on Southwest Bancshares's
financial statements.
Other Income
Total other income was $5.1 million for 1996, compared to
$3.7 million for 1995, and $2.1 million in 1994. Other
income is comprised primarily of service charges on deposit
accounts. The increases in total income during the years of
comparison were due primarily to growth of the Russellville
Bank and the Jonesboro Bank.
Other Expenses
Other expenses consist of salaries and employee benefits,
occupancy costs, amortization, and miscellaneous expenses
necessary for the operations of Southwest Bancshares.
Other expenses for 1996 total $16.2 million, an increase of
$3.2 million or 25.0% as compared to 1995. The 1995 other
expenses represented an increase of $2.8 million or 26.9% over
1994 other expenses of $10.2 million. The increases for 1995
and 1996 are principally attributable to costs associated
with incurred in conjunction with the growth in asset levels.
The 1996 and 1995 results also reflect an increase in other
expenses for Southwest Bancshares and each of the other
subsidiaries.
<PAGE>
Pursuant to a professional services agreement with a
third party, an accrual of $812,000 has been included in
the consolidated financial statement for the year ended
December 31, 1996.
Income Taxes
The provision for income taxes for 1996 was $2.9 million,
as compared to $2.2 million in 1995, and $1.3 million in 1994.
Interest Rate Sensitivity and Liquidity
Southwest Bancshares
On a parent only basis, Southwest Bancshares is dependent
upon its revolving line of credit, dividends from subsidiaries,
or future stock offerings in order to fund its future debt and
operating expense requirements.
In December 1996 Southwest Bancshares received dividend
payments from the Jonesboro Bank of $1.8 million and the
Russellville Bank of $1.4 million. Since inception of Southwest
Bancshares, other than the December 1996 dividends, none of
its subsidiaries has paid any dividends to Southwest Bancshares.
All subsidiary earnings have been retained in the respective
subsidiaries in order to increase their respective capital
levels.
In accordance with Arkansas State Banking Laws,
certain restrictions exist regarding the ability of the
banking subsidiaries to transfer funds to Southwest
Bancshares in the form of cash dividends, loans, or
advances. Under such restrictions, the bank subsidiaries
may not, without prior approval of bank regulatory
agencies, declare or pay dividends of more than 50% of the
respective net income. At December 31, 1996, approximately
$400,000 of undistributed earnings of the banking
subsidiaries, included in the consolidated retained
earnings, was available for distribution to Southwest
Bancshares without the prior approval of the regulatory
agencies. Additionally, Southwest Bancshares's Credit Loan
Agreement places additional restrictions on the payment of
dividends by the bank subsidiaries.
<PAGE>
Banking Subsidiaries
The overall management of the sources and use of funds
of Southwest Bancshares's subsidiaries is the responsibility
of each bank's Asset and Liability Management Committee.
Each committee is charged with the responsibility of
maintaining the liquidity in accordance with established
objectives which are consistent with safe and sound banking
practices. In addition, the committee is responsible for
preserving an appropriate and profitable balance between
interest sensitive assets and liabilities to minimize
adverse effects on interest rate margins resulting from
volatility in interest rate levels.
A measure of liquidity is the ability to obtain
additional funds to meet cash requirements. Liquidity
management involves providing funds to meet the requirements
of both depositors withdrawing funds and borrowers
requesting additional funds to satisfy their credit needs.
The liquidity to meet these demands is provided by maturing
assets, short-term liquid assets (including the sale of
Federal Funds), the sale of participations to other banks,
and the ability to obtain funds from external sources.
On the asset side, liquidity is achieved through the
regular maturing of earning assets. Loans, investment
securities, and Federal Funds scheduled to mature or be
repriced during the twelve-month period following December 31,
1996, total $437.8 million.
On the liability side, liquidity is achieved principally
from additional deposits, other borrowings, the maturities
structure of time deposits, and the purchase of Federal Funds.
Deposits and other interest-bearing liabilities scheduled to
mature or be repriced during the twelve-month period following
December 31, 1996, are $447.1 million.
An interest rate sensitive asset or liability is one that,
within a defined time period, either matures or experiences an
interest rate change in line with general market interest
rates. The management of interest rate risk is performed by
analyzing the maturity and repricing relationships between
interest-earning assets and interest-bearing liabilities at
specific points in time ("GAP"). Interest rate sensitivity
reflects the potential effect on net interest income of a
movement in interest rates. A company is considered to be
asset sensitive, or having a positive GAP, when the amount of
its interest-earning assets maturing or repricing within a
given period exceeds the amount of its interest-bearing
liabilities also maturing or repricing within that time period.
<PAGE>
Conversely, a company is considered to be liability sensitive,
or having a negative GAP, when the amount of its interest-
bearing liabilities maturing or repricing within a given period
exceeds the amount of its interest-earning assets also maturing
or repricing within that time period. During a period of
rising interest rates, a negative GAP would tend to affect
adversely net interest income, while a positive GAP would tend
to result in an increase in net interest income. During a
period of falling interest rates, a negative GAP would tend to
result in an increase in net interest income, while a positive
GAP would tend to affect net interest adversely.
Shortcomings are inherent in any GAP analysis since
certain assets and liabilities may not move proportionally as
interest rates change. However, Southwest Bancshares's assets
scheduled to mature or reprice during the twelve-month period
following December 31, 1996, total $437.8 million while the
liabilities scheduled to mature or be repriced total $447.1
million. Therefore, Southwest Bancshares is considered to be
liability sensitive. Therefore, should interest rates rise,
Southwest Bancshares's net interest income would generally be
adversely affected.
Capital Resources
Bank regulatory authorities in the United States have
issued risk-based capital standards by which all bank holding
companies and banks will be evaluated in terms of capital
adequacy. These guidelines relate a bank holding company's
capital to the risk profile of its assets. The risk-based
capital standards require all banks to have Tier 1 capital of
at least 4%, and total capital (Tier 1 and Tier 2) of at least
8%, of risk-adjusted assets. Tier 1 capital includes common
stockholders' equity and qualifying perpetual preferred stock
together with related surpluses and retained earnings. Tier 2
capital may be comprised of limited life preferred stock,
qualifying debt instruments, and the reserves for loan losses.
Banking regulators have also issued leverage ratio
requirements. The leverage ratio requirement is measured as
the ratio of Tier 1 capital to adjusted average assets. The
risk-based capital and leverage ratio requirements replaced the
primary capital and total capital guidelines used previously.
Since the acquisition of its subsidiary banks, and through
December 31, 1996, Southwest Bancshares has contributed $4.0
million in additional capital to First Bank of Arkansas,
Russellville, $18 million in additional capital to First Bank
of Arkansas, Jonesboro, $1.75 million in additional capital to
First Bank of Arkansas, Wynne, and $3.75 million in additional
capital to First Bank of Arkansas, Searcy. In December 1996
Southwest Bancshares received dividend payments from First Bank
of Arkansas, Jonesboro of $1,800,000 and First Bank of Arkansas,
Russellville of $1,400,000. In January 1997 Southwest
Bancshares paid dividends to common stockholders of $1,226,375
($5 per common share).
<PAGE>
INFORMATION CONCERNING FIRST COMMERCIAL
Information Incorporated by Reference
The following documents, or the indicated portions thereof,
have been filed by First Commercial with the Commission under
the Exchange Act and are incorporated by reference in this
Joint Proxy Statement/Prospectus:
1. Annual Report on Form 10-K for the year ended
December 31, 1996;
2. The description of First Commercial's common stock
contained in the Registration Statement on Form 10
filed April 30, 1981 and any amendment or report
filed for the purpose of updating such description;
and
3. Registration Statement on Form 8-A for the
preferred share purchase rights as filed on January
9, 1991.
In addition, all other reports filed by First Commercial
under the Exchange Act between the date of this Joint Proxy
Statement/Prospectus and the date of the Special Meeting are
incorporated herein by reference from date of filing. Any
statement contained in any document incorporated or deemed to
be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Joint Proxy
Statement/Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which is
also incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of
this Joint Proxy Statement/Prospectus. See "Incorporation of
Certain Documents by Reference" for information with respect
to securing copies of documents incorporated by reference in
this Joint Proxy Statement/Prospectus.
Management and Additional Information
Certain information relating to the executive compensation,
various benefit plans, voting securities and the principal
holders thereof, certain relationships and related
transactions and other related matters as to First Commercial
is incorporated by reference or set forth in the First
Commercial Annual Report on Form 10-K for the year ended
December 31, 1996, incorporated herein by reference. See
"Incorporation of Certain Documents by Reference" for
information with respect to securing copies of documents
incorporated by reference in this Joint Proxy
Statement/Prospectus.
<PAGE>
COMPARATIVE RIGHTS OF SHAREHOLDERS
General
If the stockholders of Southwest Bancshares approve the
Merger, and if the Merger is subsequently consummated, all
stockholders of Southwest Bancshares, other than those
exercising dissenters' rights, will become stockholders of
First Commercial. The rights of stockholders of First
Commercial are governed by and subject to the Arkansas
Business Corporation Act of 1987 and First Commercial's
Second Amended and Restated Articles of Incorporation, as
amended ("First Commercial's Articles"), and Bylaws.
Although the rights of stockholders of Southwest Bancshares
also are governed by and subject to the Arkansas Business
Corporation Act of 1987, the Articles of Incorporation and
Bylaws that govern Southwest Bancshares stockholders differ
in some respects from First Commercial's Articles and Bylaws.
The following is a brief summary asserting some of the
principal differences between the rights of First Commercial
stockholders and the rights of Southwest Bancshares
stockholders not described elsewhere herein.
Voting Rights
Holders of First Commercial Stock are entitled to one vote
for each share held on all matters brought to a vote before
the stockholders of First Commercial. Stockholders of
Southwest Bancshares Stock also are entitled to one vote for
each share held on all matters brought to a vote before the
stockholders of Southwest Bancshares.
Under First Commercial's Articles, the Board of Directors of
First Commercial is authorized to issue preferred stock. In
the event a series of preferred stock is issued, the holders
of such preferred stock shall be entitled to vote on the
election of two directors in the event of a default in
preference dividends on the preferred stock and shall have
such other voting rights as may be prescribed by First
Commercial's Board of Directors in the articles of amendment
creating such series of preferred stock, which articles of
amendment may be adopted by the Board of Directors without
further stockholder action.
Voting Requirements for Extraordinary Corporate Matters
The corporate law governing First Commercial and Southwest
Bancshares generally requires with respect to mergers,
consolidations, sales of all or substantially all of a
corporation's assets outside the normal course of business,
or voluntary dissolution of a corporation ("extraordinary
corporate matters"), that such extraordinary corporate
matters be approved by the affirmative vote of the holders of
a majority of the votes entitled to be cast. First
Commercial's Articles provide, however, that if a transaction
<PAGE>
is contemplated with an Interested Stockholder (as defined
herein) of First Commercial, then pursuant to the Fair Price
Provision, which is defined and described in greater detail
below, the transaction must be approved by the holders of at
least 80% of the votes entitled to be cast by the holders of
First Commercial Stock. If, on the other hand, the
transaction is approved by a majority of disinterested
directors or if the price paid to all stockholders in
connection with the transaction meet certain standards of
fairness set forth in the Fair Price Provision, the 80% vote
requirement does not apply.
Voting for Election of Directors
The directors of Southwest Bancshares are elected for a term
of one year. Pursuant to First Commercial's Articles, its
board of directors is divided into three classes of
approximately equal size. Such a board is referred to as a
classified or staggered board of directors. Each director of
First Commercial is elected for a term of three years, and
the terms are staggered in such a way that approximately one-
third of the terms expire at each annual meeting. The
staggering of terms of directors has the potential effect of
increasing the difficulty of changing the composition of
First Commercial's board of directors to the extent that at
least two annual meetings, rather than one, will be required
in order for First Commercial stockholders to effect a change
in the majority control of its board of directors.
Neither First Commercial's Articles nor Southwest Bancshares'
Articles provide for cumulative voting with respect to the
election of directors.
Amendment of Articles of Incorporation
An amendment to First Commercial's Articles or Southwest
Bancshares's Articles is deemed approved if the number of
votes cast in favor of the amendment exceeds the number of
votes cast against the amendment, provided that a quorum of
those entitled to vote is represented at the meeting;
provided, however, if the amendment creates dissenters'
rights for a voting group, the amendment must be approved by
a majority of the votes entitled to be cast by such voting
group. However, First Commercial's Articles require the
approval of at least 80% of the shares entitled to vote with
regard to the amendment, modification or repeal of provisions
dealing with a classified board of directors, advance notice
from stockholders of nominations for election of First
Commercial directors, the filling of vacancies on the First
Commercial board of directors, removal of First Commercial
directors, action of stockholders without a meeting, and an
amendment of parallel provisions in First Commercial's
Bylaws.
<PAGE>
Amendment of Bylaws
Stockholders of Southwest Bancshares have the power to amend
the Bylaws of Southwest Bancshares. Stockholders of First
Commercial have the power to amend the Bylaws of First
Commercial with the exception that Bylaw provisions relating
to the nomination of directors by stockholders, notice from
stockholders of matters to be brought by stockholders before
an annual meeting, special meetings, the taking of action by
stockholders without a meeting, the number, election and
terms of directors, the removal of directors, and the filling
of vacancies may be amended or repealed only with the consent
of the holders of at least 80% of the First Commercial Stock
entitled to vote.
Removal of Directors
Stockholders of Southwest Bancshares may remove a director,
either with or without cause, at a meeting called for that
purpose if a quorum is present and if the number of votes
cast to remove him exceeds the number of votes cast not to
remove him. The stockholders of First Commercial may
similarly remove a director, but only for cause.
Limitation of Director Liability
As permitted by the Arkansas Business Corporation Act of
1987, First Commercial's Articles and Southwest Bancshares's
Articles each provide that no director of First Commercial or
Southwest Bancshares shall be personally liable to First
Commercial or Southwest Bancshares, respectively, or their
respective stockholders for monetary damages for or with
respect to any acts or omissions in the performance of his
duties as director.
Filling Vacancies on the Board of Directors
Under the corporate law governing Southwest Bancshares,
vacancies on its Board of Directors may be filled by the vote
of its stockholders or the Board of Directors. Under First
Commercial's Articles, vacancies on its board of directors
shall be filled solely by the affirmative vote of a majority
of the remaining directors then in office. This provision
precludes the holder of a majority of First Commercial Stock
from removing incumbent directors and simultaneously gaining
control of the Board of Directors by filling the vacancies
created by removal with his own nominees.
Nomination of Director Candidates and Advance Notice of
Matters to be Brought Before an Annual Meeting by
Stockholders
First Commercial's Articles provide that nominations for the
election of directors and placement of matters before the
stockholders at an annual meeting must be made as provided by
<PAGE>
the First Commercial Bylaws. The pertinent bylaw provisions
provide that stockholders intending to nominate director
candidates for election must deliver written notice thereof
to the Secretary of First Commercial not later than (i) with
respect to an election to be held at an annual meeting of
stockholders, ninety (90) days prior to the anniversary date
of the immediately preceding annual meeting of stockholders,
and (ii) with respect to an election to be held at a special
meeting of stockholders, the close of business on the tenth
day following the date on which notice of such meeting is
first given to stockholders. The Bylaws further provide that
the notice shall set forth certain information concerning
such stockholder and his nominee(s), including their names
and addresses, a representation that the stockholder is
entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate the person or
persons specified in the notice, a description of all
arrangements or understandings between the stockholder and
each nominee, such other information as would be required to
be included in a proxy statement soliciting proxies for the
election of the nominees of such stockholder and the consent
of each nominee to serve as a director of First Commercial if
so elected.
The First Commercial Bylaws further provide that for business
properly to be brought before an annual meeting by a
stockholder, the stockholder must deliver written notice of
such matter to the Secretary of First Commercial not less
than ninety (90) days prior to the anniversary date of the
immediately preceding annual meeting of stockholders and the
notice must set forth as to each matter the stockholder
proposes to bring before the annual meeting (i) a brief
description of the business, (ii) the name and address of the
stockholder proposing such business, (iii) the class and
number of shares of First Commercial beneficially owned by
the stockholder, and (iv) any material interest of the
stockholder in such business.
The advance notice requirements, by regulating stockholder
nominations and matters to be brought before an annual
meeting by stockholders, afford the board of directors of
First Commercial the opportunity to consider the
qualifications of proposed nominees and the importance of
matters proposed to be brought before an annual meeting and,
to the extent deemed necessary or desirable by the Board, to
inform stockholders about the qualifications of nominees and
issues important to the consideration of matters brought
before an annual meeting. There is the chance that these
provisions may discourage or deter a third party from
conducting a solicitation of proxies to elect its own slate
of directors or to adopt a matter which serves its own
interest, without regard to whether such might be harmful or
beneficial to First Commercial and its stockholders.
<PAGE>
Fair Price Provision
The following summary of the Fair Price Provision in First
Commercial's Articles (the "Fair Price Provision") is
qualified in its entirety by reference to the Fair Price
Provision found in Article EIGHTH of First Commercial's
Articles, which appear as an exhibit to the Registration
Statement of which this Joint Proxy Statement/Prospectus is a
part.
First Commercial's Articles require approval by holders of
eighty percent (80%) of the votes entitled to be cast as a
condition for mergers and certain other Business Combinations
(as hereinafter more fully defined, "Business Combination")
involving First Commercial and any person or group holding
five percent (5%) or more of the First Commercial Stock (an
"Interested Shareholder"), unless the transaction is approved
by a majority of the members of the First Commercial Board
who are unaffiliated with the Interested Shareholder and who
were directors before the Interested Shareholder became an
Interested Shareholder, or certain minimum price and
procedural requirements are met.
A Business Combination includes (a) a merger or consolidation
of First Commercial with an Interested Shareholder, (b) the
sale or other disposition by First Commercial or a subsidiary
of assets of $10,000,000 or more if an Interested Shareholder
is a party to the transaction, (c) the issuance of stock or
other securities of First Commercial or of a subsidiary to a
person that, immediately prior to such issuance, is an
Interested Shareholder in exchange for cash or property of
$10,000,000 or more, (d) the adoption of any plan or proposal
for the liquidation or dissolution of First Commercial
proposed by or on behalf of an Interested Shareholder, or (e)
any reclassification of securities, recapitalization, merger
with a subsidiary or other transaction which has the effect,
directly or indirectly, of increasing the proportionate
shares of the outstanding stock of any class of First
Commercial or a subsidiary owned by an Interested
Shareholder.
The 80% affirmative stockholder vote contemplated by the Fair
Price Provision is not required if (1) the transaction is
approved by a majority of the disinterested directors or (2)
all of the various minimum price criteria and procedural
requirements are satisfied.
The minimum price criteria referred to above require that
when cash or other consideration is being paid to First
Commercial stockholders in connection with a Business
Combination, the consideration to be paid would be required
to be either cash or the same type of consideration used by
the Interested Shareholder in acquiring the largest portion
of its common stock prior to the first public announcement of
<PAGE>
the terms of the proposed Business Combination. In the case
of payments of First Commercial Stock to stockholders, the
per share fair market value of such payments would have to be
at least equal in value to the higher of (i) the highest per
share price paid by an Interested Shareholder in acquiring
any shares during the two years prior to announcement of the
Business Combination or in the transaction in which it became
an Interested Shareholder (whichever is higher) or (ii) the
fair market value per share of common stock on the date of
the announcement of the Business Combination or on the date
on which the Interested Shareholder became an Interested
Shareholder (whichever is higher), in either case
appropriately adjusted for any stock dividend, stock split or
combination of shares.
The Fair Price Provision provides that a vote of the holders
of eighty percent (80%) or more of the votes entitled to be
cast by the holders of First Commercial Stock is required in
order to amend, alter or repeal, or adopt any provisions
inconsistent with, the Fair Price Provision.
Because of the higher percentage requirement for stockholder
approval of any Business Combination not meeting the price
and procedural requirements described above, and the
possibility of having to pay a higher price than would
otherwise be the case to other stockholders in such a
Business Combination, it may become more costly for a
purchaser to acquire control of First Commercial. The Fair
Price Provision may therefore decrease the likelihood that a
tender offer will be made for less than 80% of the voting
power of First Commercial Stock and, as a result, may
adversely affect those stockholders who would desire to
participate in such a tender offer. The Fair Price Provision
also has the effect of giving veto power to the holders of a
minority of the voting power of First Commercial Stock with
respect to a Business Combination that is opposed by the
Board of Directors but which a majority of the stockholders
may believe to be desirable and beneficial. In addition,
since only the disinterested directors will have the
authority to eliminate the 80% stockholder vote required for
a Business Combination, the Fair Price Provision may have the
effect of insulating current management against the
possibility of removal in the event of a takeover bid.
Shareholder Rights Plan
Preferred share purchase rights ("Rights") are attached to
shares of First Commercial Stock, including the shares
offered hereby, pursuant to a Shareholder Rights Plan of
First Commercial (the "Rights Plan"). The following
description of the Rights is qualified in is entirety by
reference to the Rights Plan, which is incorporated herein by
reference. See "Information Concerning First Commercial -
Information Incorporated by Reference."
<PAGE>
The Rights trade automatically with shares of First
Commercial Stock, and become exercisable and will trade
separately from the First Commercial Stock on the tenth day
after public announcement that a person or group has
acquired, or has the right to acquire, beneficial ownership
of 20% or more of the outstanding shares of First Commercial
Stock, or on the tenth day following commencement or
announcement of intent to make a tender offer for 20% or more
of the outstanding shares of First Commercial Stock, in
either case without prior written consent of the First
Commercial Board. When exercisable, one Right entitles the
holder to buy 1/100 of a share of Junior Participating
Preferred Stock of First Commercial at an exercise price of
$75 per Right. The exercise price payable, and the number of
shares of Junior Participating Preferred Stock issuable, upon
exercise of the Rights are subject to adjustment from time to
time upon the occurrence of certain events in order to
prevent dilution. In addition, the number of outstanding
Rights are also subject to adjustment in the event of a stock
dividend on First Commercial Stock payable in shares of First
Commercial Stock, subdivisions of the First Commercial Stock,
or combinations of shares of First Commercial Stock into a
smaller number of shares.
In the event a person acquires a beneficial ownership of 20%
or more of First Commercial Stock, holders of Rights (other
than the acquiring person or group) may purchase First
Commercial Stock having a market value of twice the then
current exercise price of each Right or, under certain
circumstances, holders of Rights may purchase stock of the
acquiring company having a market value of twice the current
exercise price of each Right.
The Rights are designed to protect the interests of First
Commercial and its shareholders against coercive takeover
tactics. The purpose of the Rights is to encourage potential
acquirors to negotiate with First Commercial's Board of
Directors prior to attempting a takeover and to give the
Board leverage in negotiating on behalf of all shareholders
the terms of any proposed takeover. The Rights may deter
certain takeover proposals. The Rights, which can be
redeemed by First Commercial's Board of Directors in certain
circumstances, expire by their terms on September 28, 2000.
LEGAL OPINIONS
The validity of the shares of First Commercial Stock offered
hereby will be passed upon for First Commercial by Friday,
Eldredge & Clark, Little Rock, Arkansas. Legal opinions
relating to tax matters will be furnished by Friday, Eldredge
& Clark, special tax counsel to First Commercial. Paul B.
Benham III, a partner of Friday, Eldredge & Clark,
beneficially owns, individually and through various
retirement plans, 1,945 shares of First Commercial Stock.
<PAGE>
Certain legal matters will be passed upon for Southwest
Bancshares by Mitchell, Williams, Selig, Gates & Woodyard,
P.L.L.C., Little Rock, Arkansas, members of which beneficially
own, individually and through various retirement plans, ______
shares of Southwest Bancshares Stock and ____ shares of First
Commercial Stock.
EXPERTS
Southwest Bancshares
The consolidated financial statements of Southwest Bancshares
and subsidiaries as of December 31, 1996 and 1995, and for
each of the three years in the period ended December 31, 1996,
appearing in this Prospectus and Registration Statement have
been audited by Kemp & Company, independent auditors, as set
forth in their report thereon appearing elsewhere herein and
in the Registration Statement, and are included in reliance
upon such report given upon the authority of such firm as
experts in accounting and auditing.
First Commercial
The consolidated financial statements of First Commercial
incorporated by reference in First Commercial's Annual Report
(Form 10-K) for the year ended December 31, 1996, have been
audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance
upon such reports given upon the authority of such firm as
experts in accounting and auditing.
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS OF SOUTHWEST BANCSHARES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF SOUTHWEST
BANCSHARES
Report of Independent Auditors F-1
Consolidated Balance Sheets - December 31, 1996 and 1995 F-2
Consolidated Statements of Income - Years ended
December 31, 1996, 1995 and 1994 F-3
Consolidated Statements of Stockholder's Equity -
Years ended December 31, 1996, 1995 and 1994 F-4
Consolidated Statements of Cash Flows -
Years ended December 31, 1996, 1995 and 1994 F-5
Notes to Consolidated Financial Statements -
December 31, 1996 F-6
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
Southwest Bancshares, Inc.
We have audited the accompanying consolidated balance sheets of Southwest
Bancshares, Inc. and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Southwest
Bancshares, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
As discussed in Note 3 to the consolidated financial statements, the Company
changed its method of accounting for investment securities during 1994.
/s/ Kemp & Company
Little Rock, Arkansas
January 31, 1997
<PAGE>
SOUTHWEST BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
1996 1995
------- -------
ASSETS
Cash and due from banks (Note 2) $ 22,188,099 $ 17,738,653
Interest bearing deposits in other
financial institutions 149,797 129,564
Federal funds sold 23,480,000 13,295,000
Investment securities (Note 3):
Held-to-maturity securities (approximate
fair values of $110,221,425 in 1996 and
$89,232,381 in 1995) 110,977,790 89,353,147
Available-for-sale securities 32,995,543 27,818,747
----------- -----------
143,973,333 117,171,894
Loans, net (Notes 4, 8, 10 and 12) 596,735,989 508,114,511
Premises and equipment, net (Note 5) 19,068,763 17,242,826
Accrued interest receivable 7,619,981 7,340,153
Goodwill, net of accumulated amortization
of $1,110,951 in 1995 and $855,425 in 1995 2,688,179 2,959,543
Other assets 3,904,106 2,225,538
------------ -------------
$819,808,247 $686,217,682
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits (Note 6):
Noninterest bearing $ 55,129,411 $ 43,550,880
Interest bearing 661,117,399 555,774,498
----------- -----------
716,246,810 599,325,378
Federal funds purchased and securities
sold under agreements to repurchase 17,332,321 13,401,616
Revolving credit loan (Note 7) 9,250,000 7,000,000
Other borrowed funds (Note 8) 14,393,965 11,567,436
Accrued interest payable 7,310,224 5,872,492
Other liabilities 1,747,736 1,146,362
---------- ------------
Total liabilities 766,281,056 638,313,284
=========== ===========
Commitments (Notes 10, 12, 16 and 17)
<PAGE>
Stockholders' equity (Notes 7, 9, 14, 16
and 17): Common stock, $1 par value:
Authorized 10,000,000 shares
Issued and outstanding: 245,275 shares 245,275 245,275
Surplus 36,636,962 36,636,962
Retained earnings 16,723,701 10,993,207
Net unrealized gains (losses) on
available-for-sale securities less
deferred income taxes (benefit) of
($48,861) in 1996 and $17,965 in 1995 (78,747) 28,954
---------- -----------
Total stockholders' equity 53,527,191 47,904,398
------------ ------------
$819,808,247 $686,217,682
============ ============
See notes to consolidated financial statements.
<PAGE>
SOUTHWEST BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
------ ----- -----
Interest income:
Loans, including fees $52,924,159 $40,161,174 $24,002,157
Investment securities:
Taxable 6,878,065 5,824,038 4,850,016
Tax-exempt 748,077 837,614 806,188
Other 689,720 449,270 258,797
---------- ---------- ----------
61,240,021 47,272,096 29,917,158
Interest expense:
Deposits 33,413,163 27,921,004 15,319,616
Short-term borrowings 966,620 593,014 294,132
Long-term borrowings 1,501,450 1,441,505 819,873
---------- ---------- ----------
35,881,233 29,955,523 16,433,621
---------- ---------- ----------
Net interest income 25,358,788 17,316,573 13,483,537
Provision for loan losses
(Note 4) 5,581,265 1,163,874 994,077
---------- ---------- ----------
Net interest income after
provision for loan losses 19,777,523 16,152,699 12,489,460
Other income:
Service charges on deposit
accounts 2,990,749 2,292,846 1,468,097
Net gains (losses) on sales
of available-for-sale
securities (5,769) 4,318 -0-
Other (Note 15) 2,113,799 1,401,671 656,531
--------- --------- ---------
5,098,779 3,698,835 2,124,628
Other expenses:
Salaries and benefits 7,973,273 6,580,499 5,027,234
Net occupancy 2,466,036 2,012,853 1,466,631
Amortization 255,526 256,341 281,382
Other (Note 15) 5,552,760 4,143,705 3,466,512
---------- ---------- ----------
16,247,595 12,993,398 10,241,759
---------- ---------- ----------
Income before income taxes 8,628,707 6,858,136 4,372,329
Applicable income taxes
(Note 11) 2,898,213 2,245,867 1,349,635
---------- ---------- ----------
Net income $ 5,730,494 $ 4,612,269 $ 3,022,694
========== ========= =========
Net income per common share $ 23.36 $ 21.22 $ 16.08
===== ===== =====
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
SOUTHWEST BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1996, 1995 and 1994
Unrealized
gains (losses)
on available-
Common Retained for-sale
stock Surplus earnings securities Total
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $ 1,654,750 $20,241,287 $ 3,358,244 $ $25,245,281
Adjustment for change in
accounting principle, net
of deferred income taxes
of $64,329 (Note 3) 104,957 104,957
Issuance of common stock
(43,600 shares) 436,000 7,063,200 7,499,200
Net income 3,022,694 3,022,694
Net change in unrealized
gains (losses) on
available-for-sale
securities, net of
deferred income tax
benefit of $258,358 (423,925) (423,925)
Reduction in par value
of common stock
(Note 9) (1,873,575) 1,873,575
--------- --------- ---------- --------- ----------
Balance at December 31, 1994 208,175 29,178,062 6,380,938 (318,968) 35,448,207
Issuance of common stock
(37,100 shares) 37,100 7,458,900 7,496,000
Net income 4,612,269 4,612,269
Net change in unrealized
gains (losses) on
available-for-sale
securities, net of
deferred income taxes
of $215,880 347,922 347,922
--------- ---------- ---------- -------- ----------
Balance at December 31, 1995 245,275 36,636,962 10,993,207 28,954 47,904,398
Net income 5,730,494 5,730,494
Net change in unrealized
gains (losses) on
available-for-sale
securities, net of
deferred income tax
benefit of $66,827 (107,701) (107,701)
--------- ---------- --------- -------- ----------
Balance at December 31, 1996 $ 245,275 $36,636,962 $16,723,701 $ (78,747) $53,527,191
========= ========== ========== ======== ==========
<FN>
See notes to consolidated financial statements.
</FN>
<PAGE>
SOUTHWEST BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
------ ------ ------
Operating activities:
Net income $ 5,730,494 $ 4,612,269 $ 3,022,694
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 1,418,274 1,214,949 968,232
Amortization of investment
securities premiums and
accretions of discounts, net (214) 66,332 157,486
Provision for loan losses 5,581,265 1,163,874 994,077
Deferred income taxes (1,800,000) (215,000) (299,000)
Net gains (losses) on sales
of available-for-sale
securities 5,769 (4,318) -0-
Changes in assets and
liabilities net of effects
of acquisitions:
Accrued interest receivable
and other assets (91,570) (2,620,547) (2,075,371)
Accrued interest payable and
other liabilities 2,039,106 3,517,049 1,063,270
--------- --------- ---------
Net cash provided by operating
activities 12,883,124 7,734,608 3,831,388
Investing activities:
Net assets of acquired
subsidiaries, net of cash
acquired -0- -0- (1,905,194)
Net decrease (increase) in
federal funds sold (10,185,000) (13,295,000) 14,850,000
Proceeds from sales of
investment securities 965,575 1,021,875 -0-
Proceeds from maturities of
held-to-maturity securities 34,977,623 9,802,763 5,668,625
Purchases of held-to-maturity
securities (52,583,330) (10,352,306) (38,136,954)
Proceeds from maturities of
available-for-sale securities 5,800,000 12,920,000 8,945,000
Purchases of available-for-sale
securities (16,141,389) (15,326,858) (7,741,965)
Net increase in loans (94,202,743) (129,961,439) (130,884,409)
Purchases of premises and
equipment (2,972,847) (2,500,078) (4,802,218)
Other 5,558 (38,854) 488,675
----------- ----------- -----------
Net cash used in
investing activities (134,336,553) (147,729,897) (153,518,440)
<PAGE>
Financing activities:
Net increase in deposits 116,921,432 128,463,031 131,114,317
Net increase (decrease) in
federal funds purchased and
securities sold under
agreements to repurchase 3,930,705 (1,241,982) 12,908,598
Proceeds from long-term
borrowings 6,340,400 10,550,000 9,922,000
Payments on long-term
borrowings (1,263,871) (6,177,205) (4,096,188)
Proceeds from issuance of
common stock -0- 7,496,000 7,499,200
----------- ----------- -----------
Net cash provided by
financing activities 125,928,666 139,089,844 157,347,927
=========== =========== ===========
Net increase (decrease) in cash 4,475,237 (905,445) 7,660,875
Balance - January 1 17,712,862 18,618,307 10,957,432
---------- ---------- ----------
Balance - December 31 $22,188,099 $17,712,862 $18,618,307
=========== =========== ===========
See notes to consolidated financial statements.
<PAGE>
Note 1: Organization and summary of significant accounting policies
Organization
Southwest Bancshares, Inc. (the Company) was formed on July 3, 1990, as a
bank holding company. The Company has the following wholly - owned
subsidiaries as of December 31, 1996: First Bank of Arkansas, Russellville,
Arkansas (the Russellville Bank); First Bank of Arkansas, Jonesboro, Arkansas
(the Jonesboro Bank); First Bank of Arkansas, Wynne, Arkansas (the Wynne
Bank); and First Bank of Arkansas, Searcy, Arkansas (the Searcy Bank). During
1995, the First Bank of Arkansas, Trumann Arkansas (the Trumann Bank) was
merged into the Jonesboro Bank. This transaction had no effect on the
consolidated financial statements.
Acquisitions
The Company acquired all of the stock of the Searcy Bank on April 13, 1994
for $2,600,000. The purchase price was approximately $1,204,000 in excess of
the fair value of the net assets acquired which was recognized in the
financial statements as goodwill. This transaction was accounted for by the
purchase method and, accordingly, results of operations of the Searcy Bank
have been included in the consolidated financial statements since the date of
acquisition.
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany accounts and transactions have been eliminated in consolidation.
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 amount of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Investment securities
The Company's investment securities are classified as held-to-maturity
securities and available-for-sale securities. Debt securities for which
the Company has the positive intent and ability to hold until
<PAGE>
Note 1: Summary of significant accounting policies (continued)
Investment securities (continued)
maturity are classified as held-to-maturity securities that are reported at
cost, adjusted for amortization of premiums and accretion of discounts.
Available-for-sale securities consist of securities not classified
as held-to-maturity and are reported at fair value. Unrealized holding gains
and losses, net of tax, on available-for-sale securities are reported as a
net amount in a separate component of stockholders' equity until realized.
Gains or losses on the sale of securities are computed using the carrying
amount of the specific securities sold.
Revenue recognition
Interest on loans is recognized in operations based upon the principal amount
outstanding. Loans are placed on nonaccrual status when management believes
that, after giving consideration to economic and business conditions and
collection efforts, the collection of interest is doubtful or when the payment
of principal and interest has become contractually 90 days past due unless the
obligation is both well secured and in process of collection.
Allowance for loan losses
The allowance for loan losses is maintained at a level adequate to absorb
probable losses. Management determines the adequacy of the allowance based
on reviews of individual loans, recent loan loss experience, current economic
conditions, the risk characteristics of the various categories of loans and
other pertinent factors. Loans are charged against the allowance for loan
losses at such time as management believes the collectibility of the principal
is unlikely. Provisions for loan losses and recoveries on loans previously
charged off are added to the allowance.
Premises and equipment
Premises and equipment are stated at cost, less accumulated depreciation.
Depreciation expense is computed on the straight-line method over the
estimated useful lives of the assets.
Goodwill
Goodwill is amortized using the straight-line method over 15 years.
<PAGE>
Note 1: Summary of significant accounting policies (continued)
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.
The Company and its bank subsidiaries file consolidated income tax returns.
Each subsidiary provides for income taxes on a separate-return basis and
remits to or receives from the Company amounts currently payable or
receivable in accordance with the Company's tax allocation agreement.
Earnings per share
Earnings per share is based on the average shares outstanding during each
year which were 245,275 shares, 217,396 shares, and 187,964 shares for the
years ended December 31, 1996, 1995 and 1994, respectively.
Cash equivalents
For purposes of the statements of cash flows, the Company considers cash
and due from banks as cash and cash equivalents.
Reclassifications
Certain reclassifications of 1995 and 1994 amounts were made to conform
with the 1996 presentation.
Future application of accounting standards
During 1996, the Financial Accounting Standards Board issued Statement No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". The adoption of Statement No. 125 (required
in 1997), which supercedes previous accounting standards for the sale of
mortgage loans subject to repurchase agreements (see Note 10), is not
expected to have a significant impact on the Company's consolidated financial
statements.
<PAGE>
Note 1: Summary of significant accounting policies (continued)
Fair values of financial instruments
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments (see Note 10 for
summary table):
Cash, due from banks, interest bearing deposits in other financial
institutions 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.
Loans: For variable-rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on carrying values.
The fair values for fixed-rate loans are 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).
The carrying amounts for variable-rate, fixed-term money market accounts and
certificates of deposits approximate their fair values at the reporting date.
Fair values for fixed-rate certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently being
offered on certificates to a schedule of aggregated expected monthly
maturities of such deposits.
Short-term borrowings: The carrying amounts of federal funds purchased and
securities sold under agreements to repurchase approximate their fair values.
Other borrowed funds: Fair values are estimated using rates currently
offered for borrowings of similar maturities.
Revolving credit loan: Fair value on the revolving credit loan is the amount
payable at the reporting date since the interest rate is equal to the prime
rate on corporate loans.
<PAGE>
Note 1: Summary of significant accounting policies (continued)
Fair values of financial instruments (continued)
Accrued interest: The carrying amounts of accrued interest approximate their
fair values.
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.
Note 2: Restrictions on cash and due from bank accounts
The bank subsidiaries are required to maintain average reserve balances with
the Federal Reserve Bank. The average amounts of the reserve balances for the
years ended December 31, 1996 and 1995 were approximately $3,129,000 and
$2,400,000, respectively.
Note 3: Investment securities
On January 1, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities". In accordance with the Statement, prior
period financial statements were not restated to reflect the change in
accounting principle. The adoption of the Statement resulted in an increase
in stockholders' equity of $104,957, net of $64,329 in deferred income taxes,
as of January 1, 1994 to reflect the net unrealized gains on securities
classified as available-for-sale.
<PAGE>
Note 3: Investment securities (continued)
The amortized cost and approximate fair values of investment securities are
as follows as of December 31:
1996
------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
-------- --------- --------- -----
Held-to-maturity:
U. S. Treasury securities
and obligations of U.S.
government agencies $ 98,495,282 $105,579 $ 676,208 $ 97,924,653
Obligations of states and
political subdivisions 11,262,161 150,105 351,243 11,061,023
Mortgage-backed securities 1,220,347 18,311 2,909 1,235,749
Total debt securities 110,977,790 273,995 1,030,360 110,221,425
Equity securities -0- -0- -0- -0-
----------- ------- --------- ----------
$110,977,790 $273,995 $1,030,360 $110,221,425
=========== ======= ========= ===========
Available-for-sale:
U.S. Treasury securities
and obligations of U.S.
government agencies $ 24,406,106 $100,160 $ 209,845 $ 24,296,421
Obligations of states and
political subdivisions 3,138,834 26,055 43,877 3,121,012
Corporate debt securities 1,000,488 422 -0- 1,000,910
Total debt securities 28,545,428 126,637 253,722 28,418,343
Equity securities 4,577,200 -0- -0- 4,577,200
---------- ------- ------- -----------
$ 33,122,628 $126,637 $ 253,722 $ 32,995,543
========== ======= ======= ==========
<PAGE>
Note 3: Investment securities (continued)
1995
------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
--------- -------- -------- -----
Held-to-maturity:
U. S. Treasury securities
and obligations of U.S.
government agencies $76,074,700 $350,388 $382,175 $76,042,913
Obligations of states and
political subdivisions 11,524,141 226,053 348,157 11,402,037
Mortgage-backed securities 1,754,306 34,671 1,546 1,787,431
Total debt securities 89,353,147 611,112 731,878 89,232,381
Equity securities -0- -0- -0- -0-
---------- ------- -------- ----------
$89,353,147 $611,112 $731,878 $89,232,381
========== ======= ======= ==========
Available-for-sale:
U.S. Treasury securities
and obligations of U.S.
government agencies $18,119,284 $201,586 $ 42,093 $18,278,777
Obligations of states and
political subdivisions 4,105,374 60,372 168,601 3,997,145
Corporate debt securities 1,787,375 -0- 4,700 1,782,675
---------- ------- ------- ----------
Total debt securities 24,012,033 261,958 215,394 24,058,597
Equity securities 3,760,150 -0- -0- 3,760,150
---------- ------- ------- ----------
$27,772,183 $261,958 $215,394 $27,818,747
========== ======= ======= ==========
<PAGE>
Note 3: Investment securities (continued)
The scheduled maturities of held-to-maturity and available-for-sale debt
securities at December 31, 1996 are as follows:
Held-to-maturity Available-for-sale
---------------- -------------------
Amortized Fair Amortized Fair
cost value cost value
-------- ----- ------- -----
Due in one year or
less $ 13,303,522 $ 13,339,044 $ 1,999,106 $ 2,005,590
Due after one year
through five years 77,214,493 76,826,138 21,659,479 21,552,996
Due after five years
through ten years 13,378,241 13,184,820 1,250,000 1,252,965
Due after ten years 5,861,187 5,635,674 3,636,843 3,606,792
----------- ----------- ---------- ----------
109,757,443 108,985,676 28,545,428 28,418,343
Mortgage-backed
securities 1,220,347 1,235,749 -0- -0-
----------- ----------- ---------- ---------
$110,977,790 $110,221,425 $28,545,428 $28,418,343
=========== =========== ========== ==========
Proceeds from sales of available-for-sale securities during 1996 amounted to
$965,575. Gross gains of $25,460 and gross losses of $31,229 were realized on
the sales. Proceeds from sales of available-for-sale securities during 1995
amounted to $1,021,875 and gross gains of $4,318 were realized on the sales.
There were no sales of investment securities during 1994.
In connection with the implementation of the Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities issued by the Financial Accounting Standards Board in November
1995, management transferred held-to-maturity investment securities with an
amortized cost balance of $4,105,374 to the available-for-sale securities
category. The unrealized loss on the securities transferred amounted to
$103,299.
At December 31, 1996 and 1995, investment securities with an aggregate
carrying amount of approximately $122,109,000 and $81,832,000, respectively,
were pledged to collateralize public deposits and for other purposes.
<PAGE>
Note 4: Loans and allowance for loans losses
The major categories of loans as of December 31, 1996 and 1995 are as follows:
1996 1995
---- ----
Real Estate:
Residential $149,408,304 $133,742,318
Construction 59,856,122 50,224,119
Other 167,458,341 131,546,312
Commercial 158,131,322 126,891,301
Agricultural loans 28,556,058 32,760,078
Installment 42,377,087 37,027,088
----------- -----------
605,787,234 512,191,216
Less allowance for loan losses (9,051,245) (4,076,705)
----------- -----------
Loans, net $596,735,989 $508,114,511
=========== ===========
Changes in the allowance for loan losses are as follows:
1996 1995 1994
---- ---- ----
Beginning balance $4,076,705 $3,214,584 $2,220,504
Provision for loan losses 5,581,265 1,163,874 994,077
Allowances of acquired
institutions -0- -0- 111,896
Net charges-offs:
Charge-offs (756,108) (357,007) (164,219)
Recoveries 149,383 55,254 52,326
--------- --------- ---------
Ending balance $9,051,245 $4,076,705 $3,214,584
========= ========= =========
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 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.
<PAGE>
Note 4: Loans and allowance for loans losses (continued)
Nonaccrual loans amounted to approximately $2,660,000 and $286,000 at December
31, 1996 and 1995, respectively. There were no significant allowance
for loan loss allocations for nonaccrual loans at December 31, 1996 and 1995.
Average nonaccrual loans were not significant for the years ended December
31, 1996 and 1995.
<PAGE>
Note 5: Premises and equipment
Premises and equipment consists of the following at December 31:
1996 1995
---- ----
Land $ 2,009,910 $ 1,987,505
Building and improvements 14,017,538 11,837,157
Furniture and equipment 6,134,171 4,720,086
Construction in progress -0- 689,873
---------- ----------
22,161,619 19,234,621
Less accumulated depreciation (3,092,856) (1,991,795)
---------- ---------
$19,068,763 $17,242,826
========== ==========
Depreciation expense amounted to $1,146,910, $943,028 and $686,850,
in 1996, 1995 and 1994, respectively.
<PAGE>
Note 6: Deposits
The following summarizes information on deposits as of December 31:
1996 1995
Noninterest bearing accounts $ 55,129,411 $ 43,550,880
NOW and money market accounts 108,602,395 93,056,225
Savings accounts 18,692,489 16,490,874
Time deposits, $100,000 and over 202,882,816 155,546,139
Other time deposits 330,939,699 290,681,260
----------- -----------
$716,246,810 $599,325,378
=========== ===========
Note 6: Deposits
Interest paid on deposits and long-term borrowings amounted to $34,443,501,
$26,646,232 and $15,217,319 for the years ended December 31, 1996, 1995 and
1994, respectively.
Note 7: Revolving credit loan
The Company's revolving credit loan with a financial institution bears
interest, which is payable quarterly, at the lender's prime rate (8.25% at
December 31, 1996 and 8.5% at December 31, 1995). Principal payments
sufficient to reduce the outstanding principal balance to the maximum
aggregate principal amount as set forth below are payable in annual
installments on the 15th day of each January until 2002. On January 15,
2003, the remaining outstanding principal balance plus all accrued and unpaid
interest is due and payable. The note is collateralized by all of the
outstanding stock of the Company's subsidiaries. The maximum available
aggregate principal amount is as follows:
Maximum Aggregate
Principal Amount
----------------
Through January 15, 1996 $12,000,000
January 16, 1996 through January 15, 1997 10,872,000
January 16, 1997 through January 15, 1998 9,654,366
January 16, 1998 through January 15, 1999 8,128,951
January 16, 1999 through January 15, 2000 6,747,029
January 16, 2000 through January 15, 2001 5,242,442
January 16, 2001 through January 15, 2002 3,633,012
January 16, 2002 through January 15, 2003 1,855,533
The revolving credit loan agreement provides that the Company may declare and
pay dividends to its stockholders without the written consent of the lender
if the payments of principal and interest on the loan are current and the
amount of the dividends do not exceed 25% of net income (see Note 17). The
agreement allows the bank subsidiaries to pay dividends to the Company in
amounts necessary to pay amounts currently due to the lender and operating
expenses (see Note 14 for regulatory restrictions on the payments of dividends
by the bank subsidiaries). The revolving credit agreement requires the
Company and the bank subsidiaries to maintain specified financial ratios.
Certain of the financial ratio requirements have been waived by the lender.
<PAGE>
Note 8: Other borrowed funds
1996 1995
---- ----
Advances from Federal Home Loan Bank (FHLB) $14,357,965 $11,513,436
Unsecured installment note 36,000 54,000
---------- ----------
$14,393,965 $11,567,436
========== ==========
Advances from the FHLB under the Blanket Floating Lien Program are used to
fund residential real estate loans. First mortgage loans (1-4 family) must
be available to secure borrowings in an aggregate amount of up to the lesser
of 65% of the book value of such loans or 35% of total assets. The advances
are payable monthly with interest rates ranging from 5.62% to 8.41% and have
final maturities ranging from 1997 through 2015.
The unsecured installment note is payable in annual installments of $18,000
with interest at 6%.
Schedule principal payments on other borrowed funds for the next five years
are as follows: 1997 - $2,384,268; 1998 - $2,351,553; 1999 - $1,268,625;
2000 - $1,249,442; and 2001 - $1,151,494.
Note 9: Change in par value of common stock
In November 1995, the stockholders of the Company approved an amendment to
the Articles of Incorporation increasing the authorized shares of the Company
from 250,000 shares to 10,000,000 shares. In November 1994, the stockholders
of the Company approved an amendment to the Articles of Incorporation reducing
the par value of the Company's common stock to $1 from $10. The reduction
in the par value of common stock resulted in a transfer of $1,873,575 from
common stock to surplus in the consolidated financial statements.
Note 10: Commitments, financial instruments and concentrations of credit
risk
The bank subsidiaries are parties to financial instruments with off-balance-
sheet risk in the normal course of business to meet the financing needs of
their customers. These financial instruments include commitments to extend
credit, standby letters of credit and loans sold subject to repurchase
agreements. Those instruments involve, to varying degrees, elements of credit
and interest rate risk in excess of the amounts recognized in the consolidated
balance sheets.
<PAGE>
Note 10: Commitments, financial instruments and concentrations of credit
risk (continued)
The exposure to credit loss in the event of nonperformance by the other party
to the financial instrument for commitments to extend credit, standby letters
of credit and loans sold subject to repurchase agreements is represented by
the contractual terms of those instruments. The bank subsidiaries use the
same credit policies in making commitments and conditional obligations as
they do for on-balance-sheet instruments. The total amounts of financial
instruments with off-balance-sheet risk are as follows at December 31:
1996 1995
---- -----
Commitments to extend credit $87,870,000 $79,041,000
Standby letters of credit 2,598,000 610,000
Mortgage loans sold subject to
repurchase agreements 39,475,000 16,509,000
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.
The 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 bank subsidiaries to
guarantee the performance of customers to third parties. Those guarantees
are primarily issued to support private borrowing arrangements. Bank
subsidiaries were committed as of December 31, 1996 and 1995 under certain
mortgage loan sale agreements to repurchase loans that did not meet the
standards of the related sale agreements or that became delinquent within a
stated period of timeafter being sold to permanent investors.
The bank subsidiaries evaluate each customer's creditworthiness 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
counterparty. Collateral held varies but may include securities, accounts
receivable, agricultural equipment and crops, inventory, property, plant, and
equipment, income-producing commercial properties and residential and
agricultural real estate.
Most of the Company's lending activities are with customers located in the
market areas of the bank subsidiaries. The concentrations of credit by major
category of loan type are set forth in Note 4. Each bank subsidiary, as a
matter of policy, 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 loan policies of the bank subsidiaries provide
for loan to value ratios by type of loan.
<PAGE>
Note 10: Commitments, financial instruments and concentrations of credit
risk (continued)
The estimated fair values of the Company's financial instruments (see Note 1
for methods and assumptions used by the Company in estimating fair values)
were as follows at December 31:
1996 1995
------------------- --------------------
Carrying Fair Carrying Fair
amount value amount value
------ ----- ------ -----
Financial assets:
Cash and due from
banks, interest
bearing deposits
and federal funds
sold $ 45,817,896 $ 45,817,896 $ 31,163,217 $ 31,163,217
Held-to-maturity
securities 110,977,790 110,221,425 89,353,147 89,232,381
Available-for-sale
securities 32,995,543 32,995,543 27,818,747 27,818,747
Loans - total 605,787,234 600,146,899 512,191,216 503,430,000
Accrued interest
receivable 7,619,981 7,619,981 7,340,153 7,340,153
Financial liabilities:
Deposits $716,246,810 $718,930,000 $599,325,378 $602,045,000
Short-term borrowings 17,332,321 17,332,321 13,401,616 13,401,616
Revolving credit loan 9,250,000 9,250,000 7,000,000 7,000,000
Other borrowed funds 14,393,965 14,389,000 11,567,436 12,175,000
Accrued interest
payable 7,310,224 7,310,224 5,872,492 5,872,492
Note 11: Income taxes
The provision for income taxes for the years ended December 31, 1996, 1995 and 1994 consisted of
the following:
1996 1995 1994
---- ---- ----
Current:
Federal $4,354,783 $2,336,445 $1,648,635
State 343,430 124,422 -0-
--------- --------- ---------
4,698,213 2,460,867 1,648,635
========= ========= =========
Deferred:
Federal (1,600,000) (191,000) (299,000)
State (200,000) (24,000) -0-
(1,800,000) (215,000) (299,000)
---------- --------- ---------
Applicable income taxes $2,898,213 $2,245,867 $1,349,635
========= ========= =========
<PAGE>
Note 11: Income taxes (continued)
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:
1996 1995 1994
---- ---- ----
Federal income taxes at
statutory rate $2,933,760 $2,331,766 $1,486,592
Add (deduct):
State income taxes, net
of federal tax benefit 94,664 66,203 -0-
Tax-exempt interest income (254,346) (284,789) (274,104)
Amortization of goodwill 86,879 87,156 95,670
Other 37,256 45,531 41,477
--------- --------- ---------
Applicable income taxes $2,898,213 $2,245,867 $1,349,635
========= ========= =========
Significant components of the Company's deferred tax liabilities and assets
as of December 31, 1996 and 1995 are as follows:
1996 1995
---- ----
Deferred tax liabilities:
Tax over book depreciation $ 495,000 $ 328,000
Discount accretion 119,000 78,000
FHLB stock dividends 154,000 86,000
Other 49,000 16,000
------- -------
Total deferred tax liabilities 817,000 508,000
Deferred tax assets:
Provision for loan losses not deducted
for tax 3,272,000 883,000
Deferred compensation 143,000 162,000
Net operating loss carryforwards 108,000 128,000
Other -0- 115,000
--------- ---------
Total deferred tax assets 3,523,000 1,288,000
Valuation allowance for deferred tax
assets (108,000) (128,000)
--------- ---------
3,415,000 1,160,000
--------- ---------
Net deferred tax assets $2,598,000 $ 652,000
========= =========
<PAGE>
Note 11: Income taxes (continued)
At December 31, 1996, the Company has net operating loss carryforwards of
approximately $317,000 for income tax purposes that expire beginning in 2004
through 2008. There are limitations for income tax purposes on the amount of
the net operating loss carryforwards that can be utilized in any one year
during the carryforward period. For financial reporting purposes, a valuation
allowance has been recognized to offset the deferred tax assets related to the
carryforwards. The benefits of the net operating loss carryforwards will be
recognized subsequent to December 31, 1996 as a reduction of income tax expense
and the valuation allowance, subject to management's evaluation of the
realizability of the related deferred tax assets.
The Company paid $4,902,316, $2,232,000 and $1,944,000 in income taxes during
the years ended December 31, 1996, 1995 and 1994, respectively.
Note 12: Related party transactions
Certain significant stockholders, directors and officers of the Company and
the bank subsidiaries, their family members and entities in which they are
principal owners, are loan customers of the bank subsidiaries. Related party
loans are made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
unrelated persons and do not involve more than normal risk of collectibility.
Loans to such parties at December 31, 1996 and 1995 were approximately
$24,664,000 and $17,875,000, respectively. During 1996, approximately
$14,161,000 of new loans were made, and repayments totaled approximately
$7,372,000.
Note 13: Employee benefit plans
The Company has a 401(k) plan which covers all employees of the Company and
the bank subsidiaries. The Company's contributions to the plan amounted to
$139,651, $112,257 and $92,340 for the years ended December 31, 1996, 1995
and 1994, respectively.
Effective as of November 29, 1996, certain officers and employees entered
into severance agreements with the Company. The agreements, which provide
for automatic one-year extensions beginning December 31, 1997, specify the
number of months of base salary (six, twelve or twenty-four months)
to be received as severance pay due to termination of employment following a
change of control of the Company, as defined in the agreements. See Note 16.
<PAGE>
Note 14: Regulatory matters
In accordance with Arkansas state banking laws, certain restrictions exist
regarding the ability of the banking subsidiaries to transfer funds to the
Company in the form of cash dividends, loans or advances. Under such
restrictions, the bank subsidiaries may not, without prior approval of the
bank regulatory agencies, declare and pay dividends of more than 50% of net
income (see Note 7 for other restrictions on the payment of dividends by the
bank subsidiaries).
The Company and the bank subsidiaries are also required to maintain sufficient
capital to meet minimum capital ratios, as defined by the regulatory agencies.
At December 31, 1996, the capital ratios of the Company and its subsidiaries
exceeded the minimum required amounts.
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 - none in any year; Other expenses - (1)
Advertising: $362,359 in 1994; (2) Regulatory insurance assessments: $706,244
and $919,333 in 1995 and 1994, respectively; (3) Printing and supplies:
$393,323 in 1994; (4) Data processing: $343,908 in 1994; and (5) Professional
services: $1,066,368 in 1996 (see Note 16).
Note 16: Plan and Agreement of Merger
In December 1996, the Company entered into a Plan and Agreement of Merger with
First Commercial Corporation (FCC), an Arkansas corporation with its principal
office in Little Rock, Arkansas. The agreement provides for the acquisition
of all the Company's common stock in exchange for shares of FCC. The merger
is subject to approval by the Company's stockholders and regulatory
authorities.
Pursuant to an agreement with a third party dated October 16, 1996, an accrual
for professional services of $812,000 has been included in the consolidated
financial statements for the year ended December 31, 1996.
Note 17: Subsequent event
During January 1997, the Company declared and paid a dividend of $1,226,375
($5 per share).
<PAGE>
Note 18: Southwest Bancshares, Inc. (Parent Company Only) financial
information
Balance Sheets
December 31,
1996 1995
---- ----
Assets:
Cash in bank subsidiaries $ 3,394,123 $ 239,831
Receivables from bank subsidiaries 879,806 275,772
Investment in bank subsidiaries 59,185,310 54,209,751
Other assets 15,097 281,609
---------- ----------
Total assets $63,474,336 $55,006,963
========== ==========
Liabilities:
Revolving credit loan $ 9,250,000 $ 7,000,000
Accrued interest payable 154,094 95,672
Other liabilities 543,051 6,893
--------- ---------
Total liabilities 9,947,145 7,102,565
Stockholders' equity 53,527,191 47,904,398
---------- ----------
Total liabilities and
stockholders' equity $63,474,336 $55,006,963
=========== ==========
Statements of Income
Years Ended December 31
1996 1995 1994
---- ---- ----
Income:
Dividends from bank subsidiaries $ 3,200,000 $ -0- $ -0-
Expenses:
Salaries and benefits 457,218 464,782 331,079
Interest on borrowings 645,763 761,127 506,637
Other 1,240,844 (1) 211,461 179,629
--------- --------- ---------
2,343,825 (1,437,370) (1,017,345)
========= ========= =========
Income (loss) before income taxes
and equity in undistributed net
income of bank subsidiaries 856,175 (1,437,370) (1,017,345)
Income taxes (credit) (891,065) (542,737) (379,211)
1,747,240 (894,663) (638,134)
Equity in undistributed income
of bank subsidiaries 3,983,254 5,506,902 3,660,828
--------- --------- ---------
Net income $5,730,494 $4,612,269 $3,022,694
========= ========= =========
<PAGE>
Note 18: Southwest Bancshares, Inc. (Parent Company Only) financial
information (continued)
Statements of Cash Flows
Years Ended December 31
1996 1995 1994
---- ---- ----
Operating activities:
Net income $ 5,730,494 $ 4,612,269 $ 3,022,694
Adjustments to reconcile net cash
provided by operating activities:
Equity in undistributed income
of bank subsidiaries (3,983,254) (5,506,903) (3,660,828)
Other - net 257,052 16,140 (329,531)
Net cash provided by (used by)
operating activities 2,004,292 (878,494) (967,665)
Investing activities:
Purchases of subsidiaries (2,600,000)
Capital contributed to
subsidiaries (1,100,000) (5,900,000) (8,250,000)
Purchases of premises and
equipment (2) (2,144,829)
Proceeds from sale of premises
and equipment to the Jonesboro
Bank (2) 4,005,713
Net cash used by investing
activities (1,100,000) (5,900,000) (8,989,116)
Financing activities:
Proceeds from revolving credit
loan 2,250,000 4,500,000 3,250,000
Payments on revolving credit loan (5,250,000) (1,000,000)
Proceeds from sales of common stock 7,496,000 7,499,200
Proceeds from notes payable to
stockholders (3) 2,600,000
Payments on notes payable to
stockholders (3) (2,600,000)
Net cash provided by financing
activities 2,250,000 6,746,000 9,749,200
Increase (decrease) in cash 3,154,292 (32,494) (207,581)
Cash at beginning of year 239,831 272,325 479,906
Cash at end of year $ 3,394,123 $ 239,831 $ 272,325
Supplementary Cash Flows Information - The parent company paid $587,341,
$784,182 and $447,205 in interest during 1996, 1995 and 1994, respectively.
(1) See Note 16.
(2) At January 1, 1994, the parent company's portion of the construction
costs for the Jonesboro Bank's five-story bank facility was $1,874,788.
Additional expenditures of $2,144,829 were incurred by Southwest
Bancshares, Inc. in 1994. The Jonesboro Bank purchased the parent
company's interest in the facility during 1994 at the parent company's
net book value.
(3) In connection with the purchase of the Searcy Bank, the parent company
borrowed $2,600,000 from stockholders and repaid the borrowings with
interest at prime (average rate of 6.96%) with proceeds from sales of
common stock.
<PAGE>
ATTACHMENT I
December 20, 1996
Board of Directors
Southwest Bancshares, Inc.
2400 East Highland Drive
Jonesboro, Arkansas 72403
Members of the Board:
We have acted as your financial advisor in connection
with the proposed merger with First Commercial Corporation
("First Commercial") (the "Transaction"). The terms and
conditions of the Transaction are more fully set forth in
the Plan and Agreement of Merger by and between Southwest
Bancshares, Inc.("Southwest," or the "Company") and First
Commercial Corporation (draft dated Dec. 20, 1996) (the
"Draft Merger Agreement").
The Draft Merger Agreement provides for, among other
things, that (1) each outstanding share of common stock,
par value $1.00, of Southwest is to be converted into the
right to receive a number of shares of common stock, $3.00
par value of First Commercial (adjusted for stock splits
and stock dividends), equal to 3,412,457 (the number of
shares of First Commercial Common Stock to be issued in
the Transaction) divided by the number of outstanding
shares of Southwest on the closing date. On December 19,
1996 (the trading day immediately preceding the date here-
of) the last reported sale price per share of common stock
of First Commercial was $37.50.
You have requested our opinion as to the fairness to
the disinterested shareholders of the Company from a fi-
nancial point of view of the consideration to be received
by the Company in the Transaction. For purposes of this
opinion, the term "disinterested shareholders" means
holders of the Company's one class of common stock (the
"Common Stock") other than (1) directors, officers and
employees of the Company, (2) any holder of five percent
or more of the outstanding shares of Common Stock and (3)
Southwest and its affiliates.
In connection with our opinion, we have, among other
things:
(i) analyzed certain financial and other data publicly
available or made available to us with respect to South-
west and First Commercial, including the consolidated
financial statements for recent years and interim periods
<PAGE>
to September 30, 1996 and certain other relevant finan-
cial and operating data relating to Southwest and First
Commercial made available to us from published sources
and from the internal records of Southwest;
(ii) reviewed the Draft Merger Agreement dated December
20, 1996 and discussed the financial terms thereof with
the Company s legal counsel;
(iii) compared the respective contributions of loans,
deposits, equity, and income by Southwest and First
Commercial to the combined entity;
(iv) analyzed, on a pro forma basis, the effect of the
Transaction of the Company s earnings, book value,
balance sheet, and capitalization ratios, both in the
aggregate, and where applicable, on a per share basis;
(v) reviewed the historical market prices and trading
volumes of the common stock of First Commercial;
(vi) compared Southwest and First Commercial from a
financial point of view with certain other companies
which we deemed to be relevant;
(vii) considered the financial terms, to the extent publicly
available, of selected business combinations in the
banking industry;
(viii) reviewed and discussed with representatives of the
management of Southwest certain information of a business
and financial nature regarding Southwest furnished to us
by Southwest;
(ix) assisted in your deliberations regarding the
material terms of the Transaction and your negotiations
with First Commercial; and
(x) performed such other analyses and examinations as we
have deemed appropriate.
<PAGE>
In connection with our review, we have not assumed
any obligation indepedently to verify any of the
foregoing information and have relied on all such
information being complete and accurate in all material
respects. We are not an expert in the evaluation of loan
portfolios for purposes of assessing the adequacy of the
allowances for losses with respect thereto and have
assumed, with your consent, that such allowances for each
of Southwest and First Commercial are in the aggregate
adequate to cover such losses, In addition, we have not
assumed responsibility for reviewing any individual
credit files or making an independent evaluation,
appraisal or inspection of the real, personal, tangible
or intangible assets (including investment securities) or
individual properties of Southwest or First Commercial,
nor have we been furnished with any such evaluations or
appraisals.
We have also assumed, with your consent, that there
have been no material changes in Southwest's or First
Commercial's assets, financial condition, results of
operations, business or prospects since the respective
dates of their last financial statements reviewed by us
and that any off-balance sheet activities of Southwest
and First Commercial, including derivatives and other
similar financial instruments, will not materially and
adversely affect the future financial position or results
of operations of Southwest or First Commercial. We have
further assumed, with your consent, that in the course of
obtaining the necessary regulatory and third party
consents for the Merger, no restriction, limitation or
order will be imposed that would have or would be
expected to have a material adverse effect on the
contemplated benefits of the Merger or the transactions
contemplated thereby, and that the Merger will be
consummated in accordance with the terms of the Draft
Merger Agreement (including provisions relating to the
consideration to be exchanged in the Merger), without any
amendments to, and without any waiver by Southwest of,
any of the material conditions to its obligations
thereunder. Finally, our opinion is based on economic,
monetary, market and other conditions as in effect on,
and the information made available to us as of, the date
hereof.
<PAGE>
As part of our investment banking business, we are
continually engaged in the valuation of businesses and
their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate,
corporate and other purposes. We will receive a fee for
acting as financial advisor to Southwest, a substantial
portion of which is contingent upon the consummation of
the Merger. In the ordinary course of our business, we
may from time to time trade the equity securities of
Southwest or First Commercial for our own account and for
the accounts of customers and, accordingly, may at any
time hold a long or short position in such securities.
Based upon the foregoing and in reliance thereon, it
is our opinion as investment bankers that, as of the date
hereof, the consideration to be received by Southwest in
the Merger is fair to Southwest from a financial point of
view.
This opinion is furnished pursuant to our engagement
letter dated October 16, 1996. It is addressed to the
Board of Directors of Southwest and is not intended to be
and shall not be deemed to constitute a recommendation to
any stockholders to how such stockholder should vote with
respect to the Merger. This opinion and a summary
discussion of our underlying analyses and role as your
financial advisor may be included in communications to
the shareholders of Southwest and First Commercial
provided that we approve of such disclosures prior to
publication. In furnishing this opinion, we do not admit
that we are experts within the meaning of the term
experts as used in the Securities Act and the rules and
regulations promulgated thereunder, nor do we admit this
opinion constitutes a report or valuation within the
meaning of Section 11 of the Securities Act.
Very truly yours,
Stephens, Inc.
By: ________________
<PAGE>
ATTACHMENT II
Arkansas Business Corporation Act of 1987
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
4-27-1301. Definitions.
In this subchapter:
1. "Corporation" means the issuer of the shares held
by a dissenter before the corporate action, or the surviving
or acquiring corporation by merger or share exchange of that
issuer;
2. "Dissenter" means a shareholder who is entitled to
dissent from corporate action under Section 4-27-1302 and who
exercises that right when and in the manner required by
Sections 4-27-1320 -- 4-27-1328;
3. "Fair value," with respect to a dissenter's shares,
means the value of the shares immediately before the
effectuation of the corporate action to which the dissenter
objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would
be inequitable;
4. "Interest" means interest from the effective date
of the corporate action until the date of payment, at the
average rate currently paid by the corporation on its
principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances;
5. "Record shareholder" means the person in whose name
shares are registered in the records of a corporation or the
beneficial owner of shares to the extent of the rights
granted by a nominee certificate on file with a corporation;
6. "Beneficial shareholder" means the person who is a
beneficial owner of shares held in a voting trust or by a
nominee as the record shareholder;
7. "Shareholder" means the record shareholder or the
beneficial shareholder.
4-27-1302. Right of dissent.
A. A shareholder is entitled to dissent from and
obtain payment of the fair value of his shares in the event
of any of the following corporate actions:
1. Consummation of a plan of merger to which the
corporation is a party:
<PAGE>
(i) If shareholder approval is required for the
merger by Section 4-27-1103 or the articles of
incorporation and the shareholder is entitled to vote on
the merger; or
(ii) If the corporation is a subsidiary that is
merged with its parent under Section 4-27-1104;
2. Consummation of a plan of share exchange to which
the corporation is a party as the corporation whose shares
will be acquired, if the shareholder is entitled to vote on
the plan;
3. Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation other
than in the usual and regular course of business, if the
shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale
pursuant to a court order or a sale for cash pursuant to a
plan by which all or substantially all of the net proceeds of
the sale will be distributed to the shareholders within one
(1) year after the date of sale;
4. An amendment of the articles of incorporation that
materially and adversely affects rights in respect of a
dissenter's shares because it:
(i) Alters or abolishes a preferential right of
the shares;
(ii) Creates, alters, or abolishes a right in
respect of redemption, including a provision respecting
a sinking fund for the redemption or repurchase, of the
shares;
(iii) Alters or abolishes a preemptive right of the
holder of the shares to acquire shares or other
securities;
(iv) 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
(v) Reduces the number of shares owned by the
shareholder to a fraction of a share if the fractional
share so created is to be acquired for cash under
Section 4-27-604; or
5. Any corporate action taken pursuant to a
shareholder vote to the extent the articles of incorporation,
bylaws, or a resolution of the board of directors provides
that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
<PAGE>
B. A shareholder entitled to dissent and obtain
payment for his shares under this subchapter may not
challenge the corporate action creating his entitlement
unless the action is unlawful or fraudulent with respect to
the shareholder or the corporation.
4-27-1303. Dissent by nominees and beneficial owners.
A. A record shareholder may assert dissenters' rights
as to fewer than all the shares registered in his name only
if he dissents with respect to all shares beneficially owned
by any one (1) person and notifies the corporation in writing
of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial
dissenter under this subsection are determined as if the
shares as to which he dissents and his other shares were
registered in the names of different shareholders.
B. A beneficial shareholder may assert dissenters'
rights as to shares held on his behalf only if:
1. He submits to the corporation the record
shareholder's written consent to the dissent not later than
the time the beneficial shareholder asserts dissenters'
rights; and
2. He does so with respect to all shares of which he
is the beneficial shareholder or over which he has power to
direct the vote.
4-27-1304--4-27-1319. [Reserved.]
Procedure for Exercise of Dissenters' Rights
4-27-1320. Notice of dissenters' rights.
A. If proposed corporate action creating dissenters'
rights under Section 4-27-1302 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that
shareholders are or may be entitled to assert dissenters'
rights under this chapter and be accompanied by a copy of
this chapter.
B. If corporate action creating dissenters' rights
under Section 4-27-1302 is taken without a vote of
shareholders, the corporation shall notify in writing all
shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice
described in Section 4-27-1322.
4-27-1321. Notice of intent to demand payment.
A. If proposed corporate action creating dissenters'
rights under Section 4-27-1302 is submitted to a vote at a
<PAGE>
shareholders' meeting, a shareholder who wishes to assert
dissenters' rights:
(1) Must deliver to the corporation before the vote is
taken written notice of his intent to demand payment for his
shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed
action.
B. A shareholder who does not satisfy the requirements
of subsection A. of this section is not entitled to payment
for his shares under this subchapter.
4-27-1322. Dissenters' notice.
A. If proposed corporate action creating dissenters'
rights under Section 4-27-1302 is authorized at a
shareholders' meeting, the corporation shall deliver a
written dissenters' notice to all shareholders who satisfied
the requirements of Section 4-27-1321.
B. The dissenters' notice must be sent no later than
ten (10) days after the corporate action was taken, and must:
1. State where the payment demand must be sent and
where and when certificates for certificated shares must be
deposited;
2. Inform holders of uncertificated shares to what
extent transfer of the shares will be restricted after the
payment demand is received;
3. Supply a form for demanding payment that includes
the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action
and requires that the person asserting dissenters' rights
certify whether or not he acquired beneficial ownership of
the shares before that date;
4. Set a date by which the corporation must receive
the payment demand, which date may not be fewer than thirty
(30) nor more than sixty (60) days after the date the notice
required by subsection A. of this section is delivered; and
5. Be accompanied by a copy of this subchapter.
4-27-1323. Duty to demand payment.
A. A shareholder sent a dissenters' notice described
in Section 4-27-1322 must demand payment, certify whether he
acquired beneficial ownership of the shares before the date
required to be set forth in the dissenters' notice pursuant
to Section 4-27-1322B.3., and deposit his certificates in
accordance with the terms of the notice.
<PAGE>
B. The shareholder who demands payment and deposits
his share certificates under subsection A. of this section
retains all other rights of a shareholder until these rights
are cancelled or modified by the taking of the proposed
corporate action.
C. A shareholder who does not demand payment or
deposit his share certificates where required, each by the
date set in the dissenters' notice, is not entitled to
payment for his shares under this subchapter.
<PAGE>
4-27-1324. Share restrictions.
A. The corporation may restrict the transfer of
uncertificated shares from the date the demand for their
payment is received until the proposed corporate action is
taken or the restrictions released under Section 4-27-1326.
B. The person for whom dissenters' rights are asserted
as to uncertificated shares retains all other rights of a
shareholder until these rights are cancelled or modified by
the taking of the proposed corporate action.
4-27-1325. Payment.
A. Except as provided in Section 4-27-1327, as soon as
the proposed corporate action is taken, or upon receipt of a
payment demand, the corporation shall pay each dissenter who
complied with Section 4-27-1323 the amount the corporation
estimates to be the fair value of his shares, plus accrued
interest.
B. The payment must be accompanied by:
1. The corporation's balance sheet as of the end of a
fiscal year ending not more than sixteen (16) months before
the date of payment, an income statement for that year, a
statement of changes in shareholders' equity for that year,
and the latest available interim financial statements, if
any;
2. A statement of the corporation's estimate of the
fair value of the shares;
3. An explanation of how the interest was calculated;
4. A statement of the dissenter's right to demand
payment under Section 4-27-1328; and
5. A copy of this subchapter.
4-27-1326. Failure to take action.
A. If the corporation does not take the proposed
action within sixty (60) days after the date set for
demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and
release the transfer restrictions imposed on uncertificated
shares.
B. If after returning deposited certificates and
releasing transfer restrictions, the corporation takes the
proposed action, it must send a new dissenters' notice under
Section 4-27-1322 and repeat the payment demand procedure.
<PAGE>
4-27-1327. After-acquired shares.
A. A corporation may elect to withhold payment
required by Section 4-27-1325 from a dissenter unless he was
the beneficial owner of the shares before the date set forth
in the dissenters' notice as the date of the first
announcement to news media or to shareholders of the terms of
the proposed corporate action.
B. To the extent the corporation elects to withhold
payment under subsection A. of this section, after taking the
proposed corporate action, it shall estimate the fair value
of the shares, plus accrued interest, and shall pay this
amount to each dissenter who agrees to accept it in full
satisfaction of his demand. The corporation shall send with
its offer a statement of its estimate of the fair value of
the shares, an explanation of how the interest was
calculated, and a statement of the dissenter's right to
demand payment under Section 4-27-1328.
4-27-1328. Procedure if shareholder dissatisfied with
payment or offer.
A. A dissenter may notify the corporation in writing
of his own estimate of the fair value of his shares and
amount of interest due, and demand payment of his estimate
(less any payment under Section 4-27-1325), or reject the
corporation's offer under Section 4-27-1327 and demand
payment of the fair value of his shares and interest due, if:
1. The dissenter believes that the amount paid under
Section 4-27-1325 or offered under Section 4-27-1327 is less
than the fair value of his shares or that the interest due is
incorrectly calculated;
2. The corporation fails to make payment under Section
4-27-1325 within sixty (60) days after the date set for
demanding payment; or
3. The corporation, having failed to take the proposed
action, does not return the deposited certificates or release
the transfer restrictions imposed on uncertificated shares
within sixty (60) days after the date set for demanding
payment.
B. A dissenter waives his right to demand payment
under this section unless he notifies the corporation of his
demand in writing under subsection A. of this section within
thirty (30) days after the corporation made or offered
payment for his shares.
4-27-1329. [Reserved.]
<PAGE>
Judicial Appraisal of Shares
4-27-1330. Court action.
A. If a demand for payment under Section 4-27-1328
remains unsettled, the corporation shall commence a
proceeding within sixty (60) days after receiving the payment
demand and petition the court to determine the fair value of
the shares and accrued interest. If the corporation does not
commence the proceeding within the sixty-day period, it shall
pay each dissenter whose demand remains unsettled the amount
demanded.
B. The corporation shall commence the proceeding in
the circuit court of the county where the corporation's
principal office (or, if none in this state, its registered
office) is located. If the corporation is a foreign
corporation without a registered office in this state, it
shall commence the proceeding in the county in this state
where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign
corporation was located.
C. The corporation shall make all dissenters (whether
or not residents of this state) whose demands remain
unsettled parties to the proceeding as in an action against
their shares and all parties must be served with a copy of
the petition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
D. The jurisdiction of the court in which the
proceeding is commenced under subsection B. of this section
is plenary and exclusive. The court may appoint one (1) or
more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have
the powers described in the order appointing them, or in any
amendment to it. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
E. Each dissenter made a party to the proceeding is
entitled to judgment:
(1) For the amount, if any, by which the court finds
the fair value of his shares, plus interest, exceeds the
amount paid by the corporation; or
(2) For the fair value, plus accrued interest, of his
after-acquired shares for which the corporation elected to
withhold payment under Section 4-27-1327.
4-27-1331. Court costs and counsel fees.
A. The court in an appraisal proceeding commenced
under Section 4-27-1330 shall determine all costs of the
proceeding, including the reasonable compensation and
expenses of appraisers appointed by the court. The court
shall assess the costs against the corporation, except that
<PAGE>
the court may asses costs against all or some of the
dissenters, in amounts the court finds equitable, to the
extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under
Section 4-27-1328.
B. The court may also assess the fees and expenses of
counsel and experts for the respective parties, in amounts
the courts finds equitable.
1. Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not
substantially comply with the requirements of Sections 4-27-
1320 - 4-27-1328; or
2. Against either the corporation or a dissenter, in
favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in god faith with respect to
the rights provided by this chapter.
C. If the court finds that the services of counsel for
any dissenter were of substantial benefit to other dissenters
similarly situated, and that the fees for those services
should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the
amounts awarded the dissenters who were benefited.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 4-27-850 of the Arkansas Business Corporation
Act contains detailed provisions for indemnification of
directors and officers of Arkansas corporations against
expenses, judgments, fines and settlements in connection with
litigation. Article TWELFTH of First Commercial's Second
Amended and Restated Articles of Incorporation, as amended,
provides for indemnification of the directors and executive
officers of First Commercial to the fullest extent legally
permissible under the relevant provisions of the Arkansas
Business Corporation Act. Additionally, the Company has in
place directors' and officers' liability insurance coverage.
Item 21. Exhibits and Financial Statement Schedules.
Number Description
2 Plan and Agreement of Merger between
First Commercial Corporation and
Southwest Bancshares, Inc.
* 4.1 First Commercial's Second Amended and
Restated Articles of Incorporation, as
amended (incorporated by reference to
Exhibit 3(i) to Form 10-Q for the
quarterly period ended June 30, 1996.
* 4.2 First Commercial's By-Laws as currently
in effect (incorporated by reference to
Exhibit 3(d) to Form 10-K for the fiscal
year ended December 31, 1991, as amended,
in 0-9676).
* 4.3 Rights Agreement (incorporated by
reference to Exhibit 4 to Form 8-K dated
September 18, 1990, in 0-9676).
5 Opinion and Consent of Friday, Eldredge &
Clark.
8 Opinion and Consent of Friday, Eldredge &
Clark regarding certain tax matters.
23.1 Consent of Friday, Eldredge & Clark
(included in Exhibits 5 and 8 to this
Registration Statement).
23.2 Consent of Ernst & Young LLP.
<PAGE>
23.3 Consent of Kemp & Company.
23.4 Consent of Stephens Inc.
24 Powers of Attorney.
99 Form of Proxy.
*Incorporated herein by reference as indicated.
Item 22. Undertakings
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
registration statement (or the most recent post-
effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the
information set forth in this registration statement.
Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar
value of securities offered would not exceed that which
was registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any material
change to such information in the registration
statement.
2. That, for the purpose 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.
<PAGE>
3. To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
4. That, for purposes of determining any liability
under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
5. 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 Form S-4 with respect to reofferings by persons who may be
deemed underwriters, in addition to the information called
for by the other Items of Form S-4.
6. That every prospectus (i) that is filed pursuant to
paragraph (5) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is
used in connection with an 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.
7. 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 referred to in Item 20
above, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
<PAGE>
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.
8. 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, 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.
9. 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Little Rock, State
of Arkansas, on the 13th day of March, 1997.
FIRST COMMERCIAL CORPORATION
/s/ J. Lynn Wright
J. Lynn Wright
Chief Financial Officer
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed by the
following persons in the capacities indicated on the 13th
day of March, 1997.
* Chairman of the Board, Chief
-------------------- Executive Officer, President
Barnet Grace and Director
(Principal Executive Officer)
/s/ J. Lynn Wright
-------------------- Chief Financial Officer
J. Lynn Wright (Principal Financial and
Accounting Officer)
* Director
--------------------
John W. Allison
* Director
--------------------
Truman Arnold
* Director
--------------------
William H. Bowen
* Director
---------------------
Peggy Clark
<PAGE>
* Director
---------------------
Robert G. Cress
* Director
---------------------
Cecil W. Cupp, Jr.
* Director
----------------------
Frank D. Hickingbotham
* Director
----------------------
Walter E. Hussman, Jr.
* Director
-----------------------
Frederick E. Joyce, M.D.
* Director
-----------------------
Jack G. Justus
* Director
-----------------------
William M. Lemley
* Director
-----------------------
Michael W. Murphy
* Director
-----------------------
Sam C. Sowell
* Director
----------------------
Paul D. Tilley
*By: /s/ Edwin P. Henry
------------------
Edwin P. Henry
Attorney-in-Fact
Edwin P. Henry, by signing his name hereto, does sign this
document on behalf of each of the persons indicated above
pursuant to powers of attorney duly executed by such persons,
filed or to be filed with the Securities and Exchange
Commission as supplemental information.
<PAGE>
INDEX TO EXHIBITS
Number Description
2 Plan and Agreement of Merger between
First Commercial Corporation and
Southwest Bancshares, Inc.
* 4.1 First Commercial's Second Amended and
Restated Articles of Incorporation, as
amended (incorporated by reference to
Exhibit 3(i) to Form 10-Q for the
quarterly period ended June 30, 1996.
* 4.2 First Commercial's By-Laws as currently
in effect (incorporated by reference to
Exhibit 3(d) to Form 10-K for the fiscal
year ended December 31, 1991, as amended,
in 0-9676).
* 4.3 Rights Agreement (incorporated by
reference to Exhibit 4 to Form 8-K dated
September 18, 1990, in 0-9676).
5 Opinion and Consent of Friday, Eldredge &
Clark.
8 Opinion and Consent of Friday, Eldredge &
Clark regarding certain tax matters.
23.1 Consent of Friday, Eldredge & Clark
(included in Exhibits 5 and 8 to this
Registration Statement).
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Kemp & Company.
23.4 Consent of Stephens Inc.
24 Powers of Attorney.
99 Form of Proxy.
*Incorporated herein by reference as indicated.
</TABLE>
EXHIBIT 2
PLAN AND
AGREEMENT OF MERGER
BETWEEN
FIRST COMMERCIAL CORPORATION
AND
SOUTHWEST BANCSHARES, INC.
Date: DECEMBER 20, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
THE PLAN OF MERGER
Section 1.01. The Merger . . . . . . . . . . . . . . . . . . . . 2
Section 1.02. Effect of the Merger . . . . . . . . . . . . . . . 2
Section 1.03. Consummation of the Merger . . . . . . . . . . . . 2
Section 1.04. Articles of Incorporation; Bylaws;
Directors and Officers . . . . . . . . . . . . . . 3
Section 1.05. Merger Consideration; Conversion
of Securities . . . . . . . . . . . . . . . . . . 3
Section 1.06. Exchange of Certificates . . . . . . . . . . . . . 4
Section 1.07. Rights of Bancshares Shareholders to Dividends . . 4
ARTICLE II
APPROVAL OF MERGER
Section 2.01. Shareholder Approval . . . . . . . . . . . . . . . 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of Bancshares . . . 5
(a) Authority for Transaction . . . . . . . . . . 5
(b) Organization and Capitalization . . . . . . 5
(c) Financial Statements . . . . . . . . . . . 6
(d) Dividends . . . . . . . . . . . . . . . . . 7
(e) Loans . . . . . . . . . . . . . . . . . . . 7
(f) Taxes . . . . . . . . . . . . . . . . . . . 8
(g) Litigation and Regulatory Matters . . . . . 8
(h) Compliance . . . . . . . . . . . . . . . . 9
(i) Properties and Other Assets . . . . . . . . 9
(j) Agreement Does Not Violate Other
Instruments . . . . . . . . . . . . . . . . 10
(k) Insurance . . . . . . . . . . . . . . . . 11
(l) Employee Benefit Plans . . . . . . . . . . 11
(m) Employee Relations . . . . . . . . . . . . 13
(n) No Material Events . . . . . . . . . . . . 13
(o) Liabilities . . . . . . . . . . . . . . . . 14
(p) Marketability of Securities . . . . . . . . 14
(q) Interested Party Transactions . . . . . . . 15
(r) Material Contracts . . . . . . . . . . . . 15
(s) Environmental Matters . . . . . . . . . . . 16
(t) Property Sites Owned by Bancshares
and the Bancshares Subsidiaries . . . . . . 17
(u) Representations Not Misleading . . . . . . 17
Section 3.02. Representations and Warranties of First
Commercial . . . . . . . . . . . . . . . . . . . . 17
(a) Organization and Capitalization of First
Commercial . . . . . . . . . . . . . . . . 18
(b) Authority for Transaction . . . . . . . . . 18
<PAGE>
(c) Agreement Does Not Violate Other
Instruments . . . . . . . . . . . . . . . . 19
(d) Representations Not Misleading . . . . . . 19
(e) Financial Statements . . . . . . . . . . . 19
(f) Litigation and Regulatory Matters . . . . . 20
(g) Compliance . . . . . . . . . . . . . . . . 21
(h) No Material Events . . . . . . . . . . . . 21
(i) Taxes . . . . . . . . . . . . . . . . . . . 21
(j) Insurance . . . . . . . . . . . . . . . . . 22
(k) ERISA Plans . . . . . . . . . . . . . . . . 22
(l) Employee Relations . . . . . . . . . . . . 22
(m) Properties and Other Assets . . . . . . . . 22
(n) Environmental Matters . . . . . . . . . . . 23
(o) Pending Acquisition by FCC . . . . . . . . 23
(p) Regulatory Approval . . . . . . . . . . . . 23
(q) Availability of First Commercial Stock . . 23
ARTICLE IV
COVENANTS
Section 4.01. Covenants of Bancshares . . . . . . . . . . . . . 23
(a) Approval of Transaction and Consents . . . 23
(b) Access to Corporate Records . . . . . . . . 24
(c) Monthly Financial Statements . . . . . . . 24
(d) Closing Financial Statements . . . . . . . 25
(e) Conduct of Business . . . . . . . . . . . . 25
(f) Cooperation and Furnishing Information . . 26
(g) Related Party Transactions . . . . . . . . 27
(h) Notice of Changes . . . . . . . . . . . . . 27
(i) Limit on Bancshares's Attorneys' Fees . . . 27
Section 4.02. Covenants of First Commercial . . . . . . . . . . 27
(a) Consents and Approvals . . . . . . . . . . 27
(b) Quarterly Reports; Current Reports . . . . 28
(c) Conduct of Business . . . . . . . . . . . . 28
(d) Notice of Changes . . . . . . . . . . . . . 28
(e) Access to Corporate Records . . . . . . . . 28
(f) Election to First Commercial Board . . . . 29
(g) Registration of First Commercial Stock . . 29
(h) Pooling of Interests . . . . . . . . . . . 29
(i) Employee Benefits . . . . . . . . . . . . . 29
ARTICLE V
CONDITIONS PRECEDENT
Section 5.01. Conditions Precedent to Obligation of First
Commercial . . . . . . . . . . . . . . . . . . . . 29
(a) Performance of Covenants . . . . . . . . . 29
(b) Representations True at Closing . . . . . . 30
(c) Material Changes in Financial Condition,
Business or Prospects . . . . . . . . . . . 30
(d) Certified Resolutions . . . . . . . . . . . 30
(e) Government Approvals; Other Consents . . . 30
<PAGE>
(f) No Injunction . . . . . . . . . . . . . . . 30
(g) Litigation . . . . . . . . . . . . . . . . 31
(h) No Material Misstatements or Omissions . . 31
(i) Opinion of Bancshares's Counsel . . . . . . 31
(j) Financial Confirmation . . . . . . . . . . 31
(k) Due Diligence Review . . . . . . . . . . . 32
(l) Title Opinion . . . . . . . . . . . . . . . 32
(m) Pooling of Interests Opinion . . . . . . . 32
(n) Delivery of Continuity of Interest Letters 33
(o) Articles of Merger . . . . . . . . . . . . 33
Section 5.02. Conditions Precedent to Obligation
of Bancshares . . . . . . . . . . . . . . . . . . 33
(a) Performance of Covenants . . . . . . . . . 33
(b) Representations True at Closing . . . . . . 33
(c) Material Changes in Financial Condition . . 34
(d) Certified Resolutions . . . . . . . . . . . 34
(e) No Injunction . . . . . . . . . . . . . . . 34
(f) No Material Misstatements or Omissions . . 34
(g) Opinion of First Commercial's Counsel . . . 34
(h) Tax Opinion . . . . . . . . . . . . . . . . 35
(i) Securities Registration Opinion . . . . . 35
(j) Fairness Opinion . . . . . . . . . . . . . 35
(k) Articles of Merger . . . . . . . . . . . . 35
(l) Due Diligence Review . . . . . . . . . . . 35
(m) No Adverse Change . . . . . . . . . . . . . 36
(n) Litigation . . . . . . . . . . . . . . . . 36
(o) Receipt of Government Approval . . . . . . 37
ARTICLE VI
TERMINATION
Section 6.01. Procedure for Termination . . . . . . . . . . . . 37
Section 6.02. Termination by Mutual Agreement . . . . . . . . . 39
Section 6.03. Effect of Termination for Non-Willful Breach . . . 39
Section 6.04. Effect of Termination for Willful Breach . . . . . 39
Section 6.05. Termination Fee . . . . . . . . . . . . . . . . 39
Section 6.06. Enforcement Expenses . . . . . . . . . . . . . . 39
ARTICLE VII
BROKERS AND EXPENSES
Section 7.01. Brokers . . . . . . . . . . . . . . . . . . . . . 40
Section 7.02. Expenses . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Announcements . . . . . . . . . . . . . . . . . . 40
Section 8.02. Notices . . . . . . . . . . . . . . . . . . . . . 40
Section 8.03. Binding Effect . . . . . . . . . . . . . . . . . . 41
Section 8.04. Headings . . . . . . . . . . . . . . . . . . . . . 41
Section 8.05. Counterparts . . . . . . . . . . . . . . . . . . . 41
<PAGE>
Section 8.06. Integration of Agreement . . . . . . . . . . . . . 41
Section 8.07. Amendments; Waivers . . . . . . . . . . . . . . . 41
Section 8.08. Governing Law . . . . . . . . . . . . . . . . . . 41
Section 8.09. Incorporation by Reference . . . . . . . . . . . . 41
Section 8.10. Confidentiality of Information . . . . . . . . . . 42
Section 8.11. No Assignment . . . . . . . . . . . . . . . . . . 42
Section 8.12. Severability . . . . . . . . . . . . . . . . . . . 42
Section 8.13. Survival of Representations and Warranties . . . . 42
Section 8.14. Definition of To The Knowledge Of . . . . . . . . 42
Section 8.15. Applicability of Agreement to Entity Prior
to Becoming Bancshares Subsidiary . . . . . . . . 43
<PAGE>
List of Exhibits:
A Form of Articles of Merger (Section 1.01)
B Form of Opinion of Mitchell, Williams, Selig, Gates & Woodyard,
P.L.L.C. (Section 5.01(i))
C Form of Opinion of Friday, Eldredge & Clark (Section 5.02(g))
<PAGE>
List of Schedules:
A Schedule of Ownership of Common Stock (Delivered Pursuant to
Section 3.01(b)(ii))
B Schedule of Dividends (Delivered Pursuant to Section 3.01(d))
C Schedule of Loans (Delivered Pursuant to Section 3.01(e))
D Schedule of Internal Revenue Service and/or State Taxing
Authority Audits (Delivered Pursuant to Section 3.01(f)
E Schedule of Litigation (Delivered Pursuant to Section 3.01(g))
F Schedule of Consents and Approvals to be Obtained by
Bancshares and Bancshares Subsidiaries (Delivered Pursuant to
Section 3.01(j))
G Schedule of Insurance Policies (Delivered Pursuant to Section
3.01(k))
H Schedule of Employee Benefit Plans (Delivered Pursuant to
Section 3.01(l))
I Schedule of Employees (Delivered Pursuant to Section 3.01(m))
J Schedule of Material Changes (Delivered Pursuant to Section
3.01(n))
K Schedule of Pledges of Investment (Delivered Pursuant to
Section 3.01(p))
L Schedule of Interested Party Transactions and Loans (Delivered
Pursuant to Section 3.01(q))
M Schedule of Material Contracts (Delivered Pursuant to Section
3.01(r))
N Schedule of Properties Containing Hazardous Materials
(Delivered Pursuant to Section 3.01(s))
O Schedule of Property Sites Owned by Bancshares and Bancshares
Subsidiaries (Delivered Pursuant to Section 3.01(t))
P Schedule of Consents and Approvals to Be Obtained by First
Commercial (Delivered Pursuant to Section 3.02(c))
Q Schedule of Litigation (Delivered Pursuant to Section 3.02(f)).
<PAGE>
DEFINITIONS
Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Articles of Merger . . . . . . . . . . . . . . . . . . . . . . 2
Bancshares . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Bancshares Balance Sheet . . . . . . . . . . . . . . . . . . . . 8
Bancshares Due Diligence Review . . . . . . . . . . . . . . . . 36
Bancshares Financial Statements . . . . . . . . . . . . . . . . . 6
Bancshares Stock . . . . . . . . . . . . . . . . . . . . . . . . 1
Bancshares Subsidiaries . . . . . . . . . . . . . . . . . . . . 1
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Financial Statements . . . . . . . . . . . . . . . . . . 25
COBRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . 3
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . 2
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Federal Reserve Board . . . . . . . . . . . . . . . . . . . . . . 20
First Commercial . . . . . . . . . . . . . . . . . . . . . . . . 1
First Commercial Banks . . . . . . . . . . . . . . . . . . . . . 20
First Commercial Due Diligence Review . . . . . . . . . . . . . 32
First Commercial Stock . . . . . . . . . . . . . . . . . . . . . 1
First Commercial Financial Statements . . . . . . . . . . . . . 19
Insurance Policies . . . . . . . . . . . . . . . . . . . . . . 11
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Consideration . . . . . . . . . . . . . . . . . . . . . 3
Monthly Financial Statements . . . . . . . . . . . . . . . . . 24
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . 12
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Registration Statement . . . . . . . . . . . . . . . . . . . . 29
SFAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Subsidiary Banks . . . . . . . . . . . . . . . . . . . . . . . . 7
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . 2
<PAGE>
PLAN AND
AGREEMENT OF MERGER
BETWEEN
FIRST COMMERCIAL CORPORATION
AND
SOUTHWEST BANCSHARES, INC.
This AGREEMENT is made as of this 20th day of December, 1996,
between FIRST COMMERCIAL CORPORATION, an Arkansas corporation having
its principal office in Little Rock, Arkansas ("First Commercial"),
and SOUTHWEST BANCSHARES, INC., an Arkansas corporation having its
principal office in Jonesboro, Arkansas ("Bancshares").
W I T N E S S E T H:
WHEREAS, Bancshares owns all of the issued and outstanding common
stock of each of First Bank of Arkansas, Jonesboro; First Bank of
Arkansas, Russellville; First Bank of Arkansas, Searcy; and First Bank
of Arkansas, Wynne; and First Bank of Arkansas, Jonesboro owns all of
the issued and outstanding common stock of First Processing Services,
Inc., which holds a 52% general partnership interest in Advance Data
(such direct and indirect subsidiaries are collectively referred to
herein as the "Bancshares Subsidiaries"); and
WHEREAS, for good and sound reasons germane to the business of the
parties hereto, the Boards of Directors of First Commercial and
Bancshares have each determined that it would be in the best interests
of such corporations, their respective shareholders, subsidiaries and
customers and the communities they serve for Bancshares to be merged
with and into First Commercial with the shareholders of Bancshares
receiving shares of common stock of First Commercial, par value $3.00
per share ("First Commercial Stock"), in exchange for the outstanding
shares of common stock of Bancshares, par value $1.00 per share
("Bancshares Stock"), owned by them (the "Merger"), thereby permitting
First Commercial to acquire Bancshares and the Bancshares Subsidiaries;
and
WHEREAS, the Boards of Directors of First Commercial and
Bancshares have adopted resolutions approving the Merger upon the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of these premises and the mutual
promises, representations, covenants and actions hereinafter set forth,
the parties hereto, each intending to be legally bound hereby, agree as
follows:
<PAGE>
ARTICLE I
THE PLAN OF MERGER
Section 1.01. The Merger. At the Effective Time (as defined in
Section 1.03 hereof) in accordance with this Agreement and Arkansas
law, Bancshares shall be merged with and into First Commercial pursuant
to the Articles of Merger to be entered into by Bancshares and First
Commercial in substantially the form attached hereto as Exhibit A (the
"Articles of Merger"), the separate existence of Bancshares shall
cease, and First Commercial shall continue as the surviving corporation
under the corporate name it possesses immediately prior to the
Effective Time. First Commercial, as at the Effective Time and
thereafter, hereinafter may sometimes be referred to as the "Surviving
Corporation."
Section 1.02. Effect of the Merger. At the Effective Time the
effect of the Merger shall be that (i) the Surviving Corporation shall
possess all the rights, privileges and franchises possessed by each of
First Commercial and Bancshares, (ii) all of the property and assets of
whatsoever kind or description of each of First Commercial and
Bancshares, and all debts due on whatever account to any of them,
including subscriptions for shares or other choses in action belonging
to any of them, shall be taken and be deemed to be transferred to, and
vested in, the Surviving Corporation without further act or deed, and
(iii) the Surviving Corporation shall be responsible for all of the
liabilities and obligations of each of First Commercial and Bancshares,
as provided by applicable law, in the same manner as if the Surviving
Corporation had itself incurred such liabilities or obligations; but
the liabilities of First Commercial and Bancshares, or of their
shareholders, directors or officers, shall not be affected, nor shall
the rights of the creditors thereof, or of any persons dealing with
such corporations be impaired by the Merger, and any claim existing, or
action or proceeding pending, by or against either of First Commercial
or Bancshares may be prosecuted to judgment as if the Merger had not
taken place, or the Surviving Corporation may be proceeded against, or
substituted, in place of First Commercial or Bancshares, as the case
may be.
Section 1.03. Consummation of the Merger. The Merger will be
closed in accordance herewith (the "Closing") on the first business day
of the month immediately following the month in which all approvals and
consents, and the expiration of all waiting periods, necessary to
consummate the transactions contemplated herein have been received, or
such other date as the parties may mutually agree in writing (the
"Closing Date") subject to the fulfillment of each condition set forth
in Article V hereafter. The parties hereto will use their best efforts
to accomplish the Closing before June 30, 1997. The parties hereto
will cause the Merger to be consummated by filing with the Secretary of
State of the State of Arkansas on the Closing Date appropriate Articles
<PAGE>
of Merger. The "Effective Time" shall be 5:00 p.m., Little Rock time,
on the date of such filing. The Closing will take place at 10:00 a.m.,
Little Rock time, on the Closing Date, at the offices of Friday,
Eldredge & Clark in Little Rock, Arkansas, or at such other mutually
agreeable time or place.
Section 1.04. Articles of Incorporation; Bylaws; Directors and
Officers. The Articles of Incorporation of First Commercial, as in
effect immediately prior to the Effective Time, shall be the Articles
of Incorporation of the Surviving Corporation after the Effective Time
until thereafter amended as provided therein and under Arkansas law.
The Bylaws of First Commercial, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation after
the Effective Time until thereafter amended as provided therein and
under Arkansas law. The directors and officers of First Commercial
immediately prior to the Effective Time shall be the initial directors
and officers of the Surviving Corporation after the Effective Time
until their successors are elected and qualified.
Section 1.05. Merger Consideration; Conversion of Securities. At
the Effective Time, by virtue of the Merger and without any action on
the part of First Commercial, Bancshares or the holder of any of the
securities of such corporations:
(a) Each share of Bancshares Stock issued and outstanding
immediately prior to the Effective Time (other than shares as to which
dissenters' rights have been perfected and not withdrawn or otherwise
forfeited under applicable Arkansas law ("Dissenting Shares")) shall be
canceled and extinguished and be converted into the right to receive
that number of shares of First Commercial Stock equal to the result
obtained by dividing (Y) 3,412,457 (the number of shares of First
Commercial Stock to be issued in the Merger) by (Z) the number of
outstanding shares of Bancshares Stock on the Closing Date (such
consideration, as well as any payment due in lieu of fractional shares
of First Commercial Stock as hereinafter provided being herein referred
to as the "Merger Consideration"); provided, however, that in the event
after the date hereof the shares of First Commercial Stock at any time
outstanding prior to the Closing Date shall be subdivided, by
reclassification, recapitalization, stock dividend, or otherwise, into
a greater number of shares without the actual receipt by First
Commercial of consideration (at least equal to book value) for the
additional number of shares so issued, or the number of shares of First
Commercial Stock at any time outstanding shall be reduced, by
reclassification, recapitalization, reduction of capital stock, or
otherwise, or the outstanding shares of First Commercial Stock shall be
reclassified or changed other than in such manner, then the number of
shares of First Commercial Stock that each holder of Bancshares Stock
shall be deemed to have the right to receive shall be adjusted
accordingly to the nearest 10,000th share of First Commercial Stock.
<PAGE>
(b) No fractional shares of First Commercial Stock shall be
issued as part of the Merger, and in lieu of fractional shares, First
Commercial shall pay a sum in cash equal to the value of any such
fractional share of First Commercial Stock to which any holder of
Bancshares Stock shall be entitled determined on the basis of the last
reported sales price on the Closing Date for shares of First Commercial
Stock on the Nasdaq National Market.
(c) At and after the Effective Time, there shall be no transfers
on the stock transfer books of Bancshares with respect to shares of
Bancshares Stock issued and outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates formerly
representing shares of Bancshares Stock are presented to First
Commercial or its transfer agent, they shall be canceled and exchanged
for the Merger Consideration as provided in Section 1.06 and following,
subject to applicable law in the case of Dissenting Shares.
Section 1.06. Exchange of Certificates. From and after the
Effective Time, all certificates representing shares of Bancshares
Stock, with the exception of certificates representing Dissenting
Shares or shares of Bancshares Stock held by First Commercial, shall
represent the right to receive shares of First Commercial Stock on the
basis set forth above, and the right to receive cash in lieu of
fractional shares in exchange therefor, upon the terms and conditions
of this Agreement, subject to applicable abandoned property, escheat
and similar laws. Upon delivery of certificates representing shares of
Bancshares Stock to the transfer agent of First Commercial, including
shares delivered at the Closing provided the transfer agent of First
Commercial has been given at least ten (10) days notice of the intent
to make such delivery, First Commercial shall cause the transfer agent
to issue certificates representing the requisite number of shares of
First Commercial Stock for each share of Bancshares Stock represented
by the certificates therefor properly delivered, and First Commercial
shall pay by certified or cashier's check the amount entitled to be
received in lieu of fractional shares. Notwithstanding the foregoing,
neither First Commercial's transfer agent nor any party hereto shall be
liable to a holder of shares of Bancshares Stock for any of the Merger
Consideration delivered to a public official pursuant to applicable
abandoned property, escheat and similar laws.
Section 1.07. Rights of Bancshares Shareholders to Dividends.
Holders of Bancshares Stock on the Effective Date shall be entitled to
receive, subject to applicable abandoned property, escheat and similar
laws, payment of dividends declared by First Commercial subsequent to
the Effective Date, but delivery of payment of such dividends will not
be required of First Commercial until such persons have delivered their
certificates representing shares of Bancshares Stock in exchange for
certificates representing shares of First Commercial Stock in
accordance with the provisions of Section 1.06 above. Notwithstanding
the foregoing, First Commercial shall not be liable to a holder of
shares of Bancshares Stock for any such dividends delivered to a public
official pursuant to any abandoned property, escheat and similar laws.
<PAGE>
ARTICLE II
APPROVAL OF MERGER
Section 2.01. Shareholder Approval. The Shareholders of
Bancshares shall approve the Merger in accordance with Arkansas law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of Bancshares. No
representation or warranty is made by any director, officer or employee
of Bancshares, or any Bancshares Subsidiary, as an individual.
Bancshares, for itself and on behalf of each Bancshares Subsidiary,
represents and warrants to First Commercial the following, each of
which representations and warranties shall be continuing and shall
(except as otherwise stated herein) be true as of the date of this
Agreement and on the Closing Date:
(a) Authority for Transaction. The Board of Directors of
Bancshares has duly approved this Agreement and the transactions
contemplated hereby, and this Agreement constitutes the valid and
binding obligation of Bancshares enforceable in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws from
time to time in effect which affect creditors' rights generally and by
legal and equitable limitations on the availability of injunctive
relief, specific performance and other equitable remedies which are
available only in the discretion of the court. Bancshares has full
corporate power, authority and legal right to enter into this Agreement
and, upon approval thereof by its shareholders and by appropriate
regulatory authorities, to consummate the transactions contemplated
hereby. The Board of Directors of Bancshares and its shareholders
shall have taken all action required by law or by the Articles of
Incorporation and Bylaws of Bancshares or otherwise to authorize the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.
(b) Organization and Capitalization.
(i) Bancshares has delivered to First Commercial complete
and correct copies of the Articles of Incorporation, and all amendments
thereto or restatements thereof, and Bylaws of Bancshares as in effect
on the date hereof. Bancshares is a corporation duly organized and
validly existing in good standing under the laws of the State of
Arkansas, with full corporate power and authority to carry on its
<PAGE>
business as and where it is now being conducted and to own and lease
its properties and assets in the places where such properties and
assets are now or will be owned or leased. As of the date of this
Agreement, the authorized capital stock of Bancshares consists of
10,000,000 shares of Bancshares Stock, 245,275 shares of which are
issued and outstanding. All such issued and outstanding shares of
Bancshares Stock have been fully paid, are validly authorized and duly
issued and are non-assessable and such shares of Bancshares Stock have
not been issued in violation of any preemptive rights. Bancshares does
not have outstanding any subscriptions, options or other arrangements
or commitments obligating it to issue or dispose of, and it is not
obligated to issue, any shares of Bancshares Stock or other securities.
(ii) Bancshares has delivered to First Commercial complete
and correct copies of the Articles of Incorporation or Partnership
Agreement, as the case may be, and all amendments thereto, and Bylaws,
when applicable, of each of the Bancshares Subsidiaries as in effect on
the date hereof. Each Bancshares Subsidiary is a banking corporation,
business corporation or partnership duly organized and validly existing
in good standing under the laws of the State of Arkansas with full
power and authority to carry on its business as and where it is now
being conducted and to own and lease its properties and assets in the
places where such properties and assets are now or will be owned or
leased. As of the date of this Agreement, the authorized capital stock
of each of the banking and business corporation Bancshares Subsidiaries
consists of the number of shares of common stock, the par values per
share, the number of shares issued and outstanding and ownership
thereof as are reflected in Schedule A, all of which outstanding shares
have been fully paid, are validly authorized and duly issued and are
not subject to assessment, and such shares have not been issued in
violation of any preemptive rights of stockholders. First Processing
Services, Inc. owns a 52% general partnership interest in Advance Data.
To the knowledge of Bancshares and the Bancshares Subsidiaries, no
regulatory agency has threatened or considered any assessment against
the owner of the stock of any banking Bancshares Subsidiary. There are
no subscriptions, options or other arrangements or commitments
obligating Bancshares or any Bancshares Subsidiary to issue or to
acquire or dispose of, and no Bancshares Subsidiary is otherwise
obligated to issue, any shares of its common stock or other securities.
(iii) Bancshares has no direct or indirect subsidiary other
than the Bancshares Subsidiaries.
(c) Financial Statements. Bancshares has delivered to First
Commercial its consolidated financial statements for the years ended
December 31, 1995, 1994, and 1993 with the unqualified report of its
independent auditors, Kemp & Company (the "Bancshares Financial
Statements"). Contemporaneously with its execution and delivery
hereof, Bancshares will also deliver to First Commercial copies of all
of the periodic public reports filed by Bancshares or by any Bancshares
Subsidiary with banking regulators and agencies since January 1, 1994.
The Bancshares Financial Statements are complete and correct and were
prepared from the books and records of Bancshares and the Bancshares
<PAGE>
Subsidiaries, which accurately and fairly reflect the transactions and
dispositions of assets of Bancshares and the Bancshares Subsidiaries,
taken as a whole, and fairly present on a consolidated basis the
financial condition, results of operations and changes in capital
accounts and undivided profits of Bancshares and each Bancshares
Subsidiary, at their respective dates and for the periods to which they
relate. The Bancshares Financial Statements were prepared in
accordance with generally accepted accounting principles consistently
applied. Advance Data was accounted for under the equity method of
accounting. There are no material obligations or liabilities of
Bancshares or the Bancshares Subsidiaries, taken as a whole, whether
absolute, accrued or contingent (including, without limitation,
unfunded obligations under employee benefit plans or arrangements or
liabilities for federal, state, local or foreign taxes or assessments)
or any "loss contingencies" considered "probable" or "reasonably
estimable" within the meaning of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 5, which, in
accordance with generally accepted accounting principles, were required
to be reflected or disclosed in the Bancshares Financial Statements and
which were not so reflected or disclosed therein, except such as have
been reported in writing to First Commercial. All reserves and
allowances included in the Bancshares Financial Statements, taken as a
whole, are adequate and appropriate pursuant to generally accepted
accounting principles.
(d) Dividends. Since December 31, 1995, no dividend has been
declared or paid on any equity securities of Bancshares, nor has
Bancshares purchased or redeemed any of its equity securities, except
as disclosed in Schedule B attached hereto.
(e) Loans. Bancshares has delivered to First Commercial complete
and correct copies of the most current written policies of the banking
subsidiaries of Bancshares (the "Subsidiary Banks") relating to the
making, collection, classification and charge off of loans and other
evidences of indebtedness. To the knowledge of Bancshares and the
Subsidiary Banks, all loans and other evidences of indebtedness of the
Subsidiary Banks have been appropriately and correctly classified
pursuant to the written policies of the Subsidiary Banks. The
Subsidiary Banks have no loans or other evidences of indebtedness in
their respective portfolios that (i) are considered nonperforming or
have been placed on a nonaccrual status in accordance with their
written policies; (ii) are classified as other loans especially
mentioned, substandard, doubtful, or loss loans in accordance with its
written policies; (iii) are sixty (60) days or more past due; (iv) have
been renegotiated as to payment terms or collateral because of credit
risks associated with such loans; or (v) to the knowledge of Bancshares
and the Subsidiary Banks, are subject to any defenses, offsets or
counterclaims that may be asserted against the present holder thereof,
except in each case such loans or evidences of indebtedness as have
been disclosed in Schedule C attached hereto.
<PAGE>
(f) Taxes. Bancshares and each Bancshares Subsidiary has timely
filed returns for all federal, state and local taxes of Bancshares and
each Bancshares Subsidiary to the extent such filings and payments were
required prior to the date of this Agreement, and such returns are true
and correct in all material respects. Neither Bancshares nor any
Bancshares Subsidiary has had any tax deficiencies proposed or assessed
against it and neither Bancshares nor any Bancshares Subsidiary has
executed any waiver of or extended the statute of limitations on the
audit of any tax return or the assessment or collection of any tax.
All taxes and governmental charges levied or assessed against the
property or the business of Bancshares or any Bancshares Subsidiary
have been paid in full, other than taxes or charges the payment of
which are not yet due or which, if due, are not yet delinquent or are
being contested in good faith or have not been finally determined.
Except as has been indicated to First Commercial in writing, the amount
set up as accruals for taxes on the balance sheet of Bancshares as at
December 31, 1995, contained in the Bancshares Financial Statements
("Bancshares Balance Sheet") is sufficient in all material respects for
the payment of all unpaid taxes applicable to the property or business
of Bancshares and the Bancshares Subsidiaries for the period ended on
December 31, 1995, and all periods prior thereto. Except as disclosed
in Schedule D attached hereto, no tax returns or reports of Bancshares
or any Bancshares Subsidiary have been audited by the Internal Revenue
Service or any state taxing authority within the past five years.
(g) Litigation and Regulatory Matters. Bancshares has disclosed
in Schedule E attached hereto all material actions, suits, proceedings
and investigations pending or, to the knowledge of Bancshares or the
Bancshares Subsidiaries, threatened against or affecting Bancshares or
any Bancshares Subsidiary or any property or rights or stock of
Bancshares or any Bancshares Subsidiary, or their respective officers
or directors (in their capacity as such) at law or in equity, or before
or by any court or other governmental instrumentality, excluding
actions affecting the banking industry generally. Except to the extent
so disclosed in Schedule E, none of such actions, suits, proceedings or
investigations, either (i) involves a claim for an amount exceeding the
amount recoverable by Bancshares or any Bancshares Subsidiary under any
applicable insurance policies, subject to the deductible amounts under
such policies, (ii) results or would result, if adversely determined,
in any material adverse change in the business, operations, prospects
or assets or the condition, financial or otherwise, of Bancshares and
the Bancshares Subsidiaries, taken as a whole, or (iii) would prevent
the Bancshares shareholders from approving and consummating the
transactions contemplated herein. Except as so disclosed in Schedule
E, neither Bancshares nor any Bancshares Subsidiary is subject to any
continuing court or administrative order, writ, injunction, decree,
agreement, memorandum or letter applicable specifically to it or to its
business, property or employees, and neither Bancshares nor any
Bancshares Subsidiary is in default with respect to any order, writ,
injunction or decree, agreement, memorandum or letter of any court or
other governmental instrumentality.
<PAGE>
(h) Compliance. Bancshares and the Bancshares Subsidiaries,
taken as a whole, have complied in all material respects with, and
Bancshares and the Bancshares Subsidiaries, taken as a whole, are not
in default in any material respect under, any law, ordinance,
requirement, rule, regulation or order applicable to their respective
businesses or to the assets owned, used or occupied by them (including,
without limitation, the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), licensing requirements with respect to
their personnel and all federal and state consumer credit laws, rules
and regulations), and Bancshares and each Bancshares Subsidiary has
filed with the proper authorities all statements and reports required
by the laws, regulations, licensing requirements and orders to which
they or any of their employees (because of their activities on behalf
of Bancshares or any Bancshares Subsidiary) are subject where the
failure to do so would have a material adverse effect on Bancshares and
the Bancshares Subsidiaries, taken as a whole, and Bancshares and each
Bancshares Subsidiary possess all licenses, franchises, permits and
governmental authorizations necessary to conduct its business in the
manner in which and in the jurisdictions and places where such
businesses are now conducted where the failure to do so would have a
material adverse effect on Bancshares and the Bancshares Subsidiaries,
taken as a whole.
(i) Properties and Other Assets. Bancshares and each Bancshares
Subsidiary has good and marketable fee simple title to, or, as the case
may be, valid and enforceable leasehold interests in, all its
respective properties, interests in properties and other assets, real
and personal, as owned or leased by Bancshares or any Bancshares
Subsidiary, as applicable (i) reflected on the Bancshares Balance
Sheet, or (ii) acquired since the date thereof,except to the extent
such properties and assets are or were thereafter disposed of for fair
value in the ordinary course of business. All such properties and
assets are free and clear of all liens, charges and encumbrances,
except (i) those set forth or reflected in the Bancshares Balance
Sheet, (ii) liens for taxes not yet due and payable or being contested
in good faith and (iii) defects in title and liens, charges and
encumbrances, if any, as do not materially detract from the value, or
materially interfere with the present or proposed use, of the property
or asset subject thereto or affected thereby or as do not otherwise
materially impair business operations of either Bancshares or any
Bancshares Subsidiary. The operation of the properties and businesses
of Bancshares and the Bancshares Subsidiaries in the manner in which
they are now operated does not violate any zoning ordinances or
municipal regulations in such a way as could, if such ordinances or
regulations were enforced, foreseeably result in any material
impairment of the uses of their respective properties for the purposes
for which they are now operated. No asset included in the Bancshares
Balance Sheet was valued in excess of its cost less depreciation or, in
the case of investment securities, in excess of cost, adjusted for
amortization of premiums or accretion of discounts, with the exception
of securities classified as available for sale in accordance with
<PAGE>
Statement of Financial Accounting Standards ("SFAS") No. 115, which are
carried at fair market value. All real and tangible personal property
owned or used by Bancshares or any Bancshares Subsidiary in their
respective businesses is in good condition, normal wear and tear
excepted, and is in good operating order. There are no (i) patents,
trademarks, trade names or copyrights, or applications therefor, owned
by or registered in the name of either Bancshares or any Bancshares
Subsidiary, or in which either Bancshares or any Bancshares Subsidiary
has rights, which have not been disclosed in writing to First
Commercial (other than rights held by a Subsidiary Bank as a secured
party in the ordinary course of its lending business), (ii) license
agreements, other than those usually required in normal operations in
the banking industry, to which either Bancshares or any Bancshares
Subsidiary is a party, either as a licensor or licensee, with respect
to any patents, trademarks, tradenames or copyrights which have not
been disclosed in writing to First Commercial or (iii) to the knowledge
of Bancshares, claims that in the conduct of its business, as now
conducted, either Bancshares or any Bancshares Subsidiary is infringing
on any patents, trademarks, trade names or copyrights of others which
have not been disclosed in writing to First Commercial. Bancshares and
each Bancshares Subsidiary has obtained all necessary permits and
certificates for the use and occupancy of the real estate owned, leased
or used by it and the improvements thereon and systems therein, and
such use and occupancy is in full compliance with all federal, state
and local laws, rules and regulations. To the knowledge of Bancshares,
no material fact or condition exists which would result in the
termination or material impairment in the furnishing of any water,
sewer, gas, electricity, telephone, drainage or other services and
equipment to the real estate owned, leased or occupied by Bancshares or
any Bancshares Subsidiary.
(j) Agreement Does Not Violate Other Instruments. Subject to
obtaining any required consents and approvals (which necessary consents
and approvals are disclosed in Schedule F attached hereto and will be
obtained by Bancshares prior to Closing), the execution and delivery of
this Agreement by Bancshares does not, and the consummation of the
transactions contemplated hereby will not, (i) violate any provision of
the Articles of Incorporation or Bylaws of Bancshares, (ii) violate any
provision of the Articles of Association or the Bylaws of any
Subsidiary Bank or the partnership agreement of Advance Data, (iii)
violate any provision of, or result in any breach or termination of, or
constitute a default under, or constitute an event which with notice or
lapse of time, or both, would become a default under, or result in the
creation of any material lien, security interest, charge or encumbrance
upon any property of Bancshares or any Bancshares Subsidiary under, any
material lease, indenture, or other agreement (written or oral) or
instrument to which Bancshares or any Bancshares Subsidiary is a party
or by which Bancshares or any Bancshares Subsidiary may be bound or
affected or under which Bancshares or any Bancshares Subsidiary
receives benefits, (iv) violate any material law, rule, regulation,
<PAGE>
order, writ, injunction or decree or administrative memorandum,
agreement or letter to which Bancshares or any Bancshares Subsidiary is
a party or by which Bancshares or any Bancshares Subsidiary may be
bound or affected or under which Bancshares or any Bancshares
Subsidiary receives benefits, or (v) result in the material loss or
material adverse modification of any license, franchise, permit or
other authorization granted to or otherwise held by Bancshares or any
Bancshares Subsidiary.
(k) Insurance. During each of the past three calendar years
Bancshares and the Bancshares Subsidiaries and their properties have
been insured for customary risks, all with limits, deductibles, and
exclusions as are customary in the banking industry. Such insurance
protection continues in effect, and neither Bancshares nor any
Bancshares Subsidiary is aware of any facts or events relating to its
operations or financial condition which reasonably can be expected to
increase materially the premiums or reduce the coverage under any of
such policies, except as has been indicated in writing to First
Commercial. Schedule G attached hereto sets forth a complete and
accurate schedule, including the type of policy, policy number, the
limits of coverage, the insurance carrier, the insurance agent or
broker and the expiration date, of all insurance policies, letters of
credit, performance bonds and fidelity bonds at any time held by, for
the benefit of, or issued to Bancshares or any Bancshares Subsidiary
and now in force (collectively, the "Insurance Policies"). Except as
disclosed in Schedule G, neither Bancshares nor any Bancshares
Subsidiary has forfeited or waived any claim under any Insurance Policy
and each has fully complied with the terms and conditions thereof.
(l) Employee Benefit Plans. Bancshares and the Bancshares
Subsidiaries have disclosed in Schedule H attached hereto each employee
benefit plan (as defined in Section 3(3) of ERISA) or other plan
maintained for their respective employees or under which any one of
them has any present or future liability (each a "Plan"), and true and
complete copies of all Plans will be delivered to First Commercial,
together with the most recent Internal Revenue Service determination
letters, annual reports (Form 5500 Series) and accompanying schedules,
summary plan descriptions, certified financial statements (if
available) and actuarial reports related thereto, within five (5)
business days following the execution and delivery hereof by
Bancshares. With respect to each Plan for which an annual report has
been filed, no material adverse change has occurred with respect to the
matters covered by the annual report since the date thereof, except as
has been disclosed in writing to First Commercial. There are no
unfunded vested benefits under any Plan which are subject to the
vesting and funding standards of ERISA, and none of the Plans is a
multiemployer plan within the meaning of Section 3(37) of ERISA. Each
of the Plans covered by ERISA (i) has been operated in all material
respects in accordance with ERISA, (ii) has not engaged in any
"prohibited transaction" (as such term is defined in Section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code") or in
<PAGE>
Section 406 of ERISA) which would result in a material penalty, and
(iii) has met the minimum funding standards of Section 412 of the Code,
if applicable. Each of the Plans which is an employee pension benefit
plan (as defined in Section 3(2) of ERISA) ("Pension Plan") that is
intended to "qualify" under Section 401(a) of the Code, is qualified
within the meaning of Section 401(a) of the Code, except as heretofore
disclosed in writing to First Commercial, and a favorable determination
letter has been issued by the Internal Revenue Service with respect to
each such qualified Pension Plan. No Pension Plan has been amended
since issuance of the most recent determination letter by the Internal
Revenue Service with respect thereto, except as disclosed in Schedule
H. Each Pension Plan has been administered in accordance with Section
401(a) of the Code, where applicable. No Reportable Event (within the
meaning of Section 4043 of ERISA) has occurred with respect to any Plan
which would result in material liability to Bancshares and the
Bancshares Subsidiaries, taken as a whole. Since the enactment of
ERISA, neither Bancshares nor any Bancshares Subsidiary has completely
or partially terminated any employee pension benefit plan or withdrawn
from any multiemployer pension plan, other than as disclosed in
Schedule H. No proceeding by the Pension Benefit Guaranty Corporation
has been instituted or threatened to terminate, pursuant to Subtitle C
of Title IV of ERISA, any Plan. There is no suit, action or proceeding
pending, threatened against or affecting, or likely to have an adverse
impact on any Plan. One or more of the Plans may be covered by the
Consolidated Omnibus Budget Reconciliation Act of 1986 ("COBRA"). If
so, each such Plan has been operated in, and is in, material compliance
with COBRA. All notices required to be given under COBRA have been
timely and properly given in accordance with COBRA, and the rules and
regulations promulgated thereunder, and no employee, former employee or
"qualified beneficiary" (as defined in COBRA) has any claim or
contingent claim against Bancshares or any Bancshares Subsidiary for
failure to comply with COBRA or the rules and regulations promulgated
thereunder. Schedule H lists all persons currently eligible for
benefits under COBRA.
(m) Employee Relations.
(i) No employee of Bancshares or any Bancshares Subsidiary
is a party to a collective bargaining agreement. There are no pending
or threatened labor disputes with any of the employees of Bancshares or
any Bancshares Subsidiary. Except as Bancshares has previously
disclosed in Schedule I, neither Bancshares nor any Bancshares
Subsidiary is obligated to pay any person employed by Bancshares or any
Bancshares Subsidiary total annual compensation for fiscal year 1996
(including bonuses and the like) in excess of Fifty Thousand Dollars
($50,000). To the knowledge of Bancshares and the Bancshares
Subsidiaries, there are no facts that would indicate that any employee
of Bancshares or any Bancshares Subsidiary will not continue in his
respective employment on an acceptable basis, subject to normal
turnover, except as has been disclosed in Schedule I.
<PAGE>
(ii) Neither Bancshares nor any Bancshares Subsidiary has
entered into or agreed to enter into any employment agreement or
covenant not to compete agreement, has, since December 31, 1995,
granted or agreed to grant any increase in excess of 10% in the wages,
salaries or other compensation of any of its employees or directors,
has, since December 31, 1995, paid or agreed to pay any bonus to any of
its employees, has directly or indirectly paid or made a commitment to
pay any severance or termination payment to any of its employees, or
has, since December 31, 1995, entered into or agreed to enter into any
written consulting agreement or other agreement for the purchase of
services, except as disclosed in Schedule I.
(n) No Material Events. Except as disclosed in Schedule J
attached hereto or in the cases of clauses (i), (ii), (iii) and (iv)
below, except for transactions in the ordinary course of business
consistent with past practices, since December 31, 1995 (or as
otherwise indicated), neither Bancshares nor any Bancshares Subsidiary
has (i) incurred or become subject to, or agreed to incur or become
subject to, any material obligation or liability, absolute or
contingent; (ii) discharged or satisfied or agreed to discharge or
satisfy any lien or encumbrance or paid any obligation or liability,
absolute or contingent; (iii) canceled or agreed to cancel any material
debts or claims or waived any rights of substantial value; (iv) made or
permitted or agreed to make or permit any material amendment or
termination of any material contract, lease, arrangement, license or
other instrument to which it is a party; (v) made any material change
in its method of accounting; (vi) made any material capital
expenditures or entered into commitments therefor; (vii) made or agreed
to make any loan or loans to any one person that would cause such
person to have outstanding loans as of the date hereof from any
Subsidiary Bank exceeding in the aggregate Two Hundred Fifty Thousand
Dollars ($250,000) (The term "person," for purposes of this clause,
shall include, in addition to an individual, the persons specified in
Rule 144(a)(2) of the Securities and Exchange Commission.); (viii)
purchased or sold or agreed to purchase or sell any material amounts of
tax-exempt bonds; (ix) made, renewed or extended or agreed to make,
renew or extend any nonadjustable rate loans with maturities exceeding
sixty (60) months; (x) repossessed or purchased in a foreclosure action
any material personal or real property; (xi) charged any loan to the
reserve for loan and lease losses or established any special allocation
thereto; (xii) sold or transferred or agreed to sell or transfer any
loans (excluding partial participations) or other real estate owned;
(xiii) mortgaged or pledged any of its material assets, tangible or
intangible, or permitted any of its material assets, tangible or
<PAGE>
intangible, to become subject to any lien, charge or other encumbrance
(other than liens for real estate taxes not yet due and payable and
mechanics', materialmen's and similar liens imposed by statute that are
being contested in good faith) and which remain outstanding as of the
date hereof; (xiv) sold, assigned or transferred any material asset or
property of any nature whatsoever, whether real, personal or mixed,
tangible or intangible; or (xv) made any material change in its
business or operations or entered into any other material transaction.
(o) Liabilities. The liabilities on the Bancshares Balance Sheet
consist solely of obligations and liabilities incurred by Bancshares
and the Bancshares Subsidiaries in the ordinary and regular course of
their businesses, and with regard to such liabilities, all non-deposit
liabilities are to persons who are not affiliated with Bancshares or
any Bancshares Subsidiary. As of December 31, 1995, neither Bancshares
nor the Bancshares Subsidiaries, taken as a whole, had any material and
adverse liabilities or obligations of any nature whatsoever, including,
without limitation, fixed or contingent, accrued, absolute, matured or
unmatured, or any "loss contingencies" considered "probable" or
"reasonably estimable" within the meaning of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 5,
which were not recorded on the Bancshares Balance Sheet. Bancshares
and the Bancshares Subsidiaries, taken as a whole, are not obligated to
make any material investment, directly or indirectly, in any person,
corporation, association, partnership, joint venture, trust or other
entity, except for investments in investment securities and other
evidences of indebtedness made in the ordinary course of business
consistent with past practices.
(p) Marketability of Securities. Except for pledges to secure
public and trust deposits and repurchase agreements disclosed in
Schedule K attached hereto, none of the investments reflected in the
Bancshares Balance Sheet under the heading "Investment Securities" and
none of the investments made since such date are subject to any
"investment" or other restriction, whether contractual or statutory,
which impairs the ability of Bancshares or any Bancshares Subsidiary to
freely dispose of such investment in the open market at any time.
(q) Interested Party Transactions. Neither Bancshares nor any
Bancshares Subsidiary is a party to, and none of their property is
bound or affected by, nor does Bancshares or any Bancshares Subsidiary
receive benefits under, any written or oral or express or implied
contract or other arrangement which is not in the ordinary course of
business in which a material interest is held by any person or entity
which is an "affiliate" of Bancshares or any Bancshares Subsidiary
within the meaning of Rule 144 under the Securities Act of 1933, as
amended, any executive officer or director of Bancshares or any
<PAGE>
Bancshares Subsidiary or any "affiliate" or "associate" of any such
executive officer or director, as such terms are defined in Rule 14a-1
under the Securities Exchange Act of 1934, as amended, which is not on
substantially the same terms (including, without limitation, in the
case of lending transactions, interest rates, maturity schedule and
collateral) as those prevailing at the time for comparable transactions
with unrelated parties or which involves more than normal risk of
collectibility or which involves other unfavorable features. Schedule
L attached hereto contains (i) a list of all amounts in excess of
$10,000 paid or to be paid by Bancshares or any Bancshares Subsidiary
to, or received or to be received by Bancshares or any Bancshares
Subsidiary from, any executive officer or director of Bancshares or any
Bancshares Subsidiary or any "affiliate" or "associate" of any such
executive officer or director during their 1996 and 1995 fiscal years
for products or services, not including services as an employee,
executive officer or director, and (ii) a description of all loans from
any Subsidiary Bank to any of such persons outstanding at any quarter
end during 1996 or currently outstanding.
(r) Material Contracts. Schedule M attached hereto contains a
list of all written, and a brief description of all oral, material
contracts, agreements, leases, commitments, licenses, instruments and
obligations not listed in another Schedule hereto to which Bancshares
or any Bancshares Subsidiary is a party or by which any of their assets
is bound. For purposes of this Section 3.01(r), "material" shall mean
an amount exceeding $100,000 over the life of the contract, agreement,
lease, commitment, license, insurance policy or other obligation (as
the case may be), and this Section shall not be deemed to apply to
deposits at the Subsidiary Banks. Neither Bancshares nor any
Bancshares Subsidiary is a party to, and none of their respective
property is bound or affected by, and neither Bancshares nor any
Bancshares Subsidiary receives benefits under, any written or oral or
express or implied material contract or other arrangement which is not
in the ordinary course of business consistent with its past practices,
except as disclosed in Schedule M. Bancshares and each Bancshares
Subsidiary has, in all material respects, performed all of its
obligations required to be performed by it to date and is not in
default in any material respect under any material contract, lease,
insurance policy, commitment or arrangement to which it is a party or
by which it or its property may be bound or affected or under which it
or its property receives benefits, and there has not occurred any event
which with the lapse of time or giving of notice or both would
constitute such a default. All such material contracts, leases,
insurance policies and other instruments are in full force and effect,
are binding obligations of the respective parties thereto in accordance
with their terms, and there are no defenses, offsets or counterclaims
thereto which may be made by any party thereto other than Bancshares or
<PAGE>
any Bancshares Subsidiary, and neither Bancshares nor any Bancshares
Subsidiary has waived any substantial rights thereunder. Neither
Bancshares nor any Bancshares Subsidiary is a party to or otherwise
bound by any material contract, agreement, plan, lease, license,
commitment or undertaking which, in the reasonable opinion of
Bancshares or any Bancshares Subsidiary, is materially adverse,
materially onerous, or materially harmful to any aspect of the business
or prospects of Bancshares and the Bancshares Subsidiaries, taken as a
whole.
(s) Environmental Matters. To the knowledge of Bancshares,
except as disclosed in Schedule N attached hereto, none of the
properties of Bancshares or of any Bancshares Subsidiary contains
hazardous materials, waste or substances that cannot be easily
remediated, removed or cleaned up, and, in the case of asbestos,
completely abated. For purposes of this provision, a hazardous
material, waste or substance is deemed easily remediated, removed or
cleaned up, and, in the case of asbestos, completely abated, if the
reasonably estimated cost of such removal, clean-up, remediation,
restoration of natural resources, or abatement does not exceed Fifty
Thousand Dollars ($50,000) in the aggregate and if such removal, clean-
up, remediation, restoration of natural resources, or abatement does
not materially interfere with the day-to-day operations of Bancshares
or any Bancshares Subsidiary. To the knowledge of Bancshares, except
as disclosed in Schedule N, none of the outstanding loans of any
Subsidiary Bank are secured by properties that contain hazardous
materials, wastes, or substances that cannot be remediated, removed or
cleaned up, and, in the case of asbestos, completely abated, at an
expense not exceeding ten percent (10%) of the fair market value of
such properties. As used herein, "hazardous substance" or "hazardous
material" means substances subject to reporting under Title III of the
Superfund Amendments and Reauthorization Act of 1986, as amended, the
Comprehensive Environmental Response, Compensation and Liability Act,
as amended, or the Resource Conservation and Recovery Act, as amended;
petroleum; petroleum products; substances regulated by the Toxic
Substance Control Act, as amended; substances regulated by the Federal
Insecticide, Fungicide, and Rodenticide Act, as amended; or any
hazardous, toxic, or dangerous waste, substance, or material defined as
such in the above-referenced Acts, or any federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree
regulating, relating to, or imposing liability standards of conduct
concerning any hazardous, toxic or dangerous waste, substance, or
material as now in effect. To the knowledge of Bancshares, no
Subsidiary Bank has loaned money against the securities or assets of
any company or other association that has not obtained all permits,
licenses, approvals, and other authorizations that are required under
<PAGE>
federal, state and local laws and regulations relating to emissions,
discharges, wetlands, releases or threatened releases of pollutants,
contaminants or hazardous or toxic materials or waste into ambient air,
surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, release,
discharge, emission, storage, disposal, transport or handling of
pollutants, contaminants or hazardous or toxic materials or waste. To
the knowledge of Bancshares, no Subsidiary Bank has loaned money
against the securities or assets of any company or other association,
and has not at any time owned property, that is presently or for which
in the future there is a reasonable basis that it will be subject to
any claim, action, suit, proceeding, hearing, investigation,
injunction, notice of violation, consent administrative order, or
penalty arising out of or relating to the manufacture, presence,
processing, distribution, use, treatment, release, discharge, emission,
storage, disposal, transport or handling of any pollutant, contaminant,
or hazardous or toxic material or waste. To the extent any property is
listed or referred to in Schedule N hereto, such listing or reference
shall not be deemed an admission by Bancshares that it is in violation
of any of the statutes, rules or regulations enumerated in this Section
3.01(s).
(t) Property Sites Owned by Bancshares and the Bancshares
Subsidiaries. Set forth on Schedule O attached hereto is a complete
and accurate list of locations (identified by address, owner/operator,
type of facilities located on the property, and period of time owned,
leased or occupied by Bancshares or any Bancshares Subsidiary) of all
real estate that Bancshares or any Bancshares Subsidiary owned, leased
or used at any time during the previous five (5) years.
(u) Representations Not Misleading. No representation or
warranty by Bancshares in this Agreement or in any Schedule attached
hereto, nor any statement or disclosure furnished to First Commercial
by or on behalf of Bancshares or any Bancshares Subsidiary under and
pursuant to this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained herein or therein not
misleading.
Section 3.02. Representations and Warranties of First Commercial.
No representations or warranties are made by any director, officer,
employee or shareholder of First Commercial as an individual. First
<PAGE>
Commercial represents and warrants to Bancshares the following, each of
which representations and warranties shall (except as otherwise stated
herein) be continuing and shall be true as of the date of this
Agreement hereof and on the Closing Date:
(a) Organization and Capitalization of First Commercial. First
Commercial has delivered to Bancshares complete and correct copies of
the Second Amended and Restated Articles of Incorporation, as amended,
and Bylaws of First Commercial as in effect on the date hereof. First
Commercial is an Arkansas corporation duly organized and validly
existing in good standing under the laws of Arkansas, with full
corporate power and authority to carry on its business as and where
conducted and to own and lease its properties and assets in the places
where such properties and assets are now or will be owned or leased.
As of the date of this Agreement, the authorized capital stock of First
Commercial consists of 50,000,000 shares of First Commercial Common
Stock, of which 28,807,172 shares are outstanding, and 400,000 shares
of preferred stock, each $1.00 par value, of which no shares are
outstanding. All issued and outstanding shares of First Commercial
Common Stock are, and all shares of First Commercial Common Stock to be
issued pursuant to this Agreement will be, validly authorized, duly
issued, fully paid and nonassessable shares of First Commercial Common
Stock, and such shares have not been, or will not be, issued in
violation of any preemptive rights of stockholders. Except as
described in the financial information provided to Bancshares by First
Commercial, First Commercial does not have outstanding any
subscriptions, options or other arrangements or commitments obligating
First Commercial to issue or dispose of, and it is not obligated to
issue, any shares of First Commercial Common Stock or other securities.
Since December 31, 1995, no dividends have been declared or paid on any
equity securities of First Commercial, nor has First Commercial
purchased or redeemed any of its equity securities, except, in both
instances, as disclosed in the First Commercial Financial Statements
(as hereinafter defined) or in writing to Bancshares.
(b) Authority for Transaction. The Board of Directors of First
Commercial has duly approved this Agreement and the transactions
contemplated hereby, and this Agreement constitutes the valid and
binding obligation of First Commercial enforceable in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws from time to time in effect which affect creditors' rights
generally and by legal and equitable limitations on the availability of
injunctive relief, specific performance and other equitable remedies
which are available only in the discretion of the court. First
Commercial has full corporate power, authority and legal right to
execute and deliver this Agreement and, upon approval thereof by the
necessary regulatory authorities, to consummate the transactions
contemplated hereby.
<PAGE>
(c) Agreement Does Not Violate Other Instruments. Subject to
obtaining any required consents and approvals (which necessary consents
and approvals are disclosed in Schedule P attached hereto and will be
obtained by First Commercial prior to Closing), the execution and
delivery of this Agreement by First Commercial does not, and the
consummation of the transactions contemplated hereby will not, (i)
violate any provision of the Articles of Incorporation or Bylaws of
First Commercial, (ii) violate any provision of the Articles of
Incorporation or Association or the Bylaws of any subsidiary of First
Commercial, (iii) violate any provision of, or result in any breach or
termination of, or constitute a default under, or constitute an event
which with notice or lapse of time, or both, would become a default
under, or result in the creation of any material lien, security
interest, charge or encumbrance upon any property of First Commercial
or any subsidiary of First Commercial under, any material lease,
indenture, or other agreement (written or oral) or instrument to which
First Commercial or any subsidiary of First Commercial is a party or by
which First Commercial or any subsidiary of First Commercial may be
bound or affected or under which First Commercial or any subsidiary of
First Commercial receives benefits, (iv) violate any material law,
rule, regulation, order, writ, injunction or decree or administrative
memorandum, agreement or letter to which First Commercial or any
subsidiary of First Commercial is a party or by which First Commercial
or any subsidiary of First Commercial may be bound or affected or under
which First Commercial or any subsidiary of First Commercial receives
benefits, or (v) result in the material loss or material adverse
modification of any license, franchise, permit or other authorization
granted to or otherwise held by First Commercial or any subsidiary of
First Commercial.
(d) Representations Not Misleading. No representation or
warranty by First Commercial in or required by this Agreement, nor any
statement, exhibit or disclosure furnished to Bancshares by or on
behalf of First Commercial under and pursuant to this Agreement,
contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
(e) Financial Statements. First Commercial has delivered to
Bancshares the following financial statements: the consolidated
balance sheets of First Commercial as of December 31, 1995, 1994 and
1993, together with the consolidated statements of income,
stockholders' equity and cash flow of First Commercial for the periods
then ended, accompanied by the notes thereto, and an unqualified audit
report of Ernst & Young LLP for such years (the "First Commercial
Financial Statements"). First Commercial has also delivered to
Bancshares copies of all periodic and other reports and proxy
statements filed by First Commercial with the Securities and Exchange
<PAGE>
Commission and the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board") since January 1, 1994, and has made
available copies of all of periodic and other public reports filed by
the banking subsidiaries of First Commercial (the "First Commercial
Banks") with the Arkansas State Bank Department, the Office of the
Comptroller of the Currency or the Federal Deposit Insurance
Corporation since January 1, 1995. The First Commercial Financial
Statements are complete and correct and have been prepared from the
books and records of First Commercial and the First Commercial Banks,
which accurately and fairly reflect the transactions and dispositions
of assets of First Commercial and the First Commercial Banks and fairly
present the financial condition, results of operations and changes in
capital accounts and undivided profits of First Commercial and the
First Commercial Banks, taken as a whole, at their respective dates and
for the periods to which they relate. The First Commercial Financial
Statements were prepared in accordance with generally accepted
accounting principles and general practices within the banking industry
consistently applied. There are no material obligations or liabilities
of First Commercial or the First Commercial Banks, taken as a whole,
whether absolute, accrued or contingent (including, without limitation,
unfunded obligations under employee benefit plans or arrangements or
liabilities for federal, state, local or foreign taxes or assessments)
or any "loss contingencies" considered "probable" or "reasonably
estimable" within the meaning of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 5, which, in
accordance with generally accepted accounting principles, were required
to be reflected or disclosed in the First Commercial Financial
Statements and which are not so reflected or disclosed therein, except
as disclosed in writing to Bancshares. All allowances and reserves for
loan losses, as reflected in the First Commercial Financial Statements,
are adequate and appropriate as determined by generally accepted
accounting principles.
(f) Litigation and Regulatory Matters. First Commercial and the
First Commercial Banks have disclosed in Schedule Q attached hereto all
material actions, suits, proceedings and investigations pending or, to
the knowledge of First Commercial or the First Commercial Banks,
threatened against or affecting First Commercial or any First
Commercial Bank or any property or rights or stock of First Commercial
or any First Commercial Bank, or their respective officers or directors
(in their capacity as such) at law or in equity, or before or by any
court or other governmental instrumentality, excluding actions
affecting the banking industry generally. Except to the extent so
disclosed in Schedule Q, none of such actions, suits, proceedings or
investigations, either (i) involves a claim for an amount exceeding the
amount recoverable by First Commercial or any First Commercial Bank
under any applicable insurance policies, subject to the deductible
amounts under such policies, or (ii) results or would result, if
<PAGE>
adversely determined, in any material adverse change in the business,
operations, prospects or assets or the condition, financial or
otherwise, of First Commercial and the First Commercial Banks, taken as
a whole. Except as so disclosed in Schedule Q, neither First
Commercial nor any First Commercial Bank is subject to any continuing
court or administrative order, writ, injunction, decree, agreement,
memorandum or letter applicable specifically to it or to its business,
property or employees, and neither First Commercial nor any First
Commercial Bank is in default with respect to any order, writ,
injunction or decree, agreement, memorandum or letter of any court or
other governmental instrumentality.
(g) Compliance. First Commercial and the First Commercial Banks,
taken as a whole, have complied in all material respects with, and
First Commercial and the First Commercial Banks, taken as a whole, are
not in default in any material respect under, any law, ordinance,
requirement, rule, regulation or order applicable to their respective
businesses or to the assets owned, used or occupied by them (including,
without limitation, ERISA, licensing requirements with respect to their
personnel and all federal and state consumer credit laws, rules and
regulations), and First Commercial and each First Commercial Bank has
filed with the proper authorities all statements and reports required
by the laws, regulations, licensing requirements and orders to which
they or any of their employees (because of their activities on behalf
of First Commercial or any First Commercial Bank) are subject, and
First Commercial and each First Commercial Bank possess all licenses,
franchises, permits and governmental authorizations necessary to
conduct its business in the manner in which and in the jurisdictions
and places where such businesses are now conducted.
(h) No Material Events. Except as reflected in the First
Commercial Financial Statements or as may be disclosed in writing to
Bancshares and except for transactions in the ordinary course of
business consistent with past practices of First Commercial, since
December 31, 1995, First Commercial has not experienced any material
adverse changes in the condition (financial or otherwise) of its
properties, assets, liabilities, business, operations or prospects.
(i) Taxes. First Commercial and the First Commercial Banks
have timely filed returns for all federal, state and local taxes of
First Commercial and the First Commercial Banks to the extent such
filings and payments were required prior to the date of this Agreement,
and such returns are true and correct in all material respects.
Neither First Commercial nor the First Commercial Banks has had any tax
deficiencies proposed or assessed against them and neither First
Commercial nor the First Commercial Banks has executed any waiver of or
extended the statute of limitations on the audit of any tax return or
the assessment or collection of any tax. All taxes and governmental
charges levied or assessed against the property or the business of
<PAGE>
First Commercial or the First Commercial Banks have been paid in full,
other than taxes or charges the payment of which is not yet due or
which, if due, is not yet delinquent or is being contested in good
faith or has not been finally determined. Except as indicated in
writing to Bancshares, the amount set up as accruals for taxes on the
December 31, 1995, balance sheet for First Commercial is sufficient in
all material respects for the payment of all unpaid taxes and
governmental charges of all kinds, applicable to the property or
business of First Commercial and the First Commercial Banks for the
period ended on December 31, 1995, and all periods prior thereto.
(j) Insurance. During each of the past three calendar years
First Commercial and its properties have been insured for customary
risks, all with limits, deductibles, and exclusions as are customary in
the banking industry. Such insurance protection continues in effect,
and First Commercial is not aware of any facts or events relating to
its operations or financial condition which reasonably can be expected
to increase materially the premiums or reduce the coverage under any of
such policies, except as has been indicated in writing to Bancshares.
(k) ERISA Plans. No ERISA Plans of First Commercial, nor any
trustee, administrator or fiduciary thereof, has engaged in a
"prohibited transaction," as such term is defined in Section 4974 of
the Code or Title I of ERISA, which could subject the ERISA Plans, or
any of them, or any trustee, administrator, or fiduciary thereof, or
any party dealing with the ERISA Plans, or any such trust, to any
material tax or penalty on prohibited transactions imposed by Section
4975 of the Code or liability under Title I of ERISA. The execution
and delivery of this Agreement and consummation of the transactions
contemplated herein will not involve any transaction prohibited by
ERISA or by Section 4975 of the Code. None of the ERISA Plans of First
Commercial has been terminated nor have any proceedings to terminate
such plans been instituted, nor have there been any "reportable
events," as that term is defined in Section 4043 of ERISA, since the
effective date of ERISA that have not already been reported by the
filing of appropriate Form 5500 in accordance with ERISA requirements.
(l) Employee Relations. Neither First Commercial nor the First
Commercial Banks has agreements with any labor or other organization
representing employees for collective bargaining or other labor
relations purposes.
(m) Properties and Other Assets. First Commercial and the First
Commercial Banks have good and marketable fee simple title to, or, as
the case may be, valid and enforceable leasehold interest in, all their
respective properties, interests in properties and other assets, real
and personal, (i) reflected on the First Commercial Financial
Statements or (ii) acquired since the date thereof, except to the
<PAGE>
extent such properties and assets are or were thereafter disposed of
for fair value in the ordinary course of business. All such properties
and assets are free and clear of all liens, charges and encumbrances,
except (i) those set forth or reflected in the First Commercial
Financial Statements, (ii) liens for taxes not yet due and payable or
being contested in good faith and (iii) defects in title and liens,
charges and encumbrances, if any, as do not materially detract from the
value, or materially interfere with the present or proposed use, of the
property or assets subject thereto or affected thereby or as do not
otherwise materially impair business operations of either First
Commercial or the First Commercial Banks.
(n) Environmental Matters. To its knowledge and except as
identified in writing to Bancshares, First Commercial has no present or
past environmental condition under which First Commercial has or may
become materially liable to any person or by reason of which any First
Commercial assets may be subjected to any material lien, or by reason
of which First Commercial may materially violate any environmental law
or order.
(o) Pending Acquisitions by FCC. FCC has not entered into any
agreement, letter of intent or other undertaking with respect to the
acquisition of the capital stock of or other interest in any
corporation, business or other entity, except with respect to its
acquisition of City National Bank, Whitehouse, Texas and W.B.T. Holding
Company, parent of United American Bank, Memphis, Tennessee.
(p) Regulatory Approval. To the knowledge of First Commercial,
there is no reason that approval from regulatory authorities, including
but not limited to the Securities and Exchange Commission, necessary to
consummate the transactions contemplated hereby cannot or will not be
obtained in the ordinary course, except as has been disclosed in
writing to Bancshares.
(q) Availability of First Commercial Stock. First Commercial has
available a sufficient number of authorized and unissued shares of
First Commercial Stock to pay the Merger Consideration, and First
Commercial will not take any action during the term of this Agreement
that will cause it not to have a sufficient number of authorized and
unissued shares of First Commercial Stock to pay the Merger
Consideration.
<PAGE>
ARTICLE IV
COVENANTS
Section 4.01. Covenants of Bancshares. Bancshares hereby
covenants and agrees that between the date hereof and the Effective
Date:
(a) Approval of Transaction and Consents. Bancshares will submit
to and recommend the approval and adoption of this Agreement, and the
transactions contemplated hereby, by its shareholders, with such
approval to be evidenced by the vote of the requisite number of its
shareholders at a meeting thereof to be duly called, properly noticed
and held as soon as practicable following completion of the First
Commercial Due Diligence Review and declaration by the Securities and
Exchange Commission of the effectiveness of the Registration Statement
(as defined elsewhere herein). Bancshares shall, and shall cause each
Bancshares Subsidiary to, use its best efforts to obtain all licenses,
approvals and consents of any federal, state or other regulatory agency
having jurisdiction and of any other party to the extent that such
licenses, approvals or consents are required of Bancshares to effect
the Merger and the transactions contemplated hereby, or are required
pursuant to Section 3.01(j) hereof.
(b) Access to Corporate Records. Until the Effective Date,
Bancshares and the Bancshares Subsidiaries will afford to First
Commercial and its employees, agents and representatives, including its
accountants, Ernst & Young LLP, full access during normal business
hours to all of the offices, property, documents, contracts, books and
records of Bancshares and the Bancshares Subsidiaries and such
additional information with respect to the business affairs and
properties of Bancshares and the Bancshares Subsidiaries as First
Commercial from time to time may reasonably request. Bancshares and
the Bancshares Subsidiaries will cause their transfer agent and
registrar to make stock transfer records relating to Bancshares and the
Bancshares Subsidiaries available to the extent necessary to effectuate
the intent of this Agreement. Upon the request of First Commercial,
Bancshares and the Bancshares Subsidiaries will furnish abstracts of
title or title insurance policies to real property owned or leased by
Bancshares and the Bancshares Subsidiaries, and copies of any
unrecorded leases to which any of them is a party.
<PAGE>
(c) Monthly Financial Statements. Bancshares shall promptly
provide First Commercial with copies of all of the monthly financial
statements for Bancshares and the Bancshares Subsidiaries ("Monthly
Financial Statements") for each of the monthly periods ending between
December 31, 1995, and the Closing Date. The Monthly Financial
Statements shall be accompanied by a certificate of the Chief Financial
Officer of Bancshares to the effect that they are complete and correct
and accurately and fairly reflect the transactions and dispositions of
assets of Bancshares and the Bancshares Subsidiaries, taken as a whole,
and the financial condition and results of operations of Bancshares and
the Bancshares Subsidiaries, taken as a whole, at their respective
dates and for the periods to which they relate, subject to normal year-
end audit adjustments. In addition, the Monthly Financial Statements
shall be prepared in accordance with generally accepted accounting
principles and general practices within the banking industry
consistently applied, except for any footnotes that may be required or
except as otherwise set forth in the accompanying Chief Financial
Officer's certificate. Bancshares shall also promptly provide to First
Commercial copies of all reports and correspondence filed by Bancshares
or any Bancshares Subsidiary during such period with banking regulators
and agencies or received by Bancshares or any Bancshares Subsidiary
from same.
(d) Closing Financial Statements. At the Closing, Bancshares
shall deliver to First Commercial consolidated balance sheets and
statements of income of Bancshares and the Bancshares Subsidiaries
dated as of the last day of the month immediately preceding the Closing
Date (the "Closing Financial Statements"), which shall be certified by
the Chief Financial Officer of Bancshares as being true and correct in
all material respects and as fairly reflecting the consolidated
financial condition and results of operations of Bancshares and the
Bancshares Subsidiaries at the date and for the period to which they
relate, except for any footnotes that may be required and except as
specifically disclosed in the accompanying Chief Financial Officer's
certificate.
(e) Conduct of Business. Bancshares shall, and shall cause the
Bancshares Subsidiaries to, conduct their respective businesses in the
ordinary course so as to maintain their respective properties and
businesses and to preserve their respective business organizations and
the goodwill of their employees, depositors, customers and others
<PAGE>
having dealings with them and to maintain their books and records in
the usual, ordinary and normal course. Without the prior written
consent of First Commercial, Bancshares shall not, and shall not permit
any Bancshares Subsidiary to, (i) except for payment of income or
dividends of the Bancshares Subsidiaries, declare or distribute any
cash or stock dividend, authorize a stock split, or authorize, issue or
make any distribution of its capital stock or any security convertible
into or exercisable for Bancshares Stock or the common stock of any
Bancshares Subsidiary or pledge or otherwise encumber any of its
capital stock or any security convertible into or exercisable for
Bancshares Stock or the common stock of any Bancshares Subsidiary,
except that Bancshares may pay (a) a cash dividend of Five Dollars
($5.00) per share of Bancshares Stock in January of 1997 and (b)
thereafter cash dividends (at such time or times as Bancshares
determines appropriate) on each share of Bancshares Stock equal to the
cash dividends declared by First Commercial from January 1, 1997
through the Effective Date on each share of First Commercial Stock
multiplied by the result obtained by dividing 3,412,457 by the number
of shares of Bancshares Stock outstanding on the date the cash dividend
is paid by Bancshares; (ii) open or acquire any new branch office;
(iii) make any direct or indirect redemption, purchase or other
acquisition of any of its capital stock, other than the redemption of
qualifying shares of their respective directors; (iv) intentionally
incur any liability or obligation, make any commitment or disbursement,
acquire or dispose of any property or asset, make any contract or
agreement, subject any of its properties or assets to any lien, claim,
charge, option or encumbrance or engage in any transaction, except in
the ordinary course of its business, except that Bancshares may repay
or borrow on its revolving loan from National Bank of Commerce,
Memphis, Tennessee; (v) increase or decrease by more than 10% the rate
of compensation of any director or employee or enter into any agreement
to increase or decrease the rate of compensation of any director or
employee except with respect to the payment of "inside director" fees
at First Bank Searcy; (vi) create or modify any pension or profit
sharing plan, bonus, deferred compensation, death benefit, or
retirement plan, or the level of benefits under any such plan or
increase or decrease any severance or termination pay benefit or any
other fringe benefit; (vii) amend its articles of incorporation or
bylaws except as may be necessary to carry out this Agreement or as
required by law; or (viii) directly or indirectly encourage, solicit,
participate in or initiate discussions or negotiations with, or provide
any information to, any corporation, partnership, person or other
entity or group (other than First Commercial or an affiliate of First
Commercial) concerning any merger, sale of assets, sale of shares of
<PAGE>
capital stock or similar transaction involving Bancshares or any
Bancshares Subsidiary (an "Acquisition"). Bancshares represents that
as of the date hereof Bancshares and the Bancshares Subsidiaries have
ceased all prior activities, and Bancshares and the Bancshares
Subsidiaries have no present intention to engage in activities, of the
type contemplated by clause (viii) with respect to an Acquisition
(other than with First Commercial or an affiliate of First Commercial).
Bancshares shall, and shall cause the Bancshares Subsidiaries to,
advise First Commercial in writing of (i) the institution of any
litigation or proceedings of any kind whatsoever against either
Bancshares or the Bancshares Subsidiaries, (ii) the happening of any
event which would have a material adverse effect on the financial
condition, business, prospects or affairs of either of them, and (iii)
the terms of any proposal or inquiry which it may receive in respect of
an Acquisition by any person (other than First Commercial or any
affiliate of First Commercial). Bancshares and the Bancshares
Subsidiaries will use their reasonable best efforts to comply with all
material contracts, agreements, commitments or obligations to which
Bancshares or any Bancshares Subsidiary is a party or by which
Bancshares or any Bancshares Subsidiary may be bound.
(f) Cooperation and Furnishing Information. Bancshares agrees
to use its reasonable best efforts to cooperate with First Commercial
in furnishing such information concerning the business and affairs of
Bancshares and the Bancshares Subsidiaries as is reasonably necessary
or requested by First Commercial in order to prepare and file any
application for regulatory or government approvals required for
consummation of the transactions contemplated by this Agreement. All
such information shall be true and correct in all material respects and
shall not omit any material fact necessary to make such information not
misleading.
(g) Related Party Transactions. Without the prior written
consent of First Commercial, to the knowledge of Bancshares and the
Bancshares Subsidiaries, neither Bancshares nor any Bancshares
Subsidiary shall enter into any transaction, other than those in the
ordinary course of business, with any of its officers, directors or any
of such person's "affiliates" or "associates," or with any business of
which an officer or director of Bancshares or any Bancshares
Subsidiary, or any of such persons' "affiliates" or "associates," is an
officer, director, employee or ten percent (10%) or more equity owner,
as such terms "affiliates" or "associates" are defined in Rule 14a-1
under the Securities Exchange Act of 1934, as amended.
(h) Notice of Changes. Until the Effective Date, Bancshares
shall, and shall cause the Bancshares Subsidiaries to, give First
Commercial prompt written notice of the occurrence of any event or the
failure of any event to occur that results in a breach of any
representation or warranty by Bancshares or any Bancshares Subsidiary
or a failure by Bancshares or any Bancshares Subsidiary to comply with
any covenant, condition or agreement contained herein, or any other
<PAGE>
changes or any inaccuracies in any information or data previously given
or made available to First Commercial pursuant to this Agreement.
(i) Limit on Bancshares's Attorney's Fees. Bancshares agrees
that any fees or expenses it will pay to attorneys in connection with
this Agreement and the consummation of the transactions contemplated
herein shall not exceed $60,000.
Section 4.02. Covenants of First Commercial. First Commercial
hereby covenants and agrees that between the date hereof and the
Effective Date:
(a) Consents and Approvals. First Commercial agrees to cooperate
with Bancshares in furnishing such information concerning the business
and affairs of First Commercial and its directors and officers as is
reasonably necessary or requested in order to prepare and file
applications for regulatory and governmental approvals, including, but
not limited to, an application to the Federal Reserve Board for prior
approval of the transaction contemplated hereunder. First Commercial
will use its best efforts to file such application with the Federal
Reserve Board in a reasonably timely fashion. First Commercial also
will use its best efforts to obtain all licenses, approvals and
consents of any federal, state or other regulatory agency having
jurisdiction and of any other party to the extent that such licenses,
approvals or consents are required to effect the transactions
contemplated hereby, or are required pursuant to Section 3.02(c)
hereof. All such information shall be true and correct in all material
respects and shall not omit any material fact necessary to make such
information not misleading.
(b) Quarterly Reports; Current Reports. First Commercial shall,
between the date of this Agreement and the Closing Date, promptly
provide Bancshares with copies of its Annual Report on Form 10-K, its
Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K
filed with the Securities and Exchange Commission and its regulatory
reports filed with the Federal Reserve Board.
(c) Conduct of Business. First Commercial will, and will cause
the First Commercial Banks to, conduct their respective businesses in
the ordinary course so as to maintain their respective properties and
business and to preserve their respective business organizations and
the goodwill of their employees, depositors, customers and others
having dealings with them. First Commercial will maintain its books
and records in the usual, ordinary and normal course. First Commercial
will promptly advise Bancshares in writing of (i) the institution of
any material litigation against First Commercial or its subsidiaries,
(ii) the happening of any event that would have a material adverse
effect on the financial condition, business or affairs of First
Commercial and (iii) any material contacts with regulatory agencies
regarding their approval of the Merger. First Commercial shall advise
<PAGE>
Bancshares in writing of (x) the institution of any material litigation
or proceedings of any kind whatsoever against either First Commercial
or the First Commercial Banks and (y) the happening of any event which
would have a material adverse affect on the financial condition,
business, prospects or affairs of First Commercial and the First
Commercial Banks, taken as a whole. First Commercial and the First
Commercial Banks will use their reasonable best efforts to comply with
all material contracts, agreements, commitments or obligations to which
First Commercial or any First Commercial Bank is a party or by which
First Commercial or any First Commercial Bank may be bound.
(d) Notice of Changes. Until the Closing Date, First Commercial
will give Bancshares prompt written notice of the occurrence of any
event or the failure of any event to occur that results in a breach of
any representation or warranty by First Commercial or a failure by
First Commercial to comply with any covenant, condition or agreement
contained herein, or any other changes or any inaccuracies in any data
previously given or made available to Bancshares pursuant to this
Agreement.
(e) Access to Corporate Records. Until the Effective Date, First
Commercial will afford to Bancshares and its employees, agents and
representatives, including its accountants, Kemp & Company, full access
during normal business hours to all of the offices, property,
documents, contracts, books and records of First Commercial and the
First Commercial Banks and such additional information with respect to
the business affairs and properties of First Commercial and the First
Commercial Banks as Bancshares from time to time may reasonably
request. First Commercial will cause its transfer agent and registrar
to make stock transfer records relating to First Commercial available
to the extent necessary to effectuate the intent of this Agreement.
(f) Election to First Commercial Board. Upon the closing of the
Merger, the Board of Directors of First Commercial will elect Wallace
W. Fowler as a member of such Board of Directors and of its Executive
Committee.
(g) Registration of First Commercial Stock. First Commercial
will prepare and file with the Securities and Exchange Commission, as
soon as practicable following the date hereof, a registration statement
on Form S-4 (the "Registration Statement"), or such other form as it
deems appropriate, for the registration under the Securities Act of the
shares of First Commercial Stock constituting the Merger Consideration.
First Commercial shall use its best efforts to cause the Registration
Statement to become effective as soon as practicable, and to cause such
shares of First Commercial Stock to be listed or included for trading
on the Nasdaq National Market or any other market on which shares of
First Commercial Stock trade at the time of effectiveness of the
Registration Statement.
(h) Pooling of Interests. Neither First Commercial nor any First
Commercial Bank has taken, and First Commercial shall not, and shall
not allow any First Commercial Bank to take, unless otherwise required
by law, any action which should prevent the Merger from qualifying for
<PAGE>
pooling of interests accounting treatment under Accounting Principles
Board Opinion No. 16 if closed and consummated in accordance with this
Agreement.
(i) Employee Benefits. First Commercial undertakes to provide
Bancshares and the Bancshares Subsidiaries employees who become
employed by First Commercial or who remain employed by any Bancshares
Subsidiary following the Merger with substantially the same benefits as
those provided to other employees of First Commercial.
ARTICLE V
CONDITIONS PRECEDENT
Section 5.01. Conditions Precedent to Obligation of First
Commercial. The obligation of First Commercial to consummate the
transactions contemplated by this Agreement shall be subject to the
satisfaction, on or before the Closing Date, of each and every one of
the following conditions, all or any of which may be waived, in whole
or in part, by First Commercial, in its sole and absolute discretion:
(a) Performance of Covenants. Each of the acts and undertakings
of Bancshares to be performed on or before the Closing Date shall have
been duly performed and the Chief Executive Officer of Bancshares shall
have executed and delivered to First Commercial a certificate, dated as
of the Closing Date, to the effect that the foregoing condition has
been fulfilled.
(b) Representations True at Closing. The representations and
warranties made by Bancshares and the Bancshares Subsidiaries herein
shall be true and correct in all material respects on the Closing Date
hereunder with the same force and effect as though such representations
and warranties had been made on and as of such time (except that such
representations and warranties may be untrue or incorrect as a result
of actions or transactions contemplated or permitted by this Agreement
or actions or transactions of Bancshares or any Bancshares Subsidiary
made with the written consent of First Commercial), and the Chief
Executive Officer of Bancshares shall have executed and delivered to
First Commercial a certificate, dated as of the Closing Date, to the
effect that the foregoing condition has been fulfilled.
(c) Material Changes in Financial Condition, Business or
Prospects. Since December 31, 1995, there shall not have occurred any
material adverse change in the assets, financial condition, operations,
business or prospects of Bancshares and the Bancshares Subsidiaries,
taken as a whole, regardless of the cause.
(d) Certified Resolutions. Bancshares shall furnish to First
Commercial certified copies of resolutions duly adopted by the Board of
Directors and the shareholders of Bancshares approving this Agreement
and the Merger.
<PAGE>
(e) Government Approvals; Other Consents. First Commercial shall
have received in form and substance reasonably satisfactory to First
Commercial and its counsel all necessary federal and state governmental
and regulatory approvals for the transactions contemplated by this
Agreement (including, but not limited to, the approval of the Federal
Reserve Board, the Office of the Comptroller of the Currency and the
Arkansas State Bank Department, if required), and Bancshares and the
Bancshares Subsidiaries shall have received any and all consents
required pursuant to Section 3.01(j) hereof; provided, however, that
any divestiture of assets mandated by a regulatory authority shall not
constitute a failure to receive satisfactory regulatory approval.
(f) No Injunction. No proceeding shall have been instituted or
threatened before any court, governmental agency or legislative body to
enjoin, restrain or prohibit, or to obtain substantial damages in
respect of, or which is related to or arises out of, this Agreement or
the consummation of the transactions contemplated hereby, which, in the
reasonable judgment of First Commercial, would make it inadvisable to
consummate such transactions (it being understood and agreed that a
written request by governmental authorities for information with
respect to the transactions contemplated herein may not be deemed by
First Commercial to be a threat of material litigation or proceeding,
regardless of whether such request is received before or after
execution of this Agreement).
(g) Litigation. On the Effective Date, there shall not be
pending or threatened against Bancshares or any Bancshares Subsidiary
or the officers or directors of Bancshares or any Bancshares Subsidiary
in their capacity as such, any suit, action or proceeding which, if
successful, would, in the reasonable judgment of First Commercial, have
a material adverse effect on the financial condition, operations,
business or prospects of Bancshares and the Bancshares Subsidiaries,
taken as a whole.
(h) No Material Misstatements or Omissions. First Commercial
shall not have discovered in any of the representations or warranties
of Bancshares or any Bancshares Subsidiary or in any certificate or
information furnished or to be furnished to First Commercial hereunder
or in any application or report to any governmental agency or authority
(including the Federal Reserve Board, the Office of the Comptroller of
the Currency and the Arkansas State Bank Department) relating to the
transactions contemplated by this Agreement any untrue statement of a
material fact or any omission to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or any material failure to
perform or satisfy any covenants of Bancshares or any Bancshares
Subsidiary contained herein.
(i) Opinion of Bancshares's Counsel. An opinion of Mitchell,
Williams, Selig, Gates & Woodyard, P.L.L.C., counsel for Bancshares,
dated the Closing Date, in substantially the form attached hereto as
Exhibit B, shall have been delivered to First Commercial. In rendering
<PAGE>
the opinions contained therein, such counsel may rely as to factual
matters upon certificates of one or more officers of Bancshares and any
Bancshares Subsidiary and of public officials and, as to litigation in
which such counsel is not counsel, on opinions of counsel handling such
litigation, copies of which opinions shall be delivered to First
Commercial.
(j) Financial Confirmation. The Chief Financial Officer of
Bancshares shall have furnished to First Commercial a certificate,
dated the Closing Date, in form and substance satisfactory to First
Commercial, to the effect that nothing has come to Bancshares's
attention that would indicate that (a) during the period from December
31, 1995, to the Closing Date there was any change in the
capitalization of Bancshares and the Bancshares Subsidiaries, taken as
a whole, other than as described in or contemplated by this Agreement,
(b) any material adjustments need to be made to the financial
statements for the period ending at the end of the most recent month
prior to the Closing Date in order for them to be in conformity with
generally accepted accounting principles applied on a consistent basis
with that of prior periods, other than year-end adjustments, or (c)
since December 31, 1995, there has occurred or there is threatened to
occur a matter that would have a material adverse effect on the
business, financial condition, operations, results of operations or
prospects of Bancshares and the Bancshares Subsidiaries, taken as a
whole.
(k) Due Diligence Review. First Commercial shall have the right
to inspect and review, including the right to conduct an audit of, the
books and records relating in any way to the Bancshares Financial
Statements, or to the business, properties and assets of Bancshares and
the Bancshares Subsidiaries, and to conduct such other inspection and
review of the business, assets, condition (financial or other),
operations and prospects of Bancshares and of the Bancshares
Subsidiaries, to the extent First Commercial shall deem necessary (the
"First Commercial Due Diligence Review"). The First Commercial Due
Diligence Review shall not have indicated, in the reasonable judgment
of First Commercial, any matter that may be reasonably expected to have
a material adverse effect on the business, financial condition,
operations, results of operations or prospects of Bancshares and the
Bancshares Subsidiaries, taken as a whole, or that may materially
impair the contemplated benefits, taken as a whole, to First Commercial
of the transactions contemplated by this Agreement. First Commercial
shall complete the First Commercial Due Diligence Review as diligently
as possible but at the latest within ninety (90) days from the date of
this Agreement and shall, upon such completion, advise Bancshares in
writing within ten (10) days thereafter of its intention either to
proceed, pursuant to this Agreement, with the transactions contemplated
by this Agreement or to terminate this Agreement due to non-
satisfaction of the condition precedent set forth in this Section
5.01(k). Provided, however, Bancshares shall have ten (10) days from
the date of a termination notice to attempt to cure the matter(s)
described in such notice as the reason for termination. If such
<PAGE>
matter(s) are not, in the reasonable judgment of First Commercial,
cured within the ten (10) day period, this Agreement shall be
terminated.
(l) Title Opinion. First Commercial shall have received in form
and substance satisfactory to its counsel an attorney's opinion and/or
title policy or policies issued by a title insurance company acceptable
to First Commercial relating to all of the real property (except for
other real estate owned) owned or leased by Bancshares or any
Bancshares Subsidiary.
(m) Pooling of Interests Opinion. Ernst & Young LLP, certified
public accountants, shall have delivered to First Commercial, dated the
Closing Date and reasonably satisfactory in form and substance to First
Commercial and its counsel, an opinion to the effect that the
transactions contemplated by this Agreement shall be recorded on the
books and records of First Commercial and shall be reported in the
financial statements of First Commercial by the pooling of interests
method of accounting under generally accepted accounting principles, as
defined in APB Opinion No. 16, together with such additional letter of
assurances regarding the financial condition of Bancshares and the
Bancshares Subsidiaries as First Commercial shall reasonably request.
First Commercial, predicated on its knowledge and the terms of this
Agreement, has no reason to believe as of the date hereof that such
transactions will not be recorded by the pooling of interests method of
accounting.
(n) Delivery of Continuity of Interest Letters.
(i) Each stockholder of Bancshares who is an executive
officer, director or beneficial owner of ten percent (10%) or more of
Bancshares Stock shall have delivered to First Commercial a letter
representing and warranting that he will not sell, transfer or in any
way reduce his risk with respect to the First Commercial Stock received
in connection with the Merger until such time as First Commercial shall
have published financial results covering at least thirty (30) days of
post-transaction combined operations.
(ii) Each stockholder of Bancshares who is the beneficial
owner of five percent (5%) or more of Bancshares Stock shall have
delivered to First Commercial a letter representing or warranting that
(or, if such shareholder is delivering a letter pursuant to Section
5.01(n)(i) above, include a statement in such letter to the effect
that) he has no present intent to sell, transfer or otherwise dispose
of any of the First Commercial Stock to be received by him in
connection with the Merger nor will he sell, transfer or otherwise
dispose of more than fifty percent (50%) of such stock for a period of
at least one (1) year following the Closing.
(o) Articles of Merger. The parties shall have executed and
delivered the Articles of Merger.
<PAGE>
Section 5.02. Conditions Precedent to Obligation of Bancshares.
The obligation of Bancshares to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, on
or before the Closing Date, of each and every one of the following
conditions, all or any of which may be waived, in whole or in part, by
Bancshares in its sole and absolute discretion:
(a) Performance of Covenants. Each of the acts and undertakings
of First Commercial to be performed on or before the Closing Date shall
have been duly performed, and an authorized officer of First Commercial
shall have executed and delivered to Bancshares a certificate, dated as
of the Closing Date, to the effect that this condition has been
fulfilled.
(b) Representations True at Closing. The representations and
warranties made by First Commercial pursuant to this Agreement shall be
true and correct in all material respects on the Closing Date hereunder
with the same force and effect as though such representations and
warranties had been made on and as of such time (except that such
representations and warranties may be untrue or incorrect as a result
of actions or transactions contemplated or permitted by this Agreement
or actions or transactions of First Commercial made with the written
consent of Bancshares), and an authorized officer of First Commercial
shall have executed and delivered to Bancshares a certificate, dated as
of the Closing Date, to the effect that this condition has been
fulfilled.
(c) Material Changes in Financial Condition. Since December 31,
1995, there shall not have occurred any material adverse change in the
assets, financial condition, operations, business or prospects of First
Commercial or the First Commercial Banks, taken as a whole, regardless
of the cause.
(d) Certified Resolutions. First Commercial shall have furnished
to Bancshares a certified copy of resolutions duly adopted by the Board
of Directors of First Commercial authorizing the transactions
contemplated by this Agreement.
(e) No Injunction. No action, proceeding, regulation or
legislation shall have been instituted or threatened before any court,
governmental agency or legislative body to enjoin, restrain or
prohibit, or to obtain substantial damages in respect of, or which is
related to or arises out of, this Agreement or the consummation of the
transactions contemplated hereby, which, in the reasonable judgment of
Bancshares, would make it inadvisable to consummate such transactions
(it being understood and agreed that a written request by governmental
authorities for information with respect to the transactions
contemplated herein may not be deemed by Bancshares to be a threat of
material litigation or proceeding, regardless of whether such request
is received before or after execution of this Agreement).
<PAGE>
(f) No Material Misstatements or Omissions. Bancshares shall not
have discovered in any of the representations or warranties of First
Commercial or in any certificate or information furnished or to be
furnished to Bancshares hereunder or in any application or report to
any governmental agency or authority (including the Federal Reserve
Board) relating to the transactions contemplated by this Agreement any
untrue statement of a material fact or any omission to state a material
fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading,
or any material failure to perform or satisfy any covenants of First
Commercial or any First Commercial Bank contained herein, and such fact
shall be certified to Bancshares by First Commercial.
(g) Opinion of First Commercial's Counsel. An opinion of Friday,
Eldredge & Clark, counsel for First Commercial, dated as of the Closing
Date, in substantially the form attached hereto as Exhibit C, shall
have been delivered to Bancshares. In rendering the opinions contained
therein, such counsel may rely as to factual matters upon certificates
of officers of First Commercial and its subsidiaries and of public
officials and as to litigation in which they are not counsel on opin-
ions of counsel handling such litigation, copies of which opinions
shall be delivered to Bancshares.
(h) Tax Opinion. Bancshares shall have received an opinion of
Friday, Eldredge & Clark, counsel to First Commercial, to the effect
that the transactions contemplated herein will be treated for federal
income tax purposes as a tax-free corporate reorganization within the
meaning of Section 368(a)(1)(A) of the Code. The parties agree to
utilize their reasonable best efforts to consummate the transactions
described herein in a manner which will qualify as a tax-free corporate
reorganization within the meaning of the foregoing provisions.
(i) Securities Registration Opinion. Bancshares shall have
received an opinion of Friday, Eldredge & Clark, counsel to First
Commercial, to the effect that the shares of First Commercial Stock
issued to the shareholders of Bancshares pursuant to this Agreement
have been registered with the Securities and Exchange Commission
pursuant to Section 5 of the Securities Act of 1933, as amended, and
may be sold or transferred by the shareholders of Bancshares without
further registration under Section 5 of the Securities Act of 1933, as
amended, except as may otherwise be provided by Rules 144 and 145 of
the Securities and Exchange Commission and the terms of the letter to
be delivered by certain stockholders of Bancshares pursuant to Section
5.01(n) of this Agreement.
(j) Fairness Opinion. Bancshares shall have received an opinion
from Stephens Inc. that the transactions contemplated by this Agreement
and the Merger Consideration to be received by the holders of
Bancshares Stock pursuant to the terms set forth in this Agreement are
fair from a financial point of view to the holders of Bancshares Stock,
which opinion shall be dated as of the date of this Agreement and
delivered concurrently with its execution. Such opinion shall remain
<PAGE>
in effect and not have been withdrawn as of the date of the Joint Proxy
Statement/Prospectus forming a part of the Registration Statement.
(k) Articles of Merger. The parties shall have executed and
delivered the Articles of Merger.
(l) Due Diligence Review. Bancshares and its counsel or agent
shall have the right to inspect and review, including the right to
conduct an audit of, the books and records relating in any way to the
First Commercial Financial Statements, or the business, properties and
assets of First Commercial and the First Commercial Banks, and to
conduct such other inspection and review of the business, assets,
condition (financial or other), operations and prospects of First
Commercial and of the First Commercial Banks, to the extent Bancshares
shall deem necessary (the "Bancshares Due Diligence Review"). The
Bancshares Due Diligence Review shall not have indicated, in the
reasonable judgment of Bancshares, any matter that may reasonably be
expected to have a material adverse effect on the business, financial
condition, operations, results of operations or prospects of First
Commercial and the First Commercial Banks, taken as a whole.
Bancshares shall complete the Bancshares Due Diligence Review within
thirty (30) days from the date of this Agreement and shall, upon such
completion, advise First Commercial of its intention either to proceed,
pursuant to this Agreement, with the transactions contemplated by this
Agreement or to terminate this Agreement due to non-satisfaction of the
condition precedent set forth in this Section 5.02(l).
(m) No Adverse Change in Market Price for First Commercial Stock.
In the event the average of the individual averages of the bid and
asked prices for shares of First Commercial Stock reported on the
Nasdaq National Market as of the close of business on each of the
twenty (20) trading days immediately proceeding the Closing Date shall
be less than $29.50 per share, subject to such adjustments as provided
in Section 1.05 hereof, then Bancshares may elect to terminate this
Agreement in accordance with Section 6.01(f) hereof, unless First
Commercial agrees to amend and restate this Agreement to provide in
Section 1.05(a) that each share of Bancshares Stock shall be converted
into the right to receive that number of shares equal to the result
obtained by dividing (Y) the number of whole shares of First Commercial
Stock having an aggregate market value closest to, but not exceeding,
$100,667,482, based on the average of the individual averages of the
bid and asked prices for shares of First Commercial Stock reported on
the Nasdaq National Market as of the close of business on each of the
twenty (20) days immediately proceeding the date on which action is
taken by Bancshares by (Z) the number of shares of Bancshares Stock
outstanding on the Effective Date. If First Commercial notifies
Bancshares in writing that First Commercial will agree to so amend and
restate this Agreement, then the Board of Directors of Bancshares shall
approve a form of amended and restated agreement incorporating changes
consistent herewith and shall authorize its execution and delivery by
officers of Bancshares.
<PAGE>
(n) Litigation. On the Effective Date, there shall not be
pending or threatened against First Commercial or any First Commercial
Bank or the officers or the directors of First Commercial or any First
Commercial Bank in their capacity as such, any suit, action or
proceeding which, if successful, would, in the reasonable judgment of
Bancshares, have a material adverse affect on the financial condition,
operations, business or prospects of First Commercial and the First
Commercial Banks, taken as a whole. Bancshares acknowledges that it is
aware of the Aearth Development, Inc. legal proceeding disclosed in
First Commercial's Report on Form 10-Q for the quarterly period ended
June 30, 1996, and that such proceeding, in the event the original
verdict rendered at trial is reinstated on appeal, will not have a
material adverse impact on the financial condition, operations,
business or prospects of First Commercial and the First Commercial
Banks, taken as a whole.
(o) Government Approvals; Other Consents. Bancshares shall have
received in form and substance reasonably satisfactory to Bancshares
and its counsel all necessary federal and state governmental and
regulatory approvals for the transactions contemplated by this
Agreement (including, but not limited to, the approval of the Federal
Reserve Board, the Office of the Comptroller of the Currency and the
Arkansas State Bank Department, if required), and First Commercial and
the First Commercial Banks shall have received any and all consents
required pursuant to Section 3.02(c) hereof; provided, however, that
any divestiture of assets mandated by regulatory authority shall not
constitute a failure to receive satisfactory regulatory approval.
ARTICLE VI
TERMINATION
Section 6.01. Procedure for Termination. This Agreement may be
terminated and abandoned at any time prior to the Closing, whether
before or after approval of the Merger by the Board of Directors of
First Commercial or by the shareholders of Bancshares, upon the
occurrence of any of the following by written notice from First
Commercial to Bancshares (as authorized by the Board of Directors of
First Commercial), or by written notice from Bancshares to First
Commercial, as the case may be:
(a) If any condition to the obligations of First Commercial
set forth in Section 5.01 is not substantially satisfied at the time or
times contemplated thereby and such condition is not waived by First
Commercial or if any condition to the obligations of Bancshares as set
forth in Section 5.02 is not substantially satisfied at the time or
times contemplated thereby and such condition is not waived by
Bancshares, it being understood that each party's right to terminate
under this Section 6.01(a) shall relate only to conditions to that
party's obligations;
(b) In the event of a material breach by the other of any
representation, warranty or agreement contained in this Agreement that
<PAGE>
is not cured within 20 days of the time that written notice of such
breach is received by such other party from the party giving notice
(except that any such notice shall not have the effect of extending the
time for termination set forth in Section 6.01(c) hereof);
(c) By either Bancshares or First Commercial if the Closing
Date shall not have occurred, for reasons other than a breach of this
Agreement by the party seeking termination, on or before September 30,
1997, or such later date agreed to in writing by the parties; or
(d) By First Commercial if there shall have been any action
taken, or any statute, rule or regulation proposed or enacted, by any
federal, state or foreign government or governmental or administrative
agency that would (i) render First Commercial substantially unable to
satisfy its obligations hereunder, (ii) in the sole, but reasonable,
judgment of First Commercial, prohibit or delay for four months, or
longer, consummation of the transactions contemplated by this
Agreement, or (iii) materially impair the contemplated benefits to
First Commercial of the transactions contemplated by this Agreement by
limiting the location at which or manner in which First Commercial
presently conducts its business or by requiring First Commercial,
Bancshares or any Bancshares Subsidiary to undertake any material
changes in personnel, organizational structure, internal controls,
accounting systems, operations or policies, or otherwise.
(e) By First Commercial if there shall have occurred:
(i) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States,
(ii) a commencement of a war, armed hostilities, or
other international or national calamity, directly or indirectly
involving the United States, or
(iii) a material change in the United States or any other
currency exchange rates or a suspension of, or limitation on, the
markets thereof;
or, in the case of any of the foregoing existing at the time of this
Agreement, a material acceleration or worsening thereof.
(f) At the election of Bancshares upon the occurrence of the
event described in 5.02(m), subject to the right set forth therein of
First Commercial to preclude such election.
(g) By Bancshares if its Board of Directors so determines,
in the event that prior to the Effective Date (i) First Commercial
enters into a letter of intent or comparable document or a definitive
(a) purchase and sale agreement to be acquired, or (b) merger agreement
in which First Commercial is not the surviving corporation, or (ii)
another person publicly announces the intent to acquire twenty-five
<PAGE>
percent (25%) or more of the outstanding equity securities of First
Commercial whether by tender offer or otherwise.
Section 6.02. Termination by Mutual Agreement. This Agreement
may be terminated and abandoned (whether before or after approval of
the Merger by First Commercial or by the shareholders of Bancshares) by
mutual written consent of Bancshares and First Commercial, as
authorized by their respective Board of Directors.
Section 6.03. Effect of Termination for Non-Willful Breach. In
the event of termination of this Agreement caused otherwise than by a
willful breach of this Agreement by any of the parties hereto, this
Agreement shall cease and terminate, the acquisition of Bancshares as
provided herein shall not be consummated, and neither Bancshares or
First Commercial shall have any liability to the other party under this
Agreement of any nature whatever; provided, however, that the duties of
the parties with respect to confidential information as set forth in
Section 8.10 shall survive any such termination.
Section 6.04. Effect of Termination for Willful Breach. If
termination of this Agreement shall have been caused by willful breach
of this Agreement, then, in addition to other remedies as may be
available at law or equity for breach of this Agreement, the party so
found to have willfully breached this Agreement shall indemnify the
other party for its costs, fees and expenses of its counsel,
accountants and other experts and advisors, as well as fees and
expenses incident to negotiation, preparation and execution of this
Agreement, and all parties shall be bound by the confidentiality
obligations provided in Section 8.10 of this Agreement.
Section 6.05. Termination Fee. If termination of this Agreement
shall have been caused by the willful breach or the willful failure to
perform this Agreement by Bancshares, or by First Commercial, then if
Bancshares is the breaching party it shall pay to First Commercial, in
addition to any other costs, fees or expenses due under this Agreement,
within five (5) business days after the date of such termination,
$5,000,000 in immediately available funds, and if First Commercial is
the breaching party it shall pay to Bancshares, in addition to any
other costs, fees or expenses due under this Agreement, within five (5)
business days after the date of such termination, $500,000 in
immediately available funds. The parties hereto agree that such
termination fee is necessary because of the difficulty in ascertaining
the precise amount of damages to either party from the willful breach
of or failure to perform this Agreement and that such termination fee
represents a reasonable estimate of those damages. No termination fee
shall be paid in the event of a non-willful breach of or non-willful
failure to perform this Agreement.
Section 6.06. Enforcement Expenses. The prevailing party in any
suit or action to enforce this Agreement or to obtain any remedy which
may be available as a result of a breach of any representation,
warranty or covenant contained herein prior to Closing shall be
entitled to recover its court costs and reasonable attorneys' fees,
<PAGE>
including costs and attorneys' fees on appeal from any such suit or
action.
ARTICLE VII
BROKERS AND EXPENSES
Section 7.01. Brokers. Bancshares represents and warrants to
First Commercial that no broker or finder has acted for it in
connection with the execution and delivery of this Agreement or the
transactions contemplated hereby other than Stephens, Inc.
Section 7.02. Expenses. Each party hereto will pay all
attorneys' and accountants' fees and all other costs and expenses
incurred by it in connection with this Agreement and the transactions
contemplated hereby, except as provided in Article VI hereof, and
except as limited by Section 4.01(i) hereof.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Announcements. Neither First Commercial nor
Bancshares will make any press release or other announcement to the
public concerning the transactions contemplated by this Agreement
without the prior written consent of the other party, except as
required by law.
Section 8.02. Notices. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to
have been duly given upon receipt when delivered personally or by
confirmed telefacsimile, or one(1) business day following the date it
is given to a nationally-recognized overnight mail or delivery service
(with postage or delivery charge prepaid) providing proof of delivery,
as follows:
(a) If to Bancshares to:
Southwest Bancshares, Inc.
2400 East Highland Drive
Jonesboro, Arkansas 72401
Attention: Mr. Wallace W. Fowler, Chairman
with copy to:
John S. Selig
Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C.
320 West Capitol Avenue, Suite 1000
Little Rock, Arkansas 72201-3525
<PAGE>
(b) If to First Commercial, to:
First Commercial Corporation
400 West Capitol Avenue
Little Rock, Arkansas 72201
Attention: Mr. J. Lynn Wright
with copy to:
John Clayton Randolph
Friday, Eldredge & Clark
400 West Capitol Avenue, Suite 2000
Little Rock, Arkansas 72201-3493
or to such other address as any person may designate in writing to
First Commercial and Bancshares at the addresses listed above, in
accordance with this Section 8.02.
Section 8.03. Binding Effect. All of the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
Section 8.04. Headings. The Article, Section, paragraph and
other headings in this Agreement are inserted solely as a matter of
convenience and for reference and are not a part of this Agreement.
Section 8.05. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same instrument.
Section 8.06. Integration of Agreement. This Agreement
constitutes the entire understanding of the parties with respect to the
subject matter hereof and supersedes all prior agreements, arrangements
or communications, oral or written, between the parties hereto with
respect to the subject matter hereof.
Section 8.07. Amendments; Waivers. Any of the terms or
conditions of this Agreement may be waived, but only in writing of the
party against which the enforcement of such waiver is sought, and any
such terms or conditions may be amended or modified in whole or in part
at any time by agreement in writing, executed in the same manner as
this Agreement.
Section 8.08. Governing Law. This Agreement shall be governed by
and construed and enforced under and pursuant to the laws of the State
of Arkansas.
Section 8.09. Incorporation by Reference. Any and all schedules,
exhibits, annexes, statements, reports, certificates or other documents
or instruments referred to herein or attached hereto are incorporated
<PAGE>
herein by reference thereto as though fully set forth at the point
referred to in this Agreement.
Section 8.10. Confidentiality of Information. Until the Closing
Date, or in the event of termination of this Agreement without
consummation of the transactions contemplated hereby, First Commercial
and Bancshares each hereby covenants and agrees that it and its agents
shall keep and shall cause its subsidiaries to keep confidential any
information (unless readily ascertainable from public or published
information or sources) obtained from the other party or its agents,
except for disclosures of information expressly allowed by such other
party. In the event this Agreement is terminated, then promptly after
such termination First Commercial or Bancshares (as the case may be)
and its agents shall return to the other party hereto all documents,
work papers and other written material obtained from such other party
or its agents in connection with this Agreement and not theretofore
made public (including all copies thereof).
Section 8.11. No Assignment. Neither this Agreement nor any
rights or obligations of any party hereunder or thereunder, may be
assigned by the parties, by operation of law or otherwise, except with
the written consent of the other party.
Section 8.12. Severability. If any portion or provision of this
Agreement is determined by a court of competent jurisdiction to be
invalid, illegal or unenforceable in any jurisdiction, such portion or
provision shall be ineffective as to that jurisdiction to the extent of
such invalidity, illegality or unenforceability, without affecting in
any way the validity or enforceability of the remaining portions or
provisions in such jurisdiction or rendering that or any other portions
or provisions of this Agreement invalid, illegal or unenforceable in
any other jurisdiction.
Section 8.13. Survival of Representations and Warranties. None
of the representations, warranties or covenants contained in this
Agreement, or in any instrument or other document delivered pursuant to
this Agreement, shall survive the Closing.
Section 8.14. Definition of To The Knowledge Of.
(i) When used in this Agreement, the phrases "to the knowledge of
Bancshares," "to the knowledge of Bancshares and the Bancshares
Subsidiaries," and "nothing has come to Bancshares's attention" shall
mean the actual knowledge of Wallace W. Fowler, Lloyd McCracken, Jr.
and Phil Jones in the case of Bancshares, and these individuals and the
individuals serving in the office of President in the case of the
Bancshares Subsidiaries, including the knowledge that such individuals
should have acquired in the ordinary course of performing their duties
as officers of Bancshares and/or a Bancshares Subsidiary.
(ii) When used in this Agreement, the phrases "to the knowledge of
First Commercial," "to the knowledge of First Commercial and the First
<PAGE>
Commercial Banks," and "nothing has come to First Commercial's
attention" shall mean the actual knowledge of Barnett Grace, Edwin P.
Henry and J. Lynn Wright, including the knowledge that such individuals
should have acquired in the ordinary course of performing their duties
as executive officers of First Commercial.
Section 8.15. Applicability of Agreement to Entity Prior to
Becoming Bancshares Subsidiary. Notwithstanding anything in this
Agreement to the contrary, no Bancshares Subsidiary shall be required
to make any representation or warranty, nor shall Bancshares be deemed
to have made any representation or warranty as to or concerning a
Bancshares Subsidiary, or provide any information, with respect to a
period of time during which such entity was not a subsidiary of
Bancshares.
<PAGE>
IN WITNESS WHEREOF, First Commercial and Bancshares have caused
this Agreement to be executed and delivered in multiple counterparts as
of the date first above written.
FIRST COMMERCIAL CORPORATION
By: __________________________
Title: ________________________
ATTEST:
____________________
Secretary
SOUTHWEST BANCSHARES, INC.
By: __________________________
Title: ________________________
ATTEST:
____________________
Secretary
<PAGE>
EXHIBIT A
ARTICLES OF MERGER
OF
SOUTHWEST BANCSHARES, INC.
WITH AND INTO
FIRST COMMERCIAL CORPORATION
We, ___________, the duly elected __________ of Southwest
Bancshares, Inc., an Arkansas corporation ("Bancshares") and ________
_______, the duly elected _________ of First Commercial Corporation, an
Arkansas corporation, ("First Commercial") do hereby state on oath that
the following information relating to the merger of Bancshares with and
into First Commercial is true, correct, and complete to the best of our
knowledge and belief:
ARTICLE I
THE PLAN OF MERGER
Section 1.01. The Merger. At the Effective Time (as defined in
Section 1.03 hereof) in accordance with this Plan of Merger and
Arkansas law, Bancshares shall be merged with and into First Commercial
pursuant to this Plan of Merger, the separate existence of Bancshares
shall cease, and First Commercial shall continue as the surviving
corporation under the corporate name "First Commercial Corporation."
First Commercial hereinafter may sometimes be referred to as the
"Surviving Corporation."
Section 1.02. Effect of the Merger. At the Effective Time the
effect of the Merger shall be that (i) the Surviving Corporation shall
possess all the rights, privileges, and franchises possessed by each of
First Commercial and Bancshares, (ii) all of the property and assets of
whatsoever kind or description of each of First Commercial and
Bancshares, and all debts due on whatever account to any of them,
including subscriptions for shares or other choses in action belonging
to any of them, shall be taken and be deemed to be transferred to, and
vested in, the Surviving Corporation without further act or deed, and
(iii) the Surviving Corporation shall be responsible for all of the
liabilities and obligations of each of First Commercial and Bancshares,
as provided by applicable law, in the same manner as if the Surviving
Corporation had itself incurred such liabilities or obligations; but
the liabilities of First Commercial and Bancshares, or of their
shareholders, directors, or officers, shall not be affected, nor shall
the rights of the creditors thereof, or of any persons dealing with
such corporations be impaired by the Merger, and any claim existing, or
action or proceeding pending, by or against either of First Commercial
or Bancshares may be prosecuted to judgment as if the Merger had not
taken place, or the Surviving Corporation may be proceeded against, or
substituted, in place of First Commercial or Bancshares, as the case
may be.
<PAGE>
Section 1.03. Consummation of the Merger, Effective Time. The
parties hereto will cause the Merger to be consummated by filing with
the Secretary of State of the State of Arkansas these Articles of
Merger. The "Effective Time" shall be 5:00 p.m., Little Rock time, on
the date of such filing.
Section 1.04. Articles of Incorporation; Bylaws; Directors and
Officers. The Articles of Incorporation of First Commercial, as in
effect immediately prior to the Effective Time, shall be the Articles
of Incorporation of the Surviving Corporation after the Effective Time
until thereafter amended as provided therein and under Arkansas law.
The Bylaws of First Commercial, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation after
the Effective Time until thereafter amended as provided therein and
under Arkansas law. The directors and officers of First Commercial
immediately prior to the Effective Time shall be the initial directors
and officers of the Surviving Corporation after the Effective Time
until their successors are elected and qualified.
Section 1.05. Merger Consideration; Conversion of Securities. At
the Effective Time, by virtue of the Merger and without any action on
the part of First Commercial, Bancshares, or the holder of any of the
securities of such corporations:
(a) Each share of the common stock of Bancshares, par value $____
per share ("Bancshares Stock"), issued and outstanding immediately
prior to the Effective Time (other than shares as to which dissenters'
rights have been perfected and not withdrawn or otherwise forfeited
under applicable Arkansas law ("Dissenting Shares")) shall be canceled
and extinguished and be converted into the right to receive that number
of shares of common stock of First Commercial, $3.00 par value ("First
Commercial Stock"), equal to the result obtained by dividing (Y)
3,412,457 by (Z) 245,275 (such consideration, as well as any payment
due in lieu of fractional shares of First Commercial Stock as
hereinafter provided being herein referred to as the "Merger
Consideration").
(b) No fractional shares of First Commercial Stock shall be
issued as part of the Merger, and in lieu of fractional shares, First
Commercial shall pay a sum in cash equal to the value of any such
fractional share of First Commercial Stock to which any holder of
Bancshares Stock shall be entitled determined on the basis of the last
reported sales price on the date on which the Effective Time occurs for
shares of First Commercial Stock on The Nasdaq National Market.
(c) At and after the Effective Time, there shall be no transfers
on the stock transfer books of Bancshares with respect to shares of
Bancshares Stock issued and outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates formerly
representing shares of Bancshares Stock are presented to First
Commercial or its transfer agent, they shall be canceled and exchanged
<PAGE>
for the Merger Consideration as provided in Section 1.06 and following,
subject to applicable law in the case of Dissenting Shares.
Section 1.06. Exchange of Certificates. From and after the
Effective Time, all certificates representing shares of Bancshares
Stock, with the exception of certificates representing Dissenting
Shares or shares of Bancshares Stock held by First Commercial, shall
represent the right to receive shares of First Commercial Stock on the
basis set forth above, and the right to receive cash in lieu of
fractional shares in exchange therefor, upon the terms and conditions
of this Plan of Merger, subject to applicable abandoned property,
escheat, and similar laws. Upon delivery of certificates representing
shares of Bancshares Stock to the transfer agent of First Commercial,
First Commercial shall cause the transfer agent to issue certificates
representing the requisite number of shares of First Commercial Stock
for each share of Bancshares Stock represented by the certificates
therefor properly delivered, and First Commercial shall pay by
certified or cashier's check the amount entitled to be received in lieu
of fractional shares. Notwithstanding the foregoing, neither First
Commercial's transfer agent nor any party hereto shall be liable to a
holder of shares of Bancshares Stock for any of the Merger
Consideration delivered to a public official pursuant to applicable
abandoned property, escheat, and similar laws.
Section 1.07. Rights of Bancshares Shareholders to Dividends.
Holders of Bancshares Stock on the Effective Date shall be entitled to
receive, subject to applicable abandoned property, escheat and similar
laws, payment of dividends declared by First Commercial subsequent to
the Effective Date, but delivery of payment of such dividends will not
be required of First Commercial until such persons have delivered their
certificates representing shares of Bancshares Stock in exchange for
certificates representing shares of First Commercial Stock in
accordance with the provisions of Section 1.06 above. Notwithstanding
the foregoing, First Commercial shall not be liable to a holder of
shares of Bancshares Stock for any such dividends delivered to a public
official pursuant to any abandoned property, escheat and similar laws.
ARTICLE II
APPROVAL OF PLAN OF MERGER
Section 2.01. Approval by Board of Directors. The Plan of Merger
incorporated herein has been adopted by the Board of Directors of each
of Bancshares and First Commercial.
Section 2.02. Approval by Shareholders.
(a) Pursuant to Ark. Code Ann. Section 4-27-1103G, shareholder
approval of the Plan of Merger was not required by the shareholders of
First Commercial.
<PAGE>
(b) The Plan of Merger was approved by the shareholders of
Bancshares on _________, 1997, pursuant to Ark. Code Ann. Section
4-27-1103E at a special meeting of shareholders duly called and held
for that purpose. On the date of approval of the Plan of Merger,
Bancshares's sole outstanding class of capital stock was common stock,
$____ par value per share, each share of which was entitled to one
vote, and _____ shares of which were outstanding.
Bancshares's shareholders approved the Plan of Merger by a vote of
in favor of the proposal and against the proposal.
IN WITNESS WHEREOF, we have executed these Articles of Merger on
__________________, 1997.
SOUTHWEST BANCSHARES, INC.
By:
[Name], [Title]
FIRST COMMERCIAL CORPORATION
By:
[Name], [Title]
<PAGE>
EXHIBIT B
Substantive Provisions of Bancshares's
Counsel's Opinion
The opinion of _______, Counsel for Bancshares, shall be dated the
Closing Date and shall opine, in substance, as follows:
1. Bancshares and the Bancshares Subsidiaries have been duly
organized and are corporations, state chartered banks, and a
partnership, respectively, validly existing in good standing under the
laws of the State of Arkansas. Each of Bancshares and the Bancshares
Subsidiaries has full corporate power to own its property and assets
and to carry on its business as presently conducted, and is duly
qualified or registered to do business in each jurisdiction where the
nature of its business or the type of its assets requires such
qualification and where the failure to so qualify would be material to
the business of Bancshares or the Bancshares Subsidiaries.
2. Bancshares has full corporate power to execute and deliver
this Agreement. All corporate action of Bancshares required to duly
authorize and execute this Agreement has been taken. This Agreement is
valid and binding on Bancshares and is enforceable in accordance with
its terms, subject, as to the enforcement of remedies, to applicable
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforceability of creditors' rights generally and to limitations on the
availability of injunctive relief, specific performance and other
equitable remedies, whether applied by a court of law or equity.
3. All shares of Bancshares Stock and common stock of the
Bancshares Subsidiaries issued and outstanding as of the Closing Date
are duly authorized, validly issued, fully paid and not subject to
assessment. None of such shares has been issued in violation of any
preemptive rights of shareholders. To the knowledge of such counsel,
neither Bancshares nor the Bancshares Subsidiaries has outstanding and
is not obligated to issue subscriptions, options or other arrangements
or commitments obligating it to issue or dispose of any shares of its
common stock.
4. The consummation of the Merger will not violate any provision
of either Bancshares's or the Bancshares Subsidiaries' Articles of
Incorporation or Bylaws, or violate any provision of, or result in the
acceleration of any material obligation under, any mortgage, loan
agreement, order, judgment, law or decree known to such counsel to
which Bancshares or any of the Bancshares Subsidiaries is a party or by
which any of them is bound, and will not violate or conflict with any
other material restriction of any kind or character known to such
counsel to which Bancshares or any of the Bancshares Subsidiaries is
subject.
<PAGE>
5. To the knowledge of such counsel, each of Bancshares and the
Bancshares Subsidiaries has all licenses, permits, approvals and other
authorizations from Federal and state agencies and authorities having
jurisdiction in the premises required in the conduct of its business as
presently being conducted where the failure to do so would have a
material adverse effect on Bancshares and the Bancshares Subsidiaries,
taken as a whole.
6. To the knowledge of such counsel, there is no claim, action,
suit or proceeding pending or threatened against Bancshares or any of
the Bancshares Subsidiaries which, if adversely determined, would have
a material adverse effect on the business, assets, operations or
financial condition of Bancshares and the Bancshares Subsidiaries,
taken as a whole, would question the validity of the Agreement or would
prevent, hinder or delay consummation of the transactions contemplated
by the Agreement.
7. To the knowledge of such counsel, each of Bancshares and the
Bancshares Subsidiaries is, in the conduct of its business, in
compliance with all applicable Federal, state and local laws, statutes,
ordinances and regulations, which the failure to comply with would
materially adversely affect the business or the value of the properties
or assets of Bancshares and the Bancshares Subsidiaries, taken as a
whole.
In rendering such opinions, such counsel may rely as to factual
matters upon certificates of one or more officers of Bancshares and any
of the Bancshares Subsidiaries and of public officials and, as to
litigation where they are not counsel of record, on opinions of counsel
handling such litigation, copies of which opinions shall be delivered
to First Commercial.
<PAGE>
EXHIBIT C
Substantive Provisions of First Commercial
Counsel's Opinion
The opinion of Friday, Eldredge & Clark, Counsel for First
Commercial, shall be dated the Closing Date and shall opine, in
substance, as follows:
1. First Commercial and the First Commercial Banks have been
duly organized and are a corporation, state chartered banks and
national banking associations, respectively, validly existing in good
standing under the laws of the State of Arkansas and the United States
of America and have full corporate power to own their property and
assets and to carry on their business as presently conducted.
2. All corporate action of First Commercial required to
authorize the Agreement and to effectuate the Merger contemplated by
the Agreement has been taken. The Agreement is valid and binding on
First Commercial and is enforceable in accordance with its terms,
subject as to the enforcement of remedies to applicable bankruptcy,
insolvency, moratorium or other similar laws affecting the enforcement
of creditors' rights generally and to limitations on the availability
of injunctive relief, specific performance and other equitable
remedies, whether applied by a court of law or equity.
3. The consummation of the Merger will not violate any provision
of the Articles of Incorporation or Association or Bylaws of First
Commercial or any First Commercial Bank or violate any provision of, or
result in the acceleration of any material obligation under, any
mortgage, loan agreement, order, judgment, law or decree known to such
counsel to which First Commercial or any First Commercial Bank is a
party or by which it is bound, and will not violate or conflict with
any other material restriction of any kind or character known to such
counsel to which First Commercial or any First Commercial Bank is
subject.
4. To the knowledge of such counsel, there is no claim, action,
suit or proceeding pending or threatened against First Commercial or
any of the First Commercial Banks which, if adversely determined, would
have a material adverse effect on the business, assets, operations or
financial condition of First Commercial and the First Commercial Banks,
taken as a whole, would question the validity of the Agreement or would
prevent, hinder or delay consummation of the transactions contemplated
by the Agreement.
<PAGE>
5. To the knowledge of such counsel, each of First Commercial
and the First Commercial Banks has all licenses, permits, approvals and
other authorizations from Federal and state agencies and authorities
having jurisdiction in the premises required in the conduct of its
business as presently being conducted where the failure to do so would
have a material adverse effect on First Commercial and the First
Commercial Banks, taken as a whole.
6. To the knowledge of such counsel, each of First Commercial
and the First Commercial Banks is, in the conduct of its business, in
compliance with all applicable Federal, state and local laws, statutes,
ordinances and regulations, which the failure to comply with would
materially adversely affect the business or the value of the properties
or assets of First Commercial and the First Commercial Banks, taken as
a whole.
7. No facts have come to such counsel's attention that lead them
to believe that the joint proxy statement/prospectus (other then the
financial and statistical data contained or incorporated therein, as to
which such counsel need not express any opinion or belief) contains as
of this date any untrue statement of material fact or omits to state
any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(Such counsel need not pass upon nor assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
joint proxy statements/prospectus, and such opinion may be based upon a
limited review of, and participation and conferences relating to, the
joint proxy statement/prospectus, without independent verification.)
8. The shares of First Commercial Stock to be issued to the
shareholders of Bancshares following the Closing will be fully paid,
validly authorized and duly issued and are not subject to assessment
and are not issued in violation of any preemptive rights of First
Commercial's shareholders. Such shares have been registered with the
Security and Exchange Commission pursuant to Section 5 of the
Securities Act of 1933, as amended (the "Act"), and may be sold or
transferred by the shareholders of Bancshares without further
registration under Section 5 of the Act except as may otherwise be
provided by Rules 144 and 145 of the Securities and Exchange Commission
and the terms of certain continuity of interest letters to be delivered
by certain shareholders of Bancshares pursuant to Section 5.01(n) of
this Agreement.
In rendering such opinions, such counsel may rely as to factual
matters upon certificates of officers of First Commercial and of public
officials and, as to litigation where they are not counsel of record,
on opinions of counsel handling such litigation, copies of which
opinions shall be delivered to Bancshares.
EXHIBIT 5
FRIDAY, ELDREDGE & CLARK
2000 First Commercial Building
400 West Capitol Avenue
Little Rock, Arkansas 72201-3493
March 12, 1997
First Commercial Corporation
400 West Capitol Avenue
Little Rock, Arkansas 72201
Ladies and Gentlemen:
We refer to the Registration Statement on Form S-4 (the
"Registration Statement") filed with the Securities and
Exchange Commission on or about this date by First Commercial
Corporation (the "Company") for registration under the
Securities Act of 1933, as amended (the "Act"), of 3,412,457
shares of the Company's common stock, $3.00 par value per share
(the "Shares"), to be issued in connection with the merger of
Southwest Bancshares, Inc. with and into the Company.
It is our opinion that all action necessary to register
the Shares under the Act will have been taken when:
a. The Registration Statement shall have become
effective in accordance with the applicable provisions of the
Act; and
b. Appropriate action shall have been taken by the Board
of Directors of the Company for the purpose of authorizing the
registration of the Shares.
It is our further opinion that the Shares will be, upon
issuance pursuant to the terms of the agreement governing the
aforementioned merger, validly authorized, validly issued,
fully paid and non-assessable. This opinion does not pass upon
the matter of compliance with "Blue Sky" laws or similar laws
relating to the sale or distribution of the Shares.
We are members of the Arkansas Bar and do not hold
ourselves out as experts on the laws of any other State.
We hereby consent to the use of this opinion as an exhibit
to the Registration Statement, as it may be amended, and
consent to such references to our firm as are made therein.
Very truly yours,
/s/ FRIDAY, ELDREDGE & CLARK
FRIDAY, ELDREDGE & CLARK
JCR/bb
EXHIBIT 8
FRIDAY, ELDREDGE & CLARK
2000 First Commercial Building
400 West Capitol Avenue
Little Rock, Arkansas 72201-3493
Barnett Grace
Chairman of the Board
First Commercial Corporation
400 W. Capitol Avenue
Little Rock, AR 72201
Wallace W. Fowler
Chairman of the Board
Southwest Bancshares, Inc.
2400 East Highland Drive
Jonesboro, AR 72401
Re: Merger of Southwest Bancshares, Inc. with and into
First Commercial Corporation
Gentlemen:
You have asked for our opinion regarding certain federal
income tax consequences in connection with the proposed
merger of Southwest Bancshares, Inc. ("SBI"), an Arkansas
corporation, with and into First Commercial Corporation
("First Commercial"), an Arkansas corporation, pursuant to a
Plan and Agreement of Merger dated as of December 20, 1996
(the "Merger Agreement").
This opinion is based upon the following factual
assumptions:
(a) First Commercial and SBI are engaged in the
business of operating as bank holding companies under the
laws of the State of Arkansas and the federal laws of the
United States.
(b) Upon the effective date of the merger, the
shareholders of SBI (other than SBI shareholders who exercise
dissenters' rights under applicable state law), will receive
approximately 13.91278 shares of First Commercial voting
common stock in exchange for each outstanding share of SBI
common stock. First Commercial will make a cash payment to
shareholders of SBI in lieu of issuing fractional shares of
First Commercial common stock. SBI shares of common stock
having a value equal to at least fifty percent (50%) of the
value of the outstanding shares of SBI common stock shall be
exchanged in the merger solely for First Commercial common
stock.
<PAGE>
(c) SBI presently has, and within the last three (3)
years has had, only one class of capital stock outstanding,
all of which is common stock having a par value of $1.00 per
share.
(d) SBI will be merged with and into First Commercial
pursuant to laws of the State of Arkansas and the separate
existence of SBI shall cease and First Commercial shall
continue as the surviving corporation with all the assets and
liabilities of SBI and First Commercial combined. First
Commercial will continue to carry on the business previously
conducted by it.
(e) The First Commercial common stock to be received by
the SBI shareholders in connection with the merger will be
voting common stock with all of the rights normally accorded
to First Commercial common stockholders.
(f) The merger is being consummated for valid business
reasons germane to the business of the parties, separate and
apart from tax purposes.
(g) The fair market value of the First Commercial
common stock to be received by each SBI shareholder will be
approximately equal to the fair market value of the SBI stock
surrendered in the exchange.
(h) There is no plan or intention by the shareholders
of SBI to sell, exchange, or otherwise dispose of a number of
shares of First Commercial common stock received in the
transaction that would reduce the SBI shareholders' ownership
of First Commercial stock to a number of shares having a
value, as of the date of the transaction, of less than 50% of
the value of all of the outstand-ing stock of SBI as of the
same date. For purposes of this assumption, shares of SBI
stock exchanged for cash or other property, surrendered by
dissenters, or exchanged for cash in lieu of fractional
shares of First Commercial stock, will be treated as
outstanding SBI stock on the date of the transaction.
Moreover, shares of SBI stock and shares of First Commercial
stock held by SBI shareholders and otherwise sold, redeemed,
or disposed of prior or subsequent to the transaction will be
considered in making this assumption. There will have been
no transfers, in the aggregate, of more than fifty percent
(50%) of the value of the SBI stock prior to the effective
date of the merger which were made in contemplation of the
merger.
(i) First Commercial has no plan or intention to
reacquire any of its stock issued in the transaction.
<PAGE>
(j) First Commercial has no plan or intention to sell
or otherwise dispose of any of the assets of SBI acquired in
the transaction, except for dispositions made in the ordinary
course of business or transfers described in I.R.C.
Section 368(a)(2)(C), and except for a possible divestiture of
assets required by governmental authorities, which
divestitures shall not exceed, in the aggregate, fifty
percent (50%) of the value of the assets of SBI.
(k) The liabilities of SBI assumed by First Commercial
and the liabilities to which the transferred assets of SBI
are subject were incurred by SBI in the ordinary course of
its business. The assumption by First Commercial of the
liabilities of SBI pursuant to the merger will be for a bona
fide business purpose and not for the purpose of avoiding
federal income tax. No liabilities of any person other than
SBI shall be assumed by First Commercial in the merger, and
none of the shares of SBI stock surrendered in the merger in
exchange for First Commercial stock will be subject to any
liabilities.
(l) Following the transaction, First Commercial will
continue the historic business of SBI or use a significant
portion of SBI's historic business assets in a business.
(m) First Commercial, SBI and the shareholders of SBI
will pay their respective expenses, if any, incurred in
connection with the transaction.
(n) There is no intercorporate indebtedness existing
between First Commercial and SBI that was issued, acquired,
or will be settled at a discount.
(o) No two parties to the transaction are investment
companies as defined in I.R.C. Section 368(a)(2)(F)(iii) and
(iv).
(p) SBI is not under the jurisdiction of a court
pursuant to a case under Title XI of the United States Code,
or a receivership, foreclosure, or other similar proceeding
in a federal or state court.
(q) The fair market value of the assets of SBI
transferred to First Commercial will exceed the sum of the
liabilities assumed by First Commercial, plus the amount of
liabilities, if any, to which the transferred assets are
subject.
<PAGE>
(r) No fractional share interests in First Commercial
common stock will be issued in connection with the
transaction. The payment of cash in lieu of fractional
shares of First Commercial common stock is solely for the
purpose of avoiding the expense and inconvenience to First
Commercial of issuing fractional shares and does not
represent separately bargained-for consideration.
(s) None of the compensation received by any
shareholder-employee of SBI will be separate consideration
for, or allocable to, any of his or her shares of SBI stock.
(t) None of the shares of First Commercial stock
received by any shareholder-employee of SBI will be separate
consideration for, or allocable to, any employment agreement,
and the compensation paid to any shareholder-employee will be
for services actually rendered and will be commensurate with
the amounts paid to third parties bargaining at arm's length
for similar services.
Based upon the foregoing factual representations and
assumptions, and subject to the comments and qualifications
expressed herein, we are of the opinion that:
1. The proposed merger will constitute a
reorganization with the meaning of I.R.C. Section 368(a)(1)(A).
2. SBI and First Commercial will each be "a party
to a reorganization" within the meaning of I.R.C. Section 368(b).
3. No gain or loss will be recognized by SBI on
the transfer of its assets to First Commercial in exchange
for First Commercial common stock and the assumption by First
Commercial of the liabilities, if any, of SBI. I.R.C.
Sections 357(a) and 361(a).
4. No gain or loss will be recognized by First
Commercial upon the receipt of the assets of SBI in exchange
for First Commercial common stock. I.R.C. Section 1032(a).
5. The basis of the assets of SBI acquired by SBI
will be the same in the hands of First Commercial as the
basis of such assets in the hands of SBI immediately prior to
the exchange. I.R.C. Section 362(b).
<PAGE>
6. The holding period of the assets of SBI in the
hands of First Commercial will, in each instance, include the
period for which such assets were held by SBI. I.R.C.
Section 1223(2).
7. No gain or loss will be recognized by the
shareholders of SBI upon the exchange of SBI common stock
solely for First Commercial common stock. I.R.C. Section
354(a)(1).
8. The basis of the First Commercial common stock
received by the shareholders of SBI will be the same as the
basis of the SBI stock surrendered in exchange therefor.
I.R.C. Section 358(a)(1).
9. The holding period of the First Commercial
common stock received by the shareholders of SBI will include
the period during which the SBI stock surrendered in exchange
therefor was held, provided the stock of SBI is a capital
asset in the hands of the shareholders of SBI on the date of
the exchange. I.R.C. Section 1223(1).
10. Where a shareholder of SBI dissents to the
proposed transaction and receives solely cash in exchange for
his stock, such cash will be treated as having been received
by the shareholder as a distribution in redemption of such
shareholder's stock subject to the provisions and limitations
of I.R.C. Section 302. Rev. Rul. 74-515, 1974-2 C.B. 118.
11. The payment of cash to SBI shareholders in
lieu of fractional share interests of First Commercial common
stock will be treated as if the fractional shares were
distributed as part of the exchange and then redeemed by
First Commercial. These cash payments will be treated as
having been received as distributions in full payment in
exchange for the stock redeemed subject to the provisions and
limitations of I.R.C. Section 302. Rev. Rul. 66-365, 1966-2
C.B. 116 and Rev. Proc. 77-41, 1977-2 C.B. 574.
The opinions expressed herein are subject to the
following qualifications:
(i) We have assumed that the express written terms
of the Merger Agreement set forth the entire agreement of the
parties with respect to the proposed transaction, and that
there are no oral or written statements, representations,
agreements, or understandings which modify, amend, or vary
any of the terms thereof.
(ii) This opinion is limited to the matters
expressly set forth herein, and no opinion may be implied or
inferred beyond the specific language and scope so stated.
<PAGE>
(iii) The opinions expressed above regarding tax-
free reorganization treatment of the merger assume that the
SBI shareholders have, and will continue following the merger
to maintain, a "continuity of interest" in the business of
the SBI, directly through the ownership of SBI stock prior to
the merger, and indirectly through the ownership of First
Commercial common stock following the merger. For this
purpose, a "continuity of interest" shall mean the ownership
of stock having a value, as of the date of the transaction,
of 50% or more of the value of all of the formerly
outstanding stock of SBI on such date.
(iv) This opinion is based upon the factual
assumptions and representations described herein.
Accordingly, we shall have no liability in rendering this
opinion to the extent it is adversely affected by reason of
any such factual assumptions or representations being false
or incorrect.
(v) This opinion is rendered as of the date hereof
and is based upon the current version of the Internal Revenue
Code, regulations promulgated thereunder, current rulings of
the Internal Revenue Service, and applicable case law, and,
accordingly, is subject to any changes in such law,
regulations, rulings, or judicial decisions occurring after
the date of this opinion.
(vi) This opinion is provided solely for the
benefit of First Commercial, SBI and the shareholders of SBI
and may not be relied upon by any other person or entity,
quoted in whole or in part, filed with any governmental
agency, or otherwise referred to or utilized for any other
purpose, without, in each instance, or prior written consent.
We consent to the use and filing of this opinion in
connection with filings to be made with the Federal Reserve
<PAGE>
Board and Securities and Exchange Commission concerning this
transaction and in connection with the disclosure documents
to SBI shareholders with respect tot he proposed transaction.
In addition, we specifically consent to the use of this
opinion as an exhibit to First Commercial's Registration
Statement on Form S-4 (No. ________), as it may be amended,
and consent to such references to our firm as are made
therein.
(vii) This opinion is being furnished as of the date
hereof and we have no obligation or duty to update or
supplement this opinion by reason of events or changes in
applicable law occurring after the date of this letter.
Very truly yours,
FRIDAY, ELDREDGE & CLARK
FEC/WME/mjs
EXHIBIT 23.2
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption
"Experts" in the Registration Statement (Form S-4) and
related Prospectus of First Commercial Corporation for the
registration of 3,412,457 shares of its common stock and to
the incorporation by reference therein of our report dated
January 30, 1997, with respect to the consolidated financial
statements of First Commercial Corporation included in its
Annual Report (Form 10-K) for the year ended December 31,
1996, filed with the Securities and Exchange Commission.
Ernst & Young LLP
Little Rock, Arkansas
March 11, 1997
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated January 31,
1997 with respect to the consolidated financial statements
of Southwest Bancshares, Inc. included in the Registration
Statement on Form S-4 and related Prospectus of First
Commercial Corporation for the registration of 3,412,457
shares of its common stock.
/s/ KEMP & COMPANY
Little Rock, Arkansas
March 12, 1997
EXHIBIT 23.4
CONSENT OF STEPHENS INC.
We hereby consent to the inclusion of our opinion letter
dated December 20, 1996 to the Board of Southwest Bancshares,
Inc. as an annex to the Joint Proxy Statement/Prospectus which
forms a part of the Registration Statement on Form S-4
relating to the proposed merger of Southwest Bancshares, Inc.
with and into First Commercial Corporation and to the references
to such opinion under "Summary - Opinion of Southwest Bancshares's
Financial Advisor", "The Merger - Background and Reasons of
Southwest Bancshares for the Merger" and "The Merger - Opinion of
Southwest Bancshares's Financial Advisor," in such Joint Proxy
Statement/Prospectus. In giving such consent, we do not thereby
admit that we come within the category of persons whose consent
is required under Section 7 of the Securities Act of 1993 or
the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
Stephens Inc.
March 12, 1997
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
constitutes and appoints Barnett Grace and Edwin P. Henry,
and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement on Form S-4 of
First Commercial Corporation (the "Company") pertaining to
the registration of up to 3,412,517 shares of the Company's
Common Stock, $3.00 par value per share, to be offered as
described in the Registration Statement and to sign any and
all amendments (including post-effective amendments) to the
Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission,
granting unto such attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Date: March 12, 1997
--------------
/s/ Barnett Grace /s/ John W. Allison
---------------------- --------------------
Barnett Grace John W. Allison
Director Director
/s/ Truman Arnold /s/ William H. Bowen
---------------------- --------------------
Truman Arnold William H. Bowen
Director Director
/s/ Peggy Clark /s/ Robert G. Cress
---------------------- --------------------
Peggy Clark Robert G. Cress
Director Director
/s/ Cecil W. Cupp, Jr. /s/ Frank D. Hickingbotham
---------------------- --------------------------
Cecil W. Cupp, Jr. Frank D. Hickingbotham
Director Director
/s/ Walter E. Hussman, Jr. /s/ Frederick E. Joyce, M.D.
-------------------------- -----------------------------
Walter E. Hussman, Jr. Frederick E. Joyce, M.D.
Director Director
<PAGE>
/s/ Jack G. Justus /s/ William M. Lemley
--------------------------- -----------------------------
Jack G. Justus William M. Lemley
Director Director
/s/ Michael W. Murphy /s/ Sam C. Sowell
--------------------------- -----------------------------
Michael W. Murphy Sam C. Sowell
Director Director
/s/ Paul d. Tilley
---------------------------
Paul D. Tilley
Director
EXHIBIT 99
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Southwest Bancshares, Inc.
2400 East Highland Drive
Jonesboro, Arkansas 72401
Telephone No. (501) 972-9093
PROXY
The undersigned hereby constitutes and appoints Wallace W.
Fowler and Phil Jones, or either of them, proxies for the
undersigned, with power of substitution, to represent the
undersigned and to vote all of the shares of Common Stock of
Southwest Bancshares, Inc. (the "Company) which the
undersigned is entitled to vote at the annual meeting of
shareholders of the Company to be held on ----------, 1997,
and at any and all adjournments thereof.
1. Proposal to approve the Plan and Agreement of Merger
between First Commercial Corporation and Southwest
Bancshares, Inc. dated December 20, 1996.
----- FOR ----- AGAINST ------ ABSTAIN
2. Establish the number of Directors for the ensuing year at
seven and elect Wallace W. Fowler, James M. Fowler, Phil
Jones, Mark Fowler, Lloyd McCracken, Jr., Roy Reaves and
Charles Green as Directors.
----- FOR ----- AGAINST ------ WITHHOLD
AUTHORITY
3. In their discretion to transact such other business as
may properly come before the meeting and all adjournments
thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFIC
DIRECTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSAL 1
AND THE RE-ELECTION OF DIRECTORS AS SET FORTH HEREIN.
------------------------- --------------------------------
Signature NAME: PLEASE PRINT
------------------------- --------------------------------
Signature (if held jointly) NAME (if joint tenant):
PLEASE PRINT
Date: -----------------
Please sign exactly as name appears on the certificates
representing shares to be voted by this proxy. When signing
as executor, trustee or guardian, please give full title as
such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership,
please sign in partnership name by authorized persons.
