SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 25, 2000
(May 15, 2000)
Texarkana First Financial Corporation
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(Exact name of registrant as specified in its charter)
Texas 1-13842 71-0771419
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3rd and Olive Streets, Texarkana, Arkansas 71854-5917
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (870)773-1103
Not Applicable
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(Former name or former address, if changed since last report.)
Item 5. Other Events
On May 15, 2000, Texarkana First Financial Corporation, a Texas
corporation (the "Registrant") and First United Bancshares, Inc., an
Arkansas corporation ("First United"), entered into an Agreement and
Plan of Reorganization ("Reorganization Agreement") pursuant to which,
among other things, First United will acquire the Registrant through an
all cash merger of a wholly-owned subsidiary of First United with and
into the Registrant. Following the merger, the Registrant, as the
surviving corporation, will then be merged into First United. Under the
terms of the Reorganization Agreement, First United will acquire all of
the outstanding stock and existing options of the Registrant for $37.5
million in cash, or $23.35 per share. The merger is subject to the
satisfaction or waiver by the parties of certain closing conditions,
including the receipt of all necesssary regulatory, corporate and other
approvals. The merger also is subject to certain termination rights
specified in the Reorganization Agreement. The proposed transaction is
expected to close in the third quarter of 2000.
The Reorganization Agreement is attached hereto as Exhibit 2.1 and
is incorporated herein by reference. The foregoing descriptions of the
Reorganization Agreement and the merger are qualified in their entirety
by reference to the terms of the Reorganization Agreement. The
description of certain terms of the Reorganization set forth herein does
not purport to be complete and is qualified in its entirety by the
provisions of the Reorganization Agreement.
Also on May 15, 2000, the Registrant issued a press release
announcing the transaction. A copy of the press release is filed as
Exhibit 99.1 hereto, which is incorporated herein by reference. The
news release may be deemed to be solicitation material with respect to
the proposed merger of Texarkana and First United. Texarkana and its
directors may be deemed to be participants in the solicitation of
proxies with respect to a shareholder meeting to be held in connection
with such merger. Texarkana's directors include John M. Andres, John E.
Harrison, Arthur L. McElmurry, James W. McKinney, Donald N. Morriss and
Josh R. Morriss, Jr. At March 31, 2000, Texarkana's directors, as a
group, were beneficial owners of 200,476 shares (13.0%) of the
outstanding common stock of Texarkana, with individual beneficial
ownership of James W. McKinney at 69,605 shares (4.5%), John E. Harrison
at 64,611 shares (4.2%), Donald N. Morriss at 21,829 shares (1.4%),
Arthur L. McElMurry at 15,829 shares (1.0%), Josh R. Morriss, Jr. at
15,773 shares (1.0%) and John M. Andres at 12,829 shares (.8%).
In connection with the proposed merger, Texarkana will file a proxy
statement with the Securities and Exchange Commission. Shareholders of
Texarkana are encouraged to read the proxy statement, because it will
contain important information about the merger, Texarkana and First
United. After the proxy statement is filed with the SEC, it will be
provided to the Texarkana shareholders in connection with their
shareholders meeting and will be available free of charge, both on the
SEC's web site (www.sec.gov) and from Texarkana's corporate secretary.
Item 7. Financial Statements and Exhibits.
Exhibit Index
Exhibit No. Description
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2.1 Agreement and Plan of Reorganization
99.1 Press Release of the Registrant, released on
May 15, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereto duly authorized.
Texarkana First Financial Corporation
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(Registrant)
Date: May 25, 2000 By: /s/ James W. McKinney
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James W. McKinney
Chairman and CEO
Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
Between
FIRST UNITED BANCSHARES, INC.,
AND
TEXARKANA FIRST FINANCIAL CORPORATION
TABLE OF CONTENTS
Section Page
ARTICLE I
The Merger
SECTION 1.01. The Merger ................................................. 2
SECTION 1.02. Conversion of FFC Stock .................................... 2
SECTION 1.04. Exchange Procedures ........................................ 4
SECTION 1.04. Effective Time of the Merger ............................... 5
SECTION 1.05. Closing .................................................... 6
SECTION 1.06. Subsidiary Mergers ......................................... 6
ARTICLE II
Representations and Warranties of FFC
SECTION 2.01. Organization of FFC ........................................ 6
SECTION 2.02. Capital Structure of FFC ................................... 7
SECTION 2.03. Ownership and Organization of FSA .......................... 7
SECTION 2.04. Capital Structure of FSA ................................... 8
SECTION 2.05. Subsidiaries ............................................... 8
SECTION 2.06. Authority .................................................. 8
SECTION 2.07. No Default ................................................. 9
SECTION 2.08. FFC Financial Statements .................................. 10
SECTION 2.09. FFC Reports ............................................... 11
SECTION 2.10. Information Supplied ...................................... 11
SECTION 2.11. Authorizations; Compliance with Applicable Laws 12
Page i
Section Page
SECTION 2.12. Compliance With Environmental Laws ........................ 13
SECTION 2.13. Litigation and Claims ..................................... 16
SECTION 2.14. Taxes ..................................................... 16
SECTION 2.15. Certain Agreements ........................................ 17
SECTION 2.16. Employee Benefit Plans .................................... 18
SECTION 2.17. Insurance ................................................. 25
SECTION 2.18. Conduct of FFC to Date .................................... 25
SECTION 2.19. Material Adverse Change ................................... 27
SECTION 2.20. Properties, Leases and Other Agreements ................... 27
SECTION 2.21. No Untrue Statements ...................................... 28
SECTION 2.22. Proper Documentation ...................................... 28
SECTION 2.23. Material Contracts ........................................ 30
SECTION 2.24. Regulatory Approvals ...................................... 31
SECTION 2.25. Federal Financial Assistance .............................. 31
ARTICLE III
Representations and Warranties of Bancshares
SECTION 3.01. Organization of Bancshares ................................ 32
SECTION 3.02. Authority ................................................. 32
SECTION 3.03. No Default ................................................ 32
SECTION 3.04. Bancshares Financial Statements ........................... 33
SECTION 3.05. No Untrue Statements ...................................... 33
SECTION 3.06. Material Adverse Change ................................... 34
Page ii
Section Page
SECTION 3.07. Authorizations; Compliance with Applicable Laws ........... 34
SECTION 3.08. Regulatory Approval ....................................... 34
SECTION 3.09. Accredited Investor ....................................... 34
ARTICLE IV
Agreements of FFC
SECTION 4.01. Affirmative Covenants of FFC .............................. 35
SECTION 4.02. Negative Covenants of FFC ................................. 36
SECTION 4.03. Access and Information .................................... 39
SECTION 4.04. FFC Shareholders Meeting .................................. 40
SECTION 4.05. Proxy Statement ........................................... 40
SECTION 4.06. Termination or Merger of Employee Benefit Plans ........... 41
SECTION 4.07. FFC ESOP .................................................. 42
SECTION 4.08. FFC's Disclosure Schedule ................................. 43
ARTICLE V
Agreements of Bancshares
SECTION 5.01. Regulatory Approvals ...................................... 43
SECTION 5.02. Bancshares Employee Benefit Plans ......................... 44
SECTION 5.03. Indemnification ........................................... 47
ARTICLE VI
Additional Agreements
SECTION 6.01. Legal Conditions to Merger ................................ 49
SECTION 6.02. Reports ................................................... 50
Page iii
Section Page
SECTION 6.03. Update Disclosure; Breaches ............................... 51
SECTION 6.04. Ability to Perform ........................................ 51
SECTION 6.05. Brokers or Finders ........................................ 51
SECTION 6.06. Reasonable Efforts ........................................ 51
SECTION 6.07. Governmental and Other Third Party Approvals .............. 52
SECTION 6.08. Nonpublic Information ..................................... 52
ARTICLE VII
Conditions Precedent
SECTION 7.01. Conditions to Each Party's Obligation to Effect the Merger 53
SECTION 7.02. Conditions to Obligations of Bancshares ................... 54
SECTION 7.03. Conditions to Obligations of FFC .......................... 56
ARTICLE VIII
Termination and Amendment
SECTION 8.01. Termination ............................................... 57
SECTION 8.02. Effect of Termination ..................................... 58
SECTION 8.03. Amendment ................................................. 58
SECTION 8.04. Extension; Waiver ......................................... 59
ARTICLE IX
General Provisions
SECTION 9.01. Notices ................................................... 59
SECTION 9.02. Interpretation ............................................ 60
Page iv
Section Page
SECTION 9.03. Counterparts .............................................. 60
SECTION 9.04. Entire Agreement .......................................... 60
SECTION 9.05. Governing Law ............................................. 61
SECTION 9.06. Publicity ................................................. 61
SECTION 9.07. Assignment ................................................ 61
SECTION 9.08. Knowledge of FFC .......................................... 61
SECTION 9.09. Material Adverse Change ................................... 61
SECTION 9.10. Severability .............................................. 62
SECTION 9.11. Successors and Assigns .................................... 62
SECTION 9.12. Expenses .................................................. 62
SECTION 9.13. Non-Survival of Representations and Warranties ............ 62
EXHIBIT A Plan of Merger
EXHIBIT 7.02(c) Legal Opinion of Jenkens & Gilchrist, P.C.
EXHIBIT 7.02(h) Noncompetition Agreement
EXHIBIT 7.02(i) FFC Option Holder Agreement and Waiver
EXHIBIT 7.03(d) Legal Opinion of Mitchell, Williams, Selig, Gates & Woodyard,
P.L.L.C.
Page v
INDEX OF DEFINED TERMS
Section
Act ..................................................................... 3.09
Agreement ............................................................. Page 1
Articles of Merger ...................................................... 1.04
BHC Act .............................................................. 2.07(a)
Bancshares ............................................................ Page 1
Bancshares Financial Statements ......................................... 3.04
Bancshares Permits .......................................................3.07
Certificate, Certificates ................................................1.03
Closing ................................................................. 1.05
Closing Date ............................................................ 1.05
Code .....................................................................2.16
Competing Transaction ................................................ 4.02(f)
Continuing Employee ..................................................... 5.02
Effective Time .......................................................... 1.04
Employee Benefit Plans .................................................. 2.16
Environmental Laws ................................................... 2.10(f)
ERISA ................................................................... 2.16
ESOP .................................................................... 4.06
Exchange Act ............................................................ 2.07
401(k) Plan .......................................................... 5.02 C.
FDIC .................................................................... 2.09
Page vi
Index of Defined Terms Section
FFC ................................................................... Page 1
FFC Disclosure Schedule ................................................. 4.08
FFC Financial Statements ................................................ 2.08
FFC Material Contracts .................................................. 2.23
FFC Merger .............................................................. 1.06
FFC Options ............................................................. 1.02
FFC Permits ............................................................. 2.11
FFC Property ......................................................... 2.12(h)
FFC Reports ............................................................. 2.09
FFC Shareholder ......................................................... 1.02
FFC Stock ............................................................. Page 1
FSA .................................................................. 3.12(a)
FSA Merger .............................................................. 1.06
FRB ..................................................................... 2.10
GAAP .................................................................... 2.08
Governmental Entity ..................................................... 2.07
Hazardous Materials .................................................. 2.10(g)
Held to Maturity ..................................................... 4.02(m)
HOL Act ................................................................. 2.01
Indemnified Parties ..................................................... 5.03
Injunction ........................................................... 7.01(c)
Page vii
Index of Defined Terms Section
Instructions ............................................................ 1.03
IRS ..................................................................... 2.14
Laws .............................................................. 2.11, 3.07
Merger ................................................................ Page 1
Merger Agreements ..................................................... Page 1
Option Consideration ............................................. 1.02(a)(ii)
OTS ..................................................................... 1.03
Paying Agent ............................................................ 1.03
Per Share Purchase Price .......................................... 1.02(a)(i)
Plan of Merger ........................................................ Page 1
Proxy Statement ...................................................... 2.10(b)
Purchase Price .......................................................... 1.02
SEC ..................................................................... 2.09
Securities Act .......................................................... 2.07
Sub ................................................................... Page 1
Subsidiary Mergers ...................................................... 1.06
Tax, Taxes, Taxable ..................................................... 2.14
TBCA .................................................................... 1.01
Transmittal Items ....................................................... 1.03
Transmittal Letter ...................................................... 1.03
Violation ............................................................... 3.04
Voting Debt ............................................................. 3.03
Page viii
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization ("Agreement") is made as
of May 15, 2000 by and between First United Bancshares, Inc.
("Bancshares") and Texarkana First Financial Corporation ("FFC").
WHEREAS, FFC owns one hundred percent (100%) of the issued and
outstanding shares of capital stock of First Federal Savings & Loan
Association of Texarkana, Texarkana, Arkansas ("FSA"); and
WHEREAS, Bancshares desires to acquire one hundred percent (100%) of the
capital stock of FFC (the "FFC Stock") upon the terms and conditions
hereinafter set forth through the merger of a newly created subsidiary of
Bancshares ("Sub") with and into FFC with FFC to be the surviving corporation,
(the "Merger"), pursuant to a Plan of Merger in substantially the form
attached hereto as Exhibit A (the "Plan of Merger"); and
WHEREAS, it is the intention of the parties to this Agreement that the
Merger shall not subject either party or Sub to any federal income tax
pursuant to provisions of the Internal Revenue Code; and
WHEREAS, the respective Boards of Directors of Bancshares and FFC believe
that such proposed Merger and the exchange of cash for the FFC Stock, pursuant
and subject to the terms of this Agreement and the Plan of Merger (the "Merger
Agreements"), is in the best interests of their respective corporations and
shareholders; and
WHEREAS, Bancshares and FFC desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties hereto agree as
follows:
Page 1
ARTICLE I
Terms of The Merger
1.01. The Merger. Subject to the terms and conditions of this
Agreement, Bancshares and FFC agree to effect the Merger of Sub, a wholly-
owned subsidiary of Bancshares to be created by Bancshares, with and into FFC
in accordance with the Texas Business Corporation Act (the "TBCA"). FFC shall
be the surviving corporation under the Merger. The separate corporate
identity of Sub shall cease upon consummation of the Merger. The Merger will
not effect any changes in FFC's Articles of Incorporation.
1.02. Conversion of FFC Stock.
(a) Purchase Price. At the Effective Time (as defined in Section
1.04), by virtue of the Merger and without any action on the part of any
holder of FFC Stock ("FFC Shareholder"), but subject to the rights of
dissenting shareholders of FFC, all of the shares of the FFC Stock issued and
outstanding and all options to purchase shares of FFC Stock (the "FFC
Options") which are outstanding and unexercised immediately prior to the
Effective Time, shall be converted into the right to receive from Bancshares,
an aggregate amount in cash equal to $37,500,000 (the "Purchase Price"). The
Purchase Price shall be allocated to the holders of the FFC Stock and FFC
Options as follows:
(i) FFC Stock. For each share of FFC Stock issued and
outstanding at the Effective Time, an amount in cash of $23.35208 per share
(the "Per Share Purchase Price"). Subject only to dissenter's rights under
Articles 5.11 through 5.13 of the TBCA, at the Effective Time all shares of
FFC Stock shall no longer be outstanding and shall be canceled and retired and
all rights with respect thereto shall cease to exist, and each holder of FFC
Stock shall cease to have any rights thereto, except the right to receive,
upon surrender of the certificate(s) representing any such shares of FFC
Stock, his pro rata share of the Purchase Price.
Page 2
(ii) FFC Options. For each FFC Option outstanding and
unexercised immediately prior to the Effective Time, an amount in cash
calculated in the manner provided in this Section 1.02(a)(ii). The amount of
cash to be received by each holder of an FFC Option shall be equal to the
mathematical result obtained by multiplying (x) the Per Share Purchase Price
less the weighted average per-share exercise price of all FFC Options held by
such holder, by (y) the number of shares subject to FFC Options held by such
holder (such amount of cash to be received by a holder of FFC Options with
respect to such holder's total FFC Options being the "Option Consideration").
(b) Cancellation of Shares. All shares of FFC Stock issued and
outstanding immediately prior to the Effective Time shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease
to exist, and each holder of a certificate representing any such shares shall
cease to have any rights with respect thereto, except dissenter's rights or
the right to receive a pro rata cash payment as provided in this Section 1.02
and Section 1.03 and in accordance with the Plan of Merger, without interest.
(c) Acceleration and Cancellation of Options. The right to
exercise all FFC Options shall be accelerated and all FFC Options shall be
deemed exercised immediately prior to the Effective Time. All holders of FFC
Options prior to the Effective Time shall cease to have any rights with
respect thereto except the right to receive a pro rata cash payment as
provided in this Section 1.02 and Section 1.03 and in accordance with the Plan
of Merger, without interest.
(d) Conversion of Stock of Sub. At the Effective Time, the shares
of Sub common stock validly issued and outstanding immediately prior to the
Effective Time will, by virtue of the Merger and without any action by the
holder thereof, be converted into the capital stock of FFC, so that all shares
of capital stock of FFC will be owned by Bancshares. The outstanding
certificates representing shares of Sub common stock will, after the Effective
Time, be deemed to represent the number of shares of FFC into which they have
been converted and may be exchanged for new certificates of FFC upon request
of the holder thereof.
Page 3
(e) Dissenting Shareholders. Any shares of FFC Stock held by FFC
Shareholders who perfect their dissenters' rights under the TBCA shall not be
converted as provided herein but shall, after the Effective Time, represent
such rights as are granted to dissenting shareholders by the TBCA.
1.03. Exchange Procedures. No later than twenty (20) days prior to the
Effective Time, Bancshares shall furnish to FFC, and FFC shall mail to each
holder of record of the FFC Stock and FFC Options, addressed to the most
current address of such persons according to the records of FFC, the
following: (i) a letter of transmittal specifying that delivery of
certificates representing ownership of FFC Stock or FFC Options
("Certificates" or, individually, a "Certificate") shall be effected and risk
of loss shall pass, on or after the Effective Time only upon delivery of the
Certificates to First United Trust Company, N.A. (the "Paying Agent"), which
shall be in a form and contain any other provisions as Bancshares may
reasonably require (the "Transmittal Letter"), and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for cash in the
amount of the consideration due hereunder (the "Instructions"). The
Instructions shall request holders to deliver their Certificates, a properly
completed, duly executed Transmittal Letter, and any other documentation that
may be required from such holder pursuant to the Instructions (collectively,
the "Transmittal Items") to the Paying Agent, and shall state that (x)
occurrence of the Effective Time is contingent upon the satisfaction of
significant conditions, including regulatory approval of the Merger and
expiration of statutory waiting periods, and (y)
Page 4
the Transmittal Items will be returned to the holders thereof if the Agreement
is terminated prior to the Effective Time. Bancshares shall instruct the
Paying Agent that, on and after the Effective Time, upon the delivery to the
Paying Agent of the properly completed Transmittal Items, the Paying Agent is
to pay the holder of such Certificate in exchange therefor the amount of cash
such holder is entitled to receive in respect of the Certificate surrendered,
pursuant to the provisions of Section 1.02 and this Section 1.03, payable by
check or direct deposit into such shareholder's or option holder's account
with FSA, and the Certificate so surrendered shall forthwith be canceled.
Such payments shall be made, in the case of holders whose properly completed
Transmittal Items are delivered to the Paying Agent no later than ten (10)
days prior to the Effective Time, by mailing checks or making the direct
deposit immediately after the Effective Time and in no event later than the
next business day after the Effective Time, and in all other cases, by mailing
checks or making the direct deposit promptly, but in no event more than ten
(10) days following the later of (i) the Effective Time, or (ii) the date on
which the properly completed Transmittal Items are delivered to the Paying
Agent. Only holders of Certificates who have delivered their properly
completed Transmittal Items to the Paying Agent no later than ten (10) days
prior to the Effective Time shall be eligible to receive payment at the
Effective Time as herein provided. Notwithstanding the foregoing, no payment
shall be made to an individual under this section until the Paying Agent has
received from such holder all of the required Transmittal Items properly
completed in accordance with the instructions. No payment shall be made for
the Certificates prior to the Effective Time, and no interest shall be payable
with respect to the payment of the Purchase Price.
1.04. Effective Time of the Merger. Subject to the provisions of this
Agreement, articles of merger shall be duly prepared and executed by Sub and
FFC (the "Articles of Merger") and thereafter delivered to the Secretary of
State of Texas for filing, as provided in the TBCA, as soon as practicable on
or after the Closing Date (as defined in Section 1.05). The Merger shall
become effective upon the approval and filing of the Articles of Merger by the
Secretary of State of Texas (the "Effective Time").
Page 5
1.05. Closing. The closing of the Merger (the "Closing") will take place
at the offices of Bancshares at a time and on a date (the "Closing Date") to
be specified in writing by the parties as soon as reasonably practicable after
the later to occur of all regulatory and other approvals and the expiration of
all waiting periods but in no event later than ten (10) business days after
the satisfaction of all conditions set forth in Article VII.
1.06. Subsidiary Mergers. Immediately after the Effective Time FFC shall
be merged with and into Bancshares in accordance with the provisions of the
TBCA and the Arkansas Business Corporation Act, with Bancshares to be the
surviving corporation (the "FFC Merger"). Also, immediately after the
Effective Time FSA shall be merged with and into FirstBank, Texarkana, Texas,
with FirstBank to be the surviving entity (the "FSA Merger"). FFC and
Bancshares will take and will, respectively, cause FSA and FirstBank to take,
all such actions as are necessary to effect the FFC Merger and the FSA Merger
(which together are referred to herein as the "Subsidiary Mergers")
immediately after the Effective Time, including the filing of all necessary
applications for approval by banking regulators, providing information, and
taking all necessary corporate action.
ARTICLE II
Representations and Warranties of FFC
FFC hereby represents and warrants to Bancshares and United the following:
2.01. Organization of FFC. FFC is a corporation duly organized, validly
existing and in good standing under the laws of the state of Texas and has the
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as now being conducted. FFC is
Page 6
qualified to do business in Arkansas and FFC is not qualified to do business
in any other state or foreign jurisdiction, and its ownership or leasing of
property or the conduct of its business does not require it to be so
qualified. FFC is registered as a savings and loan holding company with the
Office of Thrift Supervision ("OTS") under the Home Owners Loan Act of 1933,
as amended (the "HOL Act"). FFC has delivered to Bancshares true, accurate
and complete copies of its currently effective Articles of Incorporation and
Bylaws, including all amendments thereto.
2.02. Capital Structure of FFC. The authorized capital stock of FFC
consists of (i) 15,000,000 shares of common stock, $0.01 par value, of which
1,983,750 shares are issued, 1,539,342 shares are outstanding and 444,408
shares are held by FFC in its treasury and (ii) 5,000,000 shares of preferred
stock, no par value, none of which are issued and outstanding. Options to
purchase 172,614 shares of FFC common stock are outstanding, all of which
shall be deemed to be exercised immediately prior to Closing. All outstanding
shares of FFC common stock are validly issued, fully paid, nonassessable, and
have not been issued in violation of any preemptive rights. FFC has not issued
and has no outstanding bonds, debentures, notes or other indebtedness having
the right to vote (or convertible into securities having the right to vote) on
any matters on which shareholders may vote ("Voting Debt"). Except as
described herein, there are no outstanding options, warrants, calls, rights,
or agreements of any character whatsoever to which FFC is a party or by which
FFC is obligated to issue, deliver or sell additional shares of capital stock
or any Voting Debt or by which FFC is obligated to grant, extend or enter into
any such option, warrant, call, right or agreement.
2.03. Ownership and Organization of FSA. FFC directly and beneficially
owns all of the shares of the outstanding capital stock of FSA. FSA is a
federal savings association duly organized and in good standing under the laws
of the United States and has the corporate power and authority to own, lease
and operate its assets and properties and to carry on its business as now
being conducted. FFC has caused FSA to deliver to Bancshares true, accurate
and complete copies of its currently effective Articles of Association and
Bylaws, including all amendments thereto.
Page 7
2.04. Capital Structure of FSA. The authorized capital stock of FSA
consists of (i) 10,000,000 shares of common stock $0.01 par value, of which
100 shares are issued and outstanding and no shares are held by FSA in its
treasury and (ii) 5,000,000 shares of preferred stock, $0.01 par value, none
of which are issued and outstanding. All of the outstanding shares of common
stock of FSA are fully paid and nonassessable and are owned by FFC free and
clear of any claim, lien, encumbrance or agreement with respect thereto and
were not issued in violation of any preemptive rights. FSA has not issued and
has no outstanding Voting Debt. There are no outstanding options, warrants,
calls, rights, or agreements of any character whatsoever to which FSA is a
party or by which FSA is obligated to issue, deliver or sell additional shares
of capital stock or any Voting Debt or by which FSA is obligated to grant,
extend or enter into any such option, warrant, call, right or agreement.
2.05. Subsidiaries. FFC has no subsidiaries other than FSA. Except as
described herein and except for securities held in FSA's capacity as a
fiduciary or as investments made and held in the ordinary course of business,
neither FFC nor FSA owns beneficially, directly or indirectly, any class of
equity securities, partnership interests or similar interests of any
corporation, bank, partnership, limited partnership, business trust,
association or similar organization.
2.06. Authority. FFC has all requisite corporate power and authority to
enter into this Agreement and the Plan of Merger and, subject only to approval
of this Agreement and the Plan of Merger by the shareholders of FFC and by
applicable regulatory authorities, to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the Plan
of Merger and the consummation of the transactions contemplated hereby and
Page 8
thereby have been duly authorized by all necessary corporate action on the
part of FFC's board of directors. This Agreement and the Plan of Merger have
been duly executed and delivered by FFC, and, subject to such shareholder
approval, each constitutes a valid and binding obligation of FFC enforceable
in accordance with its terms, except as the enforceability of the Agreement
may be subject to or limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights of
creditors and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
2.07. No Default.
(a) Except as set forth in Schedule 2.07 of FFC's Disclosure
Schedule, the execution and delivery of this Agreement and the Plan of Merger
do not, and the consummation of the transactions contemplated hereby and
thereby will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or the
loss of a material benefit under, or the creation of a lien, pledge, security
interest or other encumbrance on assets (any such conflict, violation,
default, right of termination, cancellation or acceleration, loss or creation,
a "Violation"), pursuant to any provision of (i) the Articles of
Incorporation, Articles of Association, or Bylaws of FFC or FSA or (ii) any
loan or credit agreement, note, mortgage, indenture, lease, or other
agreement, obligation, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to FFC or FSA or their respective properties or assets, except
where such violation would not have a material adverse effect on the business,
operations or financial condition of FFC and FSA taken as a whole. Other than
in connection or in compliance with the provisions of the TBCA, the Securities
Act of 1933, as amended and the regulations thereunder (the "Securities
Act"), the Securities and Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Exchange Act"), the securities or blue sky laws
Page 9
of the various states, and consents, authorizations, approvals, notices or
exemptions required under the Bank Merger Act, the Bank Holding Company Act of
1956 (the "BHC Act"), the HOL Act, Arkansas banking laws, Texas banking laws,
and from other Governmental Entities (as defined below), no consent, approval,
order or authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"), is required by
or with respect to FFC or FSA in connection with the execution and delivery of
this Agreement and the Plan of Merger by FFC or the consummation by FFC of the
transactions contemplated hereby and thereby.
(b) Neither FFC nor FSA is in default under any material agreement,
ordinance, resolution, decree, bond, note, indenture, order or judgment to
which it is a party, by which it is bound, or to which its properties or
assets are subject.
2.08. FFC Financial Statements.
(a) The (i) consolidated balance sheet of FFC as of September 30,
1999 and 1998 and the related consolidated statements of income, consolidated
statements of cash flows and consolidated statements of shareholders equity
for the years then ended certified Wilf & Henderson, P.C., and (ii) the
internally prepared and unaudited financial statements for FFC and FSA dated
February 29, 2000, (items (i) & (ii) being called collectively the "FFC
Financial Statements"), copies of which have been furnished by FFC to
Bancshares, have been prepared in accordance with generally accepted
accounting principles ("GAAP") (except as otherwise noted therein and, except
for year-end adjustments of the unaudited financial statements of a
nonmaterial nature), present fairly the consolidated financial condition of
FFC and the financial condition of FSA, at the dates, and the results of
operations and cash flows for the periods, stated therein.
Page 10
(b) Neither FFC nor FSA has any liability of any nature, whether
direct, indirect, accrued, absolute, contingent or otherwise, which is
material to FFC and is required to be so disclosed under GAAP, except as
provided for or disclosed in the FFC Financial Statements and except for such
liabilities as are incurred in the ordinary course of business.
2.09. FFC Reports. FFC and FSA have filed all reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that were and are required to be filed with (i) the OTS, (ii) the
Federal Deposit Insurance Corporation ("FDIC"), (iii) the Securities and
Exchange Commission ("SEC") and (iv) any other applicable Governmental Entity
(all such reports and statements are collectively referred to herein as the
"FFC Reports"), except where such failure to file would not have a material
adverse effect on the business operations or financial condition of FFC or
FSA. The FFC Reports complied in all material respects with all of the
statutes, rules and regulations enforced or promulgated by the Governmental
Entity with which they were filed and did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.10. Information Supplied.
(a) None of the information provided or to be provided by FFC for
inclusion or incorporation by reference in any document to be filed with the
SEC, the Board of Governors of the Federal Reserve System ("FRB"), the FDIC,
the Texas Banking Commissioner or any regulatory agency or officer in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of any material fact or omit to state a material fact
required to be stated therein in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Page 11
(b) None of the information with respect to FFC or FSA to be
included in the Proxy Statement (as defined below) will, at the time of the
mailing of the Proxy Statement or any amendments or supplements thereto, and
at the time of the FFC Shareholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act. The letter to shareholders, notice of meeting, proxy statement
and form of proxy to be distributed to shareholders in connection with the
Merger and any schedules required to be filed with the SEC in connection
therewith are collectively referred to herein as the "Proxy Statement."
2.11. Authorizations; Compliance with Applicable Laws. FFC and FSA hold
all authorizations, permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities which are material to the operations of
the businesses of FFC or FSA (the "FFC Permits"). FFC and FSA are in
compliance with the terms of the FFC Permits, except where the failure so to
comply would not have a material adverse effect on FFC or FSA. To the
knowledge of FFC, the businesses of FFC and FSA are not being conducted in
violation of any federal, state or local law, statute, ordinance or regulation
of any Governmental Entity (collectively "Laws"), except for possible
violations which individually or in the aggregate do not and, insofar as
reasonably can be foreseen, in the future will not, have a material adverse
effect on FFC or FSA. Other than routine, scheduled examinations by banking
regulators, no investigation or review by any Governmental Entity with respect
to FFC or FSA is pending or, to the knowledge of FFC, threatened, nor has any
Governmental Entity indicated an intention to conduct the same.
Page 12
2.12. Compliance With Environmental Laws. Except as disclosed in Schedule
2.12 of FFC's Disclosure Schedule:
(a) To the knowledge of FFC, FFC and FSA are, and at all times have
been, in material compliance with, and have not been and are not in violation
of or liable under, any Environmental Law as defined below. FFC and FSA do
not have any basis to expect, nor has either received, any actual or
threatened order, notice or other communication from (a) any Governmental
Entity or private citizen acting in the public interest, or (b) the current or
prior owner or operator of any of the FFC Property, as defined below, of any
actual or potential violation or failure to comply with any Environmental Law,
or of any actual or threatened obligation to undertake or bear any costs or
expenses to comply with or as a result of such Environmental Law with respect
to any of the FFC Property, or with respect to any of the FFC Property to or
at which Hazardous Materials were generated, manufactured, refined,
transferred, imported, used or processed by FFC or FSA or any person for whose
conduct they are or may be held responsible, or from or at which Hazardous
Materials have been transported, treated, stored, handled, transferred,
disposed, recycled or received.
(b) None of the FFC Property contains Hazardous Materials 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 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 $250,000 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 FFC or FSA.
(c) To the knowledge of FFC, none of the outstanding loans of FFC
or FSA are secured by properties (such term shall include properties held by
FFC or FSA as trustee) that contain Hazardous Materials that cannot be
Page 13
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.
(d) To the knowledge of FFC, FFC and FSA do not hold in the
capacity of trustee, and have not 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
Environmental Laws relating to emissions, discharges, wetlands, releases or
threatened releases of pollutants, contaminants or Hazardous Materials 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 Materials.
(e) To the knowledge of FFC, FFC and FSA do not hold in the
capacity of trustee, and have not loaned money against, the securities or
assets of any company or other association, and have not at any time owned
property, that is presently, or for which there is a reasonable basis to
believe that it will be in the future, 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 Material or violation of Environmental
Laws.
(f) As used in this Agreement, "Environmental Laws" means any and
all federal, state and local environmental, health and/or safety-related laws,
standards, ordinances, rules, codes, judicial or administrative orders or
decrees, directives, guidelines, and permits or permit conditions, which are
or become applicable to the FFC Property, including, without limitation, (i)
Page 14
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended (42 U.S.C. SS9601, et seq.), (ii) the Hazardous Materials
Transportation Act, as amended (49 U.S.C. SS1801, et seq.), (iii) the Resource
Conservation and Recovery Act, as amended (42 U.S.C. SS 6901, et seq.), (iv)
the Federal Water Pollution Control Act, as amended (33 U.S.C. SS1251, et seq.
and SS1321, et seq.), (v) the Occupational Safety and Health Act of 1970, as
amended (29 U.S.C. SS651 et seq.), (vi) the Toxic Substances Control Act, as
amended (15 U.S.C. S2601 et seq.), and in the regulations adopted and
promulgated pursuant thereto, as such laws or regulations now exist or may be
amended, enacted, issued or adopted in the future.
(g) As used in this Agreement, "Hazardous Materials" means any
chemical, substance, material, controlled substance, object, condition, waste,
living organism or combination thereof which is or may be hazardous to human
health or safety or to the environment due to its radioactivity, ignitability,
corrosivity, reactivity, explosivity, toxicity, carcinogenicity, mutagenicity,
phytotoxicity, infectiousness or other harmful or potentially harmful
properties or effects, including, without limitation, petroleum and petroleum
products, asbestos and asbestos-containing materials, radon, underground
storage tanks and the contents thereof, polychlorinated biphenyls (PCBs), and
all of those chemicals, substances, materials, controlled substances, objects,
conditions, wastes, living organisms or combinations thereof, which are
listed, defined or regulated in any manner, based directly or indirectly upon
such properties or effects, pursuant to any Environmental Law.
(h) As used in this Agreement, "FFC Property" means any and all
real estate currently or previously owned, leased or otherwise used in the
ordinary course of business by FFC or FSA, or in which FFC or FSA has or had
an investment or security interest (by mortgage, deed of trust or otherwise),
including, without limitation, properties owned pursuant to foreclosure,
properties held by FFC or FSA in the capacity of a trustee or properties in
Page 15
which any venture capital or similar unit of FFC or FSA had an interest.
Warranties given herein with respect to the FFC Property in which FFC or FSA
has only a security interest shall be to the knowledge of FFC.
(i) There shall be no breach of any warranty given in this Section
2.12 unless as a result of the acts or omissions in question FFC and/or FSA
are subject to or reasonably likely to incur a material liability, or suffer a
diminution in value of any interests, exceeding $300,000.
2.13. Litigation and Claims. Except as disclosed in Schedule 2.13 of FFC's
Disclosure Schedule, (a) neither FFC nor FSA is subject to any continuing
order of, or written agreement or memorandum of understanding with, or
continuing material investigation by, any federal or state banking or
insurance authority or other Governmental Entity, or any judgment, order,
writ, injunction, decree or award of any Governmental Entity or arbitrator,
including, without limitation, cease-and-desist or other orders of any bank
regulatory authority, (b) there is no claim of any kind, action, suit,
litigation, proceeding, arbitration, investigation, or controversy affecting
FFC or FSA pending or, to the knowledge of FFC, threatened, which will have or
can reasonably be expected to have a material adverse effect on FFC or FSA,
and (c) there are no uncured material violations, or violations with respect
to which material refunds or restitutions may be required, cited in any
compliance report to FFC or FSA as a result of the examination by any bank
regulatory authority.
2.14. Taxes. FFC and FSA have filed all tax returns required to be filed
by them and have paid or have set up an adequate reserve for the payment of,
all taxes required to be paid as shown on such returns, and the most recent
FFC Financial Statements reflect an adequate reserve for all taxes payable by
FFC and FSA accrued through the date of such financial statements. There has
been no audit by the United States Internal Revenue Service ("IRS") of FFC or
FSA. There is no audit pending by the IRS with respect to FFC or FSA. Neither
FFC nor FSA has executed or filed with the IRS any agreement which is still in
effect extending the period for assessment and collection of any federal tax,
Page 16
and there are no existing material disputes as to federal, state, or local
taxes due from FFC or FSA. There are no material liens for taxes upon the
assets of FFC or FSA, except for statutory liens for taxes not yet delinquent.
Neither FFC nor FSA is a party to any action or proceeding by any Governmental
Entity for assessment and collection of taxes, and no claim for assessment and
collection of taxes has been asserted against any of them. For the purpose of
this Agreement, the term "tax" (including, with correlative meaning, the terms
"taxes" and "taxable") shall include all federal, state, and local income,
profits, franchise, gross receipts, payroll, sales, employment, use, personal
and real property, withholding, excise and other taxes, duties or assessments
of any nature whatsoever, together with all interest, penalties and additions
imposed with respect to such amounts. FFC and FSA have withheld from their
employees and timely paid to the appropriate governmental agency proper and
accurate amounts for all periods through the date hereof in material
compliance with all tax withholding provisions of applicable federal, state,
and local laws (including without limitation income, social security and
employment tax withholding for all types of compensation).
2.15. Certain Agreements. Except as disclosed in Schedule 2.15 of FFC's
Disclosure Schedule or as otherwise contemplated by this Agreement, neither
FFC nor FSA is a party to any written, or to their knowledge, oral (i)
consulting, professional services, employment or other agreement providing any
term of employment, compensation, guarantee, or severance or supplemental
retirement benefit not terminable at will, (ii) union, guild or collective
bargaining agreement, (iii) agreement or plan, any of the benefits of which
will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on
the basis of the transactions contemplated by this Agreement, (iv) any stock
Page 17
option plan, stock appreciation rights plan, restricted stock plan, stock
purchase plan or similar plan granting rights to acquire stock or other equity
in FFC or FSA, or (v) contract containing covenants which limit the ability of
FFC or FSA to compete in any line of business or with any person or which
involve any restriction of the geographical area in which, or method by which,
FFC or FSA may carry on its business (other than as may be required by law or
applicable regulatory authorities). FFC and FSA shall terminate all existing
consulting, professional services and employment contracts other than at will
employment contracts and other than those disclosed in Schedule 2.15 of FFC's
Disclosure Schedule, by no later than the Closing Date unless otherwise
requested by Bancshares.
2.16. Employee Benefit Plans.
(a) Schedule 2.16(a) of FFC's Disclosure Schedule sets forth a
true, complete and correct list (all of which are collectively referred to as
the "Employee Benefit Plans") of all "employee benefit plans", as defined in
S 3(3) of the Employee Retirement Security Act of 1974, as amended and the
rules and regulations promulgated thereunder (collectively, "ERISA") all
benefit plans as defined in S 6039D of the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder (collectively
the "Code"), and all other bonus, incentive compensation, deferred
compensation, profit sharing, stock option, severance, supplemental
unemployment, layoff, salary continuation, retirement, pension, health, life
insurance, disability, group insurance, vacation, holiday, sick leave, fringe
benefit or welfare plan or employment, consulting, change in control,
independent contractor, professional services, confidentiality, or non-
competition agreement or any other similar plan, agreement, policy or
understanding (whether oral or written, qualified or non-qualified) and any
trust, escrow or other funding arrangement related thereto except to the
extent previously disclosed under Section 2.15,
Page 18
(i) which is currently or has been at any time within the last
sixty (60) months maintained or contributed to by FFC, FSA
or any ERISA Affiliate (as herein defined), or
(ii) with respect to which FFC, FSA or any ERISA Affiliate, to
the knowledge of FFC, has any liability or obligations to
any current or former officer, Employee, or service
provider of FFC, FSA or any ERISA Affiliate, or the
dependents of any thereof, and regardless of whether
funded, or
(iii) which to the knowledge of FFC could result in the
imposition of liability or obligation of any kind or
nature, whether accrued, absolute, contingent, direct,
indirect, known or unknown, perfected or inchoate or
otherwise and whether or not now due or to become due, to
FFC, FSA or an ERISA Affiliate which would have a material
adverse effect on FFC, FSA or Bancshares.
(b) No Employee Benefit Plan is a defined benefit plan within the
meaning of S 3(35) of ERISA. Except as disclosed in Schedule 2.16(b) of FFC's
Disclosure Schedule, during the last sixty (60) months, FFC, FSA and all ERISA
Affiliates have not maintained, sponsored or been obligated to contribute to
any Employee Benefit Plans that are subject to Title IV of ERISA, that are
multi-employer plans, or that are multiple employer plans as defined under the
Code and ERISA.
(c) FFC has heretofore provided to Bancshares, or will provide to
Bancshares, within fourteen days following the date hereof (or for purposes of
Section 2.16(c)(xv), the date of request by Bancshares, if later) with respect
to each of the Employee Benefit Plans, true, accurate and complete copies of
the following documents as applicable:
(i) the Employee Benefit Plan document and all amendments,
Page 19
(ii) the actuarial report, if any, for such Employee Benefit
Plan for each of the last three (3) years,
(iii) the most recent determination letter from the Internal
Revenue Service for such Employee Benefit Plan,
(iv) the Internal Revenue Service Form 5500 annual reports for
such Employee Benefit Plan for each of the last three
years,
(v) the most recent summary plan description and related
summaries of material modifications,
(vi) all personnel, payroll and employment manuals and policies,
(vii) all collective bargaining agreements pursuant to which
contributions have been made or obligations incurred by
FFC, FSA or any ERISA Affiliates, and all collective
bargaining agreements pursuant to which contributions are
being made or obligations are owed by such entities,
(viii) a written description of any Employee Benefit Plan that is
not otherwise in writing,
(ix) all registration statements filed with respect to any
Employee Benefit Plan,
(x) all insurance policies purchased by or to provide benefits
under any Employee Benefit Plan,
(xi) all contracts with third party administrators, actuaries,
investment managers, consultants, and other independent
contractors that relate to any Employee Benefit Plan,
(xii) all tests for compliance for the past three (3) years under
Code SS 401(a)(4), 401(a)(26), 401(k), 401(m), 404, 410(b),
415 and 416, if applicable and reports submitted within the
three (3) years preceding the date of this Agreement by
Page 20
third party administrators, actuaries, investment managers,
consultants, or other independent contractors with respect
to any Employee Benefit Plan,
(xiii) sample notices that were given by FFC, FSA, or any ERISA
Affiliate to the Internal Revenue Service (the "IRS"), the
Pension Benefit Guaranty Corporation ("PBGC"), the
Department of Labor ("DOL") or any participant or
beneficiary, pursuant to statute, within the three (3)
years preceding the date of this Agreement, including
notices that are expressly mentioned elsewhere in this
Section 2.16,
(xiv) all closing agreements and documentation regarding any IRS,
DOL or PBGC audits or self-correction programs and all
notices that were given by the IRS, the PBGC, or the DOL to
FFC, FSA, or any ERISA Affiliate within the three (3) years
preceding the date of this Agreement, and
(xv) such other documents, records or other materials related
thereto reasonably requested by Bancshares prior to the
Merger.
(d) Except as disclosed in Schedule 2.16(d) of FFC's Disclosure
Schedule, there have been no material prohibited transactions, breaches of
fiduciary duty or any other breaches or violations of any law applicable to
the Employee Benefit Plans. None of the facts disclosed in Schedule 2.16(d)
of FFC's Disclosure Schedule have had or could reasonably be expected to have
a material adverse effect on FFC and FSA taken as a whole. Except as
disclosed in Schedule 2.16(d) of FFC's Disclosure Schedule, each Employee
Benefit Plan is in compliance with all applicable material provisions of the
Code and ERISA; each Employee Benefit Plan intended to be qualified under Code
S 401(a) has a current favorable determination letter and any subsequent
amendments are within the remedial amendment period; and nothing has occurred
which could reasonably be expected to result in the revocation of such
favorable determination letter. There are no pending or, to the knowledge of
Page 21
FFC, threatened or anticipated claims, lawsuits or actions relating to, by,
on behalf of or against any Employee Benefit Plan (other than routine claims
for benefits). There is no medical, dental, life or disability coverage for
any period of time beyond termination of employment (except to the extent of
coverage required under the Family and Medical Leave Act, S 4980B of the Code
and S 601 of ERISA).
(e) To the knowledge of FFC and except as disclosed in Schedule
2.16(e) of FFC's Disclosure Schedule:
(i) FFC and FSA have performed all of their respective
obligations under all Employee Benefit Plans, and have made
appropriate entries in their financial records and
statements for all obligations and liabilities under such
Employee Benefit Plans, that have accrued but are not due.
(ii) No statement, either written or oral, has been made by FFC
or FSA with regard to any Employee Benefit Plan that was
not in accordance with the Employee Benefit Plan that could
have a material adverse economic consequence to FFC, FSA or
to Bancshares.
(iii) Each Employee Benefit Plan is in full compliance with
ERISA, the Code, all securities laws, and other applicable
laws including the provisions of such laws expressly
mentioned in this Section 2.16 and with any applicable
collective bargaining agreement.
(iv) All filings required by ERISA and the Code as to each
Employee Benefit Plan have been timely filed, and all
notices and disclosures to participants required by either
ERISA or the Code have been timely provided.
Page 22
(v) All contributions and payments made or accrued with respect
to all Employee Benefit Plans, are deductible under Code S
162 or S 404. No amount, or any asset of any Employee
Benefit Plan is subject to tax as unrelated business
taxable income.
(vi) Except to the extent disclosed pursuant to this Agreement,
each Employee Benefit Plan can be terminated within thirty
(30) days, without payment of any additional contribution
or amount and without the acceleration of any benefits
promised by such Employee Benefit Plan.
(viii) No event has occurred or circumstance exists that could
result in a material increase in premium costs of Employee
Benefit Plans that are insured, or a material increase in
benefit costs of any other Employee Benefit Plan.
(ix) FFC and FSA have not filed a notice of intent to terminate
any Employee Benefit Plan or adopted any amendment to treat
any Employee Benefit Plan as terminated.
(x) No payment that is owed or may become due to any director,
officer, Employee, or agent of FFC or FSA or any ERISA
Affiliate will be non-deductible to the FFC or FSA or
subject to tax under Code S 280G or S 4999; nor will FFC or
FSA be required to "gross up" or otherwise compensate any
such person because of the imposition of any excise tax on
a payment to such person.
Page 23
(xi) The consummation of the Merger will not result in the
payment, vesting, or acceleration of any benefit except as
otherwise contemplated by this Agreement.
(xii) Full payment has been made of all amounts which FFC, FSA or
any ERISA Affiliate is required, under applicable law or
under any Employee Benefit Plan or any agreement relating
to any Employee Benefit Plan to which FFC, FSA or any ERISA
Affiliate is a party, to have paid as contributions or
premiums thereto as of the last day of the most recent
fiscal year of such Employee Benefit Plan ended prior to
the date hereof. All such contributions and/or premiums
have been fully deducted for income tax purposes and no
such deduction has been challenged or disallowed by any
Governmental Entity, and no event has occurred and no
condition or circumstance has existed that could give rise
to any such challenge or disallowance. FFC and FSA have
made adequate provision for the reserves to meet
contributions and premiums and any other liabilities that
have not been paid or satisfied because they are not yet
due under the terms of any Employee Benefit Plan,
applicable law or related agreements. Benefits under all
Employee Benefit Plans are as represented and have not been
increased subsequent to the date as of which documents have
been provided except as otherwise contemplated by this
Agreement.
(f) For the purpose of this Section 2.16, the term "ERISA
Affiliate" shall mean (i) any related company or trade or business that is
Page 24
required to be aggregated with FFC or FSA under Code Sections 414(b), (c), (m)
or (o); (ii) any other company, entity or trade or business that has adopted
or has ever participated in any Employee Benefit Plan; and (iii) any
predecessor or successor company or trade or business of FFC or FSA or any
entity described in 2.16(f)(i) and (f)(ii).
(g) For the purpose of this Section 2.16, the term "Employee" shall
be considered to include individuals rendering personal services to FFC or FSA
as independent contractors and leased employees as defined in Code S 414(n)
and the regulations promulgated pursuant thereto.
(h) No lien, security interests or other encumbrances exist with
respect to any of the assets of FFC or FSA, which were imposed pursuant to the
terms of the Code or ERISA, and to the knowledge of FFC or FSA no condition
exists or could occur that would result in the imposition of such liens,
security interests or encumbrances arising from or relating to the Employee
Benefit Plans which could have a material adverse effect on FFC, FSA or
Bancshares.
2.17. Insurance. FFC has delivered to Bancshares correct and complete
copies of all material policies of insurance of FFC and FSA currently in
effect, including, but not limited to, directors and officers liability
policies and blanket bond policies. Neither FFC nor FSA has any liability for
unpaid premiums or premium adjustments not properly reflected on the FFC
Financial Statements.
2.18. Conduct of FFC to Date. Except as contemplated by this Agreement
and the Plan of Merger, from and after December 31, 1999: (a) FFC and FSA have
carried on their respective businesses in the ordinary and usual course
Page 25
consistent with past practices, (b) FFC and FSA have not issued or sold any
capital stock or equity interests or issued or sold any corporate debt
securities which would be classified as long term debt on the balance sheet of
FFC or FSA other than in connection with FFC Employee Benefit Plans, (c) FFC
and FSA have not granted any option for the purchase of capital stock,
effected any stock split, or otherwise changed their capitalization, (d)
except as set forth in Schedule 2.18 of FFC's Disclosure Schedule, FFC has not
declared, set aside, or paid any cash or stock dividend or other distribution
in respect to its capital stock, (e) neither FFC nor FSA has incurred any
material obligation or liability (absolute or contingent), except normal trade
or business obligations or liabilities incurred in the ordinary course of
business or mortgaged, pledged, or subjected to lien, claim, security
interest, charge, encumbrance or restriction any of its assets or properties,
(f) neither FFC nor FSA has discharged or satisfied any material lien,
mortgage, pledge, claim, security interest, charges, encumbrance, or
restriction or paid any material obligation or liability (absolute or
contingent), other than in the ordinary course of business, (g) neither FFC
nor FSA has since December 31, 1999, sold, assigned, transferred, leased,
exchanged, or otherwise disposed of any of its properties or assets other than
for a fair consideration in the ordinary course of business, (h) except as set
forth in Schedule 2.18 of FFC's Disclosure Schedule, neither FFC nor FSA has
increased the rate of compensation of, or paid any bonus to, any of its
directors, executive officers, or other employees, except merit, promotion, or
periodic increases in accordance with existing policy; entered into any new,
or amended or supplemented any existing, employment, management, consulting,
deferred compensation, severance, or other similar contract; adopted, entered
into, terminated, amended or modified (other than as legally required to do so
with respect to the qualified plans) any Employee Benefit Plan in respect of
any of their present or former directors, officers or other employees; or
agreed to do any of the foregoing, (i) neither FFC nor FSA has suffered any
material damage, destruction, or loss, whether as the result of flood, fire,
Page 26
explosion, earthquake, accident, casualty, labor trouble, requisition or
taking of property by any government or any agency of any government,
windstorm, embargo, riot, act of God, or other similar or dissimilar casualty
or event or otherwise, whether or not covered by insurance, (j) except as set
forth in Schedule 2.18 of FFC's Disclosure Schedule, neither FFC nor FSA has
cancelled or compromised any debt to an extent exceeding $250,000.00 owed to
FFC or FSA or claim to an extent exceeding $250,000.00 asserted by FFC or FSA,
(k) neither FFC nor FSA has entered into any transaction, contract, or
commitment outside the ordinary course of its business, (1) neither FFC nor
FSA has entered, or agreed to enter, into any agreement or arrangement
granting any preferential right to purchase any of its material assets,
properties or rights or requiring the consent of any party to the transfer and
assignment of any such material assets, properties or rights, (m) there has
not been any material change in the method of accounting or accounting
practices of FFC or FSA other than as a result of changes or pronouncements by
a Governmental Entity, and (n) FFC and FSA have kept all records substantially
in accordance with all regulatory and statutory requirements and substantially
in accordance with industry standards, and have retained such records for the
periods required by statute, regulation industry standards.
2.19. Material Adverse Change. Since December 31, 1999, there has been no
material adverse change in the financial condition, results of operations or
business of FFC or FSA.
2.20. Properties, Leases and Other Agreements. Except (i) with respect to
debts reflected in the FFC Financial Statements, (ii) for any lien for current
taxes not yet delinquent, (iii) for pledges to secure deposits and (iv) for
such other liens, security interests, claims, charges, options or other
encumbrances and imperfections of title which do not materially affect the
value or interfere with or impair the present and continued use of personal or
real property reflected in the FFC Financial Statements or acquired since the
Page 27
date of such FFC Statements, FFC and FSA have good title, free and clear of
any liens, security interests, claims, charges, options or other encumbrances
to all of the personal and real property reflected in the FFC Financial
Statements, and all personal and real property acquired since the date of such
FFC Financial Statements, except such personal and real property as has been
disposed of in the ordinary course of business. All of the buildings and
equipment in regular use by FFC and FSA have been reasonably maintained and
are in good and serviceable condition, reasonable wear and tear excepted. All
leases material to FFC and FSA pursuant to which FFC or FSA, as lessee,
leases real or personal property are valid and effective in accordance with
their respective terms and there is not, under any of such leases, any
material existing default by FFC or FSA, or, to their knowledge, any other
party thereto, or any event which with notice or lapse of time or both would
constitute such a material default. No options to renew said leases have
lapsed and the terms of the leases govern the rights of the respective
landlords of FFC and FSA.
2.21. No Untrue Statements. To the knowledge of FFC, no representation or
warranty hereunder in any financial statement or any other document delivered
to Bancshares pursuant to this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading.
2.22. Proper Documentation. With respect to all loans to borrowers which
are payable to FFC or FSA either directly or as a participant and except for
such imperfections in documentation which when considered as a whole would not
have a material adverse effect on the business, operations or financial
condition of either FFC or FSA:
(a) All loans were made for good, valuable and adequate
consideration in the normal and ordinary course of business, and the notes and
other evidences of indebtedness and any loan agreements or security documents
executed in connection therewith are true and genuine and, to the knowledge of
Page 28
FFC, constitute the valid and legally binding obligations of the borrowers to
whom the loans were made and are legally enforceable against such borrowers in
accordance with their terms subject to applicable bankruptcy, insolvency,
reorganization, moratorium, and similar debtor relief laws from time to time
in effect, as well as general principles of equity applied by a court of
proper jurisdiction (regardless of whether such enforceability is considered
in a proceeding in equity or at law);
(b) The amounts reflected in the FFC Statements as the balances
owing on the loans are the correct amounts actually and unconditionally owing,
are undisputed, and are not subject to any offsets, credits, deductions or
counterclaims;
(c) The collateral securing each loan as referenced in a security
agreement is in fact the collateral held by FFC or FSA to secure each loan;
(d) Except for loans originated by others in which FSA
participates, FFC or FSA has possession of reasonably complete loan document
files and credit files for all loans held by them containing promissory notes
and other relevant evidences of indebtedness with original signatures of their
borrowers and guarantors;
(e) To the knowledge of FFC, FFC and FSA hold validly perfected
liens or security interests in the collateral granted to them to secure all
loans as referenced in the security agreements and the loan or credit files
contain the original security agreements, mortgages, or other lien creation
and perfection documents unless originals of such documents are filed of
public record;
(f) To the knowledge of FFC, each lien or security interest of FFC
or FSA in the collateral held for each loan is properly perfected in the
priority described as being held by FFC or FSA in the security agreements
contained in the loan document or credit files;
Page 29
(g) FFC and FSA are in possession of all collateral that the loan
document files or credit files indicate they have in their possession;
(h) To the knowledge of FFC, all guaranties granted to FFC and FSA
to insure payment of loans constitute the valid and legally binding
obligations of the guarantors and are enforceable in accordance with their
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, and similar debtor relief laws from time to time in effect, as
well as general principles of equity applied by a court of proper jurisdiction
(regardless of whether such enforceability is considered in a proceeding in
equity or at law);
(i) With respect to any loans in which FFC and FSA have sold
participation interests to another bank or other financial institution, to the
knowledge of FFC, none of the buyers of such participation interests are in
default under any participation agreements.
2.23. Material Contracts. Except as set forth in the FFC Reports and
except for contracts with data processing providers, neither FFC nor FSA is a
party to or bound by any "material contract" (as such term is defined in item
601(b)(10) of Regulation S-K of the SEC) (all contracts of the type described
in this Section 2.23 being referred to herein as "FFC Material Contracts").
Schedule 2.23 of FFC's Disclosure Schedule sets forth, as of the date of this
Agreement, a true and complete list of all contracts (other than those
disclosed in FFC's SEC reports) to which FFC or FSA is a party relating to the
business or assets of FFC or FSA (except, with respect to clauses (ii) and
(iv) below, any of the foregoing calling for aggregate payments of less than
$100,000), including, without limitation, all written or oral, express or
implied (i) contracts not made in the ordinary course of business consistent
with past practice; (ii) purchase, supply and customer contracts; (iii)
contracts relating to the borrowing of money or for lines of credit; (iv)
contracts involving leases and subleases of real or personal property; (v)
contracts for the sale of any assets other than in the ordinary course of
Page 30
business consistent with past practice or for the grant of any options or
preferential rights to purchase any assets, property or rights; (vi) contracts
granting any power of attorney with respect to the affairs of either FFC or
FSA; (vii) suretyship contracts, working capital maintenance or other forms of
guaranty contracts; (viii) contracts limiting or restraining FFC or FSA from
engaging or competing in any lines of business or with any person, firm or
corporation, (ix) partnership and joint venture contracts; (x) indentures,
mortgages, notes, installment obligations, or other instruments relating to
the borrowing of money in excess of $100,000 by FFC or FSA; (xi) contracts
which have remaining terms, as of the date of this Agreement, of over one year
in length of obligation on the part of FFC or FSA and provide for aggregate
payments in excess of $100,000; and (xii) all amendments, modifications,
extensions or renewals of any of the foregoing. Each contract described above
is valid and binding on FFC or FSA and is in full force and effect, and FFC
and FSA have in all material respects performed all obligations required to be
performed by them to date under each FFC Material Contract, except where such
noncompliance, individually or in the aggregate, would not have a material
adverse effect on FFC or FSA. Neither FFC nor FSA knows of, or has received
notice of, any violation or default under any such contract except for such
violations or defaults as would not in the aggregate have a material adverse
effect on FFC or FSA.
2.24. Regulatory Approvals. FFC is not aware of any reason that would
prevent Bancshares from obtaining the necessary regulatory approval for the
consummation of the Merger.
2.25. Federal Financial Assistance. FFC has never received any Federal
Financial Assistance as that term is defined in Section 597 of the Code and
the regulations adopted thereunder.
Page 31
ARTICLE III
Representations and Warranties of Bancshares
Bancshares hereby represents and warrants to FFC as follows:
3.01. Organization of Bancshares. Bancshares is a corporation duly
organized, validly existing and in good standing under the laws of the state
of Arkansas and has the corporate power and authority to own, lease and
operate its assets and properties and to carry on its business as now being
conducted. Bancshares is registered as a bank holding company with the FRB
under the BHC Act.
3.02. Authority. Subject to the approval of this Agreement and the Plan
of Merger by applicable regulatory authorities, Bancshares has the corporate
power and authority to enter into this Agreement and the Plan of Merger and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Plan of Merger and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Bancshares' board of directors.
This Agreement and the Plan of Merger have been duly executed and delivered by
Bancshares and each constitutes a valid and binding obligation of Bancshares
enforceable in accordance with its terms, except as the enforceability of the
Agreement may be subject to or limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
3.03. No Default. The execution and delivery of this Agreement and the
Plan of Merger do not, and the consummation of the transactions contemplated
hereby and thereby will not, result in any Violation pursuant to any provision
of (i) the Articles of Incorporation or Bylaws of Bancshares or any of its
subsidiaries or (ii) any loan or credit agreement, note, mortgage, indenture,
Page 32
lease, or other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Bancshares or any of its subsidiaries or their
respective properties or assets, except where such violation would not have a
material adverse effect on the business, operations or financial condition of
Bancshares and its subsidiaries taken as a whole. Other than in connection or
in compliance with the provisions of the TBCA, the Securities Act, the
Exchange Act, the securities or blue sky laws of the various states, and
consents, authorizations, approvals, notices or exemptions required under the
Bank Merger Act, BHC Act, the HOL Act, Arkansas banking laws, Texas banking
laws, and from other Governmental Entities, no consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Bancshares in connection
with the execution and delivery of this Agreement and the Plan of Merger by
Bancshares or the consummation by Bancshares of the transactions contemplated
hereby and thereby.
3.04. Bancshares Financial Statements. (a) The (i) consolidated balance
sheets of Bancshares as of December 31, 1999 and 1998 and the related
consolidated statements of income, consolidated statements of cash flows and
consolidated statements of shareholders equity for the years then ended
certified by Arthur Andersen LLP ("Bancshares Financial Statements") copies of
which have been furnished by Bancshares to FFC, have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as otherwise noted therein and except for year end
adjustments of a nonmaterial nature), and present fairly the
consolidated financial condition of Bancshares, at the dates, and the
consolidated results of operations and cash flows for the periods, stated
therein.
3.05. No Untrue Statements. To Bancshares' knowledge, no representation
or warranty hereunder or in any financial statement or any other document
Page 33
delivered to FFC pursuant to this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading.
3.06. Material Adverse Change. Since December 31, 1999, there has been no
material adverse change in the financial condition, results of operations or
business of Bancshares.
3.07. Authorizations; Compliance with Applicable Laws. Bancshares and its
subsidiaries hold all authorizations, permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities which are
material to the operations of the business of Bancshares and its subsidiaries
(the "Bancshares Permits"). Bancshares and its subsidiaries are in compliance
with the terms of the Bancshares Permits, except where the failure so to
comply would not have a material adverse effect on Bancshares or a Bancshares
subsidiary. To the knowledge of Bancshares, the businesses of Bancshares and
its subsidiaries are not being conducted in violation of any federal, state or
local law, statute, ordinance or regulation of any Governmental Entity
(collectively "Laws"), except for possible violations which individually or in
the aggregate do not and, insofar as reasonably can be foreseen, in the future
will not, have a material adverse effect on Bancshares or a Bancshares
subsidiary. Other than routine, scheduled examinations by banking regulators,
no investigation or review by any Governmental Entity with respect to
Bancshares or a Bancshares subsidiary is pending or, to the knowledge of
Bancshares, threatened, nor has any Governmental Entity indicated an intention
to conduct the same.
3.08. Regulatory Approval. Bancshares is not aware of any reason that
would prevent Bancshares from obtaining the necessary regulatory approvals for
the consummation of the Merger and the Subsidiary Mergers.
3.09. Accredited Investor. Bancshares is an accredited investor as
defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as
amended ("Act").
Page 34
ARTICLE IV
Agreements of FFC
4.01. Affirmative Covenants of FFC. FFC hereby covenants and agrees with
Bancshares that prior to the Effective Time, unless the prior written consent
of Bancshares shall have been obtained, which consent shall not be
unreasonably withheld, and except as otherwise contemplated herein, FFC will
and FFC will cause FSA to:
(a) operate its business only in the usual, regular and ordinary
course consistent with past practices;
(b) use reasonable efforts to preserve intact its business
organization and assets, maintain its rights and franchises, retain the
services of its officers and key employees (except that it shall have the
right to lawfully terminate the employment of any officer or key employee if
such termination is in accordance with existing employment procedures of FFC
or FSA) and maintain its relationships with customers;
(c) use reasonable efforts to maintain and keep its properties in
as good repair and condition as at present, except for depreciation due to
ordinary wear and tear;
(d) use reasonable efforts to keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that now
maintained;
(e) perform in all material respects all obligations required to be
performed by it under all material contracts, leases, and documents relating
to or affecting its assets, properties, and business;
(f) use reasonable efforts to comply with and perform in all
material respects all obligations and duties imposed upon it by all Laws; and
Page 35
(g) give Bancshares notice of all board of directors meetings,
allow Bancshares to have a non-voting representative at each such meeting
except to the extent that FFC's legal counsel advises the directors that
permitting Bancshares' presence would constitute a breach of its fiduciary
duties, and provide Bancshares with all written materials and communications
provided to the directors in connection with such meetings; provided, however,
that such representative will not receive written materials relating solely to
the Merger and will be excused from the portion of such meetings at which the
sole matter to be considered is action related to the Merger.
4.02. Negative Covenants of FFC. Except as specifically contemplated by
this Agreement, from the date hereof until the earlier of the termination of
the Agreement or the Effective Time, FFC shall not do, and FFC will cause FSA
not to do, any of the following acts without the prior written consent of
Bancshares, which consent shall not be unreasonably withheld:
(a) incur any material liabilities or material obligations, whether
directly or by way of guaranty, including any obligation for borrowed money
whether or not evidenced by a note, bond, debenture or similar instrument,
except in the ordinary course of business consistent with past practice;
(b) (i) except as disclosed in Schedule 2.18 of FFC's Disclosure
Schedule and except for merit or promotion increases in accordance with
existing policy, grant any bonuses or increase in compensation to their
employees, officers or directors, (ii) effect any change in retirement or any
other benefits to any class of employees or officers (unless any such change
shall be required by this Agreement or applicable law) which would increase
their retirement benefit liabilities, (iii) adopt, enter into, amend or modify
any FFC Employee Benefit Plan except as provided herein, or (iv) hire any
executive officer or elect any new director;
Page 36
(c) except as set forth in Schedule 4.02(c) of FFC's Disclosure
Schedule, declare or pay any dividend on, or make any other distribution in
respect of, their outstanding shares of capital stock or equity interests
other than cash dividends by FSA;
(d) except as contemplated by this Agreement or as set forth in
Schedule 4.02(d) of FFC's Disclosure Schedule, (i) redeem, Purchase or
otherwise acquire any shares of its capital stock or equity interests or any
securities or obligations convertible into or exchangeable for any shares of
its capital stock or equity interests, or any options, warrants, conversion or
other rights to acquire any shares of its capital stock or equity interests or
any such securities or obligations; (ii) merge with or into or consolidate
with any other corporation or bank, or effect any reorganization or
recapitalization; (iii) Purchase or otherwise acquire any substantial portion
of the assets or any class of stock, of any corporation, bank or other
business; (iv) liquidate, sell, dispose of, or encumber any assets or acquire
any assets, other than in the ordinary course of business consistent with past
practice; or (v) split, combine or reclassify any of its capital or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock;
(e) issue, deliver, award, grant or sell, or authorize or propose
the issuance, delivery, award, grant or sale of, any shares of its capital
stock of any class (including shares held in treasury), any equity interests,
any Voting Debt or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, equity interests, Voting Debt or
convertible securities;
(f) except pursuant to a written opinion of legal counsel that
failure to take such action would violate the directors' fiduciary duties,
initiate, solicit or encourage (including by way of furnishing information or
assistance), take any action to facilitate, any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, any
Page 37
Competing Transaction (as such term is defined below), or negotiate with any
person in furtherance of such inquiries or to obtain a Competing Transaction,
or agree to or endorse any Competing Transaction, or authorize any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by FFC or FSA to take
any such action and, upon learning of such action by any representative, shall
take appropriate steps to terminate such action and shall promptly notify
Bancshares orally of all of the relevant details relating to all inquiries and
proposals which it may receive relating to any of such matters. For purposes
of this Agreement, "Competing Transaction" shall mean any of the following
involving FFC or FSA: any merger, consolidation, share exchange or other
business combination; a sale, lease, exchange, mortgage, pledge, transfer or
other disposition of a substantial portion of assets; a sale of shares of
capital stock (or securities convertible or exchangeable into or otherwise
evidencing, or any agreement or instrument evidencing, the right to acquire
capital stock) or equity interests;
(g) propose or adopt any amendments to its corporate charter or
bylaws except as provided in this Agreement;
(h) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into an agreement in principle with
respect to any acquisition of a material amount of assets or securities or any
release or relinquishment of any material contract rights not in the ordinary
course of business;
(i) except in their fiduciary capacities, Purchase any shares of
Bancshares common stock;
(j) change any method of accounting in effect at December 31, 1999,
or change any method of reporting income or deductions for federal income tax
Page 38
purposes from those employed in the preparation of the federal income tax
returns for the taxable year ending December 31, 1999, except as may be
required by law, rule or regulation or GAAP;
(k) change the lending, investment, asset/liability management and
other material policies concerning the business of FFC or FSA, unless required
by Law or order or unless such change does not cause a material adverse effect
on FFC or FSA;
(l) make any single new loan or series of loans not in accordance
with existing loan policies to one borrower or related series of borrowers in
an aggregate amount greater than $500,000;
(m) sell or otherwise dispose of securities owned as investments
except at maturity dates or in accordance with past practices for securities
held for sale or trading or in accordance with GAAP for securities classified
as "held to maturity";
(n) sell or dispose of any real estate or other assets having a
value in excess of $100,000.00;
(o) make any capital expenditure other than those set forth in
Schedule 4.02(o) of FFC's Disclosure Schedule or those that are made in the
ordinary course of business or are necessary to maintain existing assets in
good repair, and in any event are in an amount of no more than $100,000 in the
aggregate, or except as necessary to comply with applicable regulatory
guidelines; or
(p) agree in writing or otherwise to do any of the foregoing.
4.03. Access and Information. Upon reasonable notice, FFC shall, and
shall cause FSA to, afford to Bancshares's officers, employees, accountants,
counsel and other representatives, reasonable access, during normal business
hours during the period prior to the Effective Time, to all its properties,
books, contracts, commitments and records. Bancshares agrees that any such
Page 39
investigation will be conducted in a manner that is the least disruptive to
FFC's and FSA's business as possible. During such period, FFC shall, and
shall cause FSA to, furnish promptly to Bancshares (i) a copy of each FFC
Report filed by it during such period pursuant to the requirements of all
applicable federal or state banking laws or bank holding company laws promptly
after such documents are available, (ii) the monthly financial statements of
FSA promptly after such financial statements are available, (iii) minutes of
the meetings of the Boards of Directors, or any committee thereof, of FFC or
FSA, and (iv) all other information concerning its business, properties and
personnel as Bancshares may reasonably request.
4.04. FFC Shareholders Meeting. FFC shall call a meeting of its
shareholders to be held as promptly as practicable, which date may be after
Bancshares has filed its regulatory applications related to the Merger, for
the purpose of voting upon the Merger Agreements. Consummation of the Merger
shall be contingent upon its approval by the legally required votes of the
shares of FFC Stock at such shareholder meeting. FFC will with the cooperation
and assistance of Bancshares, prepare and file a Proxy Statement soliciting
proxies from FFC's shareholders in connection with the FFC shareholders
meeting. The Board of Directors of FFC shall recommend approval of the Plan
of Merger to FFC's shareholders, provided, however, that FFC's Board of
Directors may submit this Agreement and the transactions contemplated therein
to its shareholders for approval without recommendation pursuant to Article
5.03(B) of the TBCA if such Board of Directors determines in good faith that
it must do so in order to comply with its fiduciary duties.
4.05. Proxy Statement. As soon as practicable after the date hereof,
after Bancshares files its applications, FFC shall prepare and file the Proxy
Statement with the SEC under the Exchange Act and shall use its reasonable
best efforts to have the Proxy Statement cleared by the SEC. Bancshares and
Page 40
FFC shall cooperate with each other in the preparation of the Proxy Statement.
FFC shall notify Bancshares promptly of the receipt of any comments of the SEC
with respect to the Proxy Statement and of any request by the SEC for any
amendment or supplement thereto or for additional information. FFC shall
provide to Bancshares promptly copies of all correspondence between FFC or any
representative of FFC and the SEC. FFC shall give Bancshares and its counsel
the opportunity to review the Proxy Statement prior to its being filed with
the SEC and shall give Bancshares and its counsel the opportunity to review
all amendments and supplements to the Proxy Statement and all responses to
requests for additional information and replies to comments prior to their
being filed with, or sent to, the SEC. Each of Bancshares and FFC agrees to
use its reasonable best efforts, after consultation with the other party
hereto, to respond promptly to all such comments of and requests by the SEC
and to cause the Proxy Statement and all required amendments and supplements
thereto to be mailed to the holders of FFC Stock entitled to vote at the FFC
shareholders meeting referred to in Section 4.04 at the earliest practicable
time.
4.06. Termination or Merger of Employee Benefit Plans. If requested by
Bancshares, prior to the Effective Time, FFC hereby covenants and agrees to
cooperate with Bancshares and take all reasonable actions to effect the merger
of any Employee Benefit Plan that is intended to be qualified under Code
S 401(a) into the appropriate tax qualified retirement plan of Bancshares (or
upon merger of Bancshares with BancorpSouth, Inc. of BancorpSouth, Inc. or
BancorpSouth Bank) after the Merger is completed, so that such plan merger
satisfies the requirements of Code S 414(l); provided, however, that
Bancshares shall not be obligated to effect any such merger of an Employee
Benefit Plan.
If requested by Bancshares (or, upon merger of Bancshares with
BancorpSouth, Inc., by BancorpSouth, Inc.), prior to the Effective Time, FFC
hereby covenants and agrees to freeze, terminate, amend or take other action
with respect to any Employee Benefit Plan that Bancshares (or BancorpSouth,
Page 41
Inc.), in its sole discretion, deems advisable and not inconsistent with this
Agreement; to take all steps necessary to accomplish such requests, including
terminating FFC's and FSA's participation in any Employee Benefit Plan with
respect to FFC and FSA Employees; to provide all the required notices to
participants and appropriate governmental agencies, to adopt all necessary
resolutions and Employee Benefit Plan amendments, and to provide to Bancshares
(or BancorpSouth, Inc.) satisfactory evidence of the executed documents
described in this Section 4.06.
4.07. FFC ESOP. Upon execution of this Agreement, FFC will amend the FFC
ESOP to provide that: (i) effective with the Closing Date, amounts received by
the FFC ESOP on the sale of the shares held as collateral for the outstanding
FFC ESOP loan will be used first to repay the outstanding balance on the FFC
ESOP loan; (ii) then any proceeds from the sale of pledged unallocated shares
held by the FFC ESOP in excess of the outstanding balance on the FFC ESOP
loan, will be allocated directly to participants' accounts under the FFC ESOP,
as earnings, in accordance with the terms of the FFC ESOP; and (iii) that none
of the proceeds received on the sale of the shares held as collateral for the
outstanding FFC ESOP loan will be treated as annual additions for purposes of
Code section 415. FFC shall then promptly file such amendment with the
Internal Revenue Service for a determination as to the effect of the amendment
on the qualified status of the FFC ESOP. Following the receipt of a favorable
determination letter, all proceeds received by the FFC ESOP will be allocated
to participants' accounts under the FFC ESOP, in accordance with the terms of
the approved amendment. In the event a favorable determination letter is not
received, all proceeds received by the FFC ESOP will be allocated to
participants' accounts under the FFC ESOP in accordance with its terms.
Following such allocation, and subject to Section 4.06 and Section 5.02(c)
hereof, the FFC ESOP may either be terminated or merged into a Bancshares plan
(or upon the merger of Bancshares with BancorpSouth, Inc., a BancorpSouth,
Inc. Plan or BancorpSouth Bank plan) at the request of Bancshares in
accordance with the terms of ERISA and all other applicable law.
Page 42
4.08. FFC's Disclosure Schedule. On or prior to the date hereof, FFC has
delivered to Bancshares a schedule ("FFC's Disclosure Schedule") setting
forth, among other things, items the disclosure of which is necessary or
appropriate in relation to any or all of its representations and warranties.
ARTICLE V
Agreements of Bancshares
5.01. Regulatory Approvals. Bancshares shall file all regulatory
applications required to consummate the Merger, including but not limited to
an application for the prior approval of the FDIC and the Texas Banking
Commissioner, and shall use its reasonable best efforts to have the
applications approved. Bancshares and FFC shall cooperate with each other in
the preparation of the applications and Bancshares shall notify FFC promptly
of the receipt of any comments of any regulatory agency with respect to an
application and of any request for any amendment or supplement thereto or for
additional information. Bancshares shall provide to FFC promptly copies of
all correspondence between Bancshares or any representative of Bancshares and
any regulatory agency regarding an application. Bancshares shall give FFC and
its counsel the opportunity to review the applications prior to their being
filed and shall give FFC and its counsel the opportunity to review all
amendments and supplements to any application and all responses to requests
for additional information and replies to comments prior to their being filed
with, or sent to, the regulatory agency. Each of Bancshares and FFC agrees to
use its reasonable best efforts, after consultation with the other party
hereto, to respond promptly to all such comments of and requests by a
regulatory agency.
Page 43
5.02. Bancshares Employee Benefit Plans. Bancshares presently intends
that, whether the Employee Benefit Plans are terminated or merged, after the
Merger, neither Bancshares, FFC nor FSA will make additional contributions to
the Employee Benefit Plan, under the terms of the Employee Benefit Plans.
Each employee of FFC or FSA who after the Merger becomes an employee of
Bancshares or a Bancshares subsidiary (or of BancorpSouth or a BancorpSouth
subsidiary) or who remains an employee of FSA, (each, a "Continuing
Employee"), to the extent permissible under the terms of the Bancshares plans
(or upon the merger of Bancshares with BancorpSouth, Inc., under the terms of
the BancorpSouth, Inc. or BancorpSouth Bank plans), will be entitled to
participate in the employee benefit plans and programs maintained for
similarly situated employees of Bancshares (or of BancorpSouth, Inc. or
BancorpSouth Bank) and its affiliates to the same extent as similarly situated
employees of Bancshares (or of BancorpSouth, Inc. or BancorpSouth Bank), in
accordance with the respective terms of such plans and programs, and
Bancshares shall take all actions necessary or appropriate to facilitate
coverage of the Continuing Employees in such plans and programs from and after
the Effective Time (it being understood that inclusion of FFC and FSA
employees in Bancshares', BancorpSouth, Inc.'s, or BancorpSouth Bank's plans
may occur at different times with respect to different plans based on the
specific eligibility requirements and entry dates of each plan) subject to the
following:
(a) Each Continuing Employee shall be given vesting and eligibility
service credit for time during which the employee was employed by FFC and/or
FSA for purposes of determining benefits due under the Bancshares' Employee
Stock Ownership Plan and the Bancshares' 401(k) Plan (or upon the merger of
Bancshares with BancorpSouth, Inc., the BankcorpSouth, Inc. or BancorpSouth
Bank plans). Continuing Employees shall not receive service credit, for any
purpose under the Bancshares' Defined Benefit Retirement Plan, which has been
Page 44
frozen (or upon merger of Bancshares with BancorpSouth, Inc., Continuing
Employees shall not receive service credit for the purpose of accrual of
pension benefits under the BancorpSouth, Inc. or BancorpSouth Bank defined
benefit plan).
(b) Each Continuing Employee shall receive credit for all time
employed with FFC or FSA for purposes of the application of Bancshares' or a
Bancshares' subsidiary's (or, if applicable, BancorpSouth, Inc.'s or
BancorpSouth Bank's) severance (as limited by Section 5.02(d)) and vacation
policies applicable to employees generally, and for all purposes under the
employee welfare benefit plans and other employee benefit plans and programs
sponsored by Bancshares or its affiliates (or by BancorpSouth, Inc. or
BancorpSouth Bank) (but not for any purpose under the Bancshares' Defined
Benefit Retirement Plan or for accrual of pension benefits under any defined
benefit plan of BancorpSouth, Inc. or BancorpSouth Bank); provided however,
that such service shall not be recognized to the extent that such recognition
would result in a duplication or increase of benefits or such service would
not be recognized under an Employee Benefit Plan (or a plan of BancorpSouth,
Inc. or BancorpSouth Bank). Any preexisting condition exclusion applicable to
such plans and programs shall be waived with respect to any Continuing
Employee to the same extent waived under the FFC or FSA Employee Benefit
Plans. For purposes of determining each Continuing Employee's benefit for the
year in which the Merger occurs under the Bancshares' (or, if applicable,
BancorpSouth, Inc.'s or BancorpSouth Bank's) vacation program, any vacation
taken by a Continuing Employee preceding the Closing Date for the calendar
year in which the Merger occurs will be deducted from the total Bancshares'
(or, if applicable, BancorpSouth, Inc.'s or BancorpSouth Bank's) vacation
benefit available to such employee for such calendar year.
(c) On or before, but effective as of the Closing Date, FFC may
take such actions as may be necessary (a) to cause each individual employed by
Page 45
FFC or FSA immediately prior to the Closing Date to have a fully vested and
nonforfeitable interest in such employee's account balance in the FFC ESOP and
the First Federal Savings & Loan Association of Texarkana Financial
Institutions Thrift Plan ("401(k) Plan") sponsored by FFC as of the Closing
Date and (b) to contribute amounts accrued on the books of FFC from January 1,
2000 to the Closing Date to such plan(s).
The provisions of this Section are solely for the purpose of setting
forth the understanding between Bancshares and FFC, and shall not create or
modify any employee benefit plan of Bancshares or any of its affiliates (or of
BancorpSouth, Inc. or BancorpSouth Bank), and shall not be construed as
creating any employment contract or third party beneficiary right between
Bancshares or FFC (or BancorpSouth, Inc. or BancorpSouth Bank), on one hand,
and any such employee, on the other hand.
(d) Any Continuing Employee who is terminated for any reason other
than for cause within one year from the Closing Date shall be entitled to
receive severance pay ("Severance Pay") equal to the product of (x) such
Continuing Employee's weekly base salary, and (y) the number of weeks
applicable to such Continuing Employee as set forth in the following schedule:
Salary Ranges
_______________________________________________________
$15,000 or less $15,001 to $40,000 $40,001 or greater
_______________ __________________ __________________
Length of Service
_________________
90 days but less
than 5 years
2 weeks 4 weeks 8 weeks
5 years but less
than 10 years
5 weeks 8 weeks 14 weeks
10 years or greater
8 weeks 12 weeks 20 weeks
Any Continuing Employee who receives Severance Pay under this schedule shall
not be entitled to additional severance pay under any other policy of
Bancshares (or BancorpSouth) as a result of the termination described herein.
For purposes of this Section 5.02(d), "cause" shall be defined as (i) any act
or omission by such Continuing Employee constituting fraud under the laws of
Page 46
the State of Arkansas or the United States of America; or (ii) a finding of
probable cause, or a plea of nolo contendere to, a felony or other crime
involving moral turpitude by such Continuing Employee; or (iii) the negligent
performance by such Continuing Employee of the material responsibilities of
his or her position or the negligent failure by such Continuing Employee to
adhere to the policies of Bancshares (or BancorpSouth); or (iv) the willful or
reckless failure by such Continuing Employee to substantially perform his
duties hereunder, the willful or reckless failure by such Continuing Employee
to adhere to Bancshares' (or BancorpSouth's) policies, or the willful or
reckless engaging by such Continuing Employee in misconduct which is
materially injurious to Bancshares (or BancorpSouth); or (v) failure by such
Continuing Employee to comply with Bancshares' (or BancorpSouth's) policies
concerning employment discrimination or harassment; or (vi) the receipt by
such Continuing Employee of a materially and substantially unfavorable
performance review, provided, however, that such Continuing Employee shall be
given a thirty day probationary period within which said Continuing Employee
shall be allowed an opportunity to correct any performance deficiencies
included in the review.
5.03. Indemnification.
(a) For a period of five years after the Effective Time, Bancshares
shall indemnify, defend and hold harmless the officers and directors of FFC
(each, an "Indemnified Party") against all liabilities arising out of actions
or omissions out of their employment by or service with FFC and occurring at
or prior to the Effective Time to the full extent permitted under applicable
law and by Bancshares' Articles of Incorporation and Bylaws as in effect on
the date hereof, including provisions relating to advances of expenses
incurred in the defense of any litigation; provided that no such
indemnification shall be made for actions or omissions which constitute fraud,
are intentionally taken or omitted in bad faith, constitute a knowing breach
Page 47
of this Agreement or constitute violations of criminal law, unless the
Indemnified Party had no reasonable cause to believe his or her conduct was
unlawful.
(b) Any Indemnified Party wishing to claim indemnification under
this Section 5.03, upon learning of any such liability of litigation, shall
promptly notify Bancshares thereof (provided, however, that the failure to so
notify shall release Bancshares only to the extent it actually prejudiced
thereby). In the event of any such litigation (whether arising before or
after the Effective Time), (i) Bancshares shall have the right to assume the
defense thereof and Bancshares shall not be liable to such Indemnified Party
for any legal expenses for other counsel or any other expenses subsequently
incurred by such Indemnified Parties in connection with the defense thereof,
except that if Bancshares elects not to assume such defense or counsel for the
Indemnified Parties advises that there are substantive issues which raise
conflicts of interest between Bancshares and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and Bancshares
shall pay all reasonable fees and expenses of such counsel for the Indemnified
Parties; provided, however, that Bancshares shall be obligated pursuant to
this Section 5.03 to pay for such additional counsel for Indemnified Parties
in any jurisdiction as counsel for Bancshares shall determine is necessary
under law and professional ethics; (ii) the Indemnified Parties will cooperate
in the defense of any such litigation, and (iii) Bancshares shall not be
liable for any settlement effected without its prior written consent; and
provided, further, that Bancshares shall not have obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall
determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
(c) In consideration of the indemnification obligations provided by
Bancshares in this Section 5.03 and as a condition precedent thereto, each
Page 48
officer and director of FFC shall have delivered to Bancshares on or prior to
the date of this Agreement a letter (in form reasonably satisfactory to
Bancshares) describing all known claims such officers and directors may have
against FFC. In the letter, the officer or director shall; (a) acknowledge
the assumption by Bancshares of all liability (to the extent FFC would be so
liable) for claims for indemnification arising under Section 5.03 hereof; (b)
affirm that he or she is not aware of any claims he or she might have against
FFC; (c) identify any other facts or circumstances of which he or she is aware
and which he or she reasonably believes could give rise to a claim for
indemnification under Section 5.03 hereof; and (d) release as of the Effective
Time any and all claims that he or she may have against FFC known to him or
her which he or she knowingly did not disclose to Bancshares.
(d) FFC hereby represents and warrants to Bancshares that it has no
knowledge of any claim, pending or threatened, or of any facts or
circumstances that it reasonably believes could give rise to any obligation by
Bancshares to provide the indemnification required by this Section 5.03.
(e) Bancshares shall cause the persons serving as officers and
directors of FFC immediately prior to the Effective Time to be covered for a
period of four years from the Effective Time by the directors' and officers'
liability insurance policy maintained by Bancshares with respect to acts or
omissions occurring prior to the Effective Time which were committed by such
officers and directors in their capacity as such.
ARTICLE VI
Additional Agreements
6.01. Legal Conditions to Merger. Each of FFC and Bancshares will take
all reasonable actions necessary to comply promptly with all legal
requirements it may have with respect to the Merger (including furnishing all
information required by the FDIC or in connection with approvals of or filings
with any other Governmental Entity) and will promptly cooperate with and
Page 49
furnish information to each other in connection with any such requirements
imposed upon either of them or any of their subsidiaries in connection with
the Merger. Each of FFC and Bancshares will, respectively, cause their
subsidiaries to take in a prompt manner all reasonable actions necessary to
obtain (and will cooperate with each other in obtaining) any agreement,
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party, required to be
obtained or made by Bancshares, FFC or any of their subsidiaries in connection
with the Merger or the taking of any action contemplated thereby or by this
Agreement and the Plan of Merger.
6.02. Reports.
(a) Prior to the Effective Time, FFC shall prepare and file as and
when required all FFC Reports.
(b) FFC shall prepare such FFC Reports such that (i) they comply in
all material respects with all of the statutes, rules and regulations enforced
or promulgated by the Governmental Entity with which they are filed and do not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (ii) with respect to any FFC Report containing financial
information of the type included in the FFC Financial Statements, the
financial information (A) will be prepared in accordance with GAAP, applied on
a consistent basis with past practices (except as stated therein or in the
notes thereto) (B) will present fairly the consolidated financial condition of
FFC, at the dates, and the consolidated results of operations and cash flows
for the periods, stated therein and (C) in the case of interim fiscal periods,
will reflect fairly the consolidated financial condition of FFC, at the dates,
and the consolidated results of operations and cash flows for the periods
stated therein, subject to year-end audit adjustments.
Page 50
6.03. Update Disclosure; Breaches. From and after the date hereof until
the earlier of the termination of this Agreement or the Effective Time, FFC
and Bancshares shall provide to the other party prompt notice of any matters
which have become known or have occurred after the date hereof which (i) are
material to the financial condition or operations of the disclosing party,
(ii) which have a material bearing on any matter dealt with herein, (iii)
would cause or constitute a failure of a condition precedent to either party's
obligation to effect the Merger, or (iv) would cause or constitute a material
breach, or would have caused or constituted a material breach had such matter
been known prior to the date hereof, of any of its representations, warranties
or agreements contained herein.
6.04. Ability to Perform. Neither FFC nor Bancshares will knowingly take
action which would or is reasonably likely to (i) adversely affect the ability
of either of Bancshares or FFC to obtain any necessary approvals of
Governmental Entities required for the transactions contemplated hereby; (ii)
adversely affect FFC's or Bancshares' ability to perform their covenants and
agreements under this Agreement; or (iii) result in any of the conditions to
the Merger set forth in Article VII not being satisfied.
6.05. Brokers or Finders. Except as set forth in Section 7.03(c),
Bancshares and FFC represent that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement.
6.06. Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including cooperating fully with the other party. In case at any time after
Page 51
the Effective Time any further action is reasonably necessary or desirable to
carry out the purposes of this Agreement or to vest Bancshares with full title
to all properties, assets, rights, approvals, immunities and franchises of
either of FFC or FSA, the proper officers and directors of each party to this
Agreement shall take all such necessary action.
6.07. Governmental and Other Third Party Approvals. FFC and Bancshares
shall each use their reasonable best efforts to obtain all governmental and
other third party approvals, authorizations and consents that may be necessary
or reasonably required of them in order to effect the transactions
contemplated by this Agreement. FFC and Bancshares agree to make all filings
and applications for such approvals and reviews as soon as practicable, to
prosecute the same with reasonable diligence and to notify each other when
such approvals, authorizations and consents have been received. FFC and
Bancshares will provide each other with copies of all regulatory notices and
filings made in connection with the transactions contemplated by this
Agreement prior to filing. Bancshares and FFC will each provide to the other
copies of any correspondence received from any regulatory agency relating to
such filings, and shall use its best efforts to keep the other party advised
of the progress of obtaining all regulatory and third party approvals required
for the consummation of all transactions contemplated by this Agreement.
Within ten days from the date of this Agreement Bancshares will make an
initial request of FFC for FFC to provide to Bancshares information Bancshares
needs to prepare its applications for regulatory approval of the Merger.
Bancshares agrees to file its applications for regulatory approval of the
Merger within 45 days from the date of this Agreement or within 30 days from
the date it receives the information required in the initial request for
information from FFC, whichever is later.
6.08. Nonpublic Information. Unless otherwise required by law, each party
will hold any nonpublic information obtained from the other in connection with
Page 52
the transaction in confidence until such time as such information otherwise
becomes publicly available through no wrongful act of the party holding
nonpublic information of the other party, and in the event of termination of
this Agreement for any reason, each party shall promptly return all nonpublic
documents obtained from the other party, and any copies made of such
documents, to such other party or destroy such documents and copies.
ARTICLE VII
Conditions Precedent
7.01. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction prior to the Closing Date of the following conditions:
(a) Shareholder Approval. The Merger shall have been approved and
adopted by the legally required vote of the holders of the outstanding shares
of FFC Stock at a shareholders meeting duly called for the purpose of voting
on the Merger.
(b) Banking Regulators. The Merger, the Subsidiary Mergers and the
transactions contemplated hereby shall have been approved by the FDIC, the
Texas Banking Commissioner, and any other necessary federal or state banking
authorities without any condition not reasonably acceptable to Bancshares.
All conditions required to be satisfied prior to the Effective Time imposed by
the terms of such approvals shall have been satisfied and all waiting periods
relating to such approvals shall have expired.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect.
Page 53
(d) No Proceeding or Litigation. No material action, suit or
proceeding before any court or any governmental or regulatory authority shall
have been commenced against Bancshares or FFC or any affiliate, subsidiary,
associate, officer or director of either of them, seeking to restrain, enjoin,
prevent, change or rescind the transactions contemplated hereby or questioning
the validity or legality of any such transactions.
(e) Closing Date. The Closing Date shall occur as soon as
practicable but in no event later than December 31, 2000 unless extended by
FFC and Bancshares.
(f) Consents Under Agreements. Bancshares, FFC and their
subsidiaries shall have obtained the consent or approval of each person whose
consent or approval shall be required in connection with the transactions
contemplated hereby under any loan or credit agreement, note, mortgage,
indenture, lease or other agreement or instrument.
7.02. Conditions to Obligations of Bancshares. The obligation of
Bancshares to effect the Merger is subject to the satisfaction of the
following conditions unless waived in writing by Bancshares:
(a) Representations and Warranties. Each of the representations
and warranties of FFC set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date, except for
changes expressly contemplated by this Agreement, and Bancshares shall have
received a certificate signed on behalf of FFC by its chief executive officer
and chief financial officer to such effect.
(b) Performance of Obligations of FFC. FFC shall have performed in
all material respects each of the obligations required to be performed by it
Page 54
under this Agreement and the Plan of Merger at or prior to the Closing Date,
and Bancshares shall have received a certificate signed on behalf of FFC by
its chief executive officer and chief financial officer to such effect.
(c) Opinion of Counsel. FFC shall have delivered to Bancshares an
opinion of its counsel, Jenkens & Gilchrist, P.C., dated as of the Closing
Date and in substantially the form and substance attached hereto as Exhibit
7.02(c).
(d) No Material Adverse Change. There shall have been no material
adverse change since December 31, 1999 in the financial condition, results of
operations or business of FFC.
(e) Environmental Audits. Phase I environmental audits of such
portions of the FFC Property as are selected by Bancshares shall have been
conducted at Bancshares' expense and shall, to Bancshares' satisfaction,
reflect no material problems under Environmental Laws.
(f) Consents Under Agreements. Bancshares and its subsidiaries
shall have obtained the consent or approval of each person whose consent or
approval of any transaction contemplated herein is required under any loan or
credit agreement, note, mortgage, indenture, lease or other agreement or
instrument.
(g) Dissenting Shares. The number of dissenting shares shall not
exceed eleven percent (11%) of the outstanding FFC Stock, not including the
FFC Options.
(h) Noncompetition Agreements of FFC Directors and Officers. Each
of the directors of FFC and FSA as of the date of this Agreement shall have
executed and delivered to Bancshares a non-competition agreement substantially
in the form of Exhibit 7.02(h) hereto. Such non-competition agreements shall
be effective as of the Closing Date and shall be null and void in the event
the Merger is not consummated.
(i) FFC Options. Each holder of an FFC Option shall have entered
into a written agreement and waiver with Bancshares and FFC in the form
Page 55
attached hereto as Exhibit 7.02(i) that said holder will accept in full
satisfaction of all rights under the FFC Options the Option Consideration due
to said holder.
(j) Directors and Officers Letters. Each of the Directors and
Officers of FFC shall have executed and delivered to Bancshares the letter
described in Section 5.03(c).
(k) Termination of Employment Agreement. James W. McKinney, FFC,
FSA and Bancshares shall have entered into an agreement amending the
provisions of McKinney's employment agreement ("Employment Agreement") to
provide (i) on the later of November 1, 2000 or one month after the Closing
Date McKinney shall retire, (ii) the Employment Agreement shall terminate on
the later of November 1, 2000 or one month after the Closing Date, (iii)
McKinney shall receive usual compensation and benefits through the later of
November 1, 2000 or one month after the Closing Date, and (iv) no compensation
or other benefits shall be paid to or provided for McKinney under Section 5(c)
of the Employment Agreement.
7.03. Conditions to Obligations of FFC. The obligations of FFC to effect
the Merger are subject to the satisfaction of the following conditions unless
waived in writing by FFC:
(a) Representations and Warranties. Each of the representations
and warranties of Bancshares set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and (except
to the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date, except
for changes expressly contemplated by this Agreement, and FFC shall have
received a certificate signed on behalf of Bancshares by its chief executive
officer and chief financial officer to such effect.
(b) Performance of Obligations of Bancshares. Bancshares shall
have performed in all material respects each of the obligations required to be
Page 56
performed by it under this Agreement and the Plan of Merger at or prior to the
Closing Date, and FFC shall have received a certificate signed on behalf of
Bancshares by its chief executive officer and chief financial officer to such
effect.
(c) Fairness Opinion. FFC shall have obtained, at its expense, on
or before the Closing Date, the opinion of Stifel, Nicolaus & Company,
acceptable to it to the effect that the terms of the transaction contemplated
by this Agreement are fair from a financial point of view to the FFC
Shareholders.
(d) Opinion of Counsel. Bancshares shall have delivered to FFC an
opinion of its counsel, Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C.,
dated as of the Closing Date in substantially the form and substance attached
hereto as Exhibit 7.03(d).
(e) No Material Adverse Change. There shall have been no material
adverse change since December 31, 1999 in the financial condition, results of
operations or business of Bancshares.
ARTICLE VIII
Termination and Amendment
8.01. Termination. This Agreement and the Plan of Merger may be
terminated at any time prior to the Effective Time:
(a) by mutual consent of the Boards of Directors of Bancshares,
United and FFC;
(b) by either Bancshares and United or by FFC (A) if there has been
a breach by the other party in any material respect of any representation,
warranty, covenant or agreement set forth in this Agreement, or (B) if any
representation or warranty of the other party shall be discovered to have
become untrue in any material respect, and in either case such breach or other
condition has not been cured within 10 business days following receipt by the
nonterminating party of notice of such breach or other condition from the
terminating party;
Page 57
(c) by either Bancshares and United or by FFC if any permanent
injunction preventing the consummation of the Merger shall have become final
and nonappealable;
(d) by either Bancshares and United or by FFC if the Merger shall
not have been consummated on or before December 31, 2000, for a reason other
than the failure of the terminating party to comply with its obligations under
this Agreement;
(e) by either Bancshares and United or by FFC if the FDIC or other
Governmental Entity has denied approval of the Merger and such denial has
become final and nonappealable; or
(f) by either Bancshares and United or by FFC if any condition
precedent to the terminating party's obligation to effect the Merger has not
been satisfied and such condition cannot reasonably be expected to be
satisfied prior to the date specified in Subsection 8.01(d).
8.02. Effect of Termination. In the event of termination of this
Agreement by either FFC or Bancshares as provided in Section 8.01, this
Agreement and the Plan of Merger shall forthwith become void and there shall
be no liability or obligation on the part of FFC, Bancshares, United or their
respective officers or directors, except to the extent that such termination
results from the willful breach by a party hereto of any of its
representations, warranties, covenants or agreements set forth in this
Agreement; provided, however, that the duties of the parties with respect to
nonpublic information as set forth in Section 6.09 will not be terminated.
8.03. Amendment. Subject to the next following sentence, this Agreement
and the Plan of Merger may be amended by the parties hereto by action taken or
authorized by the Boards of Directors of Bancshares and FFC at any time prior
to the Closing Date, except that the consideration to be received by the FFC
shareholders may not be changed after the FFC shareholders' meeting. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Page 58
8.04. Extension; Waiver. At any time prior to the Effective Time,
Bancshares or FFC by action taken or authorized by its Board of Directors,
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other party hereto, (ii) waive any
inaccuracies in the representations and warranties of the other party
contained herein or in any document delivered by the other pursuant hereto,
and (iii) waive compliance by the other party with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
ARTICLE IX
General Provisions
9.01. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally (with receipt
confirmed) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Bancshares or United, to
First United Bancshares, Inc.
Attention: John G. Copeland
P. O. Box 751
El Dorado, Arkansas 71731
with a copy to:
Hermann Ivester, Esq.
Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C.
425 West Capitol Avenue, Suite 1800
Little Rock, Arkansas 72201
Page 59
(b) if to FFC, to:
Texarkana First Financial Corporation
Third & Olive Streets
Texarkana, Arkansas 71854
Attention: Mr. James W. McKinney
with a copy to:
Jenkens & Gilchrist, P.C.
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202
Attention: Financial Institutions Department
9.02. Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation." The phrase "made available" in
this Agreement shall mean that the information referred to has been made
available if requested by the party to whom such information is to be made
available.
9.03. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one counterpart has been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart.
9.04. Entire Agreement. Except for those provisions of the letter
agreement dated January 26, 2000 between the parties under which First United
is obligated to maintain the confidentiality of certain information and to
refrain from soliciting the employment of employees of FFC, this Agreement
(including the Plan of Merger and the other documents and instruments referred
to herein) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof.
Page 60
9.05. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Arkansas, except that the Plan of
Merger shall be filed in accordance with and comply with the corporate laws of
the State of Texas.
9.06. Publicity. The parties hereto agree that they will consult with
each other concerning any proposed press release or public announcement
pertaining to the Merger and will use their best efforts to agree upon the
text of such press release or public announcement prior to the publication of
such press release or the making of such public announcement. However, the
determination by Bancshares as to when and whether it will make a public
statement and the contents of any such public statement shall be final and
binding.
9.07. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto,
whether by operation of law or otherwise, without the prior written consent of
the other parties, provided, however, that Bancshares may assign this
Agreement and its rights, interests, and obligations hereunder to
BancorpSouth, Inc., by operation of law or otherwise, without the prior
written consent of FFC and, in the event of an assignment other than by
operation of law, so long as BancorpSouth, Inc. expressly assumes Bancshares'
obligations hereunder. No such assignment shall alter or terminate
Bancshares' obligations under this Agreement. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective heirs, successors and assigns.
9.08. Knowledge of FFC. Wherever in this Agreement any representation or
warranty is made to the knowledge of FFC, such knowledge shall be limited to
the actual knowledge of the directors of FFC and FSA as of the date of this
Agreement and the individuals listed in Schedule 9.08 of FFC's Disclosure
Schedule.
9.09. Material Adverse Change. Material Adverse Change shall not be
deemed to include the impact of (a) changes in banking and similar laws of
general applicability or interpretations thereof by courts or governmental
authorities, (b) changes in GAAP or regulatory accounting principles generally
Page 61
applicable to banks and their holding companies, (c) actions and omissions of
a party (or any of its subsidiaries) taken with the prior informed consent of
the other party in contemplation of the transactions contemplated hereby, and
(d) the Merger and compliance with the provisions of this Agreement on the
operating performance of the parties.
9.10. Severability. In the event that any provisions of this Agreement or
any portion thereof shall be finally determined to be unlawful or
unenforceable, such provision or portion thereof shall be deemed to be severed
from this Agreement, and every other provision, and any portion of a
provision, that is not invalidated by such determination, shall remain in full
force and effect.
9.11. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. There shall be no third party beneficiaries hereof.
9.12. Expenses. Except as otherwise provided herein, all expenses
incurred by Bancshares and FFC in connection with or related to the
authorization, preparation and execution of this Agreement, the Plan of
Merger, and all other matters related to the closing of the transactions
contemplated hereby, including, without limitation of the generality of the
foregoing, all fees and expenses of agents, representatives, counsel and
accountants employed by either such party or its affiliates, shall be borne
solely and entirely by the party which has incurred the same.
9.13. Non-Survival of Representations and Warranties. The representations
and warranties contained in this Agreement and all other terms, covenants and
conditions hereof shall merge in the closing documents and shall not survive
Closing or, after Closing be the basis for any action by any party, except as
to any matter which is based upon willful fraud by a party with respect to
which the representations, warranties, terms, covenants and conditions set
forth in this Agreement shall expire only upon expiration of the applicable
statute of limitations and except for those covenants and agreements contained
herein which by their terms apply in whole or in part after the Effective
Time.
Page 62
IN WITNESS WHEREOF, FFC and Bancshares have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
First United Bancshares, Inc.
By:
James V. Kelley
Chairman, President and
Chief Executive Officer
Attest:
John G. Copeland, Secretary
Texarkana First Financial Corporation
By:
James W. McKinney
Chairman
Attest:
Debbie Rose, Secretary
Page 63
Exhibit 99.1
Texarkana First Financial Corporation Announces
Affiliation with First United Bancshares, Inc.
Business Editors
TEXARKANA, Ark.--May 15, 2000--James McKinney, Chairman and Chief
Executive Officer of Texarkana First Financial Corporation (AMEX:FTF)
("Texarkana First Financial"), and James V. Kelley, Chairman President
and Chief Executive Officer of First United Bancshares, Inc.
(NASDAQ/NM:UNTD) ("First United") announced today the signing of an
agreement to merge the two companies, pending approval by Texarkana
First Financial's shareholders and the applicable state and federal
regulatory authorities.
Texarkana First Financial is the parent company of First Federal
Savings & Loan Association of Texarkana, Arkansas which operates
locations in Ashdown, DeQueen, Hope, Nashville, and Texarkana, Arkansas.
At March 31, 2000, Texarkana First Financial, with total assets of $206
million, reported total loans of $171 million and total deposits of $153
million.
First United will acquire all the outstanding stock of Texarkana
First Financial for $37.5 million in cash, which equals $23.35 per
outstanding share. The transaction will be accounted for as a purchase
and management anticipates the earnings impact will be accretive to 2000
operating results. First United anticipates that this transaction will
close in the third quarter of 2000.
"We are excited about the opportunity to associate with First
United" stated McKinney. "First United and we share a commitment to
customer service as well as to our communities. The proposed
transaction will enable us to expand the breadth of our services."
"This acquisition is a natural fit for us because of our present
locations in Texarkana, Texas and Hope, Arkansas," stated Kelley. "We
are impressed with their management and staff and their commitment to
the markets they serve."
First United is a $2.7 billion multi-bank holding company with a
non-bank subsidiary, First United Trust Company, N.A., serving 39
communities in Arkansas, Texas and Louisiana.
First United has signed a definitive agreement to merge with
BancorpSouth, Inc., a $5.8 billion bank holding company located in
Tupelo, Mississippi.
First United's common stock is listed on the NASDAQ National Market
System under the symbol "UNTD" and Texarkana First Financial's common
stock is listed on the American Stock Exchange under the symbol "FTF".
CONTACT: Texarkana First Financial Corporation, Texarkana
James McKinney, 870/773-1103
firstfederal@cableone.net
INDUSTRY KEYWORD: BANKING
Forward-looking Statements
Certain statements contained in this news release may not be based on
historical facts and are "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These forward-
looking statements may be identified by their reference to a future
period or periods or by the use of forward-looking terminology, such as
"anticipate," "believe," "estimate," "expect," "may," "might," "will,"
"would," or "intend." These forward-looking statements include, without
limitation, those relating to the benefits, prospects and completion of
the merger. We caution you not to place undue reliance on the forward-
looking statements contained in this news release in that actual results
could differ materially from those indicated in such forward-looking
statements, due to a variety of factors. Those factors include, but are
not limited to, failure or delay in obtaining required shareholder or
regulatory approvals, the companies' failure to consummate the merger,
inability to successfully integrate the companies after the merger,
materially adverse changes in the companies' financial conditions,
changes in economic conditions and government fiscal and monetary
policies, fluctuations in prevailing interest rates, the ability of
Texarkana First Financial to compete with other financial services
companies, changes in Texarkana First Financial's operating or expansion
strategy, geographic concentration of Texarkana First Financial's
assets, the ability of Texarkana First Financial to attract, train, and
retain qualified personnel, the ability of Texarkana First Financial to
effectively market its services and products, Texarkana First
Financial's dependence on existing sources of funding, and other factors
generally understood to affect the financial results of financial
service companies, and other risks detailed from time to time in
Texarkana First Financial's news releases and filings with the
Securities and Exchange Commission. We undertake no obligation to
update these forward-looking statements to reflect events or
circumstances that occur after the date on which such statements were
made.
This news release may be deemed to be solicitation material with respect
to the proposed merger of Texarkana First Financial and First United.
Texarkana First Financial and its directors may be deemed to be
participants in the solicitation of proxies with respect to a
shareholders meeting to be held in connection with such merger.
Information concerning the participants in the solicitation is set forth
in the definitive proxy statement filed by Texarkana First Financial
with the Securities and Exchange Commission on December 27, 1999 for its
2000 annual meeting of shareholders. In connection with the proposed
merger, Texarkana First Financial will file a proxy statement with the
Securities and Exchange Commission. Shareholders of Texarkana First
Financial are encouraged to read the proxy statement, because it will
contain important information about the merger, Texarkana First
Financial and First United. After the proxy statement is filed with the
SEC, it will be provided to the Texarkana First Financial shareholders
in connection with their shareholders meeting and will be available free
of charge, both on the SEC's web site (www.sec.gov) and from Texarkana
First Financial's corporate secretary.