<PAGE> 1
FILED WITH THE SEC ON NOVEMBER 14, 1994
REGISTRATION NO. 33-56041
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
FORM S-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
DEPOSIT GUARANTY CORP.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Mississippi 6711 64-0472169
----------- ---- ----------
(State or other jurisdiction (Primary Standard Industrial (IRS Employer Identi-
of incorporation or Classification Code Number) fication Number)
organization)
</TABLE>
<TABLE>
<S> <C>
ARLEN L. MCDONALD
210 East Capitol Street 210 East Capitol Street
Post Office Box 730 Post Office Box 730
Jackson, Mississippi 39205 Jackson, Mississippi 39205
Telephone Number: (601)354-8497 Telephone Number: (601)354-8497
(Address, including zip code, (Name, address, including zip
and telephone number, including code, and telephone number,
area code of registrant's including area code, of agent
principal executive offices) for service)
</TABLE>
Copy to:
L. KEITH PARSONS, ESQ.
WATKINS LUDLAM & STENNIS
633 North State Street
Post Office Box 427
Jackson, Mississippi 39205-0427
Telephone Number: (601)949-4701
Approximate date of commencement of proposed sale of securities to the public:
AT THE EFFECTIVE TIME OF THE MERGER OF LBO BANCORP, INC. INTO CNC ACQUISITION
CORP AS DESCRIBED IN THE ATTACHED PROXY STATEMENT/PROSPECTUS.
If the securities being registered on this form are being offered in
conjunction with the formation of a holding company and there is compliance
with General Instruction G, check the following box. /__/
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
<PAGE> 2
DEPOSIT GUARANTY CORP.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
Caption or Location
in Proxy
Items in Form S-4 Statement/Prospectus
- ----------------- --------------------
<S> <C>
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus . . . . . . . . . . . . . . . . Cover Page of
Registration Statement;
Cross Reference Sheet;
Cover Page of the Proxy
Statement/Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus . . . . . . . . Available Information;
Incorporation of
Certain Documents by
Reference
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information . . . . . . . . . . . . . . . Summary
4. Terms of the Transaction . . . . . . . . . Summary; The Mergers;
Comparison of the Rights
of Holders of LBO Bancorp
Common Stock and Deposit
Guaranty Common Stock
5. Pro Forma Financial Information . . . . . Not Applicable
6. Material Contracts with the
Company Being Acquired . . . . . . . . . . Not Applicable
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be Under-
writers . . . . . . . . . . . . . . . . . Not Applicable
8. Interest of Named Experts and
Counsel . . . . . . . . . . . . . . . . . Legal Opinion; Experts
9. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities . . . . . . Not Applicable
10. Information with Respect to
S-3 Registrants . . . . . . . . . . . . . Available Information;
Incorporation of
Certain Documents by
Reference
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
11. Incorporation of Certain Infor-
mation by Reference . . . . . . . . . . . Available Information;
Incorporation of
Certain Documents by
Reference
12. Information with Respect to S-2
or S-3 Registrants . . . . . . . . . . . . Not Applicable
13. Incorporation of Certain Infor-
mation by Reference . . . . . . . . . . . Not Applicable
14. Information with Respect to
Registrants Other Than S-3 or
S-2 Registrants . . . . . . . . . . . . . Not Applicable
15. Information with Respect to S-3
Companies . . . . . . . . . . . . . . . . Not Applicable
16. Information with Respect to S-2
or S-3 Companies . . . . . . . . . . . . . Not Applicable
17. Information with Respect to
Companies Other Than S-3 or
S-2 Companies . . . . . . . . . . . . . . Information Concerning
LBO Bancorp; Market
Prices of and Dividends
on LBO Bancorp Common
Stock; Selected Financial
Data - Deposit Guaranty and LBO
Bancorp; Management's
Discussion and Analysis of
Consolidated Financial
Condition and Results of
Operations of LBO Bancorp;
Index to Financial Statements
18. Information if Proxies, Consents
or Authorizations Are to be
Solicited . . . . . . . . . . . . . . . . Incorporation of
Certain Documents by
Reference; Summary;
Introduction; Interests
of Certain Persons in
the Mergers; Principal
Shareholders and Stock
Ownership of Management of
LBO Bancorp; Experts
19. Information if Proxies, Consents
or Authorizations Are Not to be
Solicited or in an Exchange
Offer . . . . . . . . . . . . . . . . . . Not Applicable
</TABLE>
<PAGE> 4
LBO BANCORP, INC.
2002 N. 7th Street
West Monroe, Louisiana
November 14, 1994
To Our Shareholders:
You are cordially invited to attend a Special Meeting (the "Meeting")
of Shareholders of LBO Bancorp, Inc. ("LBO Bancorp") to be held at 9:00 a.m.,
local time, on December 15, 1994 at the West Monroe Convention Center located
at 910 Ridge Avenue, West Monroe, Louisiana.
At the Meeting you will be asked to consider and vote upon a proposal
to approve the merger (the "Company Merger") of LBO Bancorp with and into a
wholly-owned subsidiary of Deposit Guaranty Corp. ("Deposit Guaranty"). If the
Company Merger is consummated, LBO Bancorp will become a wholly-owned
subsidiary of Deposit Guaranty and you will receive 1.763 shares of common
stock of Deposit Guaranty for each share of common stock of LBO Bancorp that
you own at the effective time of the Merger. Immediately thereafter, LBO
Bancorp's subsidiary, Louisiana Bank, will be merged into Commercial National
Bank, a subsidiary of Deposit Guaranty (the "Bank Merger") (the Bank Merger and
the Company Merger together referred to as the "Mergers").
In order for the Company Merger to be consummated, the holders of at
least two-thirds of the shares of common stock of LBO Bancorp present or
represented by proxy at the Meeting must approve the Company Merger.
Consummation of the Mergers is also subject to certain regulatory approvals.
The Board of Directors of LBO Bancorp believes the Mergers are in the
best interests of LBO Bancorp and its shareholders and unanimously recommends
that you vote for approval of the Company Merger. The reasons for such
recommendation are set forth in the accompanying Proxy Statement/Prospectus.
Furthermore, LBO Bancorp's financial advisor, National Capital Corporation, has
issued its opinion to the effect that, as of the date of such opinion and based
upon the considerations described therein, the terms of the Company Merger are
fair, from a financial point of view, to the shareholders of LBO Bancorp.
We believe that the Mergers represent an opportunity for LBO Bancorp's
shareholders to join on favorable terms in a combined enterprise with greater
financial resources and a more geographically diversified business. As a result
of the proposed company Merger, you, as a shareholder of Deposit Guaranty, will
own common stock in a bank holding company whose shares are publicly traded.
We believe Deposit Guaranty to be an excellent financial institution - one
which will prove highly compatible with LBO Bancorp. Combining LBO Bancorp with
Deposit Guaranty through the Company Merger should thus provide LBO Bancorp
shareholders with a continued equity interest in a larger, more diversified
banking company.
We urge you to read the enclosed materials carefully so that you can
evaluate the Mergers for yourself.
All shareholders are invited to attend the Meeting in person.
However, in order that your shares may be represented at the Meeting, please
date, sign and promptly return the enclosed proxy form (beige color) in the
enclosed postage-paid envelope whether or not you plan to attend the Meeting.
If you attend the Meeting in person, you may, if you wish, vote personally on
all matters brought before the Meeting.
L. Michael Ashbrook
Chairman of the Board
and President
<PAGE> 5
LBO BANCORP, INC.
2002 N. 7th Street
West Monroe, Louisiana
Notice of Special Meeting of Shareholders
of LBO Bancorp, Inc.
to be held December 15, 1994
To the Shareholders of LBO Bancorp, Inc.:
Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of LBO Bancorp, Inc. ("LBO Bancorp") will be held at the West
Monroe Convention Center, 910 Ridge Avenue, West Monroe, Louisiana on December
15, 1994 at 9:00 a.m., local time, for the purpose of considering and voting
upon the following matters:
1. To consider and vote upon the proposal to approve the terms of
an Agreement and Plan of Merger (the "Merger Agreement"),
dated as of August 8, 1994, by and among Deposit Guaranty
Corp., a Mississippi corporation ("Deposit Guaranty"), CNC
Acquisition Corp, a Louisiana corporation and a wholly-owned
subsidiary of Deposit Guaranty, Commercial National
Corporation, Commercial National Bank, a wholly-owned
subsidiary of Commercial National Corporation, LBO Bancorp and
its wholly-owned subsidiary Louisiana Bank pursuant to which
(a) LBO Bancorp will merge into CNC Acquisition Corp and would
become a wholly-owned subsidiary of Deposit Guaranty (the
"Company Merger"), (b) Louisiana Bank will merge into
Commercial National Bank (the "Bank Merger") and (c) each
share of common stock of LBO Bancorp ("LBO Bancorp Common
Stock") issued and outstanding at the effective time of the
Company Merger would be converted into and exchangeable for
1.763 shares of common stock of Deposit Guaranty.
2. To transact such other business as may lawfully come before
the meeting or any adjournment or postponement thereof.
DISSENTING SHAREHOLDERS WHO COMPLY WITH THE PROCEDURAL REQUIREMENTS OF
THE BUSINESS CORPORATION LAW OF LOUISIANA WILL BE ENTITLED TO RECEIVE THE FAIR
CASH VALUE OF THEIR SHARES IF THE COMPANY MERGER IS EFFECTED UPON APPROVAL OF
LESS THAN EIGHTY PERCENT (80%) OF THE TOTAL VOTING POWER OF LBO BANCORP.
The affirmative vote of the holders of two-thirds of the shares of LBO
Bancorp Common Stock present or represented by proxy at the Meeting is required
for approval of the Merger.
Only shareholders of record as of the close of business on November 1,
1994, are entitled to vote at the Meeting.
<PAGE> 6
Action may be taken on the foregoing proposals at the Meeting on the
date specified above, or on any date to which the Meeting may be adjourned or
postponed.
By Order of the Board of Directors
Clyde R. White, Secretary
November 14, 1994
West Monroe, Louisiana
YOUR VOTE IS IMPORTANT
All shareholders are invited to attend the Meeting in person. However, in
order that your shares may be represented at the Meeting, please date, sign and
promptly return the enclosed proxy form in the enclosed postage-paid envelope,
whether or not you plan to attend the Meeting. Your proxy may be revoked by
appropriate notice to the Secretary of LBO Bancorp at any time prior to the
voting thereof. If you attend the Meeting in person, you may, if you wish,
vote personally on all matters brought before the Meeting.
<PAGE> 7
PROSPECTUS PROXY STATEMENT
DEPOSIT GUARANTY CORP. LBO BANCORP, INC.
___________________ ______________
680,539 Shares of Special Meeting of
Common Stock, no par value Shareholders to be held
December 15, 1994
This Proxy Statement/Prospectus is being furnished to the shareholders
of LBO Bancorp, Inc. ("LBO Bancorp") in connection with the solicitation of
proxies by the Board of Directors of LBO Bancorp for use at its Special Meeting
(the "Meeting") of Shareholders to be held on December 15, 1994. This Proxy
Statement/Prospectus was first mailed to shareholders of LBO Bancorp on or
about November 14, 1994.
At the Meeting, the holders of LBO Bancorp common stock, par value
$5.00 per share ("LBO Bancorp Common Stock"), will be asked to approve the
Agreement and Plan of Merger (the "Merger Agreement"), dated as of August 8,
1994, by and among Deposit Guaranty Corp. ("Deposit Guaranty"), CNC Acquisition
Corp, a wholly-owned subsidiary of Deposit Guaranty, Commercial National
Corporation, Commercial National Bank, a wholly-owned subsidiary of Commercial
National Corporation, LBO Bancorp and its wholly-owned subsidiary Louisiana
Bank, providing for a merger pursuant to which LBO Bancorp will merge into CNC
Acquisition Corp and would become a wholly-owned subsidiary of Deposit Guaranty
(the "Company Merger"). Upon consummation of the Company Merger, each
outstanding share of LBO Bancorp Common Stock, other than shares held by LBO
Bancorp shareholders who perfect dissenters' rights, will be converted into
1.763 shares of Deposit Guaranty common stock, no par value per share ("Deposit
Guaranty Common Stock"), and cash in lieu of any fractional shares. Immediately
thereafter, Louisiana Bank will merge into Commercial National Bank, a
subsidiary of Deposit Guaranty (the "Bank Merger")( the Bank Merger and the
Company Merger together referred to as the Mergers). For a more complete
description of the Merger Agreement and the terms of the Mergers, see "The
Mergers." A copy of the Merger Agreement is attached to this Proxy
Statement/Prospectus as Exhibit A. For a more complete description of
dissenters' rights see "Appraisal Rights" and "Comparison of the Rights of
Holders of LBO Bancorp Common Stock and Deposit Guaranty Common Stock."
Deposit Guaranty has filed a Registration Statement on Form S-4 with
the Securities and Exchange Commission (the "Commission"), pursuant to the
Securities Act of 1933, as amended, covering up to 680,539 shares of Deposit
Guaranty Common Stock to be issued in connection with the Company Merger.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement/Prospectus and, if given
or made, such information or representation should not be relied upon as having
been authorized. This Proxy Statement/Prospectus does not constitute an offer
to sell, or a solicitation of an offer to purchase, the securities offered by
this Proxy Statement/Prospectus, or the solicitation of a proxy, in any
jurisdiction, to or from any person to whom it is unlawful to make such offer
or solicitation of an offer or proxy solicitation in such jurisdiction. Neither
the delivery of this Proxy Statement/Prospectus nor any distribution of the
securities made under this Proxy Statement/Prospectus shall, under any
circumstances, create any implication that there has been no change in the
information set forth herein since the date of this Proxy Statement/Prospectus.
This Proxy Statement/Prospectus does not cover any resales of Deposit
Guaranty Common Stock to be received by LBO Bancorp shareholders upon
<PAGE> 8
consummation of the Company Merger, and no person is authorized to make use of
this Proxy Statement/Prospectus in connection with any such resale.
-------------------------
THE SECURITIES TO BE ISSUED IN THE COMPANY MERGER HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------
The date of this Proxy Statement/Prospectus is November 14, 1994.
2
<PAGE> 9
AVAILABLE INFORMATION
Deposit Guaranty is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files periodic reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by Deposit Guaranty can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street N.W., Washington, D.C. 20549 and at its Regional
Offices located in the Northwest Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material can also be obtained from the Commission's
Public Reference Section, Judiciary Plaza, 450 Fifth Street N.W., Washington,
D.C. 20549, at prescribed rates.
This Proxy Statement/Prospectus does not contain all the information
set forth in the Registration Statement on Form S-4 covering the securities
offered hereby which has been filed with the Commission, certain portions of
which have been omitted pursuant to the Rules and Regulations of the
Commission, and to which portions reference is hereby made for further
information with respect to Deposit Guaranty and the securities offered hereby.
AS INDICATED BELOW, THIS PROXY STATEMENT/PROSPECTUS INCORPORATES
DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
COPIES OF ANY SUCH DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE
NOT SPECIFICALLY INCORPORATED BY REFERENCE HEREIN, ARE AVAILABLE WITHOUT
CHARGE, UPON THE WRITTEN OR ORAL REQUEST OF ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED. IN
ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY REQUEST SHOULD BE MADE
BY DECEMBER 8, 1994, AND SUCH REQUESTS SHOULD BE DIRECTED TO DEPOSIT
GUARANTY'S PRINCIPAL EXECUTIVE OFFICES AT 210 EAST CAPITOL STREET, JACKSON,
MISSISSIPPI 39201, ATTENTION: ARLEN L. MCDONALD, EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER, TELEPHONE NUMBER (601) 354-8497.
3
<PAGE> 10
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Deposit Guaranty with the Commission
are hereby incorporated by reference:
(1) Deposit Guaranty's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993;
(2) Deposit Guaranty's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1994 and June 30, 1994; and
(3) The description of capital stock contained in Item 14 of
Deposit Guaranty's Registration Statement on Form 10 filed
April 21, 1970, Item 4 of Deposit Guaranty's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1982, Item 4 of
Deposit Guaranty's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1986, Item 4 of Deposit Guaranty's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1987, relating to the description of Deposit Guaranty's Common
Stock.
All documents filed by Deposit Guaranty pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and prior
to the date of the Meeting of shareholders of LBO Bancorp are hereby
incorporated by reference into this Proxy Statement/Prospectus and shall be
deemed a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated by reference shall
be deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein (or in any other subsequently filed document which
also is incorporated by reference herein) modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded.
4
<PAGE> 11
TABLE OF CONTENTS
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Page
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Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Date, Time, Place and Purpose of Meeting;
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Recommendation of the LBO Bancorp and Deposit
Guaranty Boards of Directors; Reasons for the Mergers . . . . . . . . . . . . . 2
Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Interests of Certain Persons in the Mergers . . . . . . . . . . . . . . . . . . . 2
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . 3
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Exchange of LBO Bancorp Certificates;
No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Conditions to Consummation of the Mergers . . . . . . . . . . . . . . . . . . . . 3
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Comparison of the Rights of Holders
of LBO Bancorp Common Stock and Deposit
Guaranty Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Deposit Guaranty Corp. and Subsidiaries -
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
LBO Bancorp and Subsidiaries -
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Comparative Per Share Information . . . . . . . . . . . . . . . . . . . . . . . . 7
Market Price and Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Record Date; Voting Rights; Proxies . . . . . . . . . . . . . . . . . . . . . . . 9
The Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Recommendation of the LBO Bancorp and Deposit
Guaranty Boards of Directors; Reasons for the Mergers . . . . . . . . . . . . . 10
Fairness Opinion of LBO Bancorp's Financial
Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Interests of Certain Persons in the Mergers . . . . . . . . . . . . . . . . . . . 11
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . 11
Cash in Lieu of Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . 11
Dissenters' Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Backup Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exchange of LBO Bancorp Certificates . . . . . . . . . . . . . . . . . . . . . . . 12
No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Amendment and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Resales of Deposit Guaranty Common Stock Issued
in the Company Merger; Affiliates . . . . . . . . . . . . . . . . . . . . . . . 14
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Expenses and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE> 12
<TABLE>
<S> <C>
Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Filing Written Objection and Vote Against
the Company Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Notice by LBO Bancorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Written Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Payment and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Comparison of the Rights of Holders of LBO Bancorp
Common Stock and Deposit Guaranty Common Stock . . . . . . . . . . . . . . . . . . . . 17
Authorized Shares of Capital Stock;
Dividend Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Limitations on Directors' and Officers'
Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Supermajority Voting Requirements . . . . . . . . . . . . . . . . . . . . . . . . 18
Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Vacancies in the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . 19
Amendment of Certain Bylaw Provisions . . . . . . . . . . . . . . . . . . . . . . 19
Information Concerning LBO Bancorp . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Market Prices of and Dividends on LBO Bancorp
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Principal Shareholders and Stock Ownership
of Management of LBO Bancorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations
of LBO Bancorp Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Index to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Exhibit A - Agreement and Plan of Merger
Exhibit B - Opinion of National Capital Corporation
Exhibit C - La. R.S. 12:131 (Louisiana Dissenters' Rights Statute)
</TABLE>
<PAGE> 13
SUMMARY
The following is a brief summary of certain information contained
elsewhere in this Proxy Statement/Prospectus and the documents incorporated
herein by reference. This summary does not contain a complete statement of all
material information relating to the proposed Mergers and is subject to and
qualified in its entirety by reference to the more detailed information and
financial statements contained elsewhere in this Proxy Statement/Prospectus,
including the Exhibits and the documents incorporated in this Proxy
Statement/Prospectus by reference. Certain capitalized terms used in this
summary are defined elsewhere in this Proxy Statement/Prospectus.
THE MERGERS
The shareholders of LBO Bancorp are being asked to consider and vote
upon a proposal to approve the Merger Agreement pursuant to which LBO Bancorp
will be merged into a subsidiary of Deposit Guaranty, Louisiana Bank will be
merged into Commercial National Bank, and each share of LBO Bancorp Common
Stock issued and outstanding immediately prior to the Effective Time of the
Company Merger (except shares held directly or indirectly by Deposit Guaranty
other than in a fiduciary capacity and except Dissenting Shares) will be
converted into and exchangeable for 1.763 shares of Deposit Guaranty Common
Stock. As a result of the Company Merger, the shareholders of LBO Bancorp will
become shareholders of Deposit Guaranty. A copy of the Merger Agreement is
attached hereto as Exhibit A.
THE PARTIES
Deposit Guaranty Corp. Deposit Guaranty is a bank holding company,
headquartered at 210 East Capitol Street, Jackson, Mississippi 39201, telephone
(601) 354-8497. Its principal subsidiaries are Deposit Guaranty National Bank,
a national banking association, with its principal office in Jackson,
Mississippi, and Commercial National Bank, a national banking association with
its principal office in Shreveport, Louisiana. Deposit Guaranty, through its
subsidiaries, provides comprehensive corporate, commercial, correspondent and
individual banking services, and personal and corporate trust services.
As of June 30, 1994, Deposit Guaranty had total assets of $5.03
billion, total deposits of $4.07 billion, total loans of $2.56 billion and
shareholders' equity of $426 million. Based on total assets at June 30, 1994,
Deposit Guaranty ranked first among Mississippi-based bank holding companies.
Commercial National Corporation. Commercial National Corporation is a
Louisiana corporation, which owns 100% of Commercial National Bank. Deposit
Guaranty acquired 100% of the stock of Commercial National Corporation in
February, 1990. Other than its ownership of Commercial National Bank,
Commercial National Corporation does not engage in any business activities.
LBO Bancorp, Inc. LBO Bancorp is a bank holding company,
headquartered at 2002 N. 7th Street, West Monroe, Louisiana 71291, telephone
number (318) 324-2000. Its only active subsidiary is Louisiana Bank, a
Louisiana state banking association. LBO Bancorp, through its subsidiary,
provides a full complement of consumer and commercial banking services in
Ouachita Parish, Louisiana.
As of June 30, 1994, LBO Bancorp had total assets of $95.6 million,
total deposits of $85.8 million, total loans of $47.1 million and shareholders'
equity of $7.4 million.
CNC Acquisition Corp. CNC Acquisition Corp will be a wholly-owned
subsidiary of of Deposit Guaranty. It was recently formed to effect the
1
<PAGE> 14
Company Merger, and it will otherwise not conduct any activities or have any
operations.
Commercial National Bank. Commercial National Bank is a national bank
that has its principal office in Shreveport, Louisiana. It is a wholly-owned
subsidiary of Commercial National Corporation, which is a wholly-owned
subsidiary of Deposit Guaranty. At June 30, 1994, Commercial National Bank had
total assets of approximately $1.05 billion and total deposits of approximately
$819 million. Its deposits are insured by the FDIC. In addition to its
principal office, Commercial National Bank has 18 branches in the
Shreveport/Bossier City, Louisiana market.
Louisiana Bank. Louisiana Bank is a Louisiana state banking
association with its principal office located in West Monroe, Louisiana,
offering consumer and commercial banking services in Ouachita Parish,
Louisiana. Its deposit accounts are insured by the FDIC. In addition to its
main office, Louisiana Bank operates three full service branches in Monroe and
one mini-branch in West Monroe, Louisiana.
DATE, TIME, PLACE AND PURPOSE OF MEETING; RECORD DATE
A Special Meeting (the "Meeting") of the Shareholders of LBO Bancorp
will be held on December 15, 1994, at 9:00 a.m., at the West Monroe Convention
Center, 910 Ridge Avenue, West Monroe, Louisiana to consider and vote upon the
proposal to approve the Merger Agreement. The Board of Directors of LBO
Bancorp has fixed the close of business on November 1, 1994, as the record date
(the "Record Date") for determining holders of outstanding shares of LBO
Bancorp Common Stock entitled to notice of and to vote at the Meeting. Only
holders of LBO Bancorp Common Stock of record on the books of LBO Bancorp at
the close of business on the Record Date are entitled to vote at the Meeting or
at any adjournment or postponement thereof. As of the Record Date, there were
386,012 shares of LBO Bancorp Common Stock issued and outstanding, each of
which is entitled to one vote. See "Introduction -- General" and "Introduction
- -- Record Date; Voting Rights; Proxies."
VOTE REQUIRED
Approval of the Merger Agreement requires the affirmative vote of the
holders of two-thirds of the shares of LBO Bancorp Common Stock present or
represented by proxy at the Meeting. Executive officers, directors and
affiliates of LBO Bancorp are entitled to vote 56.42% of the outstanding
shares.
RECOMMENDATION OF THE LBO BANCORP AND DEPOSIT GUARANTY BOARDS OF DIRECTORS;
REASONS FOR THE MERGERS
The LBO Bancorp Board of Directors has approved the Merger Agreement
because it believes that the Mergers will afford LBO Bancorp shareholders the
opportunity to obtain on favorable terms an equity participation in a combined
enterprise with greater financial resources and a more geographically
diversified business. As a result of the proposed Company Merger, the
shareholders of LBO Bancorp will own stock in Deposit Guaranty, a bank holding
company whose shares are publicly traded. The LBO Bancorp Board of Directors
believes the Mergers are in the best interest of LBO Bancorp's shareholders and
unanimously recommends that LBO Bancorp's shareholders vote FOR the approval of
the Merger Agreement.
The Board of Directors of Deposit Guaranty has approved the Merger
Agreement because it believes that the Mergers will enhance Deposit Guaranty's
earnings capacity by enabling it to deliver products and provide services to a
larger geographic customer base and the combination of Deposit Guaranty
2
<PAGE> 15
and LBO Bancorp will result in increased overall efficiencies and economies of
scale. See "The Mergers -- Recommendation of the LBO Bancorp Board of
Directors; Reasons for the Mergers," "The Mergers -- Fairness Opinion of LBO
Bancorp's Financial Advisor" and Exhibit B.
FAIRNESS OPINION
The Board of Directors of LBO Bancorp has received the written opinion
of National Capital Corporation, LBO Bancorp's financial advisor, that the
terms of the Company Merger are fair, from a financial point of view, to LBO
Bancorp's shareholders. The opinion of National Capital Corporation is
attached hereto as Exhibit B and should be read in its entirety. See "The
Mergers -- Fairness Opinion of LBO Bancorp's Financial Advisor" and Exhibit B.
REGULATORY APPROVALS
It is a condition to the consummation of the Mergers that all required
regulatory approvals, including the approval of the Office of the Comptroller
of the Currency (the "OCC") of the merger of Louisiana Bank into Commercial
National Bank, be obtained. There can be no assurance that such approval will
be forthcoming or as to the conditions to or timing of such approval. See
"The Mergers -- Conditions" and "The Mergers -- Regulatory Approvals."
INTERESTS OF CERTAIN PERSONS IN THE MERGERS
Upon consummation of the Bank Merger, L. Michael Ashbrook, who is
Chairman of the Board of Directors of LBO Bancorp and Louisiana Bank, will
become a member of the Board of Directors of Commercial National Bank.
Deposit Guaranty has agreed that Clyde White, who is President of Louisiana
Bank and a director of LBO Bancorp, will continue his employment with
Commercial National Bank at the same salary level he is currently receiving,
plus the customary benefits provided to similar executives of Commercial
National Bank. Clyde White currently has an agreement with Louisiana Bank that
provides that if the bank terminates his employment, except termination for
cause, he is entitled to receive one year's salary as a severance payment.
Deposit Guaranty has agreed to continue this agreement for one year.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Mergers is conditioned upon receipt of an opinion
of counsel substantially to the effect that the Company Merger will be treated,
for federal income tax purposes, as a tax-free reorganization, with the result
that no gain or loss will be recognized by LBO Bancorp or by holders of LBO
Bancorp Common Stock who exchange all of their LBO Bancorp Common Stock solely
for Deposit Guaranty Common Stock pursuant to the Company Merger (except with
respect to cash, if any, received in lieu of fractional shares). LBO Bancorp
shareholders are urged to consult their own tax advisors as to the specific tax
consequences to them of the Company Merger. See "The Mergers -- Certain
Federal Income Tax Consequences."
EFFECTIVE TIME
If the Merger Agreement is approved by the requisite vote of the
shareholders of LBO Bancorp, the Mergers are approved by the required
regulatory agencies and the other conditions to the Mergers are satisfied or
waived (where permissible), the Company Merger will become effective at the
time specified in the certificate of merger to be filed with the Louisiana
Secretary of State pursuant to the Business Corporation Law of Louisiana (the
"Louisiana BCL"), and the Bank Merger will become effective at the time
specified by the appropriate bank regulatory authorities. It is expected that
the effective time of the Mergers (the "Effective Time") will
3
<PAGE> 16
occur in late 1994 or early 1995; however, there can be no assurance that the
conditions to the Mergers will be satisfied or waived so that the Mergers can
be consummated. See "The Mergers -- Effective Time" and "The Mergers --
Conditions."
AFFILIATES
It is a condition to Deposit Guaranty's obligation to consummate the
Company Merger that, at or prior to the Effective Time, each person who may be
deemed to be an "affiliate" (as such term is defined by Rule 145 of the
Securities Act of 1933) of LBO Bancorp shall have executed and delivered to
Deposit Guaranty an agreement which provides, among other things, that such
affiliate will not sell, transfer or otherwise dispose of any Deposit Guaranty
Common Stock to be received by such affiliate pursuant to the Company Merger in
violation of the Securities Act of 1933 and the rules and regulations
thereunder. For a further discussion of the provisions of the agreements
between Deposit Guaranty and such affiliates, see "The Mergers -- Resales of
Deposit Guaranty Common Stock Issued in the Company Merger; Affiliates."
ACCOUNTING TREATMENT
Deposit Guaranty has not determined whether the purchase method of
accounting or the pooling method of accounting will be used to reflect the
Mergers upon consummation. For explanation of the differences in these
accounting methods see "The Mergers -- Accounting Treatment."
EXCHANGE OF LBO BANCORP CERTIFICATES; NO FRACTIONAL SHARES
As soon as practicable after the Effective Time, The Bank of New York
(the "Exchange Agent") will mail to each holder of record of LBO Bancorp Common
Stock, a letter of transmittal and instructions for use in effecting the
surrender of the shareholder's certificates which, immediately prior to the
Effective Time, represented outstanding shares of LBO Bancorp Common Stock in
exchange for certificates representing Deposit Guaranty Common Stock. See "The
Mergers -- Exchange of LBO Bancorp Certificates". Cash will be paid in lieu of
any fractional share interests in Deposit Guaranty Common Stock. See "The
Mergers -- No Fractional Shares". CERTIFICATES REPRESENTING LBO BANCORP COMMON
STOCK SHOULD NOT BE SURRENDERED UNTIL THE TRANSMITTAL FORM IS RECEIVED.
APPRAISAL RIGHTS
Under certain conditions and by complying with the specific procedures
required by Louisiana law and described herein, LBO Bancorp's shareholders will
have the right to dissent from the Company Merger, in which event, if the
Company Merger is consummated, such shareholders may be entitled to receive in
cash the fair value of their shares of LBO Bancorp Common Stock. See
"Appraisal Rights" and Exhibit C hereto.
CONDITIONS TO CONSUMMATION OF THE MERGERS
The respective obligations of each party under the Merger Agreement
are subject, among other conditions, to approval of the Merger Agreement by the
affirmative vote of the holders of at least two-thirds of the shares of LBO
Bancorp Common Stock and the receipt of all necessary regulatory approvals.
The obligations of Deposit Guaranty and its subsidiaries under the
Merger Agreement are also conditioned, among other conditions, on the absence
of any material adverse change (except as noted in Schedule 6.02(h) to the
Merger Agreement) in the financial condition or results of operations of LBO
Bancorp or Louisiana Bank from the condition and results of operations
4
<PAGE> 17
indicated in the audited financial statements of LBO Bancorp or Louisiana Bank
at December 31, 1993, and for the year then ended. See "The Mergers --
Conditions" for a fuller discussion of the conditions to consummation.
TERMINATION
Among other reasons, the Merger Agreement may be terminated by Deposit
Guaranty at any time prior to the Effective Time, whether before or after
approval of the Company Merger by the shareholders of LBO Bancorp in the event
there are dissenting shareholders who hold more than ten percent (10%) of the
outstanding shares of LBO Bancorp Common Stock who have demanded appraisal
rights under Section 131 of the Louisiana BCL (See "Appraisal Rights"); or by
any party thereto if the Closing shall not have occurred by May 31, 1995. For
fuller discussion of the grounds for termination under the Merger Agreement,
see "The Mergers -- Amendment and Termination."
COMPARISON OF THE RIGHTS OF HOLDERS OF LBO BANCORP COMMON STOCK AND DEPOSIT
GUARANTY COMMON STOCK
For a comparison of Louisiana and Mississippi law and the charter and
bylaw provisions of LBO Bancorp and Deposit Guaranty governing the rights of
holders of LBO Bancorp Common Stock and Deposit Guaranty Common Stock, see
"Comparison of the Rights of Holders of LBO Bancorp Common Stock and Deposit
Guaranty Common Stock."
5
<PAGE> 18
DEPOSIT GUARANTY CORP. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(In Thousands Except Share Data)
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
------------------------- ---------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of earnings
Interest income $145,071 $149,723 $299,327 $322,114 $382,432 $406,724 $335,216
Interest expense 59,224 64,335 124,687 155,459 231,473 257,023 206,890
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest income 85,847 85,388 174,640 166,655 150,959 149,701 128,326
Provision for possible loan losses (2,750) (11,000) (16,000) 10,378 17,260 46,409 16,895
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest income after provision
for possible loan losses 88,597 96,388 190,640 156,277 133,699 103,292 111,431
Other operating income 49,277 36,903 74,781 67,977 61,439 74,955 48,154
Other operating expense 87,432 83,739 171,567 164,470 152,828 145,315 121,334
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes 50,442 49,552 93,854 59,784 42,310 32,932 38,251
Income tax expense 16,066 14,455 27,302 14,270 10,090 8,407 6,600
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income $34,376 $35,097 $66,552 $45,514 $32,220 $24,525 $31,651
=========== =========== =========== =========== =========== =========== ===========
Net income per share:
Primary $1.95 $1.99 $3.77 $2.67 $2.04 $1.55 $1.99
Fully diluted $1.95 $1.99 $3.77 $2.63 $1.93 $1.49 $1.88
Weighted average shares outstanding
Primary 17,668,509 17,635,526 17,649,852 17,033,664 15,799,996 15,799,996 15,892,740
Fully diluted 17,668,509 17,635,526 17,649,852 17,465,282 17,442,388 17,442,388 17,554,318
Statements of condition - averages
Securities available for sale
and investment securities $1,475,604 $1,671,486 $1,704,645 $1,616,658 $1,417,299 $1,036,123 $622,336
Loans, net of unearned income 2,453,890 2,231,153 2,293,416 2,261,034 2,411,731 2,633,394 2,202,348
Total deposits 3,963,383 3,861,467 3,867,669 3,876,927 3,990,963 3,692,556 2,826,735
Long-term debt -- -- -- 6,320 24,020 24,236 24,841
Total assets 4,923,506 4,837,172 4,826,726 4,777,596 4,814,533 4,522,212 3,557,327
Total stockholders' equity 423,050 352,873 367,592 315,833 275,345 259,644 246,846
Selected ratios
Return on average assets 1.41% 1.45% 1.38% 0.95% 0.67% 0.54% 0.89%
Return on average equity 16.39 19.89 18.10 14.41 11.70 9.45 12.82
Net interest margin-tax equivalent 4.05 4.09 4.18 4.12 3.77 4.04 4.42
Allowance for possible loan losses to
loans, net of unearned income 2.20 2.84 2.56 3.30 3.74 3.46 1.38
Net charge-offs (recoveries) to average
loans, net of unearned income 0.23 (0.06) (0.14) 1.02 0.77 1.14 0.68
Dividend payout 25.70 21.61 24.67 29.96 38.24 50.32 38.44
Average equity to average assets 8.59 7.30 7.62 6.61 5.72 5.74 6.94
Leverage ratio 7.99 7.56 8.13 6.80 5.42 5.19 6.87
Tier I risk-based 12.45 12.77 13.28 12.00 9.95 8.25 10.26
Total risk-based 13.71 14.03 14.54 13.27 12.11 10.31 12.47
</TABLE>
6
<PAGE> 19
LBO BANCORP AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(In Thousands Except Share Data)
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
--------------------- --------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
--------- --------- --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of earnings
Interest income $3,420 $3,726 $7,467 $7,728 $7,562 $6,839 $5,963
Interest expense 1,200 1,298 2,519 3,093 4,049 3,957 3,707
--------- --------- --------- --------- -------- -------- --------
Net interest income 2,220 2,428 4,948 4,635 3,513 2,882 2,256
Provision for possible loan losses -- 150 239 280 290 283 190
--------- --------- --------- --------- -------- -------- --------
Net interest income after provision
for possible loan losses 2,220 2,278 4,709 4,355 3,223 2,599 2,066
Other operating income 451 654 1,184 847 627 679 630
Other operating expense 1,822 1,699 3,622 3,272 2,857 2,459 2,119
--------- --------- --------- --------- -------- -------- --------
Income before income taxes,
change in accounting principle and
extraordinary item 849 1,233 2,271 1,930 993 819 577
Income tax expense 312 382 714 763 330 312 172
--------- --------- --------- --------- -------- -------- --------
Income before extraordinary item and
change in accounting principle 537 851 1557 1167 663 507 405
Extraordinary item -- -- -- -- 76 302 172
Change in accounting principle -- (63) (63) -- -- -- --
--------- --------- --------- --------- -------- -------- --------
Net income $537 $788 $1,494 $1,167 $739 $809 $577
========= ========= ========= ========= ======== ======== ========
Net income per share:
Income before extraordinary item
and cumulative effect of change in
accounting principle $1.40 $2.35 $4.09 $3.68 $2.09 $1.60 $1.56
Extraordinary item -- -- -- -- 0.24 0.96 0.66
Change in accounting principle -- (0.17) (0.17) -- -- -- --
--------- --------- --------- --------- -------- -------- --------
Net income per share $1.40 $2.18 $3.92 $3.68 $2.33 $2.56 $2.22
========= ========= ========= ========= ======== ======== ========
Weighted average shares outstanding 383,931 361,829 380,527 317,443 317,324 316,055 260,000
Statements of condition - averages
Securities available for sale
and investment securities $43,370 $41,301 $38,323 $35,487 $29,791 $20,493 $20,173
Loans, net of unearned income 47,280 49,718 48,128 45,839 38,746 36,818 31,422
Total deposits 86,131 88,302 85,130 82,634 71,748 59,279 53,678
Long-term debt 1,758 815 695 1,161 1,291 1,415 919
Total assets 96,511 96,810 94,012 89,761 77,333 64,359 58,734
Total stockholders' equity 7,497 6,625 6,906 5,894 4,405 3,981 3,761
Selected ratios
Return on average assets 1.11 % 1.63 % 1.59 % 1.30 % 0.96 % 1.26 % 0.98 %
Return on average equity 14.33 23.79 21.63 19.80 16.78 20.32 15.34
Net interest margin-tax equivalent 4.66 5.24 5.61 5.52 4.88 4.72 4.20
Allowance for possible loan losses to
loans, net of unearned income 2.13 1.88 2.07 1.73 1.65 1.35 1.06
Net charge-offs to average loans,
net of unearned income NM 0.11 0.13 0.27 0.39 0.38 0.65
Dividend payout -- -- -- -- 17.18 -- 25.13
Average equity to average assets 7.77 6.84 7.35 6.57 5.70 6.19 6.40
Leverage ratio 7.75 7.09 7.90 6.93 6.04 5.96 6.15
Tier I risk-based 15.24 11.15 14.02 11.69 8.65 8.78 9.75
Total risk-based 16.49 13.16 15.18 12.86 9.72 9.86 10.67
NM - Not Meaningful
</TABLE>
7
<PAGE> 20
COMPARATIVE PER SHARE INFORMATION
<TABLE>
<CAPTION>
Assume Assume
Pooling Transaction Purchase Transaction
------------------------------- ----------------------------
Historical DG and DG and
----------------------- LBO LBO LBO LBO
DG LBO Pro Forma Pro Forma Pro Forma Pro Forma
Per Common Share Corp Bancorp Combined Equivalent (a) Combined Equivalent (a)
- ----------------------------- ----------- ---------- -------------- --------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net Income (b)
For the six months ended
June 30, 1994
Primary $1.95 $1.40 $1.90 $3.35 $1.86 $3.28
Fully Diluted 1.95 1.40 1.90 3.35 $1.86 3.28
For the year ended
December 31,
1993
Primary 3.77 3.92 3.71 6.55 3.63 6.40
Fully Diluted 3.77 3.92 3.71 6.55 3.63 6.40
1992
Primary 2.67 3.68 2.65 4.68 N/A N/A
Fully Diluted 2.63 3.68 2.61 4.60 N/A N/A
1991
Primary 2.04 2.33 2.01 3.55 N/A N/A
Fully Diluted 1.93 2.33 1.91 3.36 N/A N/A
Cash Dividends (c)
For the six months ended
June 30, 1994 .50 -- .50 .88 .50 .88
For the year ended
December 31,
1993 .93 -- .93 1.64 .93 1.64
1992 .80 -- .80 1.41 .80 1.41
1991 .78 .40 .78 1.38 .78 1.38
Book Value (d)
As of June 30, 1994 24.11 19.72 23.62 41.64 23.22 40.94
As of December 31, 1993 22.41 19.24 21.99 38.76 21.58 38.05
</TABLE>
(a) LBO Bancorp pro forma equivalent amounts are computed by multiplying the
pro forma combined amounts by the assumed Conversion Number of 1.763.
(b) Net income per common share is based on weighted average common shares
outstanding.
(c) Pro forma cash dividends represent historical cash dividends of Deposit
Guaranty Corp.
(d) Book value per common share is based on total period-end shareholders'
equity.
8
<PAGE> 21
MARKET PRICE AND DIVIDENDS
Deposit Guaranty's common stock is traded in the over-the-counter market under
the NASDAQ symbol "DEPS" and is quoted on NASDAQ's National Market System. The
following table sets forth the range of the high and low prices of the common
stock, as reported by NASDAQ, and the dividends declared per share for the
periods indicated.
<TABLE>
<CAPTION>
Prices
Dividends ------------------------
Per Share High Low
--------- ------- ---------
<S> <C> <C> <C>
1994
First Quarter $ .25 $32.00 $29.50
Second Quarter .25 29.00 25.75
1993
First Quarter $.215 $31.00 $26.50
Second Quarter .215 35.75 26.50
Third Quarter .25 32.25 28.75
Fourth Quarter .25 33.00 27.00
1992
First Quarter $.195 $18.88 $16.63
Second Quarter .195 21.75 17.63
Third Quarter .195 22.38 20.50
Fourth Quarter .215 27.00 21.25
- -----------------
</TABLE>
Deposit Guaranty declared a two-for-one stock split in 1992. All shares
outstanding and per share results are calculated assuming the split occurred at
the beginning of the earliest period presented.
LBO Bancorp is not traded on any established securities market. No cash
dividends were paid by LBO Bancorp in 1993 or 1992. No cash dividends have been
paid by LBO Bancorp in 1994. The Merger agreement prohibits the payment of cash
dividends by LBO Bancorp prior to consumation of the Merger.
INTRODUCTION
GENERAL
This Proxy Statement/Prospectus is being furnished to shareholders of
LBO Bancorp in connection with the solicitation by the Board of Directors of LBO
Bancorp of proxies for use at a Special Meeting of Shareholders (the "Meeting")
to be held on December 15, 1994 at 9:00 a.m., local time, at the West Monroe
Convention Center, 910 Ridge Avenue, West Monroe, Louisiana, and at any
adjournment or postponement thereof. At the Meeting, shareholders will consider
and vote upon a proposal to approve the Merger Agreement, by and among Deposit
Guaranty, CNC Acquisition Corp, a Louisiana corporation and a wholly-owned
subsidiary of Deposit Guaranty, Commercial National Corporation, Commercial
National Bank, a wholly-owned subsidiary of Commercial National Corporation, LBO
Bancorp and its wholly-owned subsidiary Louisiana Bank, pursuant to which LBO
Bancorp will be merged into CNC Acquisition Corp (the "Company Merger") and each
share of LBO Bancorp Common Stock issued and outstanding immediately prior to
the effective time of the Company Merger (except shares held directly or
indirectly by Deposit Guaranty other than in a fiduciary capacity and Dissenting
Shares, as hereinafter defined) will be converted into and exchangeable for
1.763 shares of common stock, no par value, of Deposit Guaranty Common Stock.
Immediately thereafter, Louisiana Bank will merge into Commercial National Bank,
a subsidiary of Deposit Guaranty. See "The Mergers."
9
<PAGE> 22
This Proxy Statement/Prospectus constitutes a prospectus of Deposit
Guaranty with respect to the shares of Deposit Guaranty Common Stock to be
issued in connection with the Mergers. The information in this Proxy
Statement/Prospectus concerning Deposit Guaranty and its subsidiaries and LBO
Bancorp and its subsidiary has been furnished by each of such entities,
respectively.
The principal executive office of Deposit Guaranty is located at 210
East Capitol Street, Jackson, Mississippi 39201, and its telephone number is
(601) 354-8497. The principal executive office of LBO Bancorp is located at
2002 N. 7th Street, West Monroe, Louisiana 71291, and its telephone number is
(318) 324-2000.
This Proxy Statement/Prospectus is first being mailed to shareholders
of LBO Bancorp on or about November 14, 1994.
RECORD DATE; VOTING RIGHTS; PROXIES
The Board of Directors of LBO Bancorp has fixed the close of business
on November 1, 1994 as the Record Date for determining holders of outstanding
shares of LBO Bancorp Common Stock entitled to notice of and to vote at the
Meeting. Only holders of LBO Bancorp Common Stock of record on the books of
LBO Bancorp at the close of business on the Record Date are entitled to vote at
the Meeting or at any adjournment or postponement thereof. As of the Record
Date, there were 386,012 shares of LBO Bancorp Common Stock issued and
outstanding, each of which is entitled to one vote. Shares of LBO Bancorp
Common Stock represented by properly executed proxies will be voted in
accordance with the instructions indicated on the proxies or, if no
instructions are indicated, will be voted FOR the proposal to approve the
Merger Agreement and in the discretion of the proxy holders as to any other
matter which may properly come before the Meeting or any adjournment or
postponement thereof. A shareholder who has given a proxy may revoke it at any
time before it is voted by filing with the Secretary of LBO Bancorp an
instrument revoking it or a duly executed proxy bearing a later date, or by
appearing at the Meeting and voting in person.
Under the Louisiana BCL, approval of the Merger Agreement requires the
affirmative vote of the holders of two-thirds of the shares of LBO Bancorp
Common Stock present or represented by proxy at the Meeting. Executive
officers, directors and affiliates of LBO Bancorp are entitled to vote 56.42%
of the outstanding shares. The obligations of the parties to the Merger
Agreement are subject to the condition that such affirmative vote shall have
been obtained. See "The Mergers -- Conditions."
LBO Bancorp will bear the costs of soliciting proxies from its
shareholders. In addition to the use of the mail, proxies may be solicited by
the directors, officers and employees of LBO Bancorp in person, or by telephone
or telegram. Such directors, officers and employees will not be additionally
compensated for such solicitation but may be reimbursed for out-of-pocket
expenses incurred in connection therewith. Arrangements will also be made with
custodians, nominees and fiduciaries for the forwarding of solicitation
material to the beneficial owners of LBO Bancorp Common Stock held of record by
such persons, and LBO Bancorp may reimburse such custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred in connection
therewith.
The affirmative vote of the holders of two-thirds of the shares of CNC
Acquisition Corp present or represented by proxy at a shareholders' meeting is
required under the Louisiana BCL to approve the Merger Agreement. Deposit
Guaranty, which owns all outstanding shares of CNC Acquisition Corp, has agreed
to vote such shares in favor of the Merger Agreement.
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THE MERGERS
GENERAL
The Merger Agreement provides that, subject to the satisfaction or
waiver (where permissible) of certain conditions, including, among other
things, the receipt of all necessary regulatory approvals, the expiration of
all related waiting periods and the approval by the shareholders of LBO
Bancorp, LBO Bancorp will be merged with and into CNC Acquisition Corp. See
"The Mergers -- Conditions" and "The Mergers -- Regulatory Approvals." As a
result of the Company Merger, the separate corporate existence of LBO Bancorp
will cease and the shareholders of LBO Bancorp will become shareholders of
Deposit Guaranty. The date and time when the Company Merger will be
consummated is herein referred to as the "Effective Time." See "The Mergers --
Effective Time."
The description of the Merger Agreement included in this Proxy
Statement/Prospectus is qualified in its entirety by reference to the Merger
Agreement, which is incorporated herein by reference and a copy of which is
attached hereto as Exhibit A.
EXCHANGE RATIO
Upon consummation of the Mergers, LBO Bancorp will be merged with and
into CNC Acquisition Corp and each share of LBO Bancorp Common Stock issued and
outstanding at the Effective Time (other than shares owned by shareholders who,
pursuant to the Louisiana BCL, perfect any right to receive the fair value of
such shares ("Dissenting Shares")) will be converted into and exchangeable for
1.763 shares of Deposit Guaranty Common Stock (the "Exchange Ratio"). In the
event that Deposit Guaranty should split or combine Deposit Guaranty Common
Stock, or pay a dividend or other distribution in Deposit Guaranty Common
Stock, the Exchange Ratio will be appropriately adjusted.
The Exchange Ratio was determined by a process of arm's length
negotiations involving the managements of LBO Bancorp and Deposit Guaranty and
their respective financial advisors. Pursuant to the Company Merger, Deposit
Guaranty will be required to issue to LBO Bancorp shareholders approximately
680,539 shares of Deposit Guaranty Common Stock, which will constitute
approximately 3.7% of the shares of Deposit Guaranty Common Stock outstanding
immediately after the Effective Time. This calculation does not make any
adjustment for fractional shares or Dissenting Shares and is based upon the
number of shares of LBO Bancorp Common Stock and Deposit Guaranty Common Stock
outstanding on the Record Date.
No fractional shares of Deposit Guaranty Common Stock will be issued
in the Company Merger. Any shareholder otherwise entitled to receive a
fractional share of Deposit Guaranty Common Stock will be paid a cash amount in
lieu of any such fractional share. See "The Mergers -- No Fractional Shares."
RECOMMENDATION OF THE LBO BANCORP AND DEPOSIT GUARANTY BOARDS OF DIRECTORS;
REASONS FOR THE MERGERS
LBO Bancorp
1. The LBO Bancorp Board of Directors believes that the Mergers
afford LBO Bancorp shareholders the opportunity to obtain fair value for their
shares of LBO Bancorp Common Stock while at the same time maintaining an equity
participation in a combined enterprise with greater financial resources and a
more geographically diversified business.
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2. As a result of the Company Merger, former LBO Bancorp shareholders
will own shares of Deposit Guaranty, a publicly traded multi-bank holding
company.
3. The Mergers should generate improved and expanded services for
borrowers and depositors of LBO Bancorp.
4. As structured, the Company Merger is expected to be treated, for
federal income tax purposes, as a tax-free reorganization. See "The Mergers --
Certain Federal Income Tax Consequences."
5. The LBO Bancorp Board of Directors received the opinion of
National Capital Corporation that the consideration to be received by LBO
Bancorp shareholders is fair, from a financial point of view, to such
shareholders. See "The Mergers -- Fairness Opinion of LBO Bancorp's Financial
Advisor" and Exhibit B.
Deposit Guaranty
1. The Deposit Guaranty Board of Directors believes that by expanding
Deposit Guaranty's customer base into Louisiana, the Mergers should enhance
Deposit Guaranty's earnings capacity by enabling it to deliver products and
provide services to that enlarged customer base, and by permitting cost savings
through consolidation of operations. In addition, the Deposit Guaranty Board
of Directors believes that the combination of Deposit Guaranty and LBO Bancorp,
and the Bank Merger, will allow Deposit Guaranty and LBO Bancorp to increase
overall efficiency and take advantage of economies of scale in several areas.
2. In evaluating the Mergers, the Deposit Guaranty Board of Directors
considered a variety of factors, including the respective results of
operations, financial condition and prospects of Deposit Guaranty and LBO
Bancorp; the compatibility and complimentary nature of the respective
businesses and managerial philosophies of Deposit Guaranty and LBO Bancorp; and
the relative prices paid in recent acquisitions of financial institutions.
FAIRNESS OPINION OF LBO BANCORP'S FINANCIAL ADVISOR
The LBO Bancorp Board of Directors retained the firm of National
Capital Corporation to act as its financial advisor in connection with the
Company Merger and to evaluate the financial terms of the Company Merger.
National Capital Corporation is a financial consulting firm continually engaged
in advising financial institutions in connection with mergers and acquisitions.
National Capital Corporation was selected on the basis of its national
reputation as experts in Louisiana community bank mergers and acquisitions.
National Capital Corporation has delivered to the LBO Bancorp Board of
Directors its written opinion dated October 5, 1994 that, as of the date
thereof and on the basis of the matters referred to therein, the terms of the
Company Merger are fair, from a financial point of view, to LBO Bancorp
shareholders. No limitations were imposed by LBO Bancorp with respect to
National Capital Corporation's opinion. A copy of National Capital
Corporation's opinion, which sets forth the assumptions made, matters
considered and limitations on the review undertaken, is attached as Exhibit B
to this Proxy Statement/Prospectus and should be read in its entirety by LBO
Bancorp shareholders. As set forth therein, National Capital Corporation has
relied without independent investigation on the accuracy and completeness of
the information furnished to it by LBO Bancorp or information that is publicly
available.
LBO Bancorp has agreed to pay National Capital Corporation a fee of
$12,000 for its fairness opinion. LBO Bancorp has also agreed to reimburse
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National Capital Corporation for certain other expenses and to indemnify
National Capital Corporation against certain liabilities, including liabilities
under the federal securities laws, that might arise in connection with the
Company Merger. National Capital Corporation has not been engaged by LBO
Bancorp in connection with prior transactions. However, National Capital
Corporation was engaged by LBO Bancorp for the purpose of rendering certain
advisory services relating to LBO Bancorp's review of its strategic options.
INTERESTS OF CERTAIN PERSONS IN THE MERGERS
Upon the effective time of the Bank Merger, L. Michael Ashbrook will
become a member of the Board of Directors of Commercial National Bank. Deposit
Guaranty has agreed to nominate Mr. Ashbrook and elect him as a director of
Commercial National Bank at the first annual meeting after the effective time
of the Bank Merger. Deposit Guaranty has agreed that Clyde White, who is
President of Louisiana Bank and a director of LBO Bancorp, will continue his
employment with Commercial National Bank at the same salary level he is
currently receiving, plus the customary benefits provided to similar executives
of Commercial National Bank. Clyde White currently has an agreement with
Louisiana Bank that provides that if the bank terminates his employment, except
termination for cause, he is entitled to receive one year's salary as a
severance payment. Deposit Guaranty has agreed to continue this agreement for
one year.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the principal federal income tax
consequences of the Company Merger is based on provisions of the Internal
Revenue Code (the "Code"), the regulations thereunder, judicial authority, and
administrative rulings and practice as of the date hereof. The obligations of
Deposit Guaranty and LBO Bancorp to consummate the Company Merger are subject
to the condition that they shall have received an opinion of counsel to Deposit
Guaranty to the effect that the Company Merger will be treated, for federal
income tax purposes, as a tax-free reorganization under Section 368(a) of the
Internal Revenue Code of 1986.
An LBO Bancorp shareholder who, pursuant to the Company Merger,
exchanges all of the LBO Bancorp Common Stock that such holder owns solely for
Deposit Guaranty Common Stock will not recognize any gain or loss upon such
exchange. The aggregate tax basis of Deposit Guaranty Common Stock received by
such a holder in exchange for LBO Bancorp Common Stock will equal such holder's
tax basis in the LBO Bancorp Common Stock surrendered. If such shares of LBO
Bancorp Common Stock are held as capital assets at the Effective Time, the
holding period of the Deposit Guaranty Common Stock received will include the
holding period of the LBO Bancorp Common Stock surrendered therefor. LBO
Bancorp shareholders should consult their tax advisors as to the determination
of their tax basis and holding period in any one share of Deposit Guaranty
Common Stock, as several methods of determination may be available.
1. CASH IN LIEU OF FRACTIONAL SHARES
To avoid the expense and inconvenience to Deposit Guaranty of issuing
fractional shares, no fractional shares of Deposit Guaranty Common Stock will
be issued pursuant to the Company Merger. An LBO Bancorp shareholder who
receives cash pursuant to the Company Merger in lieu of a fractional share
interest will be treated as having received such fractional share pursuant to
the Company Merger, and then as having exchanged such fractional share for cash
in a redemption by Deposit Guaranty subject to Section 302(a) of the Code,
provided that such deemed redemption is "substantially disproportionate" with
respect to such LBO Bancorp shareholder or is "not essentially equivalent
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to a dividend." If the Deposit Guaranty Common Stock represents a capital
asset in the hands of the shareholder, then the shareholder will generally
recognize capital gain or loss on such a deemed redemption of the fractional
share in an amount determined by the difference between the amount of cash
received for such fractional share and the shareholder's tax basis in the
fractional share.
2. DISSENTERS' SHARES
LBO Bancorp shareholders who exercise appraisal rights will be treated
as having received the fair value of the LBO Bancorp Common Stock, as
determined in the appraisal rights proceeding, in redemption of the LBO Bancorp
Common Stock subject to the proceeding. Such deemed redemption will be subject
to Section 302(a) of the Code, if such deemed redemption is 'substantially
disproportionate' with respect to the LBO Bancorp shareholder who exercises
appraisal rights or is 'not essentially equivalent to a dividend,' with the
result that a holder who exercises appraisal rights will recognize gain or loss
equal to the difference between the amount realized and such holder's tax basis
in the LBO Bancorp Common Stock subject to the proceeding. Any such gain or
loss recognized on such redemption will be treated as capital gain or loss if
the LBO Bancorp Common Stock with respect to which appraisal rights were
exercised were held as capital assets. Each LBO Bancorp shareholder who
contemplates exercising appraisal rights should consult a tax advisor as to the
possibility that all or a portion of the payment received pursuant to the
appraisal proceeding will be treated as dividend income.
3. BACKUP WITHHOLDING
Unless an exemption applies under the applicable law and regulations,
the Exchange Agent will be required to withhold thirty-one percent (31%) of any
cash payments to which a stockholder or other payee is entitled pursuant to the
Company Merger unless the stockholder or other payee provides its taxpayer
identification number (social security number or employer identification
number) and certifies that such number is correct. Each stockholder and, if
applicable, each other payee should complete and sign the substitute Form W-9
included as part of the transmittal letter that accompanies the election form,
so as to provide the information and certification necessary to avoid backup
withholding, unless an applicable exemption exists and is established in a
manner satisfactory to Deposit Guaranty and the Exchange Agent.
THE FOREGOING CONSTITUTES ONLY A GENERAL DESCRIPTION OF CERTAIN
FEDERAL INCOME TAX CONSEQUENCES OF THE COMPANY MERGER WITHOUT REGARD TO THE
PARTICULAR FACTS AND CIRCUMSTANCES OF EACH LBO BANCORP SHAREHOLDER. LBO
BANCORP SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE COMPANY MERGER, INCLUDING THE
APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
EFFECTIVE TIME
If the Merger Agreement is approved by the requisite vote of the
shareholders of LBO Bancorp and the Mergers are approved by the required
regulatory agencies and the other conditions to the Mergers are satisfied or
waived (where permissible), the Company Merger will become effective at the
time specified in the certificate of merger to be filed with the Louisiana
Secretary of State pursuant to the Business Corporation Law of Louisiana (the
"Louisiana BCL"), and the Bank Merger will become effective at the time
specified by the appropriate bank regulatory authorities. It is expected that
the effective time of the Mergers (the "Effective Time") will
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occur in late 1994 or early 1995; however, there can be no assurance that the
conditions to the Mergers will be satisfied or waived so that the Mergers can
be consummated. See "The Mergers -- Conditions" and "The Mergers -- Amendment
and Termination."
EXCHANGE OF LBO BANCORP CERTIFICATES
As soon as practicable after the Effective Time, the Exchange Agent
will mail to each holder of record of LBO Bancorp Common Stock a letter of
transmittal and instructions for use in effecting the surrender of the
certificates which, immediately prior to the Effective Time, represented
outstanding shares of LBO Bancorp Common Stock ("LBO Certificates") in exchange
for certificates representing shares of Deposit Guaranty Common Stock (the
"Deposit Guaranty Certificates"), which shall specify that delivery shall be
effected, and risk of loss and title to the LBO Certificates shall pass, only
upon delivery of the certificates of LBO Bancorp to the Exchange Agent.
Shareholders of LBO Bancorp are requested not to surrender their LBO
Certificates for exchange until such letter of transmittal and instructions are
received. Upon surrender of a LBO Certificate for exchange and cancellation to
the Exchange Agent, together with a duly executed letter of transmittal, the
holder of such LBO Certificate shall be entitled to receive in exchange
therefor a Deposit Guaranty Certificate representing the number of shares of
Deposit Guaranty Common Stock to which such holder of LBO Bancorp Common Stock
shall have become entitled pursuant to the Merger Agreement, and the LBO
Certificate so surrendered shall forthwith be cancelled. Lost LBO Certificates
shall be treated in accordance with the existing procedures of LBO Bancorp.
No dividends or other distributions declared after the Effective Time
with respect to Deposit Guaranty Common Stock and payable to the holders of
record thereof after the Effective Time shall be paid to the holder of any
unsurrendered LBO Certificate until the holder thereof shall surrender such LBO
Certificate. Subject to the effect, if any, of applicable law, after the
subsequent surrender and exchange of an LBO Certificate, the record holder
thereof shall be entitled to receive any such dividends or other distributions,
without any interest thereon, which theretofore had become payable in respect
of shares of Deposit Guaranty Common Stock represented by such LBO Certificate.
If any Deposit Guaranty Certificate representing shares of Deposit
Guaranty Common Stock is to be issued in a name other than that in which the
LBO Certificate surrendered in exchange therefor is registered, it shall be a
condition of the issuance of the new Deposit Guaranty Certificate representing
Deposit Guaranty Common Stock that the LBO Certificate so surrendered shall be
properly endorsed (or accompanied by any appropriate instrument of transfer)
and otherwise in proper form for transfer, and that the person requesting such
exchange shall pay to the Exchange Agent in advance any transfer or other taxes
required by reason of the issuance of a Deposit Guaranty Certificate in any
name other than that of the registered holder of the LBO Certificate
surrendered, or required for any other reason, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
After the Effective Time, there will be no transfers on the stock
transfer books of LBO Bancorp of the shares of LBO Bancorp Common Stock that
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, LBO Certificates representing such shares are presented for
transfer to the Exchange Agent, they shall be cancelled and exchanged for
Deposit Guaranty Certificates pursuant to the terms of the Merger Agreement.
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NO FRACTIONAL SHARES
No Deposit Guaranty Certificates or scrip representing fractional
shares of Deposit Guaranty Common Stock will be issued upon the surrender for
exchange of LBO Certificates, no dividend or distribution with respect to
Deposit Guaranty Common Stock shall be payable on or with respect to any
fractional share of Deposit Guaranty Common Stock, and such fractional share
interests shall not entitle the owner thereof to vote or to any other rights of
a shareholder of Deposit Guaranty. In lieu of any such fractional share,
Deposit Guaranty shall pay to each former LBO Bancorp shareholder who otherwise
would be entitled to receive a fractional share of Deposit Guaranty Common
Stock an amount in cash determined by multiplying (i) the closing sale price of
a share of Deposit Guaranty Common Stock on the day immediately preceding the
Effective Time as quoted on the National Association of Securities Dealers
Automated Quotation System, by (ii) the fraction of a share of Deposit Guaranty
Common Stock to which such holder would otherwise be entitled.
CONDITIONS
The respective obligations of each party under the Merger Agreement
are subject, among other conditions, to (1) approval of the Merger Agreement by
the affirmative vote of the holders of at least two-thirds of the shares of LBO
Bancorp Common Stock, (2) the absence of any order, decree or injunction of a
court or agency of competent jurisdiction enjoining or prohibiting consummation
of the Mergers, (3) receipt of an opinion of Messrs. Watkins Ludlam & Stennis
substantially to the effect that the transactions contemplated by the Merger
Agreement will be treated for Federal income tax purposes as a tax-free
reorganization under Section 368 of the Internal Revenue Code, and (4) the
receipt of all necessary regulatory approvals.
The obligations of Deposit Guaranty and it subsidiaries under the
Merger Agreement are conditioned, among other conditions, on (1) receipt of an
opinion from Gordon, Arata, McCollam & Duplantis, L.L.P., counsel to Louisiana
Bank and LBO Bancorp primarily regarding certain corporate matters, (2)
approval of the Merger Agreement and the transactions contemplated thereby by
all applicable state and federal authorities in a form acceptable to Deposit
Guaranty, and (3) except as noted in Schedule 6.02(h) to the Merger Agreement,
the absence of any material adverse change in the financial condition or
results of operations of LBO Bancorp or Louisiana Bank from the condition and
results of operations indicated in the audited financial statements of LBO
Bancorp or Louisiana Bank at December 31, 1993, and for the year then ended.
The obligations of LBO Bancorp and Louisiana Bank are conditioned,
among other conditions, on (1) receipt of an opinion of Messrs. Watkins Ludlam
& Stennis, counsel to Deposit Guaranty, primarily regarding certain corporate
matters, and (2) the absence of any material adverse change from March 31, 1994
to the Effective Time in the financial condition, results of operations,
business or prospects of Deposit Guaranty's consolidated group.
AMENDMENT AND TERMINATION
The Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the Company Merger by the
shareholders of LBO Bancorp: (a) by mutual written consent; (b) by Deposit
Guaranty, if at the time of such termination there shall be a material adverse
change in the consolidated financial condition of LBO Bancorp from that set
forth in LBO Bancorp's financial statements for the period ended December 31,
1993 (except as set forth in Schedule 6.02(h) to the Merger Agreement); (c) by
LBO Bancorp, if at the time of such termination there shall be a material
adverse change in the consolidated financial condition of Deposit Guaranty from
that set forth in Deposit Guaranty's financial statements for the period ended
March 31, 1994 (except as set forth in Schedule 6.03(g) of the Merger
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Agreement); (d) by any party thereto, if a United States District Court
shall rule upon application of the Department of Justice after a full trial on
the merits or a decision on the merits based on a stipulation of facts that the
transactions contemplated by the Merger Agreement violate the antitrust laws of
the United States; (e) by any party thereto, if at the Meeting, the Merger
Agreement shall not have been approved and adopted by the affirmative vote of
the holders of at least two-thirds of the shares of LBO Bancorp Common Stock
represented at the Meeting of shareholders of LBO Bancorp; (f) by Deposit
Guaranty, in the event that shareholders who hold more than ten percent (10%) of
the outstanding shares of LBO Bancorp Common Stock dissent from the Company
Merger and demand appraisal rights under Section 131 of the Louisiana BCL (See
"Appraisal Rights"); or (g) by any party thereto if the Closing shall not have
occurred by May 31, 1995.
The parties may, by written agreement, amend the Merger Agreement, but
after approval by LBO Bancorp shareholders of the Company Merger, there may not
be, without further approval of such shareholders, any amendment, extension or
waiver of the Merger Agreement which changes the amount or form of
consideration to be delivered to shareholders of LBO Bancorp.
COVENANTS
Except with the consent of Deposit Guaranty, during the period from
the date of the Merger Agreement to the Effective Time: (a) Louisiana Bank and
LBO Bancorp will conduct their businesses and engage in transactions only in
the ordinary course and consistent with prudent banking practice; (b) no
extraordinary increase shall be made in the compensation payable or to become
payable by Louisiana Bank and LBO Bancorp to any officer, employee, or agent,
nor shall any bonus payment be made (except pursuant to existing benefit
plans), stock option be granted or extraordinary employment agreement or
consulting agreement be entered into by Louisiana Bank or LBO Bancorp with any
such officer, employee or agent; (c) no material assets of Louisiana Bank or
LBO Bancorp shall be sold or disposed of except in the ordinary course of
business; (d) no new capital commitments shall be entered into, and no capital
expenditures shall be made, by Louisiana Bank and LBO Bancorp, except
commitments or expenditures within existing operating and capital budgets or
otherwise in the ordinary course of business; (e) neither Louisiana Bank or
LBO Bancorp shall authorize or issue any shares of any class of its capital
stock or any securities exchangeable for or convertible into any such shares or
any options or rights to acquire any such shares, nor shall Louisiana Bank or
LBO Bancorp otherwise authorize or affect any change in its capitalization; (f)
LBO Bancorp shall not declare and pay any dividend to its shareholders prior to
the Effective Date. Louisiana Bank shall only declare and pay such dividends
as are necessary to pay normal and routine operating expenses, reasonable
expenses related to this transaction and the indebtedness of LBO Bancorp to
Premier Bank in the approximate amount of $71,000 and the ESOP debt of
approximately $14,000.
EMPLOYEE BENEFITS
Deposit Guaranty or Commercial National Bank will, subject to
compliance with applicable legal and regulatory requirements, provide coverage
for all Louisiana Bank employees under all Deposit Guaranty employee benefit
plans for which they are eligible, as soon as practicable after the Effective
Time. All prior years of service of Louisiana Bank employees will be counted
for vesting and eligibility purposes under all applicable Deposit Guaranty
employee benefit plans to the extent permitted by applicable law. Any Louisiana
Bank employee who, immediately prior to the Effective Time, is covered by or is
a participant in a Louisiana Bank employee benefit plan listed in Schedule 3.20
to the Agreement, shall, at the Effective Time, be covered by or participate in
the comparable Deposit Guaranty employee benefit plan if a comparable plan
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otherwise is maintained by Deposit Guaranty, and if the employee meets the
eligibility requirements of the plan. At the Effective Time, or as soon as
reasonably practical after receipt of a favorable determination letter from the
IRS with respect to the Louisiana Bank of Ouachita Parish 401(k) Plan, such
plan will be merged with and into the Retirement Savings Plan for Employees of
Deposit Guaranty Corp. and Participating Subsidiaries. At the Effective Time,
or as soon thereafter as is reasonably practical, the parties will either cause
the Louisiana Bank of Ouachita Parish Employee Stock Ownership Plan to be
merged with and into the Retirement Savings Plan for Employees of Deposit
Guaranty Corp. and Participating Subsidiaries, or cause the Louisiana Bank of
Ouachita Parish Employee Stock Ownership Plan to be terminated and all
participant accounts maintained therein distributed to, or at the direction of,
their beneficial owners in an Eligible Rollover Distribution (as that term is
defined in Section 402(f)(2)(A) of the Code), which distribution may be paid
directly to the Trustee of the Retirement Savings Plan for Employees of Deposit
Guaranty Corp. and Participating Subsidiaries, at the election of the
distributee, pursuant to Section 401(a)(31) of the Code.
RESALES OF DEPOSIT GUARANTY COMMON STOCK ISSUED IN THE COMPANY MERGER;
AFFILIATES
Deposit Guaranty Common Stock to be issued to shareholders of LBO
Bancorp in connection with the Company Merger will be freely transferable under
the Securities Act, except for shares issued to any affiliate (as such term is
defined by Rule 145 of the Securities Act) of LBO Bancorp (the "LBO Bancorp
Affiliates"). It is a condition to Deposit Guaranty's obligation to consummate
the Mergers that, at or prior to the Effective Time, each person who may be
deemed to be an LBO Bancorp Affiliate shall have executed and delivered to
Deposit Guaranty an agreement (an "Affiliate's Letter") providing that such LBO
Bancorp Affiliate will not sell, transfer or otherwise dispose of any Deposit
Guaranty Common Stock obtained as a result of the Company Merger in violation
of the Securities Act and the rules and regulations of the Commission
thereunder. See "The Mergers -- Conditions."
ACCOUNTING TREATMENT
Deposit Guaranty has not yet decided whether to account for the
Company Merger under the purchase method or the pooling method. The decision
will be based on whether Deposit Guaranty decides to issue shares in connection
with the Company Merger from authorized, but unissued shares, or to acquire
shares in the open market for issuance in connection with the Company Merger.
If shares are acquired in the open market, the pooling method will not be
available. Under the purchase method, which accounts for a business
combination as the acquisition of one enterprise by another, the value of the
Company's shares issued in the transaction is included in stockholders' equity
and any of such amount in excess of net fair values of tangible and
identifiable intangible assets of the acquired company is treated as an
intangible asset on the acquiring company's financial statements. Under the
pooling method, the financial statements of the combining enterprises are
combined as if the two were and had been a single entity and no intangible
asset is created. In summary, although the true economic effect of a
transaction is the same under both accounting methods, the pooling method
results in less dilution to future earnings and return on equity.
EXPENSES AND FEES
All legal and other costs and expenses incurred in connection with the
Mergers and the transactions contemplated thereby will be paid by the party
incurring such costs and expenses.
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REGULATORY APPROVALS
Consummation of the Mergers is conditioned on approval by all required
regulatory authorities, including approval by the OCC of the Bank Merger. The
Board of Governors of the Federal Reserve System, the Louisiana Office of
Financial Institutions and the Federal Deposit Insurance Corporation must
review the Bank Merger and comment on the competitive factors involved. The
Bank Merger may not be consummated until the expiration of thirty (30) days
after approval by the OCC has been obtained. During this 30- day period, the
United States Department of Justice, if it objects to the proposed Bank Merger
for antitrust reasons, may file suit to enjoin the Bank Merger.
Deposit Guaranty has requested confirmation from the Federal Reserve
Bank of Atlanta that no approvals are required in connection with the Company
Merger under the Bank Holding Company Act, or alternatively, a waiver of any
such approval requirements.
APPRAISAL RIGHTS
Section 131 of the Louisiana BCL (a copy of which is attached hereto
as Exhibit C) entitles any holder of record of shares of LBO Bancorp Common
Stock who files a written objection to the Company Merger before the vote to
approve the Company Merger is taken at the Meeting and who votes against the
Company Merger to demand in writing that LBO Bancorp pay to such shareholder
the fair cash value of such shares ("Appraisal Rights"). HOWEVER, INTERESTED
PARTIES SHOULD NOTE THAT, IF THE COMPANY MERGER IS APPROVED BY EIGHTY PERCENT
(80%) OR MORE OF THE OUTSTANDING SHARES OF LBO BANCORP COMMON STOCK, SECTION
131 OF THE LOUISIANA BCL PROVIDES THAT NO SUCH SHAREHOLDER WILL HAVE APPRAISAL
RIGHTS. A person who is a beneficial owner, but not a registered owner, of
shares of LBO Bancorp Common Stock who wishes to exercise the rights of a
dissenting shareholder under the Louisiana BCL cannot do so in his own name but
must cause the registered owner thereof to take all required action to comply
on his behalf with the procedures under Section 131 of the Louisiana BCL.
Any shareholder of record contemplating making a demand for appraisal
is urged to review carefully the provisions of Section 131 of the Louisiana
BCL, particularly the procedural steps required to perfect Appraisal Rights
thereunder. APPRAISAL RIGHTS WILL BE LOST IF THE PROCEDURAL REQUIREMENTS OF
SECTION 131 ARE NOT FULLY SATISFIED.
Set forth below is a summary of the procedures relating to the
exercise of Appraisal Rights. The following summary does not purport to be a
complete statement of the provisions of Section 131 of the Louisiana BCL and is
qualified in its entirety by reference to Exhibit C hereto and to any
amendments to such sections as may be adopted after the date of this Proxy
Statement/Prospectus.
FILING WRITTEN OBJECTION AND VOTE AGAINST THE COMPANY MERGER
Before the shareholders' vote is taken on the proposal to approve the
Company Merger, a shareholder of record who intends to exercise Appraisal
Rights (a "Dissenter") must deliver to LBO Bancorp a written objection to the
proposed Company Merger and vote the shares of LBO Bancorp Common Stock held by
such Dissenter (the "Shares") against the proposed Company Merger. Such
written objection may be sent to LBO Bancorp at 2002 N. 7th Street, West
Monroe, Louisiana 71291. The return of a proxy card by a Dissenter with
instructions to vote the Shares represented thereby against the Company Merger
(or abstaining from voting) is not sufficient to satisfy the requirement of
delivering written objection to LBO Bancorp. The submission of a signed blank
proxy card will serve to waive Appraisal Rights.
19
<PAGE> 32
NOTICE BY LBO BANCORP
Promptly after the Effective Time (unless the Company Merger is
approved by eighty percent (80%) or more of the outstanding shares of LBO
Bancorp Common Stock), LBO Bancorp will notify each Dissenter who has purported
to comply with the provisions of Section 131 that the Company Merger has become
effective. The giving of such notice shall not be deemed to create any rights
in the Dissenter receiving the same to demand payment for such Dissenter's
Shares. The notice shall be sent by registered mail, addressed to the Dissenter
at such Dissenter's last address on LBO Bancorp's records immediately prior to
the Effective Time.
WRITTEN DEMAND
Within twenty (20) days after the mailing of notice by LBO Bancorp,
any Dissenter must file with LBO Bancorp a demand in writing (the "Demand") for
the fair cash value of such Dissenter's Shares as of the day prior to the
Meeting, stating the amount demanded and a post office address to which LBO
Bancorp may reply. Simultaneously with the filing of the Demand, the Dissenter
shall also deposit the certificate(s) representing the Dissenter's Shares (duly
endorsed and transferred to LBO Bancorp upon the sole condition that the
certificate(s) will be delivered to LBO Bancorp upon payment of the value of
the Shares in accordance with Section 131) in escrow with a chartered bank or
trust company located in Ouachita Parish, Louisiana (the "Escrow Bank"). Along
with the Demand, the Dissenter shall deliver to LBO Bancorp a written
acknowledgment of the Escrow Bank that it holds such certificate(s), endorsed
as specified above. A Dissenter who fails to satisfy any of the foregoing
conditions within the proper time periods will conclusively be presumed to have
acquiesced in the Company Merger and will lose his Appraisal Rights. Such
written demand may be sent to LBO Bancorp at 2002 N. 7th Street, West Monroe,
Louisiana 71291. If LBO Bancorp does not disagree with the Dissenter's Demand,
LBO Bancorp shall pay to such Dissenter the value so demanded by him for his
Shares.
APPRAISAL
If LBO Bancorp does not agree to the amount demanded by the Dissenter,
or does not agree that any payment is due, it will, within twenty (20) days
after receipt of such Demand and acknowledgment, notify such Dissenter in
writing (1) of its disagreement with the Dissenter as to whether any payment is
due or as to any disagreement with the amount demanded by the Dissenter and (2)
state in the letter the value LBO Bancorp will agree to pay if any payment
should be held to be due (the "Notice of Disagreement").
Within sixty (60) days after the receipt of the Notice of Disagreement
by LBO Bancorp, but not thereafter, any Dissenter who has complied with the
required conditions of Section 131 may file suit against LBO Bancorp in
Ouachita Parish, Louisiana (the "Louisiana District Court") demanding a
determination of the fair cash value of his Shares, or within such sixty-day
period but not thereafter, file suit or intervene as a plaintiff in any other
such suit filed against LBO Bancorp by another Dissenter for a judicial
determination of the fair cash value of such other Dissenter's Shares. If a
Dissenter fails to bring or to intervene in such a suit within the applicable
sixty-day period, the Dissenter will be deemed to have consented to accept
either LBO Bancorp's statement that no payment is due or, if LBO Bancorp does
not contend that no payment is due, to accept the value of his Shares specified
by LBO Bancorp in its Notice of Disagreement. If a petition for an appraisal
is timely filed, after a hearing on such petition, the Louisiana District Court
will summarily determine which Dissenters, if any, are entitled to payment and
will determine the fair cash value of the Shares owned by such Dissenters.
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<PAGE> 33
Dissenters considering exercising Appraisal Rights should bear in mind
that the fair cash value of their Shares determined under Section 131 could be
more than, the same as or less than the consideration they would otherwise
receive pursuant to the Merger Agreement if they do not seek appraisal of their
Shares, and that opinions of financial advisors as to fairness are not opinions
as to fair cash value under Section 131.
Any Dissenter who has duly filed a Demand in compliance with Section
131 will, after filing the Demand, cease to have any of the rights of a
shareholder, except those rights (e.g., the conditional right to receive the
fair cash value of shares held, the conditional right to withdraw Demand, etc.)
generally provided to Dissenters under Section 131.
At any time prior to LBO Bancorp giving its Notice of Disagreement,
any Dissenter shall have the right to withdraw his or her Demand and to accept
the terms offered in the Company Merger; after this period, the Dissenter may
withdraw his or her Demand only with the consent of LBO Bancorp. If a Demand
is withdrawn, or the Louisiana District Court determines that the Dissenter is
not entitled to payment for his Shares, or the Dissenter otherwise loses his
Appraisal Rights, a Dissenter shall only be entitled to receive the
consideration offered pursuant to the Merger Agreement.
When the fair cash value of the Dissenter's Shares is agreed upon
between the Dissenter and LBO Bancorp, or LBO Bancorp has become liable for the
value demanded by the Dissenter because of its failure to give Notice of
Disagreement, or the Dissenter has become bound to accept the value which LBO
Bancorp agrees is due because of his failure to bring suit within sixty (60)
days after receipt of the Notice of Disagreement, LBO Bancorp may, at its
option, pay to the Escrow Bank the amount which the Dissenter is entitled to
receive for his Shares, and LBO Bancorp shall be entitled to receive such
Shares from the Escrow Bank. Any action by the Dissenter to recover such value
must be brought within five (5) years from the date the value was agreed upon,
or the liability of LBO Bancorp became fixed.
PAYMENT AND COSTS
If upon the filing of any such suit or intervention LBO Bancorp
deposits with the Louisiana District Court the amount, if any, which it
specified in its Notice of Disagreement, and if in that notice LBO Bancorp
offered to pay such amount to the Dissenter on Demand, then the costs (not
including legal fees) of the suit or intervention will be taxed against the
Dissenter if the amount finally awarded to the Dissenter, exclusive of interest
and costs, is equal to or less than the amount so deposited; otherwise, the
costs (not including legal fees) will be assessed against LBO Bancorp.
ANY LBO BANCORP SHAREHOLDER WHO DESIRES TO EXERCISE APPRAISAL RIGHTS
SHOULD CAREFULLY REVIEW THE LOUISIANA BCL AND IS URGED TO CONSULT SUCH
SHAREHOLDER'S LEGAL ADVISOR BEFORE EXERCISING OR ATTEMPTING TO EXERCISE SUCH
RIGHTS.
COMPARISON OF THE RIGHTS OF HOLDERS OF
LBO BANCORP COMMON STOCK AND DEPOSIT GUARANTY COMMON STOCK
LBO Bancorp is incorporated in the State of Louisiana and Deposit
Guaranty is incorporated in the State of Mississippi. Shareholders of LBO
Bancorp, whose rights as shareholders are currently governed by Louisiana law
and by LBO Bancorp's Articles of Incorporation (the "LBO Bancorp Articles") and
Bylaws, will, upon consummation of the Company Merger, become shareholders
21
<PAGE> 34
of Deposit Guaranty and their rights as such will be governed by Mississippi
law and by Deposit Guaranty's Articles of Incorporation (the "Deposit Guaranty
Articles") and Bylaws.
Certain significant differences between the rights of shareholders of
LBO Bancorp and shareholders of Deposit Guaranty are set forth below. This
summary is not intended to be relied upon as an exhaustive list or a detailed
description of the provisions discussed and is qualified in its entirety by the
Louisiana BCL and the Mississippi Business Corporation Act (the "Mississippi
BCA") and by the Articles of Incorporation and Bylaws of LBO Bancorp and
Deposit Guaranty, respectively, to which LBO Bancorp shareholders are referred.
AUTHORIZED SHARES OF CAPITAL STOCK; DIVIDEND RIGHTS
The LBO Bancorp Articles authorize the issuance of 410,000 shares of
LBO Bancorp Common Stock. As of the date of this Proxy Statement/Prospectus,
386,012 shares of LBO Bancorp Common Stock were issued and outstanding.
The Deposit Guaranty Articles authorize the issuance of 50,000,000
shares of Deposit Guaranty Common Stock and 10,000,000 shares of Class A Voting
Preferred Stock and 10,000,000 shares of Class B Non-Voting Preferred Stock
(together, "Deposit Guaranty Preferred Stock"). The Board of Directors of
Deposit Guaranty is authorized to provide for the issuance of Deposit Guaranty
Preferred Stock from time to time in series and, as to each series, to fix the
number of shares in such series and the voting, dividend, redemption,
liquidation, retirement and conversion provisions applicable to the shares of
such series. As of the date of this Proxy Statement/Prospectus, no shares of
Deposit Guaranty Preferred Stock were issued and outstanding.
During the time that any series of Deposit Guaranty Preferred Stock is
outstanding, no dividends may be declared or paid on Deposit Guaranty Common
Stock, unless dividends on all outstanding shares of Deposit Guaranty Preferred
Stock for the current and all past dividend periods have been declared and paid
or provision made for payment thereof. Dividends with respect to Deposit
Guaranty Preferred Stock are required to be cumulative.
VOTING RIGHTS
Pursuant to LBO Bancorp's Bylaws, each outstanding share of LBO
Bancorp stock, regardless of class, is entitled to one vote on each matter
submitted to a vote, except to the extent that the voting rights of the shares
of any class are limited or denied by the laws of the State of Louisiana.
Holders of such shares do not have cumulative voting rights.
Pursuant to the Mississippi BCA and Deposit Guaranty's Bylaws, each
outstanding share of Deposit Guaranty stock is entitled to one vote on each
matter submitted to a vote. However, in connection with the election of
directors, holders of Deposit Guaranty Common Stock have cumulative voting
rights. Pursuant to the Deposit Guaranty Bylaws, every shareholder entitled to
vote in the election of directors shall have the right to vote, in person or by
proxy, the number of shares owned by him for as many persons as there are
directors to be elected, or to cumulate his votes by giving one candidate the
number of votes equal to the number of directors to be elected multiplied by
the number of his shares, or by distributing such votes on the same principle
among any number of candidates.
APPRAISAL RIGHTS
The Louisiana BCL provides appraisal rights to shareholders in
connection with mergers and consolidations and the sale, lease or exchange of
22
<PAGE> 35
all of the corporation's assets, if such are approved by less than eighty
percent (80%) of a corporation's total voting power. Appraisal rights are not
available under the Louisiana BCL in the case of: (1) a sale pursuant to a
court order; (2) a sale for cash requiring distribution of all or substantially
all of the net proceeds to shareholders in accordance with their respective
interests within one (1) year of the date of the sale; and (3) shareholders
holding shares of any class of stock which, at the record date fixed to
determine shareholders entitled to receive notice of and to vote at the meeting
of shareholders at which a merger or consolidation was acted on, were listed on
a national securities exchange unless the shares of such shareholders were not
converted by the merger or consolidation solely into shares of the surviving or
new corporation.
The Mississippi BCA provides appraisal rights to shareholders in any
of the following corporate actions: (1) a merger if shareholder approval is
required or if the corporation is a subsidiary that merges with its parent; (2)
a plan of share exchange if the corporation is being acquired and the
shareholder is entitled to vote; and (3) a sale or exchange of all or
substantially all of the property of the corporation that is not in the usual
and regular course of business, but not including a court ordered sale or sale
pursuant to a plan where the shareholders will receive the proceeds within one
(1) year after the date of sale.
LIMITATIONS ON DIRECTORS' AND OFFICERS' LIABILITY
Deposit Guaranty's Articles and Bylaws do not contain any provision
limiting the personal liability of Deposit Guaranty's directors and officers
for monetary damages resulting from breach of fiduciary duty.
LBO Bancorp's Articles provide that no director or officer of LBO
Bancorp shall be personally liable to LBO Bancorp or its shareholders for
monetary damages resulting from breach of fiduciary duty, except for liability
for (a) breach of the director's or officer's duty of loyalty to its
shareholders, (b) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) unlawful payment of
dividends, distribution of assets, or purchase or redemption of LBO Bancorp
shares, or (d) any transaction from which the director or officer derived an
improper personal benefit. LBO Bancorp's Articles further provide that, in the
event the Louisiana BCL is amended to authorize corporate action further
limiting or eliminating the personal liability of directors and officers then
the liability of each director and officer of LBO Bancorp shall be limited or
eliminated to the full extent permitted under Louisiana law.
SUPERMAJORITY VOTING REQUIREMENTS
Deposit Guaranty's Articles require that any Business Combination (as
defined below) involving Deposit Guaranty or a subsidiary of Deposit Guaranty
and an Interested Shareholder (as defined below) or any affiliate or associate
of an Interested Shareholder or any person that following such transaction
would be an affiliate or associate of an Interested Shareholder be approved by
the affirmative vote of at least eighty percent (80%) of the votes entitled to
be cast by the holders of all the then outstanding shares of voting stock of
Deposit Guaranty, excluding shares held by the Interested Shareholder, unless
the transaction is approved by a majority of the Continuing Directors (as
defined below) or unless certain fair price and procedural requirements are
satisfied.
An "Interested Shareholder" is defined to include any person (other
than Deposit Guaranty, certain Deposit Guaranty subsidiaries, employee benefit
plans of Deposit Guaranty and the trustees of such plans) who (a) is or has
announced a plan to become the beneficial owner of ten percent (10%) or more
23
<PAGE> 36
of the voting stock of Deposit Guaranty, or (b) is an affiliate or associate of
Deposit Guaranty who has, within the past two (2) years, been the beneficial
owner of ten percent (10%) or more of Deposit Guaranty's voting stock. A
person is the "beneficial owner" of voting stock which such person, directly or
indirectly, owns or has the right to acquire or vote.
A "Business Combination" includes the following: (a) a merger or
consolidation of Deposit Guaranty or any subsidiary with an Interested
Shareholder; (b) any sale, disposition or other arrangement (including
investments, loans, advances, guarantees, extensions of credit, creation of
security interests and joint ventures) with or for the benefit of an Interested
Shareholder involving assets or securities having a fair market value (or
involving aggregate commitments) of $10,000,000 or more or constituting more
than five percent (5%) of the book value of the total assets (in the case of
transactions involving assets or commitments other than capital stock) or five
percent (5%) of the shareholders' equity (in the case of transactions in
capital stock) of the entity in question, as reflected in the most recent
fiscal year-end consolidated balance sheet of such entity existing at the time
the shareholders of Deposit Guaranty would be required to approve or authorize
such transaction; (c) the adoption of any plan or proposal for the liquidation
or dissolution of Deposit Guaranty or for any amendment to Deposit Guaranty's
Bylaws; or (d) any reclassification of securities, recapitalization, merger
with a subsidiary or other transaction which has the effect, directly or
indirectly, of increasing an Interested Shareholder's proportionate share of
the outstanding capital stock of Deposit Guaranty or a subsidiary.
"Continuing Director" means: (i) any member of the Deposit Guaranty
Board of Directors who is not affiliated with an Interested Shareholder and who
either (a) was a Deposit Guaranty director prior to the time the Interested
Shareholder became an Interested Shareholder, or (b) was a Deposit Guaranty
director on April 30, 1986 and has been a Deposit Guaranty director
continuously since; and (ii) any successor of a Continuing Director who is not
affiliated with an Interested Shareholder and who was recommended or elected to
succeed the Continuing Director by a majority of the Continuing Directors.
LBO Bancorp's Articles and Bylaws contain no comparable provisions
which would require a vote greater than that otherwise required by the
Louisiana BCL (i.e., the affirmative vote of at least two-thirds of the voting
power present) to approve any merger or consolidation or sale of substantially
all assets.
REMOVAL OF DIRECTORS
LBO Bancorp's Bylaws provide that LBO Bancorp shareholders may remove
a director upon the affirmative vote of shareholders holding a majority of the
total voting power at any special meeting called for that purpose, even though
the director's term has not expired.
Deposit Guaranty's Articles provide that Deposit Guaranty shareholders
may remove a director with or without cause, but only at a meeting expressly
called for that purpose and upon the affirmative vote of the holders of at
least eighty percent (80%) of the voting power of all shares of stock entitled
to vote generally in the election of directors, and in the event that less than
the entire Board is to be removed, no one of the directors may be removed if
the votes cast against his removal would be sufficient to elect him if then
cumulatively voted at an election of the class of directors of which he is a
part.
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<PAGE> 37
VACANCIES IN THE BOARD OF DIRECTORS
Under LBO Bancorp's Bylaws, any vacancy occurring in the LBO Bancorp
Board of Directors (including any vacancy resulting from an increase in the
authorized number of directors) may be filled by a majority vote of the
remaining directors even though such remaining directors constitute less than a
quorum, provided that the shareholders shall have the right at a special
meeting called for that purpose prior to such action by the Board, to fill the
vacancy.
Under Deposit Guaranty's Bylaws, any vacancy, including one occurring
as a result of an increase in the number of directors, may be filled only by
the shareholders.
AMENDMENT OF CERTAIN BYLAW PROVISIONS
The LBO Bancorp Board of Directors or the LBO Bancorp shareholders may
amend or repeal the corporation's bylaws.
Under the Mississippi BCA, the board of directors has the power to
amend or repeal the bylaws of a Mississippi corporation such as Deposit
Guaranty, unless such power is expressly reserved for the shareholders.
Deposit Guaranty's Articles provide that an amendment to the Articles of
Incorporation or the Bylaws relating to composition of the Board of Directors
and removal of directors must be approved by the affirmative vote of at least
eighty percent (80%) of the shareholders (the same proportion required in order
to effect the removal of a director), excluding (except for purposes of
determining whether a quorum is present) those shares beneficially owned by any
Interested Shareholder.
INFORMATION CONCERNING LBO BANCORP
LBO Bancorp, a business corporation organized under the laws of
Louisiana, was incorporated in October, 1982 to acquire all of the stock of
Louisiana Bank of Ouachita Parish (now Louisiana Bank) pursuant to a
reorganization that was consummated in 1983. From that date to the present,
Louisiana Bank has been LBO Bancorp's principal subsidiary. As of June 30,
1994, LBO Bancorp had total assets of $95.6 million, total deposits of $85.8
million, total loans of $47.1 million and shareholders' equity of $7.4 million.
LBO Bancorp's executive offices are located at 2002 N. 7th Street, West Monroe,
Louisiana 71291. Louisiana Bank, a Louisiana banking association, is a full
service commercial bank offering consumer and commercial banking services
primarily in Ouachita Parish, Louisiana. It operates a main office at 2002 N.
7th Street, West Monroe, Louisiana, has one mini-branch office located in West
Monroe and three full service branch offices in Monroe, Louisiana. Major
services provided by Louisiana Bank include consumer financing, commercial
lending, credit card services, savings and checking accounts for individuals,
businesses and public bodies and the offering of certificates of deposit and
individual retirement accounts. All deposit accounts are insured by the FDIC
to the maximum legal limits. Credit services offered by Louisiana Bank include
secured and unsecured commercial loans, Small Business Administration loans,
agricultural loans, real estate loans and consumer loans.
Louisiana Bank's deposits represent a cross-section of the area's
economy and there is no material concentration of deposits from any single
customer or group of customers. No significant portion of Louisiana Bank's
loans is concentrated within a single industry or group of related industries.
There are no material seasonal factors that would have any adverse effect on
Louisiana Bank. Louisiana Bank does not rely on foreign sources of funds or
income.
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<PAGE> 38
MARKET PRICES OF AND DIVIDENDS ON LBO BANCORP COMMON STOCK
LBO Bancorp is not traded on any established securities market. As of
August 31, 1994, there were 227 holders of record of LBO Bancorp Common Stock.
No cash dividends were paid in 1993 or 1992. No cash dividends have been paid
in 1994. The Merger Agreement prohibits the payment of cash dividends by LBO
Bancorp prior to consummation of the Mergers.
PRINCIPAL SHAREHOLDERS AND STOCK OWNERSHIP
OF MANAGEMENT OF LBO BANCORP
The following table indicates the beneficial ownership as of August
31, 1994 unless otherwise indicated below, of LBO Bancorp's Common Stock by
each director, the CEO of Louisiana Bank and the four (4) most highly
compensated executive officers of Louisiana Bank other than the CEO of
Louisiana Bank, by each person known by LBO Bancorp to be the beneficial owner
of more than five percent (5%) of the Company's outstanding shares, and by all
directors and executive officers of LBO Bancorp as a group.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature
Beneficial Owner of Beneficial Ownership Percent of Class
- ------------------- ----------------------- ----------------
<S> <C> <C>
L. Michael Ashbrook, Chairman, and
President 81,400 21.09
P. O. Box 1512
Monroe, Louisiana 71210-1512
Lamar Buffington, Director 13,256 3.43
P. O. Box Drawer 7420
Monroe, Louisiana 71211-4107
J. Lester Duncan, Director 11,346 2.94
P. O. Box 4107
Monroe, Louisiana 71211-4101
J. William Kight, III, Director 13,906 3.60
2909 Cameron
Monroe, Louisiana 71201-3713
William H. Krutzer, III, Director 35,760(1) 9.26
P. O. Box 4803
Monroe, Louisiana 71211-4803
Johnny B. Mitchell, Director 13,718(2) 3.50
904 Meadowbrook
West Monroe, Louisiana 71291-5035
Jerry W. Thomas, Director 5,527 1.43
P. O. Drawer 2110
Monroe, Louisiana 71207-2110
</TABLE>
- -----------------------------------
(1) Of the total 35,760 shares, 6,128 are owned by family members and 25,
342 are owned by WHK, Inc., a company owned by Mr. Krutzer.
(2) Of the total 13,718 shares, 343 are owned by Mr. Mitchell's wife and
193 are owned by Mr. Mitchell's son.
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<PAGE> 39
<TABLE>
<S> <C> <C>
Robert W. Young, Director 22,575 5.85
P. O. Box 215
West Monroe, Louisiana 71294-0215
Clyde R. White, Director, 11,171(3) 2.89
President and CEO of Louisiana Bank
P. O. Box 2256
West Monroe, Louisiana 71207-2110
Wayne L. Aswell, Executive Officer 626(4) .16
of Louisiana Bank
141 Ford Drive
Choudrant, Louisiana 71227
Sally A. Brown, Executive Officer 3,913(5) 1.01
of Louisiana Bank
701 Wall Williams Road
West Monroe, Louisiana 71291-4759
Raymond Guillot, Executive Officer 2,446(6) .63
of Louisiana Bank
110 Lemont Drive
West Monroe, Louisiana 71291-4730
Robert E. Schott, Executive Officer 2,384(7) .62
of Louisiana Bank
355 Forty Oaks Farm Road
West Monroe, Louisiana 71291-9096
ALL DIRECTORS AND EXECUTIVE 217,874 56.42
OFFICERS AS A GROUP
Lallage Feazel Wall 23,029(8) 5.97
By William G. Anderson and
H. F. Anderson, Curators
333 Texas Street, Suite 2121
Shreveport, Louisiana 71101-5302
</TABLE>
- -----------------------------------
(3) Of the total 11,171 shares, 619 are in a self-directed IRA and 1,777
represent Mr. White's vested interest in the Company's ESOP.
(4) Of the total 626 shares, all represent Mr. Aswell's vested interest
in the Company's ESOP.
(5) Of the total 3,913 shares, 929 represent Mrs. Brown's vested interest
in the Company's ESOP.
(6) Of the total 2,446 shares, 1,246 represent Mr. Guillot's vested
interest in the Company's ESOP.
(7) Of the total 2,384 shares, 994 represent Mr. Schott's vested interest
in the Company's ESOP.
(8) Except for the directors noted above, Mrs. Wall is the only
shareholder owning more than 5% of LBO Bancorp's issued and outstanding shares.
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<PAGE> 40
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF LBO BANCORP, INC.
The following discussion and analysis of the financial condition and
results of operations of LBO Bancorp should be read in conjunction with the
consolidated financial statements, accompanying footnotes, and other
supplemental financial information appearing elsewhere in this prospectus.
1993 COMPARED WITH 1992 AND 1991
BALANCE SHEET
Total assets were $94.5 million at December 31, 1993 compared to $92.3
million in 1992 and $90.0 million in 1991. Total loans, net of unearned
income, increased to $48.4 million compared to $47.8 million in 1992 and $40.6
million in 1991.
Total deposits remained constant at $84.5 million at year-end 1993 and
1992 compared to $83.6 million in 1991. Demand and savings deposits reflected
a continuous increase over the period, while time deposits decreased. Total
stockholders' equity for year-end 1993 was $7.3 million compared to $5.8
million and $4.4 million for year-end 1992 and 1991, respectively.
NET INCOME
LBO Bancorp's net income increased to $1.5 million for 1993 compared
to $1.2 million in 1992 and $739 thousand in 1991. Net income per share rose
7% to $3.92 in 1993 compared to $3.68 in 1992. Net income per share in 1992
reflects an increase of 58% compared to 1991's net income per share of $2.33.
The increase in net income for the period 1991 through 1993 is primarily due
to an increase in the net interest margin.
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<PAGE> 41
NET INTEREST INCOME
Net interest income is the largest component of LBO Bancorp's net
income and represents income earned on interest-earning assets less the cost of
interest-bearing liabilities. Net interest income increased to $4.9 million in
1993 as compared to $4.6 million in 1992 and $3.5 million in 1991. LBO
Bancorp has maintained net interest margins of 5.61%, 5.52% and 4.88% during
1993, 1992 and 1991, respectively. These increases from year to year were
primarily a result of an increase in the interest spread which is the
difference between yields earned on interest-earning assets and rates paid on
interest-bearing liabilities. The increase in the interest spread resulted
primarily from the interest rates paid by LBO Bancorp on deposit liabilities
decreasing more rapidly than the yields on interest-earning assets in response
to declining market rates during 1991 and 1992.
Decreases in the percentage of interest-earning assets funded by
interest-bearing liabilities from 89.33% in 1991 to 87.37% in 1992 and to
85.69% in 1993 also contributed to increases in the net interest margin.
ALLOWANCE AND PROVISION FOR POSSIBLE LOAN LOSSES
LBO BANCORP AND SUBSIDIARIES
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(In Thousands)
The following table summarizes the activity in the allowance for possible loan
losses over the past five years.
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
--------------- ------------------------------------------------
1994 1993 1992 1991 1990 1989
--------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period $1,002 $826 $671 $533 $388 $401
--------------- -------- -------- -------- -------- --------
Charge-offs:
Commercial, financial and
agricultural -- 2 49 28 169 142
Real estate -- 36 42 58 68 88
Consumer 14 73 101 133 81 48
--------------- -------- -------- -------- -------- --------
Total charge-offs 14 111 192 219 318 278
--------------- -------- -------- -------- -------- --------
Recoveries:
Commercial, financial and
agricultural 2 12 17 6 153 26
Real estate 3 16 10 13 14 46
Consumer 9 20 40 48 13 3
--------------- -------- -------- -------- -------- --------
Total recoveries 14 48 67 67 180 75
--------------- -------- -------- -------- -------- --------
Net charge-offs 0 63 125 152 138 203
Provision for possible loan losses 0 239 280 290 283 190
--------------- -------- -------- -------- -------- --------
Balance at end of period $1,002 $1,002 $826 $671 $533 $388
=============== ======== ======== ======== ======== ========
Total loans outstanding:
End of period $47,095 $48,465 $47,917 $40,852 $36,953 $34,521
Average 47,280 48,128 45,839 38,746 36,318 31,422
Ratios:
Allowance for possible loan losses
to end of period total loans 2.13% 2.07% 1.73% 1.65% 1.44% 1.12%
Allowance for possible loan losses
to net charge-offs NM 1,590 661 441 386 191
Allowance for possible loan losses
to nonperforming loans 173 219 171 99 233 90
Net charge-offs to average total loans NM 0.13 0.27 0.39 0.38 0.65
Recoveries to prior year charge-offs 12.61 25.00 30.59 21.07 64.75 26.88
</TABLE>
NM - Not Meaningful
LBO Bancorp maintains its allowance for possible loan losses in the
loan portfolio. The allowance is increased by the provision for possible loan
losses (provision) and by recoveries of previously charged-off loans and
decreased by loan charge-offs.
LBO Bancorp performs a monthly assessment of the adequacy of the
allowance for possible loan losses which determines a required allowance level
for the period based on historical trends in the portfolio and other factors.
Other factors include management's assessment of the economic conditions,
political conditions, levels of nonaccrual and other problem credits, and the
level of credit management. This required allowance amount is compared to the
actual allowance to determine whether a provision is necessary. If necessary,
a provision is used to adjust the current allowance balance to the required
amount. The provision for possible loan losses was $239 thousand for 1993
compared to $280 thousand in 1992 and $290 thousand in 1991.
The allowance at December 31, 1993 was $1.0 million or 2.07% of total
loans. The allowance was $826 thousand at December 31, 1992 or 1.73% of total
loans and $671 thousand or 1.65% at December 31, 1991.
Net charge-offs for 1993 were $63 thousand compared to $124 thousand
for 1992 and $152 thousand for 1991. These decreases from year to year reflect
increasingly positive trends in economic conditions and credit quality for the
period.
29
<PAGE> 42
NONPERFORMING ASSETS
The amounts of nonperforming assets at the indicated dates are shown in the
following table. (In Thousands)
<TABLE>
<CAPTION>
December 31,
June 30, -----------------------------------------------------
1994 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Nonaccrual loans $320 $190 $191 $330 $187 $344
Restructured loans 259 268 292 346 42 88
--------- --------- --------- --------- --------- ---------
Nonperforming loans 579 458 483 676 229 432
Other real estate 92 111 211 229 319 276
--------- --------- --------- --------- --------- ---------
Nonperforming assets $671 $569 $694 $905 $548 $708
========= ========= ========= ========= ========= =========
Accruing loans past due
90 days or more $254 $148 $85 -- -- $46
</TABLE>
LBO Bancorp's nonperforming assets consist of loans for which interest is no
longer being accrued, restructured loans, and other real estate. LBO Bancorp's
nonperforming assets at December 31, 1993 were $569 thousand which represents
an 18% decrease compared to 1992 and a 23% decrease from 1991 to 1992. This
decrease was largely a result of decreases in nonaccrual loans and restructured
loans. Nonaccrual loans for December 31, 1993 were $190 thousand as compared
to $191 thousand and $330 thousand for 1992 and 1991, respectively.
Restructured loans decreased from $346 thousand at December 31, 1991 to $292
thousand at December 31, 1992 and $268 thousand at December 31, 1993.
NONINTEREST INCOME
Noninterest income for 1993 reached $1.2 million, up from $847
thousand in 1992 and $627 thousand in 1991. The increase in noninterest income
in 1993 is primarily a result of a gain of $40 thousand on the sale of
investments and a gain of $142 thousand on the sale of assets. Sales of
investment securities in 1992 and 1991 resulted in losses of $105 thousand and
$269 thousand, respectively.
NONINTEREST EXPENSE
Total noninterest expense was $3.6 million for 1993 compared to $3.3
million in 1992 and $2.9 million in 1991. This increase is largely a result of
increases in salaries of 14% from 1992 to 1993 and 13% from 1991 to 1992.
Employee benefits increased 24% from 1992 to 1993 primarily as a result of a
25% increase in hospitalization benefits. Also, other operating expenses
increased from 1992 to 1993 as a result of a $36 thousand increase in directors
fees for the period.
LOANS
Loans outstanding at the indicated dates are shown in the following table
classified by type of loan. (In Thousands)
<TABLE>
<CAPTION>
December 31,
June 30, -----------------------------------------------------
1994 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural $6,814 $6,984 $6,750 $7,321 $6,206 $7,846
Real estate - construction 693 595 696 627 685 656
Real estate - mortgage 30,997 31,835 31,635 23,820 21,486 19,201
Consumer 8,591 9,051 8,836 8,839 8,576 6,818
--------- --------- --------- --------- --------- ---------
$47,095 $48,465 $47,917 $40,607 $36,953 $34,521
========= ========= ========= ========= ========= =========
</TABLE>
The following table shows the amounts of loans, excluding consumer and real
estate mortgage loans, in certain categories outstanding as of December 31,
1993, which based on remaining scheduled repayments of principal, are due in
the periods indicated. Also, the amounts due after one year are classified
according to their sensitivity to changes in interest rates.
<TABLE>
<CAPTION>
Maturing
--------------------------------------------
After 1 Yr. But
Within 1 Yr. Less Than 5 Yrs. After 5 Yrs. Total
------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $2,613 $3,357 $1,014 $6,984
Real Estate - Construction 222 373 - $595
------------ ---------------- ------------ ------------
$2,835 $3,730 $1,014 $7,579
============ ================ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Interest Sensitivity
--------------------------------------------
Fixed Rate Variable Rate Total
---------------- ------------ ------------
<S> <C> <C> <C>
Loans with maturities over one year:
Commercial, financial and agricultural $2,429 $1,942 $4,371
Real Estate - Construction 287 86 373
---------------- ------------ ------------
$2,716 $2,028 $4,744
================ ============ ============
</TABLE>
Loans are LBO Bancorp's largest component of interest-earning assets.
Loans increased $548 thousand to $48.5 million at December 31, 1993 from the
prior year-end. Average total loans increased from $38.7 million in 1991 and
$45.8 million in 1992 to $48.1 million in 1993. Average total loans
consistently represented 54% of interest-earning assets for the period 1991
through 1993. Loans secured by real estate of $32.4 million are the largest
category of total loans at December 31, 1993. This category for 1993 contains
$18.3 million of loans for one-to-four family residential properties, $12.8
million of loans for nonfarm nonresidential properties, and $696 thousand of
loans for construction and land development. Additionally, this category
contains various other loans secured by real estate. Included in loans
secured by real estate are residential mortgage loans which increased 33% from
1991 to 1992. This increase was primarily a result of an increase in mortgage
loans held for sale.
30
<PAGE> 43
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1994 AND 1993
BALANCE SHEET
Total assets were $95.6 million at June 30, 1994, compared to $94.5
million at December 31, 1993. Total loans decreased $1.3 million from $48.4
million at December 31, 1993 to $47.1 million at June 30, 1994. The decrease
in loans was largely a result of decreases in real estate - mortgage loans and
consumer loans. Real estate - mortgage loans decreased $838 thousand from
December 31, 1993 to June 30, 1994 while consumer loans decreased $460 thousand
during the same period.
Total deposits increased from $84.5 million at December 31, 1993 to
$85.8 million at June 30, 1994. This increase in total deposits is primarily
due to an increase of $1.4 million in interest-bearing deposits for the
aforementioned period. Total stockholders' equity was $7.4 million at June 30,
1994 compared to $7.3 million at December 31, 1993. Stockholders' equity for
June 30, 1994 included a $538 thousand unrealized loss, net of deferred taxes,
on available for sale securities as a result of implementing SFAS No. 115.
NET INCOME
Net income for the six months ended June 30, 1994 was $537 thousand, a
decrease from $788 thousand for the same period in 1993.
NET INTEREST INCOME
Net interest income for the six months ended June 30, 1994 was $2.2
million compared to $2.4 million for the six months ended June 30, 1993. This
decrease in net interest income is primarily a result of a $225 thousand
decrease in interest and fees on loans for June 30, 1994 compared to June 30,
1993.
PROVISION FOR POSSIBLE LOAN LOSSES
For the first six months of 1994, as a result of management's
assessment of the adequacy of the allowance, LBO Bancorp did not record a
provision for possible loan losses. This compares to a $150 thousand
provision for the first six months of 1993.
31
<PAGE> 44
The allowance for possible loan losses at June 30, 1994 was $1.0
million or 2.13% of total loans and 173% of nonperforming loans outstanding.
The allowance for the same period in 1993 was $921 thousand or 1.82% of total
loans. The allowance at December 31, 1993 was also $1.0 million. The
allowance as a percentage of total loans was 2.07% and 219% of nonperforming
loans.
There were no net charge-offs for the first six months of 1994 as
charge-offs and recoveries were both $14 thousand for the period. This
compares to net charge-offs of $63 thousand at December 31, 1993.
NONINTEREST INCOME
Noninterest income for the six months ended June 30, 1994 was $451
thousand compared to $654 thousand for the same period in 1993. This decrease
was primarily a result of decreases in other fee income due to the sale of
assets in 1993.
NONINTEREST EXPENSE
Noninterest expense for the first six months of 1994 was $1.8 million
compared to $1.7 million for the first six months of 1993. This increase
reflects a $21 thousand increase in salaries and employee benefits which
represents normal salary and benefit increases.
SUBSEQUENT EVENT
During the third quarter of 1994, LBO Bancorp sold approximately 59%
of its available for sale portfolio for a net loss of approximately $803
thousand. All securities available for sale with an average life over two years
were sold. The proceeds from this sale were reinvested in one year treasury
notes.
32
<PAGE> 45
LIQUIDITY
Liquidity needs include the ability to raise funds to meet deposit
withdrawals, customer borrowing needs and to maintain adequate reserve levels.
Adequate liquidity is maintained through LBO Bancorp's ability to convert
assets into cash, manage the maturities of liabilities and generate funds. The
maturing of assets, the issuance of liabilities and the growth of core
relationship deposits all serve to enhance liquidity. LBO Bancorp relies
largely on core deposits acquired through customer relationships to fund loan
demand and long-term investments. Core deposits are comprised of non-interest
bearing consumer and commercial deposits and interest bearing consumer savings
deposits.
CAPITAL ADEQUACY GUIDELINES
The Federal Reserve has adopted capital adequacy guidelines for bank
holding companies and banks that are members of the Federal Reserve System and
subject to its regulation.
Bank holding companies are required to comply with the Federal
Reserve's risk-based capital guidelines. The minimum ratio of total capital to
risk-weighted assets, including off-balance sheet items (i.e., standby letters
of credit), is 8%. At least half the capital is to be comprised of common
equity, retained earnings, and a limited amount of noncumulative perpetual
preferred stock, certain other instruments, and a limited amount of allowance
for possible loan losses (tier 1 capital). Under these guidelines, LBO
Bancorp's tier 1 and total capital ratios were 14.02% and 15.18% for December
31, 1993 as compared to 11.69% and 12.86% for December 31, 1992 and 8.65% and
9.72% for December 31, 1991. LBO Bancorp's tier 1 and total capital ratios for
the six months ended June 30, 1994 were 15.24% and 16.49%.
In addition to the risk-based capital guidelines, the Federal Reserve
has adopted a minimum leverage ratio, under which a bank holding company must
maintain a minimum level of Tier 1 capital to average total consolidated assets
of at least 3% in the case of a bank holding company which has the highest
regulatory examination rating and is not contemplating significant growth or
expansion. All other bank holding companies are expected to maintain a ratio
of at least 100 to 200 basis points above the stated minimum. LBO Bancorp's
leverage ratios for June 30, 1994 and December 31, 1993, 1992, and 1991 were
7.75%, 7.90%, 6.93% and 6.04%, respectively.
33
<PAGE> 46
FUTURE ACCOUNTING TREATMENT
In May 1993, the Financial Accounting Standards Board issued SFAS No.
114, "Accounting by Creditors for Impairment of a Loan." SFAS No. 114 requires
a creditor to measure impaired and restructured loans at the present value of
expected future cash flows, discounted at the loan's effective interest rate
or, as a practical expedient, at the loan's observable market price or the fair
value of the collateral if the loan is collateral dependent. For purposes of
this Statement, a loan is considered impaired when it is probable that a
creditor will be unable to collect all amounts due according to the contractual
terms of the loan agreement. SFAS No. 114 is effective for fiscal years
beginning after December 15, 1994. Adoption of this statement is not expected
to have a material impact on the consolidated financial statements of LBO
Bancorp.
34
<PAGE> 47
LEGAL OPINION
The validity of the shares of Deposit Guaranty Common Stock offered
hereby will be passed upon for Deposit Guaranty by Watkins Ludlam & Stennis of
Jackson, Mississippi.
EXPERTS
The consolidated financial statements of Deposit Guaranty Corp. as of
December 31, 1993 and 1992, and for each of the years in the three-year period
ended December 31, 1993, and the consolidated financial statements of LBO
Bancorp as of December 31, 1992, and for the year then ended, have been
included or incorporated by reference herein and in the registration statement
in reliance upon the reports of KPMG Peat Marwick LLP, independent certified
public accountants, also included or incorporated by reference herein, and upon
the authority of said firm as experts in accounting and auditing.
With respect to the unaudited interim financial information of Deposit
Guaranty Corp. for the periods ended June 30, 1994 and March 31, 1994,
incorporated by reference herein, KPMG Peat Marwick LLP, the independent
certified public accountants, have reported that they applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate reports included in Deposit Guaranty
Corp.'s quarterly reports on Form 10-Q for the quarters ended June 30, 1994 and
March 31, 1994, and incorporated by reference herein, state that they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on such information should
be restricted in light of the limited nature of the review procedures applied.
The accountants are not subject to the liability provisions of section 11 of
the Securities Act of 1933 for their reports on the unaudited interim financial
information because those reports are not a "report" or a "part" of the
registration statement prepared or certified by the accountants within the
meaning of sections 7 and 11 of the Act.
The consolidated financial statements of LBO Bancorp as of December
31, 1993, and 1991, and for the years then ended, have been included herein and
in the registration statement in reliance upon the reports of Donald, Tucker
and Betts, independent certified public accountants, and upon the authority of
said firm as experts in accounting and auditing.
OTHER MATTERS
As of the date of this Proxy Statement/Prospectus, the Board of
Directors of LBO Bancorp knows of no matters which will be presented for
consideration at the Meeting other than as set forth in the Notice of such
meeting attached to this Proxy Statement/Prospectus. However, if any other
matters shall come before the Meeting or any adjournment or postponement
thereof and be voted upon the enclosed proxy shall be deemed to confer
discretionary authority to the individuals named as proxies therein to vote the
shares represented by such proxy as to any such matters.
35
<PAGE> 48
INDEX TO FINANCIAL STATEMENTS
LBO BANCORP AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report F-1
Consolidated Statement of Condition at
December 31, 1993 and 1992 and June 30, 1994
(unaudited) F-4
Consolidated Statements of Earnings for each of
the Years in the Three Year Period Ended
December 31, 1993 and for the Six Months Ended
June 30, 1994 and 1993 (Unaudited) F-5
Consolidated Statements of Stockholders' Equity
for each the Years in the Three Year
Period Ended December 31, 1993 and for the
Six Months Ended June 30, 1994 (Unaudited) F-6
Consolidated Statements of Cash Flows for each of
the years in the Three Year Period ended
December 31, 1993 and for the Six Months Ended
June 30, 1994 and 1993 (Unaudited) F-7
Notes to Consolidated Financial Statements for
each of the Years in the Three Year Period
ended December 31, 1993 F-8
</TABLE>
<PAGE> 49
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
LBO Bancorp, Inc. and Subsidiaries
West Monroe, Louisiana
We have audited the accompanying consolidated balance sheets of LBO
Bancorp, Inc. and Subsidiaries as of December 31, 1993 and the related
consolidated statements of operations, changes in stockholders' equity, and
cash flow for the year then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit. The consolidated financial statements of LBO Bancorp, Inc. and
Subsidiaries as of December 31, 1992, were audited by other auditors whose
report thereon dated January 15, 1993, expressed an unqualified opinion on
these statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of LBO
Bancorp, Inc. and Subsidiaries as of December 31, 1993, and the results of
their operations and cash flows for the year then ended, in conformity with
generally accepted accounting principles.
/s/Donald, Tucker & Betts
DONALD, TUCKER & BETTS
Monroe, Louisiana
January 28, 1994
F-1(a)
<PAGE> 50
Independent Auditors' Report
The Board of Directors
LBO Bancorp, Inc.:
We have audited the accompanying consolidated statement of condition of LBO
Bancorp, Inc. and subsidiaries as of December 31, 1992, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of LBO Bancorp, Inc.
and subsidiaries as of December 31, 1992, and the results of their operations
and their cash flows for the year ended in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
January 15, 1993
Shreveport, Louisiana
F-1(b)
<PAGE> 51
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
LBO Bancorp, Inc. and Subsidiaries
West Monroe, Louisiana
We have audited the accompanying consolidated balance sheets of LBO
Bancorp, Inc. and Subsidiaries as of December 31, 1991 and 1990, and the
related statements of income, stockholders' equity, and cash flows for the
years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of LBO Bancorp, Inc. and
Subsidiaries as of December 31, 1991 and 1990, and the results of their
operations and cash flows for the year then ended, in conformity with generally
accepted accounting principles.
/s/Donald, Tucker, Betts, Allen and Green
DONALD, TUCKER, BETTS, ALLEN and GREEN
Monroe, Louisiana
January 28, 1992
F-1(c)
<PAGE> 52
Independent Auditors' Report
The Board of Directors
LBO Bancorp, Inc.:
We have audited the accompanying consolidated statement of condition of LBO
Bancorp, Inc. and subsidiaries as of December 31, 1992, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of LBO Bancorp, Inc.
and subsidiaries as of December 31, 1992, and the results of their operations
and their cash flows for the year ended in conformity with generally accepted
accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
January 15, 1993
Shreveport, Louisiana
F-2
<PAGE> 53
CONSOLIDATED STATEMENTS OF CONDITION
LBO BANCORP and Subsidiaries
- --------------------------------
(In Thousands Except Share Data)
<TABLE>
<CAPTION>
(Unaudited) December 31,
June 30, ------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $3,620 $2,429 $3,420
Interest-bearing bank balances -- 195 95
Federal funds sold and securities purchased
under agreement to resell -- 4,429 843
Securities available for sale 32,008 -- --
Investment securities
(market value: 1994 - $10,075; 1993 - $37,108;
1992 - $37,619) 9,972 36,729 37,337
Loans 47,095 48,465 47,917
Less: Unearned income (33) (59) (134)
Allowance for possible loan lossess (1,002) (1,002) (826)
----------- ----------- -----------
Net loans 46,060 47,404 46,957
Bank premises, furniture, fixtures and equip. 2,744 2,532 2,664
Other assets 1,211 816 978
----------- ----------- -----------
Total assets $95,615 $94,534 $92,294
=========== =========== ===========
LIABILITIES
Deposits:
Noninterest-bearing $12,540 $12,561 $11,054
Interest-bearing 73,303 71,922 73,411
----------- ----------- -----------
Total deposits 85,843 84,483 84,465
Federal Home Loan Bank borrowings 237 1,752 --
Other liabilities 2,123 970 2,049
----------- ----------- -----------
Total liabilities 88,203 87,205 86,514
STOCKHOLDERS' EQUITY
Common stock, par value $5; authorized
410,000 shares; issued and outstanding
386,012 - 1994 (unaudited), 380,852 - 1993,
317,443 - 1992 1,930 1,904 1,587
Surplus 1,603 1,559 1,560
Retained profits, including restricted amounts
of $363 thousand in 1992 4,431 3,894 2,717
Market valuation for securities available for sale,
net of income taxes (538) -- --
Net unrealized loss on marketable equity securities -- -- (13)
----------- ----------- -----------
7,426 7,357 5,851
Employee stock ownership plan debt commitment (14) (28) (71)
----------- ----------- -----------
Total stockholders' equity 7,412 7,329 5,780
----------- ----------- -----------
Total liabilities and stockholders' equity $95,615 $94,534 $92,294
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 54
CONSOLIDATED STATEMENTS OF EARNINGS
LBO Bancorp and Subsidiaries
- -------------------------------------
(In Thousands Except Share Data)
<TABLE>
<CAPTION>
(Unaudited)
Six Months Year Ended
Ended June 30, December 31,
-------------------- -------------------------------
1994 1993 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Interest income
Interest and fees on loans $2,309 $2,534 $5,207 $5,199 $4,787
Interest on investment securities
Taxable 252 1,122 2,108 2,351 2,409
Exempt from Federal income tax 25 30 83 38 34
Interest on securities available for sale
Taxable 807 -- -- -- --
Exempt from Federal income tax -- -- -- -- --
Interest on Federal funds sold and securities
purchased under agreements to resell 26 36 61 97 218
Interest on bank balances 1 4 8 43 114
--------- --------- --------- --------- ---------
Total interest income 3,420 3,726 7,467 7,728 7,562
--------- --------- --------- --------- ---------
Interest expense
Interest on deposits 1,148 1,277 2,431 3,007 3,939
Interest on Federal funds purchased,
securities sold under agreements to
repurchase & other short-term borrowings 52 21 88 86 110
--------- --------- --------- --------- ---------
Total interest expense 1,200 1,298 2,519 3,093 4,049
--------- --------- --------- --------- ---------
Net interest income 2,220 2,428 4,948 4,635 3,513
Provision for possible loan losses -- 150 239 280 290
--------- --------- --------- --------- ---------
Net interest income after provision for
possible loan losses 2,220 2,278 4,709 4,355 3,223
--------- --------- --------- --------- ---------
Other operating income
Service charges on deposit accounts 341 383 746 693 630
Gains (losses) on investment securities -- 6 40 (105) (269)
Other income 110 265 398 259 266
--------- --------- --------- --------- ---------
Total other operating income 451 654 1,184 847 627
--------- --------- --------- --------- ---------
Other operating expense
Salaries and other employee benefits 905 884 2,002 1,724 1,552
Occupancy expense 329 293 588 550 489
Other operating expense 588 522 1,032 998 816
--------- --------- --------- --------- ---------
Total other operating expense 1,822 1,699 3,622 3,272 2,857
--------- --------- --------- --------- ---------
Income before income tax expense,
extraordinary item and change in accounting
principle 849 1,233 2,271 1,930 993
Income tax expense 312 382 714 763 330
--------- --------- --------- --------- ---------
Income before extraordinary item and
change in accounting principle 537 851 1,557 1,167 663
Utilization of operating loss carryforward -- -- -- -- 76
Cumulative effect of application of
Statement of Financial Accounting
Standard No. 109 -- (63) (63) -- --
--------- --------- --------- --------- ---------
Net income $537 $788 $1,494 $1,167 $739
========= ========= ========= ========= =========
Net income per share before extraordinary
item and change in accounting principle $1.40 $2.35 $4.09 $3.68 $2.09
Extraordinary item -- -- -- -- 0.24
Cumulative effect of change in accounting
principle -- (0.17) (0.17) -- --
--------- --------- --------- --------- ---------
Net income per share $1.40 $2.18 $3.92 $3.68 $2.33
========= ========= ========= ========= =========
Weighted average shares outstanding 383,931 361,829 380,527 317,443 317,324
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 55
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
LBO Bancorp and Subsidiaries
- ---------------------------------------
(In Thousands Except Share Data)
<TABLE>
<CAPTION>
Unrealized Unrealized
loss on loss on
Common Stock Retained Earnings Marketable Available
----------------------- ---------------------- Equity for Sale
Shares Par Value Surplus Approp. Unapprop. Securities Securities
---------- ---------- ---------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of December 31, 1990 316,557 $1,583 $1,552 $320 $617 ($712) --
Net income 739 --
Change in unrealized loss on marketable
equity securities -- -- -- -- -- 496 --
Stock dividend 886 4 8 -- (12) -- --
Cash dividends declared ($.40 per share) -- -- -- -- (114) -- --
---------- ---------- ---------- --------- ---------- ---------- ---------
Balance as of December 31, 1991 317,443 1,587 1,560 320 1,230 (216) --
Net income -- -- -- -- 1,167 -- --
Appropriation of retained earnings -- -- -- 43 (43) -- --
Change in unrealized loss on marketable
equity securities -- -- -- -- -- 203 --
---------- ---------- ---------- --------- ---------- ---------- ---------
Balance as of December 31, 1992 317,443 1,587 1,560 363 2,354 (13) --
Net income -- -- -- -- 1,494 -- --
Stock dividend 63,409 317 (1) -- (317) -- --
Retained earnings, unappropriated (363) 363 -- --
Change in unrealized loss on marketable
equity securities -- -- -- -- -- 13 --
---------- ---------- ---------- --------- ---------- ---------- ---------
Balance as of December 31, 1993 380,852 1,904 1,559 -- 3,894 -- --
Net income (unaudited) -- -- -- -- 537 -- --
Unrealized loss on securities available
for sale (unaudited) -- -- -- -- -- -- (538)
Issuance of common stock under
stock option plan (unaudited) 5,160 26 44 -- -- -- --
---------- ---------- ---------- --------- ---------- ---------- ---------
Balance as of June 30, 1994 (unaudited) 386,012 $1,930 $1,603 $0 $4,431 $0 ($538)
========== ========== ========== ========= ========== ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 56
CONSOLIDATED STATEMENTS OF CASH FLOWS
LBO BANCORP AND SUBSIDIARIES
- ------------------------------------
(In Thousands Except Share Data)
<TABLE>
<CAPTION>
(Unaudited)
Six Months Year Ended
Ended June 30, December 31,
------------------ --------------------------
1994 1993 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $537 $788 $1,494 $1,167 $739
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible loan losses -- 150 239 280 290
Provision for depreciation and amortization 120 116 229 209 165
Provision for deferred income tax expense (benefit) 25 (62) (13) 34 --
Net amortization (accretion) of investment
security premiums and discounts 13 (14) (71) 37 (118)
Net (gain) loss on sale of investment securities -- (112) (40) 105 (5)
Unrealized loss on investment securities -- 4 -- 65 274
Writedown and net (gains) losses on
sales of other real estate (1) 12 (18) 15 (1)
Net loss (gain) on sale of premises and equipment -- -- -- 12 (5)
(Increase) decrease in accrued interest receivable (81) 4 87 85 (189)
(Increase) decrease in other assets (103) (28) (25) 12 (173)
Increase (decrease) in interest payable 54 (33) (52) (88) 8
Increase (decrease) in accrued expenses and
other liabilities 8 (420) (505) 262 240
-------- -------- -------- -------- --------
Net cash provided by operating activities 572 405 1,325 2,195 1,225
-------- -------- -------- -------- --------
Cash flows from investing activities:
Net (increase) decrease in interest-bearing bank
balances 195 -- (100) 1,037 123
Proceeds from maturities of investment securities 3,778 5,383 3,250 12,138 7,514
Proceeds from sales of investment securities -- -- 9,051 7,047 2,301
Purchases of investment securities (9,857) (7,758) (11,568) (19,417) (22,012)
Net (increase) decrease in loans 1,345 (2,749) (775) (7,441) (3,702)
Purchases of premises and equipment (333) (49) (98) (193) (708)
Proceeds from sales of premises and equipment -- -- -- 13 7
Proceeds from sales of other real estate 20 -- 206 134 171
Premium paid on core deposits -- -- -- -- (38)
-------- -------- -------- -------- --------
Net cash used in investing activities (4,852) (5,173) (34) (6,682) (16,344)
-------- -------- -------- -------- --------
Cash flows from financing activities
Net increase in deposits 1,360 2,087 19 865 19,233
Cash dividends -- (1) (1) -- (115)
Proceeds from sales of LBO common stock 70 -- -- -- --
Principal payments on notes payable (92) (69) (69) (63) (57)
Principal payments on industrial revenue bonds (533) -- (67) (67) (67)
Proceeds from FHLB borrowings 237 1,180 1,752 -- --
Redemption of debentures -- (330) (330) -- --
-------- -------- -------- -------- --------
Net cash provided by financing activities 1,042 2,867 1,304 735 18,994
-------- -------- -------- -------- --------
Increase (decrease) in cash, due from banks
federal funds sold and securities purchased under
agreements to resell (3,238) (1,901) 2,595 (3,752) 3,875
Cash, due from banks and federal funds sold
and securities purchased under agreements to
resell at the beginning of period 6,858 4,263 4,263 8,015 4,140
-------- -------- -------- -------- --------
Cash, due from banks and federal funds sold
and securities purchased under agreements to
resell at the end of period $3,620 $2,362 $6,858 $4,263 $8,015
======== ======== ======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest 1,084 1,331 2,570 3,181 4,054
Income taxes 288 441 1,336 421 24
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 57
LBO BANCORP, INC. AND SUBSIDIARIES
WEST MONROE, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of LBO
Bancorp, Inc. (the Company), its wholly-owned commercial bank subsidiary,
Louisiana Bank of Ouachita Parish (the Bank) and Louisiana Real Estate
Development, Inc., a dormant real estate development company. All significant
intercompany accounts and transactions have been eliminated in consolidation.
INVESTMENT SECURITIES
Investment securities (except marketable equity securities) are
carried at cost, adjusted for amortization of premiums and accretions of
discounts, which are recognized as adjustments to interest income. Accretion
of discount and amortization of premium on mortgage-backed securities are
periodically adjusted to reflect the actual prepayment experience of the
underlying mortgage loans. Gains or losses on dispositions are based on the
net proceeds and the adjusted carrying amount of the securities sold, using the
specific identification method.
Marketable equity securities include preferred stocks held for
long-term investment purposes and are stated at the lower of aggregate cost or
market value.
The Bank has the ability to hold these securities to maturity and the
intent is to hold them for the foreseeable future. From time to time, the Bank
may decide to sell certain securities prior to maturity for liquidity, tax
planning, and other valid business purposes.
LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans are stated at principal amount outstanding, reduced by unearned
discount and the allowance for loan losses. Unearned discount on installment
loans is recognized as income over the terms of the loans by the interest
method. Interest on other loans is calculated by using the simple interest
method on daily balance of the principal amount outstanding.
Accrual of interest is discounted on a loan when management believes,
after considering economic and business conditions and collection efforts, that
the borrower's financial condition is such that collection of interest is
doubtful. Normally, loans are reviewed for placement in non-accrual status
when the principal or interest has been billed and uncollected for a period of
ninety days. When a loan is placed on nonaccrual status, previously accrued
and uncollected interest is charged to interest income on loans. Generally,
payments on nonaccrual loans are applied to principal.
F-6
<PAGE> 58
The allowance for loan losses is established through a provision for
loan losses charged to expense. Loans are charged against the allowance for
loan losses when management believes that the collectibility of the principal
is unlikely. The allowance represents an amount which, in management's
judgment, will be adequate to absorb probable losses on existing loans that
may become uncollectible.
Management's judgment in determining the adequacy of the allowance is
based on evaluations of the collectibility of loans. These evaluations take
into consideration such factors as changes in the nature and volume of the loan
portfolio, current economic conditions that may affect the borrower's ability
to pay, overall portfolio quality, and review of specific problem loans.
Management believes that the allowance for loan losses is adequate.
While management uses available information to recognize losses on loans,
future additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Bank's allowance for loan
losses. Such agencies may require the Bank to recognize additions to the
allowance based on their judgments of information available to them at the
time of their examination.
MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale are carried at the lower of aggregate
cost or market value. The amount by which cost exceeds market value is
accounted for as a valuation allowance. Changes in the valuation allowance
are included in the determination of net earnings of the period in which the
change occurs.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are recorded at cost less accumulated
depreciation. Depreciation of bank premises and equipment is computed using a
combination of both the straight-line and declining balance methods over the
estimated useful lives of the assets. Expenditures for maintenance, repairs,
removals and betterments which do not materially prolong the useful lives of
the assets are charged to income as incurred. The cost of property retired or
sold, and the related accumulated depreciation, is removed from the accounts,
and any gain or loss, after taking into consideration proceeds from sale, is
transferred to income.
OTHER REAL ESTATE
Other real estate represents property acquired through foreclosure or
deeded to the Bank in lieu of foreclosure on real estate mortgage loans on
which the borrowers have defaulted. Amounts recorded as other real estate are
carried at the lower of the Bank's cost of acquisition or the asset's fair
value, less estimated selling costs. Reductions in the balance of other real
estate at the date of acquisition are charged to the allowance for loan losses.
Any subsequent write-downs to reflect current fair value, less estimated
selling costs, are charged to other operating expense. Subsequent gains or
losses on the sale of these assets are credited or charged to earnings.
F-7
<PAGE> 59
INCOME TAXES
The Company files a consolidated federal income tax return with its
two subsidiaries. Income taxes and benefits are generally allocated based on
each company's contribution to the total federal tax liability.
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", which
requires the use of the "liability method" of accounting for income taxes.
Accordingly, deferred tax liabilities and assets are determined based on the
temporary differences between the financial statement and tax bases of assets
and liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse. Current income taxes are based on the
year's taxable income for federal tax reporting purposes.
Pursuant to the deferred method under APB Opinion No. 11, which was
applied in years prior to 1993, deferred income taxes were recognized for
income and expense items that were reported in different years for financial
reporting purposes and income tax purposes using the tax rate applicable for
the year of the calculation. Under the deferred method, deferred taxes were
not adjusted for subsequent changes in tax rates.
STATEMENT OF CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, amounts due from banks and federal funds sold.
Generally, federal funds are sold for one-day periods.
NET INCOME PER COMMON SHARE
Net income per common share are based on the weighted average number
of common shares outstanding during each period.
RECLASSIFICATION
Certain 1992 and 1991 amounts have been reclassified to conform with
the 1993 presentation.
INTERIM FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the six month
period ended June 30, 1994 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1994. For further information,
refer to the consolidated annual financial statements and footnotes thereto
included herein.
F-8
<PAGE> 60
RECENT ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1994, the Company adopted the provisions of SFAS
No. 115, " Accounting for Certain Investments in Debt and Equity Securities".
SFAS No. 115 addresses the accounting and reporting for marketable equity
securities and all debt securities. Those investments are now classified into
three categories and accounted for as follows: securities held-to-maturity
reported at amortized cost; trading securities reported at fair value with
unrealized gains and losses included in earnings; and securities available for
sale reported at fair value with unrealized gains and losses excluded from
earnings and reported as a separate component of stockholders' equity, net of
income taxes. The effect of this change at January 1, 1994 was to increase
stockholders' equity by approximately $85 thousand.
NOTE 2 - HOLDING COMPANY
During 1983, the shareholders of the Bank approved the formation of a
bank holding company (the Company), which acquired the outstanding shares of
the Bank in exchange for its stock on May 25, 1983. The Company was formed
pursuant to the Bank Holding Company Act and has obtained regulatory approval
of the Federal Reserve Bank of Dallas under section 3(a)(1) of the Bank Holding
Company Act (12.U.S.C. Section 1842 (a)(1)) to become a bank holding company.
In connection with the exchange of stock, the Company issued
debentures in the principal amount of $480 thousand to all non-director
shareholders and assumed indebtedness of twelve directors in the amount of $521
thousand.
NOTE 3 - INVESTMENT SECURITIES
The amortized cost and estimated market values of investment
securities at December 31, 1993 and 1992, are as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
December 31, 1993 Cost Gains (Losses) Value
----------------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U. S. Treasury securities
and obligations of U. S.
government corporations
and agencies $ 3,662 $ 54 $ ( 12) $ 3,704
Obligations of states and
political subdivisions 1,288 127 - 1,416
Mortgage-backed securities 28,440 228 ( 67) 28,600
Corporate obligations and
other securities 3,339 49 - 3,388
-------- ----- ------- -------
$ 36,729 $ 458 $ ( 79) $37,108
======== ===== ======= =======
</TABLE>
F-9
<PAGE> 61
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
December 31, 1992 Cost Gains (Losses) Value
----------------- --------- ---------- ---------- ------
<S> <C> <C> <C> <C>
U. S. Treasury securities
and obligations of U. S.
government corporations
and agencies $ 4,565 $ 93 $ ( 14) $ 4,644
Obligations of states and
political subdivisions,
net of allowance for
other than temporary
decline in value of
$355 thousand 1,245 139 ( 4) 1,380
Mortgage-backed securities 25,736 210 (266) 25,680
Corporate obligations and
other securities, net of
unrealized losses on
marketable equity
securities of
$13 thousand 5,791 125 ( 1) 5,915
---------- ------ --------- ---------
$ 37,337 $ 567 $ ( 285) $ 37,619
========== ====== ========= =========
</TABLE>
The amortized cost and estimated market value of investment securities at
December 31, 1993, by contractual maturity, are shown below (in thousands).
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
repayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
----------- -----------
<S> <C> <C>
Due in one year or less $ 2,072 $ 2,121
Due after one year through five years 4,304 4,414
Due after five years through ten years 946 951
Due after ten years 560 614
------- -------
7,882 8,100
Mortgage-backed securities 28,439 28,600
Other 408 408
------- -------
$36,729 $37,108
======= =======
</TABLE>
Gross realized gains from sales of investment securities amounted to $51
thousand, $30 thousand, and $12 thousand in 1993, 1992, and 1991, respectively.
Gross realized losses from sales of investment securities amounted to $11
thousand, $135 thousand, and $281 thousand in 1993, 1992, and 1991,
respectively.
Investments in debt securities having an amortized cost of $3.8 million at
December 31, 1993 and $4.2 million at December 31, 1992, were pledged to secure
public funds on deposit and for other purposes as required or permitted by law.
F-10
<PAGE> 62
NOTE 4 - LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of the Bank's loan portfolio at December 31, 1993 and
1992, is as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992
----------- -----------
<S> <C> <C>
Real estate $ 32,430 $ 32,331
Commercial and industrial 6,984 6,750
Installment 9,051 8,836
-------- ---------
48,465 47,917
Unearned discount ( 59) ( 134)
Allowance for loan losses ( 1,002) ( 826)
-------- ---------
Net loans $ 47,404 $ 46,957
======== =========
</TABLE>
A summary in changes in the allowance for loan losses follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Balance - January 1 $ 826 $ 671 $ 533
Provisions charged to operating expenses 239 280 290
Loans charged off ( 111) ( 191) ( 226)
Recoveries on loans 48 66 74
------- ------- ------
Balance - December 31 $ 1,002 $ 826 $ 671
======= ======= ======
</TABLE>
At December 31, 1993, 1992 and 1991, the Bank had discontinued the
accrual of interest on loans aggregating $190 thousand, $191 thousand and $166
thousand, respectively. Net interest income for 1993, 1992, and 1991 would
have been higher by $21 thousand, $19 thousand and $50 thousand, respectively,
had interest been accrued at contractual rates on these nonperforming loans.
During 1993 and 1992, the Bank reduced loans through the repossession of
other real estate in the amounts of $89 thousand and $131 thousand,
respectively.
At December 31, 1993 and 1992, the aggregate amounts of loans receivable
from officers and directors and entities in which these individuals are
principals amounted to $1.4 million and $1.5 million, respectively. In the
opinion of management, all of the transactions entered into between the Bank
and these parties were made on substantially the same terms as those prevailing
at the time of comparable transactions with other parties. A summary of
changes in such loans during 1993 follows (in thousands):
<TABLE>
<S> <C>
Balance at January 1 $ 1,488
Additions 691
Reductions 822
-------
Balance at December 31 $ 1,357
=======
</TABLE>
F-11
<PAGE> 63
NOTE 5 - BANK PREMISES AND EQUIPMENT
Major classifications of these assets are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
December 31,
---------------------------
1993 1992
----------- -----------
<S> <C> <C>
Land $ 411 $ 411
Buildings and leasehold improvements 2,570 2,553
Equipment and vehicles 1,409 1,329
-------- --------
4,390 4,293
Accumulated depreciation ( 1,858) ( 1,629)
-------- --------
$ 2,532 $ 2,664
======== ========
</TABLE>
Depreciation and amortization expense amounted to $229 thousand in 1993,
$205 thousand in 1992, and $164 thousand in 1991.
NOTE 6 - TIME DEPOSITS
Included in time deposits at December 31, 1993 and 1992, were $5.7 million
and $2.9 million, respectively, of certificates of deposit in denominations of
$100 thousand or more. Interest expense on time deposits of $100 thousand or
more totaled $211 thousand, $144 thousand, and $267 thousand for the years
ended December 31, 1993, 1992 and 1991, respectively.
NOTE 7 - ADVANCES FROM FEDERAL HOME LOAN BANK
The Bank had outstanding advances from the Federal Home Loan Bank at
December 31, 1993, in the amount of $1.8 million. Security for all
indebtedness and outstanding commitments consist of a security interest in all
of the first mortgage collateral, capital stock of Federal Home Loan Bank and
deposit accounts in Federal Home Loan Bank owned by the Bank.
Maturities of the advances are as follows (in thousands):
<TABLE>
<CAPTION>
Commitment: 52204 Commitment: 53071 Commitment: 56157
Rate : 3.92% Rate : 4.22% Rate : 5.82% Totals
------------------ ----------------- ----------------- ------------
<S> <C> <C> <C>
1994 $163 $163 $39 $365
1995 170 170 41 381
1996 87 102 44 233
1997 - - 46 46
1998 - - 49 49
1999 thru 2008 - - 678 678
</TABLE>
F-12
<PAGE> 64
NOTE 8 - INDUSTRIAL REVENUE BONDS
The Bank sold $1.2 million of Industrial Revenue Bonds which were used to
construct and equip the West Monroe main office. Under the terms of the bond
indenture, title to the building and equipment passes to the Industrial
Development Board of Ouachita Parish which leases the building and equipment to
the Bank for an amount equivalent to the principal and interest payments
necessary to retire the bond issue. These bonds are, in effect, a mortgage
secured by the building and equipment, and, as such, the cost of the building
and equipment has been capitalized and the liability recognized for proceeds
received. At December 31, 1993, $1.2 million of the bond issue had been
received and twelve principal payments totaling $667 thousand had been paid,
leaving an outstanding balance of $533 thousand. The aggregate of the unpaid
principal on the bonds bears interest payable quarterly on January 1, April 1,
July 1 and October 1 of each year, commencing January 1, 1983, until maturity,
October 1, 2001, or date of redemption, at the rate of seventy percent (70%) of
prime, provided, however, that in no event shall the rate of interest on any
interest payment date exceed twenty-five percent (25%) per annum. Principal
payments of $67 thousand are due annually to maturity.
The debt agreement contains certain covenants that, among other things,
restrict the Bank from paying dividends and requires that the Bank comply with
certain financial statement ratios. At December 31, 1993, 1992 and 1991, the
Bank was not in compliance with certain of these restrictive covenants.
NOTE 9 - DEBENTURES AND NOTE PAYABLE
During 1983, the shareholders of the Bank approved the formation of the
Company, which acquired the outstanding shares of the Bank in exchange for its
stock on May 25, 1983. To facilitate the acquisition, the Company issued
debentures in the principal amount of $480 thousand to all nondirector
shareholders.
The debentures were issued in principal increments of $3.85, to maturity
and became payable in full on the tenth anniversary of their issue, May 25,
1993. Interest was payable on the debentures annually on the anniversary date
of their issuance at the rate of 10% per year. The debentures were
nonconvertible, nonvoting, and had no sinking fund requirement. Both the
principal and interest due on the debentures were subordinated to all other
indebtedness of the Company.
During 1990, the Company offered to redeem the debentures for cash or for
shares of its common stock, which were valued for this purpose at $12 per
share. The results of the offer were as follows (in thousands):
<TABLE>
<S> <C>
Original issue of debentures $ 480
Less:
Cash redemption (126)
Conversion to stock ( 24)
-----
Debentures outstanding at December 31, 1992 $ 330
=====
</TABLE>
The remaining debentures matured and were retired by the Company on May 25,
1993, as required by the debenture agreement.
F-13
<PAGE> 65
In connection with the exchange of stock in the formation of the holding
company, LBO Bancorp, Inc. assumed the indebtedness of twelve directors in the
amount of $521 thousand and refinanced the debt with a bank. The original note
is dated May 25, 1983, and is secured by 260,000 shares of Louisiana Bank of
Ouachita Parish stock with interest floating at the lending bank's prime rate
and payable quarterly. The debt had an outstanding balance of $162 thousand
and $231 thousand at December 31, 1993 and 1992, respectively.
Principal payments of $77 thousand and $85 thousand are due in 1994 and
1995, respectively.
The debt agreement contains certain covenants that, among other things,
place restrictions on the payment of dividends and require that the Bank comply
with certain financial statement ratios. The Company has received a waiver from
the lending bank for all events of noncompliance in 1992 and 1991.
NOTE 10 - STOCKHOLDERS' EQUITY
Banking regulations limit the amount of dividends that the Bank may pay
without prior approval of the Bank's regulatory agency. The Bank is required
to obtain such approval if dividends declared in any one year exceed the
profits (net income, net of actual losses on loans, investments, and other
assets) of that year combined with the net retained profits of the preceding
year. Dividends paid by the Bank represent the Company's main source of funds.
In 1993 and 1992 the Bank paid dividends to the Company in the amounts of
$448 thousand and $95 thousand, respectively.
In 1993, the Board of Directors of the Company declared a 20% stock
dividend to its shareholders. A total of 63,409 shares at $5 per share were
issued. Cash in the amount of $1,246 was issued in lieu of fractional shares,
valued for this purpose at $13.50 per share.
By action of the Company's Board of Directors, $363 thousand of retained
earnings at December 31, 1992 was accumulated and appropriated for the purpose
of retiring debentures. The amount appropriated in 1992 totaled $43 thousand.
During 1993, the debentures were retired and retained earnings, restricted for
the purpose of retiring the debentures, was reduced accordingly.
In 1984, the Board of Directors of the Company and the Bank adopted a stock
option plan which was approved by the stockholders at the 1984 annual meeting.
The plan allowed for the granting of stock options to key management employees
of the Bank over a five- year period ended in February 1989. The option price
is equal to the fair market value at the date of grant. The options granted
become exercisable any time during the ten-year period after the grant date.
Prior to December 31, 1993, 5,895 options had been granted. Of those, 1,265
have been forfeited by the recipient. In 1993, a stock dividend increased the
outstanding options by 926 shares while another 396 options were forfeited. As
of December 31, 1993, 5,160 options remain outstanding and are currently
exercisable. All shares are exercisable at $13.25 to $14.17 per share.
NOTE 11 - LEASES
The Bank leases space for one of its branches under a noncancellable lease
through 1995, with renewal options in five-year increments that allow occupancy
through 2005. Rental expense for 1991 through 1993 was $62 thousand per year.
Annual rental rates through 1995 will remain $62 thousand.
F-14
<PAGE> 66
NOTE 12 - INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". The
cumulative effect of the change in accounting for income taxes for prior years
is included in the Consolidated Statement of Earnings for 1993 as an
extraordinary item. Prior years' financial statements have not been restated
to apply the provisions of SFAS No. 109.
Total income tax expense for the year ended December 31, 1993 was allocated
as follows (in thousands):
<TABLE>
<S> <C>
Income before income taxes $ 714
Cumulative effect of change in
accounting for income taxes
for prior years 63
-----
$ 777
=====
</TABLE>
The provision for income taxes consists of (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Current $ 790 $ 728 $ 253
Deferred ( 76) 35 -
Tax benefit of loss carryforwards - - 77
----- ----- -----
$ 714 $ 763 $ 330
===== ===== =====
</TABLE>
A reconciliation of income taxes based on the Federal statutory income tax
rate applied to income before provisions for income taxes to the provision for
income taxes follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Federal statuary provision $ 772 $ 656 $ 337
Tax exempt income ( 16) ( 16) (24)
Other ( 42) 123 17
----- ----- -----
Provision for income taxes $ 714 $ 763 $ 330
===== ===== =====
Effective tax rate 31% 40% 33%
</TABLE>
The net deferred tax liability in the accompanying statements of condition
include the following components (in thousands):
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Deferred tax liability $(190) $(34)
Deferred tax asset 169 -
----- -----
Net deferred tax liability $ (21) $ (34)
===== =====
</TABLE>
F-15
<PAGE> 67
NOTE 13 - BENEFIT PLANS
In 1991, the Bank amended and restated its Louisiana Bank of Ouachita
Parish Cash or Deferred Profit Sharing Plan (Profit Sharing Plan) and its
Louisiana Bank of Ouachita Parish Employee Stock Ownership Plan (ESOP) to meet
the requirements of the Tax Reform Act of 1986. The Profit Sharing Plan became
designated as the Louisiana Bank of Ouachita Parish 401(k) Plan (the "401(k)
Plan"). Contributions to the 401(k) Plan by the Bank are discretionary.
Contributions to the ESOP are likewise discretionary, subject to the commitment
discussed below. Employees who are twenty-one years of age become eligible for
participation in both plans after one year of service. Employees become vested
in the employer contributions for both plans based upon a three to seven year
graded vesting schedule.
In 1985, the Louisiana Bank of Ouachita Parish Employee Stock Ownership
Trust (Trust) borrowed $210 thousand from a bank. The proceeds of this loan
were used to purchase common shares of the Company. In order to liquidate the
debt, the Bank made a commitment to make contributions on an annual basis to
the Trust sufficient to service the debt. Since the Bank has committed to fund
the ESOP sufficiently to meet debt service, the loan balance at year end has
been reflected in the accompanying financial statements as a reduction of
stockholders' equity. This balance is reduced as the plan makes payments on
the loan. The loan is repayable in monthly installments over a nine-year
period with interest at eighty seven and one-half percent of New York prime,
except that the resulting interest rate will not be less than 8%. At December
31, 1993, this debt was accruing interest at 8% Principle payments of $28
thousand are due in 1994.
The Bank contributed $51 thousand, $53 thousand and $44 thousand to the
Trust in 1993, 1992, and 1991, respectively. The Bank contributed $22 thousand
and $25 thousand to the 401(k) Plan in 1993 and 1992, respectively. No amounts
were contributed to the 401(k) Plan by the Bank in 1991.
NOTE 14 - CONTINGENCIES
There are various claims and legal actions arising in the ordinary course
of business involving the Company and/or the Bank. In the opinion of
management of the Company and the Bank, the ultimate disposition of these
matters will not have a material adverse effect on the Company's or the Bank's
financial condition.
NOTE 15 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank is a party to financial instruments with off-balance risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and standby letters
of credit. Those instruments involve, to varying degrees, elements of credit
and interest rate risk in excess of the amount recognized in the balance sheet.
The contractual or notional amounts of those instruments reflect the extent of
involvement the Bank has in particular classes of financial instruments.
F-16
<PAGE> 68
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual or notional amount
of those instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments.
Financial instruments whose contract amounts represent credit risk (in
thousands):
<TABLE>
<CAPTION>
Contractual or
Notional Amount at
December 31,
----------------------------
1993 1992
------ ------
<S> <C> <C>
Commitments to extend credit $4,065 $4,114
Standby letters of credit 414 380
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Bank evaluates each
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained if deemed necessary by the Bank upon extension of credit is based on
management's credit valuation of the counter party. Collateral held varies but
may include accounts receivable; inventory; property, plant and equipment; crop
liens; real estate; and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private short-term borrowing
arrangements. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan collateral is deemed
necessary.
NOTE 16 - CONCENTRATION OF CREDIT RISK
The Bank grants real estate, commercial, consumer, and residential loans to
customers throughout northeast Louisiana, primarily in Ouachita Parish.
Although the Bank has a diversified loan portfolio, a substantial portion of
its loans, although not necessarily originated for the purposes of real estate
acquisition, are secured by real estate and its ability to fully collect its
loans could depend upon the real estate market in this region. The Bank
typically requires collateral sufficient in value to cover the principal amount
of the loan. Such collateral is evidenced by mortgages on property held and
readily accessible to the Bank.
NOTE 17 - BANK SUBSIDIARY NAME CHANGE
During December 1993, the Board of Directors approved a resolution to
change the name of the Bank subsidiary from "Louisiana Bank of Ouachita Parish"
to "Louisiana Bank". The effective date of the name change is on hold, pending
approval from regulatory authorities.
F-17
<PAGE> 69
NOTE 18 - SUBSEQUENT EVENTS
On February 11, 1994, outstanding Industrial Revenue Bonds, as detailed in
Note 8, were subsequently redeemed by the Bank in the amount of $533 thousand.
On August 11, 1994, the Bank sold approximately 59% of its securities available
for sale portfolio. This sale consisted primarily of securities with average
lives of two years or longer. The proceeds from this sale were reinvested in
shorter term treasuries.
As of August 1994, the name of the Bank subsidiary was formally changed to
"Louisiana Bank".
F-18
<PAGE> 70
AGREEMENT AND PLAN OF MERGER
By and Among
DEPOSIT GUARANTY CORP.,
COMMERCIAL NATIONAL CORPORATION,
COMMERCIAL NATIONAL BANK,
CNC ACQUISITION CORP,
LBO BANCORP, INC.
And
LOUISIANA BANK
(as amended)
EXHIBIT "A"
<PAGE> 71
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of August 8, 1994, by and
among LOUISIANA BANK ("Louisiana Bank"), a state banking association organized
under the laws of Louisiana, and a wholly owned subsidiary of LBO Bancorp,
Inc., being located at 2002 N. 7th Street, West Monroe, Parish of Ouachita, in
the State of Louisiana, with 260,000 shares of common stock authorized, each of
$5.00 par value ("Louisiana Bank Common Stock"), COMMERCIAL NATIONAL BANK
("CNB"), a banking association organized under the laws of the United States,
and a subsidiary of CNC (as hereinafter defined), being located at 333 Texas
Street, Shreveport, Parish of Caddo, in the State of Louisiana; LBO BANCORP,
INC., a corporation organized under the laws of the State of Louisiana ("LBO
Bancorp") with 410,000 shares of common stock authorized, each of $5.00 par
value ("LBO Bancorp Common Stock"); DEPOSIT GUARANTY CORP., a corporation
organized under the laws of the State of Mississippi ("DGC"), COMMERCIAL
NATIONAL CORPORATION, a corporation organized under the laws of Louisiana,
which is a wholly owned subsidiary of DGC ("CNC"), and CNC ACQUISITION CORP, a
corporation organized under the laws of Louisiana, which at the Closing Date
shall be a wholly owned subsidiary of CNC ("CNCAC"), each acting pursuant to a
resolution of its Board of Directors.
In consideration of the mutual covenants, representations, warranties
and agreements herein contained, the parties agree that LBO Bancorp shall be
merged into CNCAC (the "Holding Company Merger") on the terms and subject to
the conditions set forth in this Agreement and in the Joint Agreement of Merger
attached hereto as Exhibit A (the "Holding Company Merger Agreement") and
simultaneously therewith or immediately following such merger, Louisiana Bank
shall be merged into CNB (the "Bank Merger" and together with the Holding
Company Merger, the "Mergers"), on the terms and subject to the conditions set
forth in this Agreement and in the Agreement to Merge attached hereto as
Exhibit B (the "Bank Merger Agreement" and together with the Holding Company
Merger Agreement, the "Merger Agreements").
ARTICLE I
THE HOLDING COMPANY MERGER
1.01 The Holding Company Merger; Effective Time. Following the
execution of this Agreement and subject to the conditions set forth in Article
VI hereof, LBO Bancorp and CNCAC shall enter into the Holding Company Merger
Agreement, pursuant to which LBO Bancorp shall be merged with and into CNCAC,
and CNCAC shall be the surviving corporation (sometimes referred to herein as
the "Surviving Corporation"). (CNCAC and LBO Bancorp are sometimes referred to
together as the "Constituent Corporations"). The Holding Company Merger shall
be consummated effective at the time specified in the Holding Company Merger
Agreement and the date and time of such consummation is herein referred to as
the "Closing Date" and the "Effective Time", respectively. The Bank Merger
shall be consummated simultaneously with the Holding Company Merger, or
immediately thereafter.
1.02 DGC to Make Shares Available. DGC shall make available a
sufficient number of shares of DGC Common Stock for conversion and exchange in
accordance with the Holding Company Merger Agreement, by transferring such
shares to the Exchange Agent for the benefit of the stockholders of LBO
Bancorp.
<PAGE> 72
ARTICLE II
THE BANK MERGER
2.01 The Bank Merger. Following the execution of this Agreement and
subject to the conditions of Article VI hereof, Louisiana Bank and CNB shall
enter into the Bank Merger Agreement, pursuant to which Louisiana Bank shall be
merged with and into CNB under the charter of CNB, and the separate existence
of Louisiana Bank shall cease with CNB being the surviving bank. The Bank
Merger shall be consummated simultaneously with the Holding Company Merger or
immediately thereafter.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LOUISIANA BANK AND LBO BANCORP
Louisiana Bank and LBO Bancorp hereby make the following
representations and warranties, as modified by the schedules attached hereto to
DGC, CNC, CNB, and CNCAC.
3.01 Corporate Organization. (a) Louisiana Bank is a banking
association duly organized, validly existing and in good standing under the
laws of the State of Louisiana. Louisiana Bank has the power and authority to
own or lease all of its properties and assets and to carry on its business as
it is now being conducted.
(b) LBO Bancorp is a corporation duly organized, validly
existing and in good standing under the laws of the State of Louisiana. LBO
Bancorp has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary.
3.02 Capitalization. (a) The authorized capital stock of Louisiana
Bank consists of 260,000 shares of Louisiana Bank Common Stock. At the close
of business on June 30, 1994, there were 260,000 shares of Louisiana Bank
Common Stock issued and outstanding and no shares held in Louisiana Bank's
treasury. Except as set forth on Schedule 3.02 hereto, all issued and
outstanding shares of Louisiana Bank Common Stock have been duly authorized and
validly issued and are fully paid, nonassessable (except as provided in La.
Rev. Stat. 6:262) and free of preemptive rights with no personal liability
attaching to the ownership thereof. Except as set forth on Schedule 3.02
hereof, Louisiana Bank has not issued any additional shares of Louisiana Bank
Common Stock since June 30, 1994, and does not have and is not bound by any
outstanding subscription, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of
Louisiana Bank Common Stock or any security representing the right to purchase
or otherwise receive any Louisiana Bank Common Stock. LBO Bancorp has good,
valid and marketable title to, the Louisiana Bank Common Stock, and on the
Effective Date the same will be free and clear of all liens, encumbrances,
pledges, claims, options, charges and (except as provided in La. Rev. Stat.
6:262) assessments of any nature whatsoever.
(b) The authorized capital stock of LBO Bancorp consists of
410,000 shares of LBO Bancorp Common Stock. At the close of business on June
30, 1994, there were 386,012 shares of LBO Bancorp Common Stock issued and
outstanding and no shares held in LBO Bancorp's treasury. Except as set forth
on Schedule 3.02 hereto, all issued and outstanding shares of LBO Bancorp
Common Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights with no personal liability
attaching to the ownership thereof. Except as set forth on Schedule 3.02
hereof, LBO Bancorp has not issued any
<PAGE> 73
additional shares of LBO Bancorp Common Stock since June 30, 1994, and does not
have and is not bound by any outstanding subscription, options, warrants,
calls, commitments or agreements of any character calling for the purchase or
issuance of any shares of LBO Bancorp Common Stock or any security representing
the right to purchase or otherwise receive any LBO Bancorp Common Stock.
3.03 Investments; No Subsidiaries. Except as set forth on Schedule
3.03 hereof, neither Louisiana Bank nor LBO Bancorp has any subsidiaries or
equity interest or other investment, direct or indirect, in any corporation,
partnership, joint venture or other entity except for such equity interest or
other investment which Louisiana Bank may have acquired as a result of
foreclosure, dation en paiement, or payment in lieu of foreclosure and is as of
the date hereof holding subject to sale.
3.04 Loan Portfolio. Except as set forth in Schedule 3.04 hereof,
all evidences of indebtedness reflected as assets of Louisiana Bank in
Louisiana Bank's financial statements are in all respects binding obligations
of the respective primary obligors named therein and, to the best knowledge of
Louisiana Bank, no material amount thereof is subject to any defenses which may
be asserted against Louisiana Bank. Louisiana Bank has delivered to DGC a true
and complete list of all loans held in Louisiana Bank's loan portfolio as of
August 1, 1994, identifying thereon all loans in excess of $100,000 for which
the primary collateral is a mortgage on real estate. Except as set forth in
Schedule 3.04 hereto, to the best knowledge of Louisiana Bank there are no
outstanding loans held by Louisiana Bank with an unpaid balance of $25,000 or
more in which a material default has occurred. A material default for purposes
of this Section 3.04 includes, without limitation, the failure to pay
indebtedness or an installment thereof more than thirty (30) days after it is
due and payable. Subject to the rights of DGC, CNCAC, CNC and CNB to terminate
its obligations under this Agreement in accordance with the provisions of
Section 6.02(h) hereof, LBO Bancorp and Louisiana Bank shall have the right
prior to Closing to amend the schedules under this section to reflect events
which occur after the date of this Agreement and prior to the Closing.
3.05 Authority; No Violation. Louisiana Bank and LBO Bancorp have
full corporate power and authority to execute and deliver this Agreement, the
Holding Company Merger Agreement and the Bank Merger Agreement (to the extent
each is a party thereto) and, subject to the approval of the shareholders of
Louisiana Bank and LBO Bancorp, to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the Bank
Merger Agreement and the consummation of the transactions contemplated hereby
and thereby have been duly and validly approved by the Board of Directors of
Louisiana Bank, and will be approved by LBO Bancorp as the sole shareholder of
Louisiana Bank, and no other corporate proceedings on the part of Louisiana
Bank are necessary to consummate the transactions so contemplated. The Board
of Directors of LBO Bancorp has duly and validly approved this Agreement and
the transactions contemplated hereby and has authorized the execution and
delivery of this Agreement and the Holding Company Merger Agreement, has
directed that this Agreement and the transactions contemplated hereby and
thereby be submitted to the LBO Bancorp shareholders for approval at a meeting
of such shareholders, and, except for the approval of such agreements by its
shareholders, no other corporate proceedings on the part of LBO Bancorp are
necessary to consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by Louisiana Bank and LBO Bancorp
and constitutes a valid and binding obligation of Louisiana Bank and LBO
Bancorp enforceable in accordance with its terms.
3.06 Consents and Approvals. Except for consents or approvals or
filings or registrations with the OCC, the FDIC, the Louisiana Office of
Financial Institutions and the Federal Reserve Board or as set forth in
Schedule 3.06 hereto, no permit, consent, approval or authorization of, or
declaration, filing
<PAGE> 74
or registration with, any public body or authority or to the knowledge of
Louisiana Bank and LBO Bancorp any third party is necessary in connection with
(i) the execution and delivery by Louisiana Bank or LBO Bancorp of this
Agreement, (ii) the consummation of the Mergers and the other transactions
contemplated hereby, (iii) to the knowledge of LBO Bancorp and Louisiana Bank,
the direct or indirect ownership by CNB of all of the properties and assets of
Louisiana Bank, or (iv) to the knowledge of LBO Bancorp and Louisiana Bank, the
conduct by CNB of the business of Louisiana Bank as conducted by Louisiana Bank
on the date hereof.
3.07 Financial Statements. (a) LBO Bancorp has previously delivered
to DGC or CNB true and complete copies of the consolidated balance sheets of
LBO Bancorp as of December 31 in each of the three fiscal years 1991 through
1993, inclusive, and the related consolidated statements of income, changes in
shareholders' equity and changes in financial position for the periods then
ended, in each case accompanied by the audit report of Donald, Tucker and
Betts, independent public accountants (for the fiscal years 1991 and 1993), and
KPMG Peat Marwick, independent public accountants (for the fiscal year 1992)
with respect to LBO Bancorp ("LBO Bancorp Financial Statements"). The December
31, 1993, consolidated balance sheet (the "LBO Bancorp Balance Sheet") of LBO
Bancorp (including the related notes, where applicable) fairly represents the
consolidated financial position of LBO Bancorp and its subsidiaries as of the
date thereof, and the other financial statements referred to herein (including
the related notes, where applicable) fairly present the results of the
consolidated operations and changes in shareholders' equity and consolidated
financial position of LBO Bancorp and its subsidiaries for the respective
fiscal periods or as of the respective dates therein set forth.
(b) LBO Bancorp has previously delivered to DGC or CNB true
and complete copies of the balance sheets of Louisiana Bank as of December 31
in each of the three fiscal years 1991 through 1993, inclusive, and the related
statements of income, changes in shareholders' equity and changes in financial
position for the periods then ended, in each case accompanied by the notes
thereto, included with the LBO Bancorp Financial Statements ("Louisiana Bank
Financial Statements"). The December 31, 1993 balance sheet (the "Louisiana
Bank Balance Sheet") of Louisiana Bank (including the related notes, where
applicable) fairly present the results of the consolidated operations and
changes in shareholders' equity and consolidated financial position of
Louisiana Bank and its subsidiaries for the fiscal period or as of the
respective dates therein set forth.
(c) Each of the financial statements above is true and
correct in all material respects, and has been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
other periods, except as otherwise noted.
3.08 No Broker's Fees. Except as fully described and set forth in
Schedule 3.08 hereto, neither Louisiana Bank, LBO Bancorp nor any of their
officers or directors has employed any broker or finder or incurred any
liability for any broker's fees, commissions or finder's fees in connection
with any of the transactions contemplated by this Agreement.
3.09 Legal Proceedings. LBO Bancorp and Louisiana Bank are not
parties to any and there are no pending or, to the best of LBO Bancorp's and
Louisiana Bank's knowledge, threatened material legal, administrative,
arbitration or other proceedings, claims, actions or governmental
investigations of any nature challenging the validity or propriety of the
transactions contemplated in this Agreement, and, to the best of LBO Bancorp's
and Louisiana Bank's knowledge, there is no reasonable basis for any such
proceeding, claim, action or governmental investigation. Except as set forth
in Schedule 3.09 to this Agreement, there are no pending or, to the best of LBO
Bancorp's and Louisiana
<PAGE> 75
Bank's knowledge, threatened material legal, administrative, arbitration or
other proceedings, claims, actions or governmental investigations of any nature
against LBO Bancorp or Louisiana Bank or any officer, director or agent of any
of the foregoing who would be entitled to indemnity rights from any of the
foregoing, which if decided adversely to any of the foregoing or the defense of
which would have a material adverse effect on the business, operations, assets
or financial condition of LBO Bancorp's consolidated group. Neither LBO
Bancorp, Louisiana Bank, nor any other member of LBO Bancorp's consolidated
group is a party to any order, judgment or decree which will, or might
reasonably be expected to, materially adversely affect their business,
operations, properties, assets or financial condition or their ability to
acquire any property or conduct business in any area in which they presently do
business.
3.10 Title to Properties; Encumbrances. Except as set forth in
Schedule 3.10 hereto, Louisiana Bank and LBO Bancorp have good, valid and
marketable title to, or a valid leasehold interest in, (a) all their real
properties and (b) all other properties and assets reflected in the Louisiana
Bank Balance Sheet and the LBO Bancorp Balance Sheet, delivered by Louisiana
Bank and LBO Bancorp to DGC, or CNB pursuant to Section 3.07 hereof or acquired
since December 31, 1993, other than any of such properties or assets which have
been sold or otherwise disposed of since December 31, 1993 in the ordinary
course of business and consistent with past practice. Except as set forth in
Schedule 3.10 hereto, all of such properties and assets are free and clear of
any material title defects, objections, mortgages, pledges, liens, claims,
charges, security interests or other encumbrances of any nature whatsoever,
including, without limitation, leases, options to purchase, conditional sales
contracts, collateral security arrangements and other title or interest
retention arrangements, and are not, in the case of real property, subject to
any easements, building use restrictions, exceptions, reservations or
limitations of any nature whatsoever, except, with respect to all such
properties and assets, liens for current taxes and assessments not in default,
minor imperfections of title, and encumbrances, if any, which have arisen in
the ordinary course of business, which are not substantial in character, amount
or extent and which do not detract from the value of or interfere with the
present use of any of the properties subject thereto or affected thereby or
otherwise impair the business operations conducted by Louisiana Bank or LBO
Bancorp. To the best of Louisiana Bank's knowledge, all personal property
material to the business, operations or financial condition of Louisiana Bank
or LBO Bancorp, and all buildings, structures and fixtures used by Louisiana
Bank or LBO Bancorp in the conduct of their businesses, are in good operating
condition and repair. Except as set forth in Schedule 3.10 hereto, neither
Louisiana Bank nor LBO Bancorp has received any notification of any violation
(which has not been cured) of any building, zoning or other law, ordinance or
regulation in respect of such property or structures or Louisiana Bank's or LBO
Bancorp's use thereof.
3.11 No Undisclosed Liabilities. Except as set forth in Schedule
3.11 hereto, as of the date hereof neither Louisiana Bank nor LBO Bancorp has
any liabilities or obligations of any nature (whether absolute, accrued,
contingent or otherwise and whether due or to become due), except liabilities
and obligations (i) fully reflected or reserved against in the Louisiana Bank
Balance Sheet or the LBO Bancorp Balance Sheet or disclosed in the notes
thereto or (ii) incurred since December 31, 1993 in the ordinary course of
business and consistent with past practice.
3.12 Absence of Certain Changes or Events. (a) Except as set forth
in Schedule 3.12 hereto, since December 31, 1993, there has not been:
(i) any material adverse change in the business, operations,
properties, assets or financial condition of Louisiana Bank or LBO
Bancorp, or any event which has had or will have a material adverse
effect on any of the foregoing;
<PAGE> 76
(ii) any loss, damage, destruction or other casualty
materially and adversely affecting any of the properties, assets or
business of Louisiana Bank or LBO Bancorp or any of their subsidiaries
(whether or not covered by insurance);
(iii) any increase in the compensation payable by Louisiana
Bank or LBO Bancorp to any of their directors, officers, agents,
consultants, or any of their employees whose total compensation after
such increase was in excess of $25,000 per annum, or any bonus,
percentage compensation, service award or other like benefit granted,
made or accrued to the credit of any such director, officer, agent,
consultant or employee, or any welfare, pension, retirement or similar
payment or arrangement made or agreed to by Louisiana Bank or LBO
Bancorp for the benefit of any such director, officer, agent,
consultant or employee;
(iv) any change in any method of accounting or accounting
practice of Louisiana Bank or LBO Bancorp;
(v) any loan in excess of $100,000 or portion thereof
rescheduled as to payments thereon, subject to a moratorium on payment
thereof or written off by Louisiana Bank or LBO Bancorp as
uncollectible; or
(vi) any agreement or understanding, whether in writing or
otherwise, of Louisiana Bank or LBO Bancorp to do any of the
foregoing.
(b) Except as set forth in Schedule 3.12 hereto, since December 31,
1993, neither Louisiana Bank nor LBO Bancorp has:
(i) issued or sold any promissory note, stock, bond or other
corporate security of which it is the issuer in an amount greater than
$25,000;
(ii) discharged or satisfied any lien or encumbrance or paid
or satisfied any obligation or liability (whether absolute, accrued,
contingent or otherwise and whether due or to become due) in an amount
greater than $25,000 as to each such lien, encumbrance, obligation or
liability other than current liabilities shown on the Louisiana Bank
Balance Sheet or the LBO Bancorp Balance Sheet and current liabilities
incurred since December 31, 1993 in the ordinary course of business
and consistent with past practice and other than any such lien,
encumbrance, obligation or liability of the nature (regardless of
amount) required to be disclosed pursuant to Section 3.12(a)(iii)
hereto;
(iii) declared, paid or set aside for payment any dividend or
other distribution (whether in cash, stock or property) in respect of
their capital stock;
(iv) split, combined or reclassified any shares of their
capital stock, or redeemed, purchased or otherwise acquired any shares
of their capital stock or other securities, except shares of LBO
Bancorp held by Louisiana Bank as a result of a foreclosure, dation en
paiement, or payment in lieu of foreclosure;
(v) sold, assigned or transferred any of their assets (real,
personal or mixed, tangible or intangible) cancelled any debts or
claims or waived any rights of substantial value, except, in each
case, in the ordinary course of business and consistent with past
practice;
(vi) sold, assigned, transferred or permitted to lapse any
patents, trademarks, trade names, copyrights or other similar assets,
including applications or licenses therefor;
<PAGE> 77
(vii) paid any amounts (other than normal dividends by
Louisiana Bank to LBO Bancorp) or incurred any liability to or in
respect of, or sold any properties or assets (real, personal or mixed,
tangible or intangible) to, or engaged in any transaction (other than
any transaction of the nature (regardless of amount) required to be
disclosed pursuant to Section 3.12(a)(iii) or Section 3.21(a)(iv)
hereof) or entered into any agreement or arrangement with, any
corporation or business in which Louisiana Bank, LBO Bancorp or any of
their officers or directors, or any "affiliate" or "associate" (as
such terms are defined in the rules and regulations promulgated under
the Securities Act of 1933, as amended (the "Securities Act")) of any
such person, has any direct or indirect financial interest;
(viii) entered into any collective bargaining agreements; or
(ix) entered into any other transaction other than in the
ordinary course of business and consistent with past practice or in
connection with the transactions contemplated by this Agreement.
3.13 Leases. Set forth in Schedule 3.13 hereto is an accurate and
complete list of all leases (true, complete and correct copies of which have
been previously provided to DGC by Louisiana Bank and LBO Bancorp) pursuant to
which Louisiana Bank or LBO Bancorp, as lessee, leases real or personal
property, including, without limitation, all leases of computer or computer
services and all arrangements for time-sharing or other data processing
services. Except as set forth in Schedule 3.13 hereto: (a) all such leases
are valid and binding and are enforceable in accordance with their terms; (b)
there exists no event of default or event, occurrence, condition or act which
with the giving of notice, the lapse of time or the happening of any further
event or condition would become a default under any such lease; and (c) neither
Louisiana Bank nor LBO Bancorp is a lessee under a lease having an unexpired
term greater than 36 months that requires Louisiana Bank or LBO Bancorp to make
payments for the use of any property at rates currently higher than prevailing
market rates for similar properties in the localities where such properties are
located.
3.14 Trademarks; Trade Names. Set forth in Schedule 3.14 hereto is
an accurate and complete list and brief description of all trademarks (either
registered or common law), trade names and copyrights (and all applications and
licenses therefor) owned by Louisiana Bank or LBO Bancorp or in which they have
any interest. Louisiana Bank and LBO Bancorp own, or have the rights to use,
all trademarks, trade names and copyrights used in or necessary for the
ordinary conduct of their existing businesses as heretofore conducted, and the
consummation of the transactions contemplated hereby will not alter or impair
any such rights. Except as set forth in Schedule 3.14 hereto, no claims are
pending by any person for the use of any trademarks, trade names or copyrights
or challenging or questioning the validity or effectiveness of any license or
agreement relating to the same, nor is there any valid basis for any such
claim, challenge or question, and use of such trademarks, trade names and
copyrights by Louisiana Bank or LBO Bancorp does not infringe on the rights of
any person.
3.15 Compliance with Applicable Law. Louisiana Bank and LBO Bancorp
hold, and have at all times held, all licenses, franchises, permits and
authorizations necessary for the lawful conduct of their businesses under and
pursuant to all, and have complied in all material respects with and are not in
default in any material respect under any, applicable statutes, laws,
ordinances, rules, regulations and orders of all Federal, state and local
governmental bodies, agencies and subdivisions having jurisdiction over them or
over any part of their operations (to the extent that such default or
noncompliance could result in a material limitation on the conduct of Louisiana
Bank's or LBO Bancorp's business, or could cause Louisiana
<PAGE> 78
Bank or LBO Bancorp to incur a substantial financial penalty); and, except as
set forth in Schedule 3.15 hereto, neither Louisiana Bank nor LBO Bancorp has
received notice of a violation of, and does not know of any violation of or of
any valid basis for any claim of a violation of, any of the above.
3.16 Absence of Questionable Payments. Louisiana Bank and LBO
Bancorp have not, nor has any director, officer, agent, employee, consultant or
other person associated with, or acting on behalf of, Louisiana Bank or LBO
Bancorp, (a) used any Louisiana Bank or LBO Bancorp corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity or (b) made any direct or indirect unlawful
payments to government officials from any Louisiana Bank or LBO Bancorp
corporate funds, or established or maintained any unlawful or unrecorded
accounts with funds received from Louisiana Bank or LBO Bancorp.
3.17 Insurance. Set forth in Schedule 3.17 hereto is an accurate and
complete list of all policies of insurance (true, complete and correct copies
of which have been previously provided to DGC by Louisiana Bank and LBO
Bancorp) owned by Louisiana Bank or LBO Bancorp or in which Louisiana Bank or
LBO Bancorp is named as the insured party. All such policies are valid,
outstanding and enforceable and, except as set forth in Schedule 3.17 or to the
extent adequate notice is otherwise given in advance by Louisiana Bank or LBO
Bancorp to DGC, will remain in full force and effect at least through the
consummation of the transactions contemplated by this Agreement. Such
insurance with respect to Louisiana Bank's and LBO Bancorp's property and the
conduct of their businesses is in such amounts and against such risks as are
usually insured against by persons operating similar properties and businesses
in the State of Louisiana and are adequate for the conduct of Louisiana Bank's
and LBO Bancorp's businesses. Except as set forth in Schedule 3.17 hereto,
neither Louisiana Bank nor LBO Bancorp has ever been refused any insurance nor
have their coverages been limited (other than such limitations as have been
standardly applied in Louisiana to banks of similar size and type as Louisiana
Bank) by any insurance carrier to which they have applied for insurance or
which has provided insurance to them during the last five years.
3.18 Powers of Attorney; Guarantees. Except as set forth in Schedule
3.18 hereto, other than in the ordinary course of business neither Louisiana
Bank nor LBO Bancorp has any power of attorney outstanding, nor any obligation
or liability, either actual, accruing or contingent, as guarantor, surety,
co-signer, endorser, co-maker or indemnitor in respect of the obligation of any
other person, corporation, partnership, joint venture, association,
organization or other entity.
3.19 Taxes and Tax Returns. Louisiana Bank and LBO Bancorp have
properly and accurately completed and duly filed in correct form all Federal,
state and local information and tax returns required to be filed by them (all
such returns to the best of Louisiana Bank's and LBO Bancorp's knowledge being
accurate and complete in all respects) and have duly paid or made provisions
for the payment of all taxes and other charges which have been incurred or are
due or claimed to be due from them by Federal, state or local taxing
authorities (including, without limitation, those due in respect of their
properties, income, business, capital stock, deposits, franchises, licenses,
sales and payrolls). The amounts set up as reserve for taxes on the Louisiana
Bank Balance Sheet and the LBO Bancorp Balance Sheet are, to be the best of
Louisiana Bank's and LBO Bancorp's knowledge, sufficient in the aggregate for
the payment of all unpaid Federal, state and local taxes (including any
interest or penalties thereon and including reserves for local real estate or
other property taxes in an amount which is at least as great as the amount of
such taxes paid in any prior year), whether or not disputed, accrued or
applicable for the period ended December 31, 1993 or for any year or period
prior thereto, and for which Louisiana Bank or LBO Bancorp may be liable in
their own right or as transferee of the assets of, or successor to, any
corporation, person, association, partnership, joint venture or other entity.
<PAGE> 79
The Federal income tax returns of Louisiana Bank and LBO Bancorp have never
been audited by the Internal Revenue Service. To the best of Louisiana Bank's
and LBO Bancorp's knowledge, there are no pending questions relating to, nor
claims asserted for, taxes or assessments upon Louisiana Bank or LBO Bancorp
nor has Louisiana Bank or LBO Bancorp been requested to give any waivers
extending the statutory period of limitation applicable to any Federal, state
or local income tax return for any period. Proper and accurate amounts have
been withheld by Louisiana Bank and LBO Bancorp from their employees for all
prior periods in full and complete compliance with the tax withholding
provisions of applicable Federal, state and local laws; accurate and complete
Federal, state and local returns have been filed by Louisiana Bank and LBO
Bancorp for all periods for which returns were due with respect to income tax
withholding, Social Security and unemployment taxes; and the amounts shown on
such returns to be due and payable have been paid in full or adequate provision
therefor has been included by Louisiana Bank and LBO Bancorp in their financial
statements as of December 31, 1993.
3.20 Benefit and Employee Matters. Schedule 3.20 lists all pension,
retirement, stock option, stock purchase, stock ownership, savings, stock
appreciation right, profit sharing, deferred compensation, employment,
compensation arrangements, consulting, bonus, collective bargaining, group
insurance, severance and other employee benefit, incentive and welfare
policies, contracts, plans and arrangements, and all trust agreements related
thereto established or maintained by LBO Bancorp or Louisiana Bank or any other
member of the consolidated group of corporations of which LBO Bancorp and
Louisiana Bank are members, for the benefit of any of the present or former
directors, officers, or other employees of Louisiana Bank and LBO Bancorp.
Except as set forth in Schedule 3.20 hereto, neither Louisiana Bank nor LBO
Bancorp maintains or contributes to any "employee benefit plan", as such term
is defined in Section 3 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"). Except as set forth in Schedule 3.20, all "employee
benefit plans" maintained by Louisiana Bank or LBO Bancorp (all such plans
being listed in Schedule 3.20 hereto) (collectively, the "Louisiana Bank
Plans") are in material compliance with the provisions of ERISA and the
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"). Except as set forth in Schedule 3.20, none of the Louisiana Bank
Plans, no trust created thereunder, and no trustee or administrator thereof has
engaged in a transaction that might subject any of the Louisiana Bank Plans,
any such trust, or any trustee or administrator thereof, or, to the knowledge
of LBO Bancorp and Louisiana Bank, any party dealing with the Louisiana Bank
Plans or any such trust, to the tax or penalty on prohibited transactions
imposed by Section 4975 of the Code or to a civil penalty imposed by Section
502 of ERISA. Except as set forth in Schedule 3.20 hereof, no "employee
benefit pension plan", as such term is defined in Section 3 of ERISA,
maintained by Louisiana Bank or LBO Bancorp (collectively, the "Louisiana Bank
Pension Plans") has, since September 2, 1974, been completely or partially
terminated, nor, to the best knowledge of Louisiana Bank and LBO Bancorp, have
there been any "reportable events," as such term is defined in Section 4043(b)
of ERISA, with respect to any such plan since the effective date of said
Section 4043(b). None of the Louisiana Bank Pension Plans or trusts has
incurred any "accumulated funding deficiency," as such term is defined in
Section 412 of the Code, whether or not waived, since the effective date of
said Section 412. Each of the Louisiana Bank Pension Plans has been determined
to be "qualified" within the meaning of Section 401(a) of the Code and neither
Louisiana Bank nor LBO Bancorp knows of any fact which would adversely affect
the qualified status of such plans. Louisiana Bank and LBO Bancorp have
provided to DGC true, complete and correct copies of the most recent
determination letter issued by the Internal Revenue Service with respect to
each such Louisiana Bank Pension Plan. None of the Louisiana Bank Pension
Plans is a "multi-employer plan," as defined in Section 3(37) of ERISA.
<PAGE> 80
Contributions in respect of the fiscal year ended December 31, 1993,
to the Louisiana Bank Pension Plans amounted to approximately $76,280. The
aggregate contribution in respect of the fiscal year ending December 31, 1994,
to the Louisiana Bank Pension Plans will not exceed $65,000.
Except as set forth in Schedule 3.20 hereto, (i) Louisiana Bank and
LBO Bancorp are in material compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, occupational safety and health and they are not engaged in any
unfair labor practice; (ii) there is no unfair labor practice complaint against
Louisiana Bank or LBO Bancorp pending or threatened before, or on appeal from,
the National Labor Relations Board; (iii) there is no labor strike, dispute,
slowdown or stoppage actually pending or threatened against or affecting
Louisiana Bank or LBO Bancorp; (iv) no representation question exists
respecting the employees of Louisiana Bank or LBO Bancorp; (v) no grievance
which might have an adverse effect on Louisiana Bank or LBO Bancorp or the
conduct of their businesses nor any arbitration proceeding arising out of or
under collective bargaining agreements is pending and no claims therefor exist;
(vi) no collective bargaining agreement which is binding on Louisiana Bank or
LBO Bancorp restricts them from closing any of their operations; and (vii)
neither Louisiana Bank nor LBO Bancorp has experienced any work stoppage or
other labor difficulty during the last five years.
3.21 Contracts and Commitments; No Default (a) Set forth in Schedule
3.21 hereto are summary descriptions of the following information relating to
Louisiana Bank and LBO Bancorp:
(i) to the extent permitted by law, any bank regulatory
agency reports relating to the examination of Louisiana Bank which
have been made available to Louisiana Bank or LBO Bancorp for the past
five years;
(ii) the name of each bank with which Louisiana Bank or LBO
Bancorp has an account or safekeeping or custodial arrangement or
correspondent relationship and the names of all persons who are
authorized with respect thereto;
(iii) all mortgages, indentures, promissory notes, deeds of
trust, loan or credit agreements or similar instruments under which
Louisiana Bank or LBO Bancorp is indebted in an amount greater than
$50,000 for borrowed money or the price of purchased property, and all
amendments or modifications of any thereof;
(iv) any loans, including any other credit arrangements by
Louisiana Bank, to any holder of 10% or more of Louisiana Bank Common
Stock or LBO Bancorp Common Stock, to any of Louisiana Bank's or LBO
Bancorp's directors or officers, to any members of the immediate
families of any of Louisiana Bank's or LBO Bancorp's directors or
officers or to any corporation, firm or other organization in which
any of such directors or officers has a financial interest; and
(v) any pending application, including any documents or
materials relating thereto, which has been filed by Louisiana Bank or
LBO Bancorp with any bank regulatory authority in order to obtain the
approval of such bank regulatory authority for the establishment of a
new branch bank or a new subsidiary bank.
Louisiana Bank and LBO Bancorp have previously furnished to, or made available
for inspection by, DGC true, complete and correct copies of all reports,
documents or other instruments set forth in Schedule 3.21 and otherwise
described in this subsection (a).
<PAGE> 81
(b) Except as set forth in Schedule 3.21 hereto, neither Louisiana
Bank nor LBO Bancorp is a party to or bound by, nor have any bids or proposals
to which either Louisiana Bank or LBO Bancorp would be bound if accepted by
another party thereto been made by or to Louisiana Bank or LBO Bancorp with
respect to, any written or oral, express or, to the best of Louisiana Bank's or
LBO Bancorp's knowledge, implied:
(i) contract relating to the matters referred to in paragraph
(a) above;
(ii) contract with or arrangement for directors, officers,
employees, former employees, agents or consultants with respect to
salaries, bonuses, percentage compensation, pensions, deferred
compensation or retirement payments, or any profit-sharing, stock
option, stock purchase or other employee benefit plan or arrangement;
(iii) collective bargaining or union contract or agreement;
(iv) contract, commitment or arrangement for the borrowing of
money or for a line of credit in an amount greater than $100,000;
(v) contract, commitment or arrangement for the lending of
money or for the granting of a line of credit in an amount greater
than $250,000;
(vi) contract or agreement for the future purchase by them of
any materials, equipment, services or supplies, which continues for a
period of more than twelve months (including periods covered by any
option to renew by either party), which provides for a price in excess
of the prevailing market price or is in excess of normal operating
requirements over their remaining term;
(vii) contract containing covenants purporting to limit their
freedom to compete; or
(viii) contract or commitment for the acquisition,
construction or refurbishment of any property, plant or equipment,
other than contracts and commitments for the acquisition, construction
or refurbishment of any property, plant or equipment not in excess of
$20,000 for any one establishment or $50,000 in the aggregate.
Subject to the rights of DGC, CNCAC, CNC, and CNB to terminate its
obligations under this Agreement in accordance with the provisions of Section
6.02(h) hereof, LBO Bancorp and Louisiana Bank shall have the right to update
Schedule 3.21 as it relates to loans in excess or $250,000.
(c) Louisiana Bank and LBO Bancorp have performed all material
obligations required to be performed by them under any contract, agreement,
arrangement, commitment or other instrument to which they are a party
(including, without limitation, any of those described in paragraphs (a) and
(b) of this Section 3.21), and there is not, with respect to any such contract,
agreement, commitment or other instrument, (i) any notice of violation, or (ii)
any existing default (or event which, with or without due notice or lapse of
time or both, would constitute a default) on the part of Louisiana Bank or LBO
Bancorp or on the part of any other party thereto, which default would have a
material adverse effect on Louisiana Bank's or LBO Bancorp's business,
operations, properties, assets or financial condition, and neither Louisiana
Bank nor LBO Bancorp has received notice of any such default, nor has Louisiana
Bank or LBO Bancorp knowledge of any facts or circumstances which would
reasonably indicate that Louisiana Bank or LBO Bancorp will be or may be in
default under, any such contract, agreement, arrangement, commitment or other
instrument subsequent to the date hereof.
<PAGE> 82
3.22 Disclosure. No representation or warranty contained in this
Agreement, and no statement contained in any certificate, list or other writing
furnished to DGC or CNB pursuant to the provisions hereof, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein not misleading. No information
material to this transaction which is necessary to make the representations and
warranties herein contained not misleading has been withheld from, or has not
been delivered in writing to, DGC and CNB.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DGC, CNCAC, CNC and CNB
DGC, CNCAC, CNC, and CNB represent and warrant to Louisiana Bank and
LBO Bancorp as follows:
4.01 Corporate Organization. DGC, CNC and CNCAC are corporations
duly organized, validly existing and in good standing under the laws of the
State of Mississippi with respect to DGC and the State of Louisiana with
respect to CNC and CNCAC, and CNB is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States. DGC, CNC, CNCAC, and CNB, respectively, have the corporate power and
authority (and CNB has received appropriate authorizations from the OCC) to own
or lease all of their properties and assets and to carry on their businesses as
they are now being conducted.
4.02 Capitalization. The authorized capital stock of DGC consists of
20,000,000 shares of DGC common stock, no par value ("DGC Common Stock");
10,000,000 shares of Class A Voting Preferred Stock, no par value; and
10,000,000 shares of Class B Non Voting Preferred Stock, no par value
(collectively, "the DGC Preferred Stock"). At the close of business on June
30, 1994, there were 17,668,852 shares of DGC Common Stock issued and
outstanding and no shares of DGC Preferred Stock had been issued. In addition,
options to acquire 441,354 shares of DGC Common Stock were outstanding. The
authorized capital stock of CNC consists of 5,000,000 shares of common stock,
$5.00 par value. At the close of business on June 30, 1994, there were
4,200,000 shares of CNC common stock issued and outstanding, 100% of which
shares were owned by DGC. The authorized capital stock of CNCAC consists of
10,000 shares of common stock, no par value. As of the date of this Agreement,
there were no shares of CNCAC common stock issued and outstanding. At the
Closing Date there shall be 10,000 shares of CNCAC common stock issued and
outstanding, 100% of which shares shall be owned by DGC. The authorized
capital stock of CNB consists of 1,400,000 shares of CNB common stock. At the
close of business on June 30, 1994, there were 1,400,000 shares of CNB common
stock issued and outstanding, which shares were owned by CNC. All issued and
outstanding shares of DGC Common Stock have been, and the shares of DGC Common
Stock to be issued pursuant to the Holding Company Merger will be, duly
authorized, validly issued, and free and clear of all liens, charges, security
interests, mortgages, pledges and other encumbrances and any preemptive or
similar rights other than encumbrances placed thereon by holders of CNC common
stock, and all such shares are and will be fully paid and nonassessable. Except
as referred to above, DGC does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of DGC Common
Stock or DGC Preferred Stock or any security representing the right to purchase
or otherwise receive any DGC Common Stock or DGC Preferred Stock.
4.03 Authority; No Violation. (a) DGC, CNCAC, CNC, and CNB,
respectively, have full corporate power and authority to execute and deliver
this Agreement, the Holding Company Merger Agreement and the Bank Merger
Agreement (to the extent each is a party thereto) and, subject to the approval
of the
<PAGE> 83
shareholders of CNCAC and CNB, to consummate the transactions contemplated
hereby and thereby. The respective Boards of Directors of DGC, CNCAC, CNC, and
CNB, or a majority thereof, have duly and validly approved and adopted this
Agreement, the Holding Company Merger Agreement (in the case of the respective
boards of directors of DGC and CNCAC) and the Bank Merger Agreement (in the
case of the board of directors of CNB) and the transactions contemplated hereby
and thereby, have executed or authorized the execution of and have authorized
the delivery of this Agreement, and except for approval by DGC, as the sole
shareholder of CNCAC and CNB, no other corporate proceedings on the part of
DGC, CNCAC, CNC, or CNB are necessary or desirable to consummate the
transactions so contemplated. This Agreement has been duly and validly
executed and delivered by DGC, CNCAC, CNC, and CNB and constitutes a valid and
binding obligation of each of DGC, CNCAC, CNC, and CNB, enforceable in
accordance with its terms. The Holding Company Merger has been duly and
validly executed and delivered by DGC and CNCAC and constitutes a valid and
binding obligation of each in accordance with its terms. The Bank Merger
Agreement has been duly and validly executed and delivered by CNB and is a
binding obligation of CNB in accordance with its terms.
(b) Neither the execution and delivery of this Agreement, the
Holding Company Merger Agreement or the Bank Merger Agreement by DGC, CNCAC,
CNC, or CNB nor the consummation by DGC, CNCAC, CNC, or CNB of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of
the DGC Common Stock), nor compliance by DGC, CNCAC, or CNB with any of the
provisions hereof or thereof, will (i) violate any provision of the Certificate
of Incorporation or Bylaws of DGC, CNC, or CNCAC, or the Articles of
Association or Bylaws of CNB, (ii) to the best knowledge of DGC, CNCAC, CNC,
and CNB violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to DGC, CNC, CNCAC, CNB, or any of
their subsidiaries or any of their respective properties or assets, or (iii) to
the best knowledge of DGC, CNC, CNCAC, and CNB (such knowledge standard in this
subparagraph (iii), however, not applying with respect to the issuance of DGC
Common Stock hereunder) violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event which, with or without due
notice or lapse of time, or both, would constitute a default) under, result in
the termination of, accelerate the performance required by, or result in the
creation of any lien, security interest, charge or other encumbrance upon any
of the respective properties or assets of DGC, CNCAC, CNC, CNB, or any of their
subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which DGC, CNC, CNCAC, CNB, or any of their
respective subsidiaries is a party, or by which they or any of their respective
properties or assets may be bound or affected, except for such conflicts,
breaches or defaults as are set forth in Schedule 4.03 hereto, or which either
individually or in the aggregate will not have a material adverse effect on the
business, operations, properties, assets or financial condition of DGC, CNC,
CNCAC, CNB or any of their respective subsidiaries.
4.04 Consents and Approvals. Except for consents and approvals of or
filings or registrations with the Securities and Exchange Commission, the OCC,
the FDIC, the Louisiana Office of Financial Institutions and the Federal
Reserve Bank or as set forth in Schedule 4.04 hereto, no consents or approvals
of or filings or registrations with any governmental agency or any public body
or authority are necessary in connection with (i) the execution and delivery by
DGC, CNCAC, CNC, and CNB of this Agreement or (ii) the consummation of the
Mergers and the other transactions contemplated hereby.
4.05 Legal Proceedings. DGC, CNCAC, CNC, and CNB are not parties to
any and there are no pending or, to the best of DGC's, CNC's, CNCAC's, and
CNB's knowledge, threatened material legal, administrative, arbitration or
other proceedings, claims, actions or governmental investigations of any nature
challenging the validity or propriety of the transactions contemplated in this
Agreement, and, to the best of DGC's, CNCAC's, CNC's, and CNB's knowledge,
there
<PAGE> 84
is no reasonable basis for any such proceeding, claim, action or governmental
investigation. Except as set forth in Schedule 4.05 to this Agreement, there
are no pending or, to the best of DGC's, CNC's, CNCAC's and CNB's knowledge,
threatened material legal, administrative, arbitration or other proceedings,
claims, actions or governmental investigations of any nature against DGC, CNC
or CNB or any member of DGC's consolidated group (as such term is defined in
Section 4.07 hereof) or any officer, director or agent of any of the foregoing
who would be entitled to indemnity rights from any of the foregoing, which if
decided adversely to any of the foregoing or the defense of which would have a
material adverse effect on the business, operations, assets or financial
condition of DGC's consolidated group. Neither DGC, CNCAC, CNC, CNB, nor any
other member of DGC's consolidated group is a party to any order, judgment or
decree which will, or might reasonably be expected to, materially adversely
affect their business, operations, properties, assets or financial condition or
their ability to acquire any property or conduct business in any area in which
they presently do business.
4.06 DGC, CNC, CNCAC and CNB. DGC, CNC, CNCAC and CNB have delivered
to LBO Bancorp and Louisiana Bank true and correct copies of their articles of
incorporation or association, as amended, and bylaws, as amended.
4.07 Reports of DGC. DGC has delivered to LBO Bancorp true and
complete copies of (i) its Quarterly Reports to the SEC on Form 10-Q for the
quarters ended March 31, 1994 and March 31, 1993; (ii) its Annual Reports to
the SEC on Form 10-K for the years ended December 31, 1993 and 1992; (iii) its
1994 Proxy Statement and all proxy statements disseminated to DGC's
shareholders at any time since January 1, 1992; (iv) any reports disseminated
to its shareholders since January 1, 1993; (v) any other report made by it to
the SEC since December 31, 1992; and (vi) its annual report to the Federal
Reserve for the year ended December 31, 1993. The financial statements
contained in DGC's annual reports to the SEC on Form 10-K for the years ended
December 31, 1993 and 1992 and in its Quarterly Reports to the SEC on Form 10-Q
for the quarters ended March 31, 1994 and March 31, 1993 have been prepared in
conformity with generally accepted accounting principles applied on a basis
consistent with prior periods, and present fairly, in conformity with generally
accepted accounting principles, the consolidated results of operations of DGC
and its subsidiaries ("DGC's consolidated group") for the respective periods
covered thereby and the consolidated financial condition of DGC's consolidated
group as of the respective dates thereof. All call reports of CNB since
December 31, 1991 have been filed on the appropriate form and prepared in
accordance with such form's instructions and the applicable rules and
regulations of the regulating federal agency. The financial statements
referred to above are supported by and consistent with detailed trial balances
of investment securities, loans and commitments, depositors' accounts and cash
balances on deposit with other institutions.
4.08 Accuracy of Statements. No warranty or representation made or
to be made by DGC, CNC, CNCAC or CNB in this Agreement or in any document
furnished or to be furnished by DGC, CNC, CNCAC or CNB pursuant to this
Agreement, and no information furnished by any of the foregoing pursuant to
this Agreement, contains or will contain, as of the date of this Agreement, the
effective date of the Registration Statement (as defined in subsection 5.06(a)
hereof) and the Closing Date, an untrue statement of a material fact or an
omission of a material fact necessary to make the statements contained herein
and therein, in light of the circumstances in which they are made, not
misleading.
ARTICLE V
COVENANTS OF THE PARTIES
5.01 Conduct of Business. Except with the consent of DGC, during the
period from the date of this Agreement to the Effective Time:
<PAGE> 85
(a) Louisiana Bank and LBO Bancorp will conduct their
businesses and engage in transactions only in the ordinary course and
consistent with prudent banking practice.
(b) No extraordinary increase shall be made in the
compensation payable or to become payable by Louisiana Bank and LBO Bancorp to
any officer, employee, or agent, nor shall any bonus payment be made (except
pursuant to existing benefit plans), stock option be granted or extraordinary
employment agreement or consulting agreement be entered into by Louisiana Bank
or LBO Bancorp with any such officer, employee or agent.
(c) No material assets of Louisiana Bank or LBO Bancorp shall
be sold or disposed of except in the ordinary course of business.
(d) No new capital commitments shall be entered into, and no
capital expenditures shall be made, by Louisiana Bank and LBO Bancorp, except
commitments or expenditures within existing operating and capital budgets or
otherwise in the ordinary course of business.
(e) Louisiana Bank and LBO Bancorp shall not authorize or
issue any shares of any class of its capital stock or any securities
exchangeable for or convertible into any such shares or any options or rights
to acquire any such shares, nor shall Louisiana Bank or LBO Bancorp otherwise
authorize or affect any change in its capitalization.
(f) LBO Bancorp shall not declare and pay any dividend to its
shareholders prior to the Effective Date. Louisiana Bank shall only declare
and pay such dividends as are necessary to pay normal and routine operating
expenses, reasonable expenses related to this transaction, and to pay the
indebtedness of LBO Bancorp to Premier Bank in the approximate amount of
$71,000 and the ESOP debt commitment of LBO Bancorp of approximately $14,000.
5.02 Limitation on Actions. Except to the extent required in the
reasonable opinion of counsel to LBO Bancorp to discharge the fiduciary duty of
its directors, Louisiana Bank and LBO Bancorp agree that from the date hereof
to the consummation of the Mergers, they will not, without the consent of DGC,
solicit, discuss, undertake or enter into (with or without shareholder
approval), either as the proposed surviving, terminating, acquiring or acquired
corporation, any other merger, consolidation, assets acquisition, tender offer
or other takeover transaction or (except as may be required by court order or
decree) furnish or cause to be furnished any information concerning their
business or properties to any person or entity, other than DGC and CNB,
interested in any such transaction. Nothing contained in the preceding sentence
shall affect the ability of any party to furnish information as required by
law. From the date hereof to the consummation of the Mergers, Louisiana Bank
and LBO Bancorp will not engage in any transaction not in the ordinary course
of business, nor will they combine their common stock, and any unusual
development or practice shall be promptly reported by Louisiana Bank and LBO
Bancorp to DGC.
5.03 Current Information. During the period from the date of this
Agreement to the Effective Time, Louisiana Bank and LBO Bancorp will cause one
or more of its designated representatives to confer on a regular and frequent
basis with representatives of DGC and to report the general status of its
ongoing operations. Louisiana Bank and LBO Bancorp will promptly notify DGC of
any material change in the normal course of their business or in the operation
of their properties and of any governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated), or
the institution or the threat of litigation involving either party, and will
keep DGC fully informed of such events.
<PAGE> 86
5.04 Access to Properties and Records; Confidentiality. For purposes
of allowing DGC, CNCAC, and CNB and their counsel to prepare regulatory
submissions, and for other relevant purposes, Louisiana Bank and LBO Bancorp
shall permit DGC reasonable access to their properties, and shall disclose and
make available to DGC and its agents all books, papers and records relating to
their assets, stock ownership, properties, operations, obligations and
liabilities, including, but not limited to: their books of account (including
their general ledgers); tax records; minute books of directors' and
shareholders' meetings; charter documents; bylaws; material contracts and
agreements; filings with any regulatory authority; litigation file;
compensatory plans affecting its employees; and any other materials pertaining
to business activities, projects or programs in which the other parties may
have a reasonable interest in light of the proposed Mergers. None of the
parties hereto shall be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice the
rights of any customer or other person, would jeopardize the attorney-client
privilege of the institution in possession or control of such information, or
would contravene any law, rule, regulation, order, judgment, decree or binding
agreement. The parties will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
All information furnished by one party to another pursuant hereto
shall be treated as the sole property of the party furnishing the information
until consummation of the Mergers contemplated hereby and, if such Mergers
shall not occur, the party receiving the information shall return to the party
which furnished such information all documents or other materials containing,
reflecting or referring to such information, shall use its best efforts to keep
confidential all of such information, and shall not directly or indirectly use
such information for any competitive or other commercial purpose. The
obligation to keep such information confidential shall continue for two years
from the date the proposed Mergers are abandoned and shall not apply to (i) any
information which (a) the party receiving the information can establish by
convincing evidence was already in its possession prior to the disclosure
thereof by the party furnishing the information, (b) was then generally known
to the public or set forth in public records, (c) became known to the public
through no fault of the party receiving the information, or (d) was disclosed
to the party receiving the information by a third party not bound by an
obligation of confidentiality, or (ii) disclosures in accordance with an order
of a court of competent jurisdiction.
5.05 Interim Financial Statements. As soon as reasonably available,
but in no event more than fifteen (15) days after the end of each month ending
after the date of this Agreement, Louisiana Bank and LBO Bancorp will deliver
to DGC copies of their monthly financial statements.
5.06 Regulatory Matters. (a) DGC will prepare and file (and LBO
Bancorp and Louisiana Bank will cooperate in the preparation and filing by DGC
of) a registration statement with the Securities and Exchange Commission on
Form S-4 under the Securities Act of 1933, as amended (the "Registration
Statement") and comply with all requirements of the Securities Act applicable
thereto, for the purpose of registering the DGC Common Stock to be issued in
the Holding Company Merger. DGC shall use its best efforts to cause the
Registration Statement to become effective as soon as practicable, to qualify
the DGC Common Stock under the securities or blue sky laws of such
jurisdictions as may be required and to keep the Registration Statement and
such qualifications current and in effect for so long as is necessary to
consummate the transactions contemplated hereby, and the parties will cooperate
in the preparation of a proxy statement to be mailed to LBO Bancorp
shareholders in connection with the meeting to be called to consider the
Holding Company Merger, as soon as reasonably practicable following the date of
this Agreement. It is contemplated that a combined proxy statement/prospectus
will be sent to shareholders of LBO Bancorp.
<PAGE> 87
(b) DGC, CNC, CNCAC and CNB shall prepare (and LBO Bancorp
and Louisiana Bank shall cooperate in the preparation of) all necessary
documentation, to effect all necessary filings and to obtain all necessary
permits, consents, approvals and authorizations of all third parties and
governmental bodies necessary to consummate the transactions contemplated by
this Agreement, including those required by the OCC and the Federal Reserve
Board.
5.07 Approval of Shareholders. LBO Bancorp will (i) take all steps
necessary to call, give notice of, convene and hold a special meeting of its
shareholders as soon as practicable for the purpose of approving and adopting
the Holding Company Merger Agreement and the transactions contemplated thereby
and for such other purposes as may be necessary or desirable, (ii) recommend to
its shareholders the approval of the Holding Company Merger Agreement and the
transactions contemplated thereby and such other matters as may be submitted to
its shareholders in connection with this Agreement, and (iii) cooperate and
consult with DGC, CNC, CNCAC, and CNB with respect to each of the foregoing
matters. LBO Bancorp will use its best efforts to obtain the necessary
approvals of its shareholders of the Bank Merger Agreement and the transactions
contemplated thereby. LBO Bancorp, as the sole shareholder of Louisiana Bank,
shall approve the Bank Merger Agreement and the transactions contemplated
thereby.
5.08 Compliance with Securities Act. LBO Bancorp shall identify in a
letter to DGC, after consultation with its counsel and with DGC and its
counsel, at the time of the meeting of shareholders of LBO Bancorp referred to
in Section 5.07 hereof, those persons who may be deemed to be affiliates of LBO
Bancorp as that term is defined in Rule 145 under the Securities Act of 1933
and who will become beneficial owners of Common Stock of DGC pursuant to the
Holding Company Merger ("LBO Affiliates").
5.09 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary or
desirable action. In addition, Louisiana Bank and LBO Bancorp agree to notify
DGC by telephone within twenty-four (24) hours of receipt of any inquiry with
respect to a proposed merger, consolidation, assets acquisition, tender offer
or other takeover transaction with another person or receipt of a request for
information from the FDIC, OCC or other governmental authority with respect to
a proposed acquisition of Louisiana Bank or LBO Bancorp by another party.
5.10 Public Announcements. DGC, CNC, CNCAC, CNB, Louisiana Bank and
LBO Bancorp will cooperate with each other in the development and distribution
of all news releases and other public information disclosures with respect to
this Agreement or any of the transactions contemplated hereby. No party to
this agreement shall make any public announcement or otherwise make any
disclosure (either public or private), other than such disclosure to employees
or agents of any such party as may be required to carry out the transactions
contemplated by this Agreement, without the express written consent of all
parties hereto. Each party hereto shall undertake such reasonable steps as may
be required to ensure that its employees and agents comply with the provisions
of this Section 5.10.
Section 5.11. Benefits. From and after the Effective Time, DGC or
CNB, will, subject to compliance with applicable legal and regulatory
requirements, provide coverage for all Louisiana Bank employees under all DGC
employee benefit plans for which they are eligible, as soon as practicable
after the Effective Time. All prior years of service of Louisiana Bank
employees will be counted for
<PAGE> 88
vesting and eligibility purposes under all applicable DGC employee benefit
plans to the extent permitted by applicable law. Any Louisiana Bank employee
who, immediately prior to the Effective Time, is covered by or is a participant
in a Louisiana Bank employee benefit plan listed in Schedule 3.20 of this
Agreement, shall, at the Effective Time, be covered by or participate in the
comparable CNC or DGC employee benefit plan if a comparable plan otherwise is
maintained by DGC or CNB, and if the employee meets the eligibility
requirements of the plan. At the Effective Time, or as soon as reasonably
practical after receipt of a favorable determination letter from the IRS with
respect to the Louisiana Bank of Ouachita Parish 401(k) Plan, such plan will be
merged with and into the Retirement Savings Plan for Employees of Deposit
Guaranty Corp. and Participating Subsidiaries. Immediately prior to the
Effective Time, each and every loan to or other indebtedness of the Louisiana
Bank of Ouachita Parish Employee Stock Ownership Plan will be satisfied. At the
Effective Time, or as soon thereafter as is reasonably practical, the parties
will either cause the Louisiana Bank of Ouachita Parish Employee Stock
Ownership Plan to be merged with and into the Retirement Savings Plan for
Employees of Deposit Guaranty Corp. and Participating Subsidiaries, or cause
the Louisiana Bank of Ouachita Parish Employee Stock Ownership Plan to be
terminated and all participant accounts maintained therein distributed to, or
at the direction of, their beneficial owners in an Eligible Rollover
Distribution (as that term is defined in Section 402(f)(2)(A) of the Code),
which distribution may be paid directly to the Trustee of the Retirement
Savings Plan for Employees of Deposit Guaranty Corp. and Participating
Subsidiaries, at the election of the distributee, pursuant to Section
401(a)(31) of the Code.
5.12 Additional Information from DGC. DGC will provide LBO Bancorp
with (i) prompt written notice of any material adverse change in the financial
condition, results of operations, business or prospects of DGC, CNC or CNB,
except to the extent such disclosure is in violation of law, (ii) as soon as
they become available and are publicly disclosed, copies of any financial
statements, reports and other documents of the type referred to in Section 4.07
with respect to DGC, and (iii) promptly upon its dissemination, any report
disseminated to the shareholders of DGC.
5.13 Publication of Post-Merger Financial Statements. DGC shall file
all Form 10-Qs and Form 10-Ks required to be filed by it with the SEC timely
and will issue press releases concerning earnings in accordance with its
established practice. This covenant of DGC shall expire six months from and
after the Effective Time.
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<PAGE> 89
ARTICLE VI
CLOSING CONDITIONS
6.01 Conditions to Each Party's Obligations under this Agreement.
The respective obligations of each party under this Agreement shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions,
none of which may be waived (except that the opinions set forth in paragraphs
(c) and (d) of this Section may be revised or modified by DGC):
(a) This Agreement and the transactions contemplated hereby
shall have been approved and adopted by the affirmative vote of the holders of
at least two-thirds of the shares of LBO Bancorp Common Stock represented at
the special meeting of shareholders of LBO Bancorp called pursuant to Section
5.07 hereof, at which a quorum is present.
(b) None of the parties hereto shall be subject to any order,
decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the Mergers.
(c) DGC, CNCAC, CNB, LBO Bancorp and Louisiana Bank shall
have received an opinion of Messrs. Watkins Ludlam & Stennis substantially to
the effect that the transactions contemplated by this Agreement will be treated
for Federal income tax purposes as a tax free reorganization under Section 368
of the Internal Revenue Code.
(d) Reserved.
(e) The Registration Statement relating to the shares of DGC
Common Stock to be issued pursuant to the Holding Company Merger Agreement
shall have become effective under the Securities Act of 1933 and shall not be
subject to any stop order or a threatened stop order.
(f) Any and all permits, consents, waivers, clearances,
approvals and authorizations (including those referred to in Schedule 3.06
hereto) of all third parties and governmental bodies which are necessary in
connection with the consummation of the Mergers and the other transactions
contemplated hereby or the conduct by the Association of the business of
Louisiana Bank and LBO Bancorp as conducted by Louisiana Bank and LBO Bancorp
at the Effective Time, shall have been obtained.
6.02 Conditions to the Obligations of DGC, CNC, CNCAC, and CNB under
this Agreement. The obligations of DGC, CNC, CNCAC, and CNB under this
Agreement shall be further subject to the satisfaction, at or prior to the
Effective Time, of the following conditions, any one or more of which may be
waived by DGC, CNCAC, CNC, and CNB:
(a) Each of the obligations of Louisiana Bank and LBO Bancorp
required to be performed by them at or prior to the Closing pursuant to the
terms of this Agreement shall have been duly performed and complied with and
the representations and warranties of Louisiana Bank and LBO Bancorp contained
in this Agreement shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date as though made at and as of
such date (except as otherwise contemplated by this Agreement) and DGC, CNCAC,
CNC, and CNB shall have received a certificate to that effect signed by the
president and the chief financial officer of Louisiana Bank and LBO Bancorp.
(b) All action required to be taken by, or on the part of,
Louisiana Bank and LBO Bancorp to authorize the execution, delivery and
performance of this Agreement, the Holding Company Merger Agreement and the
Bank Merger Agreement by Louisiana Bank and LBO Bancorp and the consummation of
the transactions
<PAGE> 90
contemplated hereby shall have been duly and validly taken by the Board of
Directors of Louisiana Bank and LBO Bancorp and DGC, CNCAC, CNC, and CNB shall
have received certified copies of the resolutions evidencing such
authorization.
(c) DGC, CNC, CNCAC, and CNB shall have received an opinion
from Gordon, Arata, McCollam & Duplantis, L.L.P., counsel to Louisiana Bank and
LBO Bancorp, dated the date of the Closing, in form satisfactory to CNB, DGC,
and CNCAC to the effect that:
(i) LBO Bancorp is a corporation duly organized and validly
existing under the laws of Louisiana and in good standing with the
Louisiana Secretary of State's office and has all requisite corporate
power and authority to own and lease its property and to carry on its
business as now being conducted.
(ii) Louisiana Bank is a duly chartered and validly existing
Louisiana state banking organization and (a) has all requisite
corporate power and authority to own and lease its property and to
carry on its business as now being conducted, (b) as a state chartered
financial institution, it is duly authorized to conduct a general
banking business, embracing all usual deposit functions of commercial
banks in the state of Louisiana, as well as commercial, industrial and
real estate loans and (c) is an insured bank as defined in the Federal
Deposit Insurance Act.
(iii) The execution, delivery and performance of this
Agreement and the Holding Company Merger Agreement have been duly
authorized by the board of directors and stockholders of LBO Bancorp
and all corporate acts and other corporate proceedings required on the
part of LBO Bancorp for the due and valid authorization, execution,
delivery and performance of this Agreement and the Holding Company
Merger Agreement and the consummation of the Holding Company Merger
have been taken.
(iv) The execution, delivery and performance of this
Agreement and the Bank Merger Agreement have been duly authorized by
the board of directors and sole stockholder of Louisiana Bank and all
corporate acts and other corporate proceedings required on the part of
Louisiana Bank for the due and valid authorization, execution,
delivery and performance of this Agreement and the Bank Merger
Agreement and the consummation of the Bank Merger have been taken.
(v) This Agreement and the Holding Company Merger Agreement
are the legal, valid and binding obligations of LBO Bancorp and are
enforceable against it in accordance with their terms, except as such
enforcement may be limited by bankruptcy, reorganization, insolvency
and other similar laws and court decisions relating to or affecting
the enforcement of creditors' rights generally and by provisions of
United States and Louisiana laws relating to deceptive practices,
misstatements or omissions of material facts in the sale of
securities, fraud and gross fault, and except as to the availability
of specific performance, injunction or other equitable remedies.
(vi) This Agreement and the Bank Merger Agreement are the
legal obligations of Louisiana Bank and are enforceable against it in
accordance with their terms, except as such enforcement may be limited
by bankruptcy, reorganization, insolvency and other similar laws and
court decisions relating to or affecting the enforcement of creditors'
rights generally and by provisions of United States and Louisiana laws
relating to deceptive practices, misstatements or omissions of
material facts in the sale of securities, fraud and gross fault, and
except as to the availability of specific performance, injunction or
other equitable remedies.
<PAGE> 91
(vii) Neither the execution and delivery of this Agreement
and the Holding Company Merger Agreement by LBO Bancorp nor the
consummation of the transactions contemplated thereby (a) violates,
conflicts with or results in a breach of any provision of or
constitutes a default under, its articles of incorporation, bylaws or
any material mortgage, lease, contract, agreement or other instrument
of which we have knowledge which binds it or its assets, or (b) to our
knowledge, violates any order, writ, injunction or decree of any
governmental body applicable to it or its assets, the effect of which
would be materially adverse to LBO Bancorp and Louisiana Bank or have
a materially adverse impact on the transactions contemplated by this
Agreement.
(viii) Neither the execution and delivery of this Agreement
and the Bank Merger Agreement by Louisiana Bank nor the consummation
of the transactions contemplated thereby (a) violates, conflicts with
or results in a breach of any provision of or constitutes a default
under, its articles of association, bylaws or any material mortgage,
lease, contract, agreement or other instrument of which we have
knowledge which binds it or its assets, or (b) to our knowledge
violates any order, writ, injunction or decree of any governmental
body applicable to it or its assets, the effect of which would be
materially adverse to LBO Bancorp or Louisiana Bank or have a
materially adverse impact on the transactions contemplated by this
Agreement.
(ix) The authorized capital stock of LBO Bancorp is as
follows: 410,000 shares of common stock, $5.00 par value per share,
authorized, of which 386,012 shares are issued and outstanding. The
authorized capital stock of Louisiana Bank is as follows: 260,000
shares of common stock, $5.00 par value per share, authorized, of
which 260,000 shares are issued and outstanding. All issued and
outstanding shares have been duly authorized and validly issued, and
to our knowledge are fully paid and (except as provided in La. Rev.
Stat. Section 6:262) nonassessable. To our knowledge, except for this
Agreement, the Holding Company Merger Agreement and the Bank Merger
Agreement, there are no outstanding options, warrants, contracts or
commitments entitling any person to purchase or otherwise acquire from
LBO Bancorp or Louisiana Bank any shares of their capital stock; nor
to our knowledge, do LBO Bancorp or Louisiana Bank have any
outstanding obligation with respect to their unissued capital stock,
or any outstanding obligation to repurchase, redeem or otherwise
acquire any of their outstanding shares of capital stock.
(x) To our knowledge no material litigation is pending or
overtly threatened in written communications, before any court or
agency of government or arbitration panel against LBO Bancorp or
Louisiana Bank which would prevent the performance of this Agreement,
the Holding Company Merger Agreement, the Bank Merger Agreement or any
of the transactions contemplated thereby or declare the same unlawful
or cause the rescission thereof.
We have participated in conferences with representatives of LBO
Bancorp and Louisiana Bank in connection with the preparation by DGC of the
Registration Statement and the preparation by LBO Bancorp of the Proxy
Statement contained therein, and we have considered the matters required to be
stated in the Registration Statement and in the Proxy Statement and the
statements contained therein, and based on the foregoing and relying as to
materiality upon the opinions of officers and other representatives of LBO
Bancorp and Louisiana Bank, nothing has come to our attention that would lead
us to believe that the Registration Statement, as amended, at the time it
became effective or the Proxy Statement at the time it was distributed to the
shareholders, contained any untrue statement of a material fact or omitted a
material fact required to be
<PAGE> 92
stated therein or necessary to make the statements therein not misleading,
except that we express no opinion as to the financial statements and other
financial and statistical data included in or omitted from the Registration
Statement and the Proxy Statement or as to any of the matters required to be
stated therein or any of the statements contained therein with respect to DGC,
CNC or CNB.
In connection with such opinion, such counsel may rely as to factual
matters on certificates of officers of LBO Bancorp and Louisiana Bank unless
counsel has knowledge that the certificate is incorrect and such counsel's
knowledge shall mean the actual knowledge of the lawyers in the firm who have
devoted substantive attention to the transaction contemplated by this Agreement
as counsel.
(d) Reserved.
(e) Reserved.
(f) Except for those contracts set forth in Schedule 6.02 (f)
hereto, all contracts between Louisiana Bank or LBO Bancorp and any employee
thereof or independent contractor thereto shall, by the terms of such contracts
or a written addendum thereto, be terminable by DGC, CNCAC, or CNB following
the Mergers, upon no more than thirty (30) day's written notice to the employee
or independent contractor.
(g) This Agreement and the transactions contemplated hereby
shall have been approved by the OCC and all other applicable federal and state
authorities in a form acceptable to DGC.
(h) Except as set forth in Schedule 6.02(h) hereto, there
shall have been no material adverse change in the financial condition or
results of operations of LBO Bancorp or Louisiana Bank from the condition and
results of operations indicated in the audited financial statements of LBO
Bancorp or Louisiana Bank at December 31, 1993, and for the year then ended.
(i) LBO Bancorp shall have caused all LBO Affiliates to
execute and deliver to DGC written agreements to comply with the applicable
resale restrictions set forth in Rule 145 under the Securities Act of 1933 and
with such restrictions as are necessary to permit the Mergers to be treated for
accounting purposes as a pooling of interests.
(j) DGC, CNCAC, CNB, LBO Bancorp and Louisiana Bank shall
have received an opinion of KPMG Peat Marwick dated the date of Closing, in
form and substance satisfactory to DGC, CNCAC, CNB, LBO Bancorp and Louisiana
Bank, and substantially to the effect that on the basis of a review of this
Agreement and all of the circumstances related thereto, in the opinion of KPMG
Peat Marwick Accounting Principles Board Opinion No. 16 requires the Mergers to
be accounted for as a pooling of interests.
Louisiana Bank and LBO Bancorp will furnish DGC, CNC, CNCAC, and CNB
with such certificates of their officers or others and such other documents to
evidence fulfillment of the conditions set forth in this Section 6.02 as DGC,
CNC, CNCAC, and CNB may reasonably request.
6.03 Conditions to the Obligations of Louisiana Bank and LBO Bancorp
under this Agreement. The obligations of Louisiana Bank and LBO Bancorp under
this Agreement shall be further subject to the satisfaction, at or prior to the
Effective Time, of the following conditions, any one or more of which may be
waived by Louisiana Bank and LBO Bancorp:
(a) Each of the obligations of DGC, CNCAC, CNC, or CNB,
respectively, required to be performed by them at or prior to the Closing
<PAGE> 93
pursuant to the terms of this Agreement shall have been duly performed and
complied with and the representations and warranties of DGC, CNCAC, CNC, and
CNB contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Effective Time as
though made at and as of the Effective Time (except as otherwise contemplated
by this Agreement) and Louisiana Bank and LBO Bancorp shall have received
certificates to that effect signed by the presidents and chief financial
officers of DGC, CNCAC, and CNB, respectively.
(b) All action required to be taken by, or on the part of,
DGC, CNCAC, CNC, and CNB to authorize the execution, delivery and performance
of this Agreement of DGC, CNCAC, and CNB and the consummation of the
transactions contemplated hereby shall have been duly and validly taken by the
Boards of Directors of DGC, CNCAC, and CNB, respectively, and Louisiana Bank
and LBO Bancorp shall have received certified copies of the resolutions
evidencing such authorization.
(c) Reserved.
(d) Each of the obligations of DGC, CNC and CNB required
to be performed by them at or prior to the Closing, pursuant to the terms of
this Agreement, shall have been duly performed and complied with and the
representations and warranties of DGC, CNC and CNB contained in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date, as though made at and as of such date
(except as otherwise contemplated by this Agreement). In addition DGC, CNC and
CNB shall have delivered to LBO Bancorp and Louisiana Bank a certificate to
that effect signed by the president and chief financial officer of each of DGC,
CNC and CNB.
(e) Opinion of Counsel. LBO Bancorp and Louisiana Bank
shall have received from Messrs. Watkins, Ludlam and Stennis, counsel for DGC,
CNC and CNB, an opinion, dated as of the Closing Date, in form and substance
satisfactory to LBO Bancorp and Louisiana Bank, to the effect that:
(i) Each of DGC, CNC and CNB is duly organized, validly
existing and in good standing under the laws of the jurisdiction of
its organization, has all requisite corporate power and authority to
own and lease its property and to carry on the business described as
being carried on by it in the Registration Statement. DGC is
qualified and in good standing as a foreign corporation in the State
of Louisiana;
(ii) the execution and delivery of this Agreement and the
Merger Agreements have been duly authorized by the Boards of Directors
of DGC, CNC and CNB which are party thereto, and by the shareholders
of CNB and CNCAC, and all corporate acts and other corporate
proceedings required on the part of DGC, CNC, CNCAC and CNB for the
due and valid authorization, execution and delivery of this Agreement
and the Merger Agreements, and the consummation of the Mergers, have
been validly and appropriately taken. Upon the filing of the executed
Bank Merger Agreement with the Louisiana Commissioner of Financial
Institutions and the Office of the Comptroller of the Currency, the
Bank Merger will be effective as of the time referred to in the Bank
Merger Agreement, and upon the filing of the executed Holding Company
Merger Agreement with the Secretary of State of Louisiana, the Holding
Company Merger will be effective as of the Effective Time;
(iii) this Agreement and Merger Agreements are the legal,
valid and binding obligations of DGC, CNC and CNB, as the case may be,
and are enforceable against DGC, CNC and CNB, as the case may be, in
accordance with their terms, except as such enforcement may be limited
by
<PAGE> 94
bankruptcy, reorganization, insolvency and other similar laws and
court decisions relating to or affecting the enforcement of creditors'
rights generally, and by provisions of Louisiana laws relating to
fraud and gross fault and except as to the availability of specific
performance or other equitable remedies;
(iv) neither the execution, delivery or performance of this
Agreement or the Merger Agreements by DGC, CNC and CNB, nor the
consummation of the transactions contemplated hereby or thereby, will
(A) violate, conflict with or result in a breach of any provision of
or constitute a default under the articles of incorporation, articles
of association or bylaws of DGC, CNC or CNB or, to our knowledge, any
material mortgage, lease, contract, agreement or other instrument
which binds any of them or any of their assets, or (B) to our
knowledge, violate any order, writ, injunction or decree of any
governmental body applicable to DGC, CNC, CNCAC or CNB;
(v) the authorized capital stock of DGC, CNC and CNB is as
set forth in Section 4.02 of this Agreement, and all shares of DGC
Common Stock to be issued to holders of LBO Bancorp Common Stock will
be, when issued as described in this Agreement and the Registration
Statement, duly authorized and validly issued, fully paid and
non-assessable, free of liens, security interests, pledges or other
encumbrances and all preemptive or similar rights other than liens,
security interests, pledges or other encumbrances placed thereon by
the holders of LBO Common Stock;
(vi) the Registration Statement has become effective, and to
such counsel's knowledge, no stop order suspending its effectiveness
has been issued nor have any proceedings for that purpose been
instituted;
(vii) the Registration Statement and each amendment or
supplement thereto, as of their respective effective or issue dates,
complied as to form in all material respects with the requirements of
the Securities Act and the rules and regulations promulgated
thereunder, and we do not know of any contracts or documents required
to be filed as exhibits to the Registration Statement which are not
filed as required; it being understood that such counsel need express
no opinion as to the financial statements or other financial or
statistical data contained in or omitted from the Registration
Statement or the Proxy Statement; and
(viii) to our knowledge, except as disclosed to LBO Bancorp
in writing, no material claims of any kind have been asserted and
there are no material actions, suits, proceedings, arbitrations or
investigations pending or threatened in any court or before any
governmental agency or instrumentality or arbitration panel against
any member of DGC's consolidated group, which would prevent the
performance of this Agreement or the Merger Agreements or any of the
transactions contemplated thereby or declare the same unlawful or
cause the rescission thereof.
In addition, such counsel shall state that they have participated in
conferences with representatives of the parties hereto and their respective
accountants and counsel in connection with the preparation of the Registration
Statement and the Proxy Statement and have considered the matters required to
be stated therein the statements contained therein, and based on the foregoing
(relying as to materiality on the opinion of officers and representatives of
the parties hereto) nothing has come to the attention of such counsel that
would lead them to believe that the Registration Statement and the Proxy
Statement, as amended or supplemented, if they have been amended or
supplemented (in the case of the Registration Statement), or at the time
distributed to shareholders (in the case of the Proxy Statement), contained any
untrue statement of a material
<PAGE> 95
fact or omitted a material fact required to be stated therein or necessary to
make the statements therein not misleading (except in each such case for the
financial statements and other financial and statistical data included therein
or omitted therefrom; as to which no statement need be made).
In connection with such opinion such counsel may rely as to factual
matters on certificates of DGC, CNC and CNB, unless counsel has knowledge that
the certificate is incorrect, and such counsel's knowledge shall mean the
actual knowledge of the lawyers in the firm (i) who have devoted substantive
attention to the transactions contemplated by this Agreement as counsel, and
(ii) who have historically provided to DGC legal counsel and advice concerning
the federal and state securities laws.
(f) Opinion of Investment Bankers. LBO Bancorp shall
have received an opinion, dated within five days prior to the mailing of the
Proxy Statement to the shareholders of LBO Bancorp, from National Capital
Corporation (or an affiliate thereof) in form and substance satisfactory to LBO
Bancorp, to the effect that the terms of the transactions as contemplated by
this Agreement and the Merger Agreements are fair to LBO Bancorp and its
shareholders from a financial point of view. It is understood and agreed that
the fee to be paid by LBO Bancorp for such opinion shall not exceed $12,000.
(g) No Material Adverse Change. Except as set forth in
Schedule 6.03(g) hereto, there shall not have occurred any material adverse
change from March 31, 1994 to the Closing Date in the financial condition,
results of operations, business or prospects of DGC's consolidated group.
DGC, CNCAC, and CNB will furnish Louisiana Bank and LBO Bancorp with
such certificates of their officers or others and such other documents to
evidence fulfillment of the conditions set forth in this Section 6.03 as
Louisiana Bank and LBO Bancorp may reasonably request.
ARTICLE VII
CLOSING
7.01 Time and Place. Subject to the provisions of Articles VI and
VIII hereof, the closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of DGC, One Deposit Guaranty Plaza,
210 East Capitol Street, Jackson, Mississippi 39205 at 9:00 A.M., local time,
on the first business day after the date on which all of the conditions
contained in Article VI, to the extent not waived, are satisfied; or at such
other place, at such other time, or on such other date as DGC, CNCAC, CNC, CNB,
LBO Bancorp and Louisiana Bank may mutually agree upon for the Closing to take
place (such date of the Closing being referred to herein as the "Closing
Date").
7.02 Deliveries at the Closing. Subject to the provisions of
Articles VI and VIII hereof, at the Closing there shall be delivered to DGC,
CNC, CNCAC, CNB, LBO Bancorp and Louisiana Bank the opinions, certificates, and
other documents and instruments required to be delivered under Article VI
hereof.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of the Holding Company
Merger by the shareholders of LBO Bancorp:
<PAGE> 96
(a) by mutual written consent of Louisiana Bank, LBO Bancorp,
DGC, CNCAC, CNC, and CNB, properly authorized by their respective Boards of
Directors;
(b) by DGC, CNCAC, CNC, and CNB, if at the time of such
termination there shall be a material adverse change in the consolidated
financial condition of LBO Bancorp from that set forth in LBO Bancorp's
Financial Statements for the period ended December 31, 1993 (except as set
forth in Schedule 6.02(h));
(c) by LBO Bancorp or Louisiana Bank, if at the time of such
termination there shall be a material adverse change in the consolidated
financial condition of DGC from that set forth in DGC's financial statements
for the period ended March 31, 1994 (except as set forth in Schedule 6.03(g));
(d) by any party hereto, if a United States District Court
shall rule upon application of the Department of Justice after a full trial on
the merits or a decision on the merits based on a stipulation of facts that the
transactions contemplated by this Agreement violate the antitrust laws of the
United States;
(e) by any party hereto, if at the special meeting of
shareholders to be called by LBO Bancorp pursuant to this Agreement, the
Holding Company Merger Agreement shall not have been approved and adopted by
the affirmative vote of the holders of at least two-thirds of the shares of LBO
Bancorp Common Stock represented at the special meeting of shareholders of LBO
Bancorp called pursuant to Section 5.07 hereof at which a quorum is present;
(f) by DGC, CNCAC, and CNB, in the event there are Dissenting
Shareholders who hold more than 10% of the outstanding shares of LBO Bancorp
Common Stock; or
(g) by any party hereto if the Closing shall not have
occurred by May 31, 1995.
8.02 Effect of Termination. In the event of termination of this
Agreement by either DGC, CNC, CNCAC, CNB, LBO Bancorp or Louisiana Bank as
provided above, this Agreement shall forthwith become void and except as
provided in Section 5.04 and Section 9.01 hereof there shall be no further
liability on the part of Louisiana Bank, LBO Bancorp, DGC, CNCAC, CNC, CNB, or
their respective officers or directors.
8.03 Amendment, Extension and Waiver. Subject to applicable law, at
any time prior to the consummation of the Mergers, whether before or after
approval thereof by the LBO Bancorp shareholders, DGC, CNC, CNCAC, CNB, LBO
Bancorp and Louisiana Bank may, by action taken by their respective Boards of
Directors (i) amend this Agreement, (ii) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (iii) waive
any inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto, or (iv) waive compliance with any of
the agreements or conditions contained in Articles V and VI (other than Section
6.01 hereof); provided, however, that, subject to Section 1.01 hereof, after
any approval of the Holding Company Merger by the shareholders of LBO Bancorp,
there may not be, without further approval of such shareholders, any amendment,
extension or waiver of this Agreement which changes the amount or form of
consideration to be delivered to shareholders of LBO Bancorp. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto. Any agreement on the part of a party hereto to any
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party, but such waiver or failure to insist on
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure.
<PAGE> 97
ARTICLE IX
MISCELLANEOUS
9.01 Expenses. All out-of-pocket costs and expenses incurred in
connection with the Mergers (including, but not limited to, counsel fees) shall
be paid by the party incurring such costs and expenses.
9.02 Notices. All notices or other communications hereunder shall be
in writing and shall be deemed given if delivered personally or mailed by
prepaid registered or certified first class mail (return receipt requested) or
by facsimile, cable, telegram or telex addressed as follows:
(a) If to DGC, CNCAC, CNC, or CNB, to:
Deposit Guaranty Corp.
One Deposit Guaranty Plaza
210 East Capitol Street
P.0. Box 730
Jackson, Mississippi 39205
Attention: Arlen L. McDonald
Fax Number: (601) 354-8192
Copy to:
Watkins Ludlam & Stennis
633 North State Street (39202)
Post Office Box 427
Jackson, Mississippi 39205-0427
Attention: William S. Painter, Esq.
Fax Number: (601) 949-4804
(b) If to Louisiana Bank or LBO Bancorp, to:
LBO BANCORP, INC.
2002 N. 7th Street
West Monroe, Louisiana 71291
Attention: L. Michael Ashbrook
Fax Number: (318) 324-2050
Copy to:
Gordon, Arata, McCollam & Duplantis
201 St. Charles Avenue, 40th Floor
New Orleans, Louisiana 70170-4000
Attention: Jeanne P. Breckinridge
Fax Number: (504) 582-1121
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
9.03 Parties in Interest. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any
party hereto without the prior written consent of the other parties, and that
nothing in this Agreement is intended to confer, expressly or by implication,
upon any other person any rights or remedies under or by reason of this
Agreement.
<PAGE> 98
9.04 Complete Agreement. This Agreement, including the documents and
other writings referred to herein or delivered pursuant hereto, contains the
entire agreement and understanding of the parties with respect to its subject
matter. There are no restrictions, agreements, promises, warranties, covenants
or undertakings other than those expressly set forth herein or therein. This
Agreement supersedes all prior agreements and understandings between the
parties, both written and oral, with respect to its subject matter.
9.05 Counterparts. This Agreement may be executed in one or more
counterparts all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
9.06 Governing Law. This Agreement shall be governed by the laws of
the State of Louisiana, without giving effect to the principles of conflicts of
laws thereof.
9.07 Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.08 Nonsurvival of Representations, Warranties and Covenants. None
of the representations, warranties and covenants in this Agreement or in any
instrument delivered pursuant hereto shall survive the Effective Date of the
Mergers. Each party hereby agrees that its sole right and remedy with respect
to any breach of a representation, warranty or covenant by the other party
shall be not to close the transactions described herein if such breach results
in the nonsatisfaction of a condition set forth in Article VI hereof; provided,
however, that the foregoing shall not be deemed to be a waiver of any claim for
an intentional breach of a representation or warranty or for fraud except if
such breach was required by law or by any bank or bank holding company
regulatory authority, it being understood that a disclosure in any closing
certificate provided in accordance with subsections 6.02(a) or 6.03(a) hereof
concerning an inaccuracy of a representation or warranty shall not of itself be
deemed to be an intentional breach of such representation or warranty.
IN WITNESS WHEREOF, the Boards of Directors of DGC, CNCAC, CNC, CNB,
LBO Bancorp and Louisiana Bank have caused this Agreement to be executed by
their duly authorized officers, all as of the day and year first above written.
Attest: DEPOSIT GUARANTY CORP.
______________________________ By _________________________
Secretary Chairman and
Chief Executive Officer
Attest: CNC ACQUISITION
CORP
______________________________ By _________________________
Secretary President
Attest: COMMERCIAL NATIONAL
CORPORATION
______________________________ By _________________________
Secretary Chairman
<PAGE> 99
Attest: COMMERCIAL NATIONAL BANK
_____________________________ By ________________________
Secretary President
(Seal of Bank)
(EXECUTION BY LBO BANCORP, INC. AND LOUISIANA BANK ON NEXT PAGE)
<PAGE> 100
Attest: LBO BANCORP, INC.
______________________________ By ___________________
Secretary President
Attest: LOUISIANA BANK
______________________________ By ___________________
Secretary President
(Seal of Bank)
<PAGE> 101
SCHEDULE
TABLE OF CONTENTS
<TABLE>
<S> <C>
GENERAL COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SCHEDULE 3.02--CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SCHEDULE 3.03--INVESTMENTS; NO SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SCHEDULE 3.04--LOAN PORTFOLIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SCHEDULE 3.05--AUTHORITY; NO VIOLATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SCHEDULE 3.06--CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SCHEDULE 3.07--FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SCHEDULE 3.08--NO BROKERS' FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19-A
SCHEDULE 3.09--LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SCHEDULE 3.10--TITLE TO PROPERTIES; ENCUMBRANCES . . . . . . . . . . . . . . . . . . . . . . . . . 24
SCHEDULE 3.11--UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SCHEDULE 3.12--CERTAIN CHANGES OR EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SCHEDULE 3.13--LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SCHEDULE 3.14--TRADEMARKS; TRADE NAMES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SCHEDULE 3.15--COMPLIANCE WITH APPLICABLE LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SCHEDULE 3.17--INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SCHEDULE 3.18--POWERS OF ATTORNEYS; GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SCHEDULE 3.20--BENEFIT AND EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SCHEDULE 3.21--CONTRACTS AND COMMITMENTS; NO DEFAULT . . . . . . . . . . . . . . . . . . . . . . . 44
SCHEDULE 4.03--NO VIOLATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SCHEDULE 4.04--CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SCHEDULE 4.05--LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SCHEDULE 6.02(f)--CONTRACTS NOT TERMINABLE ON THIRTY DAYS
NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SCHEDULE 6.02(h)--NO MATERIAL ADVERSE CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SCHEDULE 6.03(g)--NO MATERIAL ADVERSE CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
INDEX OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
</TABLE>
<PAGE> 102
EXHIBIT A
JOINT AGREEMENT OF MERGER
OF
LBO BANCORP, INC.
WITH AND INTO
CNC ACQUISITION CORP
This Joint Agreement of Merger (this "Joint Agreement") is
dated as of the ______ day of August, 1994, between LBO Bancorp, Inc., a
Louisiana corporation ("LBO") and CNC Acquisition Corp, a Louisiana corporation
which, at the Closing Date, shall be the wholly-owned subsidiary of Commercial
National Corporation ("CNC") (CNC Acquisition Corp herein referred to as
"CNCAC") joined in by Deposit Guaranty Corp., a Mississippi corporation and the
parent company of CNC ("DGC"); and is entered into pursuant to the provisions
of Sections 111 et seq. of the Louisiana Business Corporation Law ("LBCL").
WHEREAS, the respective Boards of Directors of LBO, and DGC
and CNCAC (collectively, the "Corporations") deem it advisable that LBO be
merged with and into CNCAC (the "Merger"), as provided in this Joint Agreement
and in the Agreement and Plan of Merger dated August 8, 1994 (the "Plan"),
among DGC, CNC, CNCAC, LBO, Commercial National Bank, a national banking
association domiciled in Shreveport, Louisiana and a wholly-owned subsidiary of
CNC, and Louisiana Bank, a state banking association domiciled in West Monroe,
Louisiana and a wholly-owned subsidiary of LBO; and
WHEREAS, the respective Boards of Directors of the
Corporations wish to enter into this Joint Agreement and submit it to the
shareholders of LBO for approval in the manner required by law (approval by the
shareholders of CNCAC not being required by virtue of Section 112E of the LBCL)
and, subject to such approval and to such other approvals as may be required,
to effect the Merger, all in accordance with the provisions of this Joint
Agreement.
NOW THEREFORE, in consideration of the mutual benefits to be
derived from this Joint Agreement and the Merger, the parties hereto agree as
follows:
1. THE MERGER
In accordance with the applicable provisions of the LBCL, LBO
shall be merged with and into CNCAC; the separate existence of LBO shall cease;
and CNCAC shall be the corporation surviving the Merger.
2. EFFECTIVENESS OF THE MERGER
.1 Effective Time of the Merger. The Merger shall
become effective at the time (the "Effective Time") at which this Joint
Agreement, having been executed and acknowledged in the manner required by law,
is filed in the office of the Secretary of State of Louisiana.
.2 Effect of the Merger. At the Effective Time, (i) the
separate existence of LBO shall cease and LBO shall be merged with and into
CNCAC; (ii) CNCAC shall continue to possess all of the rights, privileges and
franchises possessed by it and shall, at the Effective Time, become vested with
and possess all rights, privileges and franchises possessed by LBO; (iii) CNCAC
shall be responsible for all of the liabilities and obligations of LBO in the
same manner as if CNCAC had itself incurred such liabilities or obligations,
and the Merger shall not affect or impair the rights of the creditors or of any
persons dealing with LBO; (iv) the Merger will not of itself cause a change,
alteration or amendment to the Articles of Incorporation or the By-Laws of
CNCAC; (v) the
<PAGE> 103
Merger will not of itself affect the tenure in office of any officer or
director of CNCAC and no such person will succeed to such positions solely by
virtue of the Merger; and (vi) the Merger shall, from and after the Effective
Time, have all the effects provided by applicable Louisiana law.
.3 Additional Actions. If, at any time after the
Effective Time, CNCAC shall consider or be advised that any further assignments
or assurances in law or any other acts are necessary or desirable (a) to vest,
perfect or confirm, of record or otherwise, in CNCAC, title to or the
possession of any property or right of LBO acquired or to be acquired by reason
of, or as a result of, the Merger, or (b) otherwise to carry out the purposes
of this Joint Agreement, LBO and its proper officers and directors shall be
deemed to have granted to CNCAC an irrevocable power of attorney to execute and
deliver all such proper deeds, assignments and assurances in law and to do all
acts necessary or proper to vest, perfect or confirm title to and possession of
such property or rights in CNCAC and otherwise to carry out the purposes of
this Joint Agreement; and the proper officers and directors of CNCAC are fully
authorized in the name of LBO to take any and all such action.
3. METHOD OF CARRYING MERGER INTO EFFECT
This Joint Agreement shall be submitted to the shareholders of
LBO for their approval. If such approval is given, then the fact of such
approval shall be certified hereon by the Secretary of LBO. Approval of this
Joint Agreement by the shareholders of CNCAC is not required by virtue of
Section 112E of the LBCL, and that fact shall be certified hereon by the
Secretary of CNCAC. This Joint Agreement, so approved and certified, shall, as
soon as is practicable, be signed and acknowledged by the President or Vice
President of each of LBO and CNCAC. As soon as may be practicable thereafter,
this Joint Agreement, so certified, signed and acknowledged, shall be delivered
to the Secretary of State of Louisiana for filing in the manner required by law
and shall be effective at the Effective Time; and thereafter, as soon as
practicable, a copy of the Certificate of Merger issued by the Secretary of
State of Louisiana, and certified by him to be a true copy, shall be filed for
record in the Office of the Recorder of Mortgages of the parishes in which LBO
and CNCAC have their respective registered offices and in the Office of the
Recorder of Conveyances of each parish in which LBO has immovable property.
4. CONVERSION OF SHARES
.1 Conversion of LBO Shares. Each share of common
stock, $5.00 par value, of LBO (the "LBO Common Stock") issued and outstanding
immediately prior to the Effective Time other than shares of LBO Common Stock
owned by stockholders who, pursuant to the LBCL, perfect dissenters' rights
("Dissenting Shares"), shall, by virtue of this Agreement and without any
action on the part of the holder thereof, be converted into and exchangeable
for 1.7630 shares of common stock, no par value, of DGC (the "DGC Common
Stock"), subject to adjustment as provided herein and, in respect of fractional
shares, subject to Section 4.2(e) hereof. If prior to the Effective Time DGC
should split or combine DGC Common Stock, or pay a dividend or other
distribution in DGC Common Stock, then the 1.7630 exchange ratio shall be
appropriately adjusted to reflect such split, combination, dividend or
distribution.
.2 Exchange of Shares. (a) As soon as practicable
after the Effective Time, Deposit Guaranty National Bank, acting as exchange
agent (the "Exchange Agent"), shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented issued and outstanding shares of LBO Common Stock (the
"Certificates"), a form letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent) and
instructions for use in effecting the
<PAGE> 104
surrender of the Certificates in exchange for Certificates representing DGC
Common Stock. Upon surrender of a Certificate for exchange and cancellation to
the Exchange Agent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange
therefor a Certificate representing that number of shares of DGC Common Stock
to which such holder of LBO Common Stock shall have become entitled pursuant to
the provisions hereof, and the Certificate so surrendered shall forthwith be
cancelled. Lost Certificates shall be treated in accordance with the existing
procedures of LBO.
(b) No dividends or other distributions declared after
the Effective Time with respect to DGC Common Stock and payable to the holders
of record thereof after the Effective Time shall be paid to the holder of any
unsurrendered Certificate until the holder thereof shall surrender such
Certificate. Subject to the effect, if any, of applicable law, after the
subsequent surrender and exchange of a Certificate, the record holder thereof
shall be entitled to receive any such dividends or other distributions, without
any interest thereon, which theretofore had become payable with respect to
shares of DGC Common Stock represented by such Certificate.
(c) If any Certificate representing shares of DGC Common
Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the Certificate so surrendered shall be properly endorsed
(or accompanied by an appropriate instrument of transfer) and otherwise in
proper form for transfer, and that the person requesting such exchange shall
pay to the Exchange Agent in advance any transfer or other taxes required by
reason of the issuance of a Certificate representing shares of DGC Common Stock
in any name other than that of the registered holder of the Certificate
surrendered, or required for any other reason, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) After the Effective Time there shall be no transfers
on the stock transfer books of LBO of the shares of LBO Common Stock which are
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates representing such shares are presented for transfer to the
Exchange Agent, they shall be cancelled and exchanged for Certificates
representing shares of DGC Common Stock as provided herein.
(e) No Certificates or scrip representing fractional
shares of DGC Common Stock shall be issued upon the surrender for exchange of
such Certificates, no dividend or distribution with respect to DGC Common Stock
shall be payable on or with respect to any fractional share, and such
fractional share interests shall not entitle the owner thereof to vote or to
any other rights of a shareholder of DGC. In lieu of any such fractional
share, DGC shall pay to each former stockholder of LBO who otherwise would be
entitled to receive a fractional share of DGC Common Stock an amount in cash
determined by multiplying (i) the closing sale price of a share of DGC Common
Stock on the date immediately proceeding the Effective Time as quoted on the
National Association of Securities Dealers Automated Quotation System, by (ii)
the fraction of a share of DGC Common Stock to which such holder would
otherwise be entitled.
.3 DGC to Make Shares Available. DGC shall make
available a sufficient number of shares of DGC Common Stock for conversion and
exchange in accordance with Sections 4.1 and 4.2 hereof, by transferring such
shares to the Exchange Agent for the benefit of the stockholders of LBO.
.4 Shares of CNCAC. The shares of capital stock of
CNCAC outstanding immediately prior to the Effective Time shall not be changed
or converted by virtue of the Merger.
5. MISCELLANEOUS
<PAGE> 105
.1 Tax Consequences. It is intended that the Merger
shall constitute a reorganization within the meaning of Section 368(a)(1)(A) of
the Internal Revenue Code of 1986, as amended (the "Code"), and that this Joint
Agreement shall constitute a "plan of reorganization" within the meaning of
Section 368 of the Code.
.2 Termination. Prior to the Effective Time, this Joint
Agreement may be terminated, and the Merger abandoned, as set forth in the
Plan.
.3 Headings. The descriptive headings of the sections
of this Joint Agreement are inserted for convenience only and do not constitute
a part hereof for any other purpose.
.4 Modifications, Amendments and Waivers. At any time
prior to the Effective Time (notwithstanding any shareholder approval that may
have already been given), the parties hereto may, to the extent permitted by
and as provided in the Plan, modify, amend or supplement any term or provision
of this Joint Agreement.
.5 Governing Law. This Joint Agreement shall be
governed by the laws of the State of Louisiana (regardless of the laws that
might be applicable under principles of conflicts of law) as to all matters,
including, but not limited to, matters of validity, construction, effect and
performance.
IN WITNESS WHEREOF, the Boards of Directors of DGC, CNC and
LBO have caused this Agreement to be executed by their duly authorized
officers, all as of the day and year first above written.
Attest: DEPOSIT GUARANTY CORP.
_________________________ By:________________________________
Secretary Chairman and
Chief Executive Officer
Attest: CNC ACQUISITION CORP
_________________________ By:________________________________
Secretary President
(EXECUTION BY LBO BANCORP, INC. ON NEXT PAGE
REST OF THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 106
Attest: LBO BANCORP, INC.
________________________ By:________________________________
Secretary President
<PAGE> 107
CERTIFICATE OF SECRETARY OF
LBO BANCORP, INC.
I hereby certify that I am the duly elected Secretary of LBO
Bancorp, Inc., a Louisiana corporation, presently serving in such capacity and
that the foregoing Agreement was, in the manner required by law, duly approved,
without alteration or amendment, by the voting power present of LBO Bancorp,
Inc.
Certificate dated _______________, 1994.
___________________________________
________________________, Secretary
CERTIFICATE OF SECRETARY OF
CNC ACQUISITION CORP
I hereby certify that I am the duly elected Secretary of CNC
Acquisition Corp, a Louisiana corporation, presently serving in such capacity
and that the foregoing Agreement was adopted pursuant to La. R.S. 12:112E and
that, as no shares of CNC Acquisition Corp have been or will be issued or
delivered under this Agreement, La. R.S. 12:112E is applicable to this
Agreement.
Certificate dated _______________, 1994.
___________________________________
________________________, Secretary
<PAGE> 108
ACKNOWLEDGMENT AS TO
DEPOSIT GUARANTY CORP.
STATE OF MISSISSIPPI
COUNTY OF _______________
BEFORE ME, the undersigned authority, personally came and
appeared E. B. Robinson, Jr., who, being duly sworn, declared and acknowledged
before me that he is the Chairman and Chief Executive Officer of Deposit
Guaranty Corp. and that in such capacity he was duly authorized to and did
execute the foregoing Agreement on behalf of such corporation, for the purposes
therein expressed and as his and such corporation's free act and deed.
___________________________________
Appearer
Sworn to and subscribed before me
this _____ day of ____________,
1994.
___________________________________
Notary Public
<PAGE> 109
ACKNOWLEDGMENT AS TO
CNC ACQUISITION CORP
STATE OF LOUISIANA
PARISH OF _______________
BEFORE ME, the undersigned authority, personally came and
appeared _______________, who, being duly sworn, declared and acknowledged
before me that he is the President of CNC Acquisition Corp and that in such
capacity he was duly authorized to and did execute the foregoing Agreement on
behalf of such corporation, for the purposes therein expressed and as his and
such corporation's free act and deed.
___________________________________
Appearer
Sworn to and subscribed before me
this _____ day of ____________,
1994.
___________________________________
Notary Public
<PAGE> 110
ACKNOWLEDGMENT AS TO
LBO BANCORP, INC.
STATE OF LOUISIANA
PARISH OF OUACHITA
BEFORE ME, the undersigned authority, personally came and
appeared L. Michael Ashbrook, who, being duly sworn, declared and acknowledged
before me that he is the President of LBO Bancorp, Inc. and that in such
capacity he was duly authorized to and did execute the foregoing Agreement on
behalf of such corporation, for the purposes therein expressed and as his and
such corporation's free act and deed.
___________________________________
Appearer
Sworn to and subscribed before me
this _____ day of ____________,
1994.
___________________________________
Notary Public
<PAGE> 111
EXHIBIT B
AGREEMENT OF MERGER
OF
LOUISIANA BANK
INTO
COMMERCIAL NATIONAL BANK
This Agreement of Merger (this "Agreement") is made and
entered into as of this ______ day of August, 1994, between Louisiana Bank, a
Louisiana state bank domiciled at West Monroe, Louisiana ("Bank"), and
Commercial National Bank, a national banking association domiciled at
Shreveport, Louisiana ("Commercial" or the "Receiving Association").
WHEREAS, the respective Boards of Directors of Bank and
Commercial (collectively called the "Merging Associations") deem it advisable
that Bank be merged with and into Commercial (the "Bank Merger"), as provided
in this Agreement and in the Agreement and Plan of Merger dated August 8, 1994
(the "Plan"), among the Merging Associations, Deposit Guaranty Corp., a
Mississippi corporation ("DGC"), its wholly-owned subsidiary Commercial
National Corporation ("CNC"), CNC Acquisition Corp ("CNCAC") and LBO Bancorp,
Inc., a Louisiana corporation ("LBO") of which Bank is a wholly-owned
subsidiary, which sets forth, among other things, certain representations,
warranties, covenants and conditions relating to the Bank Merger: and
WHEREAS, the respective Boards of Directors of the Merging
Associations wish to enter into this Agreement and submit it to the respective
shareholders of the Merging Associations for approval in the manner required by
law and, subject to said approval and to approval by the Comptroller of the
Currency of the United States (the "Comptroller") being duly given and to such
other approvals as may be required by law, to effect the Bank Merger, all in
accordance with the provisions of this Agreement.
NOW THEREFORE, in consideration of the mutual benefits to be
derived from this Agreement and the Bank Merger, the parties hereto agree as
follows:
1. The Bank Merger. At the Effective Time (as defined
in Section 2 hereof), Bank shall be merged with and into Commercial under the
Articles of Association of Commercial, as amended, existing under Charter No.
13648, pursuant to the provisions of, and with the effect provided in, 12
U.S.C. Section 215a and La. R.S. 6:351 et seq. At the Effective Time,
Commercial, the Receiving Association, shall continue to be a national banking
association, and its business shall continue to be conducted at its main office
in Shreveport, Louisiana, and at its legally established branches (including,
without limitation, the legally established offices from which Bank conducted
business immediately prior to the Effective Time). The Articles of Association
of Commercial shall not be altered or amended by virtue of the Bank Merger, and
the incumbency of the directors and officers of Commercial shall not be
affected by the Bank Merger nor shall any person succeed to such positions by
virtue of the Bank Merger other than L. Michael Ashbrook, who shall become a
director of Commercial upon consummation of the Bank Merger.
2. Effective Time. Commercial shall file the Bank
Merger Agreement with the Louisiana Commissioner of Financial Institutions (the
"Commissioner") pursuant to La. R.S. 6:352 and make appropriate filings with
the Comptroller, and the Bank Merger shall become effective at the time (the
"Effective Time") specified in the Certificate of Merger by the Commissioner,
or in the certificate or other written record issued by the Comptroller,
whichever date is later.
<PAGE> 112
3. Cancellation of Capital Stock of Bank. At the
Effective Time, by virtue of the Bank Merger, all shares of the capital stock
of Bank shall be cancelled and no cash, securities or other property shall be
issued in the Bank Merger in respect thereof.
4. Capital Structure of the Receiving Association. As
of June 30, 1994, CNB had a capital of $14,000,000 divided into 1,400,000
shares of common stock authorized, each of $10 par value ("CNB Common Stock"),
surplus of $34,000,000 and undivided profits, including capital reserves, of
$51,569,000. As of June 30, 1994, Louisiana Bank had a capital of $1,300,000
divided into 260,000 shares of common stock authorized, each of $5.00 par value
("Louisiana Bank Common Stock"), surplus of $1,750,000 and undivided profits,
including capital reserves, of $4,443,000.
If accounted for under the pooling method, at the Effective Time, the
amount of capital of the Receiving Association shall be $14,000,000 divided
into 1,400,000 shares of common stock, each of the par value of $10.00, and at
the Effective Time, the Receiving Association shall have a surplus of
$37,050,000 and undivided profits, including capital reserves, which when
combined with capital and surplus will be equal to the combined capital
structures of CNB and Louisiana Bank, as set forth above, adjusted, however,
for the results of operations between June 30, 1994 and the Effective Time.
If accounted for under the purchase method, at the Effective Time, the
amount of capital of the Receiving Association shall be $14,000,000 divided
into 1,400,000 shares of common stock, each of the par value of $10.00, and at
the Effective Time, the Receiving Association shall have a surplus of
$34,000,000 and undivided profits, including capital reserves, which when
combined with capital and surplus will be equal to the capital structure of
CNB, as set forth above, adjusted, however, for the results of operations of
CNB between June 30, 1994 and the Effective Time.
5. Assets and Liabilities of the Merging Associations.
At the Effective Time, the corporate existence of each of the Merging
Associations shall be merged into and continued in Commercial, the Receiving
Association, and such Receiving Association shall be deemed to be the same
corporation as each bank or banking association participating in the Bank
Merger. All rights, franchises, and interests of the individual Merging
Associations in and to every type of property (real, personal and mixed) and
choses in action shall be transferred to and vested in the Receiving
Association by virtue of the Bank Merger without any deed or other transfer.
The Receiving Association, upon the Bank Merger and without any order or other
action on the part of any court or otherwise, shall hold and enjoy all rights
of property, franchises, and interests, including appointments, designations,
and nominations, and all other rights and interests as trustee, executor,
administrator, registrar of stocks and bonds, guardian of estates, and in every
other fiduciary capacity, in the same manner and to the same extent as such
rights, franchises, and interests were held or enjoyed by any one of the
Merging Associations at the time of the Bank Merger, subject to the conditions
specified in 12 U.S.C. Section 215a(f). The Receiving Association shall, from
and after the Effective Time, be liable for all liabilities of the Merging
Associations.
6. Shareholder Approval; Conditions; Filing. This
Agreement shall be submitted to the shareholders of the Merging Associations
for ratification and confirmation in accordance with applicable provisions of
law. The obligations of the Merging Associations to effect the Bank Merger
shall be subject to all the terms and conditions of the Plan. If the
shareholders of the Merging Associations ratify and confirm this Agreement,
then the fact of such approval shall be certified hereon by the Secretary of
each of the Merging Associations and this Agreement, so approved and certified,
shall, as soon as is practicable, be signed and acknowledged by the President
or Vice-President of each of them.
<PAGE> 113
As soon as may be practicable thereafter, this Agreement, so certified, signed
and acknowledged, shall be delivered to the Commissioner and to the Comptroller
for filing in the manner required by law.
7. Tax Consequences. It is intended that the Bank
Merger shall constitute a tax-free reorganization pursuant to Section
368(a)(1)(A) of the Internal Revenue Code ("Code"), and that the transactions
made the subject matter of the Plan shall constitute a "plan of reorganization"
for purposes of the rules and regulations governing Code Section 368.
8. Miscellaneous. This Agreement may, at any time prior
to the Effective Time, be amended or terminated as provided in the Plan. This
Agreement may be executed in counterparts, each of which shall be deemed to
constitute an original. This Agreement shall be governed and interpreted in
accordance with federal law and the applicable laws of the State of Louisiana.
This Agreement may be assigned only to the extent that the party seeking to
assign it is permitted to assign its interests in the Plan, and subject to the
same effect as any such assignment. The headings in this Agreement are
inserted for convenience only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by a
majority of the directors of each of the Merging Associations, as of the day
and year first above written.
(INTENTIONALLY LEFT BLANK)
<PAGE> 114
FOR THE BOARD OF DIRECTORS OF
LOUISIANA BANK
__________________________ ______________________________
__________________________ ______________________________
__________________________ ______________________________
__________________________ ______________________________
__________________________
<PAGE> 115
FOR THE BOARD OF DIRECTORS OF
COMMERCIAL NATIONAL BANK
__________________________ ______________________________
__________________________ ______________________________
__________________________ ______________________________
__________________________ ______________________________
__________________________ ______________________________
__________________________ ______________________________
__________________________ ______________________________
<PAGE> 116
CERTIFICATE OF SECRETARY OF
LOUISIANA BANK
(a Louisiana state banking organization)
I hereby certify that I am the duly elected Secretary of
Louisiana Bank, a Louisiana state bank, presently serving in such capacity and
that the foregoing Agreement was, in the manner required by law, duly approved,
without alteration or amendment, by the sole shareholder of Louisiana Bank.
Certificate dated _______________, 1994.
___________________________________
________________________, Secretary
<PAGE> 117
CERTIFICATE OF SECRETARY OF
COMMERCIAL NATIONAL BANK
(a national banking association)
I hereby certify that I am the duly elected Secretary of
Commercial National Bank, a national banking association, presently serving in
such capacity and that the foregoing Agreement was, in the manner required by
law, duly approved, without alteration or amendment, by the sole shareholder of
Commercial National Bank.
Certificate dated _______________, 1994.
___________________________________
________________________, Secretary
<PAGE> 118
EXECUTION BY BANKS
Considering the approval of this Agreement by the shareholders
of the parties hereto, as certified above, this Agreement is executed by such
parties, acting through their respective President, this _____ day of
_______________, 1994.
LOUISIANA BANK
By:________________________________
Clyde R. White
President
Attest:
_________________________
Secretary
(EXECUTION BY COMMERCIAL NATIONAL BANK ON NEXT PAGE
REST OF THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 119
COMMERCIAL NATIONAL BANK
By:________________________________
Steven C. Walker
President
Attest:
_________________________
Secretary
<PAGE> 120
ACKNOWLEDGMENT AS TO
LOUISIANA BANK
STATE OF LOUISIANA
PARISH OF OUACHITA
BEFORE ME, the undersigned authority, personally came and
appeared Clyde R. White, who, being duly sworn, declared and acknowledged
before me that he is the President of Louisiana Bank and that in such capacity
he was duly authorized to and did execute the foregoing Agreement on behalf of
such bank, for the purposes therein expressed and as his and such bank's free
act and deed.
___________________________________
Appearer
Sworn to and subscribed before me
this _____ day of ____________,
1994.
___________________________________
Notary Public
<PAGE> 121
ACKNOWLEDGMENT AS TO
COMMERCIAL NATIONAL BANK
STATE OF LOUISIANA
PARISH OF _______________
BEFORE ME, the undersigned authority, personally came and
appeared Steven C. Walker, who, being duly sworn, declared and acknowledged
before me that he is the President of Commercial National Bank and that in such
capacity he was duly authorized to and did execute the foregoing Agreement on
behalf of such bank, for the purposes therein expressed and as his and such
bank's free act and deed.
___________________________________
Appearer
Sworn to and subscribed before me
this _____ day of ____________,
1994.
___________________________________
Notary Public
<PAGE> 122
EXHIBIT B
October 5, 1994
Board of Directors
LBO Bancorp, Inc.
2002 N. 7th Street
West Monroe, Louisiana 71291-4418
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of LBO Bancorp, Inc. ("LBO Bancorp") of the proposed
merger (the "Merger") of LBO Bancorp into CNC Acquisition Corp, a wholly-owned
subsidiary of Deposit Guaranty Corp. ("Deposit Guaranty") of Jackson,
Mississippi. Pursuant to the terms of the Agreement and Plan of Merger ("the
Merger Agreement") and as a result of the Merger, each outstanding share of LBO
Bancorp Common Stock shall be converted into the right to receive 1.763 shares
of Deposit Guaranty Common Stock.
National Capital Corporation has extensive experience in investment analysis
and the valuation of bank and bank holding company securities in connection
with acquisitions and mergers. Neither National Capital Corporation, nor any
of its officers, directors, or employees has an interest in the common stock of
LBO Bancorp. National Capital Corporation has performed no services for LBO
Bancorp at any time prior to the present. National Capital Corporation is
currently acting as financial advisor to the Board of Directors of LBO Bancorp
in connection with the Merger and will receive a fee for those services.
National Capital Corporation will also receive a fee for rendering this
opinion.
In arriving at our opinion, we have: (1) discussed with officers of Deposit
Guaranty and LBO Bancorp their businesses, reserves, earnings, properties and
prospects; (2) reviewed certain public financial information and other data
with respect to both Deposit Guaranty and LBO Bancorp including certain
financial forecasts, consolidated financial statements for recent years and
interim periods through June 30, 1994, as well as other relevant financial and
operating data furnished by LBO Bancorp to National Capital Corporation; (3)
reviewed the Merger Agreement; (4) reviewed certain historical market prices
and trading volumes of Deposit Guaranty Common Stock; (5) analyzed market
volatility studies of Deposit Guaranty Common Stock; (6) made inquiries
regarding and discussed the Merger Agreement and other matters related thereto
with LBO Bancorp s counsel; and (7) performed such other analyses and
examinations as National Capital Corporation deemed appropriate.
In connection with our review, we have not independently verified any of the
foregoing information, and have relied on its being complete and accurate in
all material respects. We have assumed that the financial information and
forecasts reviewed by us were prepared using the best available judgments of
Deposit Guaranty and LBO Bancorp s management regarding the projected financial
performance of Deposit Guaranty and LBO Bancorp. In addition, we have not made
an independent evaluation or appraisal of any of the assets of Deposit Guaranty
or LBO Bancorp, nor have we examined any individual loan files, or been
furnished with any such appraisals or files.
LBO Bancorp is hereby authorized to reproduce this opinion in full in any
disclosure document or proxy statement regarding the merger that is: (1)
filed under the Securities Act of 1933, (2) filed under any state
<PAGE> 123
blue sky law, or (3) distributed to LBO Bancorp s shareholders. Otherwise it
is understood that this letter is for the information of the Board of Directors
of LBO Bancorp only and is not to be quoted or referred to, in whole or in
part, in any document used in connection with the offering or sale of
securities, nor shall this letter be used for any other purpose, without
National Capital Corporation s prior written consent. In reaching our opinion
we took into consideration the financial benefits of the proposed transaction
to all LBO Bancorp s shareholders. It is our opinion that the proposed
transaction is fair to LBO Bancorp and all of LBO Bancorp s shareholders, based
on all factors that we consider relevant.
Very Truly Yours,
NATIONAL CAPITAL CORPORATION
<PAGE> 124
EXHIBIT C
La. R.S. 12:131 (1993)
Section 131. Rights of a shareholder dissenting from certain corporate
actions
A. Except as provided in subsection B of this section, if a
corporation has, by vote of its shareholders, authorized a sale, lease or
exchange of all of its assets, or has, by vote of its shareholders, become a
party to a merger or consolidation, then, unless such authorization or action
shall have been given or approved by at least eighty percent of the total
voting power, a shareholder who voted against such corporate action shall have
the right to dissent. If a corporation has become a party to a merger pursuant
to R.S. 12:112(H), the shareholders of any subsidiaries party to the merger
shall have the right to dissent without regard to the proportion of the voting
power which approved the merger and despite the fact that the merger was not
approved by vote of the shareholders of any of the corporations involved.
B. The right to dissent provided by this Section shall not exist
in the case of:
(1) A sale pursuant to an order of a court having
jurisdiction in the premises.
(2) A sale for cash on terms requiring distribution of
all or substantially all of the net proceeds to the shareholders in accordance
with their respective interests within one year after the date of the sale.
(3) Shareholders holding shares of any class of stock
which, at the record date fixed to determine shareholders entitled to receive
notice of and to vote at the meeting of shareholders at which a merger or
consolidation was acted on, were listed on a national securities exchange, or
were designated as a national market system security on an inter-dealer
quotation system by the National Association of Securities Dealers, unless the
articles of the corporation issuing such stock provide otherwise or the shares
of such shareholders were not converted by the merger or consolidation solely
into shares of the surviving or new corporation.
C. Except as provided in the last sentence of this subsection,
any shareholder electing to exercise such right of dissent shall file with the
corporation, prior to or at the meeting of shareholders at which such proposed
corporate action is submitted to a vote, a written objection to such proposed
corporate action, and shall vote his shares against such action. If such
proposed corporate action be taken by the required vote, but by less than
eighty percent of the total voting power, and the merger, consolidation or
sale, lease or exchange of assets authorized thereby be effected, the
corporation shall promptly thereafter give written notice thereof, by
registered mail, to each shareholder who filed such written objection to, and
voted his shares against, such action, at such shareholder's last address on
the corporation's records. Each such shareholder may, within twenty days after
the mailing of such notice to him, but not thereafter, file with the
corporation a demand in writing for the fair cash value of his shares as of the
day before such vote was taken; provided that he state in such demand the value
demanded, and a post office address to which the reply of the corporation may
be sent, and at the same time deposit in escrow in a chartered bank or trust
company located in the parish of the registered office of the corporation, the
certificates representing his shares, duly endorsed and transferred to the
corporation upon the sole condition that said certificates shall be delivered
to the corporation upon payment of the value of the shares determined in
accordance with the provisions of this section. With his demand the
shareholder shall deliver to the corporation, the written acknowledgment of
such bank or trust company that it so holds his certificates of stock. Unless
the objection, demand and acknowledgment aforesaid
<PAGE> 125
be made and delivered by the shareholder within the period above limited, he
shall conclusively be presumed to have acquiesced in the corporate action
proposed or taken. In the case of a merger pursuant to R.S. 12:112(H), the
dissenting shareholder need not file an objection with the corporation nor
vote against the merger, but need only file with the corporation, within twenty
days after a copy of the merger certificate was mailed to him, a demand in
writing for the cash value of his shares as of the day before the certificate
was filed with the secretary of state, state in such demand the value demanded
and a post office address to which the corporation's reply may be sent, deposit
the certificates representing his shares in escrow as hereinabove provided, and
deliver to the corporation with his demand the acknowledgment of the escrow
bank or trust company as hereinabove prescribed.
D. If the corporation does not agree to the value so stated and
demanded, or does not agree that a payment is due, it shall, within twenty days
after receipt of such demand and acknowledgment, notify in writing the
shareholder, at the designated post office address, of its disagreement, and
shall state in such notice the value it will agree to pay if any payment should
be held to be due; otherwise it shall be liable for, and shall pay to the
dissatisfied shareholder, the value demanded by him for his shares.
E. In case of disagreement as to such fair cash value, or as to
whether any payment is due, after compliance by the parties with the provisions
of subsections C and D of this section, the dissatisfied shareholder, within
sixty days after receipt of notice in writing of the corporation's
disagreement, but not thereafter, may file suit against the corporation, or the
merged or consolidated corporation, as the case may be, in the district court
of the parish in which the corporation or the merged or consolidated
corporation, as the case may be, has its registered office, praying the court
to fix and decree the fair cash value of the dissatisfied shareholder's shares
as of the day before such corporate action complained of was taken, and the
court shall, on such evidence as may be adduced in relation thereto, determine
summarily whether any payment is due, and, if so, such cash value, and render
judgment accordingly. Any shareholder entitled to file such suit may, within
such sixty-day period but not thereafter, intervene as a plaintiff in such suit
filed by another shareholder, and recover therein judgment against the
corporation for the fair cash value of his shares. No order or decree shall be
made by the court staying the proposed corporate action, and any such corporate
action may be carried to completion notwithstanding any such suit. Failure of
the shareholder to bring suit, or to intervene in such a suit, within sixty
days after receipt of notice of disagreement by the corporation shall
conclusively bind the shareholder (1) by the corporation's statement that no
payment is due, or (2) if the corporation does not contend that no payment is
due, to accept the value of his shares as fixed by the corporation in its
notice of disagreement.
F. When the fair value of the shares has been agreed upon between
the shareholder and the corporation, or when the corporation has become liable
for the value demanded by the shareholder because of failure to give notice of
disagreement and of the value it will pay, or when the shareholder has become
bound to accept the value the corporation agrees is due because of his failure
to bring suit within sixty days after receipt of notice of the corporation's
disagreement, the action of the shareholder to recover such value must be
brought within five years from the date the value was agreed upon, or the
liability of the corporation became fixed.
G. If the corporation or the merged or consolidated corporation,
as the case may be, shall, in its notice of disagreement, have offered to pay
to the dissatisfied shareholder on demand an amount in cash deemed by it to be
the fair cash value of his shares, and if, on the institution of a suit by the
dissatisfied shareholder claiming an amount in excess of the amount so offered,
the corporation, or the merged or consolidated corporation, as the case may be,
shall deposit in the registry of the court, there to remain until the final
determination of the cause, the amount so offered, then, if the amount finally
awarded such shareholder,
<PAGE> 126
exclusive of interest and costs, be more than the amount offered and deposited
as aforesaid, the costs of the proceeding shall be taxed against the
corporation, or the merged or consolidated corporation, as the case may be;
otherwise the costs of the proceeding shall be taxed against such shareholder.
H. Upon filing a demand for the value of his shares, the
shareholder shall cease to have any of the rights of a shareholder except the
rights accorded by this section. Such a demand may be withdrawn by the
shareholder at any time before the corporation gives notice of disagreement, as
provided in subsection D of this section. After such notice of disagreement is
given, withdrawal of a notice of election shall require the written consent of
the corporation. If a notice of election is withdrawn, or the proposed
corporate action is abandoned or rescinded, or a court shall determine that the
shareholder is not entitled to receive payment for his shares, or the
shareholder shall otherwise lose his dissenter's rights, he shall not have the
right to receive payment for his shares, his share certificates shall be
returned to him (and, on his request, new certificates shall be issued to him
in exchange for the old ones endorsed to the corporation), and he shall be
reinstated to all his rights as a shareholder as of the filing of his demand
for value, including any intervening preemptive rights, and the right to
payment of any intervening dividend or other distribution, or, if any such
rights have expired or any such dividend or distribution other than in cash has
been completed, in lieu thereof, at the election of the corporation, the fair
value thereof in cash as determined by the board as of the time of such
expiration or completion, but without prejudice otherwise to any corporate
proceedings that may have been taken in the interim.
<PAGE> 127
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is incorporated under the laws of Mississippi. Subarticle
E of Article 8 of the Mississippi Business Corporation Act prescribes the
conditions under which indemnification may be obtained by a present or former
director or officer of the Company who incurs expenses or liability as a
consequence of matters arising out of his activities as a director or officer.
Article Nine of the Company's Articles of Incorporation also provides
for indemnification of officers and directors under certain circumstances. The
Company has purchased a liability policy which, subject to any limitations set
forth in the policy, indemnifies the Company's directors and officers for
damages that they become legally obligated to pay as a result of any negligent
act, error or omission committed by such person in his capacity as an officer
or director.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
ITEM 21. EXHIBITS
The following exhibits are furnished (or incorporated by reference) as
a part of this Registration Statement:
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
*2 Agreement and Plan of Merger dated as of
August 8, 1994 included as Exhibit A to the
Proxy Statement/Prospectus contained herein.
*5 Opinion of Watkins Ludlam & Stennis regarding
legality of common stock registered hereby.
8 Opinion of Watkins Ludlam & Stennis regarding
tax matters. (to be filed by amendment)
*11 Statement regarding computation of per share
earnings
</TABLE>
<PAGE> 128
<TABLE>
<S> <C>
*23(a) Consent of KPMG Peat Marwick, independent
auditors
*23(b) Consent of Donald, Tucker and Betts,
independent auditors
*23(c) Consent of Watkins Ludlam & Stennis is
contained in their opinion filed as Exhibit 5
to this Registration Statement
*23(d) Consent of National Capital Corporation is
contained in their opinion included as
Exhibit B to the Proxy Statement/Prospectus
contained herein
*24 Power of attorney included as part of
signature page
</TABLE>
*Previously filed.
ITEM 22. UNDERTAKINGS
(1) The Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(2) The Registrant hereby undertakes that every prospectus (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Act and issued in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post- effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) The Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(4) The Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(5) The Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
<PAGE> 129
(6) Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
<PAGE> 130
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Deposit
Guaranty has duly caused this Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Jackson, State of Mississippi on this the 10th day of November, 1994.
DEPOSIT GUARANTY CORP.
BY: /s/ E. B. ROBINSON, JR.
E. B. Robinson, Jr.
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to Registration Statement has been signed by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ E. B. ROBINSON, JR. Chairman of the Board November 10, 1994
E. B. Robinson, Jr. and Director (Principal
Executive Officer)
*Howard L. McMillan, Jr. President and Director November 10, 1994
Howard L. McMillan, Jr.
</TABLE>
<PAGE> 131
<TABLE>
<S> <C> <C>
*ARLEN L. MCDONALD Executive Vice President November 10, 1994
Arlen L. McDonald (Principal Financial
Officer)
*STEPHEN E. BARKER Controller (Principal November 10, 1994
Stephen E. Barker Accounting Officer)
*CHARLES L. IRBY Director November 10, 1994
Charles L. Irby
*RICHARD D. MCRAE, JR. Director November 10, 1994
Richard D. McRae, Jr.
*W. R. NEWMAN, III Director November 10, 1994
W. R. Newman, III
*JOHN N. PALMER Director November 10, 1994
John N. Palmer
*J. KELLY WILLIAMS Director November 10, 1994
J. Kelley Williams
*By:
------------------
E.B. Robinson, Jr.
Attorney-in-fact
</TABLE>
<PAGE> 132
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
8 Tax opinion
</TABLE>
<PAGE> 1
FORM OF FEDERAL INCOME TAX OPINION
November 11, 1994
<TABLE>
<S> <C>
Board of Directors Board of Directors
Deposit Guaranty Corp. Commercial National Bank
One Deposit Guaranty Plaza 333 Texas Street
210 East Capitol Street Shreveport, Louisiana 71152
Post Office Box 730
Jackson, Mississippi 39205-0730
Board of Directors Board of Directors
CNC Acquisition Corp LBO Bancorp, Inc.
c/o One Deposit Guaranty Plaza 2002 N. 7th Street
210 East Capitol Street West Monroe, Louisiana 71291
Post Office Box 730
Jackson, Mississippi 39205-0730
Board of Directors Board of Directors
Commercial National Corporation Louisiana Bank
333 Texas Street 2002 N. 7th Street
Shreveport, Louisiana 71152 West Monroe, Louisiana 71291
</TABLE>
RE: THE FEDERAL INCOME TAX CONSEQUENCES OF CERTAIN MATTERS ARISING
UNDER THE CORPORATE REORGANIZATION PROVISIONS OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED
Gentlemen:
You have requested our opinion regarding the federal income tax
consequences of the proposed merger of LBO Bancorp, Inc. ("LBO Bancorp") with
and into CNC Acquisition Corp ("CNCAC"), immediately followed by the merger of
Louisiana Bank ("Louisiana Bank") with and into Commercial National Bank
("CNB"). The merger of LBO Bancorp with and into CNCAC is hereinafter referred
to as the "Holding Company Merger." The merger of Louisiana Bank with and into
CNB is hereinafter referred to as the "Bank Merger." Both mergers are
sometimes hereinafter collectively referred to as the "Mergers," and each
merger is more fully described herein. Unless
<PAGE> 2
Board of Directors
DGC, CNCAC, CNC, LBO Bancorp, Louisiana Bank, CNB
November 10, 1994
Page 2
otherwise noted, the capitalized terms herein shall have the same meaning
ascribed to such terms in that certain Agreement and Plan of Merger by and
among you, dated as of August 8, 1994 (the "Merger Agreement"). This opinion
is rendered in satisfaction of the closing condition described in section
6.01(c) of the Merger Agreement.
We have examined and are familiar with the Merger Agreement, the Proxy
Statement/Prospectus of DGC and LBO Bancorp dated November 14, 1994 regarding
the proposed transactions, certain financial statements of the parties to the
proposed Mergers, and such other documents as we have deemed sufficient to
enable us to express our informed opinion. In rendering this opinion we have
relied not only on such documents but also on the representations and
statements of the parties to the proposed Mergers, some of which are stated in
the Certificate dated November __, 1994, attached hereto as Exhibit "A",
regarding certain matters addressed in this opinion, and the following factual
information supplied by the parties to the proposed Mergers.
I. BACKGROUND FACTS CONCERNING CORPORATE PARTIES(1/)
A. Deposit Guaranty Corp.
Deposit Guaranty Corp. ("DGC") was incorporated in 1968 under the laws
of the State of Mississippi for the primary purpose of acting as a bank holding
company for Deposit Guaranty National Bank ("DGNB"), a national banking
association. DGC is registered as a bank holding company with the Federal
Reserve System.
DGC has an authorized capital structure consisting of 50,000,000
shares of no par value voting common stock ( the "DGC Common Stock"),
10,000,000 shares of no par value Class A voting preferred stock, and
10,000,000 shares of Class B non-voting preferred stock. DGC has 17,685,752
shares of Common Stock issued and outstanding and no preferred stock is
outstanding. DGC is a publicly held company with over 5,000 shareholders of
record as of September 30, 1994, and its stock is traded on the NASDAQ National
Market System. In addition, options to acquire 441,354 shares of DGC Common
Stock are outstanding.
____________________
(1/) The following information regarding the capital structures
of the various parties is as of September 30, 1994.
<PAGE> 3
Board of Directors
DGC, CNCAC, CNC, LBO Bancorp, Louisiana Bank, CNB
November 10, 1994
Page 3
DGC and its subsidiaries are engaged only in the general banking
business and activities closely related to banking, as authorized by the
banking laws of the United States and the regulations issued pursuant thereto.
DGC offers complete banking and trust services to the commercial, industrial
and agricultural areas which it serves through its banking subsidiaries, DGNB
and CNB. DGC owns and operates DGC Services Company, a Mississippi business
corporation, furnishing managerial and financial advisory services to DGC. DGC
also owns and operates Deposit Guaranty Financial Services, Inc., a Mississippi
business corporation which operates in Florida and engages in mortgage lending
and brokerage services, and Deposit Guaranty of Omaha, N.A., a Nebraska
business corporation, which through licensing agreements, extends credit by
issuing VISA and MasterCard cards to its customers and customers of its
correspondent banks.
The books of account of DGC are maintained on a calendar year basis
and DGC computes its income under the accrual method of accounting. DGC is the
parent of an affiliated group that, for federal income tax purposes, includes,
among other entities, CNC (described below), and CNB.
B. Commercial National Corporation
Commercial National Corporation ("CNC") is a bank holding company and
is registered as such with the Federal Reserve System. The authorized capital
stock of CNC consists of 5,000,000 shares of common stock, $5.00 par value.
There are 4,200,000 shares of CNC common stock issued and outstanding, all of
which are owned by DGC. All of CNC's common stock was acquired by DGC in
February, 1990.
CNC does not engage in any business activities other than its
ownership of CNB. The books of CNC are maintained on a calendar year basis and
CNC computes its income under the accrual method of accounting.
C. CNC Acquisition Corp.
CNCAC was organized on August 4, 1994 under the laws of the State of
Louisiana, primarily for the purpose of consummating the Holding Company
Merger. The authorized capital stock of CNCAC consists of 10,000 shares of
common stock, no par value. Pursuant to Section 4.02 of the Merger Agreement,
at the Closing Date, there will be 10,000 shares of CNCAC common stock issued
and outstanding, all of which shares shall be owned by DGC. As discussed in
more detail below, DGC presently intends to preserve CNCAC as a separate
subsidiary.
D. Commercial National Bank
CNB is a national banking association, duly organized and validly
existing under the laws of the United States with its main office located in
Shreveport, Louisiana. All of its branches are located in the State of
Louisiana.
<PAGE> 4
Board of Directors
DGC, CNCAC, CNC, LBO Bancorp, Louisiana Bank, CNB
November 10, 1994
Page 4
Presently, CNB has authorized capital stock consisting of 1,400,000
shares of $5.00 par value voting Common Stock (the "CNB Common Stock"). All of
the CNB Common Stock is outstanding and is owned by CNC.
CNB conducts a general banking business embracing all of the customary
banking functions as are permitted by Federal regulatory authorities. Through
its Trust Division, CNB offers a wide range of fiduciary services. CNB and its
branches serve the general area in which they are located, engaging in retail
and commercial banking activities.
CNB's books of account are maintained on a calendar year, accrual
basis and it files a consolidated federal income tax return with CNC and DGC.
E. LBO Bancorp.
LBO Bancorp was organized under the laws of the State of Louisiana for
the purpose of acting as a bank holding company. LBO Bancorp offers a full
complement of consumer and commercial banking services through its only
subsidiary, Louisiana Bank. LBO Bancorp is registered as a bank holding
company with the Federal Reserve System.
LBO Bancorp has an authorized capital structure consisting of 410,000
shares of $5.00 par value voting common stock (the "LBO Bancorp Common Stock").
There are 386,012 shares of LBO Bancorp Common Stock issued and outstanding to
227 stockholders of record. The LBO Bancorp Common Stock is not traded on an
established securities market. LBO Bancorp has no other common or preferred
stock authorized or outstanding.
LBO Bancorp and Louisiana Bank are engaged in the general banking
business and activities closely related to banking, as are authorized by the
banking laws of the United States, the state of Louisiana and the regulations
issued pursuant thereto.
LBO Bancorp's books of account are maintained on a calendar year basis
and LBO Bancorp computes its income under the accrual method of accounting.
F. Louisiana Bank.
Louisiana Bank is a state banking association duly organized and
validly existing under the laws of the state of Louisiana with its principal
office located in West Monroe, Louisiana. The authorized capital structure of
Louisiana Bank consists of 260,000 shares of $5.00 par value voting common
stock (the "Louisiana Bank Common Stock"), all of which are outstanding and
owned by LBO Bancorp.
<PAGE> 5
Board of Directors
DGC, CNCAC, CNC, LBO Bancorp, Louisiana Bank, CNB
November 10, 1994
Page 5
Louisiana Bank offers a wide range of consumer and commercial banking
services in the Ouachita Parish, Louisiana area. Louisiana Bank's books of
account are maintained on a calendar year basis. It files a consolidated
federal income tax return with LBO Bancorp.
II. BUSINESS REASONS FOR AND DESCRIPTION
OF THE PROPOSED MERGERS
A. LBO Bancorp Reasons for the Mergers.
The Board of Directors of LBO Bancorp has determined that the proposed
Mergers are in the best interests of LBO Bancorp's shareholders and unanimously
authorized consummation thereof, subject to the approval of the LBO Bancorp
shareholders and certain other conditions set forth in the Merger Agreement.
LBO Bancorp's shareholders are scheduled to vote on the proposed transactions
on December 15, 1994, subject to satisfaction of certain conditions in the
Agreement. The proposed Mergers will afford the shareholders of LBO Bancorp
the opportunity to obtain on favorable terms an equity interest in a much
larger and more diversified enterprise. DGC has substantially more outstanding
stock held by more shareholders than does LBO Bancorp. The DGC Common Stock is
traded on the over-the-counter market, and is quoted by NASDAQ, while the LBO
Bancorp common Stock is not traded on any established securities market. The
proposed transactions will also result in improved and expanded services to
businesses and individuals in LBO Bancorp's/Louisiana Bank's market area
through increased lending capacity and the provision of specialized financial
services.
B. DGC's Reasons for the Mergers.
The Board of Directors of DGC has approved the Merger Agreement
because it believes that the Mergers will enhance DGC's earnings capacity by
enabling it to deliver products and provide services to a larger geographic
customer base and that the combination of DGC and LBO Bancorp can take
advantage of increased overall efficiencies and economies of scale. Also, the
Mergers will allow DGC to continue to protect a potential growth market which
lies between Mississippi and Shreveport, Louisiana, the primary operating base
of CNB.
C. Description of Proposed Mergers.
The proposed Mergers will be structured in accordance with the
preceding statements of background facts, the Merger Agreement, the laws of the
State of Mississippi and the United States, the representations of the parties
to the transactions, and the following descriptions:
<PAGE> 6
Board of Directors
DGC, CNCAC, CNC, LBO Bancorp, Louisiana Bank, CNB
November 10, 1994
Page 6
1. The Holding Company Merger. Pursuant to the Merger Agreement,
LBO Bancorp will merge with and into CNCAC pursuant to the
laws of the State of Louisiana. CNCAC will be the surviving
corporation. At the Effective Time of the Holding Company
Merger, each issued and outstanding share of LBO Common Stock
(except shares held by dissenting shareholders) will be
converted into the right to receive 1.763 shares of DGC Common
Stock. As a result of the Holding Company Merger, the
shareholders of LBO Bancorp will become shareholders of DGC
(approximately 680,539 shares of DGC Common Stock are expected
to be issued in the Holding Company Merger). No fractional
shares of DGC Common Stock will be issued in the Holding
Company Merger. In lieu thereof, any LBO Bancorp shareholder
otherwise entitled to receive a fractional share of DGC Common
Stock will be paid a cash amount for such fractional share as
more fully detailed in paragraph 4 immediately below.
Any dissenters to the Holding Company Merger will have the
right under Louisiana law to receive cash for their shares
from LBO Bancorp. The Merger Agreement, however, provides
that not more than ten percent (10%) of the LBO Bancorp Common
Stock outstanding at the Effective Date of the Holding Company
Merger may be converted into cash.
2. The Bank Merger. Immediately after the Holding Company
Merger, Louisiana Bank will merge with and into CNB in
accordance with applicable federal and state law. CNB will
acquire all of the assets and assume all of the liabilities of
Louisiana Bank, and Louisiana Bank will cease to exist. Each
share of outstanding Louisiana Bank Common Stock will be
cancelled. CNC will constructively receive CNB Common Stock
as consideration for the Bank Merger. No new shares of CNB
Common Stock will actually be issued to CNC or to Louisiana
Bank in the Bank Merger. There will be no dissenters to the
Bank Merger.
3. DGC presently intends to preserve CNCAC as a separate
subsidiary for an indefinite period of time until it is
satisfied that no contingent liabilities (assumed in the
Holding Company Merger) exist or remain undischarged. Once it
is so satisfied, DGC expects to liquidate CNCAC into itself to
simplify its corporate structure and eliminate unnecessary
shares.
4. Each LBO Bancorp shareholder entitled to a fractional share of
DGC Common Stock will receive the right to be paid by DGC an
amount of cash determined by multiplying (a) the closing sale
price of a share of DGC Common Stock on the day immediately
preceding the Effective Time of the Holding Company Merger as
<PAGE> 7
Board of Directors
DGC, CNCAC, CNC, LBO Bancorp, Louisiana Bank, CNB
November 10, 1994
Page 7
quoted on the NASDAQ System, by (b) the fraction of a share of
DGC Common Stock to which such shareholder would otherwise be
entitled.
5. After the Mergers are completed, all of LBO Bancorp's former
shareholders will own DGC Common Stock. There will be no cash
paid in connection with either of the Mergers (except for
payments for fractional shares as noted above). The ownership
structure of DGC, CNC, and CNB will not change. After the
Mergers, CNB will continue its historical business and the
historic of business of Louisiana Bank in a substantially
unchanged manner.
III. DISCUSSION OF APPLICABLE REORGANIZATION PROVISIONS
A. The Holding Company Merger.
In form, the Holding Company Merger satisfies the requirements for
treatment as a tax-free reorganization under section 368(a)(1)(A) of the
Internal Revenue Code of 1986 (the "Code") by reason of the application of Code
section(2/) 368(a)(2)(D). These Code sections describe a forward triangular or
subsidiary merger under which the target corporation (LBO Bancorp) is merged
into a first tier subsidiary (CNCAC) of the parent corporation (DGC here) in
exchange for parent company stock distributed to the target's historic
shareholders.
We are of the opinion, however, that if the Internal Revenue Service
(the "Service") examined the totality of the facts and circumstances
surrounding the Mergers, it is likely that the Service would recharacterize the
Holding Company Merger and treat and test it in substance as a stock-for-assets
reorganization under section 368(a)(1)(C) (a "Type C reorganization") based on
Rev. Rul. 72-405, 1972-2 C.B. 217. Rev. Rul. 72-405 holds that the formation
of a subsidiary solely to acquire the assets of another corporation in exchange
for parent stock, immediately followed by the liquidation of the subsidiary
into the parent pursuant to an overall plan, is treated as a Type C
reorganization, instead of as a forward triangular merger. A Type C
reorganization occurs when a target transfers substantially all of its assets
to the acquiror in exchange for voting stock of the acquiror, with such stock
then being distributed to the target shareholders upon the liquidation of the
target. This revenue ruling states that where the liquidation of a newly
formed subsidiary into its parent is part of an overall plan for the parent to
acquire the assets of the target, the transitory passage of the assets and
liabilities through the acquiring subsidiary will not be accorded independent
significance for federal income tax purposes.
____________________
(2/) Unless otherwise noted, all section references are to the Code.
<PAGE> 8
Board of Directors
DGC, CNCAC, CNC, LBO Bancorp, Louisiana Bank, CNB
November 10, 1994
Page 8
In the Holding Company Merger, although CNCAC will not be liquidated
or merged away and will be maintained as a separate subsidiary for an
indefinite period of time pending the discharge of any contingent liabilities
assumed, and even though this appears to be a valid business reason which
justifies treatment of CNCAC as an entity which is not transitory in nature,
the Bank Merger will in fact result in the transfer of the assets of Louisiana
Bank and in the cancellation of Louisiana Bank's stock held by CNCAC. After
the Mergers, CNCAC will be left with very few, if any, assets, and it is our
understanding that if contingent liabilities do arise which require payment,
the funds to extinguish such liabilities would have to be made available to
CNCAC in the form of a capital contribution from DGC. Since these dispositions
(i.e., the transfer of Louisiana Bank's assets and the cancellation of
Louisiana Bank's stock held by CNCAC), along with the lack of significant CNCAC
assets are factors which may be considered as tantamount to a liquidation of
CNCAC, we are of the opinion that for federal income tax purposes, it is
probable that CNCAC will be considered as a transitory subsidiary.
Although there are several differences between a Type C reorganization
and a forward triangular merger, the most significant difference in the present
case is that in a Type C reorganization, no more than twenty percent (20%) of
the consideration may be boot (i.e., consideration other than DGC's voting
stock). If recharacterized, the Holding Company Merger would be viewed as an
acquisition by DGC of all of the assets of LBO Bancorp in exchange for DGC
Common Stock paid to LBO Bancorp. LBO Bancorp, in turn, will be deemed to
liquidate and distribute the DGC Common Stock to the LBO Bancorp shareholders
in exchange for their LBO Bancorp Common Stock. The next step in this
recharacterization would involve the constructive contribution of the Louisiana
Bank stock and any other assets to CNC and CNCAC, respectively. Such
contributions are permitted in connection with a Type C reorganization pursuant
to section 368(a)(2)(C). Following this recharacterization (i.e., the Type C
reorganization, followed by a constructive contribution of assets), CNC would
be deemed to own the Louisiana Bank stock, along with the CNB stock that it
actually owns, immediately after the transactions. Then, the Bank Merger would
occur.
B. The Bank Merger.
The Bank Merger will be a statutory merger of downstream
brother-sister corporations. As such, the Bank Merger will qualify, for
federal income tax purposes, as a tax-free reorganization under section
368(a)(1)(A) (a "Type A reorganization").
The Bank Merger is also described in and will qualify as a tax-free
reorganization under section 368(a)(1)(D) (a "Type D reorganization"). The
Code describes a Type D reorganization involving the transfer of assets to a
controlled corporation, as follows:
<PAGE> 9
Board of Directors
DGC, CNCAC, CNC, LBO Bancorp, Louisiana Bank, CNB
November 10, 1994
Page 9
1. A transfer by one corporation of substantially all of its
assets to a controlled corporation (i.e., a corporation owned
by the transferor or its shareholders (3/), followed by a
section 354 or section 356 of the distribution of the
stock, and
2. In effect, a complete liquidation of the transferor
corporation. (Although section 354(b) does not explicitly
require a complete liquidation of the transferor, the
requisite distribution of all of the transferor's properties
will have the effect of a complete liquidation).
The Service has ruled that in cases involving an overlap of a Type A
and a Type D reorganization, the Type D reorganization controls. See Rev. Rul.
75-161, 1975-1 C.B. 114. The difference is that Rev. Rul. 75-161 provides that
section 357(c) applies to the transaction. Section 357(c) requires that if the
sum of the amount of the liabilities assumed by the corporate transferee and
the amount of the liabilities to which the property transferred is subject
exceeds the total of the adjusted basis of the property transferred, then the
excess shall be recognized as gain by the transferor. As stated in the
Certificate, in connection with the Bank Merger, Louisiana Bank has represented
that the liabilities of Louisiana Bank which will be assumed by CNB, plus the
amount of the liabilities to which the property transferred is subject, will
not exceed Louisiana Bank's total adjusted basis in the property transferred.
Based on this representation and our limited review of pertinent financial
statements, we have concluded that the gain recognition provision of section
357(c) should not apply to the Bank Merger.
IV. OPINION
In reliance upon the foregoing facts and the representations of the
parties to the Merger transactions, and based upon our review of such documents
and consideration of such legal matters as we have deemed relevant and
sufficient to enable us to render an informed opinion, we are of the opinion
that the federal income tax consequences of the proposed Mergers will be as
follows:
A. With respect to the Holding Company Merger:
1. The merger of LBO Bancorp with and into CNCAC, followed by the
Bank Merger will be treated as the acquisition by DGC of
substantially all of the assets of LBO Bancorp, followed by:
(a) the liquidation of LBO Bancorp, and (b) the contribution
__________________________________
(3/) The determination of whether a "controlled corporation" exists is made
using the 50% ownership test of section 304(c) as the "control" threshold, as
mandated by section 368(a)(2)(H).
<PAGE> 10
Board of Directors
DGC, CNCAC, CNC, LBO Bancorp, Louisiana Bank, CNB
November 10, 1994
Page 10
of the Louisiana Bank Common Stock obtained from LBO Bancorp
to CNC, and the contribution of any other assets obtained from
LBO Bancorp to CNCAC. CNCAC will be treated as transitory and
its existence will be disregarded for federal income tax
purposes.
2. The acquisition by DGC of substantially all of the assets of
LBO Bancorp solely in exchange for DGC Common Stock, and the
assumption by DGC of the liabilities of LBO Bancorp, followed
by the distribution by LBO Bancorp of the DGC Common Stock to
the shareholders of LBO Bancorp in exchange for all of their
LBO Bancorp Common Stock in complete liquidation of LBO
Bancorp, will constitute a reorganization within the meaning
of section 368(a)(1)(C) of the Code. For purposes of this
opinion, "substantially all" means at least 90 percent of the
fair market value of the net assets and at least 70 percent of
the fair market value of the gross assets held by LBO Bancorp
immediately prior to the Holding Company Merger. DGC and LBO
Bancorp will each be a "party to a reorganization" within the
meaning of section 368(b)(2) of the Code.
3. No gain or loss will be recognized to LBO Bancorp upon the
transfer of substantially all of its assets to DGC in exchange
solely for DGC Common Stock and the assumption by DGC of the
liabilities of LBO Bancorp. Such non-recognition is not
affected by the fact that LBO Bancorp will be deemed to
receive cash in lieu of fractional share interests of LBO
Bancorp shareholders, since all of the cash will be deemed
distributed to LBO Bancorp shareholders pursuant to the Merger
Agreement.
4. No gain or loss will be recognized by DGC upon the receipt of
substantially all of the assets of LBO Bancorp solely in
exchange for DGC Common Stock issued to LBO Bancorp.
5. The constructive contribution by DGC of the LBO Bancorp Common
Stock to CNC and the other Bancorp assets, if any, to CNCAC
will not disqualify the reorganization (see section
368(a)(2)(C), section 1.368-2(j) of the Income Tax
Regulations, and Rev. Rul. 72-576, 1976-2 C.B. 217).
6. The basis of the assets of LBO Bancorp in the hands of DGC
will be, in each instance, the same as the basis of those
assets in the hands of LBO Bancorp immediately prior to the
Holding Company Merger.
7. The holding period of LBO Bancorp's assets in the hands of DGC
will include the period during which the assets were held by
LBO Bancorp.
<PAGE> 11
Board of Directors
DGC, CNCAC, CNC, LBO Bancorp, Louisiana Bank, CNB
November 10, 1994
Page 11
8. No gain or loss will be recognized by the shareholders of LBO
Bancorp upon their receipt of DGC Common Stock (including
fractional share interests to which they may be entitled)
solely in exchange for their LBO Bancorp Common Stock.
9. The basis of the DGC Common Stock to be received by the LBO
Bancorp shareholders (including any fractional share interests
to which they may be entitled) will be, in each instance, the
same as the basis of the LBO Bancorp Common Stock surrendered
in exchange therefor.
10. The holding period of the DGC Common Stock to be received by
the LBO Bancorp shareholders (including any fractional share
interests to which they may be entitled) will include, in each
case, the period during which the LBO Bancorp Common Stock
surrendered in exchange therefor was held, provided that the
LBO Bancorp Common Stock is held as a capital asset in the
hands of the LBO Bancorp shareholder on the date of the
exchange.
11. The payment of cash to LBO Bancorp shareholders in lieu of
fractional shares of DGC Common Stock will be treated for
federal income tax purposes as if the fractional shares were
distributed as part of the reorganization exchange and then
redeemed by DGC. The cash payments will be treated as having
been received as distributions in redemption of such stock,
subject to the provisions and limitations of section 302 of
the Code.
12. Where a dissenting LBO Bancorp shareholder receives solely
cash in exchange for his or her LBO Bancorp Common Stock, such
cash will be treated as having been received by the
shareholder as a distribution in redemption of his or her
stock subject to the provisions and limitations of section
302.
B. With respect to the Bank Merger:
1. Provided that the merger of Louisiana Bank into CNB qualifies
as a statutory merger under applicable state or federal law,
the proposed Bank Merger will be a reorganization within the
meaning of section 368(a)(1)(A) of the Code. Louisiana Bank
and CNB will each be a party to a reorganization" within the
meaning of section 368(b)(2).
2. No gain or loss will be recognized to Louisiana Bank on the
transfer of all of its assets to CNB in constructive exchange
for CNB Common Stock issued to CNC and the assumption by CNB
of the liabilities of Louisiana Bank.
<PAGE> 12
Board of Directors
DGC, CNCAC, CNC, LBO Bancorp, Louisiana Bank, CNB
November 10, 1994
Page 12
3. No gain or loss will be recognized to CNB upon the receipt by
CNB of all of the assets of Louisiana Bank in constructive
exchange for CNB Common Stock issued to CNC and the assumption
by CNB of the liabilities of Louisiana Bank.
4. No gain or loss will be recognized by DGC or CNC as a result
of the Bank Merger and the surrender of the Louisiana Bank
Common Stock in constructive exchange for the CNB Common
Stock.
5. The basis of the assets of Louisiana Bank in the hands of CNB
will, in each case, be the same as the basis of those assets
in the hands of Louisiana Bank immediately prior to the Bank
Merger.
6. The holding period of the assets of Louisiana Bank in the
hands of CNB will, in each case, include the period for which
such assets were held by Louisiana Bank.
We have qualified our opinions by reference to the Code, the Treasury
Regulations promulgated thereunder, and existing judicial and administrative
interpretations thereof. In so opining, we have relief upon the foregoing
facts and representations and have reviewed such documents and have considered
such legal matters as we have deemed relevant and sufficient to enable us to
render an informed opinion. We have also relied, to some extent, on the oral
representations and statements of representatives of the parties with respect
to the foregoing factual determinations. While we have not been requested nor
have we undertaken to make independent investigations to verify such
representations and statements, based upon our discussions with representatives
of the parties and our limited review of certain background material, we
believe that it is reasonable for us to rely on such representations and
statements.
Our opinion is limited to the specific opinions expressed above, and
no other opinions are intended nor should they be inferred. An opinion of
counsel has no binding effect upon the Service and no assurances can be given
that the conclusions reached in any opinion will not be contested by the
Service, or if contested, will be sustained by a court.
The opinions we have expressed above are based on the facts and
representations outlined herein being correct in all material respects as of
the dates indicated or at the time of the proposed transactions as the case may
be. In the event that one or more of the facts or representations are
incorrect for any such time, our opinion would likely be substantially
different than that expressed above.
<PAGE> 13
Board of Directors
DGC, CNCAC, CNC, LBO Bancorp, Louisiana Bank, CNB
November 10, 1994
Page 13
The opinion expressed herein is for the sole benefit of DGC, CNC,
CNCAC, CNB, LBO Bancorp and Louisiana Bank, together with their respective
shareholders, and is not to be delivered to or relied upon by any other party
without our prior written consent.
Very truly yours,
WATKINS LUDLAM & STENNIS
