<PAGE> 1
Filed pursuant to Rule 424(b)(2)
Registration No. 33-64333
THIS PROSPECTUS SUPPLEMENT RELATES TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AND IS SUBJECT TO COMPLETION OR
AMENDMENT. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH JURISDICTION.
SUBJECT TO COMPLETION DATED APRIL 18, 1996.
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 7, 1996.
$100,000,000
Deposit Guaranty Corp.
% Senior Notes Due April , 2006
Interest payable April and October
------------------
The % Senior Notes Due April , 2006 (the "Notes") are not subject to
redemption or repayment prior to maturity and will not be subject to any
sinking fund. The Notes will be unsecured debt obligations of Deposit
Guaranty Corp. (the "Corporation") and will rank equally with all
other unsubordinated and unsecured Indebtedness of the
Corporation. See "Description of the Notes."
The Notes will be represented by one permanent global certificate (the "Global
Security") registered in the name of a nominee of The Depository Trust
Company, as depositary (the "Depositary"). The Notes will be available
for purchase in minimum denominations of $1,000 or any amount in
excess thereof which is an integral multiple of $1,000 in
book-entry form only. Beneficial interests in the Global
Security will be shown on, and transfers thereof will be
effected only through, records maintained by the
Depositary and its participants. Except as described
under "Description of Notes -- Book-Entry System"
herein, owners of beneficial interests in the
Global Security will not be entitled to
receive Notes in definitive form.
------------------
THE NOTES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT
INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND OR THE BANK
INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions Corporation(1)(2)
--------------- --------------- ---------------
<S> <C> <C> <C>
Per Note..................................... % % %
Total........................................ $ $ $
</TABLE>
(1) Plus accrued interest, if any, from April , 1996.
(2) Before deduction of expenses payable by the Corporation estimated at
$ .
------------------
The Notes are offered by the several Underwriters when, as and if issued by
the Corporation, delivered to and accepted by the Underwriters and subject to
their right to reject orders in whole or in part. It is expected that delivery
of the Global Security, in book-entry form, will be made through the facilities
of the Depositary on or about April , 1996, against payment in immediately
available funds.
CS First Boston Keefe, Bruyette & Woods, Inc.
The date of this Prospectus Supplement is April , 1996.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
RECENT DEVELOPMENTS
On April 16, 1996, the Corporation reported that consolidated net income
for the three months ended March 31, 1996, was $21.5 million, or $1.11 per
share, compared to $18.0 million, or $.93 per share, for the same period in
1995. This increase in earnings was primarily due to an increase in net interest
income resulting largely from a 19% increase in loan volume. The first quarter
of 1996 also included a gain of $1.7 million, after income taxes, resulting from
the disposition of assets related to lease financing transactions.
The Corporation's return on average assets for the first quarter of 1996
was 1.44% compared to 1.39% for the same period in 1995. Return on average
equity for the first quarter of 1996 was 15.97% compared to 15.10% for the first
quarter of 1995.
The Corporation's total assets were $6.0 billion at March 31, 1996, up from
$5.4 billion at March 31, 1995. Stockholders' equity was $520 million at March
31, 1996, compared to $483 million at March 31, 1995.
On January 1, 1996, the Corporation adopted Statement of Financial
Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights, an
Amendment of Financial Accounting Standards Board Statement No. 65" ("SFAS No.
122"). SFAS No. 122 provides guidance for recognition of mortgage servicing
rights as an asset when a mortgage loan is sold or securitized and servicing
rights retained. This statement also requires that impairment of mortgage
servicing rights be measured as the difference between the carrying amount of
the servicing rights and their current fair values. SFAS No. 122 is to be
applied prospectively in fiscal years beginning after December 15, 1995. The
adoption of this statement on January 1, 1996 had the effect of increasing first
quarter 1996 net income by approximately $750 thousand.
THE CORPORATION
Deposit Guaranty Corp. is a Mississippi business corporation and a bank
holding company headquartered in Jackson, Mississippi, engaged primarily in the
business of commercial and retail banking. It provides a wide range of banking,
fiduciary and other financial services to its corporate, individual and
institutional customers through its banking subsidiaries, the most significant
of which are the 98%-owned Deposit Guaranty National Bank ("Deposit Guaranty")
with $4.5 billion in assets at December 31, 1995, and the 100%-owned Commercial
National Bank ("Commercial") with $1.2 billion in assets at December 31, 1995,
two other banking subsidiaries and its various bank related subsidiaries.
In addition to the customary banking services of accepting deposits and
making loans, Deposit Guaranty Corp.'s bank and certain nonbank subsidiaries
provide services including personal and corporate trust services, brokerage
services and mortgage banking services.
THE CORPORATION WILL PROVIDE UPON REQUEST AND WITHOUT CHARGE TO EACH PERSON
TO WHOM THIS PROSPECTUS SUPPLEMENT IS DELIVERED A COPY OF ANY OR ALL OF THE
DOCUMENTS INCORPORATED HEREIN OR IN THE PROSPECTUS BY REFERENCE (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED THEREIN BY
REFERENCE). WRITTEN REQUESTS SHOULD BE DIRECTED TO J. CLIFFORD HARRISON, GENERAL
COUNSEL AND SECRETARY, DEPOSIT GUARANTY CORP., 210 EAST CAPITOL STREET, POST
OFFICE BOX 730, JACKSON, MISSISSIPPI 39205 (TELEPHONE (601) 354-8497).
USE OF PROCEEDS
The Corporation will use the net proceeds from the sale of the Notes
offered hereby for general corporate purposes, including investments in, and
advances to, the Corporation's banking and nonbanking subsidiaries, reduction of
short-term borrowings, investments, and financing possible future acquisitions
including, without limitation, the acquisition of banking and nonbanking
companies and financial assets and liabilities.
The precise amounts and timing of the application of proceeds used for such
corporate purposes will depend upon funding requirements and the availability of
other funds to the Corporation and its subsidiaries.
S-2
<PAGE> 3
CAPITALIZATION
The following table sets forth the consolidated capitalization of Deposit
Guaranty Corp. and its subsidiaries at December 31, 1995, and as adjusted as of
such date to give effect to the issuance of the Notes offered hereby.
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
LONG-TERM DEBT
% Senior Notes Due April , 2006................................. $ -- $ 100,000
Other Long-term debt................................................ -- --
-------- --------
Total long-term debt...................................... -- 100,000
-------- --------
SHAREHOLDERS' EQUITY
Cumulative preferred stock, no par value, authorized: 10,000,000
shares of Class A voting; and 10,000,000 shares of Class B
non-voting; issued and outstanding: none.......................... -- --
Common stock, no par value, authorized 50,000,000 shares; issued and
outstanding: 19,379,643 shares.................................... 21,257 21,257
Surplus............................................................. 171,073 171,073
Retained earnings................................................... 327,633 327,633
Unrealized gain on securities available for sale, net of deferred
income taxes...................................................... 19,090 19,090
Total stockholders' equity................................ 539,053 539,053
-------- --------
Total capitalization...................................... $539,053 $ 639,053
======== ========
</TABLE>
In addition to the capitalization described in the above table, the
Corporation and its subsidiaries employ a variety of other sources of funds in
the operation of their businesses. At December 31, 1995 funding sources for the
subsidiary banks included demand deposits of $1.09 billion, interest bearing
deposits of $3.69 billion, Federal funds purchased and securities sold under
agreements to repurchase and other short-term borrowings of $599 million.
On April 16, 1996, the stockholders of the Corporation approved an increase
in the shares which the Company has the authority to issue to 100,000,000 shares
of Common Stock, no par value, 25,000,000 shares of Class A Voting Preferred, no
par value, and 25,000,000 shares of Class B Non-Voting Preferred, no par value.
S-3
<PAGE> 4
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents summary consolidated historical financial data
which has been derived from, and should be read in conjunction with, the
consolidated financial statements of the Corporation and notes thereto and the
financial information with respect to the Corporation incorporated by reference
into the Prospectus. This summary is qualified in its entirety by the detailed
information and financial statements included in the documents incorporated by
reference under "Incorporation of Certain Documents by Reference" in the
accompanying Prospectus. The comparability of the data presented is affected by
certain acquisitions and divestitures that the Corporation has completed in the
time periods presented.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
FOR THE PERIOD
Interest income........................................... $ 402,704 $ 307,272 $ 299,327 $ 322,114 $ 382,432
Interest expense.......................................... 173,432 125,881 124,687 155,459 231,473
Net interest income....................................... 229,272 181,391 174,640 166,655 150,959
Provision for possible loan losses........................ 2,160 (4,750) (16,000) 10,378 17,260
Net interest income after provision for possible loan
losses.................................................. 227,112 186,141 190,640 156,277 133,699
Other operating income.................................... 91,989 93,499 74,781 67,977 61,439
Other operating expense................................... 211,452 180,047 171,567 164,470 152,828
Income before income taxes................................ 107,649 99,593 93,854 59,784 42,310
Income tax expense........................................ 35,029 32,463 27,302 14,270 10,090
Net income................................................ 72,620 67,130 66,552 45,514 32,220
NET INCOME PER SHARE(1)
Primary................................................... $ 3.78 $ 3.80 $ 3.77 $ 2.67 $ 2.04
Fully diluted............................................. 3.78 3.80 3.77 2.63 1.93
CASH DIVIDENDS PER SHARE.................................... $ 1.21 $ 1.06 $ .93 $ .80 $ .78
WEIGHTED AVERAGE SHARES OUTSTANDING
Primary................................................... 19,215,581 17,668,062 17,649,852 17,033,664 15,799,996
Fully diluted............................................. 19,215,581 17,668,062 17,649,852 17,465,282 17,442,388
AT END OF THE PERIOD
Total assets.............................................. $ 6,026,199 $ 5,130,897 $ 4,898,080 $ 4,994,431 $ 5,058,838
Earning assets............................................ 5,362,122 4,562,138 4,379,907 4,455,786 4,507,321
Securities available for sale............................. 1,199,391 8,631 1,365,728 1,030,642 --
Investment securities..................................... 139,033 1,330,171 316,858 527,629 1,666,859
Loans, net of unearned income............................. 3,579,302 2,859,398 2,418,585 2,265,483 2,339,281
Deposits.................................................. 4,780,659 4,038,550 3,921,141 4,001,969 4,075,605
Long-term debt............................................ -- -- -- -- 24,020
Total stockholders' equity................................ 539,053 443,549 395,888 344,324 285,605
SELECTED RATIOS
Return on average assets.................................. 1.30% 1.36% 1.38% .95% .67%
Return on average equity.................................. 14.58 15.61 18.10 14.41 11.70
Net interest margin-tax equivalent........................ 4.75 4.24 4.18 4.12 3.77
Efficiency ratio.......................................... 64.62 64.22 67.23 67.68 68.26
Expense ratio............................................. 2.41 1.96 2.23 2.26 2.11
Loans to deposits......................................... 73.75 64.59 59.30 58.32 60.43
Allowance for possible loan losses to loans, net of
unearned income......................................... 1.64 1.95 2.56 3.30 3.74
Net charge-offs (recoveries) on average loans, net of
unearned income......................................... .12 .10 (.14) 1.02 .77
Dividend payout(2)........................................ 32.01 27.89 24.67 29.96 38.24
Average equity to average assets.......................... 8.94 8.70 7.62 6.61 5.72
Leverage ratio............................................ 7.87 8.43 8.13 6.80 5.42
Tier I risk-based capital................................. 11.05 12.49 13.28 12.00 9.95
Total risk-based capital.................................. 12.30 13.75 14.54 13.27 12.11
Earnings to fixed charges(3)
Excluding interest on deposits.......................... 4.61x 7.01x 7.48x 4.48x 2.57x
Including interest on deposits.......................... 1.62 1.79 1.75 1.38 1.18
</TABLE>
- ---------------
(1) All share data reflects a 2 for 1 stock split declared in 1992.
(2) The dividend payout ratio is calculated using historical Deposit Guaranty
Corp. dividends per share.
(3) For purposes of computing the earnings to fixed charges ratios, earnings
represent consolidated income before income taxes and extraordinary item
plus fixed charges. Fixed charges include interest expense (excluding or
including interest on deposits, as the case may be) and the proportion
deemed representative of the interest factor of rental expense, net of
income from subleases. The Corporation had no outstanding preferred stock
for the periods shown.
S-4
<PAGE> 5
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Corporation's net income for 1995 was $72.6 million compared to $67.1
million in 1994 and $66.6 million in 1993. Net income per share for 1995 was
$3.78 compared to $3.80 and $3.77 in 1994 and 1993, respectively. The
improvement in 1995's net income as compared to 1994 was primarily the result of
an increase in net interest income. The improvement in net interest income
resulted largely from an increase in average loans of $692 million in 1995 as
compared to 1994. This improvement in the mix of interest-earning assets to
higher-yielding loans contributed to a net interest margin of 4.75% for 1995, up
51 basis points from 1994.
At year-end 1995, total assets were $6.0 billion, an increase of $895
million or 17% over year-end 1994. Total average assets increased to $5.6
billion in 1995 from $4.9 billion in 1994. The return on average assets for 1995
was 1.30% compared to 1.36% in 1994 and 1.38% in 1993. The return on average
equity in 1995 was 14.58% compared to 15.61% and 18.10% in 1994 and 1993,
respectively.
The capital ratios for the Corporation remain above the minimum regulatory
guidelines. The leverage ratio for the Corporation at December 31, 1995, was
7.87% compared to 8.43% in 1994. The Tier I capital and total risk-based capital
at December 31, 1995, were 11.05% and 12.30%, respectively, compared to 12.49%
and 13.75% at year-end 1994. The capital ratios of each of the Corporation's
banking subsidiaries categorize them as "well capitalized" according to the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA").
On February 6, 1996, the Corporation entered into a definitive agreement to
acquire Bank of Gonzales Holding Co. with assets of $124 million, and its
wholly-owned banking subsidiary Bank of Gonzales, located in Gonzales,
Louisiana. This acquisition, which is subject to the approval of the
stockholders of Bank of Gonzales Holding Co. and regulatory authorities, will be
accounted for as a purchase business combination and is expected to be
consummated during the second quarter of 1996.
NET INTEREST INCOME
Net interest income is the largest component of the Corporation's net
income and represents the income earned on interest-earning assets less the cost
of interest bearing liabilities. This major source of income represents the
earnings from the Corporation's primary business of gathering funds from deposit
sources and investing those funds in loans and securities. The Corporation's
long-term objective is to manage those assets and liabilities to provide the
greatest income, while balancing interest-rate, credit, liquidity and capital
risks.
Net interest income is presented in this discussion on a tax-equivalent
basis, so that the income from assets exempt from Federal income taxes is
adjusted based on a statutory marginal Federal income tax rate of 35%. The tax
equivalent net interest margin (margin) provides an indication of the efficiency
of the earnings from balance-sheet activities and is calculated by dividing the
tax-equivalent net interest income by interest-earning assets.
Tax-equivalent net interest income in 1995 was $235.2 million compared to
$186.9 million in 1994 and $180.4 million in 1993. The 4.75% margin achieved by
the Corporation in 1995 is a significant increase over the 4.24% for 1994 and
4.18% for 1993. The increase in the 1995 margin is primarily attributable to a
continuing increase in loan volume resulting in improvements in the mix of
interest-earning assets and in the interest spread.
Average loans increased 27% to $3.3 billion in 1995 compared to $2.6
billion in 1994. This increase in loan volume resulted in a more favorable mix
of earning assets as loans increased as a percent of interest-earning assets to
66% in 1995 compared to 59% in 1994. Loan growth was funded by both an increase
in deposit liabilities and a decrease in lower yielding short-term money market
assets. As a percentage of interest-earning assets, short-term money market
assets decreased from 9% in 1994 to 3% in 1995.
The interest spread, the difference between the yield on interest-earning
assets and the rate paid on interest-bearing liabilities, increased from 3.57%
in 1994 to 3.95% in 1995. Deposit spreads widened in 1995 as
S-5
<PAGE> 6
the rates paid on deposits increased slower than the yields on interest-earning
assets. The rate paid on interest-bearing deposits for 1995 was 4.12%, an
increase of 62 basis points from 1994 compared to a 115 basis point increase in
the yield on interest-earning assets in 1995 to 8.24%. The liability-funding
ratio for 1995 increased slightly to 81.4% from 81.0% in 1994.
The increase in net interest income in 1994 reflected a 13% increase in
average loans, stable funding costs and an improved mix of funding sources
resulting in a decline in the liability funding ratio from 82.9% in 1993 to
81.0% in 1994. The mix of interest-earning assets improved as average loans
increased is a percent of interest-earning assets to 59% in 1994 from 53% in
1993. While market interest rates rose rapidly in 1994, the cost of funding
sources remained relatively stable.
LOAN LOSS PROVISION
A discussion of the Corporation's loan loss provision is included in
"-- Asset Quality -- Provision and Allowance for Possible Loan Losses" starting
on page S-9.
OTHER OPERATING INCOME
Growth in noninterest related sources of income is a key long-term goal of
the Corporation. The Corporation's strategy is to develop new sources of
noninterest related income and to reprice services and products to manage their
profitability. Other operating income includes fees for trust services, deposit
service charges, mortgage loan servicing fees, income from broker/dealer
services and many other corporate and retail products.
During 1995, other operating income was $92.0 million compared to $93.5
million in 1994, a decrease of $1.5 million. Other operating income for 1995
included gains on the sale of securities of $919 thousand compared to $13.6
million for 1994. Excluding these gains, other operating income increased $11.2
million, or 14% from 1994 to 1995. Approximately $6.2 million of this increase
was attributable to acquisitions with the balance of the increase due to
increases in core fee revenue sources.
Service charges on deposit accounts have historically represented one of
the primary sources of other operating income. As a result of a continuing
increase in business volumes, revenues in this area increased approximately $4.5
million, or 16%, to $32.1 million in 1995 compared to $27.6 million in 1994.
Fees for trust services increased 5%, to $14.8 million in 1995 from $14.1
million in 1994 primarily as a result of new trust business.
Other service charges, commissions and fees increased $6.5 million, or 20%,
from $32.7 million in 1994 to $39.2 million in 1995. Approximately $2.6 million
of this increase was a result of fee income from the acquired companies. The
remainder of the increase resulted from broker/dealer services, credit life
insurance products, mortgage loan servicing and other retail services of the
Corporation.
Other income decreased from $5.5 million in 1994 to $4.9 million in 1995.
This decrease reflected a $1.9 million reimbursement in 1994 for prior years'
legal fees.
During 1994, other operating income increased $18.7 million to $93.5
million compared to $74.8 million in 1993. This increase was primarily the
result of gains on the sale of securities of $13.6 million in 1994 compared to
gains of $102 thousand for 1993. Excluding the gains on the sales of securities,
other operating income rose $5 million, or 7%, from 1993 to 1994, largely due to
increases in service charges on deposit accounts, trust fees and other income.
Revenue from service charges on deposits increased $2 million to $27.6 million
in 1994 compared to $25.6 million in 1993. Fees for trust services increased
$1.2 million in 1994 from $12.9 million in 1993 principally as a result of new
business. Other income increased approximately $2.1 million, or 62%, from $3.4
million in 1993 to $5.5 million in 1994 primarily as a result of a $1.9 million
reimbursement for prior years' legal fees. These increases in 1994 were
partially offset by a decline in other service charges, commissions and fees in
1994 compared to 1993. This decrease was largely due to a decrease in
broker/dealer income of $1.9 million reflecting an unfavorable market
environment during 1994.
S-6
<PAGE> 7
OTHER OPERATING EXPENSE
Enhancing operational efficiency without sacrificing quality service for
the Corporation's customers continues to be a priority. A key measure used in
the banking industry to assess the level of noninterest expense is the
efficiency ratio, which is defined as noninterest expense divided by the sum of
tax-equivalent net interest income plus noninterest income. Improvement in the
efficiency ratio is measured by a reduction in the percentage reported. The
efficiency ratios for 1995, 1994, and 1993 were 64.62%, 64.22% and 67.23%,
respectively. The Corporation is committed to improve efficiency to a long-term
goal of 60% and, in order to achieve this goal, the Corporation must continue to
increase revenues, primarily through loan growth and increased fee income, while
controlling expense growth.
Other operating expense increased $31.4 million, or 17% in 1995 compared to
1994. Approximately $15.0 million of the increase in 1995 can be attributed to
acquisitions. Salaries and employee benefits, which account for 53% of other
operating expense, increased $13.2 million, or 13%, compared to 1994. Excluding
the effects of the acquisitions, salaries and employee benefits increased $5.3
million, or 6%, as a result of annual merit increases and higher benefit costs.
Employee benefits rose largely due to continuing increases in health benefit
costs of $700 thousand, an increase of $767 thousand in pension plan cost and
$600 thousand in separation pay expense.
Combined net occupancy and equipment expense increased $4.4 million, or
17%, over 1994 of which $2.3 million was due to increased depreciation, rentals
and maintenance for branch banking facilities acquired through acquisitions. The
remaining increase was due to the cost of increased automation to more
effectively and efficiently deliver products and services to our customers.
Service fees increased $1.5 million, or 14%, in 1995 compared to 1994
largely as a result of increased professional and consulting fees related to
efforts to enhance the Corporation's products and their delivery to the
customer, and to provide efficiencies within the organization. Legal and
professional fees also increased due to the increased merger activity and as a
result of collateral protection insurance litigation.
The FDIC assessment decreased $3.9 million, or 44%, from 1994 to 1995. This
decrease was the result of the FDIC lowering the premium rate on insured
deposits. The rate for the Corporation's banking subsidiaries, which all qualify
for the most favorable insurance rates, was lowered by 83% as of June 1, 1995,
and was virtually eliminated for the first half of 1996.
Other expense increased $14.2 million, to $34.5 million in 1995 compared to
$20.3 million in 1994. Approximately $5.9 million, or 42%, of this increase is
related to acquisitions, including $4.3 million due to increased amortization of
goodwill, core deposit intangibles and purchased mortgage servicing rights. The
increase in other expense, excluding the effect of the acquisitions, was
primarily the result of an accrual of $3.5 million for the proposed settlement
of a class action suit concerning collateral protection insurance. Additionally,
other real estate expense increased $1.1 million, due to a decrease in gains on
the sales of properties, and purchased mortgage servicing rights amortization
increased by $1 million.
The Corporation's other operating expense increased $8.5 million in 1994
compared to 1993. Approximately $3.4 million of this increase can be attributed
to an acquisition resulting in an underlying increase in other operating expense
of $5.1 million, or 3%. Salaries and employee benefits increased $5.6 million,
or 6%, in 1994 including $3.4 million in normal merit increases, $1 million
related to an acquisition, $400 thousand in incentives and bonuses as a result
of improved earnings, and $621 thousand in employee benefits. Combined net
occupancy and equipment expense increased $1.4 million, or 6%, over 1993
primarily due to higher depreciation, rentals and maintenance for branch banking
facilities and due to the cost of increased automation. Other expense for 1994
was $20.3 million compared to $18.6 million in 1993. This increase in other
expense was primarily the result of a $2.1 million increase in other real estate
expenses due to an increase in the allowance for possible losses on other real
estate.
INCOME TAXES
Income tax expense was $35.0 million in 1995, compared to $32.5 million in
1994 and $27.3 million in 1993. The increase in tax expense in 1995 and 1994 was
primarily the result of increased pre-tax
S-7
<PAGE> 8
earnings. The Corporation's effective tax rate was 33% for 1995 and 1994 and 29%
for 1993. These effective tax rates are lower than the statutory income tax
rate, primarily due to tax exempt interest income received on certain loans and
debt securities. The increase in the effective tax rate for 1995 and 1994 as
compared to 1993 is primarily the result of three factors. First, the proportion
of tax exempt income to total pre-tax income declined as taxable income
increased for 1995 and 1994 and tax exempt income declined from 1993 levels.
Second, as a result of the 1994 and 1995 merger activity, the level of
nondeductible expenses, primarily goodwill amortization, increased. Finally,
1993 tax expense is net of $1.6 million in tax benefits recorded from the
cumulative effect of adopting SFAS No. 109, "Accounting for Income Taxes," and
the deferred tax benefit of the 1% increase in the federal statutory rate
beginning in 1993.
LOANS
Loans are the Corporation's largest and most profitable component of
interest-earning assets. Total loans increased $714 million, or 25%, to $3.6
billion at December 31, 1995, compared to $2.9 billion at December 31, 1994.
Approximately 51% of this increase resulted from acquisitions while the
remaining increase was the result of a higher loan demand in the Corporation's
market areas and a favorable interest rate environment. Average total loans grew
27% from $2.6 billion in 1994 to $3.3 billion in 1995. Average total loans
represented 66% of interest-earning assets in 1995, compared to 59% in 1994 and
53% in 1993. The portfolio mix at year-end 1995 consisted of 49% real estate
loans, 28% commercial, financial, and agricultural loans, and 23% consumer
loans.
Loans outstanding at December 31 of each of the past five years are shown
in the following table classified by type of loan.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural....................... $1,010,174 $ 927,551 $ 712,522 $ 757,582 $ 886,079
Real estate -- construction.......... 122,765 92,411 70,506 81,320 91,718
Real estate -- mortgage.............. 1,615,166 1,152,068 1,051,752 929,966 840,303
Consumer............................. 843,747 705,716 604,261 523,322 573,699
---------- ---------- ---------- ---------- ----------
$3,591,852 $2,877,746 $2,439,041 $2,292,190 $2,391,799
========== ========== ========== ========== ==========
</TABLE>
Diversification in the loan portfolio is a means of reducing the risks
associated with fluctuations in economic conditions. At December 31, 1995, the
Corporation had no concentrations of 10% or more of total loans in any single
industry. The Corporation's loans were primarily made to borrowers domiciled in
the Mississippi, Louisiana, and Arkansas markets representing 67%, 17% and 5% of
total loans, respectively, in 1995.
Loans secured by real estate are the largest category of loans at $1.7
billion at year-end 1995. This loan portfolio is composed of $819 million of
loans on one-to-four family residential properties including both loans held for
sale and held for investment, $73 million of loans on multi-family residential
properties, $636 million of loans to businesses for intermediate and longer term
financing of land and buildings, and $123 million of loans for construction and
land development. Additionally, this category contains various other loans
secured by real estate.
Real estate loans increased $493 million, or 40%, from year-end 1994 to
1995 following a $122 million increase in 1994. Approximately 75% of this
increase was due to acquisitions. Real estate construction loans increased $30
million, or 33%, in 1995 following a $22 million increase in 1994. Residential
mortgage loans held for investment increased $381 million and mortgage loans
held for sale increased $82 million as a result of increased origination
activity due to favorable interest rates in 1995.
Commercial, financial and agricultural loans increased to $1.0 billion at
year-end 1995 from $928 million and $713 million at year-end 1994 and 1993,
respectively. The commercial, financial and agricultural loan portfolio is a
diverse group of loans to small, medium and large businesses. The purpose of
these loans vary from supporting seasonal working capital needs to the term
financing of equipment. These loans are underwritten by a thorough analysis of
management, financial condition and the business' ability to generate
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<PAGE> 9
sufficient cash flow to repay the debt in an orderly manner. While some of the
short-term loans may be made on an unsecured basis, most are secured by the
assets being financed with appropriate margins. The commercial loan portfolio
was sufficiently diverse to minimize the impact of a decline in a single
industry in 1995. It was geographically concentrated in Mississippi, Louisiana,
and Arkansas so it was exposed to the risk of a general downturn in the
economies of these three states.
Consumer loans increased $138 million, or 20%, from year-end 1994 to
year-end 1995 which was consistent with the Corporation's goal of increasing the
consumer loan portfolio and compares to an increase of $101 million from
year-end 1993 to year-end 1994. The consumer loan portfolio was composed of
installment loans, home equity loans, unsecured revolving credit products, and
other similar types of credit facilities in 1995.
ASSET QUALITY
Provision and Allowance for Possible Loan Losses
In conjunction with the credit process, the Corporation maintains its
allowance for possible loan losses (allowance) at a level that is considered
sufficient to absorb potential losses in the loan portfolio. The allowance is
adjusted by the provision for possible loan losses (provision) and is increased
by recoveries of previously charged-offs loans and decreased by loan
charge-offs. The provision is the adjustment to expense necessary to maintain
the allowance at an adequate level. Various factors are taken into consideration
when the Corporation determines the amount of the provision and the adequacy of
the allowance. These factors include: 1) management's analysis of current and
future economic conditions and their anticipated impact on specific borrowers;
2) the current level of classified and criticized assets and the associated risk
factors with each; 3) past due and nonperforming assets; 4) the current level of
the allowance in relation to total loans and to historical and current loss
levels; and 5) growth and composition of the loan portfolio.
S-9
<PAGE> 10
The following table summarizes the activity in the allowance for possible
loan losses over the past five years.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Allowance for possible loan losses --
beginning balance.................. $ 55,873 $ 62,032 $ 74,856 $ 87,493 $ 88,862
Charge-offs:
Commercial, financial and
agricultural.................. 1,591 7,851 2,881 22,348 7,577
Real estate -- construction..... 177 132 40 80 1,073
Real estate -- mortgage......... 1,723 1,691 1,846 3,772 8,706
Consumer........................ 8,833 5,234 5,375 7,708 13,579
---------- ---------- ---------- ---------- ----------
Total charge-offs............... 12,324 14,908 10,142 33,908 30,935
---------- ---------- ---------- ---------- ----------
Recoveries:
Commercial, financial and
agricultural.................. 2,217 5,163 5,164 2,037 2,476
Real estate -- construction..... 272 621 1,398 803 302
Real estate -- mortgage......... 1,403 2,393 2,077 2,723 3,403
Consumer........................ 4,466 4,098 4,679 5,330 6,125
---------- ---------- ---------- ---------- ----------
Total recoveries................ 8,358 12,275 13,318 10,893 12,306
---------- ---------- ---------- ---------- ----------
Net charge-offs (recoveries)....... 3,966 2,633 (3,176) 23,015 18,629
Provision for possible loan
losses.......................... 2,160 (4,750) (16,000) 10,378 17,260
Additions due to acquisitions...... 4,652 1,224 -- -- --
---------- ---------- ---------- ---------- ----------
Allowance for possible loan losses --
ending balance..................... $ 58,719 $ 55,873 $ 62,032 $ 74,856 $ 87,493
========== ========== ========== ========== ==========
Total loans outstanding:
End of year........................ $3,579,302 $2,859,398 $2,418,585 $2,265,483 $2,339,281
========== ========== ========== ========== ==========
Average............................ $3,273,408 $2,581,724 $2,293,416 $2,261,034 $2,411,731
========== ========== ========== ========== ==========
Ratios:
Allowance for possible loan losses
to end of year total loans...... 1.64% 1.95% 2.56% 3.30% 3.74%
Allowance for possible loan losses
to net charge-offs.............. 1,480 2,122 NM* 325 470
Allowance for possible loan losses
to nonperforming loans.......... 262 219 204 189 106
Net charge-offs (recoveries) to
average total loans............. .12 .10 (.14) 1.02 .77
Recoveries to prior year
charge-offs..................... 56.06 121.03 39.28 35.21 30.60
</TABLE>
- ---------------
*NM -- Not Meaningful
As a result of management's assessment of the adequacy of the allowance and
the increased loan growth in 1995, the Corporation recorded a $2.2 million
provision to the allowance for possible loan losses. During 1994, the
Corporation recorded a negative provision of $4.8 million compared to a negative
provision of $16 million in 1993. Additions to the allowance of $4.7 million and
$1.2 million resulted from acquisitions in 1995 and 1994, respectively.
Net charge-offs for the Corporation were .12% of average loans in 1995
compared to net charge-offs of .10% of average loans in 1994 and net recoveries
of .14% of average loans in 1993. These levels are significantly
S-10
<PAGE> 11
lower than typical historical levels for the Corporation and the banking
industry. Net charge-offs were $4.0 million in 1995, compared to $2.6 million in
1994 and net recoveries of $3.2 million in 1993.
The allowance at December 31, 1995, was $58.7 million or 1.64% of total
loans and 262% of nonperforming loans. While future losses are difficult to
predict, management believes that the current level of the allowance is adequate
to cover possible losses in the loan portfolio based on the allowance
methodology given the current and expected economic climate and the level of
nonperforming assets. The allowance at December 31, 1994, was $55.9 million or
1.95% of total loans and at December 31, 1993, was $62.0 million or 2.56% of
total loans.
Nonperforming Assets
The Corporation's nonperforming assets consist of loans on which interest
is no longer accrued (nonaccrual); certain restructured loans where the interest
rate or other terms have been materially changed due to the financial condition
of the borrowers (restructured); and other real estate. A loan is placed on
nonaccrual when management believes there is reasonable uncertainty about the
full collection of both principal and interest, or when the loan is
contractually past due ninety days or more, not well secured and not in process
of collection. The Corporation's policy regarding nonperforming loans, is to
take appropriate, timely and aggressive action when necessary to reach a timely
resolution.
Nonperforming assets continued to improve by decreasing $3.3 million to
$28.9 million at year-end 1995 compared to $32.2 million at year-end 1994 and
$43.7 million at year-end 1993. In 1995, nonperforming assets decreased due to
cash payoffs on two nonperforming loans carried at $6.7 million, other cash
collections, property sales, restoration of loans to performing status, and
charge-offs. Somewhat offsetting these decreases were $1.5 million in additions
due to acquisitions.
The amounts of the Corporation's nonperforming assets at December 31 of
each of the past five years are as follows:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------- ------- ------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans................................ $22,452 $25,556 $30,425 $39,456 $ 82,213
Restructured loans.............................. -- -- 54 249 240
------- ------- ------- ------- --------
Nonperforming loans............................. 22,452 25,556 30,479 39,705 82,453
Other real estate............................... 6,485 6,689 13,256 17,349 18,251
------- ------- ------- ------- --------
Nonperforming assets............................ $28,937 $32,245 $43,735 $57,054 $100,704
======= ======= ======= ======= ========
Accruing loans past due 90 days or more......... $ 4,767 $ 3,055 $ 2,935 $ 3,670 $ 11,548
======= ======= ======= ======= ========
Ratios:
Nonperforming assets to loans plus other
real estate................................ .81% 1.12% 1.80% 2.50% 4.27%
Nonperforming assets to total assets.......... .48 .63 .89 1.14 1.99
</TABLE>
- ---------------
Interest income of approximately $2.3 million on nonaccrual and restructured
loans at December 31, 1995 would have been recorded in 1995 if such loans had
been in compliance with their original terms. Interest income actually recorded
on such loans in 1995 was $.8 million.
The year-end 1995 total is comprised of $22.5 million of nonaccrual loans
and $6.5 million of other real estate. The Corporation had no restructured loans
at year-end 1995 or 1994.
The Corporation had an additional $215 thousand of outstanding loans which,
while not yet considered nonperforming at December 31, 1995, management has
serious doubt as to the borrowers' continued ability to comply with the present
terms of these loans.
S-11
<PAGE> 12
LIQUIDITY
Liquidity is maintained through the Corporation's ability to convert assets
into cash, manage the maturities of liabilities and generate funds on a
short-term basis either through the national Federal funds market, backup lines
of credit, or through the national CD market.
Short-term investments totaling $444 million provide the major source of
liquidity at December 31, 1995. Cash flows from repayments and maturities from
the securities and loan portfolios provide an additional source of liquidity.
Excluding prepayments from mortgage-backed securities, $301 million, or 23%, of
the securities portfolio and $1.5 billion, or 42% of total loans, have
maturities of one year or less.
The Corporation relies largely on core deposits to fund loan demand and
long-term investments. Core deposits increased to $4.1 billion at December 31,
1995, compared to $3.7 billion at December 31, 1994. Additional funding is
provided from an established Federal funds market within Mississippi, Louisiana
and other contiguous states. Although the Corporation prefers to meet liquidity
requirements through internally generated funding sources and through the
matching of maturities of assets and liabilities, it also maintains funding
relationships with numerous other financial institutions.
The consolidated statements of cash flows can be used to review the
Corporation's cash flows from operating, investing and financing activities.
Cash and cash equivalents increased $17 million during 1995 to $344 million at
December 31, 1995. Net cash provided by operating activities of $2 million for
1995 and $87 million for 1994 included net income, adjusted for various noncash
charges to income, as well as changes in the balance of loans held for sale. The
decrease in net cash provided by operating activities from 1994 to 1995 was
primarily due to an increase in mortgage loans held for sale in 1995. The
increase in net cash provided by operating activities from 1993 to 1994 was
primarily due to a decrease in mortgage loans held for sale in 1994.
Investing activities, primarily in loans and securities, had the effect of
reducing cash flows by $154 million in 1995. This use of funds was largely a
result of increased loan volume and short-term investments which were partially
offset by funds provided by decreases in securities and interest-bearing bank
balances. In 1994, investing activities had the effect of reducing cash flows by
$29 million as increases in loan volumes and short-term investments were largely
offset by funds provided by a decrease in securities.
Financing activities are the primary funding source of investing activities
and primarily include the taking of deposits and use of purchased funds.
Financing activities were a net provider of cash by $169 million in 1995 as the
increase in cash flows from deposits provided more funds than were expended by
purchases of common stock, dividends, and repayment of a short-term line of
credit. In 1994, financing activities had the effect of reducing cash flows by
$25 million as the decrease in cash flows from deposits and the payment of
dividends required more funds than were provided by an increase in purchased
funds.
The liquidity requirements of the parent company to pay dividends to its
shareholders and to meet operating expenses are primarily funded from dividends
received from its banking subsidiaries. The subsidiary banks have available for
payment of dividends in 1996, without prior regulatory approval, $87.1 million
plus their net profits for 1996. From time to time the parent company uses
short-term lines of credit and issues long-term debt to meet acquisition and
expansion needs. At December 31, 1995, the parent company had $27.6 million
outstanding under a short-term line of credit and no long-term debt outstanding.
CAPITAL AND DIVIDENDS
Dividends paid by the Corporation are substantially provided by dividends
from the banking subsidiaries. The approval of the Comptroller of the Currency
(the "OCC") is required if the total of all dividends declared by a national
bank in any calendar year exceeds the total of its net profits for that year
combined with its retained net profits of the preceding two years. In 1996, the
banking subsidiaries have available for payment of dividends to the Corporation,
without approval of the OCC, $87.1 million plus their net profits for 1996.
The Corporation's two sources of capital are internally generated capital
and the capital markets. Primary reliance historically has been on internally
generated capital. Net income for 1995, 1994 and 1993 added
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<PAGE> 13
$72.6 million, $67.1 million and $66.6 million, respectively, to capital.
Capital was further increased by $1.6 million in 1995 with the issuance of
common stock as a result of the exercise of executive stock options. Capital was
decreased by dividends of $23.1 million, $18.7 million and $16.4 million
declared in 1995, 1994 and 1993, respectively. Capital was also increased by
$25.2 million as a result of acquisitions, net of related stock repurchases,
during 1995. The Corporation repurchased 1.3 million shares of its common stock
for the purpose of offsetting the 1.7 million shares issued in the acquisitions
of LBO Bancorp, Inc. and First Merchants Financial Corporation. The Corporation
currently has the authorization to purchase up to 634 thousand shares under a
repurchase plan for the purpose of offsetting the shares anticipated to be
issued in the acquisition of Bank of Gonzales Holding Company. As a result of
the provisions set forth in Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS No.
115"), capital includes the unrealized gain on securities available for sale,
net of deferred taxes, which was $19.1 million at year-end 1995 compared to $2.0
million at year-end 1994. Average stockholders' equity to average assets for
1995 was 8.94% compared to 8.70% in 1994 and 7.62% in 1993.
Under the risk-based capital guidelines adopted by the Federal Reserve
Board for bank holding companies such as the Corporation, the minimum ratio of
total capital to risk-weighted assets, including certain off-balance-sheet items
such as standby letters of credit (total capital), is 8%. At least half of the
total 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 I
capital). The unrealized gain on securities available for sale, resulting from
SFAS No. 115 is excluded from the calculation of these ratios. Under these
guidelines, the Corporation's Tier I and total capital ratios were 11.05% and
12.30%, respectively, at December 31, 1995, compared to 12.49% and 13.75%, at
year-end 1994 and 13.28% and 14.54%, at year-end 1993.
The OCC also has established risk-based capital guidelines for national
banks. These regulations are generally similar to those established by the
Federal Reserve Board for bank holding companies. The Corporation's strategy
related to risk-based capital is to maintain capital levels which will be
sufficient to qualify the Corporation's banking subsidiaries as "well
capitalized" under the guidelines set forth by FDICIA. Maintaining capital
ratios at the "well capitalized" level avoids certain restrictions which, for
example, could impact the Corporation's banking subsidiaries' FDIC assessments,
trust services and asset/liability management.
At December 31, 1995, the Tier I and total capital ratios for each of the
Corporation's banking subsidiaries were well above the minimum 6% and 10% levels
required to be categorized as a "well capitalized" insured depository
institution.
The Federal Reserve Board and the OCC have established minimum leverage
ratios for bank holding companies and national banks, respectively, requiring
such banking organizations to maintain Tier I capital of at least 3.00% of the
quarterly average assets (net of the allowance for possible loan losses) less
goodwill and other nonqualifying intangible assets. FDICIA also established a
minimum leverage ratio requirement of 5% for "well capitalized" institutions.
The Corporation's leverage ratios for December 31, 1995, 1994 and 1993, were
7.87%, 8.43% and 8.13%, respectively. The Corporation's banking subsidiaries
have maintained leverage ratios well above the minimum ratios required by the
banks' regulators.
Capital adequacy is continually monitored by the Corporation to ensure that
appropriate levels of capital are maintained to meet both current operating
needs and anticipate future requirements. The capital guidelines play a crucial
role in a banking organization's plans for business, asset allocations,
acquisitions and expansion.
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<PAGE> 14
DESCRIPTION OF NOTES
The following description of the specific terms of the Corporation's Notes
offered hereby supplements the description of the general terms and provisions
of the Notes set forth under the heading "Description of Debt Securities" in the
accompanying Prospectus, to which description reference is hereby made.
GENERAL
The Notes will be issued under a Senior Indenture (the "Senior Indenture"),
to be dated as of April , 1996, between the Corporation and SunTrust Bank, as
Trustee (the "Senior Trustee.") The Notes offered hereby will be limited to
$100,000,000 aggregate principal amount, will constitute a series of Senior Debt
Securities of the Corporation, and are to be issued under the Senior Indenture
as defined in the accompanying Prospectus.
The Notes will bear interest from April , 1996 payable semiannually in
arrears on each April and October , beginning October , 1996. Interest
shall be paid to the person in whose name such Note is registered at the close
of business on the or , as the case may be, preceding
each interest payment. The Notes will bear interest at a rate of % per
annum.
The Notes will mature on April , 2006 and are not redeemable prior to
maturity. The Notes do not provide for any sinking fund.
The Notes will be issued initially solely in book-entry form and will be
represented by one or more Global Securities. See "Book-Entry System." The Notes
will be sold in denominations of $1,000 and integral multiples of $1,000 in
excess thereof. Any transfer, or payments or other transactions in respect, of
Notes held in book-entry form shall be made as set forth in the accompanying
Prospectus. The Corporation expects that the Depositary for the Notes, upon
receipt of any payment of principal or interest in respect of such Global
Securities, will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Securities as shown on the records of such Depositary. The
Corporation also expects that payments by participants to owners of beneficial
interests in such Global Securities held through such participants will be
governed by standing instructions and customary practices, as is now the case
with the securities held for the accounts of customers registered in "street
names," and will be the responsibility of such participants. None of the
Corporation, the Senior Trustee or any agent of the Corporation or the Senior
Trustee shall have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests of a
Global Security, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
THE NOTES ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE
SAVINGS ASSOCIATION INSURANCE FUND OR THE BANK INSURANCE FUND OF THE FEDERAL
DEPOSIT INSURANCE CORPORATION.
MODIFICATION AND WAIVER
The following description of the modification and waiver provisions of the
Senior Indenture replaces the second paragraph in the accompanying Prospectus
under "Description of Debt Securities -- Modification and Waiver."
The Holders of at least a majority of the aggregate principal amount of the
Outstanding Debt Securities of any series of Senior Debt Securities may, on
behalf of all Holders of that series, waive compliance by the Corporation with
certain restrictive provisions of the Senior Indenture. (Section 10.8) There is
no comparable provision in the Subordinated Indenture. The Holders of a majority
of the aggregate principal amount of the Senior Debt Securities or the
Subordinated Debt Securities may, on behalf of all Holders of the Senior Debt
Securities or the Subordinated Debt Securities, respectively, waive any past
default under the Applicable
S-14
<PAGE> 15
Indenture, except a default in the payment of principal, premium or interest or
in the performance of certain covenants. (Section 5.13)
DEFEASANCE
"Defeasance," as described under the heading "Description of Debt
Securities -- Defeasance and Covenant Defeasance" in the accompanying
Prospectus, shall apply to the Notes. (Section 13.2)
BOOK-ENTRY SYSTEM
Upon issuance, the Notes will be represented by one or more Global
Securities. Each Global Security representing the Notes will be deposited with,
or on behalf of, The Depositary and registered in the name of Cede & Co., the
nominee of the Depositary. The Global Securities will not be exchangeable for
certificated notes, except under the circumstances described below.
Except as provided below, owners of beneficial interests in the Global
Security registered in the name of the Depositary will not be entitled to have
the Notes registered in their names and will not receive or be entitled to
receive physical delivery of the Notes in definitive form. Unless and until
definitive Notes are issued, Holders of the Notes will not be recognized as such
by the Senior Trustee. Hence, until such time, the Holders of the Notes will
only be able to exercise the rights of Holders indirectly through the Depositary
and its participating organizations. Except as set forth below, the Global
Security may not be transferred except as a whole by the Depositary to a nominee
of the Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any nominee to a successor of
the Depositary or a nominee of such successor.
The Depositary has advised the Corporation as follows: The Depositary is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934 (the "Exchange Act"). The Depositary was created to hold securities
of its participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations, some of whom (and/or their
representatives) own the Depositary. Access to the Depositary's book-entry
system is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodian relationship with a
participant, either directly or indirectly.
Principal and interest payments on the Notes registered in the name of the
Depositary's nominee will be made by the Trustee to the Depositary's nominee as
the registered owner of the Global Security representing the Notes. The Senior
Indenture provides that the Corporation and the Senior Trustee will treat the
person in whose name the Notes are registered (the Depositary or its nominee) as
the owner of the Notes for the purpose of receiving payment of principal and
interest on the Notes and for all other purposes whatsoever.
If the Depositary for the Notes is at any time unwilling or unable to
continue as Depositary or ceases to be a clearing agency under the Exchange Act
or there shall have occurred and be continuing an Event of Default or an event
which, with notice of lapse of time, would become an Event of Default under the
Senior Indenture, the Corporation will issue Notes in definitive certificated
form. In addition, the Corporation may at any time and in its sole discretion
determine not to have any of the Notes represented by one or more Global
Securities and, in such event, will issue Notes in definitive certificated form
in exchange for all of the Global Securities representing the Notes.
A further description of the Depositary's procedure with respect to Global
Securities representing the Notes is set forth in the accompanying Prospectus
under "Description of Debt Securities -- Global Securities." The Depositary has
confirmed to the Corporation and the Subordinated Trustee that it intends to
follow such procedures.
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<PAGE> 16
UNDERWRITING
Under the terms and subject to the conditions in an Underwriting Agreement,
dated April , 1996 (the "Underwriting Agreement"), the Underwriters named
below (the "Underwriters") have severally but not jointly agreed to purchase
from the Corporation the following respective principal amounts of the Notes:
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
----------------------------------------------------------------------- ------------
<S> <C>
CS First Boston Corporation............................................ $
Keefe, Bruyette & Woods, Inc...........................................
------------
Total........................................................ $100,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, and that the
Underwriters will be obligated to purchase all of the Notes offered hereby if
any are purchased. The Underwriting Agreement provides that, in the event of a
default by an Underwriter, in certain circumstances the purchase commitments of
the non-defaulting Underwriter may be increased or the Underwriting Agreement
may be terminated.
The Underwriters have advised the Corporation that they propose to offer
the Notes to the public initially at the public offering price set forth on the
cover page of this Prospectus Supplement, and to certain dealers at such price
less a concession of % of the principal amount, and the Underwriters and
such dealers may allow a discount of % of the principal amount of the Notes
on sales to certain other dealers. After the initial public offering, the public
offering price and concession and discount to dealers may be changed by the
Underwriters.
The Notes are a new issue of securities with no established trading market.
The Corporation has been advised by the Underwriters that they intend to make a
market in the Notes but are not obligated to so do and may discontinue market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the Notes.
The Corporation has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act of 1933, as
amended, or contribute to payments which the Underwriters may be required to
make in respect thereof.
In the ordinary course of their respective businesses, the Underwriters and
their affiliates have engaged, and may in the future engage, in investment
banking with the Corporation and certain of its affiliates.
VALIDITY OF NOTES
The validity of the Notes offered hereby will be passed upon for the
Corporation by Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York,
New York 10022 and Watkins Ludlam & Stennis, 633 North State Street, Jackson,
Mississippi 39205. Simpson Thacher & Bartlett (a partnership which includes
professional corporations), New York, New York, will act as counsel for the
Underwriters.
S-16
<PAGE> 17
PROSPECTUS
Deposit Guaranty Corp.
$300,000,000
<TABLE>
<S> <C>
DEBT SECURITIES DEBT WARRANTS
PREFERRED STOCK PREFERRED STOCK WARRANTS
DEPOSITARY SHARES DEPOSITARY SHARE WARRANTS
COMMON STOCK COMMON STOCK WARRANTS
</TABLE>
Deposit Guaranty Corp., a Mississippi business corporation (the
"Corporation"), intends to issue from time to time, either separately or
together, (i) one or more series of its unsecured debt securities, which may be
either senior debentures, notes, bonds, and/or other evidences of indebtedness
(the "Senior Debt Securities") or subordinated debentures, notes, bonds, and/or
other evidences of indebtedness which may be convertible at the option of a
holder or the Corporation into Equity Securities (as described herein) of the
Corporation (the "Subordinated Debt Securities" and, together with the Senior
Debt Securities, the "Debt Securities"), (ii) warrants to purchase Debt
Securities (the "Debt Warrants"), (iii) shares of Preferred Stock, no par value
(the "Preferred Stock"), which may be convertible, at the option of the holder,
into Common Stock or any other class or series of Equity Securities of the
Corporation or convertible at the option of the Corporation into Equity
Securities or other debt securities of the Corporation, (iv) shares of Preferred
Stock represented by depositary shares ("Depositary Shares"), (v) warrants to
purchase shares of Preferred Stock (the "Preferred Stock Warrants"), (vi)
warrants to purchase Depositary Shares (the "Depositary Share Warrants"), (vii)
Common Stock, no par value (the "Common Stock" and, together with the Preferred
Stock or Depositary Shares representing Preferred Stock, the "Equity
Securities"), and (viii) warrants to purchase Common Stock (the "Common Stock
Warrants," and together with the Debt Warrants, the Preferred Stock Warrants,
and the Depositary Share Warrants, being collectively referred to herein as the
"Securities Warrants") in amounts, at prices, and on terms to be determined at
the time of the offering. The Debt Securities, Securities Warrants, Preferred
Stock, Depositary Shares and Common Stock offered hereby are collectively
referred to herein as the "Securities."
The Securities offered pursuant to this Prospectus may be offered separately
or together in one or more series up to an aggregate initial public offering
price of $300,000,000 or the equivalent thereof in one or more foreign
currencies or units of one or more foreign currencies or composite currencies
(such as European Currency Units), at individual prices and on terms to be set
forth in one or more supplements to this Prospectus (each, a "Prospectus
Supplement"); provided, however, that the amount of Equity Securities issuable
hereunder may be further limited to that which is permissible under Rule
415(a)(4). The particular terms of the Securities offered by any Prospectus
Supplement will be described in the Prospectus Supplement relating to such
Securities (an "Applicable Prospectus Supplement").
The Senior Debt Securities, when issued, will rank equally with all other
unsubordinated and unsecured indebtedness of the Corporation. The Subordinated
Debt Securities, when issued, will be subordinate to all existing and future
obligations of the Corporation to its other creditors, except obligations
ranking on a parity with or junior to the Subordinated Debt Securities. See
"Description of Debt Securities -- Subordination of Subordinated Debt
Securities." The Debt Securities of any series may be issued with Securities
Warrants, and, in the case of the Subordinated Debt Securities, may be
convertible into Equity Securities of the Corporation. Unless otherwise
indicated in a Prospectus Supplement, the maturity of the Subordinated Debt
Securities will be subject to acceleration only in the event of certain events
of bankruptcy, insolvency, or reorganization of the Corporation. See
"Description of Debt Securities -- Events of Default".
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in a Prospectus Supplement and, among other
things, will include, where applicable, (i) in the case of Debt Securities, the
specific designation, aggregate principal amount, currency, denomination,
maturity, priority, premium, if any, rate of interest (which may be variable or
fixed), time of payment of interest, terms for optional redemption or repayment
by the Corporation or any holder and for sinking fund payments, terms for
conversion, the initial public offering price, any special provisions related to
Debt Securities denominated in a foreign currency or issued as medium-term
notes, original issue discount securities, or with other special terms, and the
designation of any applicable trustee, security registrar, or paying agent, (ii)
in the case of shares of Preferred Stock, the specific title and stated value,
number of shares or fractional interests therein, any dividend, liquidation,
redemption, voting, and other rights, the terms for conversion, if any, the
initial public offering price, and whether such shares are to be issued as
Depositary Shares, and, if so, the fraction of a share to be represented by each
Depositary Share and the designation of the Depositary (as defined herein),
(iii) in the case of Common Stock, the aggregate number of shares offered and
the initial offering price, and (iv) in the case of Securities Warrants, where
applicable, the applicable type and amount of securities covered thereby, and,
where applicable, the aggregate amount, duration, offering price, exercise
price, and detachability.
A Prospectus Supplement will also contain information, where applicable,
about certain U.S. Federal income tax, accounting, and other considerations
relating to, and any listing on a securities exchange of, the Securities covered
by the Prospectus Supplement.
THE SECURITIES WILL BE OBLIGATIONS OF THE CORPORATION, ARE NOT AND WILL NOT
BE SAVINGS ACCOUNTS OR DEPOSITS, WILL NOT BE OTHER OBLIGATIONS OF ANY BANK OR
NONBANK SUBSIDIARY OF THE CORPORATION, AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION
INSURANCE FUND, OR ANY OTHER GOVERNMENT AGENCY OR INSTRUMENTALITY.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Securities may be sold to underwriters pursuant to the terms of the
offering fixed at the time of sale, directly by the Corporation, or through
dealers or agents designated from time to time by the Corporation, which agents
may be affiliates of the Corporation. Each Prospectus Supplement will set forth
the names of the underwriters, dealers, or agents, if any, and any applicable
fees, commissions, or discounts and the net proceeds to the Corporation from
such sale together with the terms of the offering. See "Plan of Distribution."
The date of this Prospectus is February 7, 1996.
<PAGE> 18
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports, proxy statements, and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements, and other information filed by the Corporation 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 the
Commission's regional offices at The Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Thirteenth
Floor, New York, New York 10048. Copies of such material can be obtained by mail
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Common Stock of the Corporation
is quoted on the Nasdaq National Stock Market (symbol: DEPS), and such reports,
proxy statements, and other information concerning the Corporation also may be
inspected at the offices of the National Association of Securities Dealers, Inc.
at 9513 Key West Avenue, Rockville, Maryland 20850-3389.
The Prospectus constitutes part of a registration statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Corporation with the Commission under the Securities
Act. This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted from this Prospectus
in accordance with the rules and regulations of the Commission. Reference is
made to the Registration Statement and to the exhibits thereto for further
information pertaining to the Corporation and the Securities offered hereby. The
Registration Statement (and exhibits thereto) may be inspected without charge at
the office of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and copies thereof may be obtained from the Commission at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this Prospectus the following
documents and information heretofore filed by the Corporation with the
Commission:
1. The Corporation's Annual Report on Form 10-K for the year ended
December 31, 1994;
2. The Corporation's Quarterly Reports on Form 10-Q for the quarters
ended March 30, 1995, June 30, 1995 and September 30, 1995;
3. The description of capital stock contained in Item 14 of the
Corporation's Registration Statement on Form 10 filed April 21, 1970, Item
4 of the Corporation's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1982, Item 4 of the Corporation's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1986, Item 4 of the Corporation's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1987, relating to the
description of the Corporation's Common Stock; and
4. The Corporation's Current Report on Form 8-K dated September 26,
1995.
All reports subsequently filed by the Corporation pursuant to Sections
13(a), 13(c), 14, or 15(d) of the Exchange Act prior to the termination of the
offering of the Securities offered hereby shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in a Prospectus Supplement, or any other subsequently filed
document which also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
THE CORPORATION WILL PROVIDE UPON REQUEST AND WITHOUT CHARGE TO EACH PERSON
TO WHOM THIS PROSPECTUS IS DELIVERED A COPY OF ANY OR ALL OF THE FOREGOING
DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED THEREIN BY REFERENCE). WRITTEN
REQUESTS SHOULD BE DIRECTED TO ROBERT G.
2
<PAGE> 19
BARNETT, GENERAL COUNSEL AND SECRETARY, DEPOSIT GUARANTY CORP., 210 EAST CAPITOL
STREET, POST OFFICE BOX 730, JACKSON, MISSISSIPPI, 39205. (TELEPHONE (601)
354-8497).
NO DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
CORPORATION OR ANY UNDERWRITER OR AGENT. THIS PROSPECTUS MAY NOT BE USED TO
CONSUMMATE SALES OF THE SECURITIES UNLESS ACCOMPANIED BY A PROSPECTUS
SUPPLEMENT. THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE REGISTERED SECURITIES TO WHICH THEY RELATE AND DO NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR
ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE CORPORATION SINCE THE DATE HEREOF OR THEREOF OR THAT THE
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO SUCH DATE.
UNLESS OTHERWISE INDICATED, CURRENCY AMOUNTS IN THIS PROSPECTUS AND ANY
PROSPECTUS SUPPLEMENT ARE STATED IN U.S. DOLLARS ("$," "DOLLARS," "U.S.
DOLLARS," OR "U.S. $").
THE CORPORATION
Deposit Guaranty Corp. (the "Corporation") is a Mississippi business
corporation organized in 1968 as a bank holding company registered under the
Bank Holding Company Act of 1956, as amended (the "BHCA"). The Corporation is
headquartered at 210 East Capitol Street, Jackson, Mississippi 39201, telephone
(601) 354-8497. Its principal subsidiaries are Deposit Guaranty National Bank
("Deposit Guaranty"), a national banking association, with its principal office
in Jackson, Mississippi, Commercial National Bank ("Commercial"), a national
banking association with its principal office in Shreveport, Louisiana, Citizens
National Bank ("Citizens National"), a national banking association with its
principal office in Hammond, Louisiana and Merchants National Bank
("Merchants"), a national banking association with its principal office in Fort
Smith, Arkansas. The Corporation, through its subsidiaries, provides
comprehensive corporate, commercial, correspondent and individual banking
services, and personal and corporate trust services.
As of December 31, 1994, the Corporation had total assets of $5.1 billion,
total deposits of $4 billion, total loans of $2.9 billion and shareholders'
equity of $443.5 million. Based on total assets at December 31, 1994, the
Corporation ranked first among Mississippi-based bank holding companies.
Deposit Guaranty is located throughout Mississippi with approximately 133
banking locations and is the second largest bank in Mississippi.
Commercial is located in Louisiana. It is the fifth largest bank in
Louisiana and has nineteen banking locations in the Shreveport/Bossier market
and five branches in the Monroe/West Monroe market.
Deposit Guaranty, through its wholly-owned subsidiary, Deposit Guaranty
Mortgage Company, acts as a mortgage lender, mortgage banker, mortgage broker
and mortgage servicing agent throughout Mississippi and Shreveport/Bossier. On
August 8, 1995, Deposit Guaranty Mortgage Company acquired First Mortgage Corp,
located in Omaha, Nebraska for $15.8 million in a purchase business combination.
First Mortgage Corp. has a $1.1 billion mortgage servicing portfolio and 6
production offices in Nebraska and Oklahoma.
3
<PAGE> 20
The Corporation provides investment advice and brokerage services through
three indirect subsidiaries, Deposit Guaranty Investments, Inc., a subsidiary of
Deposit Guaranty, Commercial National Brokerage Services, Inc., a subsidiary of
Commercial and Merchants Investment Center, Inc., a subsidiary of Merchants.
The Corporation provides credit insurance related to extensions of credit
by its bank subsidiaries through its subsidiary, G&W Life Insurance Company.
During 1994, the Corporation acquired First Columbus Financial Corporation
and its wholly-owned subsidiary First Columbus National Bank located in
Columbus, Mississippi, with assets of approximately $209 million. First Columbus
Financial Corporation was merged into the Corporation and First Columbus
National Bank was merged into Deposit Guaranty. At year end 1994, the
Corporation acquired LBO Bancorp, Inc., with assets having a fair value of $109
million, and its wholly-owned subsidiary, Louisiana Bank, located in West
Monroe, Louisiana. LBO Bancorp, Inc. was merged into a subsidiary of the
Corporation and Louisiana Bank was merged into Commercial. On March 10, 1994,
the Corporation purchased the Coahoma County, Mississippi operations of a local
Mississippi bank. This acquisition added assets of approximately $82 million.
On May 19, 1995, the Corporation exchanged 1.4 million shares of Common
Stock for all of the outstanding shares of Citizens National Bancshares, Inc.
("Citizens"), a bank holding company, in a pooling of interests transaction.
Citizens had assets of approximately $193 million at the date of acquisition.
On August 31, 1995, the Corporation exchanged 994,026 shares of Common
Stock and $3.7 million for all of the outstanding shares of common stock of
First Merchants Financial Corporation ("First Merchants"), a bank holding
company with approximately $280 million in total assets. First Merchants was
then merged into Deposit Guaranty Arkansas Corp., a wholly-owned subsidiary of
Deposit Guaranty Corp., which will continue to operate six branches in the Fort
Smith market under the name Merchants National Bank.
The Corporation is a legal entity separate and distinct from its banking
and other subsidiaries. Accordingly, the right of the Corporation, its
securityholders and its creditors to participate in any distribution of the
assets or earnings of its banking and other subsidiaries is necessarily subject
to the prior claims of the respective creditors of such banking and other
subsidiaries, except to the extent that claims of the Corporation in its
capacity as a creditor of such banking and other subsidiaries may be recognized.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The Corporation's ratios of earnings to fixed charges and to combined fixed
charges and preferred stock dividends are set forth below for the periods
indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- -------------
1990 1991 1992 1993 1994 1994 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings to Fixed Charges and to Combined Fixed
Charges and Preferred Stock Dividend
Requirements:
Excluding Interest on Deposits................... 1.85 2.57 4.48 7.48 7.01 7.12 4.69
Including Interest on Deposits................... 1.13 1.18 1.38 1.75 1.79 1.78 1.65
</TABLE>
For purposes of computing the above ratios, earnings represent consolidated
income before income taxes plus fixed charges. Fixed charges include interest
expense (excluding or including interest on deposits, as the case may be) and
the proportion deemed representative of the interest factor of rental expense,
net of income from subleases. The Corporation had no outstanding preferred stock
for the periods shown.
4
<PAGE> 21
REGULATORY MATTERS
GENERAL
The Corporation is a bank holding company subject to supervision and
regulation by the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") under the BHCA. As a bank holding company, the Corporation's
activities and those of its banking and nonbanking subsidiaries are limited to
the business of banking and activities closely related or incidental to banking,
and the Corporation may not directly or indirectly acquire the ownership or
control of more than five percent of any class of voting shares or substantially
all of the assets of any company, including a bank, without the prior approval
of the Federal Reserve Board.
The Corporation's bank subsidiaries, Deposit Guaranty, Commercial, Citizens
National and Merchants, are national banks subject to supervision and
examination by the Office of the Comptroller of the Currency (the "OCC"). The
Federal Deposit Insurance Corporation (the "FDIC") also has back-up enforcement
authority with respect to these bank subsidiaries. The Corporation's bank
subsidiaries are insured by, and subject to certain regulations of, the FDIC,
and are also subject to requirements and restrictions under federal and state
law, including requirements to maintain reserves against deposits, restrictions
on the types and amounts of loans that may be made and the interest that may be
charged thereon, and limitations on the types of investments that may be made
and the types of services that may be offered. Various consumer laws and
regulations also affect the operations of the Corporation's bank subsidiaries.
The following description summarizes some of the laws to which the
Corporation and its bank subsidiaries are subject. To the extent statutory or
regulatory provisions or proposals are described, the description is qualified
in its entirety by reference to the particular statutory or regulatory
provisions or proposals.
REGULATORY RESTRICTIONS ON DIVIDENDS
It is the policy of the Federal Reserve Board that bank holding companies
should pay cash dividends on common stock only out of income available over the
past year and only if prospective earnings retention is consistent with the
organization's expected future needs and financial condition. The policy
provides that bank holding companies should not maintain a level of cash
dividends that undermines the bank holding company's ability to serve as a
source of strength to its bank subsidiaries. Principal sources of revenues for
the Corporation are dividends received from its banks and other subsidiaries and
interest earned on short-term investments and advances to subsidiaries.
Federal law imposes limitations on the payment of dividends by the national
bank subsidiaries of the Corporation. Two different calculations are performed
to measure the amount of dividends that may be paid: a recent earnings test and
a cumulative net profit test. Under the recent earnings test, a dividend may not
be paid if the total of all dividends declared by a national bank in any
calendar year is in excess of the current year's net profits combined with the
retained net profits of the two preceding years unless the bank obtains the
approval of the OCC. Under the cumulative net undivided profits test, a dividend
may not be paid in excess of a bank's cumulative net profits after deducting bad
debts in excess of the reserve for loan losses. Under the recent earnings test,
which is the more restrictive of the two tests, at September 30, 1995, Deposit
Guaranty, Commercial, Citizens National and Merchants could pay dividends of
$103.4 million, $26.1 million, $4.2 million and $1.7 million, respectively, to
the Corporation without prior approval of the OCC. Deposit Guaranty, Commercial,
Citizens National and Merchants had undivided profits of $193.3 million, $43.0
million, $14.3 million and $146 thousand, respectively, at September 30, 1995.
In addition, the federal regulatory agencies are authorized to prohibit a
national bank or bank holding company from engaging in an unsafe or unsound
banking practice. Depending upon the circumstances, the agencies could take the
position that paying a dividend would constitute an unsafe or unsound banking
practice.
5
<PAGE> 22
HOLDING COMPANY STRUCTURE
The Corporation's bank subsidiaries are subject to restrictions under
federal law which limit certain transactions by each of them with the
Corporation and its nonbanking subsidiaries, including loans, other extensions
of credit, investments or asset purchases. Such transactions by any bank
subsidiary with the Corporation or any of its nonbanking subsidiaries are
limited in amount to ten percent of such bank subsidiary's capital and surplus
and, with respect to the Corporation and all of its nonbanking subsidiaries
together, to an aggregate of twenty percent of such bank subsidiary's capital
and surplus. Furthermore, such loans and extensions of credit, as well as
certain other transactions, are required to be secured in specified amounts.
These and certain other transactions, including any payment of money to the
Corporation, must be on terms and conditions that are or in good faith would be
offered to nonaffiliated companies.
Because the Corporation is a legal entity separate and distinct from its
banking and nonbanking subsidiaries, its right to participate in the
distribution of assets of any subsidiary upon the subsidiary's liquidation or
reorganization will be subject to the prior claims of the subsidiary's creditors
(including depositors in the case of bank subsidiaries) except to the extent
that the Corporation may itself be a creditor with recognized claims against the
subsidiary. However, in the event of a liquidation or other resolution of an
insured depository institution, the claims of depositors and other general or
subordinated creditors are entitled to a priority of payment over the claims of
holders of any obligation of the institution to its shareholders, including any
depository institution holding company or any shareholder or creditor thereof.
CROSS-GUARANTY AND HOLDING COMPANY LIABILITY
A depository institution insured by the FDIC can be held liable for any
loss incurred by, or reasonably expected to be incurred by, the FDIC in
connection with (i) the default of a commonly controlled FDIC-insured depository
institution or (ii) any assistance provided by the FDIC to a commonly controlled
depository institution in danger of default. Each of the Corporation's bank
subsidiaries is a commonly controlled depository institution. Cross-guarantee
liability may result in the ultimate failure or insolvency of one or more
insured depository institutions in a holding company structure. Any obligation
or liability owed by a bank subsidiary to its parent company or any of the bank
subsidiary's other affiliates is subordinate to the bank subsidiary's
cross-guarantee liability.
Under Federal Reserve Board policy, a bank holding company is expected to
act as a source of financial strength to each of its banking subsidiaries and
commit resources to their support. Such support may be required at times when,
absent this Federal Reserve Board policy, a holding company may not be inclined
to provide it. As discussed below under "Prompt Corrective Action," a bank
holding company in certain circumstances could be required to guarantee the
capital plan of an undercapitalized bank subsidiary.
In the event of a bank holding company's bankruptcy under Chapter 11 of the
U.S. Bankruptcy Code, the trustee will be deemed to have assumed and is required
to cure immediately any deficit under any commitment by the debtor holding
company to any of the federal banking agencies to maintain the capital of an
insured depository institution, and any claim for breach of such obligation will
generally have priority over most other unsecured claims.
PROMPT CORRECTIVE ACTION
Under the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), the federal banking agencies must take prompt supervisory and
regulatory actions against undercapitalized depository institutions. Depository
institutions are assigned one of five capital categories: "well capitalized,"
"adequately capitalized," "undercapitalized," "significantly undercapitalized,"
and "critically undercapitalized," and subjected to differential regulation
corresponding to the capital category within which the institution falls. Under
certain circumstances, a well capitalized, adequately capitalized or
undercapitalized institution may be treated as if the institution were in the
next lower capital category. A depository institution is generally prohibited
from making capital distributions (including paying dividends) or paying
management fees to a holding company if the institution would thereafter be
undercapitalized. Adequately capitalized institutions cannot accept, renew or
roll over brokered deposits except with a waiver from the FDIC, and are subject
to
6
<PAGE> 23
restrictions on the interest rates that can be paid on such deposits.
Undercapitalized institutions may not accept, renew, or roll over brokered
deposits.
The banking regulatory agencies are permitted or, in certain cases,
required to take certain actions with respect to institutions falling within one
of the three undercapitalized categories. Depending on the level of an
institution's capital, the agency's corrective powers include, among other
things: placing limits on asset growth and restrictions on activities; placing
additional restrictions on transactions with affiliates; restricting the
interest rate the institution may pay on deposits; prohibiting the institution
from accepting deposits from correspondent banks; prohibiting the payment of
principal and interest on subordinated debt; prohibiting the holding company
from making distributions without prior regulatory approval; and in the most
severe cases, appointing a conservator or receiver for the institution. A bank
that is undercapitalized is required to submit a capital restoration plan, and
such a plan will not be accepted unless, among other things, the bank's holding
company guarantees the plan up to a certain specified amount. As of September
30, 1995 all of the Corporation's bank subsidiaries exceeded the required
capital ratios for classification as "well capitalized." See "Capital Adequacy."
FDIC INSURANCE ASSESSMENTS
The Corporation's bank subsidiaries, the deposits of which are insured, up
to applicable limits, by the Bank Insurance Fund (the "BIF") of the FDIC, are
subject to FDIC deposit insurance assessments.
The FDIC has adopted a risk-based assessment system under which the
assessment rate for an insured depository institution varies according to the
level of risk involved in its activities. Under this risk-based insurance
system, effective January 1, 1996, the rates applicable to BIF-assessed deposits
have been reduced by 4 basis points from between 4 and 31 cents per $100 of
deposits to between 0 and 27 cents per $100 of deposits. As of that date, the
rate assessed for each of the Corporation's bank subsidiaries decreased from 4
cents per $100 of eligible deposits to zero, subject to a minimum assessment of
$2,000 per institution per year.
Most thrift institutions are insured by the Savings Association Insurance
Fund (the "SAIF") of the FDIC and are currently assessed deposit insurance
premiums higher than those assessed against most BIF institutions. In response
to concerns that such an insurance premium disparity would have a negative
effect on SAIF-insured institutions and the SAIF, Congress recently passed
legislation that would have, among other things, eliminated the deposit
insurance premium disparity and utilized BIF assessments to help fund debt
service on certain Financing Corporation (FICO) bonds, which could have resulted
in higher insurance premiums for BIF-insured institutions. This legislation,
which was part of budget reconciliation proposals passed by Congress, was vetoed
by President Clinton in December 1995, but could reappear in subsequent budget
legislation. In addition, other bills have been introduced in Congress that also
attempt to eliminate the BIF-SAIF assessment disparity. It cannot be predicted
whether, when or in what form any such legislation will be enacted, or what
effect such legislation will have on BIF-insured institutions such as the
Corporation's bank subsidiaries.
CAPITAL ADEQUACY
RISK-BASED CAPITAL AND LEVERAGE RATIOS
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1995
-------------------------------- MINIMUM "WELL
DEPOSIT CITIZENS REQUIRED CAPITALIZED"
CORPORATION GUARANTY COMMERCIAL NATIONAL MERCHANTS RATIO MINIMUM RATIO
----------- -------- ---------- -------- --------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total stockholders'
equity
Tier 1 capital........... 10.91% 10.66% 13.93% 20.06% 12.17% 4.00% 6%
Total capital............ 12.17% 11.91% 15.19% 21.31% 13.42% 8.00% 10%
Risk-weighted assets
Leverage ratio........... 7.95% 7.98% 8.57% 10.44% 7.57% 3.00% 5%
</TABLE>
The Federal Reserve Board has adopted risk-based capital guidelines for
bank holding companies such as the Corporation. The minimum ratio of total
capital to risk-weighted assets (which are the credit risk
7
<PAGE> 24
equivalents of balance sheet assets and certain off balance sheet items such as
standby letters of credit) is 8.00 percent. At least half of the total capital
must be composed of common stockholders' equity (including retained earnings),
qualifying non-cumulative perpetual preferred stock, and a limited amount of
qualifying cumulative perpetual preferred stock and minority interests in the
equity accounts of consolidated subsidiaries, less goodwill, other disallowed
intangibles and disallowed deferred tax assets, among other items ("Tier 1
capital"). The remainder may consist of a limited amount of subordinated debt,
other perpetual preferred stock, hybrid capital instruments, mandatory
convertible debt securities that meet certain requirements, as well as a limited
amount of reserves for loan losses ("Tier 2 capital"). The Federal Reserve Board
has also adopted a minimum leverage ratio for bank holding companies, requiring
Tier 1 capital of at least 3.00 percent of average total consolidated assets.
Under the Federal Reserve Board's requirements, the Corporation's Tier 1 and
total capital and leverage ratios at September 30, 1995 were 10.91 percent,
12.17 percent and 7.95 percent, respectively.
The OCC and other federal bank regulatory authorities have also established
risk-based and leverage capital guidelines for banks. These regulations are
generally similar to those established by the Federal Reserve Board for banking
holding companies. Under the OCC guidelines, the Tier 1, total capital and
leverage ratios at September 30, 1995, respectively, for Deposit Guaranty were
10.66 percent, 11.91 percent and 7.98 percent, for Commercial were 13.93
percent, 15.19 percent and 8.57 percent, respectively, for Citizens National,
were 20.06 percent, 21.31 percent and 10.44 percent, respectively and for
Merchants, were 12.17 percent, 13.42 percent and 7.57 percent, respectively.
The federal banking agencies' risk-based and leverage ratios are minimum
supervisory ratios generally applicable to banking organizations that meet
certain specified criteria, assuming that they have the highest regulatory
rating. Banking organizations not meeting these criteria are expected to operate
with capital positions well above the minimum ratios. The federal bank
regulatory agencies may set capital requirements for a particular banking
organization that are higher than the minimum ratios when circumstances warrant.
Federal Reserve Board guidelines also provide that banking organizations
experiencing internal growth or making acquisitions will be expected to maintain
strong capital positions substantially above the minimum supervisory levels,
without significant reliance on intangible assets. In addition, the regulations
of the OCC and the Federal Reserve Board provide that concentration of credit
risk and certain risks arising from nontraditional activities, as well as an
institution's ability to manage these risks, are important factors to be taken
into account by regulatory agencies in assessing an institution's overall
capital adequacy.
The OCC and the Federal Reserve Board recently adopted amendments to their
risk-based capital regulations to provide for the consideration of interest rate
risk in the agencies' determination of a banking institution's capital adequacy.
The amendments require such institutions to effectively measure and monitor
their interest rate risk and to maintain capital adequate for that risk. The
agencies have also issued for comment a joint policy statement that describes a
frame-work that may be used by the agencies to measure and monitor an
institution's level of interest rate risk in the assessment of a bank's capital
adequacy. The agencies plan at some future date to propose the establishment of
an explicit minimum capital requirement to account for interest rate risk.
As discussed below under "Enforcement Powers," failure to meet the minimum
regulatory capital requirements could subject a banking institution to a variety
of enforcement remedies available to federal regulatory authorities, including,
in the most severe cases, the termination of deposit insurance by the FDIC and
placing the institution into conservatorship or receivership.
ENFORCEMENT POWERS OF THE FEDERAL BANKING AGENCIES
The OCC, the Federal Reserve Board, and the FDIC have broad enforcement
powers, including the power to terminate deposit insurance, impose substantial
fines and other civil and criminal penalties and appoint a conservator or
receiver. Failure to comply with applicable laws, regulations and supervisory
agreements could subject the Corporation or its bank subsidiaries, as well as
officers, directors and other institution-affiliated parties of these
organizations, to administrative sanctions and potentially substantial civil
money penalties. In addition to the grounds discussed under "Prompt Corrective
Action," the OCC may
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appoint the FDIC as conservator or receiver for a bank (or the FDIC may appoint
itself, under certain circumstances) if any one or more of a number of
circumstances exist, including, without limitation, the fact that the bank is
undercapitalized and has no reasonable prospect of becoming adequately
capitalized; fails to become adequately capitalized when required to do so;
fails to submit a timely and acceptable capital restoration plan; or materially
fails to implement an accepted capital restoration plan.
CONTROL ACQUISITIONS
The Change in Bank Control Act (the "CBCA") prohibits a person or group of
persons from acquiring "control" of a bank holding company unless the Federal
Reserve Board has been notified and has not objected to the transaction. Under a
rebuttable presumption established by the Federal Reserve Board, the acquisition
of 10% or more of a class of voting stock of a bank holding company with a class
of securities registered under Section 12 of the Exchange Act, such as the
Corporation, would, under the circumstances set forth in the presumption,
constitute acquisition of control of the Company.
In addition, any company is required to obtain the approval of the Federal
Reserve Board under the BHCA before acquiring 25% (5% in the case of an acquiror
that is a banking holding company) or more of the outstanding Common Stock of
the Corporation, or otherwise obtaining control or a "controlling influence"
over the Corporation.
Effective September 24, 1995, the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 has permitted an adequately capitalized and
adequately managed bank holding company, with Federal Reserve Board approval, to
acquire banks located in states other than the bank holding company's home state
without regard to whether the transaction is prohibited under state law. In
addition, effective June 1, 1997, national banks and state banks with different
home states will be permitted to merge across state lines, with the approval of
the appropriate federal banking agency, unless the home state of a participating
bank passes legislation prior to this date that expressly prohibits interstate
mergers. Further, such interstate mergers may be effected prior to June 1, 1997
so long as the home state of each participating bank has passed qualifying
legislation that expressly permits such transactions.
FUTURE LEGISLATION
Various legislation, including proposals to overhaul the bank regulatory
system, expand bank and bank holding company powers and limit the investments
that a depository institution may make with insured funds, is from time to time
introduced in Congress. Such legislation may change banking statutes and the
operating environment of the Corporation and its bank subsidiaries in
substantial and unpredictable ways. The Corporation cannot determine the
ultimate effect that potential legislation, if enacted, or implementing
regulations, would have upon the financial condition or results of operations of
the Corporation or its subsidiaries.
USE OF PROCEEDS
Unless otherwise set forth in the Applicable Prospectus Supplement, the
Corporation intends to use the net proceeds from the sale of the Securities for
general corporate purposes, including investments in, and advances to, the
Corporation's banking and nonbanking subsidiaries, reduction of short-term
borrowings, investments, and financing possible future acquisitions including,
without limitation, the acquisition of banking and nonbanking companies and
financial assets and liabilities. The Corporation may also use part of the net
proceeds from the sale of the Securities for the repurchase of its Common Stock.
DESCRIPTION OF DEBT SECURITIES
The Senior Debt Securities are to be issued under an Indenture (the "Senior
Indenture"), between the Corporation and SunTrust Bank, Atlanta, as trustee. The
Subordinated Debt Securities are to be issued under a second Indenture (the
"Subordinated Indenture"), between the Corporation and SunTrust Bank, Atlanta,
as trustee. Copies of the Senior Indenture and the Subordinated Indenture have
been filed with the
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Commission as exhibits to the Registration Statement. The Senior Indenture and
the Subordinated Indenture are sometimes referred to collectively as the
"Indentures." SunTrust Bank, Atlanta is hereinafter referred to as the "Senior
Trustee" when referring to it in its capacity as trustee under the Senior
Indenture, as the "Subordinated Trustee" when referring to it in its capacity as
trustee under the Subordinated Indenture, and as the "Trustee" when referring to
it in its capacity as trustee under both of the Indentures. The following
summaries of certain provisions of the Senior Debt Securities, the Subordinated
Debt Securities and the Indentures do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all the provisions of
the Indenture applicable to a particular series of Debt Securities (the
"Applicable Indenture"), including the definitions therein of certain terms.
Wherever particular Sections, Articles or defined terms of the Applicable
Indenture are referred to, it is intended that such Sections, Articles or
defined terms shall be incorporated herein by reference. Article and Section
references used herein are references to the Applicable Indenture. Capitalized
terms not otherwise defined herein shall have the meaning given in the
Applicable Indenture.
The following sets forth certain general terms and provisions of the Debt
Securities offered hereby. The particular terms of the Debt Securities offered
by any Prospectus Supplement (the "Offered Debt Securities") will be described
in the Prospectus Supplement relating to such Offered Debt Securities (the
"Applicable Prospectus Supplement").
The Corporation is a banking holding company, and the right of the
Corporation to participate as a shareholder in any distribution of assets of any
subsidiary upon its liquidation or reorganization or winding-up (and thus the
ability of Holders of the Debt Securities to benefit, as creditors of the
Corporation, from such distribution) is subject to the prior claims of creditors
of any such subsidiary. The Corporation's bank subsidiaries are subject to
claims by creditors for debt obligations, including deposit liabilities,
obligations for federal funds purchased and securities sold under repurchase
agreements. There are also various legal limitations on the extent to which the
Corporation's bank subsidiaries may pay dividends or otherwise supply funds to
the Corporation or its affiliates. See "Regulatory Matters."
GENERAL
The Indentures do not limit the amount of Debt Securities that may be
issued thereunder and provide that Debt Securities may be issued thereunder from
time to time in one or more series. The Debt Securities will be unsecured
obligations of the Corporation. The Applicable Prospectus Supplement will set
forth the aggregate amount of outstanding indebtedness as of the most recent
practicable date that by the terms of such Debt Securities would be senior to
the Subordinated Debt Securities and will state any limitation on the issuance
of additional Senior Indebtedness.
Unless otherwise indicated in the Applicable Prospectus Supplement,
principal of, premium, if any, and interest on the Debt Securities will be
payable, and the transfer of Debt Securities will be registrable, at the office
or agency of the Corporation in each Place of Payment maintained by the
Corporation and at any other office or agency maintained by the Corporation for
such purpose, except that, at the option of the Corporation, interest may be
paid by mailing a check to the address of the Person entitled thereto as it
appears on the register for the Debt Securities. (Sections 3.1, 3.5, 3.7 and
10.2) The Debt Securities will be issued only in fully registered form without
coupons and, unless otherwise indicated in the Applicable Prospectus Supplement,
in denominations of $1,000 or integral multiples thereof. (Section 3.2) No
service charge will be made for any registration of transfer or exchange of the
Debt Securities, but the Corporation may require payment of a sum sufficient to
cover any tax or other governmental charge imposed in connection therewith.
(Section 3.5)
The Applicable Prospectus Supplement will describe the following terms of
the Offered Debt Securities: (1) the title of the Offered Debt Securities; (2)
whether the Offered Debt Securities are Senior Debt Securities or Subordinated
Debt Securities; (3) any limit on the aggregate principal amount of the Offered
Debt Securities; (4) the Person to whom any interest on the Offered Debt
Securities is payable if other than the Person in whose name any such Offered
Debt Securities are registered; (5) the date or dates on which the principal of
the Offered Debt Securities will mature; (6) the rate or rates per annum (which
may be fixed or variable) at which the Offered Debt Securities will bear
interest, if any, and the date or dates from which any
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such interest, if any, will accrue; (7) the dates on which such interest, if
any, on the Offered Debt Securities will be payable and the Regular Record Dates
for such Interest Payment Dates; (8) the place or places where the principal of
and any premium and interest on the Offered Debt Securities shall be payable;
(9) any mandatory or optional sinking funds or analogous provisions; (10) the
date, if any, after which and the price or prices at which the Offered Debt
Securities may, pursuant to any optional or mandatory redemption provisions, be
redeemed and the other detailed terms and provisions of any such optional or
mandatory redemption provision; (11) the obligation of the Corporation, if any,
to redeem or repurchase the Offered Debt Securities at the option of the Holder;
(12) if other than denominations of $1,000 and any integral multiple thereof,
the denominations in which the Offered Debt Securities shall be issuable; (13)
if other than the principal amount thereof, the portion of the principal amount
of the Offered Debt Securities that will be payable upon the declaration of
acceleration of the Maturity thereof; (14) the currency of payment of principal
of and any premium and interest on the Offered Debt Securities; (15) any index
used to determine the amount of payment of principal of, and any premium and
interest on, the Offered Debt Securities; (16) if the Offered Debt Securities
will be issuable only in the form of a Global Security, the Depositary or its
nominee with respect to the Offered Debt Securities and the circumstances under
which the Global Security may be registered for transfer or exchange in the name
of a Person other than the Depositary or its nominee; (17) the applicability, if
any, of the provisions described under "Defeasance and Covenant Defeasance";
(18) any additional Event of Default, and in the case of any Offered
Subordinated Debt Securities, any additional Event of Default that would result
in the acceleration of the maturity thereof; and (19) any other terms of the
Offered Debt Securities. (Section 3.1)
Both Senior Debt Securities and Subordinated Debt Securities may be issued
as Original Issue Discount Debt Securities to be offered and sold at a
substantial discount below their stated principal amount. Federal income tax
consequences and other special considerations applicable to any such Original
Issue Discount Debt Securities will be described in the Applicable Prospectus
Supplement. "Original Issue Discount Debt Security" means any Debt Security
which provides for an amount less than the principal amount thereof to be due
and payable upon the declaration of acceleration of the Maturity thereof upon
the occurrence of an Event of Default and the continuation thereof. (Section
1.1)
Unless otherwise indicated in the Applicable Prospectus Supplement, the
covenants contained in the Indentures and the Debt Securities will not afford
Holders protection in the event of a sudden decline in credit rating that might
result from a recapitalization, restructuring, or other highly leveraged
transaction.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the Applicable Prospectus Supplement, the
following provisions will apply to the Subordinated Debt Securities.
The payment of the principal of, and interest on, the Subordinated Debt
Securities will, to the extent set forth in the Subordinated Indenture, be
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness (as defined below). (Section 13.1) In certain events of insolvency,
bankruptcy, reorganization or similar events involving the Corporation, the
payment of the principal of and the interest on the Subordinated Debt Securities
will, to the extent set forth in the Subordinated Indenture, also effectively be
subordinated in right of payment to the prior payment in full of all Other
Financial Obligations (as defined below). Upon any payment or distribution of
assets to creditors upon any liquidation, dissolution, winding up,
reorganization, assignment for the benefit of creditors, marshalling of assets
or any bankruptcy, insolvency or similar proceedings of the Corporation, the
holders of all Senior Indebtedness will first be entitled to receive payment in
full of all amounts due or to become due thereon before the Holders of the
Subordinated Debt Securities will be entitled to receive any payment in respect
of the principal of, or interest on, the Subordinated Debt Securities. (Section
13.2) If, upon any such payment or distribution of assets to creditors, there
remain, after giving effect to such subordination provisions in favor of the
holders of Senior Indebtedness, any amounts of cash, property or securities
available for payment or distribution in respect of the Senior Debt Securities
(as defined in the Subordinated Indenture, "Excess Proceeds") and if, at such
time, any person entitled to payment pursuant to the terms of the Other
Financial Obligations (as defined in the Subordinated Indenture, "Entitled
Person") has not received payment in full of all amounts due or to
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become due on or in respect of such Other Financial Obligations, then such
Excess Proceeds shall first be applied to pay or provide for the payment in full
of such Other Financial Obligations before any payment or distribution may be
made in respect of the Subordinated Debt Securities. In the event of the
acceleration of the Maturity of any Subordinated Debt Securities, the holders of
all Senior Indebtedness will first be entitled to receive payment in full of all
amounts due or to become due thereon before the Holders of the Subordinated Debt
Securities will be entitled to receive any payment of principal of, or interest
on, the Subordinated Debt Securities. (Section 13.3) Accordingly, in a case of
such an acceleration, all Senior Indebtedness would have to be repaid before any
payment could be made in respect of the Subordinated Debt Securities. No
payments on account of principal or interest in respect of the Subordinated Debt
Securities may be made if there shall have occurred and be continuing a default
in any payment with respect to any Senior Indebtedness, or an event of default
with respect to any Senior Indebtedness permitting the holders thereof to
accelerate the maturity thereof, or if any judicial proceeding shall be pending
with respect to any such default. (Section 13.4)
By reason of such subordination, in the event of the insolvency of the
Corporation, creditors of the Corporation who are not holders of Senior
Indebtedness or the Subordinated Debt Securities may recover less, ratably, than
holders of Senior Indebtedness and may recover more, ratably, than Holders of
the Subordinated Debt Securities.
"Senior Indebtedness" is defined in the Subordinated Indenture to mean the
principal of, premium, if any, and interest on (i) all indebtedness of the
Corporation for money borrowed (including indebtedness of others guaranteed by
the Corporation) other than the Subordinated Debt Securities, whether
outstanding on the date of execution of the Subordinated Indenture or thereafter
created, assumed or incurred and (ii) any amendments, renewals, extensions,
modifications and refundings of any such indebtedness, unless in either case in
the instrument creating or evidencing any such indebtedness or pursuant to which
it is outstanding it is provided that such indebtedness is not superior in right
of payment to the Subordinated Debt Securities. (Section 1.1) For the purposes
of this definition, "indebtedness for money borrowed" is defined as (i) any
obligation of, or any obligation guaranteed by, the Corporation for the
repayment of borrowed money, whether or not evidenced by bonds, debentures,
notes or other written instruments, (ii) any deferred payment obligation of, or
any such obligation guaranteed by, the Corporation for the payment of the
purchase price of property or assets evidenced by a note or similar instrument,
and (iii) any obligation of, or any such obligation guaranteed by, the
Corporation for the payment of rent or other amounts under a lease of property
or assets which obligation is required to be classified and accounted for as a
capitalized lease on the balance sheet of the Corporation under generally
accepted accounting principles.
"Other Financial Obligations" is defined in the Subordinated Indenture to
mean all obligations of the Corporation to make payment pursuant to the terms of
financial instruments, such as (i) securities contracts and foreign currency
exchange contracts, (ii) derivative instruments, such as swap agreements
(including interest rate and currency and foreign exchange rate swap
agreements), cap agreements, floor agreements, collar agreements, interest rate
agreements, foreign exchange agreements, options, commodity futures contracts,
commodity options, contracts and (iii) similar financial instruments; provided
that the term "Other Financial Obligations" shall not include (A) obligations on
account of Senior Indebtedness and (B) obligations on account of indebtedness of
the Corporation for money borrowed ranking pari passu with or subordinate to the
Subordinated Debt Securities.
The Subordinated Indenture will not limit the amount of other indebtedness,
including Senior Indebtedness and Other Financial Obligations, that may be
issued or incurred by the Corporation or any of its Subsidiaries.
The Prospectus Supplement may further describe the provisions, if any,
applicable to the subordination of the Subordinated Debt Securities of a
particular series.
RESTRICTION ON SALE OR ISSUANCE OF VOTING STOCK OF PRINCIPAL SUBSIDIARIES
The Senior Indenture contains a covenant by the Corporation that, so long
as any Debt Securities under the Applicable Indenture are outstanding, (a) it
will not, and will not permit any Subsidiary to, issue, sell, transfer, assign,
pledge or otherwise dispose of any shares of Voting Stock of any class of any
Principal
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Subsidiary or any securities convertible or exchangeable into or options,
warrants or rights to subscribe for or purchase shares of Voting Stock of any
class of such Principal Subsidiary, unless, after giving effect to such
transaction and to shares issuable upon conversion or exchange of outstanding
securities convertible or exchangeable into such Voting Stock or upon the
exercise of options, warrants or rights (including such securities, if any,
which may be the subject of such transaction), at least 80 percent of the
outstanding shares of Voting Stock of each class of such Principal Subsidiary
shall be owned at that time directly or indirectly by the Corporation, free of
any lien; and (b) it will not permit any Principal Subsidiary to merge or
consolidate or convey or transfer all or substantially all of its assets, unless
at least 80 percent of the outstanding shares of Voting Stock of each class
(after giving effect to such transaction and to shares issuable upon conversion
or exchange of outstanding securities convertible or exchangeable into Voting
Stock or upon the exercise of options, warrants or rights, including such
securities, if any, which may be issued in such transaction) of the surviving
corporation in the case of merger or consolidation or of the transferee
corporation in the case of a conveyance or transfer, shall be owned at the time
directly or indirectly by the Corporation.
As defined in the Senior Indenture, the term "Principal Subsidiary" means
Deposit Guaranty, Commercial, Citizens National or Merchants and any successors
to such banks, and the term "Voting Stock" means stock which ordinarily has
voting power for election of a majority of the board of directors whether at all
times or only so long as no senior class of stock has such voting power by
reason of any contingency.
Notwithstanding the foregoing, any such issuance, sale or disposition of
shares or securities, or any such merger or consolidation or conveyance or
transfer of assets shall not be prohibited if required (a) by any law,
regulation or order of any court or governmental authority of competent
jurisdiction or (b) as a condition imposed by any law, regulation or order of
any court or governmental authority of competent jurisdiction to the acquisition
by the Corporation, directly or indirectly, through purchase of stock or assets,
merger, consolidation or otherwise of any other corporation or entity, if, after
giving effect to such disposition and acquisition, (i) the Corporation would
own, directly or indirectly, more than 80 percent of the Voting Stock of such
other corporation or entity, and (ii) the Consolidated Banking Assets of the
Corporation would be at least equal to the Consolidated Banking Assets of the
Corporation prior to such transaction. For this purpose, "Consolidated Banking
Assets" means all assets owned directly or indirectly by a Bank Subsidiary and
reflected in the Corporation's consolidated statement of condition prepared in
accordance with generally accepted accounting principles. (Section 10.7)
There is no similar restriction on the sale or issuance of Voting Stock by
a Principal Subsidiary in the Subordinated Indenture.
EVENTS OF DEFAULT
The Senior Indenture (with respect to any series of Senior Debt Securities
then outstanding) and, unless otherwise provided in the Applicable Prospectus
Supplement, the Subordinated Indenture (with respect to any series of
Subordinated Debt Securities), define an Event of Default as any one of the
following events: (a) default in the payment of any interest on any Debt
Security of that series when it becomes due and payable, and continuance of such
default for a period of 30 days (in the case of the Subordinated Indenture,
whether or not payment is prohibited by the subordination provisions); (b)
default in the payment of the principal of (or premium, if any, on) any Debt
Security of that series at its Maturity (in the case of the Subordinated
Indenture, whether or not payment is prohibited by the subordination
provisions); (c) failure to deposit any sinking fund payment when, and as, due
by the terms of a Debt Security of that series (in the case of the Subordinated
Indenture, whether or not payment is prohibited by the subordination
provisions); (d) failure to perform any other covenants or agreements of the
Corporation in the Debt Securities of that series or in the Applicable Indenture
(other than covenants or agreements included exclusively in the terms of Debt
Securities of any series other than that series or those included in the
Applicable Indenture solely for the benefit of a series of Debt Securities
thereunder other than that series), and continuance of such default for a period
of 60 days after the holders of at least 25 percent of the principal amount of
the Outstanding Debt Securities of that series have given written notice
specifying such failure as provided in the Applicable Indenture; (e) certain
events in bankruptcy, insolvency or reorganization of the Corporation (and in
the case of the Senior Indenture only, of certain of its Subsidiaries); and (f)
any other Event of Default provided with respect to Debt Securities of that
series. (Section 5.1) If an Event of Default occurs with respect to Debt
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Securities of any series, the Trustee shall give the Holders of Debt Securities
of such series notice of such default, provided, however, that in the case of a
default described in (d) above, no such notice to Holders shall be given until
at least 30 days after the occurrence thereof. (Section 6.2)
If an Event of Default with respect to the Senior Debt Securities of any
series at the time Outstanding occurs and is continuing, either the Trustee or
the Holders of at least 25 percent of the aggregate principal amount of the
Outstanding Debt Securities of that series may declare the principal amount (or,
if the Debt Securities of that series are Original Issue Discount Debt
Securities, such portion of the principal amount as may be specified in the
terms thereof) of all the Senior Debt Securities of that series to be due and
payable immediately. Payment of the principal of the Subordinated Debt
Securities may be accelerated only in the case of certain events of bankruptcy,
insolvency or reorganization of the Corporation. The Trustee and the Holders
will not be entitled to accelerate the maturity of the Subordinated Debt
Securities upon the occurrence of any of the Events of Default described above
except for those described in subparagraph (e) with respect to the Subordinated
Debt Securities (i.e., certain events in bankruptcy, insolvency or
reorganization of the Corporation). Accordingly, there is no right of
acceleration in the case of a default in the performance of any other covenant
with respect to the Subordinated Debt Securities, including the payment of
interest or principal. At any time after a declaration of acceleration with
respect to Debt Securities of any series has been made, but before a judgment or
decree based on acceleration has been obtained, the Holders of a majority of the
aggregate principal amount of Outstanding Debt Securities of that series may,
under certain circumstances, rescind and annul such acceleration. (Section 5.2)
The Indentures provide that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable security or indemnity. (Section 6.3) Subject
to such provisions for the indemnification of the Trustee and to certain other
conditions, the Holders of a majority of the aggregate principal amount of the
Outstanding Debt Securities of any series will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of that series. (Section 5.12)
No Holder of any series of Debt Securities will have any right to institute
any proceeding with respect to the Applicable Indenture or for any remedy
thereunder, unless: (a) such Holder has previously given to the Trustee under
the Applicable Indenture written notice of a continuing Event of Default; (b)
the Holders of at least 25 percent of the aggregate principal amount of the
Outstanding Debt Securities of that series have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee; (c) in the 60-day period following receipt of a written notice from a
Holder, the Trustee has not received from the Holders of a majority of the
aggregate principal amount of the Outstanding Debt Securities of that series a
direction inconsistent with such request; and (d) the Trustee shall have failed
to institute such proceeding within such 60-day period. (Section 5.7) However,
such limitations do not apply to a suit instituted by a Holder of a Debt
Security for enforcement of payment of the principal of and premium, if any, or
interest on such Debt Security on or after the respective due dates expressed in
such Debt Security. (Section 5.8)
The Corporation is required to furnish to the Trustee annually a statement
as to the performance by the Corporation of certain of its obligations under the
Indenture and as to any default in such performance. (Section 10.5)
DEFEASANCE AND COVENANT DEFEASANCE
The Indentures provide that, if such provision is made applicable to the
Debt Securities of any series pursuant to Section 3.1 of the Applicable
Indenture (which will be indicated in the Applicable Prospectus Supplement), the
Corporation may elect either (a) to defease and be discharged from any and all
obligations in respect of such Debt Securities then outstanding (including, in
the case of Subordinated Debt Securities, the provisions described under
"Subordination of Subordinated Debt Securities" and except for certain
obligations to register the transfer of or exchange of such Debt Securities,
replace stolen, lost or mutilated Debt Securities, maintain paying agencies and
hold monies for payment in trust) ("defeasance") or (b) to be
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released from its obligations with respect to such Debt Securities concerning
the restriction on sale or issuance of Voting Stock of the Corporation's
Principal Subsidiaries described under "Restriction on Sale or Issuance of
Voting Stock of Principal Subsidiaries" and the subordination provisions
described under "Subordination of Subordinated Debt Securities" and any other
covenants applicable to such Debt Securities which are determined pursuant to
Section 3.1 of the Applicable Indenture to be subject to covenant defeasance
("covenant defeasance"), and the occurrence of an event described in clause (d)
(insofar as with respect to covenants subject to covenant defeasance) under
"Events of Default" above shall no longer be an Event of Default, in each case
(a) or (b), if the Corporation deposits, in trust, with the Trustee money or
U.S. Government Obligations, which through the payment of interest thereon and
principal thereof in accordance with their terms will provide money, in an
amount sufficient, without reinvestment, to pay all the principal of (and
premium, if any) and interest on such Debt Securities on the dates such payments
are due (which may include one or more redemption dates designated by the
Corporation) and any mandatory sinking fund or analogous payments thereon in
accordance with the terms of such Debt Securities. Such a trust may only be
established if, among other things, (i) no Event of Default or event which with
the giving of notice or lapse of time, or both, would become an Event of Default
under the Indenture shall have occurred and be continuing on the date of such
deposit, (ii) such deposit will not cause the Trustee to have any conflicting
interest with respect to other securities of the Corporation and (iii) the
Corporation shall have delivered an Opinion of Counsel to the effect that the
Holders will not recognize income, gain or loss for Federal income tax purposes
as a result of such deposit or defeasance and will be subject to Federal income
tax in the same manner as if such defeasance had not occurred.
The Corporation may exercise its defeasance option with respect to such
Debt Securities notwithstanding its prior exercise of its covenant defeasance
option. If the Corporation exercises its defeasance option, payment of such Debt
Securities may not be accelerated because of an Event of Default. If the
Corporation exercises its covenant defeasance option, payment of such Debt
Securities may not be accelerated by reference to the covenants noted under
clause (b) above. In the event the Corporation omits to comply with its
remaining obligations with respect to such Debt Securities under the Applicable
Indenture after exercising its covenant defeasance option and such Debt
Securities are declared due and payable because of the occurrence of any Event
of Default, the amount of money and U.S. Government Obligations on deposit with
the Trustee may be insufficient to pay amounts due on the Debt Securities of
such series at the time of the acceleration resulting from such Event of
Default. However, the Corporation will remain liable in respect of such
payments. (Article Thirteen and Article Fourteen of the Senior Indenture and the
Subordinated Indenture, respectively.)
MODIFICATION AND WAIVER
Modifications and amendments of each Indenture may be made by the
Corporation and the Trustee with the consent of the Holders of not less than a
majority of the aggregate principal amount of the Outstanding Debt Securities of
all series issued under the Indenture and affected by the modification or
amendments (voting as a single class); provided, however, that no such
modification or amendment may, without the consent of the Holders of all Debt
Securities affected thereby, (i) change the Stated Maturity of the principal of,
or any installment of principal of or interest on, any Debt Security; (ii)
reduce the principal amount of, or the premium, if any, or (except as otherwise
provided in the Applicable Prospectus Supplement) interest on, any Debt Security
(including in the case of an Original Issue Discount Debt Security the amount
payable upon acceleration of the maturity thereof); (iii) change the place or
currency of payment of principal of, premium, if any, or interest on any Debt
Security; (iv) impair the right to institute suit for the enforcement of any
payment on any Debt Security on or after the Stated Maturity thereof (or in the
case of redemption, on or after the Redemption Date); (v) in the case of the
Subordinated Indenture, modify the subordination provisions in a manner adverse
to the Holders of the Subordinated Debt Securities; or (vi) reduce the
percentage of the principal amount of Outstanding Debt Securities of any series,
the consent of whose Holders is required for modification or amendment of the
Indenture or for waiver of compliance with certain provisions of the Indenture
or for waiver of certain defaults. (Section 9.2)
The Holders of at least a majority of the aggregate principal amount of the
Outstanding Debt Securities of any series of Senior Debt Securities may, on
behalf of all Holders of that series, waive compliance by the
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Corporation with certain restrictive provisions of the Senior Indenture.
(Section 10.8) There is no comparable provision in the Subordinated Indenture.
The Holders of a majority of the aggregate principal amount of the Senior Debt
Securities or the Subordinated Debt Securities may, on behalf of all Holders of
the Senior Debt Securities or the Subordinated Debt Securities, respectively,
waive any past default under the Applicable Indenture, except a default in the
payment of principal, premium or interest or in the performance of certain
covenants. (Section 5.13)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Corporation may not consolidate with or merge into any other Person or
transfer or lease its assets substantially as an entirety to any Person and may
not permit any Person to merge into or consolidate with the Corporation or
transfer or lease its assets substantially as an entirety to the Corporation,
unless (i) any successor or purchaser is a corporation organized under the laws
of the United States of America, any State or the District of Columbia, and any
such successor or purchaser expressly assumes the Corporation's obligations on
the Debt Securities under a supplemental Indenture, and (ii) (a) in the case of
Senior Debt Securities, immediately after giving effect to the transaction no
Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have occurred and be continuing and (b),
in the case of any series of Subordinated Debt Securities, no Event of Default
that would permit the Trustee or the Holders to accelerate the Corporation's
obligation to pay the principal of such Subordinated Debt Securities shall have
occurred and be continuing. The Trustee may receive an Opinion of Counsel as
conclusive evidence of compliance with these provisions. (Article VIII)
CONVERSION
The holders of Subordinated Debt Securities of a specified series that are
convertible into Equity Securities ("Subordinated Convertible Debt Securities")
may be entitled or, if so provided in the Applicable Prospectus Supplement, may
be required at such time or times specified in the Applicable Prospectus
Supplement relating to such Subordinated Convertible Debt Securities, subject to
prior redemption, repayment, or repurchase, to convert any Subordinated
Convertible Debt Securities of such series into Equity Securities, at the
conversion price set forth in such Applicable Prospectus Supplement, subject to
adjustment and to such other terms as are set forth in such Applicable
Prospectus Supplement. No separate consideration will be received for any Equity
Securities issued upon conversion of Subordinated Convertible Debt Securities.
RISK FACTORS OF DEBT SECURITIES DENOMINATED IN FOREIGN CURRENCIES
Debt Securities denominated or payable in foreign currencies may entail
significant risks. These risks include, without limitation, the possibility of
significant fluctuations in the foreign currency market, the imposition of
foreign exchange controls, and potential illiquidity in the secondary market.
These risks will vary depending upon the currency involved. These risks may be
more fully described in the Applicable Prospectus Supplement.
GLOBAL SECURITIES
Debt Securities of a series may be issued in the form of one or more Global
Securities that will be deposited with a Depositary or its nominee identified in
the Applicable Prospectus Supplement. In such a case, one or more Global
Securities will be issued in a denomination or aggregate denominations equal to
the portion of the aggregate principal amount of Outstanding Debt Securities of
the series to be represented by such Global Security or Securities. Unless and
until it is exchanged in whole or in part for Debt Securities in definitive
registered form, a Global Security may not be registered for transfer or
exchange except as a whole by the Depositary for such Global Security to a
nominee or such Depositary and except in the circumstances described in the
Applicable Prospectus Supplement. (Sections 2.4 and 3.5)
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the Applicable Prospectus Supplement.
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CONCERNING THE TRUSTEE
SunTrust Bank, Atlanta is a Trustee under the Indentures. The Trustee
performs services for the Corporation in the ordinary course of business.
DESCRIPTION OF PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which any
Prospectus Supplement may relate (the "Preferred Stock"). Certain terms of any
series of the Preferred Stock offered by any Prospectus Supplement will be
described in the Prospectus Supplement relating to such series of the Preferred
Stock. If so indicated in the Prospectus Supplement, the terms of any such
series may differ from the terms set forth below. The description of certain
provisions of the Preferred Stock set forth below and in any Prospectus
Supplement does not purport to be complete and is subject to and qualified in
its entirety by reference to the Articles of Amendment to the Corporation's
Articles of Incorporation (the "Articles of Incorporation") relating to each
series of the Preferred Stock which will be filed with the Commission at or
prior to the time of the offering of such series of Preferred Stock.
GENERAL
Under the Corporation's Articles of Incorporation, the Board of Directors
of the Corporation is authorized without further shareholder action to provide
for the issuance of up to 10,000,000 shares of Class A voting Preferred Stock
and 10,000,000 shares of Class B non-voting Preferred Stock, in each case
without par value, in one or more series, with Class A Preferred Stock having
full voting rights and Class B Preferred Stock having no voting rights and with
relative preferences and rights as shall be set forth in resolutions providing
for the issue thereof adopted by the Board of Directors or a duly authorized
committee thereof except that all shares of the same class shall be identical
except for the following relative rights and preferences: (i) the rate of
dividend; (ii) redemption rights and the terms and conditions of such rights;
(iii) the amount payable upon liquidation; (iv) sinking fund provisions; and (v)
the terms and conditions, if any, of conversion. The Corporation may amend from
time to time its Articles of Incorporation to increase the number of authorized
shares of Preferred Stock. Any such amendment would require the approval of the
holders of a majority of the outstanding shares of Common Stock, and the
approval of the holders of a majority of the outstanding shares of all series of
Preferred Stock voting together as a single class. As of the date of this
Prospectus, the Corporation has no shares of Preferred Stock outstanding.
Under regulations adopted by the Federal Reserve Board, if the holders of
any series of Preferred Stock become entitled to vote for the election of
directors because dividends on such series are in arrears as described under
"Voting Rights" below, such series may then be deemed a "class of voting
securities" and a holder of 25 percent or more of such series (or a holder of 5
percent or more if it otherwise exercises a "controlling influence" over the
Corporation) may then be subject to regulation as a bank holding company in
accordance with the BHCA. In addition, at such time as such series is deemed a
class of voting securities, (i) any other bank holding company may be required
to obtain the prior approval of the Federal Reserve Board under the BHCA to
acquire or retain 5 percent or more of such series and (ii) any person other
than a bank holding company may be required to obtain the prior approval of the
Federal Reserve Board under the Change in Bank Control Act to acquire or retain
ten percent or more of such series.
The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise provided in the Prospectus
Supplement relating to a particular series of the Preferred Stock. Reference is
made to the Prospectus Supplement relating to the particular series of the
Preferred Stock offered thereby for specific terms, including: (i) the title and
stated value per share of such Preferred Stock and the number of shares offered;
(ii) the price at which such Preferred Stock will be issued; (iii) the dividend
rate (or method of calculation), the dates on which dividends shall be payable
and the dates from which dividends shall commence to cumulate; (iv) any
redemption or sinking fund provisions of such Preferred Stock; (v) the terms of
conversion, if any; and (vi) any additional dividend, liquidation, redemption,
sinking fund and other rights, preferences, privileges, limitations and
restrictions of such Preferred Stock.
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The Preferred Stock will, when issued, be fully paid and nonassessable.
Unless otherwise specified in the Prospectus Supplement relating to a particular
series of the Preferred Stock, each series of the Preferred Stock will rank on a
parity in all respects with any outstanding Preferred Stock of the Corporation
and each other series of Preferred Stock.
DIVIDEND RIGHTS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Corporation, out of
assets of the Corporation legally available therefor, cash dividends at such
rates and on such dates as are set forth in the Prospectus Supplement relating
to such series of the Preferred Stock. Such rate may be fixed or variable or
both. Each such dividend will be payable to the holders of record as they appear
on the stock books of the Corporation on such record dates as will be fixed by
the Board of Directors of the Corporation or a duly authorized committee
thereof. Dividends on any series of the Preferred Stock shall be cumulative, so
that if for any period the same shall not be paid, the right thereto shall
accumulate as against the Common Stock, and all arrears so accumulated shall be
paid before any dividend shall be paid upon the Common Stock.
No full dividends will be declared or paid or set apart for payment on the
Preferred Stock of any series ranking, as to dividends, on a parity with or
junior to any series of Preferred Stock for any period unless full dividends
have been or contemporaneously are declared and paid, or declared and a sum
sufficient for the payment thereof set apart for such payment, on such series of
Preferred Stock for the then-current dividend payment period and all other
dividend payment periods terminating on or before the date of payment of such
full dividends. When dividends are not paid in full upon any series of the
Preferred Stock and any other Preferred Stock ranking on a parity as to
dividends with such series of the Preferred Stock, all dividends declared upon
such series of the Preferred Stock and any other Preferred Stock ranking on a
parity as to dividends will be declared pro rata so that the amount of dividends
declared per share on such series of the Preferred Stock and such other
Preferred Stock will in all cases bear to each other the same ratio that accrued
dividends per share on such series of the Preferred Stock and such other
Preferred Stock bear to each other. Except as provided in the preceding
sentence, unless full dividends, including accumulations, if any, in respect of
prior dividend payment periods, on all outstanding shares of any series of the
Preferred Stock have been paid, no dividends (other than in shares of Common
Stock or another stock ranking junior to such series of the Preferred Stock as
to dividends and upon liquidation ) will be declared or paid or set aside for
payment or other distributions made upon the Common Stock or any other stock of
the Corporation ranking junior to or on a parity with the Preferred Stock as to
dividends or upon liquidation, nor will any Common Stock or any stock of the
Corporation ranking junior to or on a parity with such series of the Preferred
Stock as to dividends or upon liquidation be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made available for a
sinking fund for the redemption of any shares of any such stock) by the
Corporation. No interest, or sum of money in lieu of interest, shall be payable
in respect of any dividend payment or payments which may be in arrears.
The amount of dividends payable for each dividend period will be computed
by annualizing the applicable dividend rate and dividing by the number of
dividend periods in a year, except that the amount of dividends payable for the
initial dividend period or any period shorter than a full dividend period shall
be computed on the basis of 30-day months, a 360-day year and the actual number
of days elapsed in the period.
Each series of Preferred Stock will be entitled to dividends as described
in the Prospectus Supplement relating to such series, which may be based upon
one or more methods of determination. Different series of the Preferred Stock
may be entitled to dividends at different rates or based upon different methods
of determination.
RIGHTS UPON LIQUIDATION
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the holders of each series of Preferred Stock
will be entitled to receive out of assets of the Corporation available for
distribution to shareholders, before any distribution of assets is made to
holders of Common Stock or any
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other class of stock ranking junior to such series of the Preferred Stock upon
liquidation, liquidating distributions in the amount set forth in the Prospectus
Supplement relating to such series of the Preferred Stock plus an amount equal
to accrued and unpaid dividends for the then-current dividend period and for all
dividend periods prior thereto. If, upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the amounts payable
with respect to the Preferred Stock of any series and any other shares of stock
of the Corporation ranking as to any such distribution on a parity with such
series of the Preferred Stock are not paid in full, the holders of the Preferred
Stock of such series and of such other shares will share ratably in any such
distribution of assets of the Corporation in proportion to the full respective
preferential amounts to which they are entitled. After payment of the full
amount of the liquidating distribution to which they are entitled, the holders
of such series of Preferred Stock will have no right or claim to any of the
remaining assets of the Corporation. Neither the sale of all or substantially
all of the property or business of the Corporation nor the merger or
consolidation of the Corporation into or with any other corporation shall be
deemed to be a dissolution, liquidation or winding up, voluntarily or
involuntarily, of the Corporation.
REDEMPTION
A series of the Preferred Stock may be redeemable, in whole or in part, at
the option of the Corporation, and may be subject to mandatory redemption
pursuant to a sinking fund, in each case upon terms, at the times and at the
redemption prices set forth in the Prospectus Supplement relating to such
series.
The Prospectus Supplement relating to a series of Preferred Stock which is
subject to mandatory redemption shall specify the number of shares of such
series of Preferred Stock which shall be redeemed by the Corporation in each
year commencing after a date to be specified, at a redemption price per share to
be specified, together with an amount equal to any accrued and unpaid dividends
thereon to the date of redemption. The redemption price may be payable in cash,
capital stock or in cash received from the net proceeds of the issuance of
capital stock of the Corporation, as specified in the Prospectus Supplement
relating to such series of Preferred Stock.
If fewer than all the outstanding shares of the Preferred Stock are to be
redeemed, whether by mandatory or optional redemption, the selection of the
shares to be redeemed shall be determined by lot or pro rata as may be
determined by the Board of Directors of the Corporation (or a duly authorized
committee thereof) or by any other method which may be determined by the Board
of Directors (or such committee) to be equitable. From and after the redemption
date (unless default shall be made by the Corporation in providing for the
payment of the redemption price), dividends shall cease to accrue on the shares
of Preferred Stock called for redemption and all rights of the holders thereof
(except the right to receive the redemption price) shall cease.
In the event that full dividends, including accumulations on any series of
the Preferred Stock, have not been paid, such series of the Preferred Stock may
not be redeemed in part and the Corporation may not purchase or acquire any
shares of such series of the Preferred Stock otherwise than pursuant to a
purchase or exchange offer made on the same terms to all holders of such series
of the Preferred Stock.
VOTING RIGHTS
The holders of Class A Preferred Stock will be entitled to full voting
rights and the holders of Class B Preferred Stock will have no voting rights,
except as specifically required by applicable law. Except as indicated in the
Prospectus Supplement relating to a particular series of Preferred Stock, each
such share will be entitled to one vote on matters on which holders of such
series of the Preferred Stock are entitled to vote.
The affirmative vote or consent of the holders of at least a majority of
the outstanding shares of any series of Preferred Stock, voting as a class, will
be required for any amendment of the Corporation's Articles of Incorporation (or
any certificate amendatory thereof or supplemental thereto relating to any
series of the Preferred Stock) which will adversely affect the powers,
preferences, privileges or rights of such series of the Preferred Stock. The
affirmative vote or consent of the holders of shares representing at least a
majority of the outstanding shares of any series of Preferred Stock and any
other series of Preferred Stock of the Corporation ranking on parity with such
series of the Preferred Stock as to dividends or upon liquidation, voting as a
single-
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class without regard to series, will be required to authorize the creation of,
or reclassify any authorized stock of the Corporation into, or issue or
authorize any obligation or security convertible into or evidencing a right to
purchase, any additional class or series of stock having rights or preferences
ranking prior, superior or substantially equal to such series of the Preferred
Stock as to dividends or upon liquidation.
In addition to the foregoing voting rights, under the Mississippi Business
Corporation Act as now in effect, any Articles of Amendment to the Articles of
Incorporation which would increase the number of authorized shares of Preferred
Stock of the Corporation would require the approval of the holders of a majority
of the outstanding shares of Common Stock and the approval of the holders of a
majority of the outstanding shares of all series of Preferred Stock voting
together as a single class.
CONVERSION
The holders of a specified series of Preferred Stock may be entitled, or if
so provided in the Articles of Amendment to the Articles of Incorporation, may
be required, to convert such shares into Common Stock or, at the option of the
Corporation, other debt securities of the Corporation, at such conversion price
or prices and on such other terms as may be set forth in the Applicable
Prospectus Supplement relating to such series of Preferred Stock.
DEPOSITARY SHARES
General. The Corporation may, at its option, elect to offer fractional
shares ("Depositary Shares") of Preferred Stock, rather than full shares of
Preferred Stock. In the event such option is exercised, the Corporation will
issue to the public receipts for Depositary Shares, each of which will represent
a fraction (to be set forth in the Prospectus Supplement relating to a
particular series of Preferred Stock) of a share of a particular series of
Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between the Corporation and a bank or trust company selected by the Corporation
having its principal office in the United States and having a combined capital
and surplus of at least $50,000,000 (the "Depositary"). Subject to the terms of
the Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fraction of a share of Preferred Stock represented
by such Depositary Share, to all the rights and preferences of the Preferred
Stock represented thereby (including dividend, voting, redemption and
liquidation rights).
The shares of Preferred Stock deposited under the Deposit Agreement may be
withdrawn as provided therein.
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). Depositary Receipts
will be distributed to those persons purchasing the fractional shares of
Preferred Stock in accordance with the terms of the offering. Copies of the
forms of Deposit Agreement and Depositary Receipt are filed as exhibits to the
Registration Statement of which this Prospectus is a part, and the following
summary is qualified in its entirety by reference to such exhibits.
Pending the preparation of definitive engraved Depositary Receipts, the
Depositary may, upon the written order of the Corporation, issue temporary
Depositary Receipts substantially identical to (and entitling the holders
thereof to all the rights pertaining to) the definitive Depositary Receipts but
not in definitive form. Definitive Depositary Receipts will be prepared
thereafter without unreasonable delay, and temporary Depositary Receipts will be
exchangeable for definitive Depositary Receipts at the Corporation's expense.
Dividends and Other Distributions. The Depositary will distribute all cash
dividends or other cash distributions received in respect of the Preferred Stock
to the record holders of Depositary Shares relating to such Preferred Stock in
proportion to the numbers of such Depositary Shares owned by such holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not
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feasible to make such distribution, in which case the Depositary may, with the
approval of the Corporation, sell such property and distribute the net proceeds
from such sale to such holders.
Redemption of Depositary Shares. If a series of Preferred Stock
represented by Depositary Shares is subject to redemption, the Depositary Shares
will be redeemed from the proceeds received by the Depositary resulting from the
redemption, in whole or in part, of such series of Preferred Stock held by the
Depositary. The redemption price per Depositary Share will be equal to the
applicable fraction of the redemption price per share payable with respect to
such series of the Preferred Stock. Whenever the Corporation redeems shares of
Preferred Stock held by the Depositary, the Depositary will redeem as of the
same redemption date the number of Depositary Shares representing shares of
Preferred Stock so redeemed. If fewer than all the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected by lot or pro
rata as may be determined by the Depositary.
Voting the Preferred Stock. Upon receipt of notice of any meeting at which
the holders of the Preferred Stock are entitled to vote, the Depositary will
mail the information contained in such notice of meeting to the record holders
of the Depositary Shares relating to such Preferred Stock. Each record holder of
such Depositary Shares on the record date (which will be the same date as the
record date for the Preferred Stock) will be entitled to instruct the Depositary
as to the exercise of the voting rights pertaining to the amount of the
Preferred Stock represented by such holder's Depositary Shares. The Depositary
will endeavor, insofar as practicable, to vote the amount of the Preferred Stock
represented by such Depositary Shares in accordance with such instructions, and
the Corporation will agree to take all action which may be deemed necessary by
the Depositary in order to enable the Depositary to do so. The Depositary will
abstain from voting shares of the Preferred Stock to the extent it does not
receive specific instructions from the holder of Depositary Shares representing
such Preferred Stock.
Amendment and Termination of the Deposit Agreement. The form of Depositary
Receipt evidencing the Depositary Shares and any provision of the Deposit
Agreement may at any time be amended by agreement between the Corporation and
the Depositary. However, any amendment which materially and adversely alters the
rights of the holders of Depositary Shares will not be effective unless such
amendment has been approved by the holders of at least a majority of the
Depositary Shares then outstanding. The Deposit Agreement will only terminate if
(i) all outstanding Depositary Shares have been redeemed or (ii) there has been
a final distribution in respect of the Preferred Stock in connection with any
liquidation, dissolution or winding up of the Corporation and such distribution
has been distributed to the holders of Depositary Receipts.
Charges of Depositary. The Corporation will pay all transfer and other
taxes and governmental charges arising solely from the existence of the
depositary arrangements. The Corporation will pay charges of the Depositary in
connection with the initial deposit of the Preferred Stock and any redemption of
the Preferred Stock. Holders of Depositary Receipts will pay other transfer and
other taxes and governmental charges and such other charges as are expressly
provided in the Deposit Agreement to be for their accounts.
Miscellaneous. The Depositary will forward all reports and communications
from the Corporation which are delivered to the Depositary and which the
Corporation is required or otherwise determines to furnish to the holders of the
Preferred Stock.
Neither the Depositary nor the Corporation will be liable if it is
prevented or delayed by law or any circumstance beyond its control in performing
its obligations under the Depositary Agreement. The obligations of the
Corporation and the Depositary under the Deposit Agreement will be limited to
performance in good faith of their duties thereunder and they will not be
obligated to prosecute or defend any legal proceeding in respect of any
Depositary Shares or Preferred Stock unless satisfactory indemnity is furnished.
They may rely upon written advice of counsel or accountants, or upon information
provided by persons presenting Preferred Stock for deposit, holders of
Depositary Receipts or other persons believed to be competent and on documents
believed to be genuine.
Resignation and Removal of Depositary. The Depositary may resign at any
time by delivering to the Corporation notice of its election to do so, and the
Corporation may at any time remove the Depositary, any such resignation or
removal to take effect upon the appointment of a successor Depositary and its
acceptance
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of such appointment. Such successor Depositary must be appointed within 60 days
after delivery of the notice of resignation or removal and must be a bank or
trust company having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000.
TRANSFER AGENT AND REGISTRAR
Deposit Guaranty National Bank will be the transfer agent, registrar and
dividend disbursement agent for the Preferred Stock. The registrar for shares of
Preferred Stock will send notices to shareholders of any meetings at which
holders of the Preferred Stock have the right to elect directors of the
Corporation or to vote on any other matter.
DESCRIPTION OF COMMON STOCK
The description of certain provisions of the Common Stock set forth below
does not purport to be complete and is subject to and qualified in its entirety
by reference to the Articles of Incorporation and the By-Laws of the Corporation
which are exhibits to the Registration Statement.
GENERAL
The Corporation's Common Stock consists of 50,000,000 authorized shares, no
par value, of which there were 19,549,143 shares outstanding as of September 30,
1995. The Common Stock is quoted on the Nasdaq National Market System. The
transfer agent and registrar for the Common Stock is Deposit Guaranty National
Bank.
Shares of Common Stock of the Corporation may be issued from time to time,
in such amounts and proportion and for such consideration as may be fixed by the
Board of Directors of the Corporation. No holder of Common Stock has any
preemptive or preferential rights to purchase or to subscribe for any shares of
capital stock or other securities which may be issued by the Corporation. The
Common Stock has no redemptive or sinking fund provisions applicable thereto.
Common Stock does not have any conversion rights. The rights of holders of
Common Stock will be subject to, and may be adversely affected by, the rights of
holders of any Preferred Stock that may be issued in the future.
The Corporation may issue authorized but unissued Common Stock in
connection with several employee benefit and stock option and incentive plans
maintained by the Corporation or its subsidiaries.
The outstanding Common Stock is fully paid and non-assessable and future
issuances of Common Stock, when fully paid for, will be non-assessable.
DIVIDENDS
When, as, and if dividends, payable in cash, stock, or other property, are
declared by the Board of Directors of the Corporation out of funds legally
available therefor, the holders of Common Stock are entitled to share equally,
share for share, in such dividends. The payment of dividends on the Common Stock
is subject to the prior payment of dividends on any shares of the Preferred
Stock outstanding.
VOTING
Deposit Guaranty. Pursuant to the Mississippi Business Corporation Act and
the Corporation's Bylaws, each outstanding share of the Corporation's stock is
entitled to one (1) vote on each matter submitted to a vote. However, in
connection with the election of directors, holders of Common Stock of the
Corporation have cumulative voting rights. Pursuant to the Corporation's 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 (1) 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.
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LIQUIDATION
In the event of any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Common Stock
are entitled to receive, on a share for share basis, any assets or funds of the
Corporation which are distributable to its holders of Common Stock upon such
events, subject to the prior rights of creditors of the Corporation and holders
of any outstanding shares of Preferred Stock.
DESCRIPTION OF SECURITIES WARRANTS
The Corporation may issue, separately or together with any Debt Securities,
Preferred Stock, Common Stock, or Depositary Shares, Securities Warrants for the
purchase of other Debt Securities, Preferred Stock, Common Stock, or Depositary
Shares (collectively, the "Underlying Securities"). The Securities Warrants will
be issued under a warrant agreement (a "Securities Warrant Agreement") to be
entered into between the Corporation and a bank or trust company, as warrant
agent (the "Securities Warrant Agent"), all as set forth in the Applicable
Prospectus Supplement relating to the particular issue of Securities Warrants.
The form of Securities Warrant Agreement, including the form of certificates
representing the Securities Warrants ("Securities Warrant Certificates"),
reflecting the alternative provisions to be included in the Securities Warrant
Agreements that will be entered into with respect to particular offerings of
Securities Warrants, is filed as an exhibit to the Registration Statement. The
following summaries of certain provisions of the Securities Warrant Agreement
and the Securities Warrant Certificates, which are filed as exhibits to the
Registration Statement, do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all of the provisions of the
Securities Warrant Agreement and the Securities Warrant Certificates,
respectively, including the definitions therein of certain terms. Wherever
defined terms of the Securities Warrant Agreement are referred to, it is
intended that such defined terms shall be incorporated herein by reference.
GENERAL
The Applicable Prospectus Supplement relating to the particular issue of
Securities Warrants offered thereby will describe the terms of the offered
Securities Warrants, the Securities Warrant Agreement relating to the offered
Securities Warrants, and the Securities Warrant Certificates representing the
offered Securities Warrants, including the following where applicable: (1) if
the Securities Warrants are offered for separate consideration, the offering
price and the currency for which Securities Warrants may be purchased; (2) the
title, aggregate principal amount, currency, and terms of the series of Debt
Securities purchasable upon exercise of the Debt Warrants and the price at which
such Debt Securities may be purchased upon such exercise; (3) the title, number
of shares, stated value, and terms (including, without limitation, liquidation,
dividend, conversion, redemption, and voting rights) of the series of Preferred
Stock purchasable upon exercise of Preferred Stock Warrants and the price at
which such number of shares of Preferred Stock of such series may be purchased
upon such exercise; (4) the number of Common Stock purchasable upon the exercise
of Common Stock Warrants and the price at which such number of Common Stock may
be purchased upon such exercise; (5) the number of Depositary Shares purchasable
upon the exercise of Depositary Share Warrants, the terms of the Preferred Stock
which the Depositary Shares represent and the price at which such number of
Depositary Shares may be purchased upon such exercise; (6) the date, if any, on
and after which the offered Securities Warrants and the related Debt Securities,
Preferred Stock, Common Stock and/or Depositary Shares will be separately
transferable; (7) the time or times at which, or period or periods during which,
the offered Securities Warrants may be exercised and the final date on which the
Offered Securities Warrants may be exercised (the "Expiration Date"); (8) a
discussion of the specific United States Federal income tax, accounting, and
other considerations applicable to the Securities Warrants; (9) the location
where the offered Securities Warrants represented by the Securities Warrant
Certificates may be transferred and registered; and (10) any other terms of the
offered Securities Warrants.
Securities Warrant Certificates will be exchangeable on the terms specified
in the Applicable Prospectus Supplement for new Securities Warrant Certificates
of different denominations evidencing the same aggregate
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number of Warrants of the same title, and may be transferred in whole or in part
on the terms specified in the Applicable Prospectus Supplement.
Prospective purchasers of Securities Warrants should be aware that special
U.S. federal income tax, accounting and other considerations may be applicable
to instruments such as Securities Warrants. The Applicable Prospectus Supplement
relating to any issue of Securities Warrants will describe such considerations.
EXERCISE OF WARRANTS
Each Securities Warrant will entitle the holder to purchase the principal
amount of or number of Underlying Securities provided for therein, at such
exercise price as shall in each case be set forth in, or be determinable from,
the Applicable Prospectus Supplement relating to the Securities Warrants, by
payment of such exercise price (the "Warrant Price") in full in the currency and
in the manner specified in the Applicable Prospectus Supplement. Securities
Warrants may be exercised at any time at or before 5:00 P.M., New York City time
on the Expiration Date (or such later date to which such Expiration Date may be
extended by the Corporation), and unexercised Securities Warrants will become
void at such time. Securities Warrants may be exercised at the corporate trust
office of the Securities Warrant Agent or any other office indicated in the
Applicable Prospectus Supplement relating to the Securities Warrants.
Upon receipt at the corporate trust office of the Securities Warrant Agent
or any other office indicated in the Applicable Prospectus Supplement of (i)
payment of the Warrant Price and (ii) the form of election to purchase set forth
on the reverse side of the Securities Warrant Certificate properly completed and
duly executed, the Corporation will, as soon as practicable, issue the
Underlying Securities purchasable upon such exercise. If fewer than all of the
Securities Warrants represented by such Securities Warrant Certificate are
exercised, a new Securities Warrant Certificate will be issued for the remaining
number of unexercised Securities Warrants.
MODIFICATIONS
The Warrant Agreement may be supplemented or amended by the Corporation and
the Warrant Agent from time to time, without the approval of any Holder (as
defined in the Warrant Agreement), in order to cure any ambiguity, to correct or
supplement any defective or inconsistent provision contained therein, or to make
any other provision in regard to matters or questions arising thereunder that
the Corporation and the Warrant Agent may deem necessary or desirable and which
will not adversely affect the interests of the Holders.
The Corporation and the Warrant Agent may also modify or amend the Warrant
Agreement and the Securities Warrant Certificates with the consent of the
Holders of not fewer than a majority in number of the then outstanding
unexercised Warrants affected by such modification or amendment, for any
purpose, provided that no such modification or amendment that shortens the
period of time during which the Warrants may be exercised, or otherwise
materially and adversely affects the exercise rights of the Holders or reduces
the percentage of Holders of outstanding Warrants the consent of which is
required for modification or amendment of the Warrant Agreement or the Warrants
may be made without the consent of each Holder affected thereby.
COMMON STOCK WARRANT ADJUSTMENTS
The terms and conditions on which the Warrant Price of and/or the number of
Common Stock covered by a Warrant to purchase Common Stock (a "Common Stock
Warrant") are subject to adjustment will be set forth in the Warrant Agreement
and the Applicable Prospectus Supplement. Such terms will include provisions for
adjusting the Warrant Price and/or the number of Common Stock covered by such
Common Stock Warrant; the events requiring such adjustment; the events upon
which the Corporation may, in lieu of making such adjustment, make proper
provision so that the holder of such Common Stock Warrant, upon exercise
thereof, would be treated as if such holder had exercised such Common Stock
Warrant prior to the
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occurrence of such events; and provisions affecting exercise in the event of
certain events affecting the Common Stock.
MERGER, CONSOLIDATION, SALE OR OTHER DISPOSITIONS
If at any time there shall be a merger, consolidation, sale, conveyance,
transfer, lease, or other disposition of substantially all of the assets of the
Corporation, then the successor or assuming corporation shall succeed to and be
substituted for the Corporation in, and the Corporation will be relieved of any
further obligation under, the Warrant Agreement or the Warrants.
ENFORCEABILITY OF RIGHTS OF HOLDERS
The Warrant Agent will act solely as an agent of the Corporation in acting
under the Warrant Agreement and in connection with any Warrant Certificate. The
Warrant Agent shall have no duty or responsibility in case of any default by the
Corporation in the performance of its covenants or agreements contained in the
Warrant Agreement or in any Warrant Certificate. Each Holder may, without the
consent of the Warrant Agent, enforce by appropriate legal action, on its own
behalf, the Holder's right to exercise its Warrants in the manner provided in
the Warrant Agreement and its Warrant Certificate.
NO RIGHTS AS HOLDERS OF UNDERLYING SECURITIES
Prior to the exercise of any Securities Warrants to purchase Underlying
Securities, holders of such Securities Warrants will not have any of the rights
of holders of the Underlying Securities purchasable upon such exercise,
including, without limitation, the right to receive the payment of principal of,
or premium on, if any, or interest, if any, dividends or distributions of any
kind, if any, on Underlying Securities, the right to enforce any of the
covenants in the Indentures, if applicable, or the right to exercise any voting
rights.
PLAN OF DISTRIBUTION
The Corporation may offer and sell Securities to one or more underwriters,
acting as principals for their own accounts or as agents, for public offering
and sale by them or may sell Securities to investors directly or through agents
which may be affiliates of the Corporation. Any such underwriter or agent
involved in the offer and sale of the Securities will be named in the related
Prospectus Supplement. The Corporation may also offer and sell Securities to
certain third parties upon the exercise of options or on behalf of such third
parties. The Corporation may also offer and sell Equity Securities in "at the
market offerings" as defined in Rule 415(a)(4) of the Securities Act.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, or from time to time at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Corporation also may, from time to time, authorize
underwriters acting as agents to offer and sell the Securities upon the terms
and conditions set forth in any Prospectus Supplement. In connection with the
sale of Securities, underwriters may be deemed to have received compensation
from the Corporation in the form of underwriting discounts, concessions or
commissions and may also receive commissions from purchasers of Securities for
whom they may act as agents. Underwriters may sell Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions (which may be changed from time to time) from the
underwriters and/or from the purchasers for whom they may act as agents.
The Securities will be new issues of securities with no established trading
market, other than the Common Stock which are quoted on the Nasdaq National
Market System. Any Common Stock sold pursuant to a Prospectus Supplement will be
eligible for such quotation. It has not presently been established whether the
underwriters, if any, of any Securities will make a market in such Securities.
If a market is made, it may be discontinued at any time without notice. No
assurance can be given as to the liquidity of the trading market for the
Securities.
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Any underwriting compensation paid by the Corporation to underwriters or
agents in connection with the offering of Securities and any discounts,
concessions or commissions allowed by underwriters to participating dealers will
be set forth in the Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of the Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the Securities may be deemed to be underwriting
discounts and commissions under the Securities Act. Under agreements that may be
entered into with the Corporation, underwriters, dealers and agents who
participate in the distribution of the Securities may be entitled to
indemnification by the Corporation against certain civil liabilities, including
liabilities under the Securities Act or contribution with respect to payments
which the underwriters, dealers or agents may be required to make in respect
thereof.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with, and perform services for, the Corporation and its
subsidiaries in the ordinary course of business.
LEGAL OPINIONS
The validity of the Securities offered hereby will be passed upon for the
Corporation, as shall be indicated in the Applicable Prospectus Supplement, by
Watkins Ludlam & Stennis, 633 North State Street, Post Office Box 427, Jackson,
Mississippi 39205, and Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue,
New York, New York 10022, counsel to the Corporation, and for the Underwriters
by counsel named in the Applicable Prospectus Summary.
EXPERTS
The consolidated financial statements of the Corporation as of December 31,
1994 and 1993, and for each of the years in the three-year period ended December
31, 1994, have been incorporated by reference herein and in the registration
statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, also incorporated by reference herein, and upon
the authority of said firm as experts in accounting and auditing. The report of
KPMG Peat Marwick LLP covering the December 31, 1994, consolidated financial
statements refers to a change in the method of accounting for debt securities.
With respect to the unaudited interim financial information for the periods
ended September 30, 1995, June 30, 1995 and March 31, 1995, incorporated by
reference herein, 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
the Corporation's quarterly report on Form 10-Q for the quarters ended September
30, 1995, June 30, 1995 and March 31, 1995, 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 procedure applied. The accountants are not subject to the liability
provisions of section 11 of the Securities Act 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 section 7 and 11 of the Securities Act.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
CORPORATION OR ANY UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE CORPORATION SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Recent Developments.................. S-2
The Corporation...................... S-2
Use of Proceeds...................... S-2
Capitalization....................... S-3
Selected Consolidated Financial
Data............................... S-4
Management's Discussion of Financial
Condition and Results of
Operations......................... S-5
Description of Notes................. S-14
Underwriting......................... S-16
Validity of Notes.................... S-16
PROSPECTUS
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
The Corporation...................... 3
Regulatory Matters................... 5
Use of Proceeds...................... 9
Description of Debt Securities....... 9
Description of Preferred Stock....... 17
Description of Common Stock.......... 22
Description of Securities Warrants... 23
Plan of Distribution................. 25
Legal Opinions....................... 26
Experts.............................. 26
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
Deposit Guaranty Corp.
$100,000,000
% Senior Notes
Due April , 2006
PROSPECTUS SUPPLEMENT
CS First Boston
Keefe, Bruyette & Woods, Inc.
- ------------------------------------------------------
