<PAGE> 1
Filed with the SEC on May 1, 1996 Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
-----------------------
DEPOSIT GUARANTY CORP.
(Exact name of registrant as specified in its charter)
MISSISSIPPI 6711 64-072169
(State or other jurisdiction (Primary Standard Industrial (IRS Employer Identi-
of incorporation or Classification Code Number) fication Number)
organization)
ARLEN L. MCDONALD
210 EAST CAPITOL STREET 210 EAST CAPITOL STREET
POST OFFICE BOX 730 POST OFFICE BOX 730
JACKSON, MISSISSIPPI 39205 JACKSON, MISSISSIPPI 39205
TELEPHONE NUMBER: (601)354-8497 TELEPHONE NUMBER: (601)354-8497
(Address, including zip code, (Name, address, including zip
and telephone number, including code, and telephone number,
area code of registrant's including area code, of agent
principal executive offices) for service)
Copies to:
L. Keith Parsons, Esq. Lisa M. Buchanan, Esq.
Watkins Ludlam & Stennis. P.A. Jones, Walker, Waechter, Poitevent,
633 North State Street Carrere & Denegre, L.L.P.
Post Office Box 427 201 St. Charles Avenue, Suite 5100
Jackson, Mississippi 39205-0427 New Orleans, Louisiana 70170
Telephone Number: (601)949-4701 Telephone Number: (504) 582-8310
Approximate date of commencement of proposed sale of securities to the public:
At the Effective Date of the merger of Bank of Gonzales Holding Company, Inc.
into Commercial National Corporation as described in the attached Proxy
Statement/Prospectus.
If the securities being registered on this form are being offered in
conjunction with the formation of a holding company and there is compliance
with General Instruction G, check the following box. /__/
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Offering Price(2) Amount of
Securities to be Registered Registered(1) Per Unit Registration Fee
- --------------------------------------------------------------------------------------------------------------------
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Common Stock, no par value 634,000 NA $11,769,731 $4,058.53
====================================================================================================================
</TABLE>
(1) Plus such additional shares as may be issued as a result of the adjustment
provisions contained in the Agreement and Plan of Merger. Based upon the
anticipated maximum number of shares to be issued in connection with the
transaction described herein.
(2) Estimated in accordance with Rule 457(f)(2) solely for the purpose of
calculating the registration fee on the basis of the book value of the
outstanding shares of Bank of Gonzales Holding Company, Inc. common stock as
of March 31, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A),
MAY DETERMINE.
<PAGE> 2
DEPOSIT GUARANTY CORP.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
Caption or Location
in Proxy
Items in Form S-4 Statement/Prospectus
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1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus....................... Cover Page of
Registration Statement;
Cross Reference Sheet;
Cover Page of the Proxy
Statement/Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus........ Available Information;
Incorporation of
Certain Documents by
Reference
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information...................... Summary
4. Terms of the Transaction......... Summary; The Merger; Comparison
of the Rights of Holders of
Gonzales Holding Common Stock
and Deposit Guaranty Common
Stock
5. Pro Forma Financial Information.. Not Applicable
6. Material Contracts with the
Company Being Acquired........... Not Applicable
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be Under-
writers.......................... Not Applicable
8. Interest of Named Experts and
Counsel.......................... Legal Opinion; Experts
9. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities... Not Applicable
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10. Information with Respect to
S-3 Registrants.................. Available Information;
Incorporation of
Certain Documents by
Reference
11. Incorporation of Certain Infor-
mation by Reference.............. Available Information;
Incorporation of
Certain Documents by
Reference
12. Information with Respect to S-2
or S-3 Registrants............... Not Applicable
13. Incorporation of Certain Infor-
mation by Reference.............. Not Applicable
14. Information with Respect to
Registrants Other Than S-3 or
S-2 Registrants.................. Not Applicable
15. Information with Respect to S-3
Companies........................ Not Applicable
16. Information with Respect to S-2
or S-3 Companies................. Not Applicable
17. Information with Respect to
Companies Other Than S-3 or
S-2 Companies.................... Information Concerning Gonzales
Holding ; Market Prices of and
Dividends on Gonzales Holding
Common Stock; Management's
Discussion and Analysis of
Financial Condition and Results
of Operations for the Years
Ended December 31, 1995 and
1994; Index to Financial
Statements
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<PAGE> 4
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18. Information if Proxies, Consents
or Authorizations Are to be
Solicited........................ Incorporation of Certain
Documents by Reference;
Summary; Introduction; The
Merger--Interests of Certain
Persons in the Merger; Stock
Ownership of Management of
Gonzales Holding; Principal
Shareholders of Gonzales
Holding ; Experts
19. Information if Proxies, Consents
or Authorizations Are Not to be
Solicited or in an Exchange
Offer............................ Not Applicable
</TABLE>
<PAGE> 5
BANK OF GONZALES HOLDING COMPANY, INC.
916 SOUTH BURNSIDE AVENUE AT WORTHEY ROAD
POST OFFICE BOX 1089
GONZALEZ, LOUISIANA 70707-1089
May __, 1996
To Our Shareholders:
You are cordially invited to attend a Special Meeting (the "Meeting")
of Shareholders of Bank of Gonzales Holding Company, Inc. ("Gonzales Holding")
to be held at [2:00 p.m]., local time, on May __, 1996 at the [Holiday Inn -
Gonzales at 1500 West Highway 30, Gonzales, Louisiana].
At the Meeting you will be asked to consider and vote upon the
proposal to approve an Agreement and Plan of Merger (the "Merger Agreement"),
dated as of February 5, 1996, by and among Deposit Guaranty Corp., a
Mississippi corporation ("Deposit Guaranty"), Commercial National Corporation
("CNC"), a Louisiana corporation and a wholly-owned subsidiary of Deposit
Guaranty, and Citizens National Bank ("Citizens Bank"), a national bank and a
wholly-owned subsidiary of CNC, on the one hand, and Gonzales Holding and its
wholly-owned subsidiary, Bank of Gonzales ("Gonzales Bank"), on the other hand,
pursuant to which (a) Gonzales Holding will merge into CNC (the "Holding
Company Merger") and Gonzales Bank will merge into Citizens Bank (the "Bank
Merger" and together with the Holding Company Merger, the "Mergers"), and (b)
each outstanding share of Gonzales Holding common stock will be converted into
shares of Deposit Guaranty common stock as more fully described in the
accompanying Proxy Statement/Prospectus.
The affirmative vote of the holders of at least a majority of the
outstanding shares of common stock of Gonzales Holding must approve the Merger
Agreement. Consummation of the Mergers also requires certain regulatory
approvals.
The Board of Directors of Gonzales Holding believes the Mergers are in
the best interests of Gonzales Holding and its shareholders and unanimously
recommends that you vote for approval of the Merger Agreement. The reasons for
such recommendation are set forth in the accompanying Proxy
Statement/Prospectus. Furthermore, Gonzales Holding's financial advisor, Alex
Sheshunoff & Co. Investment Banking, has issued its opinion to the effect that,
as of the date of such opinion and based upon the considerations described
therein, the terms of the Mergers are fair, from a financial point of view, to
the shareholders of Gonzales Holding.
We believe that the Mergers represent an exceptional opportunity for
Gonzales Holding shareholders to join on favorable terms in a combined
enterprise with greater financial resources and a more geographically
diversified business. As a result of the proposed Mergers, you, as a
shareholder of Deposit Guaranty, will own common stock in a bank holding
company whose shares are actively traded. Combining Gonzales Holding with
Deposit Guaranty through the Mergers should thus provide Gonzales Holding
shareholders with a continued equity interest in a larger, more diversified
banking company.
We urge you to read the enclosed materials carefully so that you can
evaluate the Mergers for yourself.
All shareholders are invited to attend the Meeting in person.
However, in order to ensure that your shares will be represented at the
Meeting, please date, sign and promptly return the enclosed proxy card in the
enclosed postage-paid envelope whether or not you plan to attend the Meeting.
If you attend the Meeting in person, you may, if you wish, vote personally on
all matters brought before the Meeting.
Very truly yours,
D. Dale Gaudet
President and Chief Executive Officer
<PAGE> 6
BANK OF GONZALES HOLDING COMPANY, INC.
916 SOUTH BURNSIDE AVENUE AT WORTHEY
POST OFFICE BOX 1089
GONZALES, LOUISIANA 70707-1089
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Bank of Gonzales Holding Company, Inc.:
Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of Bank of Gonzales Holding Company, Inc. ("Gonzales Holding ")
will be held at [the Holiday Inn - Gonzales at 1500 West Highway 30, Gonzales,
Louisiana] on May __, 1996 at [2:00 p.m.], local time, for the purpose of
considering and voting upon the following matters:
1. To consider and vote upon the proposal to approve an Agreement
and Plan of Merger (the "Merger Agreement"), dated as of
February 5, 1996, by and among Deposit Guaranty Corp., a
Mississippi corporation ("Deposit Guaranty"), Commercial
National Corporation ("CNC"), a Louisiana corporation and a
wholly-owned subsidiary of Deposit Guaranty, and Citizens
National Bank ("Citizens Bank"), a national bank and a
wholly-owned subsidiary of CNC, on the one hand, and Gonzales
Holding, and its wholly-owned subsidiary, Bank of Gonzales
("Gonzales Bank"), a Louisiana state bank, on the other hand,
pursuant to which (a) Gonzales Holding will merge into CNC
(the "Holding Company Merger") and Gonzales Bank will merge
into Citizens Bank (the "Bank Merger"), and (b) each
outstanding share of Gonzales Holding common stock will be
converted into shares of Deposit Guaranty common stock in
accordance with the terms of the Merger Agreement; and
2. To transact such other business as may lawfully come before
the meeting or any adjournment or postponement thereof.
DISSENTING SHAREHOLDERS WHO COMPLY WITH THE PROCEDURAL REQUIREMENTS OF
THE BUSINESS CORPORATION LAW OF LOUISIANA WILL BE ENTITLED TO RECEIVE PAYMENT
OF THE FAIR CASH VALUE OF THEIR SHARES IF THE HOLDING COMPANY MERGER IS
EFFECTED UPON APPROVAL BY LESS THAN EIGHTY PERCENT (80%) OF THE TOTAL VOTING
POWER OF GONZALES HOLDING.
The affirmative vote of the holders of a majority of the outstanding
shares of Gonzales Holding Common Stock is required for approval of the Merger
Agreement. Only shareholders of record as of the close of business on April
__, 1996, are entitled to vote at the Meeting. All shareholders are invited to
attend the Meeting in person. However, in order to ensure that your shares
will be represented at the Meeting, please date, sign and promptly return the
enclosed proxy card in the enclosed postage-paid envelope, whether or not you
plan to attend the Meeting. Your proxy may be revoked by appropriate notice to
the Secretary of Gonzales Holding at any time prior to the voting thereof. If
you attend the Meeting in person, you may, if you wish, vote personally on all
matters brought before the Meeting.
By Order of the Board of Directors
Ida N. Reine
Secretary
May __, 1996
Gonzales, Louisiana
<PAGE> 7
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PROSPECTUS PROXY STATEMENT
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DEPOSIT GUARANTY CORP. BANK OF GONZALES HOLDING COMPANY, INC.
___________________ ______________
634,000 SHARES OF SPECIAL MEETING OF
COMMON STOCK, NO PAR VALUE SHAREHOLDERS TO BE HELD
MAY__, 1996
</TABLE>
This Proxy Statement/Prospectus is being furnished to the shareholders
of Bank of Gonzales Holding Company, Inc. ("Gonzales Holding") in connection
with the solicitation of proxies by the Board of Directors of Gonzales Holding
for use at its Special Meeting (the "Meeting") of Shareholders to be held on
May __, 1996. This Proxy Statement/Prospectus was first mailed to shareholders
of Gonzales Holding on or about May _____, 1996.
At the Meeting, the holders of Gonzales Holding common stock, no par
value, ("Gonzales Holding Common Stock"), will be asked to approve the
Agreement and Plan of Merger (the "Merger Agreement"), dated as of February 5,
1996, by and among Deposit Guaranty Corp. ("Deposit Guaranty"), a Mississippi
corporation, Commercial National Corporation ("CNC"), a Louisiana corporation
and a wholly-owned subsidiary of Deposit Guaranty and Citizens National Bank
("Citizens Bank") a wholly-owned subsidiary of CNC, on the one hand, and
Gonzales Holding and its wholly-owned subsidiary, Bank of Gonzales ("Gonzales
Bank"), a Louisiana state bank, on the other hand, pursuant to which Gonzales
Holding will merge into CNC (the "Holding Company Merger") and Gonzales Bank
will merge into Citizens Bank (the "Bank Merger", and together with the Holding
Company Merger, the "Mergers"). Upon consummation of the Mergers, each
outstanding share of Gonzales Holding common stock ("Gonzales Holding Common
Stock"), other than shares held by Gonzales Holding shareholders who perfect
dissenters' rights, will be converted into shares of Deposit Guaranty common
stock, no par value per share ("Deposit Guaranty Common Stock"), and cash in
lieu of any fractional shares, all in accordance with the terms of the Merger
Agreement. For a more complete description of the Merger Agreement and the
terms of the Mergers, see "The Mergers." A conformed copy of the Merger
Agreement is attached to this Proxy Statement/Prospectus as Exhibit A. For a
more complete description of dissenters' rights see "Dissenters' Rights".
Deposit Guaranty has filed a Registration Statement on Form S-4 with
the Securities and Exchange Commission (the "Commission"), pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), covering up to
634,000 shares of Deposit Guaranty Common Stock to be issued in connection with
the Mergers. This document constitutes a Proxy Statement of Gonzales Holding
in connection with the Meeting and a Prospectus of Deposit Guaranty with
respect to the shares of Deposit Guaranty Common Stock to be issued upon
consummation of the Mergers. Each of Deposit Guaranty and Gonzales Holding has
furnished all information included herein with respect to it and its
consolidated subsidiaries.
No person is authorized to give any information or to make any
representation concerning the Mergers not contained in this Proxy
Statement/Prospectus and, if given or made, such information or representation
should not be relied upon as having been authorized. This Proxy
Statement/Prospectus does not constitute an offer to sell, or a solicitation of
an offer to purchase, the securities offered by this Proxy
Statement/Prospectus, or the solicitation of a proxy, in any jurisdiction, to
or from any person to whom it is unlawful to make such offer or solicitation of
an offer or proxy solicitation in such jurisdiction. Neither the delivery of
this Proxy Statement/Prospectus nor any distribution of the securities made
under this Proxy Statement/Prospectus shall, under any circumstances, create
any implication that there has been no change in the information set forth
herein since the date of this Proxy Statement/Prospectus.
This Proxy Statement/Prospectus does not cover any resales of Deposit
Guaranty Common Stock to be received by Gonzales Holding shareholders upon
consummation of the Merger, and no person is authorized to make use of this
Proxy Statement/Prospectus in connection with any such resale.
_________________________
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR
HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
__________________________
The date of this Proxy Statement/Prospectus is May ___, 1996.
<PAGE> 8
AVAILABLE INFORMATION
Deposit Guaranty is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files periodic reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by Deposit Guaranty can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street N.W., Washington, D.C. 20549 and at its Regional
Offices located in the Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can also be obtained from the Commission's
Public Reference Section, Judiciary Plaza, 450 Fifth Street N.W., Washington,
D.C. 20549, at prescribed rates.
Deposit Guaranty has filed with the Commission a Registration
Statement on Form S-4 (the "Registration Statement") under the Securities Act
with respect to the common stock offered by this Proxy Statement/Prospectus.
This Proxy Statement/Prospectus does not contain all the information set forth
in the Registration Statement, certain portions of which have been omitted
pursuant to the Rules and Regulations of the Commission, and to which portions
reference is hereby made for further information with respect to Deposit
Guaranty and the securities offered hereby.
AS INDICATED BELOW, THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY
REFERENCE CERTAIN INFORMATION WITH RESPECT TO DEPOSIT GUARANTY, WHICH IS NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH INFORMATION OR
DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE HEREIN, ARE AVAILABLE WITHOUT CHARGE, UPON THE
WRITTEN OR ORAL REQUEST OF ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM
THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED. IN ORDER TO ENSURE TIMELY
DELIVERY OF SUCH DOCUMENTS, ANY REQUEST SHOULD BE MADE BY MAY___ , 1996, AND
SUCH REQUESTS SHOULD BE DIRECTED TO DEPOSIT GUARANTY'S PRINCIPAL EXECUTIVE
OFFICES AT 210 EAST CAPITOL STREET, JACKSON, MISSISSIPPI 39201, ATTENTION:
ARLEN L. MCDONALD, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER,
TELEPHONE NUMBER (601) 354-8497.
<PAGE> 9
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Deposit Guaranty with the Commission
are hereby incorporated by reference:
(1) Deposit Guaranty's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995;
The description of capital stock contained in Item 14 of
Deposit Guaranty's Registration Statement on Form 10 filed
April 21, 1970, Item 4 of Deposit Guaranty's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1982, Item 4 of
Deposit Guaranty's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1986, Item 4 of Deposit Guaranty's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1987, relating to the description of Deposit Guaranty's Common
Stock.
All documents filed by Deposit Guaranty pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and prior
to the date of the Meeting of shareholders of Gonzales Holding are hereby
incorporated by reference into this Proxy Statement/Prospectus and shall be
deemed a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated by reference shall
be deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein (or in any other subsequently filed document which
also is incorporated by reference herein) modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded.
<PAGE> 10
TABLE OF CONTENTS
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Page
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SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Purpose of the Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Date, Time and Place of the Meeting; Record Date . . . . . . . . . . . . . . . . . . . . . . . 1
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Reasons for the Merger; Recommendation of the Board of Directors . . . . . . . . . . . . . . . . 2
Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Other Conditions to Consummation of the Mergers . . . . . . . . . . . . . . . . . . . . . . . . 3
Exchange of Gonzales Holding Certificates; No Fractional Shares . . . . . . . . . . . . . . . . 3
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Deposit Guaranty - Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Bank of Gonzales Holding Company, Inc. and Subsidiaries - Selected Financial Data . . . . . . . 6
Deposit Guaranty Corp. and Subsidiaries - Selected Financial Data . . . . . . . . . . . . . . . 7
Comparative Per Share Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Record Date; Voting Rights; Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
THE MERGERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Structure and Terms of the Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Background of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Reasons for the Mergers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Other Conditions to the Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Interests of Certain Persons in the Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Exchange of Gonzales Holding Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Amendment; Waiver; Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Conduct of Business Pending the Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Resales of Deposit Guaranty Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Expenses and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
DISSENTERS' RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Filing Written Objection and Vote Against the Mergers . . . . . . . . . . . . . . . . . . . . . 21
Notice of the Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Written Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
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Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Payment and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
COMPARATIVE RIGHTS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Cumulative Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Limitations on Directors' and Officers' Liability . . . . . . . . . . . . . . . . . . . . . . . 23
Supermajority Voting Requirements; Business Combinations; Control Shares . . . . . . . . . . . . 23
Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Vacancies in the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Amendment of the Articles of Incorporation or Bylaws . . . . . . . . . . . . . . . . . . . . . . 24
Special Meetings of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Shareholder Proposals and Nominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
MARKET PRICES OF AND DIVIDENDS ON GONZALES HOLDING COMMON STOCK . . . . . . . . . . . . . . . . . . . . . 25
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF GONZALES HOLDING . . . . . . . . . . . . 26
INFORMATION CONCERNING GONZALES HOLDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Supervision and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1995 AND 1994
GONZALES HOLDING AND SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
INDEX TO GONZALES HOLDING FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Exhibit A - Agreement and Plan of Merger
Exhibit B - Fairness Opinion of Sheshunoff
Exhibit C - Section 131 of the Louisiana Business Corporation Law
</TABLE>
<PAGE> 12
SUMMARY
The following is a brief summary of certain information contained
elsewhere in this Proxy Statement/ Prospectus and the documents incorporated
herein by reference. This summary is necessarily incomplete and is subject to
and qualified in its entirety by reference to the more detailed information and
financial statements contained elsewhere in this Proxy Statement/Prospectus,
including the Exhibits and the documents incorporated in this Proxy
Statement/Prospectus by reference. Certain capitalized terms used in this
summary are defined elsewhere in this Proxy Statement/Prospectus.
PURPOSE OF THE MEETING
The purpose of the Meeting is to consider and vote upon a proposal to
approve an Agreement and Plan of Merger, dated February 5, 1996 (the "Merger
Agreement"), by and among Deposit Guaranty Corp., a Mississippi corporation
("Deposit Guaranty"), its wholly-owned subsidiary, Commercial National
Corporation, a Louisiana corporation ("CNC"), and CNC's wholly-owned
subsidiary, Citizens National Bank, a national banking association ("Citizens
Bank"), on the one hand, and Bank of Gonzales Holding Company, Inc., a
Louisiana corporation ("Gonzales Holding") and its wholly-owned subsidiary,
Bank of Gonzales, a Louisiana state bank ("Gonzales Bank"), on the other hand,
pursuant to which, among other things, (a) Gonzales Holding will be merged into
CNC (the "Holding Company Merger"), (b) Gonzales Bank will be merged into
Citizens Bank (the "Bank Merger" and together with the Holding Company Merger,
the "Mergers"), and (c) on the effective date of the Mergers (the "Effective
Date"), each outstanding share of Gonzales Holding common stock, no par value
per share ("Gonzales Holding Common Stock"), will be converted into a number of
shares of common stock, no par value per share, of Deposit Guaranty ("Deposit
Guaranty Common Stock") determined by dividing 634,000 by the number of shares
of Gonzales Holding Common Stock outstanding on the date immediately preceding
the Effective Date. As a result of the Mergers, the business and properties of
Gonzales Holding will become the business and properties of CNC, the business
and properties of Gonzales Bank will become the business and properties of
Citizens Bank, and shareholders of Gonzales Holding will become shareholders of
Deposit Guaranty.
DATE, TIME AND PLACE OF THE MEETING; RECORD DATE
A Special Meeting (the "Meeting") of the Shareholders of Gonzales
Holding will be held on May ____, 1996, at [2:00 p.m.], at the[ Holiday Inn -
Gonzales at 1500 West Highway 30, Gonzales, Louisiana]. The Board of Directors
of Gonzales Holding has fixed the close of business on_____________, 1996, as
the record date (the "Record Date") for determining holders of outstanding
shares of Gonzales Holding Common Stock entitled to notice of and to vote at
the Meeting. Only holders of Gonzales Holding Common Stock of record on the
books of Gonzales Holding at the close of business on the Record Date are
entitled to vote at the Meeting or at any adjournment or postponement thereof.
As of the Record Date, there were 561,801 shares of Gonzales Holding Common
Stock issued and outstanding, each of which is entitled to one vote. See
"Introduction -- General" and "Introduction -- Record Date; Voting Rights;
Proxies."
VOTE REQUIRED
Approval of the Merger Agreement requires the affirmative vote at the
Meeting of the holders of not less than a majority of the outstanding shares of
Gonzales Holding Common Stock. As of the Record Date, the executive officers
and directors of Gonzales Holding as a group had the power to vote
approximately 119,102 shares of Gonzales Holding Common Stock, representing
approximately 22% of the outstanding shares, all of which are expected to be
voted in favor of the Merger Agreement.
THE PARTIES
Deposit Guaranty Corp. Deposit Guaranty is a bank holding company
headquartered at 210 East Capitol Street, Jackson, Mississippi 39201, telephone
(601) 354-8497. Its principal subsidiaries are Deposit Guaranty National Bank,
a national banking association with its principal office in Jackson,
Mississippi; Commercial National Bank, a national banking association with its
principal office in Shreveport, Louisiana; Citizens National Bank, a national
banking association with
1
<PAGE> 13
its principal office in Hammond, Louisiana; Merchants National Bank, a
national banking association with its principal office in Fort Smith, Arkansas;
and two full-service mortgage banking firms, Deposit Guaranty Mortgage Company,
headquartered in Jackson, Mississippi and First Mortgage Corp., headquartered
in Omaha, Nebraska. Deposit Guaranty, through its subsidiaries, provides
comprehensive corporate, commercial, correspondent and individual banking
services, mortgage loan servicing, and personal and corporate trust services.
As of December 31, 1995, Deposit Guaranty had total assets of $6
billion, total deposits of $4.8 billion, total loans of $3.6 billion and
shareholders' equity of $539.1 million. Based on total assets at December 31,
1995, Deposit Guaranty ranked first among Mississippi-based bank holding
companies.
Commercial National Corporation. Commercial National Corporation is a
Louisiana corporation, which owns 100% of Commercial National Bank and Citizens
Bank. Deposit Guaranty acquired 100% of the stock of Commercial National
Corporation in February, 1990. Other than its ownership of Commercial National
Bank and Citizens National Bank, Commercial National Corporation does not
engage in substantial business activities.
Citizens National Bank. Citizens Bank is a national bank
headquartered at 201 NW Railroad Ave., Hammond, Louisiana. Citizens Bank
provides a full complement of consumer and commercial banking services in
Tangipahoa Parish, Louisiana.
Bank of Gonzales Holding Company, Inc. Gonzales Holding is a bank
holding company headquartered at 916 South Burnside Avenue at Worthey Road,
Gonzales, Louisiana 70707-1089, telephone number (504) 542-2265. Its only
subsidiary is Gonzales Bank. Gonzales Holding, through its subsidiary,
provides a full complement of consumer and commercial banking services in
Ascension Parish, Louisiana. As of December 31, 1995, Gonzales Holding had
total assets of $124.4 million, total deposits of $108.2 million, loans of
$59.6 million and shareholders' equity of $12.4 million.
Bank of Gonzales. Gonzales Bank, a Louisiana state banking
association, is a full service commercial bank offering consumer and commercial
banking services primarily in Ascension Parish, Louisiana. It conducts its
business through its main office at South Burnside Avenue at Worthey, Gonzales,
Louisiana and at two branch offices in eastern Ascension Parish, Louisiana.
The Bank offers a full range of traditional commercial banking services,
including demand, savings and time deposits, consumer, commercial and real
estate loans, safe-deposit boxes and access to two retail credit plans --
"VISA" and "Mastercard".
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
The Gonzales Holding Board has unanimously approved the Mergers and
the Merger Agreement and has determined that the Mergers are in the best
interests of Gonzales Holding and its shareholders. In approving the Mergers,
Gonzales Holding's directors considered among other factors the financial terms
of the transaction; the liquidity afforded to shareholders of Gonzales Holding
through ownership of a publicly traded stock; a review of the business and
prospects of Gonzales Holding and Deposit Guaranty; the federal income tax
consequences of the Mergers; the likelihood of the Mergers being approved by
regulatory authorities without undue conditions or delays; and an opinion from
Alex Sheshunoff & Co. Investment Banking ("Sheshunoff") regarding the fairness
of the terms of the Mergers, from a financial point of view, to Gonzales
Holding 's shareholders. THE GONZALES HOLDING BOARD OF DIRECTORS BELIEVES THE
MERGERS ARE IN THE BEST INTEREST OF GONZALES HOLDING 'S SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT GONZALES HOLDING 'S SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE MERGER AGREEMENT.
The Board of Directors of Deposit Guaranty has approved the Merger
Agreement because it believes that the Merger will enhance Deposit Guaranty's
earnings capacity by enabling it to deliver products and provide services to a
larger geographic customer base and that the combination of Deposit Guaranty
and Gonzales Holding can take advantage of increased overall efficiencies and
economies of scale. See "The Mergers -- Reasons for the Mergers;
Recommendation of the Gonzales Bank Board of Directors.
2
<PAGE> 14
FAIRNESS OPINION
The Board of Directors of Gonzales Holding has received the written
opinion of Sheshunoff, Gonzales Holding's financial advisor, that the terms of
the Mergers are fair, from a financial point of view, to Gonzales Holding and
Gonzales Holding shareholders. The opinion of Sheshunoff is attached hereto
as Exhibit B and should be read in its entirety. See "The Merger -- Opinion of
Financial Advisor."
REGULATORY APPROVALS
It is a condition to the consummation of the Mergers that all required
regulatory approvals, including the approval of the Office of the Comptroller
of the Currency (OCC) , be obtained. OCC approval was obtained on April 24 ,
1996. See "The Mergers -- Regulatory Approvals."
OTHER CONDITIONS TO CONSUMMATION OF THE MERGERS
In addition to regulatory approvals and the approval by the
shareholders of Gonzales Holding, the respective obligations of each party
under the Merger Agreement are subject, among other conditions, to receipt of
an opinion of Watkins Ludlam & Stennis, P.A. substantially to the effect that
the transactions contemplated by the Merger Agreement will be treated for
federal income tax purposes as a tax-free reorganization under Section 368 of
the Code, and the absence of a material adverse change in the financial
condition, results of operations or business of the other party's consolidated
group. See "The Merger -- Other Conditions to the Mergers" for a fuller
discussion of the conditions to consummation.
EXCHANGE OF GONZALES HOLDING CERTIFICATES; NO FRACTIONAL SHARES
As soon as practicable after the Effective Date, The Bank of New York
(the "Exchange Agent") will mail to each holder of record of Gonzales Holding
Common Stock, a letter of transmittal and instructions for use in effecting the
surrender of the certificates which, immediately prior to the Effective Date,
represented outstanding shares of Gonzales Holding Common Stock in exchange for
certificates representing Deposit Guaranty Common Stock. See "The Merger --
Exchange of Gonzales Holding Certificates." Cash will be paid in lieu of any
fractional share interests in Deposit Guaranty Common Stock. See "The Mergers
- -- Structure and Terms of the Mergers." Certificates representing Gonzales
Holding Common Stock should not be surrendered until the transmittal form is
received.
EFFECTIVE DATE
If the Merger Agreement is approved by the requisite vote of the
shareholders of Gonzales Holding and the Mergers are approved by all required
regulatory agencies and the other conditions to the Mergers are satisfied or
waived (where permissible), the Merger will become effective at the date (the
"Effective Date") a certificate of merger (the "Certificate of Merger") is
filed with the Secretary of State of Louisiana, or as of such later date in
time to which Deposit Guaranty and Gonzales Holding agree, which may be
specified in the Certificate of Merger to be filed with the Louisiana Secretary
of State pursuant to the Business Corporation Law of the State of Louisiana
(the "Louisiana BCL"). It is expected that the Effective Date will occur in
mid-1996; however, there can be no assurance that the conditions to the Merger
will be satisfied or waived so that the Merger can be consummated. See "The
Merger -- Effective Date" and "The Mergers -- Other Conditions to the Mergers."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Gonzales Holding's management and Board of
Directors have interests in the Mergers in addition to their interests as
shareholders of Gonzales Holding generally. Those interests relate to, among
other things, provisions in the Merger Agreement regarding indemnification and
eligibility to participate in certain Deposit Guaranty employee benefit plans.
Executive officers of Gonzales Holding also have an interest in the Mergers as
a result of change
3
<PAGE> 15
in control severance arrangements in their existing employment agreements. See
"The Mergers - Interests of Certain Persons in the Mergers."
TERMINATION
Among other reasons, the Merger Agreement may be terminated at any
time prior to the Effective Date (i) in the event the Merger Agreement is not
approved by the shareholders of Gonzales Holding at the Meeting, (ii) if the
number of shares of Gonzales Holding Common Stock, the holders of which perfect
dissenters' rights, exceeds 10% of the outstanding shares of Gonzales Holding
Common Stock, or (iii) if the Closing has not occurred by December 31, 1996.
The Merger Agreement may also be terminated by mutual consent, or by Gonzales
Holding's Board of Directors if necessary to fulfill its fiduciary duties based
on advice of counsel upon payment of certain expenses. See "The Mergers --
Amendment; Waiver; Termination."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Mergers is conditioned upon receipt of an opinion
of counsel substantially to the effect that the Mergers will be treated, for
federal income tax purposes, as a tax-free reorganization, with the result
that, no gain or loss will be recognized by Gonzales Holding or by holders of
Gonzales Holding Common Stock who exchange all of their Gonzales Holding Common
Stock solely for Deposit Guaranty Common Stock pursuant to the Mergers (except
with respect to cash, if any, received in lieu of fractional shares). Gonzales
Holding shareholders are urged to consult their own tax advisors as to the
specific tax consequences to them of the Mergers. See "The Mergers -- Certain
Federal Income Tax Consequences."
ACCOUNTING TREATMENT
The purchase method of accounting will be used to reflect the Mergers
upon consummation. "The Mergers -- Accounting Treatment."
DISSENTERS' RIGHTS
Under certain conditions and by complying with the specific procedures
required by Louisiana law and described herein, Gonzales Holding 's
shareholders will have the right to dissent from the Holding Company Merger, in
which event, if the Holding Company Merger is consummated, such shareholders
may be entitled to receive in cash the fair value of their shares of Gonzales
Holding Common Stock. See "Dissenters Rights" and Exhibit C hereto.
DEPOSIT GUARANTY - RECENT DEVELOPMENTS
On April 16, 1996, Deposit Guaranty 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 as well as approximately $750 thousand resulting from adoption of
a new accounting pronouncement relating to mortgage service rights.
Deposit Guaranty'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.
Deposit Guaranty's total assets were $6.0 billion at March 31, 1996,
up from $5.4 billion at March 31, 1995. Stockholder's equity was $520 million
at March 31, 1996, compared to $483 million at March 31, 1995.
4
<PAGE> 16
On April 26, 1996, Deposit Guaranty issued unsecured 7 1/4% Senior
Notes Due May 1, 2006 in the aggregate principal amount of $100,000,000. The
proceeds of the offering will be used for general corporate purposes, including
investments in, and advances to, Deposit Guaranty'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.
SELECTED FINANCIAL DATA
The following selected financial data for Deposit Guaranty and
Gonzales Holding has been derived from the consolidated financial statements of
Deposit Guaranty and Gonzales Holding. The information set forth below should
be read in conjunction with the consolidated financial statements of Deposit
Guaranty and Gonzales Holding incorporated by reference or included elsewhere
herein.
5
<PAGE> 17
BANK OF GONZALES HOLDING COMPANY, INC. AND SUBSIDIARIES - SELECTED FINANCIAL
DATA
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
-----------------------------------------------------------------------
<S> <C> <C> <C>
STATEMENTS OF EARNINGS
Interest income $9,981 $8,940 $8,800 $8,512 $8,888
Interest expense 3,258 2,488 2,432 3,100 4,587
-----------------------------------------------------------------------
Net interest income 6,723 6,452 6,368 5,412 4,301
Provision for possible loan losses 60 (250) (398) 385 1,195
-----------------------------------------------------------------------
Net interest income after provision for 6,663 6,702 6,766 5,027 3,106
possible loan losses
Other operating income 1,419 1,477 1,324 1,198 1,145
Other operating expense 4,241 4,302 4,673 4,058 3,497
-----------------------------------------------------------------------
Income before income taxes, extraordinary 3,841 3,877 3,417 2,167 754
item, and cumulative effect of accounting
change
Income tax expense 1,251 620 737 --
1,230
Income before extraordinary item and -----------------------------------------------------------------------
cumulative effect of accounting change 2,611 2,626 2,797 1,430 754
Extraordinary item -- -- -- 686 --
Cumulative effect of accounting change -- -- 4,282 -- --
Net income $2,611 $2,626 $7,079 $2,116 $754
=======================================================================
NET INCOME PER SHARE
Income before extraordinary item and $4.82 $4.86 $4.99 $2.80 $1.73
cumulative effect of accounting change
Extraordinary item -- -- -- 1.35 --
Cumulative effect of accounting change -- -- 7.63 -- --
-----------------------------------------------------------------------
Net income per share $4.82 $4.86 $12.62 $4.15 $1.73
=======================================================================
Weighted average shares outstanding 541,611 540,587 560,907 510,013 435,072
Cash dividends per share $ 5.40 $ 5.40 $ 0.50 $ - $ --
STATEMENTS OF CONDITION - AVERAGES
Total assets $121,664 $117,916 $113,450 $104,342 $97,814
Investment Securities 50,712 47,806 44,485 34,371 22,301
Loans, net of unearned income 60,049 59,352 57,522 56,487 58,988
Total deposits 105,523 101,687 100,673 98,745 93,158
Total stockholders' equity 11,771 12,009 11,927 4,871 3,122
SELECTED RATIOS
Return on average assets 2.15% 2.23% 6.24% 2.03% 0.77%
Return on average equity 22.18 21.87 59.35 43.44 24.15
Net interest margin - tax equivalent 5.96 5.98 5.60 5.39 4.93
Allowance for possible loan losses to loans, 2.44 2.62 3.11 4.04 3.49
net of unearned income
Net charge-offs to average loans, net of .28 .10 .05 .18 2.70
unearned income
Dividend payout 112.03 111.21 3.93 -- --
Average equity to average assets 9.68 10.18 10.51 4.67 3.19
Leverage ratio 9.60 9.84 9.20 5.97 5.62
Tier I risk-based capital 19.30 19.33 18.24 11.58 --
Total risk-based capital 20.56 21.08 19.91 13.29 --
</TABLE>
6
<PAGE> 18
DEPOSIT GUARANTY CORP. AND SUBSIDIARIES - SELECTED FINANCIAL DATA
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF EARNINGS
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 227,112 186,141 190,640 156,277 133,699
possible loan losses
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
Primary $ 3.78 $ 3.80 $ 3.77 $ 2.67 $ 2.04
Fully diluted 3.78 3.80 3.77 2.63 1.93
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
CASH DIVIDENDS PER SHARE $ 1.21 $ 1.06 $ .93 $ .80 $ .78
STATEMENTS OF CONDITION - AVERAGES
Total assets $5,571,697 $4,940,977 $4,826,726 $ 4,777,596 $ 4,814,533
Earning assets 4,961,261 4,413,938 4,333,740 4,275,345 4,329,336
Securities available for sale 186,194 712,184 1,308,634 --- ---
Investment securities 1,365,070 718,891 396,011 1,616,658 1,417,299
Loans, net of unearned income 3,273,408 2,581,724 2,293,416 2,261,034 2,411,731
Deposits 4,438,797 3,997,038 3,867,669 3,876,927 3,990,963
Long-term debt --- --- --- 6,320 24,020
Total stockholders' equity 498,023 429,967 367,592 315,833 275,345
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
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) to average
loans, net of unearned income .12 .10 (.14) 1.02 .77
Dividend payout 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
</TABLE>
7
<PAGE> 19
COMPARATIVE PER SHARE INFORMATION
<TABLE>
<CAPTION>
Deposit
Historical Guaranty and Gonzales
---------------------- Gonzales Holding
Holding Pro Pro Forma
Deposit Gonzales Forma Equivalent
Per Common Share Guaranty Holding Combined(a) (b)
-------------------- ---------------------- ------------- ----------
<S> <C> <C> <C> <C>
NET INCOME (C)
For the year ended
December 31,
1995 $3.78 $4.82 $3.82 $4.47
1994 $3.80 $4.86 $3.85 $4.50
1993 $3.77 $12.62 $4.07 $4.76
CASH DIVIDENDS (D)
For the year ended
December 31,
1995 $1.21 $5.40 $1.21 $1.42
1994 $1.06 $5.40 $1.06 $1.24
1993 $ .93 $ .50 $ .93 $1.09
BOOK VALUE (E)
As of December 31, 1995 $27.82 $22.96 $27.82 $32.54
As of December 31, 1994 $25.23 $20.39 $25.23 $29.52
</TABLE>
(a) In accordance with generally accepted accounting principles, Deposit
Guaranty will account for the Merger using the purchase accounting
method. Deposit Guaranty has been authorized to purchase in the open
market up to 100% of the Deposit Guaranty common stock to be issued in
the Holding Company Merger. The pro forma calculations.
(b) Gonzales Holding pro forma equivalent amounts are computed by
multiplying the pro forma combined amounts by assuming the maximum
number of shares issued which results in an assumed Conversion Number of
1.17.
(c) Net income per common share is based on weighted average common shares
outstanding.
(d) Pro forma cash dividends represent historical cash dividends of Deposit
Guaranty.
(e) Book value per common share is based on total period-end shareholders'
equity.
8
<PAGE> 20
INTRODUCTION
GENERAL
This Proxy Statement/Prospectus is being furnished to shareholders of
Gonzales Holding in connection with the solicitation by the Board of Directors
of Gonzales Holding of proxies for use at a Special Meeting of Shareholders
(the "Meeting") to be held at [2:00 p.m]., local time, on May __, 1996 at the
[Holiday Inn - Gonzales at 1500 West Highway 30, Gonzales, Louisiana], and at
any adjournment or postponement thereof.
At the Meeting, shareholders will consider and vote upon a proposal to
approve the Merger Agreement, by and among Deposit Guaranty, CNC, Citizens
Bank, Gonzales Holding, and Gonzales Bank pursuant to which Gonzales Holding
will merge into CNC, Gonzales Bank will merge into Citizens Bank and each share
of Gonzales Holding Common Stock issued and outstanding immediately prior to
the Effective Date of the Merger (except Dissenting Shares, as hereinafter
defined) will be converted into and exchangeable for a number of shares of
Deposit Guaranty Common Stock, determined by dividing 634,000 by the number of
shares of Gonzales Holding Common Stock outstanding on the date immediately
preceding the Effective Date. As a result of the Merger, the shareholders of
Gonzales Holding will become shareholders of Deposit Guaranty.
This Proxy Statement/Prospectus constitutes a proxy statement of
Gonzales Holding with respect to the Meeting and a prospectus of Deposit
Guaranty with respect to the shares of Deposit Guaranty Common Stock to be
issued in connection with the Mergers. The information in this Proxy
Statement/Prospectus concerning Deposit Guaranty and its subsidiaries and
Gonzales Holding and its subsidiary has been furnished by each of such
entities, respectively.
The principal executive office of Deposit Guaranty is located at 210
East Capitol Street, Jackson, Mississippi 39201, and its telephone number is
(601) 354-8497. The principal executive office of Gonzales Holding is located
at 916 South Burnside Avenue at Worthey Road, Gonzales, Louisiana 70707-1089,
and its telephone number is (504) 542-2265.
This Proxy Statement/Prospectus is first being mailed to shareholders of
Gonzales Holding on or about May __, 1996.
RECORD DATE; VOTING RIGHTS; PROXIES
The Board of Directors of Gonzales Holding has fixed the close of
business on ___________________, 1996 as the Record Date for determining
holders of outstanding shares of Gonzales Holding Common Stock entitled to
notice of and to vote at the Meeting. Only holders of Gonzales Holding Common
Stock of record on the books of Gonzales Holding at the close of business on
the Record Date are entitled to vote at the Meeting or at any adjournment or
postponement thereof. As of the Record Date, there were 561,801 shares of
Gonzales Holding Common Stock issued and outstanding, each of which is entitled
to one vote. The presence, in person or by proxy, of a majority of the total
voting power of Gonzales Holding Common Stock is necessary to constitute a
quorum of the stockholders to take action at the Meeting. Shares of Gonzales
Holding Common Stock represented by properly executed proxies will be voted in
accordance with the instructions indicated on the proxies or, if no
instructions are indicated, will be voted FOR the proposal to approve the
Merger Agreement and, in the discretion of the proxy holders, as to any other
matter which may properly come before the Meeting or any adjournment or
postponement thereof. A shareholder who has given a proxy may revoke it at any
time before it is voted by (a) filing with the Secretary of Gonzales Holding
(i) a notice in writing revoking it, or (ii) a duly executed proxy bearing a
later date or (b) voting in person at the Meeting.
Approval of the Merger Agreement requires the affirmative vote at the
Meeting of the holders of a majority of the outstanding shares of the Gonzales
Holding Common Stock. Therefore, an abstention or failure to return a properly
executed proxy will have the same effect as a vote against the Merger
Agreement, as will a broker's submitting a proxy without exercising
discretionary authority with respect to approval of the Merger Agreement. As
of the Record Date, the executive officers and directors of Gonzales Holding as
a group had the power to vote approximately 119,102 shares of Gonzales Holding
Common Stock, representing approximately 22% of the outstanding shares, all of
which are expected to be voted in favor of the Merger Agreement.
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Deposit Guaranty's shareholders are not required to approve the Merger
Agreement or the issuance of shares of Deposit Guaranty Common Stock.
Gonzales Holding will bear the costs of soliciting proxies from its
shareholders. In addition to the use of the mail, proxies may be solicited by
the directors, officers and employees of Gonzales Holding in person, or by
telephone or telegram. Such directors, officers and employees will not be
additionally compensated for such solicitation but may be reimbursed for
out-of-pocket expenses incurred in connection therewith. Arrangements will
also be made with custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of Gonzales Holding Common Stock
held of record by such persons, and Gonzales Holding may reimburse such
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred in connection therewith.
THE MERGERS
GENERAL
The Merger Agreement provides that, subject to the satisfaction or
waiver (where permissible) of certain conditions, including, among other
things, the receipt of all necessary regulatory approvals, the expiration of
all related waiting periods and the approval by the shareholders of Gonzales
Holding, Gonzales Holding will be merged with and into CNC, and the Gonzales
Bank will be merged with and into Citizens Bank. As a result of the Mergers,
the separate corporate existence of Gonzales Holding and Gonzales Bank will
cease and the shareholders of Gonzales Holding will become shareholders of
Deposit Guaranty. The date on which the Mergers will be consummated is herein
referred to as the "Effective Date." See "The Merger -- Effective Date."
The description of the Merger Agreement included in this Proxy
Statement/Prospectus is qualified in its entirety by reference to the Merger
Agreement, which is incorporated herein by reference and a copy of which is
attached hereto as Exhibit A.
STRUCTURE AND TERMS OF THE MERGERS
Upon consummation of the Merger, Gonzales Holding will be merged with
and into CNC and each share of Gonzales Holding Common Stock issued and
outstanding at the Effective Date (other than shares owned by shareholders who,
pursuant to the Louisiana BCL, perfect any right to receive the fair value of
such shares ("Dissenting Shares")) will be converted into and exchangeable for
a number of shares of Deposit Guaranty Common Stock determined by dividing
634,000 by the number of shares of Gonzales Holding Common Stock outstanding on
the date immediately preceding the Effective Date (the "Exchange Ratio"). If
prior to the Effective Date Deposit Guaranty should split or combine Deposit
Guaranty Common Stock, or pay a dividend or other distribution in Deposit
Guaranty Common Stock, then the exchange ratio shall be appropriately adjusted
to reflect such split, combination, dividend or distribution.
The Exchange Ratio was determined by a process of arm's length
negotiations involving the managements of Gonzales Holding and Deposit Guaranty
and their respective financial advisors. The 634,000 shares of Deposit
Guaranty Common Stock to be issued upon consummation of the Mergers will
constitute approximately 3.3% of the shares of Deposit Guaranty Common Stock
outstanding immediately after the Effective Date. This calculation does not
make any adjustment for fractional shares or Dissenting Shares and is based
upon the number of shares of Gonzales Holding Common Stock and Deposit Guaranty
Common Stock outstanding on the Record Date.
No fractional shares of Deposit Guaranty Common Stock will be issued in
the Mergers. Any shareholder otherwise entitled to receive a fractional share
of Deposit Guaranty Common Stock will be paid a cash amount in lieu of any such
fractional share determined by multiplying (i) the closing sale price of a
share of Deposit Guaranty Common Stock on the date immediately proceeding the
Effective Date as quoted on the National Association of Securities Dealers
Automated Quotation System, by (ii) the fraction of a share of Deposit Guaranty
Common Stock to which such holder would otherwise be entitled.
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<PAGE> 22
BACKGROUND OF MERGERS
In early 1994 after receiving expressions of interest from several
regional banks to acquire Gonzales Holding, the Gonzales Holding Board engaged
Alex Sheshunoff & Co. Investment Banking ("Sheshunoff") to value Gonzales
Holding and invite acquisition offers. Of the four preliminary offers
received, in the judgment of the Board, only one represented the appropriate
value of Gonzales Holding and, after a due diligence examination of Gonzales
Holding by the high bidder, that offer was reduced substantially. The Board
concluded that the offering price was inadequate and the offer was rejected.
Acquisition offers are often based in part on a multiple of the target's
book value and the adequacy of such offers is often evaluated by this multiple
of book value. However, if a banking company is excessively capitalized, as
was the case with Gonzales Holding in early 1994, the excess capitalization is
customarily acquired on a dollar for dollar basis rather than as a multiple of
book value.
In 1994, the Board adopted a dividend policy designed to distribute the
excess capitalization to shareholders through a series of special dividends.
After the payment of these dividends, which reduced the capital of Gonzales
Holding to normal levels, in late 1995 the Board again engaged Sheshunoff to
value Gonzales Holding and seek acquisition offers. In late 1995, offering
packages were sent to nine large banks resulting in the receipt of nine
non-binding offers.
During December 1995, the four largest bidders were permitted to perform
due diligence examinations of Gonzales Holding, after which one offer was
withdrawn, one offer was reduced and one offer was increased. Negotiations
were conducted with the two highest bidders over a period of three weeks,
resulting in the enhancement of both offers. After considerable examination
and analysis, the Board determined that the offer submitted by Deposit Guaranty
was the highest and best offer and on February 5, 1996 executed the Merger
Agreement with Deposit Guaranty.
The decision of the Board to enter into the Merger Agreement with
Deposit Guaranty was based on a careful analysis of various factors and after
consulting with the Board's financial, legal and other advisors and Gonzales
Holding management. Although the two highest offers received were very similar
in terms of exchange ratios, the Board selected Deposit Guaranty because of its
historic and expected stock performance.
REASONS FOR THE MERGERS
In reaching its decision that the Merger Agreement is in the best
interests of Gonzales Holding and its shareholders, the Board considered a
number of factors in addition to the financial terms, including, but not
limited to the following:
(a) the financial condition and results of operations of, and
prospects for, each of Gonzales Holding and Deposit Guaranty;
(b) the likelihood that Gonzales Bank would experience significant
increased competitive pressures in its market area from larger
banking and other financial institutions capable of offering a
broader array of technologically advanced financial services
and products;
(c) the lack of marketability of Gonzales Holding Common Stock and
the liquidity that would be offered to Gonzales Holding's
shareholders through the ownership of securities of a publicly
traded company such as Deposit Guaranty;
(d) The financial terms of the Mergers, including the relationship
of the value of the Deposit Guaranty Common Stock issuable in
the Mergers to the market value, book value, and earnings per
share of Gonzales Holding Common Stock;
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<PAGE> 23
(e) The nonfinancial terms of the Mergers, including the treatment
of the Mergers as a tax-free exchange of Gonzales Holding
Common Stock for Deposit Guaranty Common Stock for federal and
state income tax purposes;
(f) The likelihood of the Mergers being approved by applicable
regulatory authorities without undue conditions or delay; and
(g) The opinion rendered by Sheshunoff, Gonzales Holding's
financial advisor, to the effect that the terms of the
Mergers, as provided in the Merger Agreement, are fair from a
financial point of view, to the holders of Gonzales Holding
Common Stock.
Gonzales Holding's Board did not assign any specific or relative
weight to the foregoing factors in its considerations. Gonzales Holding's
Board believes that the Merger Agreement will provide significant value to all
Gonzales Holding shareholders and will enable them to participate in
opportunities for growth that Gonzales Holding's Board believes the Mergers
make possible.
BASED ON THE FOREGOING, THE BOARD OF DIRECTORS OF GONZALES HOLDING HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT, BELIEVES THAT THE MERGER AGREEMENT
IS IN THE BEST INTERESTS OF GONZALES HOLDING'S SHAREHOLDERS AND RECOMMENDS THAT
ALL SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
DEPOSIT GUARANTY. The Deposit Guaranty Board of Directors believes
that by expanding Deposit Guaranty's customer base into the southern portion of
Louisiana, the Mergers should enhance Deposit Guaranty's earnings capacity by
enabling it to deliver products and provide services to that enlarged customer
base, and by permitting cost savings through consolidation of operations. In
addition, the Deposit Guaranty Board of Directors believes that the combination
of Deposit Guaranty and Gonzales Holding will allow Deposit Guaranty and
Gonzales Holding to increase overall efficiency and take advantage of economies
of scale in several areas. In evaluating the Mergers, the Deposit Guaranty
Board of Directors considered a variety of factors, including the respective
results of operations, financial condition and prospects of Deposit Guaranty
and Gonzales Holding; the compatibility and complimentary nature of the
respective businesses and managerial philosophies of Deposit Guaranty and
Gonzales Holding; and the relative prices paid in recent acquisitions of
financial institutions.
OPINION OF FINANCIAL ADVISOR
In October 1995, Gonzales Holding, retained Sheshunoff, an investment
banking firm based in Austin, Texas, on the basis of its experience, to prepare
an information package and contact potential purchasers identified by
Sheshunoff for the purpose of effecting a sale, merger, exchange or other
similar transaction with respect to the shares of Gonzales Holding.
Additionally, Gonzales Holding retained Sheshunoff to render a written fairness
opinion (the "Opinion") to the Board of Directors of Gonzales Holding.
Sheshunoff has been in the business of consulting for the banking industry for
over twenty years, including the appraisal and valuation of banking
institutions and their securities in connection with mergers and acquisitions
and equity offerings. Sheshunoff has a long history of familiarity and
involvement with the banking industry nationwide, as well as familiarity with
the Louisiana market and recent transactions in this market. Sheshunoff
reviewed the negotiated terms of the Merger Agreement. Prior to being retained
for this assignment, Sheshunoff has provided professional services and products
to Gonzales Holding. The revenues derived from such services and products are
insignificant when compared to Sheshunoff's total gross revenues.
On January 18, 1996, in connection with its consideration of the Merger
Agreement, Sheshunoff issued its Oral Opinion to the Board of Directors of
Gonzales Holding that, in its opinion as investment bankers, the terms of the
Mergers as provided in the Merger Agreement are fair and equitable, from a
financial perspective, to Gonzales Holding's shareholders. The Oral Opinion,
which was confirmed in a written opinion dated May __, 1996, is based upon
conditions as they existed on December 31, 1995. A copy of the Opinion is
attached as Exhibit B to this Proxy Statement/Prospectus and should be read in
its entirety by Gonzales Holding shareholders. Sheshunoff's written opinion
does not constitute an endorsement of the Mergers or a recommendation to any
shareholder as to how such shareholder should vote.
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<PAGE> 24
In rendering its Opinion, Sheshunoff reviewed certain publicly
available information concerning Gonzales Holding and Deposit Guaranty.
Sheshunoff considered many factors in making its evaluation. In arriving at
its Opinion regarding the fairness of the transaction, Sheshunoff reviewed: (i)
the Merger Agreement; (ii) the external auditor's reports to the Board of
Directors of Gonzales Holding and the internal audit function of Deposit
Guaranty; (iii) the audited balance sheet and income statement for each of the
past three years for each organization; (iv) each organization's rate
sensitivity analysis reports; (v) each organization's listing of marketable
securities showing rate, maturity and market value as compared to book value;
(vi) each organization's internal loan classification list; (vii) a listing of
other real estate owned for each organization; (viii) the budget and long range
operating plan of each organization; (ix) a listing of unfunded letters of
credit and any other off-balance sheet risks for each organization; (x) the
minutes of the Board of Directors meetings of Gonzales Holding; (xi) the Board
report for each organization; (xii) the listing and description of significant
real properties for each organization; and (xiii) market conditions and current
trading levels of outstanding equity securities of both organizations.
Sheshunoff conducted an on-site review of Gonzales Holding and Deposit
Guaranty.
In reaching its Opinion, Sheshunoff analyzed the total purchase price
basis using standard evaluation techniques (as discussed below) including
comparable sales multiples (market value), net present value, cash flow
analysis, return on investment and the price as a percentage of total assets
based on certain assumptions of projected growth, earnings and dividends and a
range of discount rates from 12% to 15%. Sheshunoff also considered as one of
the methods of determining the fairness of the transaction, the projected pro
forma impact on Gonzales Holding shareholders' equivalent earnings per share
and equity per share (appreciation/dilution analysis), which was based upon
stand-alone financial projections for both Gonzales Holding and Deposit
Guaranty compared with pro forma financial projections.
In performing its analysis, Sheshunoff relied upon financial
projections for Gonzales Holding which were prepared and furnished by the
management of Gonzales Holding. Deposit Guaranty's projections were prepared
by Sheshunoff based on its review of publicly available information,
discussions with the management of Deposit Guaranty and an on-site due
diligence review of Deposit Guaranty. Gonzales Holding and Deposit Guaranty do
not publicly disclose internal management projections of the type provided to
Sheshunoff in connection with its review of the Mergers and such projections
were not prepared with a view towards public disclosure. The projections were
based on numerous variables and assumptions which are inherently uncertain,
including without limitation, factors related to general economic and
competitive conditions. Accordingly, actual results could vary significantly
from those set forth in such projections.
In addition, Sheshunoff discussed with the management of Gonzales
Holding and Deposit Guaranty the relative operating performance and future
prospects of each organization, primarily with respect to the current level of
their earnings and future expected operating results, giving weight to
Sheshunoff's assessment of the future of the banking industry and each
organization's performance within the industry. Sheshunoff compared the
results of operation of Gonzales Holding with the results of operation of a
peer group comprised of all Louisiana banks with total assets of $100 to $499
million (50 banks). Sheshunoff compared the results of operation of Deposit
Guaranty with the results of operation of a national peer group comprised of
all bank holding companies with total assets between $5 billion and $10 billion
(31 holding companies).
Many variables affect the value of banks, not the least of which is
the uncertainty of future events, so that the relative importance of the
valuation variables differs in different situations. The primary financial
variables to be considered are earnings, equity, dividends or dividend-paying
capacity, asset quality and cash flow. In addition, in most instances, if not
all, value is further tempered by non-financial factors such as marketability,
voting rights or block size, history of past sales of the bank's stock, nature
and relationship of the other shareholders in the bank, and special ownership
or management considerations.
"Market value" is generally defined as the price, established on an
"arms-length" basis, at which knowledgeable, unrelated buyers and sellers would
agree. The market value in connection with the evaluation of control of a bank
is determined by the previous sales of banks in the state or region.
Sheshunoff has access to a substantial database detailing the prices
paid for banking institutions nationwide. The database includes transactions
involving banking organizations in Louisiana and the surrounding states with
total assets of less than $250 million which sold for 100% stock from March 22,
1995 through March 22, 1996 (the "Market Comparables") and over the past five
years. The database provides comparable pricing and financial performance data
for banking organizations sold or acquired. Organized by different peer
groups, the data presents averages of financial performance and
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<PAGE> 25
purchase price levels, thereby facilitating a valid comparative purchase price
analysis. In analyzing the transaction value of Gonzales Holding, Sheshunoff
has considered the market approach and has evaluated price to equity and price
to earnings multiples of the Market Comparables. The following table provides
the 13 banking organizations included in the Market Comparables relative to the
ratios of the transaction as of the date of the fairness opinion:
<TABLE>
<CAPTION>
PURCHASE PRICE PURCHASE PRICE PURCHASE PRICE TO
SELLER CITY STATE TO EQUITY (X) TO EARNINGS (X) TOTAL ASSETS (%)
<S> <C> <C> <C> <C>
American Bancshares Houma LA 2.13 17.64 20.28
Cedar Creek Bncshes Seven Points TX 2.70 14.00 21.26
Canadian Bancshares Canadian TX 1.59 11.24 19.19
New Iberia Bancorp New Iberia LA 2.40 23.28 21.85
Delta B&TC Belle Chasse LA 2.16 17.76 17.10
Equitable BankShares Dallas TX 2.87 21.67 17.85
First Citizens BncSt Morgan City LA 2.52 18.03 27.28
Weatherford Nat Bksh Weatherford TX 2.18 12.15 18.73
Bunkie Bancshares Bunkie LA 2.27 15.84 18.59
Tom Green Nat'l Bank San Angelo TX 1.98 18.66 13.00
FNB Bancshares, Inc. Lake Providence LA 1.93 12.91 13.52
Peoples Bancshares Chalmette LA 2.01 21.09 17.36
Valley-Hi Inv. Co. San Antonio TX 1.24 6.87 8.79
AVERAGES 2.15X 16.24X 18.06%
Gonzales Holding Gonzales LA 2.38 13.22 23.82
</TABLE>
COMPARABLE SALES MULTIPLES. Sheshunoff calculated a "Purchase price
based on book value" of $49.36 per share based on Gonzales Holding's December
31, 1995 equity and the average price to equity multiple of 2.15x for the
Market Comparables. Sheshunoff calculated a "Purchase price based on earnings"
of $67.23 per share based on Gonzales Holding's estimated 1996 earnings and the
average price to earnings multiple of 16.24x for the Market Comparables. The
financial performance characteristics of the banking organizations in the
Market Comparables vary, sometimes substantially, from those of Gonzales
Holding. When the variance is significant for relevant performance factors,
adjustments to the price multiples are appropriate when comparing them to the
transaction value.
NET PRESENT VALUE ANALYSIS. The investment or earnings value of any
banking organization's stock is an estimate of the present value of the future
benefits, usually cash flows with an estimated residual value based on a range
of multiples of earnings or book value at some point in the future.
Sheshunoff's cash flow computations are based on Gonzales Holding's dividend
paying capacity available to common shareholders while maintaining a 6.00% tier
1 leverage ratio and using a net present value discount rate range of 12.00% to
15.00%. Assuming a residual value based on book value in the year 2005 and a
price to book range of 1.30x to 1.80x resulted in a present value range from
$31.95 per share to $44.83 per share. Assuming a residual value based on a
price to earnings range of 10x to 15x resulted in a present value range from
$29.12 per share to $41.26 per share.
PROJECTED IMPACT ON GONZALES HOLDING SHAREHOLDERS. Consideration was
given to the levels of book value and earnings per share appreciation or
dilution percentages between the merger partners over the next five years after
consummation. To justify the fairness of the transaction for Gonzales Holding
shareholders, it is important to project, based upon realistic projections of
future performance, a positive impact for Gonzales Holding shareholders. It is
important to note that the appreciation/dilution analysis is one of the methods
utilized by Sheshunoff. The projected appreciation/dilution analysis supports
Sheshunoff's Opinion as to the fairness of the transaction to Gonzales
Holding's shareholders from a financial point of view. This analysis does not
address future shareholder transactions involving Deposit Guaranty stock after
consummation of the transaction.
MARKETING EFFORTS. In rendering its opinion Sheshunoff considered the
marketing efforts Gonzales Holding undertook prior to signing the Merger
Agreement with Deposit Guaranty. In connection with the sale, the management
of Gonzales Holding believed the value of Gonzales Holding would be maximized
by soliciting offers from prospective buyers.
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A marketing effort was undertaken by Sheshunoff, which produced indications of
interest from nine regional holding companies. The highest four bidders where
invited to perform due diligence at Gonzales Holding. After a final round of
offers were analyzed, Gonzales Holding entered into discussions with Deposit
Guaranty which led to the Merger Agreement.
There are many other factors to consider, when valuing a going
concern, which do not directly impact the earnings stream and the net present
value but which do exert a degree of influence over the fair market value of a
going concern. These factors include, but are not limited to, the general
condition of the industry, the economic and competitive situations in the
market area and the expertise of the management of the organization being
valued.
Neither Gonzales Holding nor Deposit Guaranty imposed any limitations
upon the scope of the investigation to be performed by Sheshunoff in
formulating such Opinion. In rendering its Opinion, Sheshunoff did not
independently verify the asset quality and financial condition of Gonzales
Holding or Deposit Guaranty, but instead relied upon the data provided by or on
behalf of Gonzales Holding and Deposit Guaranty to be true and accurate in all
material respects.
For its services as independent financial analyst for the transaction,
including the rendering of its Opinion referred to above, Gonzales Holding has
agreed to pay Sheshunoff aggregate fees of 0.75% of the total consideration
paid, which includes the professional fee for the Opinion.
EFFECTIVE DATE
The Mergers will be consummated and become effective at the time a
certificate of merger (the "Certificate of Merger") is filed with the Secretary
of State of Louisiana, or as of such later date or time to which Deposit
Guaranty and Gonzales Holding agree, which may be specified in the Certificate
of Merger. Unless Deposit Guaranty and Gonzales Holding otherwise agree, the
Mergers will be consummated as soon as practicable following receipt of
Gonzales Holding shareholder and necessary regulatory approvals and
satisfaction or waiver of the other conditions to the Mergers. It is expected
that the Effective Date will occur in mid-1996; however, there can be no
assurance that the conditions to the Merger will be satisfied or waived so that
the Merger can be consummated. See "The Merger -- Regulatory Approvals" and --
"Other Conditions to the Mergers."
REGULATORY APPROVALS
Consummation of the Mergers is conditioned on approval by all required
regulatory authorities, including approval by the OCC. OCC approval was
obtained on April 24, 1996. The Board of Governors of the Federal Reserve
System, the Louisiana Office of Financial Institutions and the Federal Deposit
Insurance Corporation must also review the Bank Merger and comment on the
competitive factors involved. The Bank Merger may not be consummated until the
expiration of fifteen (15) days after approval by the OCC has been obtained.
During this 15-day period, the United States Department of Justice, if it
objects to the proposed Bank Merger for antitrust reasons, may file suit to
enjoin the Bank Merger.
OTHER CONDITIONS TO THE MERGERS
In addition to Gonzales Holding shareholder and regulatory approval,
the respective obligations of each party under the Merger Agreement are
subject, among other conditions, to (i) the absence of any order, decree or
injunction of a court or agency of competent jurisdiction enjoining or
prohibiting consummation of the Mergers, (ii) receipt of an opinion of Watkins
Ludlam & Stennis, P.A. substantially to the effect that the transactions
contemplated by the Merger Agreement will be treated for federal income tax
purposes as a tax-free reorganization under Section 368 of the Code, (iii) that
on the date of closing the representations and warranties made in the Merger
Agreement by each party are true and correct in all material respects, (iv)
that prior to the Effective Date there not have been a material adverse change
in the financial condition, results of operations or business of the other
party's consolidated group and (v) the receipt of customary legal opinions.
INTERESTS OF CERTAIN PERSONS IN THE MERGERS
INDEMNIFICATION. The Merger Agreement provides that CNC shall
indemnify the former directors, officers, employees and agents of Gonzales
Holding against all claims to which they become subject arising out of actions
or omissions occurring at or prior to the Effective Date of the Mergers,
including the transactions contemplated by the Merger
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Agreement, to the full extent permitted by Louisiana law or by Gonzales Holding
's Articles of Incorporation and Bylaws. The Merger Agreement also provides
that Citizens Bank shall indemnify the former directors, officers, employees
and agents of Gonzales Bank against all claims to which they become subject
arising out of actions or omissions occurring at or prior to the Effective Date
of the Mergers, including the transactions contemplated by the Merger
Agreement, to the full extent permitted by Louisiana law or by Gonzales Bank 's
Articles of Incorporation and Bylaws. CNC and Citizens Bank have agreed to use
their best efforts to maintain Gonzales Holding 's and Gonzales Bank's existing
directors' and officers' liability insurance policies (or a policy providing at
least comparable coverage) for a period of five (5) years after the Effective
Date of the Mergers. The Merger Agreement also provides for indemnification by
Deposit Guaranty of Gonzales Holding and its officers, directors and control
persons from and against liability arising under the Securities Act or
otherwise if such liability arises out of or is based on an untrue statement or
omission of a material fact required to be stated in the Registration
Statement, of which this Proxy Statement/Prospectus forms a part, or in any
amendment or supplement thereto, or necessary to make the statements made not
misleading. This indemnification does not apply to statements made in reliance
on information furnished to Deposit Guaranty by or on behalf of Gonzales
Holding or Gonzales Bank for use in the Registration Statement.
EMPLOYEE BENEFITS. The Merger Agreement provides that, after the
Effective Date of the Mergers, Deposit Guaranty will, subject to compliance
with applicable legal and regulatory requirements, provide coverage for all
employees of Gonzales Holding and Bank of Gonzales under Deposit Guaranty's
benefit plans for which they are eligible, as soon as practicable after the
Effective Date. All prior years of service of Gonzales Bank employees will be
counted for vesting and eligibility purposes under all applicable Deposit
Guaranty employee benefit plans to the extent permitted by applicable law. Any
Gonzales Bank employee who, immediately prior to the Effective Date, is covered
by or is a participant in a Gonzales Bank employee benefit plan, shall, on the
Effective Date, be covered by or participate in the comparable Deposit Guaranty
employee benefit plan if a comparable plan otherwise is maintained by Deposit
Guaranty and if the eligibility requirements of the Deposit Guaranty plan are
met.
EMPLOYMENT AND SEVERANCE ARRANGEMENTS. Gonzales Holding is a party to
an Amended and Restated Employment Agreement (the "Employment Agreement") with
its Chief Executive Officer, Mr. Dale Gaudet, which terminates on December 31,
1998. In accordance with this agreement, if the Gonzales Bank terminates the
Mr. Gaudet's employment without cause, then Gonzales Holding shall pay him his
full salary through the date of termination, and in lieu of any further salary
payments to him for periods subsequent to the date of termination, shall pay as
severance an amount equal to the present value (using a discount rate of 5%) of
the remaining salary due to him under the agreement.
Gonzales Holding is also a party to Amended and Restated Contingency
Severance Agreements ("Severance Agreements") with each of three (3) senior
vice-presidents, namely Rachel P. Cherco, James H. May, Jr. and Ida N. Reine,
the latest of which terminates on December 31, 1998. Under the Severance
Agreements, if the executive officer's employment with Gonzales Holding or
Gonzales Bank of Gonzales is terminated without "Cause" (as defined in the
Employment Agreement) within two years after a "Change in Control," then the
executive officer will be entitled to receive certain severance payments and
benefits. For purposes of the agreements, "Cause" generally will exist only if
the executive officer dies or is disabled for a continuous period of 180 days,
if he or she commits or is charged with a felony or any crime involving moral
turpitude, the willful and continuing failure by the executive officer to
promptly and efficiently discharge and perform those duties assigned to the
executive him or her in a manner in which such duties were performed prior to
the "Change in Control," or certain other criminal or unethical activities.
The Mergers will constitute a "Change in Control" for purposes of the
Severance Agreements. If an executive officer who is a party to a Severance
Agreement is discharged within two years after the Mergers without "Cause," he
or she will be entitled to receive, in addition and without prejudice to any
other rights he or she may have, including the right to bring a claim for
damages, an amount equal to the excess, if any, of (i) two times his or her
salary over (ii) the amount of compensation paid to the executive officer after
the Change in Control.
Deposit Guaranty has agreed in the Merger Agreement to assume Gonzales
Holding 's obligations under these Employment and Severance Agreements.
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ELECTION TO CITIZENS BANK BOARD. The Merger Agreement provides that
for a period of not less than three years after the Mergers are consummated, at
least two former directors of Gonzales Bank will be elected to serve as
directors of Citizens Bank.
EXCHANGE OF GONZALES HOLDING CERTIFICATES
At the Effective Date, each Gonzales Holding shareholder will cease to
have any rights as a shareholder of Gonzales Holding and his or her sole rights
will pertain to the shares of Deposit Guaranty Common Stock to which such
holder's shares of Gonzales Holding Common Stock shall have been converted
pursuant to the Mergers, except for the right to receive cash for any
fractional shares.
As soon as practicable following the Effective Date, the Exchange
Agent for the Deposit Guaranty Common Stock will mail to each holder of record
of Gonzales Holding Common Stock a letter of transmittal and instructions for
effecting the surrender of the stock certificates which, immediately prior to
the Effective Date, represented outstanding shares of Gonzales Holding Common
Stock in exchange for certificates representing shares of Deposit Guaranty
Common Stock. SHAREHOLDERS OF GONZALES HOLDING ARE REQUESTED NOT TO SURRENDER
THEIR GONZALES HOLDING CERTIFICATES FOR EXCHANGE UNTIL SUCH LETTER OF
TRANSMITTAL AND INSTRUCTIONS ARE RECEIVED. Upon surrender of a certificate
representing Gonzales Holding Common Stock for exchange and cancellation to the
Exchange Agent, together with a duly executed letter of transmittal, the holder
of such Gonzales Holding Common Stock shall be entitled to receive in exchange
therefor a Deposit Guaranty certificate representing the number of whole shares
of Deposit Guaranty Common Stock to which such holder of Gonzales Holding
Common Stock shall have become entitled pursuant to the Merger Agreement, and a
check in payment for any fractional share of Deposit Guaranty Common Stock to
which such holder may be entitled.
After the Effective Date and until surrendered, certificates
representing Gonzales Holding Common Stock will be deemed for all purposes,
other than the payment of dividends or other distributions, if any, in respect
of Deposit Guaranty Common Stock, to represent the number of whole shares of
Deposit Guaranty Common Stock into which such shares of Gonzales Holding Common
Stock have been converted. Deposit Guaranty will not pay former shareholders of
Gonzales Holding who become holders of Deposit Guaranty Common Stock pursuant
to the Mergers any dividends or other distributions that may have become
payable to holders of record of Deposit Guaranty Common Stock following the
Effective Date until they have surrendered their certificates evidencing
ownership of shares of Gonzales Holding Common Stock along with a properly
completed letter of transmittal.
Gonzales Holding shareholders who cannot locate their certificates are
urged to contact promptly the Secretary of Gonzales Holding at South Burnside
Avenue at Worthey Road, Post Office Box 1089, Gonzales, Louisiana 70707,
telephone number (504) 621-7200. A new certificate will be issued to replace
the lost certificate(s) only upon execution by the shareholder of an affidavit
certifying that his or her certificate(s) cannot be located and an agreement to
indemnify Gonzales Holding and Deposit Guaranty and their transfer agents and
registrars against any claim that may be made against Gonzales Holding or
Deposit Guaranty by the owner of the certificate(s) alleged to have been lost
or destroyed. Gonzales Holding or Deposit Guaranty may also require the
shareholder to post a bond in such sum as is sufficient to support the
shareholders' agreement to indemnify Gonzales Holding and Deposit Guaranty.
AMENDMENT; WAIVER; TERMINATION
The Merger Agreement may be amended at any time before or after its
approval by the shareholders of Gonzales Holding by written agreement of
Gonzales Holding and Deposit Guaranty, except that no amendment may be made
after Gonzales Holding shareholder approval that by law would require further
shareholder approval unless such further shareholder approval is obtained.
The Merger Agreement provides that either party may (i) extend the
time for performance of any of the obligations or other acts of the other
parties, (ii) waive any inaccuracies in the representations and warranties
contained in the Merger Agreement or in any document delivered pursuant to the
Merger Agreement or (iii) waive compliance with any of the agreements or
conditions contained in the Merger Agreement other than the satisfaction of all
requirements prescribed by law for consummation of the Mergers.
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The Merger Agreement may be terminated at any time prior to the
Effective Date (a) by mutual written consent of the parties, properly
authorized by their respective Boards of Directors; (b) by Deposit Guaranty,
CNC, and Citizens Bank, (i) if at the time of such termination there shall be a
material adverse change in the consolidated financial condition of Gonzales
Bank or Gonzales Holding from that set forth in Gonzales Bank's or Gonzales
Holding's financial statements for the period ended December 31, 1995; (ii) in
the event there are dissenting shareholders who hold more than ten percent
(10%) of the shares of Gonzales Holding Common Stock, or (iii) if the
transaction is not consummated by December 31, 1996; (c) by any party, if (i)
a United States District Court shall rule upon application of the Department of
Justice after a full trial on the merits or a decision on the merits based on a
stipulation of facts that the transactions contemplated by this Agreement
violate the antitrust laws of the United States; or (ii) the Merger Agreement
shall not have been approved by the affirmative vote of the holders of at least
a majority of the outstanding shares of Gonzales Holding Common Stock; or (d)
by Gonzales Holding's Board of Directors if necessary to fulfill its fiduciary
duties based on advice of counsel upon payment of certain expenses.
CONDUCT OF BUSINESS PENDING THE MERGERS
The Merger Agreement provides that Gonzales Bank and Gonzales Holding
will conduct their businesses and engage in transactions only in the ordinary
course and consistent with prudent banking practice. Without the prior consent
of Deposit Guaranty, neither Gonzales Bank nor Gonzales Holding shall (i)
increase by more than ten percent (10%) the compensation payable by Gonzales
Bank or Gonzales Holding to any of its directors, officers, agents,
consultants, or any of its employees whose total compensation after such
increase would be in excess of $25,000 per annum, grant or pay any
extraordinary bonus, percentage compensation, service award or other like
benefit to any such director, officer, agent, consultant or employee, or make
or agree to any extraordinary welfare, pension, retirement or similar payment
or arrangement for the benefit of any such director, officer, agent, consultant
or employee, (ii) sell or dispose of material assets except in the ordinary
course of business, (iii) enter into any new capital commitments or make any
capital expenditures, except commitments or expenditures within existing
operating and capital budgets or otherwise in the ordinary course of business,
or (iv) authorize or issue any additional shares of any class of its capital
stock or any securities exchangeable for or convertible into any such shares or
any options or rights to acquire any such shares, or otherwise authorize or
affect any change in its capitalization. In addition, no dividends shall be
paid by Gonzales Holding, except for (i) a special dividend by Gonzales Holding
in February, 1996 of $2.00 per share, and (ii) regular quarterly dividends in
1996 of $.35 per share for each complete calendar quarters that elapses prior
to the Effective Date, and no dividends shall be paid by Gonzales Bank except
dividends by Gonzales Bank to Gonzales Holding to the extent necessary to fund
authorized dividends of Gonzales Holding and to pay necessary and routine
expenses of Gonzales Holding.
In addition, Gonzales Holding has agreed that, without the prior
approval of Deposit Guaranty, it will not solicit or encourage inquiries or
proposals with respect to, or, except to the extent required in the opinion of
its counsel to discharge properly its fiduciary duties to Gonzales Holding's
consolidated group and its shareholders, furnish any information relating to or
participate in any negotiations or discussion concerning, any acquisition or
purchase of all or a substantial portion of the assets of, or a substantial
equity interest in, or any business combination with, Gonzales Holding or
Gonzales Bank, other than as contemplated by the Merger Agreement. Gonzales
Holding has also agreed to instruct its officers, directors, agents and
affiliates to refrain from doing any of the above and to notify Deposit
Guaranty immediately if any such inquiries or proposals are received by, any
such information is requested from, or any negotiations or discussions are
sought to be initiated with it or any of its officers, directors, agents and
affiliates.
RESALES OF DEPOSIT GUARANTY COMMON STOCK
The shares of Deposit Guaranty Common Stock to be issued to the
holders of Gonzales Holding Common Stock pursuant to the Merger Agreement are
being registered under the Securities Act pursuant to a Registration Statement
on Form S-4, of which this Proxy Statement/Prospectus is a part, thereby
allowing such shares to be freely transferred without restriction by persons
who will not be "affiliates" of Deposit Guaranty or who were not "affiliates"
of Gonzales Holding within the meaning of Rule 145 under the Securities Act. In
general, affiliates of Gonzales Holding include its executive officers and
directors and any person who controls, is controlled by or is under common
control with Gonzales Holding. Holders of Gonzales Holding Common Stock who are
affiliates of Gonzales Holding will not be able to resell the Deposit Guaranty
Common Stock received by them in the Mergers unless the Deposit Guaranty Common
Stock is registered for
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resale under the Securities Act, is sold in compliance with Rule 145 under the
Securities Act or is sold in compliance with another exemption from the
registration requirements of the Securities Act.
Pursuant to Rule 145 under the Securities Act, the sale of Deposit
Guaranty Common Stock held by former affiliates of Gonzales Holding will be
subject to certain restrictions. Such persons may sell Deposit Guaranty Common
Stock under Rule 145 only if (i) Deposit Guaranty has filed all reports
required to be filed by it under Section 13 or 15(d) of the Exchange Act during
the preceding twelve months, (ii) such Deposit Guaranty Common Stock is sold in
a "broker's transaction," which is defined in Rule 144 under the Securities Act
as a sale in which (a) the seller does not solicit or arrange for orders to buy
the securities, (b) the seller does not make any payment other than to the
broker, (c) the broker does no more than execute the order and receive a normal
commission and (d) the broker does not solicit customer orders to buy the
securities, and (iii) such sale and all other sales made by such person within
the preceding three months do not exceed the greater of (x) one percent of the
outstanding shares of Deposit Guaranty Common Stock or (y) the average weekly
trading volume of Deposit Guaranty Common Stock on the Nasdaq National Market
during the four-week period preceding the sale. Any affiliate of Gonzales
Holding who is not an affiliate of Deposit Guaranty after the Mergers may sell
Deposit Guaranty Common Stock without restriction following the second
anniversary of the Effective Date.
Gonzales Holding has agreed to use its best efforts to cause each of
its directors and executive officers and each person who is a beneficial owner
of 5% or more of the outstanding Gonzales Holding Common Stock (each of whom
may be deemed to be an affiliate under the Securities Act) to enter into an
agreement not to sell shares of Deposit Guaranty Common Stock received by him
or her in violation of the Securities Act or the rules and regulations of the
Commission thereunder.
EXPENSES AND FEES
All legal and other costs and expenses incurred in connection with the
Mergers and the transactions contemplated thereby will be paid by the party
incurring such costs and expenses, except that if the Merger Agreement is
terminated by Gonzales Holding's Board of Directors to fulfill its fiduciary
duties based on advice of counsel, Gonzales Holding will be required to
indemnify Deposit Guaranty for all expenses incurred by it in connection with
the Mergers.
ACCOUNTING TREATMENT
The Mergers, if consummated as proposed, will be treated as a purchase
for accounting and financial reporting purposes. The purchase method accounts
for a business combination as the acquisition of one enterprise by another, the
value of the company's shares issued in the transaction is included in
stockholders' equity and any of such amount in excess of net fair values of
tangible and identifiable intangible assets of the acquired company is treated
as an intangible asset on the acquiring company's financial statements.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the principal federal income tax
consequences of the Mergers is based on provisions of the Internal Revenue Code
of 1986 (the "Code"), the regulations thereunder, judicial authority, and
administrative rulings and practice as of the date hereof or before the
Effective Date. Consummation of the Mergers is conditioned on the receipt by
Deposit Guaranty and Gonzales Holding of an opinion of counsel to Deposit
Guaranty to the effect that the Merger will be treated, for federal income tax
purposes, as a tax-free reorganization under Section 368(a) of the Code.
Any Gonzales Holding shareholder who, pursuant to the Mergers,
exchanges all of the Gonzales Holding Common Stock that such holder owns solely
for Deposit Guaranty Common Stock will not recognize any gain or loss upon such
exchange. The aggregate tax basis of Deposit Guaranty Common Stock received by
such a holder in exchange for Gonzales Holding Common Stock will equal such
holder's tax basis in the Gonzales Holding Common Stock surrendered. If such
shares of Gonzales Holding Common Stock are held as capital assets at the
Effective Date, the holding period of the Deposit Guaranty Common Stock
received will include the holding period of the Gonzales Holding Common Stock
surrendered therefor. Gonzales Holding shareholders should consult their tax
advisors as to the determination of their tax basis and holding period in any
one share of Deposit Guaranty Common Stock, as several methods of determination
may be available.
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To avoid the expense and inconvenience to Deposit Guaranty of issuing
fractional shares, no fractional shares of Deposit Guaranty Common Stock will
be issued pursuant to the Mergers. Any Gonzales Holding shareholder who
receives cash pursuant to the Mergers in lieu of a fractional share interest
will be treated as having received such fractional share pursuant to the
Mergers, and then as having exchanged such fractional share for cash in a
redemption by Deposit Guaranty subject to Section 302(a) of the Code, provided
that such deemed redemption is not "substantially disproportionate" with
respect to such Gonzales Holding shareholder or is "not essentially equivalent
to a dividend." If the Deposit Guaranty Common Stock represents a capital asset
in the hands of the shareholder, then the shareholder will generally recognize
capital gain or loss on such a deemed redemption of the fractional share in an
amount determined by the difference between the amount of cash received for
such fractional share and the shareholder's tax basis in the fractional share.
Gonzales Holding shareholders who perfect dissenters' rights will be
treated as having received the fair value of the Gonzales Holding Common Stock,
as determined in the dissenters' rights proceeding, in redemption of the
Gonzales Holding Common Stock subject to the proceeding. Such deemed
redemption will be subject to Section 302(a) of the Code, if such deemed
redemption is "substantially disproportionate" with respect to the Gonzales
Holding shareholder who exercises dissenters' rights or is "not essentially
equivalent to a dividend," with the result that a holder who exercises
dissenters' rights will recognize gain or loss equal to the difference between
the amount realized and such holder's tax basis in the Gonzales Holding Common
Stock subject to the proceeding. Any such gain or loss recognized on such
redemption will be treated as capital gain or loss if the Gonzales Holding
Common Stock with respect to which dissenters' rights were exercised were held
as capital assets. Each Gonzales Holding shareholder who contemplates
exercising dissenters' rights should consult a tax advisor as to the
possibility that all or a portion of the payment received pursuant to the
dissenters' proceeding will be treated as dividend income.
Unless an exemption applies under the applicable law and regulations,
the Exchange Agent will be required to withhold thirty-one percent (31%) of any
cash payments to which a shareholder or other payee is entitled pursuant to the
Mergers unless the shareholder or other payee provides its taxpayer
identification number (social security number or employer identification
number) and certifies that such number is correct. Each shareholder and, if
applicable, each other payee should complete and sign the substitute Form W-9
included as part of the transmittal letter so as to provide the information and
certification necessary to avoid backup withholding, unless an applicable
exemption exists and is established in a manner satisfactory to Deposit
Guaranty and the Exchange Agent.
THE FOREGOING CONSTITUTES ONLY A GENERAL DESCRIPTION OF CERTAIN
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGERS WITHOUT REGARD TO THE PARTICULAR
FACTS AND CIRCUMSTANCES OF EACH GONZALES HOLDING SHAREHOLDER. GONZALES HOLDING
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGERS, INCLUDING THE APPLICABILITY AND EFFECT OF
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
DISSENTERS' RIGHTS
Under Section 131 of the Louisiana BCL (a copy of which is attached
hereto as Exhibit C), any holder of record of shares of Gonzales Holding Common
Stock, who files a written objection to the Mergers prior to or at the Meeting
at which the vote on the Mergers is taken, and who votes against the Mergers,
may demand in writing that such shareholder be paid in cash the fair cash value
of such shares ("Dissenters' Rights"). HOWEVER, INTERESTED PARTIES SHOULD NOTE
THAT, IF THE MERGER AGREEMENT IS APPROVED BY EIGHTY PERCENT (80%) OR MORE OF
THE OUTSTANDING SHARES OF GONZALES HOLDING COMMON STOCK, SECTION 131 OF THE
LOUISIANA BCL PROVIDES THAT NO GONZALES HOLDING SHAREHOLDER WILL HAVE
DISSENTERS' RIGHTS. A person who is a beneficial owner, but not a registered
owner, of shares of Gonzales Holding Common Stock who wishes to exercise the
rights of a dissenting shareholder under the Louisiana BCL cannot do so in his
own name but should have the record ownership of the shares transferred to his
or her name or instruct the record owner thereof to take all required action to
comply on his behalf with the procedures under Section 131 of the Louisiana
BCL.
Any shareholder of record contemplating exercising Dissenters' Rights
is urged to review carefully the provisions of Section 131 of the Louisiana
BCL, particularly the procedural steps required to perfect Dissenters' Rights
thereunder. DISSENTERS' RIGHTS WILL BE LOST IF THE PROCEDURAL REQUIREMENTS OF
SECTION 131 ARE NOT FULLY SATISFIED.
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Set forth below is a summary of the procedures relating to the
exercise of Dissenters' Rights. The following summary does not purport to be a
complete statement of the provisions of Section 131 of the Louisiana BCL and is
qualified in its entirety by reference to Exhibit C hereto and to any
amendments to such sections as may be adopted after the date of this Proxy
Statement/Prospectus.
FILING WRITTEN OBJECTION AND VOTE AGAINST THE MERGERS
To exercise the right of dissent, a shareholder (each a "Dissenter")
must (i) deliver to Gonzales Holding a written objection to the Merger
Agreement prior to or at the Meeting AND ALSO (ii) vote the shares of Gonzales
Holding Common Stock held by him (in person or by proxy) against the Merger
Agreement at the Meeting. Neither a vote against the Merger Agreement nor a
specification in a proxy to vote against the Merger Agreement will in and of
itself constitute the necessary written objection to the Merger Agreement.
Moreover, by voting in favor of, or abstaining from voting on, the Merger
Agreement, or by returning the enclosed proxy without instructing the proxy
holders to vote against the Merger Agreement, a shareholder waives his or her
rights under Section 131.
NOTICE OF THE EFFECTIVE DATE
If the Merger Agreement is approved by less than eighty percent (80%)
of the outstanding shares of Gonzales Holding Common Stock, then, promptly
after the Effective Date, notice will be given to each Dissenter that the
Mergers have become effective. The notice shall be sent by registered mail,
addressed to the Dissenter at such Dissenter's last address on Gonzales
Holding's records immediately prior to the Effective Date.
WRITTEN DEMAND
Within twenty (20) days after the mailing of such notice a Dissenter
must file with CNC a demand in writing (the "Demand") for payment of the fair
cash value of such Dissenter's shares as of the day prior to the Meeting,
stating the amount demanded and a post office address to which CNC may reply.
Simultaneously with the filing of the Demand, the Dissenter shall also deposit
the certificate(s) representing his shares of Gonzales Holding Common Stock
(duly endorsed and transferred to CNC upon the sole condition that the
certificate(s) will be delivered to CNC upon payment of the value of the shares
in accordance with Section 131 of the Louisiana BCL) in escrow with a chartered
bank or trust company located in Ascension Parish, Louisiana (the "Escrow
Bank"). Along with the Demand, the Dissenter shall deliver to CNC a written
acknowledgment of the Escrow Bank that it holds such certificate(s), endorsed
as specified above.
A Dissenter who fails to satisfy any of the foregoing conditions
within the proper time periods will conclusively be presumed to have acquiesced
to the Mergers and will forfeit any right to seek payment pursuant to Section
131. Such written demand may be sent to CNC.
APPRAISAL
If CNC does not agree to the amount demanded by the Dissenter, or does
not agree that any payment is due, it will, within twenty (20) days after
receipt of such Demand and acknowledgment, notify such Dissenter in writing of
either (i) the value it will agree to pay, or (ii) its belief that no payment
is due. If the Dissenter does not agree to accept the offered amount, or
disagrees with CNC's assertion that no payment is due, he must within sixty
(60) days after the receipt of such notice file suit against CNC in Ascension
Parish, Louisiana for a judicial determination of the fair cash value of his
shares. Any Dissenter who is also entitled to file such suit may, within such
60-day period but not thereafter, intervene as a plaintiff in any suit filed
against CNC by another former shareholder of Gonzales Holding for a judicial
determination of the fair cash value of such other shareholder's shares. If a
Dissenter fails to bring or to intervene in such a suit within the applicable
sixty-day period, the Dissenter will be deemed to have consented to accept
either CNC's statement that no payment is due or, if CNC does not contend that
no payment is due, to accept the value of his shares specified by CNC in its
notice of disagreement.
Dissenters considering exercising Dissenters' Rights should bear in
mind that the fair cash value of their shares determined under Section 131 of
the Louisiana BCL could be more than, the same as or less than the
consideration they
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would otherwise receive pursuant to the Merger Agreement if they do not seek
such rights, and that opinions of financial advisors as to fairness are not
opinions as to fair cash value under Section 131 of the Louisiana BCL.
Any Dissenter who has duly filed a Demand in compliance with Section
131 of the Louisiana BCL will, after filing the Demand, cease to have any of
the rights of a shareholder, except those rights generally provided to
Dissenters under Section 131 of the Louisiana BCL.
A Dissenter has the right to voluntarily withdraw his or her Demand
and to accept the terms offered in the Merger Agreement at any time before CNC
gives its notice of disagreement, but thereafter the Dissenter may withdraw his
or her Demand only with the consent of CNC. If a Demand is properly withdrawn,
or the Dissenter otherwise loses his Dissenters' Rights, a Dissenter shall only
be entitled to receive the consideration offered pursuant to the Merger
Agreement.
When the fair cash value of the Dissenter's Shares is agreed upon
between the Dissenter and CNC, or CNC has become liable for the value demanded
by the Dissenter because of its failure to give Notice of Disagreement, or the
Dissenter has become bound to accept the value which CNC agrees is due because
of his failure to bring suit within sixty (60) days after receipt of the Notice
of Disagreement, CNC may, at its option, pay to the Escrow Bank the amount
which the Dissenter is entitled to receive for his shares, and CNC shall be
entitled to receive such shares from the Escrow Bank. Any action by the
Dissenter to recover such value must be brought within five (5) years from the
date the value was agreed upon, or the liability of CNC became fixed.
PAYMENT AND COSTS
If upon the filing of any such suit or intervention CNC deposits with
the court the amount, if any, which it specified in its Notice of Disagreement,
and if in that notice CNC offered to pay such amount to the Dissenter on
demand, then the costs (not including legal fees) of the suit or intervention
will be taxed against the Dissenter if the amount finally awarded to the
Dissenter, exclusive of interest and costs, is equal to or less than the amount
so deposited; otherwise, the costs (not including legal fees) will be assessed
against CNC.
NOTICES
Prior to the Effective Date, dissenting shareholders of Gonzales
Holding should send any communications regarding their rights to Ida N. Reine,
Secretary, Bank of Gonzales Holding Company, Inc., South Burnside Avenue at
Worthey Road, Post Office Box 1089, Gonzales, Louisiana 70707. On or after the
Effective Date, dissenting shareholders should send any communications
regarding their rights to J. Clifford Harrison, Secretary, Commercial National
Corporation, Post Office Box 1200, Jackson, Mississippi 39215-1200. All such
communications should be signed by or on behalf of the dissenting shareholder
in the form in which his shares are registered on the books of Gonzales
Holding. Deposit Guaranty, CNC and Citizens Bank have the right to terminate
the Merger Agreement if the number of shares of Gonzales Holding Common Stock
as to which holders thereof are legally entitled to assert dissenters' rights
exceeds 10% of the outstanding shares of Gonzales Holding Common Stock. See
"The Mergers - Amendment; Waiver; Termination."
ANY GONZALES HOLDING SHAREHOLDER WHO DESIRES TO EXERCISE DISSENTERS'
RIGHTS SHOULD CAREFULLY REVIEW THE LOUISIANA BCL AND IS URGED TO CONSULT SUCH
SHAREHOLDER'S LEGAL ADVISOR BEFORE EXERCISING OR ATTEMPTING TO EXERCISE SUCH
RIGHTS.
COMPARATIVE RIGHTS OF SHAREHOLDERS
Gonzales Holding is incorporated in the State of Louisiana and Deposit
Guaranty is incorporated in the State of Mississippi. If the Mergers are
consummated, shareholders of Gonzales Holding, whose rights as shareholders are
currently governed by Louisiana law and by Gonzales Holding's Amended and
Restated Articles of Incorporation (the "Gonzales Holding Articles") and
Bylaws, will, upon consummation of the Mergers, become shareholders of Deposit
Guaranty and their rights as such will be governed by Mississippi law and by
Deposit Guaranty's Articles of Incorporation (the "Deposit Guaranty Articles")
and Bylaws.
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Certain significant differences between the rights of shareholders of
Gonzales Holding and shareholders of Deposit Guaranty are set forth below.
This summary is not intended to be relied upon as an exhaustive list or a
detailed description of the provisions discussed and is qualified in its
entirety by the Louisiana BCL and the Mississippi Business Corporation Act (the
"Mississippi BCA") and by the Articles of Incorporation and Bylaws of each of
Gonzales Holding and Deposit Guaranty, respectively, to which Gonzales Holding
shareholders are referred.
CUMULATIVE VOTING RIGHTS
GONZALES . Each outstanding share of Gonzales Holding stock is
entitled to one (1) vote on each matter submitted to a vote. The Gonzales
Holding Articles do not provide for cumulative voting in the election of
directors.
DEPOSIT GUARANTY. Pursuant to the Mississippi BCA and Deposit
Guaranty's Bylaws, each outstanding share of Deposit Guaranty stock is entitled
to one (1) vote on each matter submitted to a vote. However, in connection
with the election of directors, holders of Deposit Guaranty Common Stock have
cumulative voting rights. Pursuant to the Deposit Guaranty Bylaws, every
shareholder entitled to vote in the election of directors shall have the right
to vote, in person or by proxy, the number of shares owned by him for as many
persons as there are directors to be elected, or to cumulate his votes by
giving one (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.
LIMITATIONS ON DIRECTORS' AND OFFICERS' LIABILITY
GONZALES HOLDING. Gonzales Holding's Articles provide that no
director or officer of Gonzales Holding shall be liable to Gonzales Holding or
its shareholders for monetary damages for breach of fiduciary duty as a
director or officer, provided that the foregoing provision shall not eliminate
or limit the liability of a director or officer for (a) any breach of his duty
of loyalty to the Corporation or its shareholders; (b) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (c) unlawful payment of dividends, distribution of assets, or purchase or
redemption of Gonzales Holding shares, or (d) any transaction from which he
derived an improper personal benefit.
DEPOSIT GUARANTY. Deposit Guaranty's Articles and Bylaws do not
contain any provision limiting the personal liability of Deposit Guaranty's
directors and officers for monetary damages resulting from breach of fiduciary
duty.
SUPERMAJORITY VOTING REQUIREMENTS; BUSINESS COMBINATIONS; CONTROL SHARES
GONZALES HOLDING. The Gonzales Holding Articles provide that, except
as is otherwise made mandatory by law, an agreement of merger or consolidation
of Gonzales Holding, the sale of all or substantially all of the assets of
Gonzales Holding, or the dissolution of Gonzales Holding may be authorized by
the affirmative vote of two-thirds of the total voting power of Gonzales
Holding, unless the transaction is approved by two-thirds of the Board of
Directors in which case, only a majority of the total voting power is required
to approve the transaction.
Gonzales Holding is subject to Louisiana's Fair Price Protection
Statute (Sections 132-134 of the Louisiana BCL), which requires that, in
addition to any vote otherwise required by law or a corporation's articles of
incorporation, any "business combination" (as defined in the statute) between a
corporation and the holder of 10% or more of its total voting power be
recommended by the corporation' s board of directors and approved by (i) at
least 80% of the total voting power of the corporation and (ii) at least
two-thirds of the votes entitled to be cast by shareholders other than the 10%
shareholder, unless certain minimum price, form of consideration and procedural
requirements are satisfied by the 10% shareholder, or if the board approves the
business combination before the 10% shareholder becomes a 10% shareholder. The
Fair Price Protection Statute does not apply to the Mergers.
DEPOSIT GUARANTY. Deposit Guaranty's Articles require that any
Business Combination (as defined below) involving Deposit Guaranty or a
subsidiary of Deposit Guaranty and an Interested Shareholder (as defined below)
or any affiliate or associate of an Interested Shareholder or any person that
following such transaction would be an affiliate or associate of an Interested
Shareholder be approved by the affirmative vote of at least eighty percent
(80%) of the votes entitled to be cast by the holders of all the then
outstanding shares of voting stock of Deposit Guaranty, excluding shares
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held by the Interested Shareholder, unless the transaction is approved by a
majority of the Continuing Directors (as defined below) or unless certain fair
price and procedural requirements are satisfied.
REMOVAL OF DIRECTORS
GONZALES HOLDING. Gonzales Holding's Articles provide that Gonzales
Holding shareholders may remove a director upon the affirmative vote of
shareholders holding 75% of the total voting power at any special meeting
called for that purpose, even though the director's term has not expired.
DEPOSIT GUARANTY. Deposit Guaranty's Articles provide that Deposit
Guaranty shareholders may remove a director with or without cause, but only at
a meeting expressly called for that purpose and upon the affirmative vote of
the holders of at least eighty percent (80%) of the voting power of all shares
of stock entitled to vote generally in the election of directors, and in the
event that less than the entire Board is to be removed, not one of the
directors may be removed if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the class
of directors of which he is a part.
VACANCIES IN THE BOARD OF DIRECTORS
GONZALES HOLDING. Under Gonzales Holding's Bylaws, any vacancy
occurring in the Gonzales Holding Board of Directors (including any vacancy
resulting from an increase in the authorized number of directors, or from
failure of the shareholders to elect the full number of authorized directors),
may be filled by a majority vote of the remaining directors even though such
remaining directors constitute less than a quorum, provided that the
shareholders shall have the right at a special meeting called for that purpose
prior to such action by the Board, to fill the vacancy.
DEPOSIT GUARANTY. Under Deposit Guaranty's Bylaws, any vacancy,
including one occurring as a result of an increase in the number of directors,
may be filled only by the shareholders.
AMENDMENT OF THE ARTICLES OF INCORPORATION OR BYLAWS
GONZALES HOLDING. The Gonzales Holding Articles provide that the
amendment, repeal or adoption of any provision inconsistent with certain
provisions of its Articles and Bylaws generally containing supermajority voting
provisions requires a vote of 75% of the total voting power of Gonzales
Holding. Otherwise, any amendment to the Articles requires only the
affirmative vote of two-thirds of the voting power present. The Gonzales
Holding Bylaws provide that the Gonzales Holding Board may amend or repeal the
Gonzales Holding Bylaws, and the affirmative vote of 75% of the total voting
power of Gonzales Holding may amend or repeal any Bylaws at any annual or
special meeting, provided that notice of the proposed amendment or repeal was
contained in the notice of such meeting.
DEPOSIT GUARANTY. Under the Mississippi BCA, the board of directors
has the power to amend or repeal the bylaws of a Mississippi corporation such
as Deposit Guaranty, unless such power is expressly reserved for the
shareholders. Deposit Guaranty's Articles provide that an amendment to the
Bylaws relating to composition of the Board of Directors and removal of
directors must be approved by the affirmative vote of at least eighty percent
(80%) of the shareholders (the same proportion required in order to effect the
removal of a director), excluding (except for purposes of determining whether a
quorum is present) those shares beneficially owned by any Interested
Shareholder. The affirmative vote of at least eighty percent (80%) of the
shareholders is also required to amend the provisions of the Articles of
Incorporation requiring a supermajority approval of Business Combinations.
Amendments to the Articles of Incorporation that result in Dissenters' rights
require the affirmative vote of a majority of the outstanding shares entitled
to vote on the amendment. Otherwise, the Articles of Incorporation may be
amended by a majority vote of the shares present at a meeting where a quorum is
present.
24
<PAGE> 36
SPECIAL MEETINGS OF SHAREHOLDERS
GONZALES HOLDING . Under Gonzales Holding 's Bylaws, special meetings
of the shareholders, for any purpose or purposes, may be called by the
President or the Board of Directors, or, upon the written request of any two
directors or of any shareholder or shareholders holding in the aggregate not
less than one-fifth of the total voting power of Gonzales Holding 's voting
stock.
DEPOSIT GUARANTY. Under Deposit Guaranty's Bylaws, special meetings
of the shareholders, for any purpose or purposes, may be called by the Chairman
of the Board, the President or the Board of Directors, or upon the written
request of shareholders holding in the aggregate not less than ten percent
(10%) of the total voting power entitled to vote on an issue.
SHAREHOLDER PROPOSALS AND NOMINATIONS
GONZALES HOLDING . Neither Gonzales Holding 's Articles nor Bylaws
set forth any procedures with respect to submission by a shareholder of a
proposal for consideration at a shareholders' meeting. The Gonzales Holding
Bylaws provide that any shareholder entitled to vote in the election of
directors may nominate any person for election as a director, provided the
nomination is made to the Secretary of the Corporation and received not less
than thirty (60) days or more than sixty (90) days prior to the meeting;
provided, however, that if less than 60 days notice of the date of the meeting
is given or made to shareholders, notice by the shareholder to be timely must
be so received no later than the close of business on the 10th day following
the day on which such notice of the date of the meeting was mailed.
DEPOSIT GUARANTY. Deposit Guaranty's Bylaws provide procedures that
must be followed to properly bring a proposal before a shareholders meeting or
to nominate candidates for election as directors. At least sixty (60) days
prior notice to the Secretary of Deposit Guaranty is required if a shareholder
intends to nominate an individual for election to the Board of Directors or
propose any shareholder action. These Bylaw provisions also require information
to be supplied about both the shareholder making such nomination or proposal
and the person nominated.
MARKET PRICES OF AND DIVIDENDS ON GONZALES HOLDING COMMON STOCK
No established public trading market for Gonzales Holding's common
stock exists. The primary market area for Gonzales Holding's common stock is
Ascension Parish. No sales of Gonzales Holding's common stock came to the
attention of management of Gonzales Holding in 1995 or 1994. As of December
31, 1995, there were 756 holders of record of Gonzales Holding Common Stock.
In 1995 and 1994, Gonzales Holding paid eight quarterly dividends of
$0.35 per share, plus four extraordinary dividends totaling $8.00 per share,
for total dividends of $5,849,000. The holders of Gonzales Holding Common
Stock are entitled to receive dividends when and if declared by the Gonzales
Holding Board out of funds that are legally available therefor. If the Mergers
are not consummated, it is the intention of the Gonzales Holding Board to
continue declaring quarterly cash dividends. However, there can be no
assurance that Gonzales Holding 's dividend policy would remain unchanged.
25
<PAGE> 37
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF GONZALES HOLDING
The following table indicates the beneficial ownership as of April
__, 1996 of Gonzales Holding 's Common Stock by (i) each person known to the
Company to be the beneficial owner of more than 5% of the outstanding Gonzales
Holding Common Stock, (ii) each director of Gonzales Holding, (iii) the CEO
(who is also a director), and (iv) all directors and executive officers of
Gonzales Holding as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME BENEFICIAL OWNERSHIP CLASS
---- -------------------- -------
<S> <C> <C>
John P. Casey, Jr 13,772(1) 2.54
Earl D. Dixon 5,720(2) 1.06
John F. Fraiche, M.D. 225 *
D. Dale Gaudet 26,507(3) 4.89
Rosa B. Jackson 225 *
Phillip A. Lewis, Jr., Ph.D. 6,600(4) 1.22
Roy L. Marchand, Jr. 12,275(5) 2.27
Matthew G. McKay
18332 N. Mission Hills
Baton Rouge, LA 70810 35,544 6.56
Elanie S. Neese
2239 South Evergreen Avenue
Gonzales, LA 70737 68,820 12.71
John B. Noland
Suite 2424
One American Place
Baton Rouge, LA 70825 37,702 6.96
Gayle P. Robert 2,938(6) *
Randal J. Robert 367(7) *
Eric W. St. Amant 17,040(8) 3.15
Penrose C. St. Amant
P. O. Box 128
Gonzales, LA 70707-0128 48,878(9) 9.02
Cynthia S. Stafford 5,044 *
ALL DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP (15 PERSONS) 165,115 30.49
</TABLE>
__________________________________
* Less than 1%.
(1) Includes 13,222 shares as to which Mr. Casey shares voting and investment
power.
(2) Includes 400 shares as to which Mr. Dixon shares voting and investment
power.
(3) Includes 25,911 shares as to which Mr. Gaudet shares voting and investment
power.
(4) Includes 6,050 shares as to which Mr. Lewis shares voting and investment
power.
(5) Includes 2,511 shares as to which Mr. Marchand shares voting and
investment power.
(6) Includes 754 shares as to which Mr. G. Robert shares voting and
investment power.
(7) Includes 142 shares as to which Mr. R. Robert shares voting and investment
power.
(8) Includes 440 shares as to which Mr. E. St. Amant shares voting and
investment power.
(9) Includes 3,922 shares as to which Mr. P. St. Amant shares voting and
investment power.
26
<PAGE> 38
INFORMATION CONCERNING GONZALES HOLDING
GENERAL
Gonzales Holding is a Louisiana business corporation and a one-bank
holding company registered under the federal Bank Holding Company Act of 1956.
It was formed in 1983 primarily for the purpose of holding all of the
outstanding stock of the Gonzales Bank, which is Gonzales Holding's sole
subsidiary. Gonzales Bank was formed in 1920 under the banking laws of the
State of Louisiana. Gonzales Bank conducts a general commercial banking
business through its main office at South Burnside Avenue and Worthey Road,
Gonzales, Louisiana and at two branch offices in eastern Ascension Parish,
Louisiana. Gonzales Bank offers a full range of traditional commercial
banking services, including demand, savings and time deposits, consumer,
commercial and real estate loans, safe-deposit boxes and access to two retail
credit plans -- "VISA" and "MasterCard". Gonzales Bank does not offer trust
services. Drive-in banking facilities and automated teller machines ("ATMs")
are located at all three banking locations. Gonzales Bank also maintains
three stand-alone ATMs within Ascension Parish.
COMPETITION
Gonzales Bank competes actively with national and state banks and
savings and loan institutions in Louisiana for all types of loans and deposits.
Gonzales Bank also competes for loans with other financial institutions, such
as insurance companies, real estate investment trusts, savings and loans, small
loan companies, credit unions and certain government agencies. As of December
31, 1995, Gonzales Bank was the largest financial institution headquartered in
Ascension Parish as measured by total deposits and total assets. Five other
financial institutions have a total of eleven banking offices located in
Ascension Parish.
EMPLOYEES
As of December 31, 1995, Gonzales Holding and Gonzales Bank had
approximately 63 full time equivalent employees. Gonzales Holding has no
salaried employees, although certain executive officers hold parallel positions
with Gonzales Bank. No employees are represented by unions or other
bargaining units, and management considers its relations with employees to be
satisfactory.
SUPERVISION AND REGULATION
Gonzales Holding and Gonzales Bank are extensively regulated under
both federal and state laws. To the extent that the following information
describes particular statutory provisions, it is qualified in its entirety by
reference to the particular statutory and regulatory provisions. Any change in
applicable law or regulation may have a material effect on the business and
prospects of Gonzales Holding.
Gonzales Holding is a bank holding company within the meaning of the
Bank Holding Company Act of 1956, as amended (the "BHCA"), and, as such, is
subject to the provisions of the BHCA and to regulation and supervision by the
Board of Governors of the Federal Reserve System (the "Reserve Board").
Gonzales Holding is required to file with the Reserve Board annual reports
containing such information as the Reserve Board may require pursuant to the
BHCA and also is subject to periodic examination by the Reserve Board. The
BHCA limits, with certain exceptions, the business in which a bank holding
company may engage, directly or through subsidiaries, to banking, managing or
controlling banks, and furnishing or performing activities so closely related
to banking or managing or controlling banks as to be a proper incident thereto.
In determining whether a particular activity is a proper incident to banking or
managing or controlling banks, the Reserve Board must consider whether its
performance by an affiliate of a bank holding company can reasonably be
expected to produce benefits to the public, such as greater convenience,
increased competition or gains in efficiency that outweigh possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or other unsound banking practices. The
Reserve Board has adopted regulations implementing the provisions of the BHCA
27
<PAGE> 39
with respect to the activities of bank holding companies. Whether or not a
particular non-banking activity is permitted under the BHCA, the Reserve Board
is authorized to require a bank holding company to terminate any activity or to
divest itself of any non-banking subsidiary if its actions represent unsafe or
unsound practices or violations of law.
Under the BHCA, a bank holding company and its subsidiaries are
prohibited from engaging in certain tie-in arrangements in connection with the
extension of credit, the lease or sale of property or provision of any
services. In addition, the BHCA prohibits a bank holding company from
borrowing from its bank subsidiaries unless such loans are secured by
specified amounts and types of collateral. Such secured loans are also subject
to certain limitations based upon the subsidiary bank's capital and surplus.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"FDIC Act") subjected bank holding companies as well as banks to significantly
increased regulation and supervision. Among other things, the FDIC Act
provides that undercapitalized institutions, as defined by regulatory
authorities, must submit recapitalization plans, and a parent company of such
an institution must either (i) guarantee the institution's compliance with the
capital plan, up to an amount equal to the lesser of five percent of the
institution's assets at the time it becomes undercapitalized or the amount of
the capital deficiency when the institution fails to comply with the plan, or
(ii) suffer certain adverse consequences such as a prohibition of dividends by
the parent company to its shareholders.
Gonzales Holding is also subject to the Louisiana Bank Holding
Company Act, as amended (the "Louisiana Act") which, among other things,
provides that a bank holding company and its subsidiaries may not engage in any
insurance activity in which a bank may not engage. The Louisiana Commissioner
of Financial Institutions is authorized to administer the Louisiana Act and to
issue orders and regulations thereunder.
Federal and Louisiana laws provide for the enforcement of any pro rata
assessment of shareholders of a bank to cover impairment of capital stock by
sale, to the extent necessary, of the stock of any assessed shareholder failing
to pay the assessment. Gonzales Holding, as shareholder of Gonzales Bank, is
subject to these provisions.
Both federal and state laws extensively regulate various aspects of
Gonzales Bank's business, including requirements regarding the maintenance of
reserves against deposits, limitations on the rates that can be charged on
loans or paid on deposits, branching and restrictions on the nature and amounts
of loans and investments that can be made. As a state bank, Gonzales Bank is
subject to the supervisory authority of the Louisiana Commissioner of Financial
Institutions, whose office conducts periodic examinations of Gonzales Bank.
As a federally insured bank, Gonzales Bank is also subject to supervision and
regulation by the Federal Deposit Insurance Corporation (the "FDIC"). Under
certain circumstances, regulatory authorities may prohibit the payment of
dividends by a bank or its parent holding company. The FDIC Act and
regulations promulgated thereunder classify banks into five categories
generally relating to their regulatory capital ratios and institute a system of
supervisory actions indexed to a bank's particular classification. Generally,
banks that are classified as "well capitalized," or "adequately capitalized"
are not subject to the supervisory actions specified in the FDIC Act for prompt
corrective action, but may be restricted from taking certain actions that
will lower their classification. Banks classified as "undercapitalized,"
significantly undercapitalized," or "critically undercapitalized" are subject
to restrictions in supervisory actions of increasing stringency based on the
level of classification. Under present regulation, Gonzales Bank is "well
capitalized." While such a classification would exclude Gonzales Bank from
the restrictions and actions envisioned by the prompt corrective action
provisions of the FDIC Act, the regulatory agencies have broad powers under
other provisions of federal law that would permit them to place restrictions on
Gonzales Bank or to take other supervisory action regardless of such
classification.
SUPPLEMENTAL FINANCIAL INFORMATION
Supplemental financial information for Gonzales Holding and Gonzales Bank is
set forth below and on the following pages.
28
<PAGE> 40
DISTRIBUTION OF ASSETS, LIABILITIES, AND STOCKHOLDERS' EQUITY; INTEREST RATES
AND INTEREST DIFFERENTIAL
Average balance sheets, interest income and expenses, and average yields on
interest-bearing assets and effective rates paid on interest-bearing
liabilities for 1995 and 1994 were (In thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31, 1995
--------------------------
AVERAGE YIELD/
BALANCE INTEREST RATE
------- -------- ------
ASSETS
<S> <C> <C> <C>
Interest-earning assets:
Loans (1) $ 60,049 $6,437 10.72%
Taxable investment securities 50,013 3,384 6.77
Tax-exempt investment securities 699 31 4.43
Interest-bearing deposits with
other banks 409 28 6.85
Federal funds sold 1,763 101 5.73
-------- ------ ------
Total interest-earning assets $112,933 $9,981 8.84%
Noninterest-earning assets:
Cash and due
from banks 4,161
Premises and equipment, net 2,318
Other real estate owned 431
Deferred tax asset 1,476
Other assets 1,833
Less allowance for loan losses (1,488)
--------
Total Assets $121,664
========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits $ 19,132 $ 407 2.13%
Savings deposits 20,510 499 2.43
Time deposits of $100,000 or more 6,554 337 5.14
Time deposits of less than $100,000 38,057 1,793 4.71
Federal funds purchased 148 9 6.08
Other borrowed funds 3,330 213 6.40
-------- ------ ------
Total interest-bearing liabilities $ 87,731 $3,258 3.71%
Noninterest-bearing liabilities:
Demand deposits 21,270
Other 892
--------
Total liabilities 109,893
Shareholders' equity 11,771
--------
Total Liabilities and Shareholders' Equity $121,664
========
Net interest income $6,723
======
Net interest margin 5.96%
====
</TABLE>
29
<PAGE> 41
<TABLE>
<CAPTION>
DECEMBER 31, 1994
--------------------------
AVERAGE YIELD/
BALANCE INTEREST RATE
-------- -------- ------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans(1) $ 59,352 $6,114 10.30%
Taxable investment securities 47,317 2,772 5.86
Tax-exempt investment securities 489 20 4.09
Interest-bearing deposits with
other banks 77 3 3.90
Federal funds sold 748 31 4.14
--------- ------ ------
Total interest-earning assets $ 107,983 $8,940 8.28%
Noninterest-earning assets:
Cash and due
from banks 4,124
Premises and equipment, net 2,420
Other real estate owned 658
Deferred tax asset 2,924
Other assets 1,539
Less allowance for loan losses (1,732)
---------
Total Assets $ 117,916
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits $ 18,452 $ 342 1.85%
Savings deposits 20,541 473 2.30
Time deposits of $100,000 or more 5,968 210 3.52
Time deposits of less than $100,000 36,627 1,264 3.45
Federal funds purchased 569 23 4.04
Other borrowed funds 2,711 176 6.49
--------- ------ ------
Total interest-bearing liabilities $ 84,868 $2,488 2.93%
Noninterest-bearing liabilities:
Demand deposits 20,099
Other 940
---------
Total liabilities 105,907
Shareholders' equity 12,009
---------
Total Liabilities and Shareholders' Equity $ 117,916
=========
Net interest income $6,452
======
Net interest margin 5.98%
====
</TABLE>
________________________
(1) For the purpose of these computations, nonaccruing loans are included in
the average balance. Also, installment loans are stated net of unearned
income.
30
<PAGE> 42
The following table sets forth for the periods indicated a summary of the
changes in interest earned and interest paid resulting from changes in volume
and changes in rates (In thousand of dollars):
<TABLE>
<CAPTION>
1995 COMPARED TO 1994 1994 COMPARED TO 1993
INCREASE (DECREASE) DUE TO (1) INCREASE (DECREASE) DUE TO (1)
------------------------------ ------------------------------
VOL. RATE NET VOL. RATE NET
---- ---- --- ---- ---- ---
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans(2) $ 74 $ 249 $ 323 $ 192 $ 316 $ 508
Taxable investment
securities 181 431 612 197 40 237
Tax-exempt invest-
ment securities 9 2 11 9 (9) -
Interest-bearing
deposits with
other banks 21 4 25 1 (1) -
Federal funds sold 58 12 70 3 8 11
----- ----- ----- ------ ----- -----
Total interest-earn-
ing assets 343 698 1,041 402 354 756
Interest-bearing
liabilities:
Interest-bearing
demand deposits 13 52 65 39 (52) (13)
Savings deposits (1) 27 26 25 (35) (10)
Time deposits of
$100,000 or more 30 97 127 (23) - (23)
Time deposits of
less than
$100,000 67 462 529 (74) (12) (86)
Federal funds
purchased (26) 12 (14) 11 3 14
Other borrowed
funds 39 (2) 37 174 - 174
----- ----- ----- ------ ----- -----
Total interest-bearing
liabilities 122 648 770 152 (96) 56
----- ----- ----- ------ ----- -----
$ 221 $ 50 $ 271 $ 250 $ 450 $ 700
===== ===== ===== ====== ===== =====
</TABLE>
___________________________
(1) The change in interest due to both rate and volume has been allocated
entirely to volume.
(2) Balances of nonaccrual loans have been included for computational
purposes.
31
<PAGE> 43
The following table shows the interest rate sensitivity gaps for different time
periods and the cumulative interest rate sensitivity gaps for the same periods
as of December 31, 1995 (In thousands of dollars).
<TABLE>
<CAPTION>
3 MONTHS 3 TO 6 6 TO 12
OR LESS MONTHS MONTHS
-------- ------ ------
<S> <C> <C> <C>
Interest-earning assets:
Loans(1) $ 21,424 $ 2,015 $ 2,946
Taxable investment securities 501 - 2,334
Tax-exempt investment securities - 572 -
Interest-bearing deposits
with other banks 300 - 1,000
Federal funds sold 2,634 - -
-------- ------- --------
Total interest-earning assets 24,859 2,587 6,280
Interest-bearing liabilities:
Interest-bearing demand deposits 20,039 - -
Savings deposits 20,711 - -
Time deposits of $100,000 or more 900 2,409 2,765
Time deposits of less than $100,000 9,614 7,821 11,099
Other borrowed funds - - -
-------- ------- --------
Total interest-bearing liabilities 51,264 10,230 13,864
======== ======= ========
Gap $(26,405) $ (7,643) $ (7,584)
Cumulative gap $(26,405) $(34,048) $(41,632)
1 TO 5 OVER 5
YEARS YEARS TOTAL
----- ----- -----
Interest-earning assets:
Loans(1) $ 28,074 $ 4,815 $ 59,274
Taxable investment securities 16,334 32,023 51,192
Tax-exempt investment securi-
ties - 995 1,567
Interest-bearing deposits
with other banks - - 1,300
Federal funds sold - - 2,634
-------- ------- --------
Total interest-earning assets 44,408 37,833 115,967
Interest-bearing liabilities:
Interest-bearing demand deposits $ - $ - $ 20,039
Savings deposits - - 20,711
Time deposits of $100,000 or more 1,011 - 7,085
Time deposits of less than $100,000 10,160 - 38,694
Other borrowed funds - 3,260 3,260
-------- --------- --------
Total interest-bearing liabilities 11,171 3,260 89,789
Gap $ 33,237 $ 34,573 $ 26,178
Cumulative gap $ (8,395) $ 26,178 -
</TABLE>
___________________________
(1) Loans above exclude nonaccrual loans of $299,000.
32
<PAGE> 44
INVESTMENT PORTFOLIO
The following table sets forth the maturities of investment securities at
December 31, 1995 and the weighted average yields of such securities
(calculated on the basis of the cost and effective yields weighted for the
scheduled maturity of each security). As discussed in the notes to the
consolidated financial statements, Gonzales Holding has an unused net operating
loss carry forward at December 31, 1995. Accordingly, tax-equivalent
adjustments have not been made in calculating yields on obligations of states
and political subdivisions. In addition, for purposes of this table, Federal
Home Loan Bank stock with a book value of $572,000 has been excluded.
<TABLE>
<CAPTION>
AFTER ONE
WITHIN BUT WITHIN
ONE YEAR FIVE YEARS
--------------- -----------------
SECURITIES AVAILABLE-FOR-SALE: AMOUNT YIELD AMOUNT YIELD
------ ----- ------ -----
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of other
U.S. Government agencies and corporations $ 2,523 6.97% $ 10,725 6.45%
Obligations of states and political subdivisions - - - -
------- --------
$ 2,523 $ 10,725
======= ========
Mortgage-backed bonds and collateralized mortgage
obligations $ 313 7.16% $ 4,650 5.98%
======= ========
SECURITIES HELD-TO-MATURITY:
U.S. Treasury securities and obligations of other
U.S. Government agencies and corporations $ - - $ 959 7.58%
Obligations of states and political subdivisions - - -
------- --------
$ - $ 959
======= ========
Mortgage-backed bonds and collateralized
mortgage obligations $ - $ -
======= ========
</TABLE>
33
<PAGE> 45
<TABLE>
<CAPTION>
AFTER FIVE
BUT WITHIN
TEN YEARS AFTER TEN YEARS
------------------- ----------------------
SECURITIES AVAILABLE-FOR-SALE: AMOUNT YIELD AMOUNT YIELD
------ ----- ------ -----
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of other U.S.
Government agencies and corporations $1,721 6.58% $ - -
Obligations of states and political subdivisions - - - -
------ -------
$1,721 $ -
====== =======
Mortgage-backed bonds and collateralized
mortgage obligations $ - - $19,912 6.74%
====== =======
SECURITIES HELD-TO-MATURITY:
U.S. Treasury securities and obligations of other
U.S. Government agencies and corporations $2,504 6.86% $ - -
Obligations of states and political subdivisions 519 3.55% 476 5.60%
----- -------
$3,023 $ 476
====== =======
Mortgage-backed bonds and collateralized
mortgage obligations $4,742 5.63% $ 3,144 6.65%
====== =======
</TABLE>
Gonzales Bank's mortgage-backed bonds and collateralized mortgage obligations
stated maturity dates are as scheduled above, however principal and interest
payments are received monthly causing a portion of the outstanding balance to
paydown throughout the term.
Gonzales Holding does not own securities representing 10% or more of its
shareholders' equity with any one issuer.
The following table sets forth the carrying amounts of investment securities at
the dates indicated (In thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994
--------- ----------
<S> <C> <C>
U.S. Treasury securities and obligations of other U.S. Government
agencies and corporations $18,432 $15,158
Obligations of state and political subdivisions 995 499
Mortgage-backed bonds and collateralized
mortgage obligations 32,760 30,809
Federal Home Loan Bank stock 572 537
------- -------
Total $52,759 $47,003
======= =======
</TABLE>
34
<PAGE> 46
LOAN PORTFOLIO
The table below sets forth Gonzales Bank's loan distribution at the end of each
of the last two years (In thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1994
------------- ------------
<S> <C> <C>
Commercial, financial and agricultural $27,327 $27,772
Real estate - mortgage 20,210 20,586
Real estate - construction 1,894 1,618
Installment 10,142 9,694
------- -------
Total $59,573 $59,670
======= =======
</TABLE>
The following table shows the maturity of loans (excluding real estate-mortgage
and installment loans) outstanding as of December 31, 1995 (In thousands of
dollars). Also provided are the amounts due after one year, classified
according to sensitivity to changes in interest rates.
<TABLE>
<CAPTION>
MATURING
-----------------------------------------------
WITHIN AFTER ONE BUT AFTER
ONE YEAR WITHIN FIVE YEARS FIVE YEARS TOTAL
-------- ----------------- ---------- -----
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $6,018 $13,394 $7,915 $27,327
Real estate - construction 1,894 - - 1,894
------ ------- ------ -------
$7,912 $13,394 $7,915 $29,221
====== ======= ====== =======
Loans maturing after one year with:
Fixed interest rates $13,816
Variable interest rates 7,492
-------
$21,308
=======
</TABLE>
35
<PAGE> 47
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes Gonzales Bank's loan loss experience for each of
the two years ended (In thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1994
---------- ----------
<S> <C> <C>
Balance at beginning of period $1,525 $1,835
Charge-offs:
Commercial, financial and agricultural 25 32
Real estate (construction and mortgage) 10 9
Installment 184 133
------ ------
Total Charge-offs 219 174
Recoveries:
Commercial, financial and agricultural 8 67
Real estate (construction and mortgage) 15 11
Installment 28 36
------ ------
Total Recoveries 51 114
Net charge-offs 168 60
Provision charged (credited) to operations 60 (250)
------ ------
Balance at end of period $1,417 $1,525
====== ======
Ratio of net charge-offs to average loans
outstanding .28% .10%
</TABLE>
The provision for loan losses, which is charged to income from operations, is
based upon the changes in the loan portfolio, the amount of net loan losses
incurred, and management's estimation of potential future losses based on
several factors including, but not limited to, current economic conditions,
loan portfolio composition, nonaccrual loans, problem loans and prior loan loss
experience.
As a result of an improving economy and loan portfolio during 1994, management
determined that the allowance for possible loan losses exceeded the required
amount by $250,000 and credited the provision for possible loan losses for this
amount.
The following table shows an allocation of the allowance for possible loan
losses for each of the two years indicated (In thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------------------------- ----------------------------
PERCENTAGE OF LOANS PERCENTAGE OF LOANS
IN EACH CATEGORY IN EACH CATEGORY
AMOUNT TO TOTAL LOANS AMOUNT TO TOTAL LOANS
------ -------------------------- ------ -------------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $1,059 45.87% $ 919 46.54%
Real estate - mortgage 332 33.92% 408 34.50%
Real estate - construction - 3.18% 27 2.71%
Installment 20 17.03% 160 16.25%
Unallocated 6 -% 11 -%
------ ------- ------ -------
Total $1,417 100.00% $1,525 100.00%
====== ======= ====== =======
</TABLE>
36
<PAGE> 48
RISK ELEMENTS
The following table summarizes nonperforming loans at December 31, 1995 and
1994 (In thousands of dollars):
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Nonaccrual loans $299 $ 123
Accruing loans past due 90 days or more 26 23
Restructured loans not included above 833 1,076
</TABLE>
If nonaccrual loans had performed in accordance with their original terms,
interest income would have increased by approximately $17,000 in 1995 and
$11,000 in 1994. Interest collected and recognized as interest income on these
loans was $9,000 in 1995 and $126,000 in 1994.
DEPOSITS
The average deposits and rates paid on such deposits are summarized for the
period indicated in the following tables (In thousands of dollars):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1995 1994
------------------ -----------------
AMOUNT RATE AMOUNT RATE
------ ---- ------ ----
<S> <C> <C> <C> <C>
Noninterest-bearing demand deposits $ 21,270 $ 20,099
Interest-bearing demand deposits 19,132 2.13% 18,452 1.85%
Savings deposits 20,510 2.43% 20,541 2.30%
Time deposits 44,611 4.77% 42,595 3.46%
-------- --------
Total $105,523 $101,687
======== ========
</TABLE>
Maturities of time deposits of $100,000 or more outstanding as of December 31,
1995 are summarized as follows (In thousands of dollars):
<TABLE>
<CAPTION>
TIME CERTIFICATES OF DEPOSIT
----------------------------
<S> <C>
3 months or less $ 900
Over 3 through 6 months 2,409
Over 6 through 12 months 2,765
Over 12 months 1,011
------
Total $7,085
======
</TABLE>
RETURN ON EQUITY AND ASSETS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1995 1994
---- ----
<S> <C> <C>
Return on average assets 2.15% 2.23%
Return on average equity 22.18% 21.87%
Dividend payout ratio 112.03% 111.21%
Average equity to average assets 9.68% 10.18%
</TABLE>
37
<PAGE> 49
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
GONZALES HOLDING AND SUBSIDIARY
The purpose of this discussion is to focus on information about the
financial condition and results of operations of Gonzales Holding and Gonzales
Bank that is not otherwise apparent from the consolidated financial statements
and financial data presented elsewhere herein.
FINANCIAL CONDITION
OVERVIEW. Total assets of Gonzales Holding at December 31, 1995 and
1994 were $124,435,000 and $117,569,000, respectively, a $6,866,000 or 5.8%
increase. Average assets for 1995 and 1994 were $121,664,000 and $117,916,000,
a 3.2% increase. In order to better understand the reasons for the overall
increase in total assets, and likewise, in liabilities and shareholders'
equity, this discussion will focus on changes in the significant components of
Gonzales Holding's balance sheet.
Cash and due from banks represent coin and currency on hand at
Gonzales Bank and amounts on deposit with correspondent banks, and are the
primary source for the daily withdrawal needs of depositors and credit needs of
loan customers. At December 31, 1995 and 1994, cash and due from banks were
$5,068,000 and $4,957,000, an increase of $111,000. Average cash and due from
banks were $4,161,000 in 1995 and $4,124,000 in 1994, which represents a
$37,000 or 0.9% increase. As the largest nonearning asset on the balance
sheet, management closely monitors the level of cash on hand and in
correspondent banks as part of the overall asset/liability strategy, in order
to maintain a balance between the needs of customers and management's
obligation to endeavor to enhance shareholders' profits by assuring that the
level of all nonearning assets is minimized.
Earning assets include federal funds sold, investment securities, and
loans and are Gonzales Holding's principal source of income. Earning assets
averaged $113,403,000 in 1995 and $108,502,000 in 1994, a $4,901,000 or 4.5%
increase. Total interest earned on these assets in 1995 and 1994 were
$9,981,000 and $8,940,000, respectively, which represents average yields of
8.80% and 8.24%.
Banks must meet legal reserve requirements on a daily basis by
maintaining a specified level of currency and coin on hand plus funds on
deposit at Federal Reserve Banks. Banks with excess reserves on a particular
day may sell the excess to other banks needing funds to meet their reserve
requirements on that day. These federal funds sold represent unsecured loans
to other banks, usually on a daily basis, and are made at an agreed rate of
interest (the federal funds rate). At December 31, 1995 and 1994, federal
funds sold were $2,634,000 and $627,000, respectively. Average federal funds
sold were $1,763,000 in 1995 and $748,000 in 1994 and yielded 5.73% and 4.14%,
respectively.
INVESTMENT SECURITIES. Investment securities, in addition to
providing a source of income, are used to manage interest rate and liquidity
risk as part of Gonzales Bank's overall asset/liability strategy. On January
1, 1994, Gonzales Bank adopted the Financial Accounting Standards Board's
Statement of Financial Accounting Standards number 115 (SFAS 115), "Accounting
for Certain Investments in Debt and Equity Securities." Under SFAS 115,
investment securities of Gonzales Bank are classified as either
"held-to-maturity" or "available-for-sale." Investments held-to-maturity are
bonds and notes for which Gonzales Bank has the positive intent and ability to
hold until their maturity, and are carried at cost, adjusted for amortization
of premiums and accretion of discounts. Investments available-for-sale consist
of bonds and notes not classified as held-to-maturity and are carried at their
fair value.
The carrying amounts of all investment securities at December 31, 1995
and 1994 were $52,759,000 and $47,003,000. At December 31, 1995 and 1994, the
amortized costs of all investment securities (available-for-sale and
held-to-maturity) were $52,304,000 and $49,138,000, respectively, and the fair
values were $52,682,000 and $46,083,000. Average carrying amounts of
investments were $51,262,000 in 1995 and $48,325,000 in 1994, which include
average unrealized losses on securities available-for-sale of $709,000 and
$901,000, respectively. The decrease in interest rates in 1995 caused an
increase in the fair values of the securities. At the end of 1994, the fair
value of all securities was $3,054,000
38
<PAGE> 50
less than the amortized cost. At the end of 1995, the fair value was $378,000
more than the amortized cost. Of this $378,000 net unrealized gain at
December 31, 1995, unrealized gains of $455,000 have increased the carrying
amount of securities available-for-sale, while unrealized losses of $77,000
have not affected the carrying amount of the securities held-to-maturity, which
are carried at amortized cost. The average amortized cost of the investment
securities increased by $2,745,000, from $49,226,000 in 1994 to $51,971,000 in
1995.
LOANS. Gonzales Holding's primary use of funds is for loan demand.
Loans outstanding at the end of 1995 and 1994 were $59,573,000 and $59,670,000,
a decrease of only $97,000 or 0.2%. Average loans outstanding for 1995 and
1994 were $60,049,000 and $59,352,000, a $697,000 or 1.2% increase. Interest
income generated from loans was $6,437,000 for 1995 and $6,114,000 for 1994,
for average yields of 10.72% and 10.30%, respectively. The increase in average
yield on loans does not reflect the general decrease in interest rates which
occurred during the latter part of 1995. Management expects average loans to
continue to increase due to the continued strong economic environment,
aggressive marketing strategies, and the decline in rates.
DEPOSITS. Deposits are Gonzales Holding's primary source of funds.
Total deposits at December 31, 1995 and 1994 were $108,180,000 and
$102,527,000, respectively. Deposits averaged $105,523,000 in 1995 and
$101,687,000 in 1994, a $3,836,000 or 3.8% increase. Interest-bearing deposits
in 1995 and 1994 averaged $84,253,000 and $81,588,000. Interest expense for
these deposits was $3,036,000 in 1995 and $2,289,000 in 1994, for average rates
paid of 3.60% and 2.81%. Although rates began falling during the latter part
of 1995, the average rates paid in 1995 remained higher than the 1994 average.
Stockholders' equity increased from $11,042,000 at December 31, 1994
to $12,435,000 at December 31, 1995 due to net income in 1995 of $2,611,000,
dividends declared of $2,925,000, and an increase during 1995 in the fair
values of investment securities available-for-sale, net of deferred income
taxes, of $1,707,000. During 1995 and 1994, Gonzales Holding paid regular
dividends of $0.35 per share per quarter, plus $4.00 per share per year in
extraordinary dividends.
RESULTS OF OPERATIONS
NET INTEREST INCOME. Net income for 1995 and 1994 was $2,611,000 and
$2,626,000, respectively, a $15,000 or 0.6% decrease.
Net interest income is the difference between interest income from
loans, investments, and other interest- earning assets and interest expense on
deposits and other interest-bearing liabilities. Net interest income for 1995
and 1994 was $6,723,000 and $6,452,000, a $271,000 or 4.2% increase. The
various components of net interest income as they relate to the particular
interest-earning assets and interest-bearing liabilities have been discussed in
the previous section titled "Financial Condition." The net interest margin
(that is, net interest income divided by average interest-earning assets) was
5.93% in 1995 and 5.95% in 1994. With close monitoring of the rates, along
with proper asset/liability management, the net interest margin will be managed
to maximize profits under both falling and rising interest rate environments.
PROVISION FOR LOAN LOSSES. The provision for possible loan losses is
based on changes in the loan portfolio, the amount of net loan losses incurred,
and management's estimates of potential future losses based on several factors
including, but not limited to, current economic conditions, loan portfolio
composition, prior loan loss experience, and the level of impaired and other
problem loans. The continued improvement of the economy and reduction of
nonperforming and other problem loans contributed to management's decision to
reduce the allowance for possible loan losses by $250,000 in 1994 through a
credit to operations. In 1995, the allowance decreased by $108,000 due to net
charge-offs of $168,000 offset by a charge to operations for the provision for
loan losses of $60,000. Gonzales Holding adopted Statement of Financial
Accounting Standard number 114, "Accounting by Creditors for Impairment of a
Loan," in 1995, which did not have a material effect on financial condition or
the results of operations. Loans which have been identified by management as
impaired generally include nonaccrual loans, loans past due ninety days or more
and still accruing, loans which have previously had some portion classified as
either loss or doubtful, and other loans which for specific reasons have been
identified as impaired. At December 31, 1995, loans totaling $1,746,000 were
specifically classified as impaired. Nonperforming loans at December 31, 1994
include nonaccrual loans, loans which are past due ninety days or more as to
principal or interest payments and still accruing, and loans for which the
terms have been restructured due to the financial troubles of borrowers. Total
nonperforming loans at December 31, 1994 were $1,222,000. In addition,
management has
39
<PAGE> 51
identified other loans which are contractually current and not classified as
either impaired or nonperforming, but the borrowers are experiencing financial
difficulties. These other loans totaled $2,282,000 at the end of 1995 and
$1,895,000 at the end of 1994.
NON-INTEREST INCOME. Noninterest income was $1,419,000 for 1995 and
$1,477,000 for 1994. Noninterest income consists primarily of service charges
on deposit accounts and fees for other financial services, which were
$1,164,000 in 1995 and $1,126,000 in 1994, a $38,000 or 3.3% increase. This
increase is directly attributable to the 3.6% increase in demand, NOW, money
market, and savings accounts during 1995. The net income from operation of
foreclosed real estate was $60,000 in 1995 and $142,000 in 1994. The major
portion of these amounts were from credits to the provision for loss on
foreclosed real estate of $40,000 in 1995 and $100,000 in 1994.
NON-INTEREST EXPENSE. Noninterest expense was $4,241,000 for 1995 and
$4,302,000 for 1994, a $61,000 or 1.4% decrease. This decrease is attributable
principally to two components of noninterest expense: (1) net occupancy
expense, which was $307,000 in 1995 and $346,000 in 1994, a $39,000 decrease,
and (2) equipment expense, which was $347,000 in 1995 and $373,000 in 1994, a
$26,000 decrease. The decrease in net occupancy expense was primarily due to a
$28,000 reduction in building repairs and maintenance. The decrease in
equipment expense was primarily due to a $36,000 decrease in depreciation
expense on furniture, equipment and automobiles.
Income tax expense was $1,230,000 and $1,251,000 for 1995 and 1994.
These provisions for taxes include current expenses of $93,000 in 1995 and
$66,000 in 1994, which represent alternative minimum tax that Gonzales Holding
has paid. These taxes are expected to be recovered in future years as credit
carryovers when Gonzales Holding again begins incurring taxes under the regular
income tax system.
LIQUIDITY AND CAPITAL RESOURCES
The primary functions of asset/liability management are to assure
adequate liquidity and to maintain an appropriate balance between
interest-earning assets and interest-bearing liabilities. Liquidity management
involves the ability to meet the cash flow requirements of customers who may be
either depositors wanting to withdraw funds or borrowers needing assurance that
sufficient funds will be available to meet their credit needs. The principal
sources of liquidity for Gonzales Holding are cash and due from bank accounts,
investment securities which are available-for- sale, federal funds sold,
maturing loans, short-term borrowings through federal funds lines of credit,
and advances from the Federal Home Loan Bank.
Gonzales Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly discretionary,
actions by regulators that, if undertaken, could have a direct material effect
on Gonzales Bank's financial statements. Under capital adequacy guidelines and
the regulatory framework for prompt corrective action, Gonzales Bank must meet
specific capital guidelines that involve quantitative measures of Gonzales
Bank's assets, liabilities, and certain off- balance sheet items as calculated
under regulatory accounting practices. Gonzales Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require Gonzales Bank to maintain minimum amounts and ratios of total
and Tier 1 capital, as defined in the regulations, to risk-weighted assets, as
defined, and of Tier 1 capital to average assets, as defined. Management
believes, as of December 31, 1995, that Gonzales Bank meets all capital
adequacy requirements to which it is subject.
As of December 31, 1995, the most recent notification from the Federal
Deposit Insurance Corporation categorized Gonzales Bank as well capitalized
under the regulatory framework for prompt corrective action. To be categorized
as well capitalized, Gonzales Bank must maintain a total risk-based capital
ratio of 10% or higher, Tier 1 risk-based capital ratio of 6% or higher, and
Tier 1 leverage capital ratio of 5% or higher. No conditions or events have
occurred since that notification that management believes have changed Gonzales
Bank's category.
40
<PAGE> 52
LEGAL OPINION
Watkins Ludlam & Stennis, P.A., of Jackson, Mississippi has rendered
its opinion that the shares of Deposit Guaranty Common Stock to be issued in
connection with the Mergers have been duly authorized and if and when issued
pursuant to the terms of the Merger Agreement, will be validly issued, fully
paid and non-assessable.
EXPERTS
The consolidated financial statements of Deposit Guaranty as of
December 31, 1995 and 1994, and for each of the years in the three-year period
ended December 31, 1995, 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.
The consolidated financial statements of Gonzales Holding as of
December 31, 1995 and 1994, and for each of the years in the two-year period
ended December 31, 1995, have been audited by Basil M. Lee and Company, C.P.A.,
as indicated in their reports with respect thereto and have been included
herein and in the registration statement in reliance upon the authority of said
firm as experts in accounting and auditing in giving said reports.
OTHER MATTERS
As of the date of this Proxy Statement/Prospectus, the Board of
Directors of Gonzales Holding knows of no matters which will be presented for
consideration at the Meeting other than as set forth in the Notice of such
meeting attached to this Proxy Statement/Prospectus. However, if any other
matters shall come before the Meeting or any adjournment or postponement
thereof and be voted upon the enclosed proxy shall be deemed to confer
discretionary authority to the individuals named as proxies therein to vote the
shares represented by such proxy as to any such matters.
41
<PAGE> 53
INDEX TO FINANCIAL STATEMENTS
BANK OF GONZALES HOLDING COMPANY, INC.
AND SUBSIDIARY
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report F-2
Consolidated Statements of Financial Position at December 31, 1995 and 1994 F-3
Consolidated Statements of Income for each of the Years in the Two Year F-4
Period Ended December 31, 1995
Consolidated Statements of Cash Flows for each of the Years in the F-5
Two Year Period Ended December 31, 1995
Consolidated Statements of Shareholders' Equity for each of the F-6
Years in the Two Year Period Ended December 31, 1995
Notes to Consolidated Financial Statements for each of the Years in the F-7
Two Year Period Ended December 31, 1995
</TABLE>
F-1
<PAGE> 54
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
of Bank of Gonzales Holding Company, Inc.
We have audited the accompanying consolidated statements of financial condition
of Bank of Gonzales Holding Company, Inc. and its subsidiary as of December 31,
1995 and 1994, and the related consolidated statements of income, shareholders'
equity, and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Bank of Gonzales
Holding Company, Inc. and its subsidiary as of December 31, 1995 and 1994, and
the results of their operations and their cash flows for the years then ended
in conformity with generally accepted accounting principles.
BASIL M. LEE AND COMPANY
Certified Public Accountants
Baton Rouge, Louisiana
January 31, 1996
F-2
<PAGE> 55
BANK OF GONZALES HOLDING COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION AT
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1995 1994
ASSETS -------- --------
<S> <C> <C>
Cash and due from banks $ 5,068 $ 4,957
Federal funds sold 2,634 627
-------- --------
Cash and cash equivalents 7,702 5,584
Interest-bearing deposits in banks 1,300 --
Securities available-for-sale, at fair value 40,416 33,275
Securities held-to-maturity, fair values of $12,266 in 1995
and $12,808 in 1994 12,343 13,728
Loans receivable, net of allowance for loan losses of $1,417
in 1995 and $1,525 in 1994 58,156 58,145
Premises and equipment 2,289 2,360
Foreclosed real estate 290 572
Accrued interest receivable 788 759
Deferred tax asset 794 2,811
Other assets 357 335
-------- --------
Total assets $124,435 $117,569
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Noninterest-bearing demand deposits $21,651 $20,438
Interest-bearing demand, NOW's and MMDA's 20,039 19,186
Time deposits $100,000 and more 20,711 20,589
Savings 7,085 5,716
Other time deposits 38,694 36,598
-------- --------
Total deposits 108,180 102,527
Advance from Federal Home Loan Bank 3,260 3,410
Accrued interest payable 201 162
Other liabilities 359 428
-------- --------
Total liabilities 112,000 106,527
-------- --------
SHAREHOLDERS' EQUITY
Common stock, no par value - 10,000,000 shares 13,227 13,227
authorized, 561,801 shares issued and outstanding in 1995 and 1994
Retained earnings (deficit) (606) (292)
Treasury stock, at cost, 20,190 shares in 1995 and 1994 (485) (485)
Net unrealized appreciation (depreciation) on available-
for-sale securities, net of tax of $154 in 1995 and $726 in
1994 299 (1,408)
-------- --------
Total shareholders' equity 12,435 11,042
-------- --------
Total liabilities and shareholders' equity $124,435 $117,569
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-3
<PAGE> 56
BANK OF GONZALES HOLDING COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 AND 1994
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994
--------- --------
<S> <C> <C>
Interest income
Loans receivable $ 6,437 $ 6,114
Taxable investment securities 3,384 2,772
Tax-exempt investment securities 31 20
Federal funds sold 101 31
Other 28 3
--------- --------
Total interest income 9,981 8,940
--------- --------
Interest expense
Deposits 3,036 2,289
Federal Home Loan Bank Advance 213 176
Other 9 23
--------- --------
Total interest expense 3,258 2,488
--------- --------
Net interest income 6,723 6,452
Provision for loan losses 60 (250)
--------- --------
Net interest income after provision for loan losses 6,663 6,702
--------- --------
Noninterest income
Service charges on deposit accounts 1,164 1,126
Other service charges and fees 47 71
Net income from operation of foreclosed real estate 60 142
Other 148 138
--------- --------
Total noninterest income 1,419 1,477
--------- --------
Noninterest expense
Salaries and employee benefits 2,028 2,010
Net occupancy expense 307 346
Equipment expense 347 373
Investment securities losses 50 43
Other 1,509 1,530
--------- --------
Total noninterest expense 4,241 4,302
--------- --------
Income before income taxes 3,841 3,877
Income tax expense 1,230 1,251
--------- --------
Net income $2,611 $2,626
========= ========
Net income per common and common equivalent share--
based on weighted average number of shares
outstanding (541,611 in 1995 and 540,587 in 1994) $ 4.82 $ 4.86
========= ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-4
<PAGE> 57
BANK OF GONZALES HOLDING COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income $ 2,611 $ 2,626
Adjustments to reconcile net income to net cash provided by operating
activities
Deferred tax expense 1,137 1,186
Depreciation and amortization 241 296
Provision for loan losses 60 (250)
Net realized losses on available-for-sale securities 50 44
Provision for losses on foreclosed real estate (40) (100)
Net (accretion) amortization of securities (70) 190
(Gain) on sales of foreclosed real estate (18) (40)
Loss on sales of premises and equipment - 11
(Increase) in accrued interest receivable (29) (150)
(Increase) in other assets (43) (52)
Increase in accrued interest payable 39 19
Increase (decrease) in accrued expenses and other liabilities (69) 131
--------- ---------
Net cash provided by operating activities 3,869 3,911
--------- ---------
Cash flows from investing activities
Net (increase) in interest-bearing deposits with banks (1,300) -
Purchases of available-for-sale securities (21,704) (17,066)
Proceeds from sales of available-for-sale securities 12,790 19,976
Proceeds from maturities of available-for-sale securities 2,644 4,134
Purchases of held-to-maturity securities (4,698) (11,388)
Proceeds from maturities of held-to-maturity securities 7,819 766
Net (increase) in loans (122) (458)
Proceeds from sales of foreclosed real estate 391 165
Net purchases of premises and equipment (149) (116)
--------- ---------
Net cash (used) by investing activities (4,329) (3,987)
--------- ---------
Cash flows from financing activities
Net increase in demand, savings, NOW and money market accounts 2,188 5,379
Net (decrease) in time deposits $100,000 and more (2,175) (1,540)
Net increase (decrease) in other time deposits 5,640 (507)
Net (decrease) in federal funds purchased - (1,050)
Net increase (decrease) in F.H.L.B. advances (150) 3,410
Dividends paid (2,925) (2,874)
Purchases of treasury stock - (19)
Sales of treasury stock - 27
--------- ---------
Net cash provided by financing activities 2,578 2,826
--------- ---------
Net increase in cash and cash equivalents 2,118 2,750
Cash and cash equivalents, beginning of year 5,584 2,834
--------- ---------
Cash and cash equivalents, end of year $ 7,702 $ 5,584
========= =========
Interest paid $ 3,219 $ 2,469
========= =========
Income taxes paid $ 102 $ 40
========= =========
Foreclosed real estate acquired in satisfaction of loans $ 51 $ 88
========= =========
</TABLE>
F-5
<PAGE> 58
BANK OF GONZALES HOLDING COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Retained Cost of Common (Depreciation) on Total
Earnings Stock in Available-for-Sale Shareholders'
Common Stock (Deficit) Treasury Securities Equity
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $13,203 $ 75 $ (561) $ - $12,717
Net unrealized appreciation at January
1, 1994, due to adoption of SFAS
115, net of taxes of $151 - - - 294 294
Net income, 1994 - 2,626 - - 2,626
Sale of 3,950 shares of treasury stock 1 (69) 95 - 27
Purchase of 783 shares of treasury
stock - - (19) - (19)
Dividends declared - (2,924) - - (2,924)
Deferred tax benefit from exercise
of stock options 23 - - - 23
Net changes in unrealized
appreciation (depreciation) on
available-for-sale securities, net of
taxes of $877 - - - (1,702) (1,702)
------- -------- --------- -------- -------
Balance at December 31, 1994 13,227 (292) (485) (1,408) 11,042
Net income, 1995 - 2,611 - - 2,611
Dividends declared - (2,925) - - (2,925)
Net changes in unrealized
appreciation (depreciation) on
available-for-sale securities, net of
taxes of $880 - - - 1,707 1,707
------- -------- --------- -------- -------
Balance at December 31, 1995 $13,227 $ (606) $ (485) $ 299 $12,435
======= ======== ========= ======== =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-6
<PAGE> 59
BANK OF GONZALES HOLDING COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting principles followed by Bank of Gonzales Holding Company, Inc.
(the Company) and its wholly-owned subsidiary, Bank of Gonzales (the Bank), and
the methods of applying those principles conform with generally accepted
accounting principles consistently applied and generally practiced within the
banking industry. The principles which significantly affect the determination
of financial condition and net income are summarized below:
Principles of Consolidation: The consolidated financial statements include the
accounts of the Company and the Bank. All significant intercompany balances
and transactions have been eliminated. Investment in the Bank is carried at
the Company's equity in the underlying net assets.
Nature of operations: The Bank provides a variety of financial services to
individual and business customers through its three offices in Ascension
Parish, Louisiana, which is primarily an industrial area. The Bank's primary
deposit products are checking and savings accounts and certificates of deposit.
Its primary lending products are commercial, real estate and consumer loans.
Use of estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for losses on loans and the
valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans. In connection with the determination of the allowances
for losses on loans and foreclosed real estate, management obtains independent
appraisals for significant properties.
While management uses available information to recognize losses on loans and
foreclosed real estate, future additions to the allowances may be necessary
based on changes in local economic conditions, which depends heavily on the
petrochemical industry. In addition, regulatory agencies, as an integral part
of their examination process, periodically review the Bank's allowances for
losses on loans and foreclosed real estate. Such agencies may require the Bank
to recognize additions to the allowances based on their judgments about
information available to them at the time of their examination. Because of
these factors, it is reasonably possible that the allowances for losses on
loans and foreclosed real estate may change materially in the near term.
Investment Securities: Investment securities are classified in two categories
and accounted for as follows:
Securities Held-to-Maturity. Bonds and notes for which the Bank has the
positive intent and ability to hold to maturity are reported at cost,
adjusted for amortization of premiums and accretion of discounts which are
recognized in interest income using the interest method over the period to
maturity.
Securities Available-for-Sale. Securities available-for-sale consist of
bonds and notes not classified as securities held-to-maturity.
Declines in the fair value of individual held-to-maturity and
available-for-sale securities below their cost that are other than temporary
result in write-downs of the individual securities to their fair value. The
related write-downs are included in earnings as realized losses. Unrealized
holding gains and losses, net of tax, on securities available- for-sale are
reported as a net amount in a separate component of shareholders' equity until
realized. Gains and losses on the sale of securities available-for-sale are
determined using the specific-identification method.
F-7
<PAGE> 60
Loans Receivable and Allowance for Loan Losses: Loans are stated at the amount
of unpaid principal reduced by unearned income and the allowance for loan
losses. Unearned income on discounted loans is recognized as income over the
term of the loans using a method that approximates the interest method.
Interest on other loans is calculated by using the simple interest method on
daily balances of the principal amount outstanding. Loans are generally placed
on nonaccrual when principal or interest is delinquent for ninety days or more.
Interest income generally is not recognized on nonaccrual loans unless the
likelihood of further loss is remote. Interest payments received on such loans
are applied as a reduction of the loan principal balance. Impaired loans
generally include nonaccrual loans, loans past due ninety days or more and
still accruing, and restructured loans. Loans reviewed for impairment include
all loans (except consumer installment loans, which are generally smaller
balance, homogeneous loans) which management has identified as warranting
special attention, such as past due loans, large loans, and loans for which
management is aware of a borrower's financial difficulties.
The allowance for loan losses represents an amount which, in management's
judgment, will be adequate to absorb possible losses on existing loans that may
become uncollectible. The amount of the allowance is based on management's
evaluation of the collectibility of the loan portfolio, including the nature of
the portfolio, credit concentrations, trends in historical loss experience,
specific impaired loans, and economic conditions. Allowances for impaired
loans are generally determined based on collateral values. Ultimate losses may
vary from current estimates. A loan is charged off when it is determined to be
uncollectible. The allowance is increased by a provision for loan losses,
which is charged to expense, and reduced by charge-offs, net of recoveries.
Premises and Equipment: Premises and equipment are stated at cost less
accumulated depreciation. Repairs and maintenance expenditures which extend
the useful life of an asset are capitalized, and routine maintenance and repair
expenditures are expensed as incurred. Depreciation expense is computed using
the straight-line method over the estimated useful lives of the respective
assets.
Foreclosed Real Estate: Foreclosed real estate is comprised of properties
acquired through foreclosure proceedings or acceptance of deed in lieu of
foreclosure. These properties are carried at the lower of cost or estimated
fair market value. Losses arising at the time of acquisition of such property
are charged against the allowance for loan losses. Subsequent losses are
included in net income from operation of foreclosed real estate.
Federal Income Taxes: Provision for deferred income taxes is made as a result
of temporary differences between the financial and taxable bases of assets and
liabilities. These differences relate principally to the provision for
possible loan losses, foreclosed real estate expense, accretion of discounts on
investment securities, and the tax net operating loss carryforward.
Statement of Cash Flows: For purposes of the statement of cash flows, the
Company considers due from bank accounts and federal funds sold to be cash
equivalents.
Treasury Stock: Treasury stock is accounted for by the cost method on an
average cost basis.
Fair Values of Financial Instruments: Statement of Financial Accounting
Standards number 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value information about financial instruments,
whether or not recognized in the statement of financial condition. In cases
where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets and, in
many cases, could not be realized in immediate settlement of the instruments.
Statement 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the Company.
Reclassifications: Certain items included in the financial statements for 1994
have been reclassified to conform with the 1995 presentation and have no effect
on net income previously reported.
F-8
<PAGE> 61
NOTE B--RESTRICTIONS ON SHAREHOLDERS' EQUITY
Under applicable law, the Bank cannot, without the prior approval of regulatory
authorities, pay dividends during any year which exceed the combined net income
of that year and the immediately preceding year. Additionally, under
applicable law, the Bank cannot make loans, extensions of credit, repurchase
agreements, investments, or advances, which will exceed 10% of its capital
stock and surplus, to an affiliate. At December 31, 1995, the Bank had no such
loans or advances to its affiliate.
NOTE C--RESTRICTIONS ON CASH AND DUE FROM BANKS
The Bank is required to maintain average reserve balances with the Federal
Reserve Bank. The average amount of these reserve balances for the years ended
December 31, 1995 and 1994 was approximately $811,000 and $787,000,
respectively.
NOTE D--INVESTMENT SECURITIES
The amortized cost and estimated fair value of investments in debt securities
are as follows (In thousands of dollars):
<TABLE>
<CAPTION>
December 31, 1995
----------------------------------------------------------
Amortized Gross Gross Estimated
Cost Unrealized Unrealized Fair
Securities available-for-sale: Gains Losses Value
----------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 3,973 $ 64 $ - $ 4,037
U.S. Government agencies and corporations 10,781 199 48 10,932
Mortgage-backed securities and collateralized
mortgage obligations 24,635 357 117 24,875
-------- -------- ------ --------
$ 39,389 $ 620 $ 165 $ 39,844
======== ======== ====== ========
</TABLE>
F-9
<PAGE> 62
<TABLE>
<CAPTION>
December 31, 1995
----------------------------------------------------------
Amortized Gross Unrealized Gross Estimated
Cost Gains Unrealized Fair Value
Securities held-to-maturity: Losses
----------------------------------------------------------
(In thousands of dollars)
<S> <C> <C> <C> <C>
U.S. Government agencies and corporations $ 3,463 $ 46 $ - $ 3,509
Obligations of states and political subdivisions 995 17 46 966
Mortgage-backed securities and collateralized
mortgage obligations 7,885 22 116 7,791
-------- -------- -------- --------
$ 12,343 $ 85 $ 162 $ 12,266
======== ========= ======== =======
Debt securities pledged to secure public funds and
for other purposes $ 4,116 $ 4,058
======== ========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
----------------------------------------------------------
Amortized Gross Unrealized Gross Estimated
Cost Gains Unrealized Fair Value
Securities available-for-sale: Losses
----------------------------------------------------------
(In thousands of dollars)
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 6,455 $ - $ 185 $ 6,270
U.S. Government agencies and corporations 2,199 - 292 1,907
Mortgage-backed securities and collateralized
mortgage obligations 26,218 - 1,657 24,561
-------- -------- -------- --------
$ 34,872 $ - $ 2,134 $ 32,738
======== ======== ======== ========
Securities held-to-maturity:
U.S. Government agencies and corporations $ 6,981 $ 14 $ 201 $ 6,794
Obligations of states and political subdivisions 499 - 87 412
Mortgage-backed securities and collateralized
mortgage obligations 6,248 - 646 5,602
-------- -------- -------- --------
$ 13,728 $ 14 $ 934 $ 12,808
======== ======== ======== ========
Debt securities pledged to secure public funds and
for other purposes $ 3,214 $ 3,149
======== ========
</TABLE>
F-10
<PAGE> 63
The following is a summary of maturities of securities available-for-sale and
held-to-maturity as of December 31, 1995 (in thousands of dollars):
<TABLE>
<CAPTION>
Securities available-for-sale Securities held-to-maturity
-----------------------------------------------------------------------
Amortized Estimated Amortized Estimated
Contractual maturities: Cost Fair Value Cost Fair Value
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less $ 2,807 $ 2,836 $ - $ -
Due after one year through five years 15,249 15,375 959 976
Due after five years through ten years 1,704 1,721 7,764 7,632
Due after ten years 19,629 19,912 3,620 3,658
--------- --------- ---------- ---------
$ 39,389 $ 39,844 $ 12,343 $ 12,266
========= ========= ========== =========
</TABLE>
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties. Proceeds from sales of investments in debt securities
during 1995 and 1994 were $12,790,000 and $19,976,000, respectively. Gross gains
of $74,000 in 1995 and $111,000 in 1994, and gross losses of $124,000 in 1995
and $155,000 in 1994, were realized on those sales.
The Bank owns stock in the Federal Home Loan Bank of approximately $572,000
which was pledged to partially secure a line of credit totaling $6,204,000.
Quarterly stock dividends are paid and the Federal Home Loan Bank will
repurchase the stock at par if no advances are outstanding.
NOTE E--LOANS RECEIVABLE
Most of the Bank's loan customers are in Ascension Parish, Louisiana and its
adjacent parishes. Loans, net of unearned discount, consisted of the following
major categories at December 31 (In thousands of dollars):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Commercial, financial and agricultural $27,327 $27,772
Real estate-mortgage 20,210 20,586
Real estate-construction 1,894 1,618
Installment 10,973 10,449
------- -------
60,404 60,425
Unearned income (831) (755)
------- -------
$59,573 $59,670
======= =======
</TABLE>
F-11
<PAGE> 64
Changes in the allowance for loan losses for the years ended December 31, 1995
and 1994 were as follows (In thousands of dollars):
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Balance at beginning of year $1,525 $1,835
Provision charged (credited) to operations 60 (250)
Loans charged-off (219) (174)
Recoveries 51 114
------ ------
Balance at end of year $1,417 $1,525
====== ======
</TABLE>
The Bank adopted Statement of Financial Accounting Standards number 114,
"Accounting by Creditors for Impairment of a Loan," in 1995, which did not have
a material effect on financial condition or the results of operations. At
December 31, 1995, loans totaling $1,746,000 were specifically classified as
impaired. Of the total impaired loans at December 31, 1995, $416,000 had a
related allowance for loan losses of $104,000. The average balance of these
loans in 1995 was approximately $2,178,000. In 1995, interest income
recognized on these loans was approximately $175,000. No commitments to loan
additional funds to borrowers of impaired loans were outstanding at December
31, 1955.
Nonperforming loans at December 31, 1994, prior to the adoption of Statement
114, consist of nonaccrual loans, past due loans and restructured loans.
Nonaccrual loans are loans on which interest recognition has been suspended
until realized because of doubts as to the borrower's ability to repay
principal or interest. Past due loans are accruing loans that are
contractually past due 90 days or more as to principal or interest.
Restructured loans are loans whose terms have been modified, because of a
deterioration in financial condition of the borrower, to provide for a
reduction of either interest or principal payments. The following table
summarizes the Company's nonperforming and restructured loans at December 31,
1994, in thousands of dollars:
<TABLE>
<S> <C>
Nonaccrual loans $ 123
Accruing loans past due 90 days or more $ 23
Restructured loans $ 1,076
</TABLE>
In 1994, if nonaccrual loans had performed in accordance with their original
terms, interest income would have increased by approximately $11,000. Interest
collected and recognized as interest income on these loans in 1994 was
$126,000.
In addition, at December 31, 1995 and 1994, the Bank had approximately
$2,282,000 and $1,895,000, respectively, of loans which were contractually
current and not considered impaired or nonperforming, but the borrowers were
experiencing financial difficulties.
NOTE F--TRANSACTIONS WITH RELATED PARTIES
Loans have been made to directors, principal shareholders and executive
officers and their associates. The balance of such loans at December 31, 1995
and 1994 was $5,091,000 and $5,542,000, respectively. During 1995, new loans
of $755,000 were made and repayments of $1,206,000 were received. There were
no nonaccrual, past due and other loans to related parties who are currently
experiencing financial difficulties at December 31, 1995 and 1994.
At December 31, 1995 and 1994 related parties had deposit balances totaling
approximately $4,016,000 and $3,587,000, respectively.
Consulting and other service fees amounting to approximately $9,000 in 1995 and
$9,000 in 1994 have been paid to business affiliates of certain directors.
F-12
<PAGE> 65
NOTE G--FORECLOSED REAL ESTATE
Changes in the allowance for losses on foreclosed real estate for the years
ended December 31 were as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
(In thousands of dollars)
<S> <C> <C>
Balance at beginning of year $ 50 $ 150
Provision (credited) to operations (40) (100)
Foreclosed real estate charged-down (10) -
---------- ----------
Balance at end of year $ - $ 50
========== ==========
</TABLE>
NOTE H--PREMISES AND EQUIPMENT
Premises and equipment at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
(In thousands of dollars)
<S> <C> <C>
Land $ 334 $ 334
Buildings and improvements 4,072 4,022
Furniture and equipment 1,240 1,155
-------- --------
Total 5,646 5,511
Less accumulated depreciation and amortization 3,357 3,151
-------- --------
Net $ 2,289 $ 2,360
======== ========
</TABLE>
NOTE I--PENSION PLAN
In 1989, the Bank established a 401(k) profit sharing plan and trust ("cash or
deferred arrangement"). Under the plan, all employees who were employed at
January 1, 1989, the effective date, are eligible to participate. Other
employees become eligible on the first January 1 or July 1 following their
attaining age 21 and completing 3 months of service. Participants may elect to
defer from 1% up to 15% of their compensation as elective contributions. The
Bank is not required to match employee contributions, but is permitted to make
a discretionary contribution that would be allocated to all participants based
on compensation. The Bank contributed $30,000 to the plan in 1995. No
contributions were made by the Bank in 1994.
F-13
<PAGE> 66
NOTE J--INCOME TAXES
The components of income tax expense for each of the two years ended December
31 were:
<TABLE>
<CAPTION>
1995 1994
-------- --------
(In thousands of dollars)
<S> <C> <C>
Current $ 93 $ 66
Deferred 1,137 1,185
-------- --------
$ 1,230 $ 1,251
======== ========
</TABLE>
The applicable federal income tax expense for financial reporting purposes
differed from the amount computed by applying the federal statutory income tax
rate of 34% to income before income taxes for the following principal reasons:
<TABLE>
<CAPTION>
1995 1994
Amount Rate Amount Rate
-------- -------- -------- -------
(In thousands of dollars)
<S> <C> <C> <C> <C>
Taxes at statutory rates $ 1,306 34.0% $1,318 34.0%
Tax-exempt income (23) (0.6)% (15) (0.4)%
Nondeductible expenses 7 0.2% 5 0.1%
Alternative minimum tax 93 2.4% 66 1.7%
(Increase) decrease in tax credits carryforward (153) (4.0)% (123) (3.1)%
-------- -------- -------- -------
$ 1,230 32.0% $ 1,251 32.3%
======== ======== ======== =======
</TABLE>
At December 31, 1995 and 1994, a net deferred tax asset of $794,000 and
$2,811,000 was recorded which consisted of:
<TABLE>
<CAPTION>
1995 1994
--------- --------
(In thousands of dollars)
<S> <C> <C>
Net unrealized (appreciation) depreciation on available-for-sale securities $ (154) $ 726
Tax net operating loss carryforward 853 2,032
Provision for real estate losses 73 160
Provision for loan losses (161) (181)
Depreciation expense (118) (107)
Credits carryforward 329 182
Other (28) (1)
--------- --------
$ 794 $ 2,811
========= ========
</TABLE>
A valuation allowance of $14,000 and $167,000 at December 31,1995 and 1994 was
recorded to reduce the deferred tax asset related to the carryforward of tax
credits due to expire in future years.
F-14
<PAGE> 67
At December 31, 1995, the Company had available net operating loss
carryforwards of approximately $2,509,000 which, if not used, will expire as
follows: 2005 - $1,071,000 and 2006 - $1,438,000.
NOTE K--CREDIT ARRANGEMENTS
Pursuant to unsecured line of credit agreements for short-term borrowings with
certain banks, the Company may borrow up to $5,400,000 on such terms as the
Company and the banks mutually agree. At December 31, 1995, $5,400,000
remained available to the Company.
Pursuant to collateral agreements with the Federal Home Loan Bank ("FHLB"), the
Company may borrow up to $6,204,000, which represents 65% of the Bank's first
mortgage loans, in advances secured by FHLB stock, cash and interest-bearing
deposits in FHLB and qualifying first mortgage collateral. FHLB advances may
be short-term or long-term, and they may have either fixed or floating interest
rates. The Company had $3,260,000 in outstanding advances from the FHLB at
December 31, 1995 and $3,410,000 at December 31, 1994. Principal and
interest is due monthly at an average weighted interest rate of 6.38%. Annual
principal repayment requirements are (in thousands of dollars):
<TABLE>
<S> <C>
1996 $ 160
1997 170
1998 181
1999 193
2000 206
Thereafter 2,350
------
$3,260
======
</TABLE>
F-15
<PAGE> 68
NOTE L--BANK OF GONZALES HOLDING COMPANY, INC. (PARENT COMPANY ONLY) FINANCIAL
INFORMATION
Statements of Financial Condition
<TABLE>
<CAPTION>
December 31,
1995 1994
--------- ---------
(In thousands of dollars)
<S> <C> <C>
ASSETS
Cash $ 5 $ 5
Investment in Bank of Gonzales, at equity 12,191 10,797
Deferred tax asset 240 240
Dividends receivable 190 190
--------- ---------
Total assets $ 12,626 $ 11,232
========= =========
LIABILITIES
Dividends payable $ 190 $ 190
Other liabilities 1 -
--------- ---------
Total liabilities 191 190
--------- ---------
SHAREHOLDERS' EQUITY
Common Stock 13,227 13,227
Retained earnings (deficit) (606) (292)
Less treasury stock, at cost (485) (485)
Net unrealized appreciation (depreciation) on available-for-sale securities
of subsidiary, net of taxes 299 (1,408)
--------- ---------
Total shareholders' equity 12,435 11,042
--------- ---------
Total liabilities and shareholders' equity $ 12,626 $ 11,232
========= =========
</TABLE>
Statements of Income
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994
------ ------
(In thousands of dollars)
<S> <C> <C>
Income
Dividends from bank subsidiary $2,925 $2,924
Expenses 1 -
------ ------
Income before equity in undistributed income of subsidiary 2,924 2,924
Equity in undistributed income of Bank of Gonzales (313) (298)
------- ------
Net income $2,611 $2,626
====== ======
</TABLE>
F-16
<PAGE> 69
Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994
--------- --------
(In thousands of dollars)
<S> <C> <C>
Cash flows from operating activities
Net income $ 2,611 $ 2,626
Adjustments to reconcile net income to net cash provided by operating
activities
Equity in undistributed net income of bank 313 298
Deferred tax benefit - (5)
Increase in dividends receivable - (50)
Increase in other liabilities 1 -
--------- --------
Net cash provided by operating activities 2,925 2,869
--------- --------
Cash flows from investing activities - -
--------- --------
Cash flows from financing activities
Proceeds from sales of treasury stock - 27
Purchases of treasury stock - (19)
Dividends paid (2,925) (2,874)
--------- --------
Net cash (used) by financing activities (2,925) (2,866)
--------- --------
Net increase in cash and cash equivalents - 3
Cash and cash equivalents, beginning of year 5 2
--------- --------
Cash and cash equivalents, end of year $ 5 $ 5
========= ========
</TABLE>
NOTE M--STOCK OPTION AGREEMENT
In 1991 and 1992 Gonzales Holding granted to all senior vice presidents (4
persons) an option to purchase up to 2,500 shares of common stock each of Bank
of Gonzales Holding Company, Inc. at an exercise price equal to the book
value of such shares on December 31, 1988. These options are not transferable
and became exercisable in 1992 upon attainment of an $8.00 per share book value
of stock and the termination of the Cease and Desist Order by FDIC. During
1994, 3,500 shares were exercised at $4.32 per share. The following is a
summary of transactions for the year ended December 31, 1994:
<TABLE>
<CAPTION>
Shares Under Option 1994
----
<S> <C>
Outstanding, beginning of year 3,500
Granted during the year -
Exercised during the year 3,500
Canceled during the year -
Outstanding, end of year -
Exercisable, end of year -
</TABLE>
F-17
<PAGE> 70
NOTE N--FINANCIAL INSTRUMENTS
Gonzales Bank is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit, which involve credit risk in excess of the amounts
recognized in the balance sheets. The Bank's exposure to credit loss in the
event of nonperformance by the other party to these financial instruments is
represented by the contractual amounts of the instruments. The Bank uses the
same credit policies in making commitments and conditional obligations as it
does for on-balance sheets instruments, including collateral or other security
to support the financial instruments.
At December 31, 1995 and 1994, commitments to extend credit totaled $5,873,000
and $5,485,000, respectively. These commitments are agreements to lend to a
customer as long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments may expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements.
At December 31, 1995 and 1994, commitments under standby letters of credit
totaled $210,000 and $98,000, respectively. Standby letters of credit are
conditional commitments issued by the Bank to guarantee the performance of a
customer to a third party. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loans to
customers.
The estimated fair values of Gonzales Holding's financial instruments at
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
-------- -----
(In thousands of dollars)
<S> <C> <C>
Financial assets:
Cash and due from banks $ 5,068 $ 5,068
Federal funds sold 2,634 2,634
Interest-bearing deposits in banks 1,300 1,300
Securities 52,759 52,682
Loans receivable 58,156 59,315
Financial liabilities:
Deposits 108,180 108,026
Federal Home Loan Bank advance 3,260 3,304
Unrecognized financial instruments:
Commitments to extend credit - 19
Standby letters of credit - 1
</TABLE>
The following methods and assumptions were used by Gonzales Holding in
estimating fair values of financial instruments:
Cash, due from banks, federal funds sold, and interest-bearing deposits in
banks. The carrying amount is a reasonable estimate of fair value.
Securities. Fair value is based on quoted market price, if available. If a
quoted market price is not available, fair value is estimated using quoted
market prices for similar securities.
Loans receivable. The fair value is estimated by discounting the estimated
future cash flows using the current rates at which similar loans would be made
to borrowers with similar credit ratings and for the same remaining maturities.
F-18
<PAGE> 71
Deposits. The fair value of demand, savings, NOW and money market accounts is
the amount payable on demand at the reporting date. The fair value of
fixed-maturity time deposits is estimated using the rates currently offered for
deposits of similar remaining maturities.
Federal Home Loan Bank advance. Rates currently available to the Bank for debt
with similar terms and remaining maturities are used to estimate fair value of
existing debt.
Commitments to extend credit and standby letters of credit. The fair value is
estimated using the fees currently charged to enter into similar agreements,
taking into account the remaining terms of the agreements and the present
creditworthiness of the counterparties.
NOTE O--OTHER EXPENSES
Other expenses for the years ended December 31 were:
<TABLE>
<CAPTION>
1995 1994
------ ------
(In thousands of dollars)
<S> <C> <C>
Advertising $ 148 $ 73
Director fees 116 110
Postage, freight, express 116 102
Office supplies 115 102
FDIC and State assessments 140 247
Bank shares tax 109 184
Other 765 712
------ ------
$1,509 $1,530
====== ======
</TABLE>
NOTE P--CONTINGENCIES
Gonzales Bank has entered into agreements with its senior officers (total of
four persons) that, should the Bank terminate their employment for any reason,
other than for cause, death or permanent disability, within two years after a
change in control, each would be entitled to a lump sum payment of twice their
annual compensation reduced by amounts paid by the Bank after a change in
control. In addition, should the president of Gonzales Bank be terminated,
other than for cause, death, or permanent disability, prior to December 31,
1998, Gonzales Bank would be obligated to pay as severance pay the present
value of the remaining salary due him through December 31, 1998 in the form of
a lump sum.
NOTE Q--DEPOSITS
At December 31, 1995, the scheduled maturities of time deposits, in thousands
of dollars, are as follows:
<TABLE>
<S> <C>
1996 $34,872
1997 10,163
1998 634
1999 110
-------
$45,779
=======
</TABLE>
F-19
<PAGE> 72
NOTE R--REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly discretionary, actions by regulators
that, if undertaken, could have a direct material effect on the Bank's
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Bank must meet specific capital
guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of total and Tier 1
capital, as defined in the regulations, to risk-weighted assets, as defined,
and of Tier 1 capital to average assets, as defined. Management believes, as
of December 31, 1995, that the Bank meets all capital adequacy requirements to
which it is subject.
As of December 31, 1995, the most recent notification from the Federal Deposit
Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain a total risk-based capital ratio of 10% or
higher, Tier 1 risk-based capital ratio of 6% or higher, and Tier 1 leverage
capital ratio of 5% or higher. No conditions or events have occurred since
that notification that management believes have changed the Bank's category.
NOTE S--SUBSEQUENT EVENTS
On January 18, 1996, Gonzales Holding's Board of Directors voted to merge the
Company with Deposit Guaranty Corporation (the "Acquiror") of Mississippi. The
Bank will become a branch of a subsidiary owned by the Acquiror, and
shareholders of the Company will receive approximately 1.17 shares of the
Acquiror's common stock in exchange for each share of their Company common
stock. The merger is subject to the approval of the Company's shareholders and
appropriate regulatory authorities. Such approval is expected by June, 1996.
NOTE T--IMPAIRMENT OF LONG-LIVED ASSETS
The Company will adopt Statement of Financial Accounting Standards number 121
(SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," in 1996. SFAS 121 requires that
long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable, and that an impairment loss be recognized if the sum of the future
cash flows from the use of the asset is less than the carrying amount.
Management expects that the adoption of SFAS 121 in 1996 will result in a
charge to operations of approximately $190,000 related to the carrying amount
of certain Bank premises.
F-20
<PAGE> 73
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
BETWEEN
DEPOSIT GUARANTY CORP.,
COMMERCIAL NATIONAL CORPORATION
BANK OF GONZALES HOLDING COMPANY, INC.
AND
BANK OF GONZALES
<PAGE> 74
AGREEMENT AND PLAN OF MERGER
By and Among
DEPOSIT GUARANTY CORP.,
COMMERCIAL NATIONAL CORPORATION,
CITIZENS NATIONAL BANK,
BANK OF GONZALES HOLDING COMPANY, INC.
And
BANK OF GONZALES
<PAGE> 75
Table of Contents
<TABLE>
<S> <C> <C>
Article I. THE HOLDING COMPANY MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 Holding Company Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Effective Date of the Holding Company Merger. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.03 Effect of the Holding Company Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.04 Additional Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.05 Conversion of Gonzales Holding Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.06 Exchange of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.07 DGC to Make Shares Available. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.08 Shares of CNC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.09 Tax Consequences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Article II. THE BANK MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.01 The Bank Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.02 Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.03 Cancellation of Capital Stock of Gonzales Bank. . . . . . . . . . . . . . . . . . . . . . . . 3
2.04 Capital Structure of the Receiving Association. . . . . . . . . . . . . . . . . . . . . . . . 3
2.05 Effects of the Bank Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.06 Tax Consequences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Article III. REPRESENTATIONS AND WARRANTIES OF GONZALES BANK AND GONZALES HOLDING . . . . . . . . . . . . . . . . . 4
3.01 Corporate Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.02 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.03 Investments; No Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.04 Loan Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.05 Authority; No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.06 Consents and Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.07 SEC Documents; Financial Statements; Other Reports; Liabilities. . . . . . . . . . . . . . . 5
3.08 No Broker's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.09 Title to Properties; Encumbrances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.10 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.11 Absence of Certain Changes or Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.12 Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.13 Trademarks; Trade Names. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.14 Compliance with Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.15 Absence of Questionable Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.16 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.17 Powers of Attorney; Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.18 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.19 Benefit and Employee Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.20 Contracts and Commitments; No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.21 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.22 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.23 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.24 Contract Termination Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Article IV. REPRESENTATIONS AND WARRANTIES OF DGC, CNC AND CNB . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.01 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
i
<PAGE> 76
<TABLE>
<S> <C> <C>
4.02 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.03 Authority; No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.04 Consents and Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.05 SEC Documents; Financial Statements; Liabilities. . . . . . . . . . . . . . . . . . . . . . 14
4.06 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.07 Legality of DGC Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.08 Statements are True and Correct. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.09 No Shareholder Vote. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.10 Broker's and Finder's Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.11 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Article V. COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.01 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.02 Limitation on Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.03 Current Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.04 Access to Properties and Records; Confidentiality. . . . . . . . . . . . . . . . . . . . . 16
5.05 Interim Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.06 Regulatory Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.07 Approval of Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.08 Compliance with SEC Rules 144 and 145. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.09 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.10 Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.11 Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.12 Election of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.13 Indemnification and Liability Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 18
Article VI. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.01 Conditions to Each Party's Obligations under this Agreement. . . . . . . . . . . . . . . . 19
6.02 Conditions to the Obligations of DGC, CNC, and CNB under this Agreement. . . . . . . . . 19
6.03 Conditions to the Obligations of Bank of Gonzales and Bank of Gonzales Holding
Company, Inc. under this Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Article VII. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.01 Time and Place. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.02 Deliveries at the Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Article VIII. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.01 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.02 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Article IX. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.01 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.02 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.03 Parties in Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.04 Amendment, Extension and Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.05 Complete Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.06 Non-Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . 25
9.07 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.08 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.09 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
ii
<PAGE> 77
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of February 5, 1996, by
and among Bank of Gonzales Holding Company, Inc. ("Gonzales Holding"), a
corporation organized under the laws of the State of Louisiana, and its
wholly-owned subsidiary Bank of Gonzales ("Gonzales Bank"), a state banking
association organized under the laws of Louisiana, and Deposit Guaranty Corp.
("DGC"), a corporation organized under the laws of the State of Mississippi,
its wholly-owned subsidiary Commercial National Corporation ("CNC"), a
corporation organized under the laws of Louisiana, and CNC's wholly-owned
subsidiary Citizens National Bank ("CNB"), a banking association organized
under the laws of the United States, each acting pursuant to a resolution of
its Board of Directors.
In consideration of the mutual covenants, representations, warranties
and agreements herein contained, the parties agree that Gonzales Holding shall
be merged into CNC (the "Holding Company Merger") on the terms and subject to
the conditions set forth in this Agreement and simultaneously therewith or
immediately following the Holding Company Merger, Gonzales Bank shall be merged
into CNB (the "Bank Merger" and together with the Holding Company Merger, the
"Mergers"), on the terms and subject to the conditions set forth in this
Agreement.
Article I.
THE HOLDING COMPANY MERGER
1.01 Holding Company Merger. In accordance with the applicable
provisions of the Louisiana Business Corporation Law ("LBCL"), Gonzales Holding
shall be merged with and into CNC pursuant to a certificate of merger
substantially in the form attached as Exhibit A and executed and acknowledged
in the manner required by law; the separate existence of Gonzales Holding shall
cease; and CNC shall be the corporation surviving the Holding Company Merger.
1.02 Effective Date of the Holding Company Merger. The Holding
Company Merger shall become effective on the date (the "Effective Date") set
forth in the certificate of merger filed in the office of the Secretary of
State of Louisiana.
1.03 Effect of the Holding Company Merger. On the Effective Date,
(i) the separate existence of Gonzales Holding shall cease and Gonzales Holding
shall be merged with and into CNC, (ii) CNC shall continue to possess all of
the rights, privileges and franchises possessed by it and shall, on the
Effective Date, become vested with and possess all rights, privileges and
franchises possessed by Gonzales Holding, (iii) CNC shall be responsible for
all of the liabilities and obligations of Gonzales Holding in the same manner
as if CNC had itself incurred such liabilities or obligations, and the Holding
Company Merger shall not affect or impair the rights of the creditors or of any
persons dealing with Gonzales Holding, (iv) the Holding Company Merger will not
of itself cause a change, alteration or amendment to the Articles of
Incorporation or the Bylaws of CNC, (v) the Holding Company Merger will not of
itself affect the tenure in office of any officer or director of CNC and no
such person will succeed to such positions solely by virtue of the Holding
Company Merger, and (vi) the Holding Company Merger shall, from and after the
Effective Date, have all the effects provided by applicable Louisiana law.
1.04 Additional Actions. If, at any time after the Effective Date,
CNC shall consider or be advised that any further assignments or assurances in
law or any other acts are necessary or desirable (i) to vest, perfect or
confirm, of record or otherwise, in CNC, title to or the possession of any
property or right of Gonzales Holding acquired or to be acquired by reason of,
or as a result of, the Holding Company Merger, or (ii) otherwise to carry out
the purposes of this Agreement, Gonzales Holding and its proper officers and
directors shall be deemed to have granted to CNC an irrevocable power of
attorney to execute and deliver all such proper deeds, assignments and
assurances in law and to do all acts necessary or proper to vest, perfect or
confirm title to and possession of such property or rights in CNC and otherwise
to carry out the purposes of this Agreement; and the proper officers and
directors of CNC are fully authorized in the name of Gonzales Holding to take
any and all such action.
1
<PAGE> 78
1.05 Conversion of Gonzales Holding Shares. Each share of common
stock, no par value, of Gonzales Holding (the "Gonzales Holding Common Stock")
issued and outstanding immediately prior to the Effective Date other than
shares of Gonzales Holding Common Stock owned by stockholders who, pursuant to
the LBCL, perfect dissenters' rights ("Dissenting Shares"), shall, by virtue of
this Agreement and without any action on the part of the holder thereof, be
converted into and exchangeable for the number of shares of common stock, no
par value, of DGC (the "DGC Common Stock") equal to the Exchange Ratio, as
defined below, subject to adjustment as provided herein and, in respect of
fractional shares, subject to Section 1.06 hereof. The Exchange Ratio shall
equal 634,000 divided by the number of shares of Gonzales Holding Common Stock
outstanding on the date immediately preceding the Effective Date. If prior to
the Effective Date DGC should split or combine DGC Common Stock, or pay a
dividend or other distribution in DGC Common Stock, then the exchange ratio
shall be appropriately adjusted to reflect such split, combination, dividend or
distribution.
1.06 Exchange of Shares. (a) As soon as practicable after the
Effective Date, Deposit Guaranty National Bank, acting as exchange agent (the
"Exchange Agent"), shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Date represented issued
and outstanding shares of Gonzales Holding Common Stock (the "Certificates"), a
form letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent) and instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing DGC Common Stock. Upon surrender of a Certificate for exchange
and cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that number of shares
of DGC Common Stock to which such holder of Gonzales Holding Common Stock shall
have become entitled pursuant to the provisions hereof, and the Certificate so
surrendered shall forthwith be cancelled. Lost Certificates shall be treated
in accordance with the existing procedures of Gonzales Holding.
(b) No dividends or other distributions declared after the
Effective Date with respect to DGC Common Stock and payable to the holders of
record thereof after the Effective Date shall be paid to the holder of any
unsurrendered Certificate until the holder thereof shall surrender such
Certificate. Subject to the effect, if any, of applicable law, after the
subsequent surrender and exchange of a Certificate, the record holder thereof
shall be entitled to receive any such dividends or other distributions, without
any interest thereon, which theretofore had become payable with respect to the
shares of DGC Common Stock into which the shares represented by such
certificate have been converted.
(c) If any certificate representing shares of DGC Common Stock is
to be issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance
thereof that the Certificate so surrendered shall be properly endorsed (or
accompanied by an appropriate instrument of transfer) and otherwise in proper
form for transfer, and that the person requesting such exchange shall pay to
the Exchange Agent in advance any transfer or other taxes required by reason of
the issuance of a certificate representing shares of DGC Common Stock in any
name other than that of the registered holder of the Certificate surrendered,
or required for any other reason, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(d) After the Effective Date there shall be no transfers on the
stock transfer books of Gonzales Holding of the shares of Gonzales Holding
Common Stock which are outstanding immediately prior to the Effective Date.
If, after the Effective Date, Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be cancelled and
exchanged for certificates representing shares of DGC Common Stock as provided
herein.
(e) No certificates or scrip representing fractional shares of DGC
Common Stock shall be issued upon the surrender for exchange of such
Certificates, no dividend or distribution with respect to DGC Common Stock
shall be payable on or with respect to any fractional share, and such
fractional share interests shall not entitle the owner thereof to vote or to
any other rights of a shareholder of DGC. In lieu of any such fractional
share, DGC shall pay to each former stockholder of Gonzales Holding who
otherwise would be entitled to receive a fractional share of DGC Common Stock
an amount in cash determined by multiplying (i) the closing sale price of a
share of DGC Common Stock on the date immediately proceeding the Effective Date
as quoted on the National Association of Securities Dealers Automated Quotation
System, by (ii) the fraction of a share of DGC Common Stock to which such
holder would otherwise be entitled.
2
<PAGE> 79
1.07 DGC to Make Shares Available. DGC shall make available a
sufficient number of shares for conversion and exchange in accordance with
Section 1.05, by transferring such shares to the Exchange Agent for the benefit
of the stockholders of Gonzales Holding.
1.08 Shares of CNC. The shares of capital stock of CNC outstanding
immediately prior to the Effective Date shall not be changed or converted by
virtue of the Holding Company Merger.
1.09 Tax Consequences. It is intended that the Holding Company
Merger shall constitute a reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"), and
that this Agreement shall constitute a "plan of reorganization" within the
meaning of Section 368 of the Code.
Article II.
THE BANK MERGER
2.01 The Bank Merger. On the Effective Date (as defined in
Section 2.02 hereof), Gonzales Bank shall be merged with and into CNB under the
Articles of Association of CNB, as amended, existing under Charter No. 13648,
pursuant to the provisions of, and with the effect provided in, 12 U.S.C.
Section 215a and La. R.S. 6:351 et seq. On the Effective Date, CNB, the
Receiving Association, shall continue to be a national banking association, and
its business shall continue to be conducted at its main office in Hammond,
Louisiana, and at its legally established branches (including, without
limitation, the legally established offices from which Gonzales Bank conducted
business immediately prior to the Effective Date). The Articles of Association
of CNB shall not be altered or amended by virtue of the Bank Merger, and the
incumbency of the directors and officers of CNB shall not be affected by the
Bank Merger nor shall any person succeed to such positions by virtue of the Bank
Merger. CNB shall file this Agreement with the Louisiana Commissioner of
Financial Institutions (the "Commissioner") pursuant to La. R.S. 6:352 and make
appropriate filings with the Office of the Comptroller of the Currency (the
"OCC"). Gonzales Bank and CNB are sometimes referred to together as the
"Merging Associations."
2.02 Effective Date. The Bank Merger shall become effective on
the Effective Date.
2.03 Cancellation of Capital Stock of Gonzales Bank. On the
Effective Date, by virtue of the Bank Merger, all shares of the capital stock
of Gonzales Bank shall be cancelled and no cash, securities or other property
shall be issued in the Bank Merger in respect thereof.
2.04 Capital Structure of the Receiving Association. As of
December 31, 1995, CNB had capital of $2,341,210 divided into 234,121 shares of
common stock authorized, each of $10 par value ("CNB Common Stock"), surplus of
$3,603,351 and undivided profits, including capital reserves, of $12,480,851.
As of December 31, 1995, Gonzales Bank had capital of $4,400,000 divided into
440,000 shares of common stock authorized, each of $10 par value, surplus of
$8,506,000 and an accumulated deficit, including capital reserves, of
$775,000.
On the Effective Date, the amount of capital of the Receiving
Association shall be $2,341,210 divided into 234,121 shares of common stock,
each of the par value of $10, and on the Effective Date, the Receiving
Association shall have a surplus of $3,603,351, plus the value of the
consideration to be paid by DGC in the Holding Company Merger, and undivided
profits, including capital reserves, which when combined with capital and
surplus will be equal to the capital structure of CNB, as set forth above,
adjusted, however, for the results of operations of CNB between December 31,
1995 and the Effective Date.
2.05 Effects of the Bank Merger. On the Effective Date, the
corporate existence of each of the Merging Associations shall be merged into
and continued in CNB, the Receiving Association, and such Receiving Association
shall be deemed to be the same corporation as each bank or banking association
participating in the Bank Merger. All rights,
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franchises and interests of the individual Merging Associations in and to every
type of property (real, personal and mixed) and choses in action shall be
transferred to and vested in the Receiving Association by virtue of the Bank
Merger without any deed or other transfer. The Receiving Association, upon the
Bank Merger and without any order or other action on the part of any court or
otherwise, shall hold and enjoy all rights of property, franchises and
interests, including appointments, designations and nominations, and all other
rights and interests as trustee, executor, administrator, registrar of stocks
and bonds, guardian of estates, and in every other fiduciary capacity, in the
same manner and to the same extent as such rights, franchises and interests
were held or enjoyed by any one of the Merging Associations at the time of the
Bank Merger, subject to the conditions specified in 12 U.S.C. Section 215a(f).
The Receiving Association shall, from and after the Effective Date, be liable
for all liabilities of the Merging Associations.
2.06 Tax Consequences. It is intended that the Bank Merger shall
constitute a tax-free reorganization pursuant to Section 368(a)(1)(A) of the
Code, and that the transactions made the subject matter of the plan shall
constitute a "plan of reorganization" for purposes of the rules and regulations
governing Code Section 368.
Article III.
REPRESENTATIONS AND WARRANTIES OF
GONZALES BANK AND GONZALES HOLDING
Gonzales Bank and Gonzales Holding hereby make the following
representations and warranties to DGC, CNB, and CNC:
3.01 Corporate Organization. (a) Gonzales Bank is a banking
association duly organized, validly existing and in good standing under the
laws of the State of Louisiana. Gonzales Bank has the power and authority to
own or lease all of its properties and assets and to carry on its business as
it is now being conducted.
(b) Gonzales Holding is a corporation duly organized, validly
existing and in good standing under the laws of the State of Louisiana.
Gonzales Holding has the corporate power and authority to own or lease all of
its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary.
3.02 Capitalization. (a) The authorized capital stock of
Gonzales Bank consists of 600,000 shares of common stock, $10.00 par value (the
"Gonzales Bank Common Stock"). At the close of business on December 31, 1995,
there were 440,000 shares of Gonzales Bank Common Stock issued and outstanding
and no shares held in Gonzales Bank's treasury. Except as set forth on
Schedule 3.02 hereto, all issued and outstanding shares of Gonzales Bank Common
Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights with no personal liability
attaching to the ownership thereof. Except as set forth on Schedule 3.02
hereof, Gonzales Bank has not issued any additional shares of Gonzales Bank
Common Stock since December 31, 1995, and does not have and is not bound by any
outstanding subscription, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of Gonzales
Bank Common Stock or any security representing the right to purchase or
otherwise receive any Gonzales Bank Common Stock. Gonzales Holding has good,
valid and marketable title to, the Gonzales Bank Common Stock, and on the
Effective Date the same will be free and clear of all liens, encumbrances,
pledges, claims, options, charges and assessments of any nature whatsoever.
(b) The authorized capital stock of Gonzales Holding consists of
10,000,000 shares of Gonzales Holding Common Stock. At the close of business
on December 31, 1995, there were 561,801 shares of Gonzales Holding Common
Stock issued and outstanding and 20,190 shares held in Gonzales Holding's
treasury. Except as set forth on Schedule 3.02 hereto, all issued and
outstanding shares of Gonzales Holding Common Stock have been duly authorized
and validly issued and are fully paid, nonassessable and free of preemptive
rights with no personal liability attaching to the ownership thereof.
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Except as set forth on Schedule 3.02 hereof, Gonzales Holding has not issued
any additional shares of Gonzales Holding Common Stock since December 31, 1995,
and does not have and is not bound by any outstanding subscription, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of Gonzales Holding Common Stock or any
security representing the right to purchase or otherwise receive any Gonzales
Holding Common Stock.
3.03 Investments; No Subsidiaries. The "Gonzales Consolidated
Group," as such term is used in this Agreement, consists of Gonzales Holding
and Gonzales Bank. Except as set forth on Schedule 3.03 hereof, neither
Gonzales Bank nor Gonzales Holding has any subsidiaries or equity interest or
other investment, direct or indirect, in any corporation, partnership, joint
venture or other entity except for such equity interest or other investment
which Gonzales Bank may have acquired as a result of foreclosure and is as of
the date hereof holding subject to sale.
3.04 Loan Portfolio. All loans, discounts and financing leases
(in which any member of the Gonzales Consolidated Group is lessor) reflected on
the Gonzales Latest Balance Sheet (as defined in Section 3.07) (a) were, at the
time and under the circumstances in which made, made for good, valuable and
adequate consideration in the ordinary course of business of the Gonzales
Consolidated Group, (b) are evidenced by genuine notes, agreements or other
evidences of indebtedness and (c) to the extent secured, have been secured by
valid liens and security interests which have been perfected. Set forth in
Schedule 3.04 hereto is a true and complete list of all real property in which
Gonzales Bank has an interest as creditor or mortgagee in an amount greater
than $50,000. Except as set forth in Schedule 3.04 hereto, there are no
outstanding loans held by Gonzales Bank with an unpaid balance of $25,000 or
more in which a material default has occurred. A material default for purposes
of this Section 3.04 includes, without limitation, the failure to pay
indebtedness or an installment thereof more than sixty (60) days after it is
due and payable.
3.05 Authority; No Violation. Each of Gonzales Bank and Gonzales
Holding has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Gonzales Bank have been duly and validly
approved by the Board of Directors of Gonzales Bank, and, except for approval
by Gonzales Holding as the sole shareholder of Gonzales Bank, no other
corporate proceedings on the part of Gonzales Bank are necessary to consummate
the transactions so contemplated. The Board of Directors of Gonzales Holding
has duly and validly approved this Agreement and the transactions contemplated
hereby and has authorized the execution and delivery of this Agreement by
Gonzales Holding, and, except for the approval of this Agreement by its
shareholders, no other corporate proceedings on the part of Gonzales Holding
are necessary to consummate the transactions so contemplated. This Agreement
has been duly and validly executed and delivered by Gonzales Bank and Gonzales
Holding and constitutes a valid and binding obligation of Gonzales Bank and of
Gonzales Holding enforceable against each in accordance with its terms, except
that enforcement may be limited by bankruptcy, reorganization, insolvency and
other similar laws and court decisions relating to or affecting the enforcement
of creditors' rights generally and by general equitable principles.
3.06 Consents and Approvals. Except as set forth in Schedule
3.06 hereto, no permit, consent, approval or authorization of, or declaration,
filing or registration with, any public body or authority or to the knowledge
of Gonzales Bank and Gonzales Holding any third party is necessary in
connection with (i) the execution and delivery by Gonzales Bank or Gonzales
Holding of this Agreement, or (ii) the consummation by Gonzales Holding or
Gonzales Bank of the Mergers and the other transactions contemplated hereby.
3.07 SEC Documents; Financial Statements; Other Reports;
Liabilities. (a) Gonzales Holding has filed all required reports, schedules,
forms, statements and other documents with the SEC since January 1, 1992 (the
"Gonzales Holding SEC Documents"), complete copies of which have been provided
to DGC, CNC, and CNB. As of their respective dates, the Gonzales Holding SEC
Documents, and any such reports, forms and documents filed by Gonzales Holdings
with the SEC after the date hereof, complied, or will comply, as to form in all
material respects with the requirements of the Securities Act of 1933 (the
"Securities Act") or the Securities Exchange Act of 1934 (the "Exchange Act"),
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Gonzales Holding SEC Documents, and none of the
Gonzales Holding SEC Documents contained, or will contain, any untrue statement
of a material fact or
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omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Except to the extent that information
contained in any Gonzales Holding SEC Document has been revised or superseded
by a later filed Gonzales Holding SEC Document, none of the Gonzales Holding
SEC Documents contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) The consolidated financial statements of Gonzales Holding and
its consolidated subsidiaries (collectively, the "Gonzales Financial
Statements") included in the Gonzales Holding SEC Documents have been audited
by Basil M. Lee and Company, certified public accountants (in the case of the
audited Gonzales Financial Statements) in accordance with generally accepted
auditing standards, have been prepared in accordance with generally accepted
accounting principles and, except as disclosed therein, applied on a basis
consistent with prior periods, and present fairly the financial position of
Gonzales Holding and its consolidated subsidiaries at such dates and the
results of operations and cash flows for the periods then ended, except, in the
case of the interim financial statements (collectively, the Gonzales Interim
Financial Statements"), as permitted by Rule 10-01 of Regulation S-X of the
SEC. The Gonzales Interim Financial Statements reflect all adjustments
(consisting only of normal recurring adjustments) that are necessary for a fair
statement of the results for the interim periods presented therein. Neither
Gonzales Holding nor any of its consolidated subsidiaries has, nor are any of
their respective assets subject to, any liability, commitment, debt or
obligation (of any kind whatsoever whether absolute or contingent, accrued,
fixed, known, unknown, matured or unmatured) that is material individually or
in the aggregate, except as and to the extent reflected on the latest balance
sheet included as part of the Gonzales Interim Financial Statements (the
"Gonzales Latest Balance Sheet"), or as may have been incurred or may have
arisen since the date of the Gonzales Latest Balance Sheet in the ordinary
course of business.
(c) Since the date of the Gonzales Latest Balance Sheet, there has
been no change that has had or is likely to have a material adverse effect on
any member of the Gonzales Consolidated Group.
(d) Gonzales Holding has delivered to DGC, CNC and CNB true and
complete copies of the annual report to the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") for the year ended December 31,
1994 of each member of the Gonzales Consolidated Group required to file such
reports and all call reports made to the Federal Deposit Insurance Corporation
("FDIC") or the Federal Reserve Board, as the case may be, since December 31,
1992, of each member of the Gonzales Consolidated Group required to file such
reports. All call reports referred to above have been filed on the appropriate
form and prepared in all material respects in accordance with such form's
instructions and the applicable rules and regulations of the regulating federal
agency.
3.08 No Broker's Fees. Except as fully described and set forth
in Schedule 3.08 hereto, neither Gonzales Bank, Gonzales Holding nor any of
their officers or directors has employed any broker or finder or incurred any
liability for any broker's fees, commissions or finder's fees in connection
with any of the transactions contemplated by this Agreement, except for fees
payable in connection with the financial services rendered by Alex Sheshunoff &
Co.
3.09 Title to Properties; Encumbrances. Except as set forth in
Schedule 3.09 hereto, Gonzales Bank and Gonzales Holding have good, valid and
marketable title to, or a valid leasehold interest in, (a) all their real
properties and (b) all other properties and assets reflected in the Gonzales
Latest Balance Sheet, other than any of such properties or assets which have
been sold or otherwise disposed of since the date of the Gonzales Latest
Balance Sheet in the ordinary course of business and consistent with past
practice. Except as set forth in Schedule 3.09 hereto, all of such properties
and assets are free and clear of all title defects, mortgages, pledges, liens,
claims, charges, security interests or other encumbrances of any nature
whatsoever, including, without limitation, leases, options to purchase,
conditional sales contracts, collateral security arrangements and other title
or interest retention arrangements, and are not, in the case of real property,
subject to any easements, building use restrictions, exceptions, reservations
or limitations of any nature whatsoever, except, with respect to all such
properties and assets (i) liens for current taxes and assessments not in
default, (ii) minor imperfections of title, and encumbrances, if any, which
have arisen in the ordinary course of business, which are not substantial in
character, amount or extent and which do not detract from the value of or
interfere with the present or contemplated use of any of the properties
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subject thereto or affected thereby or otherwise impair the business operations
conducted or contemplated by Gonzales Bank or Gonzales Holding, (iii) mortgages
and encumbrances which secure indebtedness, which is properly reflected in the
Gonzales Latest Balance Sheet, and (iv) liens arising as a matter of law in the
ordinary course of business with respect to obligation incurred after the date
of the Gonzales Latest Balance Sheet provided that such obligations are not
delinquent or are being contested in good faith. All personal property material
to the business, operations or financial condition of Gonzales Bank or Gonzales
Holding, and all buildings, structures and fixtures used by Gonzales Bank or
Gonzales Holding in the conduct of their businesses, are in good operating
condition and repair, ordinary wear and tear excepted. Except as set forth in
Schedule 3.09 hereto, neither Gonzales Bank nor Gonzales Holding has received
any notification of any violation (which has not been cured) of any building,
zoning or other similar law, ordinance or regulation in respect of such
property or structures or its use thereof.
3.10 No Undisclosed Liabilities. Except as set forth in Schedule
3.10 hereto, as of the date hereof neither Gonzales Bank nor Gonzales Holding
has any liabilities or obligations of any nature (whether absolute, accrued,
contingent or otherwise and whether due or to become due), except liabilities
and obligations (i) fully reflected or reserved against in the Gonzales Latest
Balance Sheet or disclosed in the notes thereto or (ii) incurred since the date
of the Gonzales Latest Balance Sheet in the ordinary course of business and
consistent with past practice.
3.11 Absence of Certain Changes or Events. (a) Except as set
forth in Schedule 3.11 hereto, since the date of the Gonzales Latest Balance
Sheet, there has not been:
i) any material adverse change in the business,
operations, properties, assets or financial condition of Gonzales Bank
or Gonzales Holding, or any event which has had or will have a
material adverse effect on any of the foregoing;
ii) any loss, damage, destruction or other casualty
materially and adversely affecting any of the properties, assets or
business of Gonzales Bank or Gonzales Holding or any of their
subsidiaries (whether or not covered by insurance);
iii) any increase of more than ten percent (10%) in the
compensation payable by Gonzales Bank or Gonzales Holding to any of
their directors, officers, agents, consultants, or any of their
employees whose total compensation after such increase was in excess
of $25,000 per annum, or any extraordinary bonus, percentage
compensation, service award or other like benefit granted, made or
accrued to the credit of any such director, officer, agent, consultant
or employee, or any extraordinary welfare, pension, retirement or
similar payment or arrangement made or agreed to by Gonzales Bank or
Gonzales Holding for the benefit of any such director, officer, agent,
consultant or employee;
iv) any change in any method of accounting or accounting
practice of Gonzales Bank or Gonzales Holding;
v) any loan in excess of $25,000 or portion thereof
rescheduled as to payments thereon, subject to a moratorium on payment
thereof or written off by Gonzales Bank or Gonzales Holding as
uncollectible; or
vi) any agreement or understanding, whether in writing or
otherwise, of Gonzales Bank or Gonzales Holding to do any of the
foregoing.
(b) Except as set forth in Schedule 3.11 hereto, since the date of
the Gonzales Latest Balance Sheet, neither Gonzales Bank nor Gonzales Holding
has:
i) issued or sold any promissory note, stock, bond or
other corporate security of which it is the issuer in an amount
greater than $25,000;
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ii) discharged or satisfied any lien or encumbrance or
paid or satisfied any obligation or liability (whether absolute,
accrued, contingent or otherwise and whether due or to become due) in
an amount greater than $50,000 as to each such lien, encumbrance,
obligation or liability other than current liabilities shown on the
Gonzales Latest Balance Sheet and current liabilities incurred since
the date of the Gonzales Latest Balance Sheet in the ordinary course
of business and consistent with past practice and other than any such
lien, encumbrance, obligation or liability of the nature (regardless
of amount) required to be disclosed pursuant to Section 3.11(a)(iii)
hereto;
iii) declared, paid or set aside for payment any dividend
or other distribution (whether in cash, stock or property) in respect
of its capital stock, except for (i) a Special Dividend by Gonzales
Holding in February 1996 of $2.00 per share, (ii) regular quarterly
dividends in 1996 of $.35 per share for each complete calendar
quarters elapsed prior to the Effective Date, and (iii) dividends by
Gonzales Bank to Gonzales Holding to the extent necessary to fund
authorized dividends of Gonzales Holding and to pay necessary and
routine expenses of Gonzales Holding;
iv) split, combined or reclassified any shares of its
capital stock, or redeemed, purchased or otherwise acquired any shares
of its capital stock or other securities;
v) sold, assigned or transferred any of its assets
(real, personal or mixed, tangible or intangible) canceled any debts
or claims or waived any rights of substantial value, except, in each
case, in the ordinary course of business and consistent with past
practice;
vi) paid any amounts or incurred any liability to or in
respect of, or sold any properties or assets (real, personal or mixed,
tangible or intangible) to, or engaged in any transaction (other than
any transaction of the nature (regardless of amount) required to be
disclosed pursuant to Section 3.11(a)(iii) hereof) or entered into any
agreement or arrangement with, any corporation or business in which
Gonzales Bank, Gonzales Holding or any of their officers or directors,
or any "affiliate" or "associate" (as such terms are defined in the
rules and regulations promulgated under the Securities Act of any such
person, has any direct or indirect interest;
vii) entered into any collective bargaining agreements; or
viii) entered into any other transaction other than in the
ordinary course of business and consistent with past practice or in
connection with the transactions contemplated by this Agreement.
3.12 Leases. Set forth in Schedule 3.12 hereto is an accurate
and complete list of all leases calling for annual rent payments in excess of
$10,000 pursuant to which Gonzales Bank or Gonzales Holding, as lessee, leases
real or personal property, including, without limitation, all leases of
computer or computer services and all arrangements for time-sharing or other
data processing services, describing for each lease Gonzales Bank's or Gonzales
Holding's financial obligations under such lease its rental payments,
expiration date and renewal terms. Except as set forth in Schedule 3.12
hereto: (a) all such leases are in full force and effect in accordance with
their terms and (b) there exists no event of default or event, occurrence,
condition or act which with the giving of notice, the lapse of time or the
happening of any further event or condition would become a default under any
such lease.
3.13 Trademarks; Trade Names. Set forth in Schedule 3.13 hereto
is an accurate and complete list and brief description of all trademarks
(either registered or common law), trade names and copyrights (and all
applications and licenses therefor) owned by Gonzales Bank or Gonzales Holding
or in which they have any interest. Gonzales Bank and Gonzales Holding own, or
have the rights to use, all trademarks, trade names and copyrights used in or
necessary for the ordinary conduct of their existing businesses as heretofore
conducted, and the consummation of the transactions contemplated hereby will
not alter or impair any such rights. Except as set forth in Schedule 3.13
hereto, no claims are pending by any person for the use of any trademarks,
trade names or copyrights or challenging or questioning the validity or
effectiveness of any license
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or agreement relating to the same, nor is there any valid basis for any such
claim, challenge or question, and use of such trademarks, trade names and
copyrights by Gonzales Bank or Gonzales Holding does not infringe on the rights
of any person.
3.14 Compliance with Applicable Law. Gonzales Bank and Gonzales
Holding hold all licenses, franchises, permits and governmental authorizations
necessary for the lawful conduct of their respective businesses under and
pursuant to all, and have complied in all material respects with and are not in
default in any respect under any, applicable statutes, laws, ordinances, rules,
regulations, and orders of all federal, state and local governmental bodies,
agencies and subdivisions having, asserting or claiming jurisdiction over them
or over any part of their operations (to the extent that such default could
result in a material limitation on the conduct of Gonzales Bank's or Gonzales
Holding's business, or could cause Gonzales Bank or Gonzales Holding to incur a
substantial financial penalty); and, except as set forth in Schedule 3.14
hereto, neither Gonzales Bank nor Gonzales Holding has received notice of a
violation of, and does not know of any violation of or of any valid basis for
any claim of a violation of, any of the above.
3.15 Absence of Questionable Payments. Gonzales Bank and
Gonzales Holding have not, and, to the knowledge of Gonzales Bank or Gonzales
Holding, no director, officer, agent, employee, consultant or other person
acting on behalf of, Gonzales Bank or Gonzales Holding has, (a) used any
Gonzales Bank or Gonzales Holding corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity
or (b) made any direct or indirect unlawful payments to government officials
from any Gonzales Bank or Gonzales Holding corporate funds, or established or
maintained any unlawful or unrecorded accounts with funds received from
Gonzales Bank or Gonzales Holding.
3.16 Insurance. Set forth in Schedule 3.16 hereto is an accurate
and complete list of all policies of insurance, including the amounts thereof,
owned by Gonzales Bank or Gonzales Holding or in which Gonzales Bank or
Gonzales Holding is named as the insured party. All such policies are valid,
enforceable and in full force and effect, and no member of the Gonzales
Consolidated Group has received any notice of material premium increase or
cancellation with respect to any of its insurance policies now in effect. Such
insurance with respect to Gonzales Bank's and Gonzales Holding's property and
the conduct of their businesses is in such amounts and against such risks as
are usually insured against by institutions of similar size operating similar
properties and businesses in the State of Louisiana and, in the opinion of
management of Gonzales Holding or Gonzales Bank, as the case may be, are
adequate for the conduct of Gonzales Bank's and Gonzales Holding's businesses.
Except as set forth in Schedule 3.16 hereto, within the past five (5) years,
neither Gonzales Bank nor Gonzales Holding has ever been refused any insurance
nor have their coverages been limited (other than certain exclusions for
coverage of certain events or circumstances stated in such policies) by any
insurance carrier to which they have applied for insurance or with which they
have carried insurance.
3.17 Powers of Attorney; Guarantees. Except as set forth in
Schedule 3.17 hereto, other than in the ordinary course of business neither
Gonzales Bank nor Gonzales Holding has given any power of attorney to any
person to act on its behalf, or has any obligation or liability, either actual,
accruing or contingent, as guarantor, surety, cosigner, endorser, co-maker or
indemnitor in respect of the obligation of any person, corporation,
partnership, joint venture, association, organization or other entity.
3.18 Tax Matters. Gonzales Bank and Gonzales Holding make the
following representations with respect to tax matters:
(a) For purposes of this Section, the following definitions shall
apply:
(1) The term "Taxes" shall mean all taxes, however denominated,
including any interest, penalties or other additions to tax that may become
payable in respect thereof, imposed by any federal, state or local government
or any agency or political subdivision of any such government, which taxes
shall include, without limiting the generality of the foregoing, all income or
profits taxes (including, but not limited to, federal income taxes and state
income taxes), real property gains taxes, payroll and employee withholding
taxes, unemployment insurance taxes, social security taxes, sales and use
taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes,
business license taxes, occupation taxes, real and personal
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property taxes, stamp taxes, environmental taxes, transfer taxes, workers'
compensation, Pension Benefit Guaranty Corporation premiums and other
governmental charges, and other obligations of the same or of a similar nature
to any of the foregoing, which any member of the Gonzales Consolidated Group is
required to pay, withhold or collect.
(2) The term "Returns" shall mean all reports, estimates,
declarations of estimated tax, information statements and returns relating to,
or required to be filed in connection with, any Taxes, including information
returns or reports with respect to backup withholding and other payments to
third parties.
(b) To the knowledge of the Gonzales Consolidated Group, all
material Returns required to be filed by or on behalf of members of the
Gonzales Consolidated Group have been duly filed and, to the knowledge of the
Gonzales Consolidated Group, such Returns are true, complete and correct in all
material respects. All Taxes shown to be payable on the Returns or on
subsequent assessments with respect thereto have been paid in full on a timely
basis, and no other Taxes are payable by the Gonzales Consolidated Group with
respect to items or periods covered by such Returns or with respect to any
period prior to the date of this Agreement. Each member of the Gonzales
Consolidated Group has withheld and paid over all Taxes required to have been
withheld and paid over, and complied with all information reporting and backup
withholding requirements, including maintenance of required records with
respect thereto, in connection with amounts paid or owning to any employee,
creditor, independent contractor, or other third party. There are no liens on
any of the assets of any member of the Gonzales Consolidated Group with respect
to Taxes, other than liens for Taxes not yet due and payable or for Taxes that
a member of the Gonzales Consolidated Group is contesting in good faith through
appropriate proceedings and for which appropriate reserves have been
established.
(c) The Returns of the Gonzales Consolidated Group have never been
audited by a government or taxing authority, nor to the knowledge of the
Gonzales Consolidated Group, is any such audit in process, pending or
threatened. To the knowledge of the Gonzales Consolidated Group, no
deficiencies exist or have been asserted or are expected to be asserted with
respect to Taxes of the Gonzales Consolidated Group, and no member of the
Gonzales Consolidated Group has received notice or expects to receive notice
that it has not filed a Return or paid Taxes required to be filed or paid by
it. No member of the Gonzales Consolidated Group is a party to any action or
proceeding for assessment or collection of Taxes, nor to the knowledge of the
Gonzales Consolidated Group, has such event been asserted or threatened against
any member of the Gonzales Consolidated Group or any of its assets. No waiver
or extension of any statute of limitations is in effect with respect to Taxes
or Returns of the Gonzales Consolidated Group.
3.19 Benefit and Employee Matters. (a) Schedule 3.19(a) lists
all pension, retirement, stock option, stock purchase, stock ownership,
savings, stock appreciation right, profit sharing, deferred compensation,
employment, compensation arrangements, consulting, bonus, collective
bargaining, group insurance, severance and other employee benefit, incentive
and welfare policies, contracts, plans and arrangements, and all trust
agreements related thereto established or maintained by Gonzales Holding or
Gonzales Bank, for the benefit of any of the present or former directors,
officers, or other employees of Gonzales Bank and Gonzales Holding. Schedule
3.19(a) also identifies each "employee benefit plan," as such term is defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") maintained or contributed to by any member of the Gonzales
Consolidated Group. Except as set forth in Schedule 3.19(a), all "employee
benefit plans" maintained by Gonzales Bank or Gonzales Holding (all such plans
being listed in Schedule 3.19(a) hereto) (collectively, the "Gonzales Bank
Plans") are in material compliance with the provisions of ERISA and the
applicable provisions of the Code. No member of the Gonzales Consolidated
Group has ever maintained or become obligated to contribute to any "employee
benefit plan" as such term is defined in Section 3(3) of ERISA, (i) that is
subject to Title IV of ERISA or (ii) that is a multiemployer plan under Title
IV of ERISA. To the knowledge of the Gonzales Consolidated Group, no
"prohibited transaction," as defined in Section 406 of ERISA or Section 4975 of
the Code, has occurred that could result in liability to Gonzales Holding,
Gonzales Bank or DGC, CNC or CNB. The Bank of Gonzales Savings Plan & Trust has
been determined to be "qualified" within the meaning of Section 401(a) of the
Code and neither Gonzales Bank nor Gonzales Holding knows of any fact which
would adversely affect the qualified status of such plan. Gonzales Holding has
provided to DGC copies of the most recent determination letter issued by the
Internal Revenue Service with respect to such plan. No member of the Gonzales
Consolidated Group has any current or projected liability in respect of
post-employment welfare benefits for retired, current or former employees,
except as required to avoid excise tax under Section 4980B of the Code.
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(b) Except as set forth in Schedule 3.19(b) hereto, (i) each of
Gonzales Bank and Gonzales Holding is in material compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, occupational safety and health
and neither is engaged in any unfair labor practice, (ii) there is no unfair
labor practice complaint against Gonzales Bank or Gonzales Holding pending or
threatened before, or on appeal from, the National Labor Relations Board, (iii)
there is no labor strike, dispute, slowdown or stoppage actually pending or
threatened against or affecting Gonzales Bank or Gonzales Holding, (iv) no
representation question exists respecting the employees of Gonzales Bank or
Gonzales Holding, (v) no grievance which might have an adverse effect on
Gonzales Bank or Gonzales Holding or the conduct of their businesses nor any
arbitration proceeding arising out of or under collective bargaining agreements
is pending and no claims therefor exist, (vi) no collective bargaining
agreement which is binding on Gonzales Bank or Gonzales Holding restricts them
from closing any of their operations, and (vii) neither Gonzales Bank nor
Gonzales Holding has experienced any work stoppage or other material labor
difficulty during the last five (5) years.
3.20 Contracts and Commitments; No Default. (a) The following
information relating to Gonzales Bank and Gonzales Holding has been made
available to DGC, CNC or CNB:
i) to the extent permitted by law, any bank regulatory
agency reports relating to the examination of Gonzales Bank which have
been made available to Gonzales Bank or Gonzales Holding for the past
five (5) years;
ii) the name of each bank with which Gonzales Bank or
Gonzales Holding has an account or safekeeping or custodial
arrangement or correspondent relationship and the names of all persons
who are authorized with respect thereto;
iii) all mortgages, indentures, promissory notes, deeds of
trust, loan or credit agreements or similar instruments under which
Gonzales Bank or Gonzales Holding is indebted in an amount greater
than $50,000 for borrowed money or the price of purchased property,
accompanied by originals or certified copies thereof and all
amendments or modifications of any thereof;
iv) any loans, including any other credit arrangements by
Gonzales Bank, to any holder of ten percent (10%) or more of Gonzales
Holding Common Stock, to any of Gonzales Bank's or Gonzales Holding's
directors or executive officers, to any members of the immediate
families of any of Gonzales Bank's or Gonzales Holding's directors or
executive officers or to any corporation, firm or other organization
in which any of such directors or executive officers has a financial
interest; and
v) any pending application, including any documents or
materials relating thereto, which has been filed by Gonzales Bank or
Gonzales Holding with any bank regulatory authority in order to obtain
the approval of such bank regulatory authority for the establishment
of a new branch bank or a new subsidiary bank.
(b) Except as set forth in Schedule 3.20 hereto, neither Gonzales
Bank nor Gonzales Holding is a party to or bound by, nor have any bids or
proposals been made by or to Gonzales Bank or Gonzales Holding with respect to,
any written or oral, express or implied:
i) contract relating to the matters referred to in
paragraph (a) above;
ii) contract with or arrangement for directors, officers,
employees, former employees, agents or consultants with respect to
salaries, bonuses, percentage compensation, pensions, deferred
compensation or retirement payments, or any profit-sharing, stock
option, stock purchase or other employee benefit plan or arrangement;
iii) collective bargaining or union contract or agreement;
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iv) contract, commitment or arrangement for the borrowing
of money or for a line of credit in an amount greater than $50,000;
v) contract, commitment or arrangement for the lending
of money or for the granting of a line of credit in an amount greater
than $100,000;
vi) contract or agreement for the future purchase by it
of any materials, equipment, services, or supplies, which is not in
the ordinary course of business, and has a term of more than twelve
(12) months (including periods covered by any option to renew by
either party);
vii) contract containing covenants purporting to limit its
freedom to compete;
viii) contract or commitment for the acquisition,
construction or refurbishment of any property, plant or equipment,
other than contracts and commitments for the acquisition, construction
or refurbishment of any property, plant or equipment not in excess of
$20,000 for any one establishment or $50,000 in the aggregate.
(c) Each of Gonzales Bank and Gonzales Holding have performed in
all material respects all the obligations required to be performed by it under
any material contract, agreement, arrangement, commitment or other instrument
to which it is a party (including, without limitation, any of those described
in paragraphs (a) and (b) of this Section 3.20), and there is not, with respect
to any such contract, agreement, commitment or other instrument, (i) any notice
of violation, or (ii) any existing default (or event which, with or without due
notice or lapse of time or both, would constitute a default) on the part of
Gonzales Bank or Gonzales Holding, which default would have a material adverse
effect on its business, operations, properties, assets or financial condition,
and neither Gonzales Bank nor Gonzales Holding has received notice of any such
default, nor has Gonzales Bank or Gonzales Holding knowledge of any facts or
circumstances which would reasonably indicate that it will be or may be in
default under, any such contract, agreement, arrangement, commitment or other
instrument subsequent to the date hereof.
3.21 Disclosure. All facts material to the business, operations,
properties, assets, liabilities (contingent or otherwise), financial condition
and prospects of Gonzales Bank and Gonzales Holding have been disclosed to DGC,
CNC, and CNB in writing in or pursuant to this Agreement. No representation or
warranty contained in this Agreement, and no statement contained in any
schedule or certificate, list or other writing furnished to DGC or CNB pursuant
to the provisions hereof, contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements herein
or therein not misleading. No information material to this transaction which is
necessary to make the representations and warranties herein contained not
misleading has been withheld from, or has not been delivered in writing to, DGC
and CNB.
3.22 Litigation. Except (a) as disclosed in a Gonzales Holding
SEC Document, (b) that are not material individually or in the aggregate, or
(c) as listed on Schedule 3.22, there are no actions, suits, proceedings,
arbitrations or investigations pending or, to the knowledge of Gonzales Holding
or Gonzales Bank, threatened, before any court, any governmental agency or
instrumentality or any arbitration panel, against or affecting Gonzales Holding
or Gonzales Bank or any of their subsidiaries or any of the directors,
officers, or employees of the foregoing, and to the knowledge of Gonzales
Holding or Gonzales Bank no facts or circumstances exist that would be likely
to result in the filing of any such action that would have a material adverse
effect on Gonzales Holding or Gonzales Bank. Neither Gonzales Holding or
Gonzales Bank nor any of their subsidiaries is subject to any currently pending
judgment, order or decree entered in any lawsuit or proceeding.
3.23 Environmental Matters. (a) To the best knowledge of each,
Gonzales Holding and Gonzales Bank are, and have been, in compliance with all
applicable federal, state and local laws, regulations, rules and decrees
pertaining to pollution or protection of the environment ("Environmental
Laws"), including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the Louisiana
Environmental Quality Act, La. R.S. 30: 2001 et seq., or any similar
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federal, state or local law, except for such instances of non-compliance that
are not reasonably likely to have, individually or in the aggregate, a material
adverse effect on the financial condition, results of operations, business or
prospects of Gonzales Holding and Gonzales Bank.
(b) To the best knowledge of each, all property owned, leased,
operated or managed by Gonzales Holding or Gonzales Bank, or in which Gonzales
Holding or Gonzales Bank has any interest, including any mortgage or security
interest ("Business Property"), and all businesses and operations conducted on
any of the Business Property (whether by Gonzales Holding or Gonzales Bank, a
mortgagor, or any other person), are, and have been, in compliance with all
applicable Environmental Laws, except for such instances of non-compliance that
are not reasonably likely to have, individually or in the aggregate, a material
adverse effect on the financial condition, results of operations, business or
prospects of Gonzales Holding or Gonzales Bank.
(c) To the best knowledge of each, there is no judicial,
administrative, arbitration or other similar proceeding pending or threatened
before any court, governmental agency, authority or other forum in which
Gonzales Holding or Gonzales Bank or any prior owner of any Business Property
has been or, with respect to threatened matters, is threatened to be named as a
party relating to (i) alleged noncompliance with any applicable Environmental
Law or (ii) the release or threatened release into the environment of any
Hazardous Substance (as defined below), and relating to any of the Business
Property, except for such proceedings pending or threatened that are not
reasonably likely to have, individually or in the aggregate, a material adverse
effect on the financial condition, results of operations, business or prospects
of Gonzales Holding or Gonzales Bank, and to the knowledge of each there is no
reasonable basis for any such proceeding. The term "Hazardous Substance" means
any pollutant, contaminant, or toxic or hazardous substance, chemical, or waste
defined, listed or regulated by any Environmental Law (and specifically shall
include, but not be limited to, asbestos, polychlorinated biphenyls, and
petroleum and petroleum products).
(d) To the best knowledge of each, there has been no release or
threatened release of a Hazardous Substance in, on, under, or affecting any of
its Business Property, except such release or threatened release that is not
reasonably likely to have, individually or in the aggregate, a material adverse
effect on the financial condition, results of operations, business or prospects
of Gonzales Holding or Gonzales Bank.
3.24 Contract Termination Provisions. Except for those contracts
set forth in Schedule 3.24 hereto, all contracts between Gonzales Bank or
Gonzales Holding and any employee thereof or independent contractor thereto
shall, by the terms of such contracts or a written addendum thereto, be
terminable by DGC, CNC, or CNB following the Mergers, upon no more than thirty
(30) day's written notice to the employee or independent contractor.
Article IV.
REPRESENTATIONS AND WARRANTIES OF DGC, CNC AND CNB
DGC, CNC and CNB represent and warrant to Gonzales Bank and Gonzales
Holding as follows:
4.01 Corporate Organization. DGC and CNC are corporations duly
organized, validly existing and in good standing under the laws of the States
of Mississippi and Louisiana, respectively, and CNB is a national banking
association duly organized, validly existing and in good standing under the
laws of the United States. DGC, CNC, and CNB, respectively, have the corporate
power and authority (and CNB has received appropriate authorizations from the
OCC to own or lease all of their properties and assets and to carry on their
businesses as they are now being conducted.
4.02 Capitalization. The authorized capital stock of DGC
consists of 50,000,000 shares of DGC Common Stock, 10,000,000 shares of Class A
Voting Preferred Stock, no par value, and 10,000,000 shares of Class B
Non-Voting Preferred Stock, no par value (collectively, "the DGC Preferred
Stock"). At the close of business on December 31, 1995, there were 19,379,643
shares of DGC Common Stock issued and outstanding and no shares of DGC
Preferred Stock had been
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issued. In addition, options to acquire 442,852 shares of DGC Common Stock
were outstanding. The authorized capital stock of CNC consists of 5,000,000
shares, no par value. At the close of business on December 31, 1995, there
were 4,200,000 shares of CNC Common Stock issued and outstanding, one hundred
percent (100%) of which shares were owned by DGC. The authorized capital stock
of CNB consists of 234,121 shares of CNB Common Stock. At the close of
business on December 31, 1995, there were 234,121 shares of CNB Common Stock
issued and outstanding, one hundred percent (100%) of which shares were owned
by CNC. All issued and outstanding shares of DGC Common Stock have been, and
the shares of DGC Common Stock to be issued pursuant to the Holding Company
Merger will be, duly authorized and validly issued, and all such shares are and
will be fully paid. Except as referred to above, DGC does not have and is not
bound by any outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the purchase or issuance of any
shares of DGC Common Stock or DGC Preferred Stock or any security representing
the right to purchase or otherwise receive any DGC Common Stock or DGC
Preferred Stock.
4.03 Authority; No Violation. (a) DGC, CNC, and CNB,
respectively, have full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
respective Boards of Directors of DGC, CNC, and CNB, or a majority thereof, and
DGC as the sole shareholder of CNC, have duly and validly approved and adopted
this Agreement and the transactions contemplated hereby, have executed or
authorized the execution of and have authorized the delivery of this Agreement,
and except for approval by CNC, as the sole shareholder of CNB, no other
corporate proceedings on the part of DGC, CNC, or CNB are necessary or
desirable to consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by DGC, CNC, and CNB and
constitutes a valid and binding obligation of each of DGC, CNC, and CNB,
enforceable in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by DGC,
CNC, or CNB nor the consummation by DGC, CNC, or CNB of the transactions
contemplated hereby, nor compliance by DGC, CNC, or CNB with any of the
provisions hereof, will (i) violate any provision of the Certificate of
Incorporation or Bylaws of DGC, or CNC, or the Articles of Association or
Bylaws of CNB, (ii) to the best knowledge of DGC, CNC, and CNB violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to DGC, CNC, CNB, or any of their subsidiaries or any of
their respective properties or assets, or (iii) to the best knowledge of DGC,
CNC, and CNB violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event which, with or without due notice or lapse of
time, or both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in the creation of any lien,
security interest, charge or other encumbrance upon any of the respective
properties or assets of DGC, CNC, CNB, or any of their subsidiaries under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which DGC, CNC, CNB, or any of their respective subsidiaries is a party, or by
which they or any of their respective properties or assets may be bound or
affected, except for such conflicts, breaches or defaults as are set forth in
Schedule 4.03 hereto, or which either individually or in the aggregate will not
have a material adverse effect on the business, operations, properties, assets
or financial condition of DGC, CNB or any of their respective subsidiaries.
4.04 Consents and Approvals. Except for consents and approvals
of, or filings or registrations, with the SEC, OCC, the Federal Reserve Bank,
the FDIC, and the Commissioner, no consents or approvals of or filings or
registrations with any third party or any public body or authority are
necessary in connection with (i) the execution and delivery by DGC, CNC, and
CNB of this Agreement or (ii) the consummation of the Mergers and the other
transactions contemplated hereby.
4.05 SEC Documents; Financial Statements; Liabilities. (a) DGC
has filed all required reports, schedules, forms, statements and other
documents with the SEC since January 1, 1992 (the "DGC SEC Documents"),
complete copies of which have been provided to Gonzales Holding. As of their
respective dates, the DGC SEC Documents, and any such reports, forms and
documents filed by DGC with the SEC after the date hereof, complied, or will
comply, as to form in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such DGC SEC
Documents, and none of the DGC SEC Documents contained, or will contain, any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except to the extent that information contained in any DGC SEC
Document has been revised or
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superseded by a later filed DGC SEC Document, none of the DGC SEC Documents
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) The DGC financial statements included in the DGC SEC Documents
have been audited by KPMG Peat Marwick LLP, certified public accountants (in
the case of the DGC audited financial statements) in accordance with generally
accepted auditing standards, have been prepared in accordance with generally
accepted accounting principles and, except as disclosed therein, applied on a
basis consistent with prior periods, and present fairly the financial position
of DGC and its consolidated subsidiaries at such dates and the results of
operations and cash flows for the periods then ended, except, in the case of
the DGC interim financial statements, as permitted by Rule 10-01 of Regulation
S-X of the SEC. The DGC interim financial statements reflect all adjustments
(consisting only of normal recurring adjustments) that are necessary for a fair
statement of the results for the interim periods presented therein. Neither
DGC nor any of its consolidated subsidiaries has, nor are any of their
respective assets subject to, any liability, commitment, debt or obligation (of
any kind whatsoever whether absolute or contingent, accrued, fixed, known,
unknown, matured or unmatured) that is material individually or in the
aggregate, except as and to the extent reflected on the latest balance sheet
included in the DGC interim financial statements (the "DGC Latest Balance
Sheet"), or as may have been incurred or may have arisen since the date of the
DGC Latest Balance Sheet in the ordinary course of business.
(c) Since the date of the DGC Latest Balance Sheet, there has been
no change that has had or is likely to have a material adverse effect on DGC or
its subsidiaries.
4.06 Litigation. Except (a) as disclosed in a DGC SEC Document,
(b) that are not material individually or in the aggregate, or (c) as listed on
Schedule 4.06, there are no actions, suits, proceedings, arbitrations or
investigations pending or, to the knowledge of DGC, threatened, before any
court, any governmental agency or instrumentality or any arbitration panel,
against or affecting DGC or any of its subsidiaries or any of the directors,
officers, or employees of the foregoing, and to the knowledge of DGC no facts
or circumstances exist that would be likely to result in the filing of any such
action that would have a material adverse effect on DGC. Neither DGC nor any
of its subsidiaries is subject to any currently pending material judgment,
order or decree entered in any lawsuit or proceeding.
4.07 Legality of DGC Common Stock. The DGC Common Stock to be
issued in connection with the Holding Company Merger, when issued and delivered
in accordance with the terms hereof, will be duly authorized, validly issued,
fully paid and non-assessable, and free of pre-emptive rights.
4.08 Statements are True and Correct. None of the information
included in (a) the Registration Statement to be filed by DGC with the SEC in
connection with the DGC Common Stock to be issued in the Holding Company Merger
in accordance with Section 5.06 hereof, (b) the Proxy Statement to be mailed to
the shareholders of Gonzales Holding in connection with its shareholders
meeting, and (c) any other documents to be filed with the SEC or any other
regulatory authority in connection with the transactions contemplated hereby
that has been or will be supplied by DGC or any of its subsidiaries, will, at
the respective times such documents are filed, and, in the case of the
Registration Statement, when it becomes effective and, with respect to the
Proxy Statement, when first mailed to the shareholders of Gonzales Holding, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not misleading,
or, in the case of the Proxy Statement or any amendment thereof or supplement
thereto, at the time of the Gonzales Holding shareholders' meeting, be false or
misleading with respect to any material fact or omit to state any material fact
necessary to make the statements therein in light of the circumstances under
which they were made not misleading. All documents that DGC is responsible for
filing with the SEC or any other regulatory authority in connection with the
transactions contemplated hereby, will comply in all material respects with the
provisions of applicable law.
4.09 No Shareholder Vote. No vote of any class of shareholders
of DGC is required to approve this Agreement or the transactions contemplated
hereby in order to comply with the Mississippi Business Corporation Act, DGC's
Articles
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of Incorporation or Bylaws, or the rules and regulations of any exchange on
which the DGC Common Stock is listed or traded.
4.10 Broker's and Finder's Fee. No agent, broker, person or firm
acting on behalf of DGC, CNC or CNB is or will be entitled to any commission or
broker's or finder's fee from any of the parties hereto, or from any affiliate
of the parties hereto, in connection with any of the transactions contemplated
herein.
4.11 Disclosure. No representations or warranties by DGC, CNC or
CNB in this Agreement and no statement contained in the schedules or exhibits
or in any certificates to be delivered pursuant to this Agreement, contains or
will contain any untrue statement of material fact or omits or will omit to
state any material fact necessary, in light of the circumstances under which it
was made, in order to make the statements herein or therein not misleading.
Article V.
COVENANTS OF THE PARTIES
5.01 Conduct of Business. Except with the consent of the other
parties hereto, during the period from the date of this Agreement to the
Effective Date:
(a) Gonzales Bank and Gonzales Holding will conduct their
businesses and engage in transactions only in the ordinary course and
consistent with prudent banking practice.
(b) Neither Gonzales Holding nor Gonzales Bank shall (i) increase
by more than ten percent (10%) the compensation payable by Gonzales Bank or
Gonzales Holding to any of its directors, officers, agents, consultants, or any
of its employees whose total compensation after such increase would be in
excess of $25,000 per annum, (ii) grant or pay any extraordinary bonus,
percentage compensation, service award or other like benefit to any such
director, officer, agent, consultant or employee, or (iii) make or agree to any
extraordinary welfare, pension, retirement or similar payment or arrangement
for the benefit of any such director, officer, agent, consultant or employee.
(c) Neither Gonzales Holding nor Gonzales Bank shall sell or
dispose of material assets except in the ordinary course of business.
(d) Neither Gonzales Holding nor Gonzales Bank shall enter into
any new capital commitments or make any capital expenditures, except
commitments or expenditures within existing operating and capital budgets or
otherwise in the ordinary course of business.
(e) Neither Gonzales Bank nor Gonzales Holding shall authorize or
issue any additional shares of any class of its capital stock or any securities
exchangeable for or convertible into any such shares or any options or rights
to acquire any such shares, nor shall Gonzales Bank or Gonzales Holding
otherwise authorize or affect any change in its capitalization.
(f) No dividends shall be paid by Gonzales Holding, except for (i)
a special dividend by Gonzales Holding in February, 1996 of $2.00 per share,
and (ii) regular quarterly dividends in 1996 of $.35 per share for each
complete calendar quarters that elapses prior to the Effective Date. No
dividends shall be paid by Gonzales Bank except dividends by Gonzales Bank to
Gonzales Holding to the extent necessary to fund authorized dividends of
Gonzales Holding and to pay necessary and routine expenses of Gonzales Holding.
5.02 Limitation on Actions. Prior to the Effective Date or until
the termination of this Agreement, Gonzales Holding shall not, without the
prior approval of the chief executive officer of DGC,
(a) solicit or encourage inquiries or proposals with respect to; or
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(b) except as may be necessary as advised in writing by its
counsel to discharge its fiduciary duties, furnish any information relating to
or participate in any negotiations or discussions concerning, any acquisition
or purchase of all or a substantial portion of the assets of, or of a
substantial equity interest in, Gonzales Holding or any subsidiary thereof, or
any business combination with Gonzales Holding or any subsidiary thereof, other
than as contemplated by this Agreement; and shall instruct its officers,
directors, agents and affiliates to refrain from doing any of the above;
provided, however, that nothing contained herein shall be deemed to prohibit
any officer or director of Gonzales Holding from taking any action that counsel
to Gonzales Holding has advised in writing is required to discharge his or her
fiduciary duties to Gonzales Holding and its shareholders.
Gonzales Bank and Gonzales Holding agree to notify DGC by telephone
within twenty-four hours of receipt of any inquiry with respect to a proposed
merger, consolidation, assets acquisition, tender offer or other takeover
transaction with another person or receipt of a request for information from
the FDIC, OCC or other governmental authority with respect to a proposed
acquisition of Gonzales Bank or Gonzales Holding by another party.
5.03 Current Information. During the period from the date of
this Agreement to the Effective Date, Gonzales Bank and Gonzales Holding will
cause one or more of its designated representatives to confer on a regular and
frequent basis with representatives of DGC and to report the general status of
its ongoing operations. In addition, separate reporting on matters involving
the loan portfolio will occur monthly and will include, but not be limited to,
(i) all board reports, (ii) new and renewed loans (including loan
applications), (iii) delinquency reports, (iv) loan extensions, (v) to the
extent possible, loan policy exceptions, loan documentation exceptions, and
financial statement exceptions, (vi) watch list reports, (vii) all written
communications concerning problem loan accounts greater than $50,000, (viii)
notification and written details involving new loan products and/or loan
programs, and (ix) such other information regarding specific loans, the loan
portfolio and management of the loan portfolio as may be requested. Gonzales
Bank and Gonzales Holding will promptly notify DGC of any material change in
the normal course of their business or in the operation of their properties and
of any governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of litigation involving either party, and will keep DGC fully informed of such
events.
5.04 Access to Properties and Records; Confidentiality. (a) For
purposes of allowing DGC, CNC, and CNB and their counsel to prepare regulatory
submissions, and for other relevant purposes, Gonzales Bank and Gonzales
Holding shall permit DGC reasonable access to their properties during normal
business hours, and shall disclose and make available to DGC and its agents all
books, papers and records relating to their assets, stock ownership,
properties, operations, obligations and liabilities, including, but not limited
to: their books of account (including their general ledgers); tax records;
minute books of directors' and shareholders' meetings; charter documents;
bylaws; material contracts and agreements; filings with any regulatory
authority; litigation files; compensatory plans affecting its employees; and
any other materials pertaining to business activities, projects or programs in
which the other parties may have a reasonable interest in light of the proposed
Mergers. No member of the Gonzales Consolidated Group shall be required to
provide access to or to disclose information where such access or disclosure
would violate or prejudice the rights of any customer or other person, would
jeopardize the attorney-client privilege of the institution in possession or
control of such information, or would contravene any law, rule, regulation,
order, judgment, decree or binding agreement. The parties will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(b) All information furnished by any member of the Gonzales
Consolidated Group pursuant hereto shall be treated as the sole property of the
party furnishing the information until consummation of the Mergers contemplated
hereby and, if such Mergers shall not occur, DGC, CNC, and CNB shall return to
Gonzales Holding all documents or other materials containing, reflecting or
referring to such information, shall use its best efforts to keep confidential
all of such information, and shall not directly or indirectly use such
information for any competitive or other commercial purpose. The obligation to
keep such information confidential shall continue for two (2) years from the
date the proposed Mergers are abandoned and shall not apply to (a) any
information which (i) DGC, CNC and CNB can establish by convincing evidence was
already in its possession prior to the disclosure thereof by Gonzales Holding
or Gonzales Bank, (ii) was then generally known to the public or set forth in
public records, (iii) became known to the public through no fault of DGC, CNC
or CNB, or (iv) was
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disclosed to the party receiving the information by a third party not bound by
an obligation of confidentiality, or (b) disclosures in accordance with an
order of a court of competent jurisdiction.
5.05 Interim Financial Statements. As soon as reasonably
available, but in no event more than fifteen (15) days after the end of each
month ending after the date of this Agreement, Gonzales Bank and Gonzales
Holding will deliver to DGC copies of their monthly financial statements.
5.06 Regulatory Matters. (a) DGC shall prepare and file a
registration statement with the SEC on Form S-4 under the Securities Act (the
"Registration Statement"), including a proxy statement (the "Proxy Statement")
to be mailed to Gonzales Holding shareholders in connection with the meeting to
be called to consider the Holding Company Merger, as soon as reasonably
practicable following the date of this Agreement. The Registration Statement
shall comply in all material respects with the Securities Act and DGC will use
its best efforts to cause the Registration Statement to be declared effective
as soon as practicable, to qualify the DGC Common Stock under the securities or
blue sky laws of such jurisdictions as may be required and to keep the
Registration Statement and such qualifications current and in effect for so
long as is necessary to consummate the transactions contemplated hereby.
(b) DGC will use its best efforts to prepare all necessary
documentation, to effect all necessary filings and to obtain all necessary
permits, consents, approvals and authorizations of all third parties and
governmental bodies necessary to consummate the transactions contemplated by
this Agreement, including those required by the OCC, the Federal Reserve Board,
the FDIC and the Commissioner.
(c) Gonzales Holding shall cooperate in preparing the Registration
Statement and the Proxy Statement. Gonzales Holding will promptly furnish all
such data and information relating to it and its subsidiaries as DGC may
reasonably request for the purpose of including such data and information in
the Registration Statement.
(d) DGC will indemnify and hold harmless Gonzales Holding, each of
its directors, each of its officers and each person, if any, who controls
Gonzales Holding within the meaning of the Securities Act against any losses,
claims, damages or liabilities, joint, several or solidary, to which they or
any of them may become subject, under the Securities Act, any state securities
or blue sky laws, or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement, or in any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse each such person for any legal or other expenses reasonably
incurred, promptly as they are incurred, by such person in connection with
investigating or defending any such action or claim; provided, however, that
DGC shall not be liable in any case to the extent that any such loss, claim,
damage or liability (or action in respect thereof) arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement or any such amendment or supplement
in reliance upon or in conformity with information furnished to DGC by or on
behalf of the Gonzales Consolidated Group for use therein.
(e) Promptly after receipt by an indemnified party under
subparagraph (d) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against
DGC under such subparagraph, notify DGC in writing of the commencement thereof.
In case any such action shall be brought against any indemnified party and it
shall notify DGC of the commencement thereof, DGC shall be entitled to
participate therein and, to the extent that it shall wish, to assume the
defense thereof, with counsel satisfactory to such indemnified party, and,
after notice from DGC to such indemnified party of its election so to assume
the defense thereof, DGC shall not be liable to such indemnified party under
such subparagraph for any legal expenses of other counsel or any other expenses
subsequently incurred by such indemnified party; provided, however, if DGC
elects not to assume such defense or counsel for the indemnified parties
advises in writing that there are material substantive issues which raise
conflicts of interest between DGC or Gonzales Holding and one or more of the
indemnified parties, such indemnified parties may retain counsel satisfactory
to them, and DGC shall pay all reasonable fees and expenses of such counsel for
the indemnified parties promptly as statements therefor are received.
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5.07 Approval of Shareholders. Gonzales Holding will (i) take
all steps necessary to call, give notice of, convene and hold a special meeting
of its shareholders as soon as practicable for the purpose of approving this
Agreement and the transactions contemplated hereby and for such other purposes
as may be necessary or desirable, (ii) subject to the provisions of Section
5.02(b) hereof, recommend to its shareholders the approval of this Agreement
and the transactions contemplated hereby and such other matters as may be
submitted to its shareholders in connection with this Agreement, and (iii)
cooperate and consult with DGC, CNC, and CNB with respect to each of the
foregoing matters. Gonzales Holding, as the sole shareholder of Gonzales Bank,
shall approve this Agreement and the Bank Merger. CNC, as the sole shareholder
of CNB, shall approve this Agreement and the Bank Merger.
5.08 Compliance with SEC Rules 144 and 145. Gonzales Holding
shall identify in a letter to DGC, after consultation with its counsel and with
DGC and its counsel, persons who may be deemed to be affiliates of Gonzales
Holding as that term is defined in Rule 145 under the Securities Act and who
will become beneficial owners of Common Stock of DGC pursuant to the Holding
Company Merger ("Gonzales Holding Affiliates"). Gonzales Holding shall use its
best efforts to cause all Gonzales Holding Affiliates to execute and deliver to
DGC written agreements to comply with the applicable resale restrictions set
forth in Rules 144 and 145 under the Securities Act.
5.09 Further Assurances. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Effective Date any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary or
desirable action.
5.10 Public Announcements. DGC, CNC, CNB, Gonzales Bank and
Gonzales Holding will cooperate with each other in the development and
distribution of all news releases and other public information disclosures with
respect to this Agreement or any of the transactions contemplated hereby. No
party to this agreement shall make any public announcement or otherwise make
any disclosure (either public or private), other than such disclosure to
employees or agents of any such party as may be required to carry out the
transactions contemplated by this Agreement and except as may be required by
law, without the express written consent of all parties hereto. Each party
hereto shall undertake such reasonable steps as may be required to ensure that
its employees and agents comply with the provisions of this Section 5.10.
5.11 Benefits. (a) From and after the Effective Date, DGC will,
subject to compliance with applicable legal and regulatory requirements,
provide coverage for all Gonzales Bank employees under all DGC employee benefit
plans for which they are eligible, as soon as practicable after the Effective
Date. All prior years of service of Gonzales Bank employees will be counted
for vesting and eligibility purposes under all applicable DGC employee benefit
plans to the extent permitted by applicable law. Any Gonzales Bank employee
who, immediately prior to the Effective Date, is covered by or is a participant
in a Gonzales Bank employee benefit plan listed in Schedule 3.20 of this
Agreement, shall, on the Effective Date, be covered by or participate in the
comparable DGC employee benefit plan if a comparable plan otherwise is
maintained by DGC and if the eligibility requirements of the DGC plan are met.
(b) After the Effective Date, CNB will honor the employment
agreements described in Schedule 5.11 and will provide severance benefits to
former employees of Gonzales Bank that are at least equivalent to the benefits
that would have been provided under the current severance policy of Gonzales
Bank, a copy of which has been provided to CNB.
5.12 Election of Directors. For a period of not less than three
(3) years after the Effective Date, DGC and CNC shall elect at least two (2)
former members of the Board of Directors of Gonzales Bank to serve as directors
of CNB.
5.13 Indemnification and Liability Insurance. (a) From and after
the Effective Date, CNC shall indemnify, defend, and hold harmless the former
directors, officers, employees and agents of Gonzales Holding (each such
director, officer, employee or agent referred to as a "Holding Company
Indemnified Party") against all losses, claims, damages, liabilities, judgments
(and related expenses including but not limited to, attorney's fees and amounts
paid in settlement), joint,
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<PAGE> 96
several or solidary, and any action or other proceeding in respect thereof, to
which the Holding Company Indemnified Parties or any of them become subject,
based upon or arising out of actions or omissions of such persons occurring at
or prior to the Effective Date (including the transactions contemplated by this
Agreement) to the full extent permitted under Louisiana Law or by Gonzales
Holding's Articles of Incorporation and Bylaws as in effect on the date hereof,
whichever is greater.
(b) From and after the Effective Date, CNB shall indemnify,
defend, and hold harmless the former directors, officers, employees and agents
of Gonzales Bank (each such director, officer, employee or agent referred to
as a "Bank Indemnified Party") against all losses, claims, damages liabilities,
judgments (and related expenses including but not limited to, attorney's fees
and amounts paid in settlement), joint, several or solidary, and any action or
other proceeding in respect thereof, to which the Bank Indemnified Parties or
any of them become subject, based upon or arising out of actions or omissions
of such persons occurring at or prior to the Effective Date (including the
transactions contemplated by this Agreement) to the full extent permitted under
Louisiana Law or by Gonzales Bank's Articles of Incorporation and Bylaws as in
effect on the date hereof, whichever is greater.
(c) CNB and CNC shall use its best efforts to maintain the
existing directors' and officers' liability insurance policy of Gonzales Bank
and Gonzales Holding, respectively, covering persons who are currently covered
by such insurance for a period of five (5) years after the Effective Date on
terms generally no less favorable than those in effect on the date of this
Agreement; provided, however, that CNB and CNC may substitute therefor policies
providing at least comparable coverage containing terms and conditions no less
favorable than those in effect on the date of this Agreement.
Article VI.
CLOSING CONDITIONS
6.01 Conditions to Each Party's Obligations under this Agreement.
The respective obligations of each party under this Agreement shall be subject
to the fulfillment at or prior to the Effective Date of the following
conditions, none of which may be waived:
(a) This Agreement and the transactions contemplated hereby shall
have been approved by the affirmative vote of the holders of at least a
majority of the outstanding shares of Gonzales Holding Common Stock, voted at
the special meeting of shareholders of Gonzales Holding called pursuant to
Section 5.07 hereof.
(b) None of the parties hereto shall be subject to any order,
decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the Mergers.
(c) DGC, CNC, CNB, Gonzales Holding and Gonzales Bank shall have
received an opinion of Messrs. Watkins Ludlam & Stennis, P.A. substantially to
the effect that the transactions contemplated by this Agreement will be treated
for federal income tax purposes as a tax-free reorganization under Section 368
of the Code.
(d) A Registration Statement relating to the shares of DGC Common
Stock to be issued pursuant to this Agreement shall have become effective under
the Securities Act and shall not be subject to any stop order or a threatened
stop order. All necessary consents or permits from or registrations or filings
with state securities commissions shall have been obtained or made.
(e) This Agreement and the transactions contemplated hereby shall
have been approved by the OCC and all other applicable federal and state
authorities.
6.02 Conditions to the Obligations of DGC, CNC, and CNB under
this Agreement. The obligations of DGC, CNC, and CNB under this Agreement
shall be further subject to the satisfaction, at or prior to the Effective
Date, of the following conditions, any one or more of which may be waived by
DGC, CNC, and CNB:
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(a) Each of the obligations of Gonzales Bank and Gonzales Holding
required to be performed by it at or prior to the Closing pursuant to the terms
of this Agreement shall have been duly performed and complied with and the
representations and warranties of Gonzales Bank and Gonzales Holding contained
in this Agreement shall be true and correct in all material respects as of the
date of this Agreement and as of the Effective Date as though made at and as of
the Effective Date (except as otherwise contemplated by this Agreement) and
DGC, CNC, and CNB shall have received a certificate to that effect signed by
the president and the chief financial officer of Gonzales Bank and Gonzales
Holding.
(b) All action required to be taken by, or on the part of,
Gonzales Bank and Gonzales Holding to authorize the execution, delivery and
performance of this Agreement by Gonzales Bank and Gonzales Holding and the
consummation of the transactions contemplated hereby shall have been duly and
validly taken by the Boards of Directors of Gonzales Bank and Gonzales Holding
and DGC, CNC, and CNB shall have received certified copies of the resolutions
evidencing such authorization.
(c) Any and all permits, consents, waivers, clearances, approvals
and authorizations (in addition to those referred to in Section 6.01 hereof) of
all third parties and governmental bodies shall have been obtained by Gonzales
Bank and Gonzales Holding, which are necessary in connection with the
consummation of the Mergers by Gonzales Holding and Gonzales Bank and the other
transactions contemplated hereby.
(d) DGC, CNC, and CNB shall have received an opinion from Jones,
Walker, Waechter, Poitevent, Carrere & Denegre L.L.P., counsel to Gonzales Bank
and Gonzales Holding, dated the date of the Closing, in form satisfactory to
CNB, DGC, and CNC to the effect that:
i) Gonzales Holding is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Louisiana and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being
conducted. Gonzales Bank is a state banking corporation duly
organized, validly existing and in good standing under the laws of
Louisiana (a) has all requisite corporate power to own, lease and
operate its properties and to carry on its business as now being
conducted, (b) is duly authorized to conduct a general banking
business under the Banking Laws of the State of Louisiana, and (c) is
an insured bank as defined in the Federal Deposit Insurance Act;
ii) This Agreement has been duly and validly authorized,
executed and delivered by Gonzales Holding and Gonzales Bank and is
valid and enforceable against each of them, except that enforcement
may be limited by bankruptcy, reorganization, insolvency and other
similar laws and court decisions relating to or affecting the
enforcement of creditors' rights generally and by general equitable
principles;
iii) The authorized capital stock of Gonzales Holding
consists of 10,000,000 shares of Gonzales Holding Common Stock, of
which, as of December 31, 1995, 561,801 shares have been duly issued,
are presently outstanding and are fully paid and non-assessable;
iv) The authorized capital stock of Gonzales Bank
consists of 600,000 of Gonzales Bank Common Stock of which, as of
December 31, 1995, 440,000 shares are issued and outstanding; all of
such outstanding shares are validly issued, fully paid and
non-assessable;
v) The execution and delivery by Gonzales Holding and
Gonzales Bank of this Agreement, consummation by Gonzales Holding and
Gonzales Bank of the transactions contemplated hereby and compliance
by Gonzales Holding and Gonzales Bank with the provisions hereof will
not violate the Articles of Incorporation of Gonzales Holding or
Gonzales Bank or violate, result in a breach of, or constitute a
default under, any material lease, mortgage, contract, agreement,
instrument, judgment, order or decree to which Gonzales Holding or
Gonzales Bank is a party or to which they may be subject;
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vi) Such counsel has participated in several conferences
with representatives of the parties of this Agreement and their
respective accountants and counsel in connection with the preparation
of the Registration Statement and the Proxy Statement to be filed in
connection with the transactions contemplated by this Agreement and
have considered the matters required to be stated therein and the
statements contained therein, and based on the foregoing (in certain
circumstances relying as to materiality on the opinions of officers
and representatives of the parties to this Agreement) nothing has come
to the attention of such counsel that would lead them to believe that
such Registration Statement or the Proxy Statement, as amended or
supplemented if it has been amended or supplemented, at the time it
became effective and as amended or supplemented, (in the case of the
Registration Statement) or at the time distributed to shareholders (in
the case of the Proxy Statement), contained any untrue statement of a
material fact or omitted a material fact required to be stated therein
or necessary to make the statements therein not misleading (except in
each such case for the financial statements and other financial and
statistical data included therein, as to which no opinion need be
rendered).
As to matters of fact, counsel to Gonzales Holding and Gonzales Bank
may rely, to the extent they deem appropriate, upon certificates of officers of
Gonzales Holding and Gonzales Bank, provided, such certificates are delivered
to DGC and CNB prior to the Closing or attached to the opinion of counsel.
(e) There shall not have occurred any material adverse change in
the financial condition, results of operations, business or prospects of
Gonzales Holding or Gonzales Bank from the date of the Gonzales Latest Balance
Sheet to the Closing.
(f) Gonzales Holding shall have used it bests efforts to cause all
Affiliates to execute and deliver to DGC written agreements to comply with the
applicable resale restrictions set forth in Rule 145 under the Securities Act.
Gonzales Bank and Gonzales Holding will furnish DGC, CNC, and CNB with
such certificates of their officers or others and such other documents to
evidence fulfillment of the conditions set forth in this Section 6.02 as DGC,
CNC, and CNB may reasonably request.
6.03 Conditions to the Obligations of Bank of Gonzales and Bank
of Gonzales Holding Company, Inc. under this Agreement. The obligations of
Gonzales Bank and Gonzales Holding under this Agreement shall be further
subject to the satisfaction, at or prior to the Effective Date, of the
following conditions, any one or more of which may be waived by Gonzales Bank
and Gonzales Holding:
(a) Each of the obligations of DGC, CNC, or CNB, respectively,
required to be performed by them at or prior to the Closing pursuant to the
terms of this Agreement shall have been duly performed and complied with and
the representations and warranties of DGC, CNC, and CNB contained in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Effective Date as though made at and as of the
Effective Date (except as otherwise contemplated by this Agreement) and
Gonzales Bank and Gonzales Holding shall have received certificates to that
effect signed by the presidents and chief financial officers of DGC, CNC, and
CNB, respectively.
(b) All action required to be taken by, or on the part of, DGC,
CNC, and CNB to authorize the execution, delivery and performance of this
Agreement of DGC, CNC, and CNB and the consummation of the transactions
contemplated hereby shall have been duly and validly taken by the Boards of
Directors of DGC, CNC, and CNB, respectively, and Gonzales Bank and Gonzales
Holding shall have received certified copies of the resolutions evidencing such
authorization.
(c) Gonzales Holding shall have received a letter from Alex
Sheshunoff & Co., or another financial advisor selected by Gonzales Holding,
dated within five (5) days of the date of mailing of the Proxy Statement to its
shareholders to the effect that the terms of the Holding Company Merger are
fair to its shareholders from a financial point of view.
(d) There shall not have occurred any material adverse change in
the financial condition, results of operations, business or prospects of DGC,
CNC or CNB from the date of the DGC Latest Balance Sheet to the Closing.
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<PAGE> 99
(e) Gonzales Holding and Gonzales Bank shall have received from
Messrs. Watkins, Ludlam and Stennis, P.A., counsel for DGC, CNC and CNB (or as
to certain matters involving Louisiana law from Louisiana counsel to DGC, CNC
and CNB), an opinion, dated as of the Closing, in form and substance
satisfactory to Gonzales Holding and Gonzales Bank, to the effect that:
i) DGC is a corporation duly organized, validly existing
and in good standing under the laws of the State of Mississippi and
has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. DGC
is qualified to do business as a foreign corporation in Louisiana.
CNC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Louisiana and has all
requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. CNB is a state
banking corporation duly organized, validly existing and in good
standing under the laws of Louisiana (a) has all requisite corporate
power to own, lease and operate its properties and to carry on its
business as now being conducted, (b) is duly authorized to conduct a
general banking business under the Banking Laws of the State of
Louisiana, and (c) is an insured bank as defined in the Federal
Deposit Insurance Act;
ii) This Agreement has been duly and validly authorized,
executed and delivered by DGC, CNC, and CNB is valid and enforceable,
except that enforcement may be limited by bankruptcy, reorganization,
insolvency and other similar laws and court decisions relating to or
affecting the enforcement of creditors' rights generally and by
general equitable principles;
iii) The authorized capital stock of DGC consists of
50,000,000 shares of DGC Common Stock, 10,000,000 shares of Class A
Voting Preferred Stock, no par value, and 10,000,000 shares of Class B
Non-Voting Preferred Stock, no par value of which, as of December 31,
1995, 19,379,643 shares of Common Stock have been duly issued, are
presently outstanding and are fully paid and non-assessable. All
shares of DGC Common Stock to be issued to holders of Gonzales Holding
Common Stock will be, when issued as described in this Agreement and
the Registration Statement, duly authorized and validly issued, fully
paid and non-assessable, free of liens, security interests, pledges or
other encumbrances and all preemptive or similar rights other than
liens, security interests, pledges or other encumbrances placed
thereon by the holders of Gonzales Holding Common Stock;
iv) The authorized capital stock of CNC consists of
5,000,000 shares of CNC Common Stock, of which, as of December 31,
1995, 4,200,000 shares have been duly issued, are presently
outstanding and are fully paid and non-assessable;
v) The authorized capital stock of CNB consists of
234,121shares of CNB Common Stock of which, as of December 31, 1995,
234,121 shares are issued and outstanding; all of such outstanding
shares are validly issued, fully paid and non-assessable;
vi) The execution and delivery by DGC, CNC, and CNB of
this Agreement, consummation by DGC, CNC, and CNB of the transactions
contemplated hereby and compliance by DGC, CNC, and CNB with the
provisions hereof will not violate the Articles of Incorporation or
Association of DGC, CNC, and CNB or violate, result in a breach of, or
constitute a default under, any material lease, mortgage, contract,
agreement, instrument, judgment, order or decree to which DGC, CNC,
and CNB is a party or to which they may be subject;
vii) the Registration Statement has become effective, and
to such counsel's knowledge, no stop order suspending its
effectiveness has been issued nor have any proceedings for that
purpose been instituted;
viii) the Registration Statement and each amendment or
supplement thereto, as of their respective effective or issue dates,
complied as to form in all material respects with the requirements of
the Securities Act and the rules and regulations promulgated
thereunder, and we do not know of any contracts or documents required
to be filed as exhibits to the Registration Statement which are not
filed as required; it being understood that such
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<PAGE> 100
counsel need express no opinion as to the financial statements or
other financial or statistical data contained in or omitted from the
Registration Statement or the Proxy Statement; and
ix) Such counsel has participated in several conferences
with representatives of the parties of this Agreement and their
respective accountants and counsel in connection with the preparation
of the Registration Statement and the Proxy Statement to be filed in
connection with the transactions contemplated by this Agreement and
have considered the matters required to be stated therein and the
statements contained therein, and based on the foregoing (in certain
circumstances relying as to materiality on the opinions of officers
and representatives of the parties to this Agreement) nothing has come
to the attention of such counsel that would lead them to believe that
such Registration Statement or the Proxy Statement, as amended or
supplemented if it has been amended or supplemented, at the time it
became effective and as amended or supplemented, (in the case of the
Registration Statement) or at the time distributed to shareholders (in
the case of the Proxy Statement), contained any untrue statement of a
material fact or omitted a material fact required to be stated therein
or necessary to make the statements therein not misleading (except in
each such case for the financial statements and other financial and
statistical data included therein, as to which no opinion need be
rendered).
As to matters of fact, counsel to DGC, CNC and CNB may rely, to the
extent they deem appropriate, upon certificates of officers of DGC, CNC, and
CNB, provided, such certificates are delivered to Gonzales Holding and Gonzales
Bank prior to the Closing or attached to the opinion of counsel.
DGC, CNC, and CNB will furnish Gonzales Bank and Gonzales Holding with
such certificates of their officers or others and such other documents to
evidence fulfillment of the conditions set forth in this Section 6.03 as
Gonzales Bank and Gonzales Holding may reasonably request.
Article VII.
CLOSING
7.01 Time and Place. Subject to the provisions of Articles VI
and VIII hereof, the Closing of the transactions contemplated hereby shall take
place at the offices of DGC, One Deposit Guaranty Plaza, 210 East Capitol
Street, Jackson, Mississippi 39205 at 9:00 A.M., local time, on the first
business day after the date on which all of the conditions contained in Article
VI, to the extent not waived, are satisfied or at such other place, at such
other time, or on such other date as DGC, CNC, CNB, Gonzales Holding and
Gonzales Bank may mutually agree upon for the Closing to take place.
7.02 Deliveries at the Closing. Subject to the provisions of
Articles VI and VIII hereof, at the Closing there shall be delivered to DGC,
CNC, CNB, Gonzales Holding and Gonzales Bank the opinions, certificates, and
other documents and instruments required to be delivered under Article VI
hereof.
Article VIII.
TERMINATION
8.01 Termination. This Agreement may be terminated at any time
prior to the Effective Date, whether before or after approval of the Holding
Company Merger by the shareholders of Gonzales Holding:
(a) by mutual written consent of the parties, properly authorized
by their respective Boards of Directors;
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(b) by DGC, CNC, and CNB, if at the time of such termination
there shall be a material adverse change in the consolidated financial
condition of Gonzales Bank or Gonzales Holding from that set forth in Gonzales
Bank's or Gonzales Holding's Financial Statements for the period ended December
31, 1995;
(c) by any party hereto, if a United States District Court shall
rule upon application of the Department of Justice after a full trial on the
merits or a decision on the merits based on a stipulation of facts that the
transactions contemplated by this Agreement violate the antitrust laws of the
United States;
(d) by any party hereto, if at the special meeting of shareholders
to be called by Gonzales Holding pursuant to this Agreement, this Agreement
shall not have been approved by the affirmative vote of the holders of at least
a majority of the outstanding shares of Gonzales Holding Common Stock voted at
the special meeting of shareholders of Gonzales Holding called pursuant to
Section 5.07 hereof;
(e) by DGC, CNC, and CNB, in the event there are dissenting
shareholders who hold more than ten percent (10%) of the shares of Gonzales
Holding Common Stock;
(f) by any party hereto if Closing shall not have occurred by
December 31, 1996; or
(g) by Gonzales Holding's Board of Directors in accordance with
Section 5.02(b) hereof upon payment of the expenses referenced in Section 9.01
hereof.
8.02 Effect of Termination. In the event of termination of this
Agreement by either DGC, CNC, CNB, Gonzales Holding or Gonzales Bank as
provided above, this Agreement shall forthwith become void and except as
provided in Section 5.04 and Section 9.01 hereof there shall be no further
liability on the part of Gonzales Bank, Gonzales Holding, DGC, CNC, CNB, or
their respective officers or directors.
Article IX.
MISCELLANEOUS
9.01 Expenses. Except as set forth below, all out-of-pocket
costs and expenses incurred in connection with the Mergers (including, but not
limited to, counsel fees) shall be paid by the party incurring such costs and
expenses.
In recognition of the fact that DGC will bear the bulk of the expense
in preparing for regulatory approvals, in the event Gonzales Holding terminates
or seeks to terminate this Agreement without cause, or if the shareholders of
Gonzales Holding fail to approve the transaction because of action taken by an
officer or director of Gonzales Holding upon advice of counsel pursuant to
Section 5.02(b), Gonzales Holding shall indemnify DGC for all expenses
reasonably incurred by DGC in attempting to comply with the terms of the
Agreement.
9.02 Notices. All notices or other communications hereunder shall
be in writing and shall be deemed given if delivered personally or mailed by
prepaid registered or certified first class mail (return receipt requested) or
by facsimile, cable, telegram or telex addressed as follows:
(a) If to DGC, CNC, or CNB, to:
Deposit Guaranty Corporation
One Deposit Guaranty Plaza
210 East Capitol Street
P.0. Box 730
Jackson, Mississippi 39205
Attention: Arlen L. McDonald
Fax Number: (601) 354-8192
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Copy to:
Watkins Ludlam & Stennis, P.A.
633 North State Street (39202)
Post Office Box 427
Jackson, Mississippi 39205-0427
Attention: L. Keith Parsons, Esq.
Fax Number: (601) 949-4804
(b) If to Gonzales Bank or Gonzales Holding, to:
Bank of Gonzales Holding Company, Inc.
South Burnside Avenue at Worthey Road
P.O. Box 1089
Gonzales, La. 70709-1089
Attn: D. Dale Gaudet
Fax Number: (504) 621-7239
Copy to:
Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P.
201 St. Charles Ave., Suite 5100
New Orleans, La. 70170
Attn: W. Philip Clinton
Fax Number: (504) 582-8012
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
9.03 Parties in Interest. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and with respect to
Sections 5.12 and 5.13, the additional parties referenced therein, and their
respective successors and assigns; provided, however, that neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any party hereto without the prior written consent of the other
parties, and that nothing in this Agreement is intended to confer, expressly or
by implication, upon any other person any rights or remedies under or by reason
of this Agreement.
9.04 Amendment, Extension and Waiver. Subject to applicable law,
at any time prior to the consummation of the Mergers, whether before or after
approval thereof by the Gonzales Holding shareholders, DGC, CNC, CNB, Gonzales
Holding and Gonzales Bank may, by action taken by their respective Boards of
Directors (i) amend this Agreement, (ii) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (iii) waive
any inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto, or (iv) waive compliance with any of
the agreements or conditions contained in Articles V and VI (other than Section
6.01 hereof; provided, however, that, subject to Section 1.01 hereof, after any
approval of the Holding Company Merger by the shareholders of Gonzales Holding,
there may not be, without further approval of such shareholders, any amendment,
extension or waiver of this Agreement which changes the amount or form of
consideration to be delivered to shareholders of Gonzales Holding. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto. Any agreement on the part of a party
hereto to any extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party, but such waiver or
failure to insist on strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
9.05 Complete Agreement. This Agreement, including the documents
and other writings referred to herein or delivered pursuant hereto, contains
the entire agreement and understanding of the parties with respect to its
subject matter. There are no restrictions, agreements, promises, warranties,
covenants or undertakings other than those expressly set forth herein or
therein. This Agreement supersedes all prior agreements and understandings
between the parties, both written and oral, with respect to its subject matter.
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9.06 Non-Survival of Representations and Warranties. None of the
representations and warranties in this Agreement shall survive the Effective
Date, or the earlier termination of this Agreement pursuant to Article VIII
hereof. Each party hereby agrees that its sole right and remedy with respect
to any breach of a representation or a warranty by the other party shall be to
not consummate the transactions described herein if such breach results in the
nonsatisfaction of a condition set forth in Section 6.02(a) or 6.03(a) hereof,
provided, however, that the foregoing shall not be deemed a waiver of any claim
for intentional misrepresentation or fraud.
9.07 Counterparts. This Agreement may be executed in one or more
counterparts all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
9.08 Governing Law. This Agreement shall be governed by the laws
of the State of Louisiana, without giving effect to the principles of conflicts
of laws thereof.
9.09 Headings. The Article and Section headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
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IN WITNESS WHEREOF, a majority of the members of the Boards of
Directors of CNB and Gonzales Bank, respectively, have each executed this
Agreement and directed the authorized signature and seal of each respective
bank to be set hereunto by its President and attested to by its Secretary or
Cashier, and the Boards of Directors of DGC, CNC, and Gonzales Holding have
caused this Agreement to be executed by their duly authorized officers, all as
of the day and year first above written.
Attest: DEPOSIT GUARANTY CORP.
By
- ------------------------------ ------------------------------------
Secretary President
Attest: COMMERCIAL NATIONAL
CORPORATION
By
- ------------------------------ ------------------------------------
Secretary President
Attest: BANK OF GONZALES HOLDING
COMPANY, INC.
By
- ------------------------------ ------------------------------------
Secretary President
[EXECUTION BELOW BY CITIZENS NATIONAL BANK AND BANK OF GONZALES]
<PAGE> 105
Attest: CITIZENS NATIONAL BANK
By
- ------------------------------ ------------------------------------
Secretary President
(Seal of Bank)
Attest: BANK OF GONZALES
By
- ------------------------------ ------------------------------------
Secretary President
(Seal of Bank)
<PAGE> 106
EXHIBIT B
FAIRNESS OPINION OF SHESHUNOFF
<PAGE> 107
EXHIBIT B
May ___, 1996
Board of Directors
Bank of Gonzales Holding Company, Inc.
P.O. Box 1089
Gonzales, Louisiana 70707
Members of the Board:
We understand that Bank of Gonzales Holding Company, Inc., Gonzales, Louisiana
("Gonzales Holding") and Deposit Guaranty Corporation, Jackson, Mississippi
("DGC") have entered into an Agreement and Plan of Merger, dated as of February
5, 1996 (the "Agreement"), which provides, among other things, for the merger
(the "Merger") of Gonzales Holding with and into DGC. Pursuant to the Merger,
each share of common stock, no par value, of Gonzales Holding (the "Gonzales
Holding Common Stock") issued and outstanding immediately prior to the
Effective Date other than shares of Gonzales Holding Company Common Stock owned
by stockholders who, pursuant to the Louisiana Business Corporation Law
("LBCL"), perfect dissenters' rights ("Dissenting Shares"), shall, by virtue of
the Agreement and without any action on the part of the holder thereof, be
converted into and exchangeable for the number of shares of common stock, no
par value, of DGC (the "DCG Common Stock") equal to the Exchange Ratio, as
defined below, subject to adjustment as provided herein and, in respect of
fractional shares, subject to Section 1.06 of the Agreement.
The Exchange Ratio shall equal 634,000 divided by the number of shares of
Gonzales Holding Common Stock outstanding on the date immediately preceding the
Effective Date. If prior to the Effective Date DGC should split or combine DGC
Common Stock, or pay a dividend or other distribution in DGC Common Stock, then
the exchange ratio shall be appropriately adjusted to reflect such split,
combination, dividend or distribution. The terms and conditions of the Merger
are more fully set forth in the Agreement. Based upon 541,611 of Gonzales
Holding Common Stock outstanding and a stock price of $46.75 per share as of
March 22, 1996 for DGC's Common Stock, DGC will issue 634,000 common shares to
Gonzales Holding shareholders for a total transaction value of $29,639,500.
You have requested our opinion, as an independent financial advisor, as to
whether the Agreement is fair from a financial point of view to holders of
Gonzales Holding Common Stock, as of the date hereof.
In connection with our opinion, we have: (i) reviewed the Agreement; (ii)
reviewed certain publicly available financial statements and other information
of Gonzales Holding and DGC; (iii) reviewed certain internal financial
statements and other financial and operating data concerning Gonzales Holding
and DGC; (iv) discussed the past and current operations and financial condition
and the prospects of Gonzales Holding and DGC with senior executives; (v)
reviewed certain historical market prices and trading volumes of DGC and
compared them to other publicly traded companies deemed relevant; (vi) compared
Gonzales Holding and DGC from a financial point of view with certain other
companies which we deemed to be relevant; (vii) reviewed the results of certain
regulatory examinations of Gonzales Holding and DGC with the senior management
of the respective companies; (viii) reviewed the financial terms, to the extent
publicly available, of certain comparable merger transactions; and (ix)
performed such other analyses and examinations as we have deemed appropriate.
<PAGE> 108
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. In addition, we have not made an independent evaluation of the assets
or liabilities of Gonzales Holding and DGC, nor have we been furnished with any
such appraisals. In addition, we are not an expert in the evaluation of loan
portfolios for the purposes of assessing the adequacy of the allowance for
losses with respect thereto and have assumed that such allowances for each of
the companies are in the aggregate adequate to cover such losses. Our opinion
is necessarily based on economic, market and other conditions as in effect on,
and the information made available to us as of, the date hereof. With respect
to financial forecasts, as well as projected cost savings, we have assumed that
they have been reasonably prepared and reflect the best currently available
estimates and judgments of management of Gonzales Holding and DGC, as to the
future financial performance of Gonzales Holding and DGC, respectively, and we
have assumed such forecasts and projections will be realized in the amounts and
at the times contemplated thereby.
Our opinion is limited to the fairness, from a financial point of view, to the
holders of Gonzales Holding Common Stock of the Agreement and does not address
Gonzales Holding's underlying business decision to undertake the Merger.
Moreover, this letter, and the opinion expressed herein, does not constitute a
recommendation to any stockholder as to any approval of the Merger or the
Agreement. It is understood that this letter may not be disclosed or otherwise
referred to without our prior written consent, except as may otherwise be
required by law or by a court of competent jurisdiction.
Very truly yours,
ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
<PAGE> 109
EXHIBIT C
SECTION 131 OF THE LOUISIANA BUSINESS
CORPORATION LAW
<PAGE> 110
EXHIBIT C
La. R.S. 12:131 (1993)
Section 131. Rights of a shareholder dissenting from certain corporate
actions
A. Except as provided in subsection B of this section, if a
corporation has, by vote of its shareholders, authorized a sale, lease or
exchange of all of its assets, or has, by vote of its shareholders, become a
party to a merger or consolidation, then, unless such authorization or action
shall have been given or approved by at least eighty percent of the total
voting power, a shareholder who voted against such corporate action shall have
the right to dissent. If a corporation has become a party to a merger pursuant
to R.S. 12:112(H), the shareholders of any subsidiaries party to the merger
shall have the right to dissent without regard to the proportion of the voting
power which approved the merger and despite the fact that the merger was not
approved by vote of the shareholders of any of the corporations involved.
B. The right to dissent provided by this Section shall not exist
in the case of:
(1) A sale pursuant to an order of a court having jurisdiction in
the premises.
(2) A sale for cash on terms requiring distribution of all or
substantially all of the net proceeds to the shareholders in accordance with
their respective interests within one year after the date of the sale.
(3) Shareholders holding shares of any class of stock which, at
the record date fixed to determine shareholders entitled to receive notice of
and to vote at the meeting of shareholders at which a merger or consolidation
was acted on, were listed on a national securities exchange, or were designated
as a national market system security on an inter-dealer quotation system by the
National Association of Securities Dealers, unless the articles of the
corporation issuing such stock provide otherwise or the shares of such
shareholders were not converted by the merger or consolidation solely into
shares of the surviving or new corporation.
C. Except as provided in the last sentence of this subsection,
any shareholder electing to exercise such right of dissent shall file with the
corporation, prior to or at the meeting of shareholders at which such proposed
corporate action is submitted to a vote, a written objection to such proposed
corporate action, and shall vote his shares against such action. If such
proposed corporate action be taken by the required vote, but by less than
eighty percent of the total voting power, and the merger, consolidation or
sale, lease or exchange of assets authorized thereby be effected, the
corporation shall promptly thereafter give written notice thereof, by
registered mail, to each shareholder who filed such written objection to, and
voted his shares against, such action, at such shareholder's last address on
the corporation's records. Each such shareholder may, within twenty days after
the mailing of such notice to him, but not thereafter, file with the
corporation a demand in writing for the fair cash value of his shares as of the
day before such vote was taken; provided that he state in such demand the value
demanded, and a post office address to which the reply of the corporation may
be sent, and at the same time deposit in escrow in a chartered bank or trust
company located in the parish of the registered office of the corporation, the
certificates representing his shares, duly endorsed and transferred to the
corporation upon the sole condition that said certificates shall be delivered
to the corporation upon payment of the value of the shares determined in
accordance with the provisions of this section. With his demand the
shareholder shall deliver to the corporation, the written acknowledgment of
such bank or trust company that it so holds his certificates of stock. Unless
the objection, demand and acknowledgment aforesaid be made and delivered by the
shareholder within the period above
<PAGE> 111
limited, he shall conclusively be presumed to have acquiesced in the corporate
action proposed or taken. In the case of a merger pursuant to R.S. 12:112(H),
the dissenting shareholder need not file an objection with the corporation
nor vote against the merger, but need only file with the corporation, within
twenty days after a copy of the merger certificate was mailed to him, a demand
in writing for the cash value of his shares as of the day before the
certificate was filed with the secretary of state, state in such demand the
value demanded and a post office address to which the corporation's reply may
be sent, deposit the certificates representing his shares in escrow as
hereinabove provided, and deliver to the corporation with his demand the
acknowledgment of the escrow bank or trust company as hereinabove prescribed.
D. If the corporation does not agree to the value so stated and
demanded, or does not agree that a payment is due, it shall, within twenty days
after receipt of such demand and acknowledgment, notify in writing the
shareholder, at the designated post office address, of its disagreement, and
shall state in such notice the value it will agree to pay if any payment should
be held to be due; otherwise it shall be liable for, and shall pay to the
dissatisfied shareholder, the value demanded by him for his shares.
E. In case of disagreement as to such fair cash value, or as to
whether any payment is due, after compliance by the parties with the provisions
of subsections C and D of this section, the dissatisfied shareholder, within
sixty days after receipt of notice in writing of the corporation's
disagreement, but not thereafter, may file suit against the corporation, or the
merged or consolidated corporation, as the case may be, in the district court
of the parish in which the corporation or the merged or consolidated
corporation, as the case may be, has its registered office, praying the court
to fix and decree the fair cash value of the dissatisfied shareholder's shares
as of the day before such corporate action complained of was taken, and the
court shall, on such evidence as may be adduced in relation thereto, determine
summarily whether any payment is due, and, if so, such cash value, and render
judgment accordingly. Any shareholder entitled to file such suit may, within
such sixty-day period but not thereafter, intervene as a plaintiff in such suit
filed by another shareholder, and recover therein judgment against the
corporation for the fair cash value of his shares. No order or decree shall be
made by the court staying the proposed corporate action, and any such corporate
action may be carried to completion notwithstanding any such suit. Failure of
the shareholder to bring suit, or to intervene in such a suit, within sixty
days after receipt of notice of disagreement by the corporation shall
conclusively bind the shareholder (1) by the corporation's statement that no
payment is due, or (2) if the corporation does not contend that no payment is
due, to accept the value of his shares as fixed by the corporation in its
notice of disagreement.
F. When the fair value of the shares has been agreed upon between
the shareholder and the corporation, or when the corporation has become liable
for the value demanded by the shareholder because of failure to give notice of
disagreement and of the value it will pay, or when the shareholder has become
bound to accept the value the corporation agrees is due because of his failure
to bring suit within sixty days after receipt of notice of the corporation's
disagreement, the action of the shareholder to recover such value must be
brought within five years from the date the value was agreed upon, or the
liability of the corporation became fixed.
G. If the corporation or the merged or consolidated corporation,
as the case may be, shall, in its notice of disagreement, have offered to pay
to the dissatisfied shareholder on demand an amount in cash deemed by it to be
the fair cash value of his shares, and if, on the institution of a suit by the
dissatisfied shareholder claiming an amount in excess of the amount so offered,
the corporation, or the merged or consolidated corporation, as the case may be,
shall deposit in the registry of the court, there to remain until the final
determination of the cause, the amount so offered, then, if the amount finally
awarded such shareholder, exclusive of interest and costs, be more than the
amount offered and deposited as aforesaid, the costs of the proceeding shall be
taxed against the corporation, or the merged or consolidated corporation, as
the case may be; otherwise the costs of the proceeding shall be taxed against
such shareholder.
<PAGE> 112
H. Upon filing a demand for the value of his shares, the
shareholder shall cease to have any of the rights of a shareholder except the
rights accorded by this section. Such a demand may be withdrawn by the
shareholder at any time before the corporation gives notice of disagreement, as
provided in subsection D of this section. After such notice of disagreement is
given, withdrawal of a notice of election shall require the written consent of
the corporation. If a notice of election is withdrawn, or the proposed
corporate action is abandoned or rescinded, or a court shall determine that the
shareholder is not entitled to receive payment for his shares, or the
shareholder shall otherwise lose his dissenter's rights, he shall not have the
right to receive payment for his shares, his share certificates shall be
returned to him (and, on his request, new certificates shall be issued to him
in exchange for the old ones endorsed to the corporation), and he shall be
reinstated to all his rights as a shareholder as of the filing of his demand
for value, including any intervening preemptive rights, and the right to
payment of any intervening dividend or other distribution, or, if any such
rights have expired or any such dividend or distribution other than in cash has
been completed, in lieu thereof, at the election of the corporation, the fair
value thereof in cash as determined by the board as of the time of such
expiration or completion, but without prejudice otherwise to any corporate
proceedings that may have been taken in the interim.
<PAGE> 113
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Deposit Guaranty is incorporated under the laws of Mississippi.
Subarticle E of Article 8 of the Mississippi Business Corporation Act
prescribes the conditions under which indemnification may be obtained by a
present or former director or officer of Deposit Guaranty who incurs expenses
or liability as a consequence of matters arising out of his activities as a
director or officer.
Article Nine of Deposit Guaranty's Articles of Incorporation also
provides for indemnification of officers and directors under certain
circumstances. Deposit Guaranty has purchased a liability policy which, subject
to any limitations set forth in the policy, indemnifies Deposit Guaranty's
directors and officers for damages that they become legally obligated to pay as
a result of any negligent act, error or omission committed by such person in
his capacity as an officer or director.
ITEM 21. EXHIBITS
The following exhibits are furnished (or incorporated by reference) as
a part of this Registration Statement:
Exhibit Number Description
-------------- -----------
2 Agreement and Plan of Merger dated as of
February 5, 1996, as amended, included as
Exhibit A to the Proxy Statement/Prospectus
contained herein.
5 Opinion of Watkins Ludlam & Stennis, P.A.
regarding legality of common stock registered
hereby.
8 Opinion of Watkins Ludlam & Stennis, P.A.
regarding tax matters.
23(a) Consent of KPMG Peat Marwick LLP, independent
accountants
23(b) Consent of Basil M. Lee and Company,
independent accountants
23(c) Consent of Watkins Ludlam & Stennis, P.A. is
contained in their opinion filed as Exhibit 5
to this Registration Statement
23(d) Consent of Alex Sheshunoff & Co.
24 Power of attorney included as part of
signature page
99 Form of Proxy
<PAGE> 114
ITEM 22. UNDERTAKINGS
(1) The Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(2) The Registrant hereby undertakes that every prospectus (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Act and issued in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) The Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(4) The Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(5) The Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(6) Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
<PAGE> 115
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Deposit
Guaranty certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-4 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Jackson, State of Mississippi on this the 30th
day of April, 1996.
DEPOSIT GUARANTY CORP.
BY: /s/ E. B. Robinson, Jr.
-----------------------------------
E. B. Robinson, Jr.
Chairman of the Board and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, each person whose signature appears
below constitutes and appoints E. B. Robinson, Jr., Howard L. McMillan, Jr.,
and Robert G. Barnett, and each of them (with full power to act alone), his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution for him and on his behalf and in his name, place and stead,
in any and all capacities, to sign, execute and affix his name and signature to
and file any and all documents relating to the registration under the
Securities Act of 1933 of shares of Deposit Guaranty Common Stock for issuance
to Gonzales Holding in accordance with the Merger Agreement, and do hereby
grant to said attorneys, and each of them full power and authority to do and
perform each and every act and thing necessary to be done in and about the
premises in order to effectuate such registration as fully to all intents and
purposes as he might do personally, and do hereby ratify and confirm all that
said attorneys, or any of them, may lawfully do or cause to be done by virtue
hereof. The documents referred to include a Registration Statement under the
Securities Act of 1933 on Form S-4, and any amendments (including post
effective amendments) thereto, and all documents deemed necessary or desirable
by said attorneys-in-fact to be filed with departments or agencies of the
several states regulating the qualification or registration of securities under
Blue Sky laws of said states, together with any and all documents and all
exhibits relating to the registration statement, amendments, or exhibits
required to be filed with any administrative or regulatory agency or authority.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
<S> <C> <C>
/s/ E. B. Robinson, Jr. Chairman of the Board April 30, 1996
- ------------------------------ and Director (Principal
E. B. Robinson, Jr. Executive Officer)
President and Director April __, 1996
- ------------------------------
Howard L. McMillan, Jr.
</TABLE>
<PAGE> 116
<TABLE>
<S> <C> <C>
/s/ Arlen L. McDonald Executive Vice President April 30, 1996
- ------------------------------ (Principal Financial
Arlen L. McDonald Officer)
/s/ Stephen E. Barker Controller (Principal April 30, 1996
- ------------------------------ Accounting Officer)
Stephen E. Barker
Director April __, 1996
- ------------------------------
Michael B. Bemis
/s/ Richard H. Bremer Director May 1, 1996
- ------------------------------
Richard H. Bremer
Director April __, 1996
- ------------------------------
Warren A. Hood, Jr.
Director April __, 1996
- ------------------------------
Charles L. Irby
/s/ Richard D. McRae, Jr. Director April 30, 1996
- ------------------------------
Richard D. McRae, Jr.
/s/ W. R. Newman, III Director April 30, 1996
- ------------------------------
W. R. Newman, III
/s/ John N. Palmer Director April 30, 1996
- ------------------------------
John N. Palmer
/s/ Steven C. Walker Director May 1, 1996
- ------------------------------
Steven C. Walker
/s/ J. Kelley Williams Director May 1, 1996
- ------------------------------
J. Kelley Williams
</TABLE>
<PAGE> 117
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description Page Number
- -------------- ----------- -----------
<S> <C> <C>
2 Agreement and Plan of Merger dated as of February 5, 1996, as amended,
included as Exhibit A to the Proxy Statement/Prospectus contained herein.
5 Opinion of Watkins Ludlam & Stennis, P.A. regarding legality of common
stock registered hereby.
8 Opinion of Watkins Ludlam & Stennis,P.A. regarding tax matters.
23(a) Consent of KPMG Peat Marwick LLP, independent accountants
23(b) Consent of Basil M. Lee and Company, independent accountants
23(c) Consent of Watkins Ludlam & Stennis, P.A. is contained in
their opinion filed as Exhibit 5 to this Registration
Statement
23(d) Consent of Alex Sheshunoff & Co.
24 Power of attorney included as part of signature page
99 Form of Proxy
</TABLE>
<PAGE> 1
EXHIBIT 5
April 30, 1996
Board of Directors
Deposit Guaranty Corp.
210 East Capitol Street
Jackson, Mississippi 39201
Gentlemen:
We have acted as counsel to Deposit Guaranty Corp. in connection with
the preparation of its Registration Statement on Form S-4 for registration of
634,000 shares of Common Stock, no par value, under the Securities Act of 1933.
Such shares are to be issued pursuant to the Agreement and Plan of Merger (the
"Merger Agreement"), dated as of February 5, 1996, by and among Deposit
Guaranty Corp., Commercial National Corporation, Citizens National Bank, Bank
of Gonzales Holding Company, Inc. and Bank of Gonzales.
We have examined the Merger Agreement, the Articles of Incorporation
and the amendments thereto of Deposit Guaranty Corp., and such other documents
as we deemed relevant.
Based on the foregoing, it is our opinion that the 634,000 shares of
Common Stock of Deposit Guaranty Corp. to be registered under the Securities
Act of 1933, when issued pursuant to the Merger Agreement will be legally
issued, fully paid and non-assessable shares of Common Stock of Deposit
Guaranty Corp.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Opinion" in the Proxy Statement comprising Part I of the Registration
Statement.
Sincerely,
WATKINS LUDLAM & STENNIS, P.A.
<PAGE> 1
_____, 1996
Board of Directors
Bank of Gonzales Holding Company, Inc.
Board of Directors
Bank of Gonzales
Board of Directors
Deposit Guaranty Corp.
One Deposit Guaranty Plaza
210 East Capitol Street
Post Office Box 730
Jackson, Mississippi 39205-0730
Board of Directors
Commercial National Corporation
333 Texas Street
Shreveport, Louisiana 71152
RE: THE FEDERAL INCOME TAX CONSEQUENCES OF CERTAIN MATTERS ARISING
UNDER THE CORPORATE REORGANIZATION PROVISIONS OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED
Gentlemen:
You have requested our opinion regarding the federal income tax
consequences of the proposed merger of Bank of Gonzales Holding Company, Inc.
("Gonzales Holding") with and into Commercial National Corporation ("CNC"),
immediately followed by the merger of Bank of Gonzales with and into Citizens
National Bank ("CNB"). The merger of Gonzales Holding with and into CNC is
hereinafter referred to as the "Holding Company Merger." The merger of Bank of
Gonzales with and into CNB is hereinafter referred to as the "Bank Merger."
Both mergers are
<PAGE> 2
sometimes hereinafter collectively referred to as the "Mergers," and each
merger is more fully described herein. Unless otherwise noted, the capitalized
terms herein shall have the same meaning ascribed to such terms in that certain
Agreement and Plan of Merger by and among you, dated as of February 5, 1996
(the "Merger Agreement"). This opinion is rendered in satisfaction of the
closing condition described in Section 6.01(c) of the Merger Agreement.
We have examined and are familiar with the Merger Agreement, the Proxy
Statement/Prospectus of DGC and Gonzales Holding dated May __, 1996 regarding
the proposed transactions, certain financial statements of the parties to the
proposed Mergers, and such other documents as we have deemed sufficient to
enable us to express our informed opinion. In rendering this opinion we have
relied not only on such documents but also on the representations and
statements of the parties to the proposed Mergers, some of which are stated in
the Certificate dated ___, 1996, attached hereto as Exhibit "A", regarding
certain matters addressed in this opinion, and the following factual
information supplied by the parties to the proposed Mergers.
I. BACKGROUND FACTS CONCERNING CORPORATE PARTIES
A. Deposit Guaranty Corp.
Deposit Guaranty Corp. ("DGC") was incorporated in 1968 under the laws
of the State of Mississippi for the primary purpose of acting as a bank holding
company for Deposit Guaranty National Bank ("DGNB"), a national banking
association. DGC is registered as a bank holding company with the Federal
Reserve System.
DGC has an authorized capital structure consisting of 100,000,000
shares of no par value voting common stock ( the "DGC Common Stock"),
25,000,000 shares of no par value Class A voting preferred stock, and
25,000,000 shares of Class B non-voting preferred stock. As of December 31,
1995, DGC had 19,379,643 shares of Common Stock issued and outstanding and no
preferred stock is outstanding. DGC is a publicly held company with over 6,000
shareholders of record as of December 31, 1995, and its stock is traded on the
NASDAQ National Market System. In addition, as of December 31, 1995, options
to acquire 442,852 shares of DGC Common Stock are outstanding.
DGC and its subsidiaries are engaged only in the general banking
business and activities closely related to banking, as authorized by the
banking laws of the United States and the regulations issued pursuant thereto.
The books of account of DGC are maintained on a calendar year basis
and DGC computes its income under the accrual method of accounting. DGC is the
parent of an affiliated group that, for federal income tax purposes, includes,
among other entities, CNC (described below), and CNB.
B. Commercial National Corporation
CNC is a bank holding company and is registered as such with the
Federal Reserve System. The authorized capital stock of CNC consists of
5,000,000 shares of common stock, $5.00 par value.
<PAGE> 3
There are 4,200,000 shares of CNC common stock issued and outstanding, all of
which are owned by DGC. All of CNC's common stock was acquired by DGC in
February, 1990.
CNC does not engage in any business activities other than its
ownership of CNB and Commercial National Bank. The books of CNC are maintained
on a calendar year basis and CNC computes its income under the accrual method
of accounting.
C. Citizens National Bank
CNB is a national banking association, duly organized and validly
existing under the laws of the United States with its main office located in
Hammond, Louisiana. All of its branches are located in the State of Louisiana.
CNB conducts a general banking business embracing all of the customary banking
functions as are permitted by Federal regulatory authorities.
Presently, CNB has authorized capital stock consisting of 234,121
shares of Common Stock (the "CNB Common Stock"). All of the CNB Common Stock
is outstanding and is owned by CNC.
CNB's books of account are maintained on a calendar year, accrual
basis and it files a consolidated federal income tax return with CNC and DGC.
D. Gonzales Holding.
Gonzales Holding was organized under the laws of the State of
Louisiana for the purpose of acting as a bank holding company. Gonzales
Holding offers a full complement of consumer and commercial banking services
through its only subsidiary, Bank of Gonzales. Gonzales Holding is registered
as a bank holding company with the Federal Reserve System.
Gonzales Holding has an authorized capital structure consisting of
10,000,000 shares of Common Stock (the "Gonzales Holding Common Stock"). There
are 561,801 shares of Gonzales Holding Common Stock issued and outstanding to
756 stockholders of record. The Gonzales Holding Common Stock is not traded on
an established securities market.
Gonzales Holding's books of account are maintained on a calendar year
basis and Gonzales Holding computes its income under the accrual method of
accounting.
E. Bank of Gonzales.
Bank of Gonzales is a state banking association duly organized and
validly existing under the laws of the state of Louisiana with its principal
office located in Gonzales, Louisiana. The authorized capital structure of
Bank of Gonzales consists of 440,000 shares of Common Stock (the "Bank of
Gonzales Common Stock"), all of which are outstanding and owned by Gonzales
Holding.
<PAGE> 4
Bank of Gonzales offers a wide range of consumer and commercial
banking services in the Ascension Parish, Louisiana area. Bank of Gonzales's
books of account are maintained on a calendar year basis. It files a
consolidated federal income tax return with Gonzales Holding.
II. BUSINESS REASONS FOR AND DESCRIPTION
OF THE PROPOSED MERGERS
A. Gonzales Holding's Reasons for the Mergers.
In reaching its decision that the Merger Agreement is in the best
interests of Gonzales Holding and its shareholders, the Board of Gonzales
Holding considered a number of factors in addition to the financial terms,
including, but not limited to the following: (a) the financial condition and
results of operations of, and prospects for, each of Gonzales Holding and DGC;
(b) the likelihood that Gonzales Bank would experience significant increased
competitive pressures in its market area from larger banking and other
financial institutions capable of offering a broader array of technologically
advanced financial services and products; (c) the lack of marketability of
Gonzales Holding Common Stock and the liquidity that would be offered to
Gonzales Holding's shareholders through the ownership of securities of a
publicly traded company such as DGC; (d) the financial terms of the Mergers,
including the relationship of the value of the DGC Common Stock issuable in the
Mergers to the market value, book value, and earnings per share of Gonzales
Holding Common Stock; (e) the nonfinancial terms of the Mergers, including the
treatment of the Mergers as a tax-free exchange of Gonzales Holding Common
Stock for DGC Common Stock for federal and state income tax purposes; (f) the
likelihood of the Mergers being approved by applicable regulatory authorities
without undue conditions or delay; and(g) the opinion rendered by Sheshunoff,
Gonzales Holding's financial advisor, to the effect that the terms of the
Mergers, as provided in the Merger Agreement, are fair from a financial point
of view, to the holders of Gonzales Holding Common Stock.
B. DGC's Reasons for the Mergers.
The DGC Board of Directors believes that by expanding DGC's customer
base into the southern portion of Louisiana, the Mergers should enhance DGC's
earnings capacity by enabling it to deliver products and provide services to
that enlarged customer base, and by permitting cost savings through
consolidation of operations. In addition, the DGC Board of Directors believes
that the combination of DGC and Gonzales Holding will allow DGC and Gonzales
Holding to increase overall efficiency and take advantage of economies of scale
in several areas. In evaluating the Mergers, the DGC Board of Directors
considered a variety of factors, including the respective results of
operations, financial condition and prospects of DGC and Gonzales Holding; the
compatibility and complimentary nature of the respective businesses and
managerial philosophies of DGC and Gonzales Holding; and the relative prices
paid in recent acquisitions of financial institutions.
<PAGE> 5
C. Description of Proposed Mergers.
The proposed Mergers will be structured in accordance with the
preceding statements of background facts, the Merger Agreement, the laws of the
State of Louisiana and the United States, the representations of the parties to
the transactions, and the following descriptions:
1. The Holding Company Merger. Pursuant to the Merger Agreement,
Gonzales Holding will merge with and into CNC pursuant to the
laws of the State of Louisiana. CNC will be the surviving
corporation. On the Effective Date of the Holding Company
Merger, each share of Gonzales Holding Common Stock issued and
outstanding (other than shares owned by shareholders who,
pursuant to the Louisiana Business Corporation Law, perfect any
right to receive the fair value of such shares ("Dissenting
Shares")), will be converted into and exchangeable for a number
of shares of DGC Common Stock determined by dividing 634,000 by
the number of shares of Gonzales Holding Common Stock
outstanding on the date immediately preceding the Effective Date
(the "Exchange Ratio").
Any dissenters to the Holding Company Merger who meet the
statutory requirements, will have the right under Louisiana law
to receive cash for their shares from Gonzales Holding. The
Merger Agreement, however, provides that Deposit Guaranty may
terminate the Merger Agreement if more than ten percent (10%) of
the Gonzales Holding Common Stock outstanding at the Effective
Date of the Holding Company Merger would be converted into cash.
2. The Bank Merger. Immediately after the Holding Company Merger,
Bank of Gonzales will merge with and into CNB in accordance with
applicable federal and state law. CNB will acquire all of the
assets and assume all of the liabilities of Bank of Gonzales,
and Bank of Gonzales will cease to exist. Each share of
outstanding Bank of Gonzales Common Stock will be canceled. CNC
will constructively receive CNB Common Stock as consideration
for the Bank Merger. No new shares of CNB Common Stock will
actually be issued to CNC or to Bank of Gonzales in the Bank
Merger. There will be no dissenters to the Bank Merger.
3. Fractional Shares. No fractional shares of DGC Common Stock
will be issued in the Mergers. Any shareholder otherwise
entitled to receive a fractional share of DGC Common Stock will
be paid a cash amount in lieu of any such fractional share
determined by multiplying (i) the closing sale price of a share
of DGC Common Stock on the date immediately proceeding the
Effective Date as quoted on the National Association of
Securities Dealers Automated Quotation System, by (ii) the
fraction of a share of DGC Common Stock to which such holder
would otherwise be entitled.
4. Effects of the Mergers. After the Mergers are completed, all of
Gonzales Holding's former shareholders will own DGC Common
Stock. There will be no cash paid in connection with either of
the Mergers (except for payments for fractional shares as
<PAGE> 6
noted above). The ownership structure of DGC, CNC, and CNB will
not change. After the Holding Company Merger, CNC will continue
both its and Gonzales Holding's historical business in a
substantially unchanged manner. After the Bank Merger, CNB
will continue both its and Bank of Gonzales' historical business
in a substantially unchanged manner.
<PAGE> 7
III. DISCUSSION OF APPLICABLE REORGANIZATION PROVISIONS
A. The Holding Company Merger.
The parties intend that the Holding Company Merger will satisfy the
requirements for nonrecognition (i.e., treatment as a tax-free reorganization)
under section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended
(the "Code") by reason of the application of Code section1/ 368(a)(2)(D).
These Code sections describe a forward triangular or subsidiary merger under
which the target corporation (Gonzales Holding) is merged into a first tier
subsidiary (CNC) of the parent corporation (DGC here) in exchange for parent
company stock distributed to the target's historic shareholders.
Following are the criteria for nonrecognition in the case of a forward
triangular merger (applied in the context of the proposed Holding Company
Merger):
1. "Substantially all" of the properties of Gonzales Holding must be
acquired by CNC. For Internal Revenue Service ("Service") ruling purposes,
this means that CNC must acquire at least seventy percent (70%) of the fair
market value of the gross assets and at least ninety percent (90%) of the fair
market value of the net assets held by Gonzales Holding immediately prior to
the Holding Company Merger. See Code section 368(a)(2)(D); Treas. Reg. Section
1.368- 2(b)(2); and Rev. Proc. 77-37, 1977-2 C.B. 568, Section 3.01.
2. A "could have merged with the parent" test must be met. This test
means that it must have been possible for Gonzales Holding to have merged
directly into DGC in a transaction qualifying under Code section 368(a)(1)(A)
(a "Type A" merger). A Type A merger is a statutory merger under state or
federal law (although Code section 368(a)(1)(A) also covers consolidations,
consolidations are not permitted in the context of Code section 368(a)(2)(D)).
This test essentially means that it must be shown that the continuity of
interest, business purpose and continuity of business enterprise requirements
would have been met had Gonzales Holding merged into DGC. See Treas. Reg.
Section 1.368- 2(b)(2).
3. The stock issued in consideration of CNC's acquisition of Gonzales
Holding's properties must consist solely of parent (DGC) stock. The use of any
CNC stock would disqualify the Holding Company Merger under Code section
368(a)(2)(D).
4. In addition to the requirements under the Code which have been
generally described above, nonrecognition for the Holding Company Merger is
subject to several other nonstatutory rules that have been established through
case law and Treasury Regulations. These requirements involve continuity of
proprietary interest, continuity of business enterprise, and the existence of a
valid business purpose for the transaction. The judicially-developed step
transaction doctrine,
____________________
1/ Unless otherwise noted, all section references are to the Code.
<PAGE> 8
wherein a series of formally separate steps are considered together as
component parts of an overall plan, must also be considered when evaluating
whether a transaction, in substance, qualifies as a valid forward subsidiary
merger under Code section 368(a)(1)(A) and section 368(a)(2)(D).
B. The Bank Merger.
The Bank Merger will be a statutory merger of downstream
brother-sister corporations. As such, the Bank Merger will qualify, for
federal income tax purposes, as a tax-free reorganization under section
368(a)(1)(A) (a "Type A reorganization").
The Bank Merger is also described in and will qualify as a tax-free
reorganization under section 368(a)(1)(D) (a "Type D reorganization"). The
Code describes a Type D reorganization involving the transfer of assets to a
controlled corporation, as follows:
1. A transfer by one corporation of substantially all of its assets
to a controlled corporation (i.e., a corporation owned by the
transferor or its shareholders2/, followed by a section 354 or
section 356 of the distribution of the stock, and
2. In effect, a complete liquidation of the transferor corporation.
(Although section 354(b) does not explicitly require a complete
liquidation of the transferor, the requisite distribution of all
of the transferor's properties will have the effect of a
complete liquidation).
The Service has ruled that in cases involving an overlap of a Type A
and a Type D reorganization, the Type D reorganization controls. See Rev. Rul
75-161, 1975-1 C.B. 114. The difference is that Rev. Rul. 75-161 provides that
section 357(c) applies to the transaction. Section 357(c) requires that if the
sum of the amount of the liabilities assumed by the corporate transferee and
the amount of the liabilities to which the property transferred is subject
exceeds the total of the adjusted basis of the property transferred, then the
excess shall be recognized as gain by the transferor. As stated in the
Certificate, in connection with the Bank Merger, Bank of Gonzales has
represented that the liabilities of Bank of Gonzales which will be assumed by
CNB, plus the amount of the liabilities to which the property transferred is
subject, will not exceed Bank of Gonzales's total adjusted basis in the
property transferred. Based on this representation and our limited review of
pertinent financial statements, we have concluded that the gain recognition
provision of section 357(c) should not apply to the Bank Merger.
IV. OPINION
In reliance upon the foregoing facts and the representations of the
parties to the Merger transactions, and based upon our review of such documents
and consideration of such legal matters as
____________________
2/ The determination of whether a "controlled corporation" exists is made
using the 50% ownership test of section 304(c) as the "control" threshold,
as mandated by section 368(a)(2)(H).
<PAGE> 9
we have deemed relevant and sufficient to enable us to render an informed
opinion, we are of the opinion that the federal income tax consequences of the
proposed Mergers will be as follows:
A. With respect to the Holding Company Merger:
1. Provided the proposed Merger of Gonzales Holding with and into
CNC qualifies as a statutory merger under applicable Louisiana
law, the acquisition by CNC of substantially all of the assets
of Gonzales Holding in exchange for shares of DGC Common Stock
and the ssumption of liabilities of Gonzales Holding will
constitute a reorganization within the meaning of Code section
368(a)(1)(A) and section 368(a)(2)(D).
For purposes of this opinion, "substantially all" means at least
90 percent of the fair market value of the net assets and at
least 70 percent of the fair market value of the gross assets of
Gonzales Holding held immediately prior to the Merger. DGC,
CNC, and Gonzales Holding will each be "a party to a
reorganization" within the meaning of section 368(b) of the
Code.
2. No gain or loss will be recognized by Gonzales Holding upon the
transfer of substantially all of it assets to CNC in exchange
solely for DGC Common Stock and the assumption by CNC of the
liabilities of Gonzales Holding (Code sections 361(a) and
357(a)). Such non-recognition is not affected by the fact that
Gonzales Holding will be deemed to receive cash in lieu of
fractional share interests of Gonzales Holding shareholders,
since all of the cash will be deemed distributed to Gonzales
Holding shareholders pursuant to the Merger Agreement.
3. No gain or loss will be recognized to Gonzales Holding upon the
transfer of substantially all of it assets to DGC in exchange
solely for DGC Common Stock and the assumption by DGC of the
liabilities of Gonzales Holding. (Rev. Rul. 57-278, 1957-1 C.B.
124).
4. No gain or loss will be recognized by DGC upon the receipt by
CNC of substantially all of the assets of Gonzales Holding
solely in exchange for DGC Common Stock issued to Gonzales
Holding and the assumption by CNC of the liabilities of Gonzales
Holding and the liabilities to which the transferred assets are
subject (Rev. Rul 57-278, 1957-1 C.B. 124).
5. The basis of the assets of Gonzales Holding in the hands of DGC
will be, in each instance, the same as the basis of those assets
in the hands of Gonzales Holding immediately prior to the
Holding Company Merger (Code section 362(b)).
6. The holding period of Gonzales Holding's assets in the hands of
DGC will include the period during which the assets were held by
Gonzales Holding (Code section 1223(2)).
<PAGE> 10
7. No gain or loss will be recognized by the shareholders of
Gonzales Holding upon their receipt of DGC Common Stock
(including fractional share interests to which they may be
entitled) solely in exchange for their Gonzales Holding Common
Stock (Code section 354(a)(1)).
8. The basis of the DGC Common Stock to be received by the Gonzales
Holding shareholders (including any fractional share interests
to which they may be entitled) will be, in each instance, the
same as the basis of the Gonzales Holding Common Stock
surrendered in exchange therefor (Code section 358)).
9. The holding period of the DGC Common Stock to be received by
the Gonzales Holding shareholders (including any fractional
share interests to which they may be entitled) will include,
in each case, the period during which the Gonzales Holding
Common Stock surrendered in exchange therefor was held,
provided that the Gonzales Holding Common Stock is held as a
capital asset in the hands of the Gonzales Holding shareholder
on the date of the exchange (Code section 1223(1)).
10. The payment of cash to Gonzales Holding shareholders in lieu
of fractional shares of DGC Common Stock will be treated for
federal income tax purposes as if the fractional shares were
distributed as part of the reorganization exchange and then
redeemed by DGC. The cash payments will be treated as having
been received as distributions in redemption of such stock,
subject to the provisions and limitations of section 302 of
the Code.
11. Where a dissenting Gonzales Holding shareholder receives
solely cash in exchange for his or her Gonzales Holding Common
Stock, such cash will be treated as having been received by
the shareholder as a distribution in redemption of his or her
stock subject to the provisions and limitations of section
302.
B. With respect to the Bank Merger:
1. Provided that the merger of Bank of Gonzales into CNB
qualifies as a statutory merger under applicable state or
federal law, the proposed Bank Merger will be a reorganization
within the meaning of section 368(a)(1)(A) of the Code. Bank
of Gonzales and CNB will each be "a party" to a
reorganization" within the meaning of section 368(b)(2).
2. No gain or loss will be recognized to Bank of Gonzales on the
transfer of all of its assets to CNB in constructive exchange
for CNB Common Stock issued to CNC and the assumption by CNB
of the liabilities of Bank of Gonzales (Code sections 361(a)
and 357(a)).
3. No gain or loss will be recognized to CNB upon the receipt by
CNB of all of the assets of Bank of Gonzales in constructive
exchange for CNB Common Stock issued
<PAGE> 11
to CNC and the assumption by CNB of the liabilities of Bank of
Gonzales and the liabilities to which the transferred assets
are subject (Rev. Rul 57-278, 1957-1 C.B. 124).
4. No gain or loss will be recognized by DGC or CNC as a result
of the Bank Merger and the surrender of the Bank of Gonzales
Common Stock in constructive exchange for the CNB Common
Stock.
5. The basis of the assets of Bank of Gonzales in the hands of
CNB will, in each case, be the same as the basis of those
assets in the hands of Bank of Gonzales immediately prior to
the Bank Merger (Code section 362(b)).
6. The holding period of the assets of Bank of Gonzales in the
hands of CNB will, in each instance, include the period for
which such assets were held by the Bank of Gonzales. (Code
section 1223(2)).
We have qualified our opinions by reference to the Code, the Treasury
Regulations promulgated thereunder, and existing judicial and administrative
interpretations thereof. In so opining, we have relied upon the foregoing
facts and representations and have reviewed such documents and have considered
such legal matters as we have deemed relevant and sufficient to enable us to
render an informed opinion. We have also relied, to some extent, on the oral
representations and statements of representatives of the parties with respect
to the foregoing factual determinations. While we have not been requested nor
have we undertaken to make independent investigations to verify such
representations and statements, based upon our discussions with representatives
of the parties and our limited review of certain background material, we
believe that it is reasonable for us to rely on such representations and
statements.
Our opinion is limited to the specific opinions expressed above, and
no other opinions are intended nor should they be inferred. An opinion of
counsel has no binding effect upon the Service and no assurances can be given
that the conclusions reached in any opinion will not be contested by the
Service, or if contested, will be sustained by a court.
The opinions we have expressed above are based on the facts and
representations outlined herein being correct in all material respects as of
the dates indicated or at the time of the proposed transactions as the case may
be. In the event that one or more of the facts or representations are
incorrect for any such time, our opinion would likely be substantially
different than that expressed above.
<PAGE> 12
The opinion expressed herein is for the sole benefit of DGC, CNC, CNB,
Gonzales Holding and Bank of Gonzales, together with their respective
shareholders, and is not to be delivered to or relied upon by any other party
without our prior written consent.
Very truly yours,
WATKINS LUDLAM & STENNIS, P.A.
<PAGE> 1
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Directors
Deposit Guaranty Corp.:
We consent to the use of our audit report dated February 6, 1996 on the
consolidated financial statements of Deposit Guaranty Corp. and subsidiaries as
of December 31, 1995 and 1994, and for each of the years in the three-year
period ended December 31, 1995 incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus. Our report
refers to a change in the method of accounting for debt securities.
KPMG PEAT MARWICK LLP
Jackson, Mississippi
April 30, 1996
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Deposit Guaranty Corp.
on Form S-4 of our report dated January 31, 1996, appearing in the Proxy
Statement/Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "EXPERTS" in such
Proxy Statement/Prospectus.
Baton Rouge, Louisiana
April 29, 1996
<PAGE> 1
CONSENT OF ALEX SHESHUNOFF & CO. INVESTMENT BANKING
In connection with the proposed merger of Bank of Gonzales Holding Company,
Inc., Gonzales, Louisiana with Deposit Guaranty Corp., Jackson, Mississippi,
the undersigned, acting as an independent financial analyst to the common
shareholders of Bank of Gonzales Holding Company, Inc., hereby consents to the
reference to our firm in the S-4 Registration Statement and to the inclusion of
our fairness opinion as an exhibit to the S-4 Registration Statement.
ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
AUSTIN, TEXAS
April 26, 1996
<PAGE> 1
EXHIBIT 99 - FORM OF PROXY
[FORM OF PROXY]
BANK OF GONZALES HOLDING COMPANY, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE BANK OF GONZALES HOLDING COMPANY, INC.
The undersigned shareholder of Bank of
Gonzales Holding Company, Inc. ("Gonzales Holding "), a Louisiana corporation,
hereby constitutes and appoints____ and ____, or either of them, proxies of the
undersigned, with power of substitution, to represent the undersigned, and to
vote all of the shares of Gonzales Holding Common Stock that the undersigned is
entitled to vote at the Special Meeting of Shareholders of Gonzales Holding
which will be held at the [Holiday Inn - Gonzales at 1500 West Highway 30,
Gonzales, Louisiana]., on __, 1996, at __ (the "Special Meeting"), and at any
adjournments or postponements thereof.
THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED AS DIRECTED HEREIN BY THE SHAREHOLDER. IF NO DIRECTION IS
SPECIFIED WHEN THE DULY EXECUTED PROXY IS RETURNED, SUCH SHARES WILL BE VOTED
"FOR" PROPOSAL 1 SET FORTH HEREIN .
The Board of Directors of Gonzales
Holding recommends that you vote "FOR" approval of the Agreement and Plan of
Merger.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
<PAGE> 2
PLEASE MARK YOUR CHOICE LIKE
THIS [x] IN BLUE OR BLACK INK
Item 1. A proposal to approve an Agreement and Plan of Merger, dated
as of February 5, 1996 (the "Merger Agreement"), by and among
Deposit Guaranty Corp., a Mississippi corporation ("Deposit
Guaranty"), Commercial National Corporation ("CNC"), a
Louisiana corporation and a wholly-owned subsidiary of Deposit
Guaranty, and Citizens National Bank ("Citizens Bank"), a
national bank and a wholly-owned subsidiary of CNC, on the one
hand, and Gonzales Holding, and its wholly-owned subsidiary,
Bank of Gonzales ("Gonzales Bank"), a Louisiana state bank, on
the other hand, pursuant to which (a) Gonzales Holding will
merge into CNC and Gonzales Bank will merge into Citizens
Bank, and (b) each outstanding share of Gonzales Holding
common stock will be converted into shares of Deposit Guaranty
common stock in accordance with the terms of the Merger
Agreement.
For Against Abstain
[ ] [ ] [ ]
Item 2. In their discretion, to vote upon such other business as may
properly come before the meeting or any adjournment thereof.
The undersigned hereby acknowledges receipt of a copy of the
accompanying Notice of Special Meeting of Shareholders and Proxy
Statement/Prospectus and hereby revokes any proxy or proxies heretofore given.
Date
------------------------------
Signature
-------------------------
Please mark, date and sign as your name appears and return in the enclosed
envelope. If acting as executor, administrator, trustee, guardian or in a
similar capacity, you should so indicate when signing. If the person signing
is a corporation, partnership or other entity, please sign the full name of the
corporation, partnership or other entity by a duly authorized officer, partner
or other person. If the shares are held jointly, each shareholder named should
sign.
