<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1996 Commission file number 0-4518
DEPOSIT GUARANTY CORP.
----------------------
(Exact name of registrant as specified in its charter)
MISSISSIPPI 64-0472169
----------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
210 EAST CAPITOL STREET, JACKSON, MS 39201
------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (601) 354-8564
--------------
Securities registered pursuant to Section 12(b) of the Act: NONE
----
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
--------------------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of the
Form 10-K or any amendment to this Form 10-K. [X]
Aggregate market value of voting stock held by nonaffiliates of the Registrant
as of March 3, 1997: $1,083,820,988.
Common stock, no par value, outstanding as of March 3, 1997: 40,778,218 shares
Portions of the Proxy Statement of Registrant for the Annual Meeting of
Shareholders to be held on April 15, 1997, are incorporated in Parts III and IV
of this report.
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<PAGE> 2
CROSS REFERENCE INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I Item 1 Business 4-7
Statistical data required by Exchange
Act Guide 3 and Securities Act Guide
3 included in Management's Discussion
and Analysis 9-28
Item 2 Properties 7
Item 3 Legal Proceedings 8
Item 4 There has been no submission of matters to a
vote of shareholders during the quarter ended
December 31, 1996.
PART II Item 5 Market for Registrant's Common Equity
and Related Stockholder Matters 24,28
Item 6 Selected Financial Data 9
Item 7 Management's Discussion and Analysis
of Financial Condition and Results
of Operation 9-28
Item 8 Financial Statements and
Supplementary Data:
Consolidated Statements of Condition -
December 31, 1996 and 1995 29
Consolidated Statements of Earnings -
Years Ended December 31, 1996,
1995, and 1994 30
Consolidated Statements of Changes in
Stockholders' Equity - Years
Ended December 31, 1996, 1995,
and 1994 31
Consolidated Statements of Cash Flows -
Years Ended December 31, 1996,
1995, and 1994 32
Notes to Consolidated Financial Statements 33-46
Independent Auditors' Report 47
Item 9 There has been no disagreement with
accountants on accounting and financial
matters.
</TABLE>
<PAGE> 3
CROSS REFERENCE INDEX
<TABLE>
<S> <C>
PART III Item 10 Directors and Executive Officers of the
Registrant 6,7,*
Item 11 Executive Compensation *
Item 12 Security Ownership of Certain Beneficial
Owners and Management *
Item 13 Certain Relationships and Related
Transactions *
PART IV Item 14 Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
(a)(1) Financial Statements (See Item 8
for reference)
(2) Financial Statement Schedules normally
required on Form 10-K are omitted since
they are not applicable.
(3) Exhibit index is on page 51 of this
Form 10-K and exhibits are filed
herewith.
(b) No reports on Form 8-K were filed
during the last quarter of the period
covered by this report.
(c) The response to this portion of Item 14
is submitted as a separate section of
this report.
(d) Not applicable
</TABLE>
* Information called for by Part III (Items 10 through 13) is incorporated
by reference to the Registrant's Proxy Statement for the 1997 Annual
Meeting of Shareholders filed with the Securities and Exchange Commission.
<PAGE> 4
BUSINESS
General
Deposit Guaranty Corp. (the "Company") is a Mississippi business
corporation organized in 1968 as a bank holding company registered under the
Bank Holding Company Act of 1956, as amended and is headquartered in Jackson,
Mississippi. During 1996, the Company conducted its business through its
banking subsidiaries, the largest of which are the 98%-owned Deposit Guaranty
National Bank ("Deposit Guaranty") with $4.5 billion in assets and the
100%-owned Commercial National Bank (Commercial) with $1.2 billion in assets,
two other banking subsidiaries and its various bank-related subsidiaries.
Through its subsidiaries, which includes 205 banking offices, the Company
serves customers primarily in Mississippi, Louisiana, and Arkansas, offering
complete banking, mortgage banking, discount brokerage and trust services. The
Company also provides mortgage banking services in Texas, Nebraska and Oklahoma
through two of its subsidiaries.
On June 29, 1996, the Company purchased Bank of Gonzales Holding
Company, a $126 million asset bank holding company located in Gonzales,
Louisiana in a transaction accounted for as a purchase business combination.
The results of operations of this acquired company, which are not material, are
included in the 1996 financial statements from the date of acquisition.
On June 29, 1996, the Company purchased McAfee Mortgage and Investment
Company, located in Lubbock, Texas, in a transaction accounted for as a
purchase business combination. McAfee Mortgage and Investment Company has
fifteen offices located throughout Texas and originated approximately $240
million in mortgage loans in 1995. The results of operations of this acquired
company which are not material, are included in the 1996 financial statements
from the date of acquisition
On November 1, 1996, the Company purchased Tuscaloosa Bancshares,
Inc., a bank holding company with approximately $41 million in total assets
located in Denham Springs, Louisiana in a transaction accounted for as a
purchase business combination. The results of operations of this acquired
company, which are not material, are included in the 1996 financial statements
beginning July 1, 1996.
On December 26, 1996, a definitive agreement was reached to acquire
First Capital Bancorp., Inc., a bank holding company located in Monroe,
Louisiana with approximately $186 million in total assets. The transaction,
which will be accounted for as a pooling of interests, is subject to the
approval of the stockholders of First Capital Bancorp., Inc. and regulatory
authorities and is expected to be consummated during the first quarter of 1997.
On January 3, 1997, the acquisition of Jefferson Guaranty Bancorp, a
one bank holding company, located in Metairie, Louisiana, with approximately
$300 million in total assets was consummated. The Company paid a combination of
1,759,688 shares its common stock and $10 million in cash for all of the
outstanding common stock of Jefferson Guaranty Bancorp. The transaction was
accounted for as a purchase business combination.
On February 20, 1997, a definitive agreement was reached to acquire
NBC Financial Corporation, a bank holding company located in Baton Rouge,
Louisiana with approximately $70 million in total assets. The transaction,
which will be accounted for as a purchase business combination, is subject to
the approval of the stockholders of NBC Financial Corporation and regulatory
authorities and is expected to be consummated during the second quarter of
1997.
During the first quarter of 1997, the Board of Directors of the
Company approved a plan to merge Deposit Guaranty National Bank into Deposit
Guaranty Interim National Bank, a newly formed subsidiary. Each outstanding
share of Deposit Guaranty National Bank common stock will be exchanged for
9.667 shares of Company common stock. The Company owns all of the shares of
Deposit Guaranty Interim National Bank and 97.9% of the shares of Deposit
Guaranty National Bank. The Company's Board of Directors has also authorized
the purchase of all or part of the Company's common shares to be exchanged as
part of the acquisition. The acquisition is expected to be consummated during
the second quarter of 1997.
During the first quarter of 1997, the Board of Directors of the Company
approved the use of an accelerated share repurchase program with a third party
as a means of accomplishing previously approved and future share repurchases in
connection with specific purchase business combinations.
<PAGE> 5
SUPERVISION AND REGULATION
As a bank holding company, the Company's activities and those of its
banking and nonbanking subsidiaries are limited to the business of banking and
activities closely related or incidental to banking. The Company may not
directly or indirectly acquire the ownership or control of more than 5% of any
class of voting shares or substantially all of the assets of any company,
including a bank, without the prior approval of the Federal Reserve Board.
The Company's subsidiary banks are subject to supervision and
examination by the Office of the Comptroller of the Currency ("OCC"). All of
the Company's subsidiary banks are insured by, and therefore subject to the
regulations of, the Federal Deposit Insurance Corporation ("FDIC"), and are
also subject to requirements and restrictions under federal law, including
requirements to maintain reserves against deposits, restrictions on the types
and amounts of loans that may be granted and the interest that may be charged
thereon, and limitations on the types of investments that may be made and the
types of services that may be offered. Other federal and state laws and
regulations also affect the operations of the Company's subsidiaries.
The Company's subsidiary banks are subject to restrictions under
federal law applicable to certain transactions between each of them and the
Company and its nonbanking subsidiaries, including loans, other extensions of
credit, investments or asset purchases. Such transactions between any
subsidiary bank and the Company or any nonbanking subsidiary are limited in
amount to 10% of such subsidiary bank's capital and surplus. The total of such
transactions between any subsidiary bank and the Company and certain of its
affiliates, with certain exceptions, is limited to an aggregate of 20% of such
subsidiary bank's capital and surplus. Furthermore, loans and extensions of
credit from a subsidiary bank to the Company or its nonbank affiliates are
required to be secured in specified amounts by specified types of collateral.
At December 31, 1996, the banks could lend the Company a maximum of
approximately $33.0 million in aggregate.
As a result of the enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act ("FIRREA") on August 9, 1989, a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC in connection with (i) the
default of a commonly controlled FDIC-insured depository institution or (ii)
any assistance provided by the FDIC to a commonly controlled depository
institution in danger of default if the FDIC notifies the depository
institution within two years of incurring such loss. Under Federal Reserve
policy, the Company is expected to act as a source of financial strength to
each of its subsidiary banks and to commit resources to support each such
subsidiary.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") provides criteria for categorizing the capital strength of FDIC
insured depository institutions. FDICIA substantially revises the depository
institution regulatory and funding provisions of the Federal Deposit Insurance
Act and makes revisions to several other federal banking statutes. The
Company's insured depository institutions have been categorized as "well
capitalized" under the guidelines of FDICIA.
The Company's subsidiary banks are subject to FDIC deposit insurance
assessments. These insured depository institutions qualified for the lowest
assessment allowed by FDICIA. Beginning in 1997, the FDIC will assess
the banks only for the purpose of retiring debt of the Financing Corporation
(FICO). This assessment will be charged at an annual rate of $.013 of Bank
Insurance Fund deposits.
<PAGE> 6
During 1996, the Company and its subsidiaries were engaged in the
general banking business and activities closely related to banking or to
managing or controlling banks, as authorized by the laws of the United States
and regulations pursuant thereto. The Company's banking subsidiaries comprise
more than 99% of the related combined revenue, profits and assets of all
industry segments of the Company.
COMPETITION
The Company is a leader in the majority of its markets. Deposit
Guaranty, located throughout Mississippi, is the second largest bank in
Mississippi. Commercial is the sixth largest bank in Louisiana.
There are numerous other banks and financial institutions which
compete with the Company and its subsidiaries in making loans, accepting
deposits, providing credit, and performing other banking services. The Company
also competes with other providers of financial services, such as investment
companies, brokerage firms, finance companies and insurance companies, which
are involved in marketing various types of loans, investments and other
services. For information regarding industry segments see "Management's
Discussion and Analysis."
PERSONNEL
On December 31, 1996, the Company and its subsidiaries had
approximately 3,193 full-time equivalent employees.
EXECUTIVE OFFICERS OF THE REGISTRANT
The chart provided below contains certain information concerning the
executive officers of the Company and its principal subsidiaries.
<TABLE>
<CAPTION>
Position(s) And Office(s)
Held With the Company Assumed
Name Age And Subsidiaries Present Office(s)
---- --- ---------------- -----------------
<S> <C> <C> <C>
E. B. Robinson, Jr. 55 Chairman of the Board and January 1, 1984
Chief Executive Officer
of the Company and Deposit
Guaranty
Howard L. McMillan, Jr. 58 President and Chief January 1, 1984
Operating Officer of the
Company and Deposit
Guaranty
Thomas M. Hontzas 52 Executive Vice President May 18, 1982
of the Company and
Deposit Guaranty
</TABLE>
(Continued)
<PAGE> 7
<TABLE>
<CAPTION>
Position(s) And Office(s)
Held With the Company Assumed
Name Age And Subsidiaries Present Office(s)
---- --- ---------------- -----------------
<S> <C> <C> <C>
W. Parks Johnson 54 Executive Vice President February 16, 1994
of the Company and
Deposit Guaranty
James S. Lenoir 54 Executive Vice President February 15, 1983
and Chief Credit Officer
of the Company and Deposit
Guaranty
Arlen L. McDonald 48 Executive Vice President March 16, 1976
and Chief Financial
Officer of the Company
and Deposit Guaranty
W. Stanley Pratt 51 Executive Vice President September 30, 1996
of the Company and
Deposit Guaranty
Steven C. Walker 47 Executive Vice President September 30,1996
of the Company and
Deposit Guaranty
Stephen E. Barker 40 Controller and Principal February 16, 1993
Accounting Officer of the
Company and Deposit Guaranty
J. Clifford Harrison 43 General Counsel and January 1, 1996
Secretary of the Company
and Deposit Guaranty
</TABLE>
All executive officers have held executive or senior management positions
with the Company or its principal subsidiaries for more than five years.
ITEM 2. PROPERTIES
The Company has its principal office in Deposit Guaranty Plaza ("Plaza"),
210 East Capitol Street, Jackson, Mississippi, a twenty-two story office tower.
The Company owns the Plaza in addition to the building ("Building") at 200 East
Capitol Street, Jackson, Mississippi, adjacent to the Plaza. The building,
completed in its present form in 1958, was renovated during 1975. Both the
Plaza and the Building are occupied by the Company, Deposit Guaranty, and
various tenants. Deposit Guaranty Mortgage Company is also located in the
Building.
<PAGE> 8
The Company also owns the Commercial Center, located in downtown
Shreveport, Louisiana, at 333 Texas Street. The complex is occupied by
Commercial and various tenants. Commercial Center is comprised of a twenty-four
story office tower which was placed in service in 1986, a fifteen story office
building constructed in 1940, and an adjoining parking garage which was
completed in 1986.
Deposit Guaranty owns 121 of its 139 full-service branch banking
facilities. The remaining branch banking facilities as well as its mortgage
branch facilities are occupied under leases expiring from 1997 through 2024.
The Company also holds fee title to 5 tracts of land held as locations for
additional banking facilities in the future.
The Company's management considers all of its buildings and leased
premises to be in good condition. None of the properties described above are
subject to any significant encumbrances.
ITEM 3. LEGAL PROCEEDINGS
The Company's subsidiary, Deposit Guaranty National Bank (DGNB), is a
defendant in a case in which the plaintiffs are some of the beneficiaries of a
trust for which DGNB is the trustee. In an amended complaint, the plaintiffs
claim that DGNB was negligent in its dealings with the trust property, breached
its trust duties by allegedly abusing its discretion and negligently handling
trust assets, engaged in self dealing, and was grossly negligent in its handling
of the trusts. The case seeks actual damages for waste of trust assets and loss
of income and punitive damages, both in an unspecified amount to be proven at
trial, and attorney fees and court costs. While the ultimate outcome of the
lawsuit cannot be predicted with certainty, management denies all liability and
believes that the ultimate resolution of this matter will not have a material
effect on the Company's consolidated financial statements.
In addition, the Company is subject to numerous other pending and
threatened legal actions arising in the normal course of business and
management believes that the ultimate resolution of these matters will not have
a material effect on the Company's consolidated financial statements.
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
Deposit Guaranty Corp.
<TABLE>
<CAPTION>
TABLE 1 - SELECTED FINANCIAL DATA
(In Thousands Except Share Data) Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statements of earnings
Interest income $ 432,222 $ 402,704 $ 307,272 $ 299,327 $ 322,114
Interest expense 182,688 173,432 125,881 124,687 155,459
Net interest income 249,534 229,272 181,391 174,640 166,655
Provision for possible loan losses 5,340 2,160 (4,750) (16,000) 10,378
- ------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for
possible loan losses 244,194 227,112 186,141 190,640 156,277
Other operating income 117,245 91,989 93,499 74,781 67,977
Other operating expenses 237,208 211,452 180,047 171,567 164,470
- ------------------------------------------------------------------------------------------------------------------------
Income before income taxes 124,231 107,649 99,593 93,854 59,784
Income tax expense 40,621 35,029 32,463 27,302 14,270
- ------------------------------------------------------------------------------------------------------------------------
Net income $ 83,610 $ 72,620 $ 67,130 $ 66,552 $ 45,514
========================================================================================================================
Net income per share
Primary $ 2.16 $ 1.89 $ 1.90 $ 1.89 $ 1.34
Fully diluted 2.16 1.89 1.90 1.89 1.30
Cash dividends per share .715 .605 .530 .465 .400
Weighted average shares outstanding
Primary 38,760,192 38,431,162 35,336,124 35,299,704 34,067,328
Fully diluted 38,760,192 38,431,162 35,336,124 35,299,704 34,930,564
Statement of condition - averages
Total assets $ 6,026,548 $ 5,571,697 $ 4,940,977 $ 4,826,726 $ 4,777,596
Earning assets 5,395,343 4,961,261 4,413,938 4,333,740 4,275,345
Securities available for sale 1,293,830 186,194 712,184 1,308,634 --
Investment securities 130,255 1,365,070 718,891 396,011 1,616,658
Loans, net of unearned income 3,774,490 3,273,408 2,581,724 2,293,416 2,261,034
Deposits 4,750,894 4,438,797 3,997,038 3,867,669 3,876,927
Long-term debt 67,888 -- -- -- 6,320
Total stockholders' equity 551,754 498,023 429,967 367,592 315,833
Selected ratios
Return on average assets 1.39% 1.30% 1.36% 1.38% .95%
Return on average equity 15.15 14.58 15.61 18.10 14.41
Net interest margin - tax equivalent 4.77 4.75 4.24 4.18 4.12
Efficiency ratio 63.35 64.62 64.22 67.23 67.68
Loans to deposits 79.45 73.75 64.59 59.30 58.32
Allowance for possible loan losses to
loans, net of unearned income 1.56 1.64 1.95 2.56 3.30
Net charge-offs (recoveries) to average
loans, net of unearned income .10 .12 .10 (.14) 1.02
Dividend payout 33.10 32.01 27.89 24.67 29.96
Average equity to average assets 9.15 8.94 8.70 7.62 6.61
Leverage ratio 8.23 7.87 8.43 8.13 6.80
Tier I risk-based 11.42 11.05 12.49 13.28 12.00
Total risk-based 12.67 12.30 13.75 14.54 13.27
</TABLE>
All share data reflects a 2 for 1 stock split declared in 1996.
The dividend payout ratio is calculated using historical Deposit Guaranty
Corp. dividends per share.
FINANCIAL REVIEW
This section of the Annual Report reviews the results of operations and
assesses the financial condition of Deposit Guaranty Corp. (the Company). This
discussion should be read in conjunction with the consolidated financial
statements included in this Annual Report.
Net income for 1996 achieved record levels both in total and on a per-share
basis. The Company's reported net income of $83.6 million for 1996 was 15%
greater than that reported for 1995. On a per share basis, earnings increased
14% over the same period to $2.16. Several factors contributed to the favorable
results including increases in earning assets and fee income.
<PAGE> 10
TABLE 2 - SUMMARY OF QUARTERLY RESULTS
(In Thousands Except Share Data)
The summary of quarterly results of operations is presented in the following
table.
<TABLE>
<CAPTION>
Quarter Ended
- ------------------------------------------------------------------------------------------------
Dec. 31 Sept. 30 June 30 March 31
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Interest income $ 111,877 $ 110,751 $ 104,723 $ 104,871
Net interest income 65,637 64,745 59,988 59,164
Provision for possible loan losses 1,335 1,335 1,335 1,335
Gains (losses) on securities available for sale (67) 6 487 (414)
Income before income taxes 29,134 33,492 30,515 31,090
Net income 19,485 22,200 20,436 21,489
Net income per share .50 .57 .53 .56
1995
Interest income $ 107,669 $ 104,007 $ 98,786 $ 92,242
Net interest income 61,352 58,453 55,717 53,750
Provision for possible loan losses 120 1,040 1,000 --
Gains (losses) on securities available for sale 831 69 24 (5)
Income before income taxes 25,121 30,761 25,398 26,369
Net income 16,563 20,711 17,374 17,972
Net income per share .42 .55 .45 .47
</TABLE>
- --------------------------------------------------------------------------------
Return on average assets and return on average equity rose 9 basis points to
1.39% and 57 basis points to 15.15%, respectively, from 1995 to 1996.
The volume of earning assets continued to rise throughout 1996 due to both
acquisitions and growth in deposits in existing markets. Earning asset growth
was concentrated in loans as strong demand continued throughout 1996. Although
only slightly higher than 1995, the net interest margin remains strong and,
combined with a 9% increase in average earning assets, produced a steady
increase in net interest income.
At the end of 1996, total assets were $6.4 billion which represents an
increase of 6%, or $357 million, from December 31, 1995. Average total assets
for 1996 increased 8%, or $455 million, from 1995.
Capital ratios remain well above the minimum regulatory guidelines. The
leverage ratio at December 31, 1996, was 8.23% compared to 7.87% for 1995. Tier
I capital and total risk-based capital ratios at year-end 1996 were 11.42% and
12.67%, respectively. The capital ratios of each of the Company's banking
subsidiaries categorize them as "well capitalized" according to the Federal
Deposit Insurance Corporation Improvement Act of 1991 (FDICIA).
In the fourth quarter, plans were announced to consolidate the four banking
subsidiaries under one charter pursuant to the Riegle-Neal Interstate Banking
and Branching Efficiency Act of 1994 (Riegle-Neal), which becomes effective on
June 1, 1997. Prior to Riegle-Neal, bank holding companies with multi-state
operations were required to operate under a separate banking charter in each
state. Included in results of operations for 1996 is an after-tax charge of
$2.4 million for costs associated with the Company's consolidation plans which
are expected to be completed by the end of the third quarter of 1997. The
benefits of consolidation include streamlining management and consolidation of
back-office operations.
Identification of the changes in the significant components of earnings from
quarter-to-quarter aids in understanding the results of operations. Loan growth
throughout 1996, increasing yields in the securities portfolio, and an increase
in interest-earning assets due to acquisitions contributed to the increase in
net interest income in the third and fourth quarters. In the first quarter,
$1.8 million in after-tax gains were realized from the disposition of assets
related to expired lease financing transactions. In the fourth quarter, the
Company recorded an after-tax charge of $2.4 million for the estimated cost of
the planned consolidation of its subsidiary banks.
<PAGE> 11
TABLE 3 - COMPARATIVE AVERAGE BALANCES - YIELDS AND RATES
(Dollars in Thousands)
The following table shows the major categories of interest-earning assets
and interest-bearing liabilities with their corresponding average balances,
related interest income or expense and the resulting yield or rate for 1996,
1995 and 1994.
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
Interest Average Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Assets Balance Expense Rate Balance Expense Rate Balance Expense Rate
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans, net of unearned
income $3,774,490 $329,426 8.73% $3,273,408 $289,659 8.85% $2,581,724 $206,280 7.99%
Investment securities:
Taxable 130,250 10,467 8.04 1,256,785 87,896 6.99 609,604 41,511 6.81
Exempt from Federal
income tax 5 2 10.75 108,285 11,664 10.77 109,287 11,876 10.87
Securities available
for sale:
Taxable 1,115,168 72,576 6.51 169,316 10,095 5.96 710,738 36,353 5.11
Exempt from Federal
income tax 178,662 16,602 9.29 16,878 1,415 8.38 1,446 118 8.16
Trading account
securities 6,394 511 7.99 5,758 445 7.73 4,714 322 6.83
Federal funds sold and
securities purchased
under agreements
to resell 184,757 9,989 5.41 107,529 6,317 5.87 269,432 11,111 4.12
Interest-bearing
bank balances 5,617 325 5.79 23,302 1,153 4.95 126,993 5,184 4.08
- -------------------------------------------------------------------------------------------------------------------------------
Total interest-earning
assets 5,395,343 439,898 8.15 4,961,261 408,644 8.24 4,413,938 312,755 7.09
Noninterest-earning assets:
Cash and due from banks 302,696 327,200 298,143
Bank premises and
equipment 147,076 142,750 128,862
Other assets 235,543 194,437 144,857
Allowance for possible
loan losses (60,001) (59,126) (61,178)
Unrealized gain on securities
available for sale 5,891 5,175 16,355
- -------------------------------------------------------------------------------------------------------------------------------
Total assets $6,026,548 $5,571,697 $4,940,977
===============================================================================================================================
</TABLE>
For purposes of these computations, nonaccruing loans are included in the
daily average loan amounts outstanding. Interest income and average yield on
tax-exempt assets have been calculated on a fully tax equivalent basis using a
tax rate of 35% for all years.
- --------------------------------------------------------------------------------
During 1995, loan growth throughout each quarter combined with a general
increase in interest-earning assets contributed to the increase in net interest
income. The Company recorded a provision for possible loan losses of $1 million
for both the second and third quarters primarily as a result of loan growth. In
the third quarter, a $2.7 million refund of insurance premiums was recorded as
a result of the FDIC lowering the premium rate on insured deposits. In the
fourth quarter, a charge of $3.5 million was recorded for the estimated cost of
a proposed settlement of a class action suit concerning collateral protection
insurance. The suit was settled with no additional expense incurred in 1996.
Much of the growth during the past three years comes from strategic
acquisitions in new markets and acquisitions designed to enhance the Company's
presence in existing markets. The
<PAGE> 12
TABLE 3 - COMPARATIVE AVERAGE BALANCES - YIELDS AND RATES (continued)
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Average Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Liabilities Balance Expense Rate Balance Expense Rate Balance Expense Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing liabilities:
Savings and interest-bearing
transaction deposits $1,843,150 $ 47,809 2.59% $1,710,218 $ 47,807 2.80 $1,592,776 $ 37,369 2.35%
Time deposits 1,915,637 103,566 5.41 1,773,437 95,833 5.40 1,528,590 71,947 4.71
Federal funds purchased,
securities sold under
agreements to repurchase
and other short-term
borrowings 545,735 27,222 4.99 555,193 29,792 5.37 452,610 16,565 3.66
Long-term debt 67,888 4,091 6.03 -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 4,372,410 182,688 4.18 4,038,848 173,432 4.29 3,573,976 125,881 3.52
Noninterest-bearing
liabilities:
Deposits 992,107 955,142 875,672
Other liabilities 110,277 79,684 61,362
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 5,474,794 5,073,674 4,511,010
Stockholders' equity 551,754 498,023 429,967
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $6,026,548 $5,571,697 $4,940,977
====================================================================================================================================
Net interest income/
margin - tax
equivalent 257,210 4.77% 235,212 4.75% 186,874 4.24%
- ------------------------------------------------------------------------------------------------------------------------------------
Tax equivalent adjustment:
Loans 2,361 1,917 1,846
Investment securities 1 3,484 3,559
Securities available for sale 5,219 448 14
Other 95 91 64
- ------------------------------------------------------------------------------------------------------------------------------------
Total tax equivalent
adjustment 7,676 5,940 5,483
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income $ 249,534 $229,272 $181,391
====================================================================================================================================
</TABLE>
following table briefly outlines each of the mergers completed during the past
three years:
<TABLE>
<CAPTION>
Financial Total Assets Merger Accounting
Institution State (Millions) Date Treatment
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Columbus
Financial Corporation MS $209 May 1994 Purchase
LBO Bancorp, Inc. LA 96 Jan. 1995 Purchase
Citizens National
Bancshares LA 193 May 1995 Pooling
First Merchants
Financial Corp. AR 280 Aug. 1995 Purchase
Bank of Gonzales
Holding Company LA 126 June 1996 Purchase
Tuscaloosa
Bancshares, Inc. LA 41 Nov. 1996 Purchase
</TABLE>
In addition to the above mergers, the Company purchased the Coahoma
County, Mississippi operations of a local Mississippi bank in March 1995,
adding $82 million in assets.
On August 8, 1995, the purchase of First Mortgage Corp., located in Omaha,
Nebraska, was completed. This acquisition was accounted for as a purchase
business combination. First Mortgage Corp. had a $1.1 billion mortgage
servicing portfolio and six production offices in Nebraska and Oklahoma.
On June 29, 1996, the Company purchased McAfee Mortgage and Investment
Company, located in Lubbock, Texas, in a transaction accounted for as a
purchase business combination. McAfee Mortgage and Investment Company has 15
offices located throughout Texas and originated approximately $240 million in
mortgage loans in 1995.
<PAGE> 13
TABLE 4 - TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS
(In Thousands)
The following table sets forth, for the periods indicated, a summary of
the changes in interest income and expense resulting from changes in volume and
changes in rates.
<TABLE>
<CAPTION>
1996 Compared To 1995 1995 Compared To 1994
Increase (Decrease) Due To Increase (Decrease) Due To
- --------------------------------------------------------------------------------------------------------------------------
Volume Rate Net Volume Rate Net
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income on:
Loans $ 44,340 $(4,573) $ 39,767 $ 55,266 $ 28,113 $ 83,379
Investment securities:
Taxable (78,787) 1,358 (77,429) 44,070 2,315 46,385
Exempt from Federal income tax (11,663) 1 (11,662) (109) (103) (212)
Securities available for sale:
Taxable 56,394 6,087 62,481 (27,693) 1,435 (26,258)
Exempt from Federal income tax 13,546 1,641 15,187 1,260 37 1,297
Trading account securities 50 16 66 71 52 123
Federal funds sold and securities purchased
under agreements to resell 4,537 (865) 3,672 (6,677) 1,883 (4,794)
Interest-bearing bank balances (875) 47 (828) (4,233) 202 (4,031)
- --------------------------------------------------------------------------------------------------------------------------
Total 27,542 3,712 31,254 61,955 33,934 95,889
- --------------------------------------------------------------------------------------------------------------------------
Interest expense on:
Savings and interest-bearing transaction deposits 3,716 (3,714) 2 2,755 7,683 10,438
Time deposits 7,684 49 7,733 11,524 12,362 23,886
Federal funds purchased, securities sold
under agreements to repurchase, and other
short-term borrowings (508) (2,062) (2,570) 3,754 9,473 13,227
Long-term debt 4,091 -- 4,091 -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total 14,983 (5,727) 9,256 18,033 29,518 47,551
- --------------------------------------------------------------------------------------------------------------------------
Changes in net interest income - tax equivalent $ 12,559 $ 9,439 $ 21,998 $ 43,922 $ 4,416 $ 48,338
==========================================================================================================================
</TABLE>
The increase (decrease) due to changes in average balances reflected in
the above table was calculated by applying the preceding year's rate to the
current year's change in the average balance. The increase (decrease) due to
changes in average rates was calculated by applying the current year's change
in the average rates to the current year's average balance. Using this method
of calculating increases (decreases), any increase or decrease due to both
changes in average balances and rates is reflected in the changes attributable
to average rate changes.
- --------------------------------------------------------------------------------
A brief description of merger agreements which have been entered into by
the Company but were not completed at December 31, 1996, follows:
On January 3, 1997, the acquisition of Jefferson Guaranty Bancorp, a
one-bank holding company, located in Metairie, Louisiana, with approximately
$300 million in total assets was consummated. The Company paid a combination of
1.8 million shares of its common stock and $10 million in cash for all of the
outstanding common stock of Jefferson Guaranty. The transaction was accounted
for as a purchase business combination.
On December 26, 1996, a definitive agreement was reached to acquire First
Capital Bancorp, Inc., a bank holding company located in Monroe, Louisiana,
with approximately $186 million in total assets. The transaction, which will be
accounted for as a pooling of interests, is subject to the approval of the
stockholders of First Capital Bancorp, Inc. and regulatory authorities and is
expected to be consummated during the first quarter of 1997.
On February 20, 1997, a definitive agreement was reached to acquire NBC
Financial Corporation, a bank holding company located in Baton Rouge,
Louisiana, with approximately $70 million in total assets. The transaction,
which will be accounted for as a purchase business combination, is subject to
the approval of the stockholders of NBC Financial Corporation and regulatory
authorities and is expected to be consummated during the second quarter of
1997.
NET INTEREST INCOME
Net interest income is the largest component of net income and represents
the income earned on interest-earning assets less the cost of interest-bearing
liabilities. This major source of income represents the earnings from the
primary business of gathering funds from deposit and other sources and
investing those funds in loans and securities. The long-term objective is to
manage those assets and liabilities to provide the largest possible amount of
income, while balancing interest-rate, credit, liquidity and capital risks.
<PAGE> 14
TABLE 5 - INTEREST SENSITIVITY
(In Thousands)
The following table reflects the interest sensitivity of the Company over
various periods as of December 31, 1996, based on contractual maturities as of
that date.
<TABLE>
<CAPTION>
0-3 4-12 1-5 Over 5
Months Months Years Years Total
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Loans, net of unearned income $ 808,872 $ 955,791 $ 1,651,083 $ 564,131 $3,979,877
Investment securities 300 -- 2,169 142,618 145,087
Securities available for sale 2,863 5,088 621,202 832,885 1,462,038
Trading account securities 2,505 -- -- -- 2,505
Federal funds sold and securities
purchased under agreements to resell 47,640 -- -- -- 47,640
Interest-bearing bank balances 1,732 -- -- -- 1,732
- -------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 863,912 960,879 2,274,454 1,539,634 5,638,879
Noninterest-earning assets -- -- -- 744,018 744,018
- -------------------------------------------------------------------------------------------------------------------
Total assets $ 863,912 $ 960,879 $ 2,274,454 $ 2,283,652 $6,382,897
===================================================================================================================
Liabilities and stockholders' equity
Interest-bearing liabilities:
Savings deposits $ 1,905,636 $ -- $ -- $ -- $1,905,636
Time deposits 529,823 862,800 555,634 10,942 1,959,199
Short-term borrowings 543,029 -- -- -- 543,029
Long-term debt -- -- -- 99,405 99,405
- -------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 2,978,488 862,800 555,634 110,347 4,507,269
Noninterest-bearing deposits 302,770 81,963 319,286 456,895 1,160,914
Other liabilities -- -- -- 133,448 133,448
Stockholders' equity -- -- -- 581,266 581,266
- -------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $ 3,281,258 $ 944,763 $ 874,920 $ 1,281,956 $6,382,897
===================================================================================================================
Interest rate contracts $ 477,041 $ (101,015) $ (306,847) $ (69,179)
Interest sensitive gap (1,940,305) (84,899) 1,092,687 932,517
Cumulative interest sensitive gap (1,940,305) (2,025,204) (932,517) --
Cumulative interest sensitive gap
as a percent of total assets (30.40)% (31.73)% (14.61)% --
</TABLE>
- --------------------------------------------------------------------------------
Net interest income is presented in this discussion on a tax-equivalent
basis, so that the income from assets exempt from federal income taxes is
adjusted based on a statutory marginal federal income tax rate of 35%. The tax
equivalent net interest margin (margin) provides an indication of the
efficiency of the earnings from balance-sheet activities and is calculated by
dividing the tax-equivalent net interest income by the average balance of
interest-earning assets. The margin is affected by changes in the spread
between interest-earning asset yields and interest-bearing liability costs
(interest spread) and by the percentage of interest-earning assets funded by
interest-bearing liabilities (liability funding).
Tax equivalent net interest income increased $22 million, or 9%, primarily
due to a 9% increase in the level of interest-earning assets, funded by a 7%
increase in deposit balances. Continued strong loan demand improved the earning
asset mix and further contributed to the favorable results in net interest
income as average loans increased as a percentage of average earning assets to
70% in 1996 from 66% in 1995. As a result of the improving asset mix, the
margin increased 2 basis points from 1995 to 4.77% in 1996.
Interest rates on both earning assets and interest-bearing liabilities
declined reflecting the lower average market rate environment in 1996. Loan
yields fell 12 basis points from 1995 and the securities portfolio yield
declined 16 basis points to 7.00%. The improvement in asset mix partially
offset these decreases resulting in only a 9 basis point decline in the yield
on average earning assets from 1995 to 1996. The decline in
<PAGE> 15
TABLE 6 - RISK MANAGEMENT DERIVATIVE POSITION
(Dollars in Thousands)
The following table identifies the year end open positions for the
Company's risk management interest rate contracts at December 31, 1996.
<TABLE>
<CAPTION>
Pay Rate Receive Rate
Fair ----------------------------------- Underlying
Maturity Notional Value Rate Index Rate Index Asset/Liability
- --------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
Interest rate swaps
Pay fixed:
2007 $ 22,622 $ (182) 6.65% Fixed 5.56% Libor Mortgage loans
Receive fixed:
2006 100,000 1,789 5.56 Libor 6.94 Fixed Long-term debt
Interest rate caps
1997 100,000 7 6.88 -- -- -- Time deposits
Interest rate floors
1998 50,000 21 5.00 -- -- -- Commercial loans
2000 65,000 1,054 6.00 -- -- -- Commercial loans
2001 185,000 1,739 5.25 -- -- -- Commercial loans
</TABLE>
- --------------------------------------------------------------------------------
average yield on earning assets, however, was offset by an 11 basis point
drop in rates paid on interest-bearing liabilities. While the rate on time
deposits increased slightly in 1996, rates on savings and interest-bearing
transaction accounts dropped 21 basis points from 1995. The interest spread,
the difference between the yield on interest-earning assets and the rate on
interest-bearing liabilities, increased slightly from 3.95% in 1995 to 3.97% in
1996.
A drop in the proportionate level of nonearning assets contributed
favorably to the 1996 margin as these funds were invested in earning assets. In
1996, the Company reduced the proportionate level of nonearning assets to 10.5%
of average total assets from 11.0% in 1995, adding approximately 3 basis points
to the 1996 net interest margin. The reduction in the relative level of
nonearning assets is primarily related to a reduction in reserve requirements
on certain deposits.
The mix of interest-bearing liabilities during 1996 remained substantially
the same as 1995 with the exception of the issuance of $100 million in
long-term debt in April of 1996.
The increase in net interest income in 1995 from 1994 reflects an increase
in loan volumes of 27%. Both yields on earning assets and rates paid on
interest-bearing liabilities increased significantly between 1994 and 1995;
however, the increase in rates on funding sources did not keep pace with the
increase in earning asset yields. During this period, the net interest margin
increased from 4.24% in 1994 to 4.75% in 1995.
INTEREST RATE SENSITIVITY
Net interest income is managed through the Asset/Liability Management
(ALM) process. A board committee establishes ALM policy guidelines that limit
the potential variation in net interest income and the economic value of equity
due to market interest rate swings. The Asset/Liability Committee, comprised of
executive management, sets the day-to-day operating guidelines and approves
strategies affecting net interest income and coordinates activities within
board policy limits.
Simulation of the effects of interest rate changes on net income is a
broader measure of interest rate risk profile than the static interest
sensitive gap position and is therefore the primary tool used by the Company. A
computer simulation model is used to simulate the effect of complex
interactions of customer choices, product promotions, and potential market
interest rate scenarios.
Board policy limits the amount of interest rate risk the Company can take by
establishing variation limits to net interest income and economic value of
equity based on simulations with specific assumptions. The Company supplements
these with a number of other simulations which measure key sensitivities to
several specific rate scenarios as well as potential competitive issues related
to loan and deposit volume levels and pricing.
Board policy limits the negative variation of net interest income and
economic value of equity to 10% and 20%, respectively. To provide a consistent
comparative analysis, specific guidelines for each measurement are followed. A
baseline forecast of net interest income and economic value of equity is
established assuming a stable interest rate environment. For net interest
income variation, simulations are run trending interest rates up and down 200
basis points over the next 12 months from the baseline forecast. At December
31, 1996, this analysis indicated a negative variation of approximately 2% with
a 10% policy limitation for an increase in rates.
<PAGE> 16
TABLE 7 - RISK MANAGEMENT DERIVATIVE POSITION
(In Thousands)
The following table shows the interest rate swap activity (notional amounts)
for 1996.
<TABLE>
<CAPTION>
1996
Interest
December 31, December 31, Income
Maturity 1995 Purchased Matured 1996 (Expense)
- --------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Pay fixed
1996 $ 90,000 $ -- $ 90,000 $ -- $ (73)
2007 23,910 -- 1,288 22,622 (255)
- --------------------------------------------------------------------------------------------------------------------------
Total 113,910 -- 91,288 22,622 (328)
- --------------------------------------------------------------------------------------------------------------------------
Receive fixed
1996 40,000 -- 40,000 -- (148)
2006 -- 100,000 -- 100,000 867
- --------------------------------------------------------------------------------------------------------------------------
Total 40,000 100,000 40,000 100,000 719
- --------------------------------------------------------------------------------------------------------------------------
Total swaps $ 153,910 $100,000 $ 131,288 $122,622 $ 391
==========================================================================================================================
</TABLE>
For variation in economic value of equity, simulations are run assuming
interest rates move up and down immediately by 200 basis points, remain at
those levels, and no management action occurs. This rate shock, while unlikely
in management's opinion, provides insight into some components of interest rate
risk for the Company. At December 31, 1996, this measure indicated
approximately 12% negative variation in the economic value of equity with an
increase in external market interest rates compared to a policy limit of 20%.
Given the various methods used to measure and manage interest rate risk,
the Company believes its interest rate risk profile is in appropriate balance
with its profit objectives.
DERIVATIVE ACTIVITIES
RISK MANAGEMENT DERIVATIVES
Derivative instruments were used in 1996 and 1995 primarily as a means of
protecting the economic value of equity and income. The specific types of
derivatives used were interest rate swaps, forward contracts, interest rate
caps and floors and other option contracts.
Interest rate swaps were the primary instruments used to manage interest
rate risk. These are contractual agreements between counterparties to exchange
interest streams based on notional principal amounts over a set period of time.
The notional amount does not represent an amount at risk, but is used as a
basis for determining the actual cash flows related to the interest rate
contracts. As of December 31, 1996, the notional value of interest rate swap
contracts totaled $122.6 million compared to $153.9 million at December 31,
1995. This amount is composed of agreements where the Company receives fixed
rates on notional amounts totaling $100 million with a rate of 6.94% and
agreements where the Company pays fixed rates on notional amounts totaling
$22.6 million with an average rate of 6.65%. As of December 31, 1996 and 1995,
there would be no cost to replace these contracts if the counterparty defaults.
All interest rate swap counterparties are at least AA-rated by Standard and
Poors or have collateral arrangements with the Company. A stress test is used
to determine the effect of market movements on the value of the interest rate
swaps. The stress test estimates the value of the instrument assuming a
parallel 300 basis point shift in rates.
Interest rate caps were purchased during 1994 to limit the future funding
rates on floating rate deposit accounts resulting from forecasted rising
interest rates. These interest rate caps were based on the three month LIBOR
rate and assigned to certificates of deposit with maturities of three months or
less. As of December 31, 1996 and 1995, the notional value of interest rate cap
contracts totaled $100 million. The interest rate caps have one year maturities
and a fair value of $7 thousand at December 31, 1996.
Interest rate floors were purchased during 1995 and 1996 to limit any loss
resulting from falling interest rates. These interest rate floors were based on
the three month LIBOR rate and assigned to floating rate commercial loans. As
of December 31, 1996, the Company had outstanding interest rate floor contracts
with a total notional value of $300 million compared to $115 million
outstanding at December 31, 1995. The interest rate floors have two to five
year maturities and a fair value of $2.8 million at December 31, 1996.
Forward commitments are contracts for the delayed delivery of securities,
foreign currencies or money market instruments in which the seller agrees to
make delivery of a specified instrument at a specified future date and a
specified price or yield. Credit risk may arise from the possibility that
counterparties may not have the ability to fulfill their commitments. Market
risk arises from the movements in interest rates and security values. The
majority of the forward commitments represent agreements to sell mortgage
loans. As of December 31, 1996, the contract amounts for forward commitments
totaled $131 million compared to $144 million at December 31, 1995, and $37
million at December 31, 1994.
<PAGE> 17
TABLE 8 - SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES
(In Thousands)
The carrying amounts of securities available for sale and investment
securities are presented as of the dates indicated.
<TABLE>
<CAPTION>
December 31,
- --------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Securities available for sale
U.S. Treasury and other U.S. Government agencies $ 711,515 $ 868,626 $ --
Obligations of states and political subdivisions 180,833 144,487 1,872
Mortgage-backed securities 568,261 183,777 6,759
Other securities 1,429 2,501 --
- --------------------------------------------------------------------------------------------------------------------------
Total securities available for sale 1,462,038 1,199,391 8,631
- --------------------------------------------------------------------------------------------------------------------------
Investment securities
U.S. Treasury and other U.S. Government agencies 9,379 9,369 933,828
Obligations of states and political subdivisions 105 -- 104,890
Mortgage-backed securities 60,581 80,481 252,869
Other securities 75,022 49,183 38,584
- --------------------------------------------------------------------------------------------------------------------------
Total investment securities 145,087 139,033 1,330,171
- --------------------------------------------------------------------------------------------------------------------------
Total securities available for sale and investment securities $1,607,125 $1,338,424 $1,338,802
==========================================================================================================================
</TABLE>
TRADING DERIVATIVES
A Eurodollar futures and options trading account is used in order to
maintain an active presence in the Eurodollar futures and options markets.
Position limits were established for the account in order to provide for a
tightly controlled trading environment. At December 31, 1996, the trading
account had no open contracts compared to contracts with a notional value of
$300 million and a net loss of $28 thousand at December 31, 1995. Eurodollar
trading activity during 1996 was minimal.
DERIVATIVE CONTROLS
Various controls are utilized to manage the risks associated with
derivative instruments. These controls include specific internal policies,
tracking systems, and legal contracts in conjunction with management oversight,
internal and external audits, and regulatory compliance examinations. These
reviews are performed on a continuous basis.
Management and board oversight is achieved through strict internal policy
and operating guidelines which include specific approvals for each transaction.
Specific operating limits have been established for common derivative
transactions. Additionally, certain transactions require approval from the
executive committee. An on-site compliance officer reports directly to the
Board of Directors.
An automated derivatives management system is used to generate position,
pricing, and risk management reports. This system generates reports used to
maintain accurate and timely information on all derivative positions.
Derivatives credit risk is minimal. Each counterparty is either AA-rated
or higher by Standard and Poors or has executed a bilateral collateral
agreement with the Company. Collateral agreements are designed to protect
against possible default by the counterparties. Active counterparties are
required to post collateral on any net positive market value above $100
thousand on an ongoing basis. As of December 31, 1996, counterparty collateral
with a fair value of $6.3 million was being held.
SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES
The securities portfolio is the second largest component of
interest-earning assets at $1.6 billion on December 31, 1996, compared to $1.3
billion at year-end 1995 and 1994. The securities portfolio includes securities
classified as available for sale and for investment purposes. These two
segments of the securities portfolio are managed to optimize their long-term
total return.
Securities available for sale are subject to sale prior to their
contractual maturities allowing the Company the ability to respond to changes
in the interest rate environment. This portfolio can also be a secondary
liquidity source and provide a balance to interest rate and credit risks in
other categories of the balance sheet. Securities available for sale are
accounted for at fair value with unrealized gains or losses excluded from
earnings and reported as a separate component of stockholders' equity, net of
deferred income taxes. The investment securities portfolio consists of debt
securities which the Company has the positive intent and ability to hold to
maturity and is carried at amortized cost.
Securities available for sale increased $263 million to $1.5 billion at
December 31, 1996, compared to December 31, 1995. Investment securities at
December 31, 1996, were $145 million, an increase of $6 million compared to
year-end 1995. During the fourth quarter of 1995, the Company reevaluated the
securities classifications as allowed by the FASB's supplemental guidance to
SFAS No. 115. As a result, investment securities with a carrying value of $1.1
billion and a fair value of $1.2 billion, or approximately 89% of its
investment securities were reclassified to securities available for sale. The
reclassification provided
<PAGE> 18
TABLE 9 - MATURITY DISTRIBUTION AND YIELDS OF SECURITIES AVAILABLE FOR SALE
AND INVESTMENT SECURITIES
(Dollars in Thousands)
The following table shows the maturities and weighted average yields of
the Company's securities available for sale and investment securities at
December 31, 1996.
<TABLE>
<CAPTION>
Maturing
----------------------------------------------------------------------------
After One Year After Five Years Mortgage-
Within But But After Backed
One Year Within Five Years Within Ten Years Ten Years Securities Carrying
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities
available for sale
U.S. Treasury
and other U.S.
Government
agencies $ 503 6.25% $516,206 6.39% $194,806 6.44% $ -- --% $ -- --% $ 711,515
Obligations of
states and
political
subdivisions 8,268 9.96 24,494 9.1 35,493 10.58 112,578 9.08 -- -- 180,833
Mortgage-backed
securities -- -- -- -- -- -- -- -- 568,261 7.06 568,261
Other securities -- -- -- -- -- -- 1,429 7.50 -- -- 1,429
- ------------------------------------------------------------------------------------------------------------------------------------
Total securities
available
for sale 8,771 9.75 540,700 6.51 230,299 7.08 114,097 9.06 568,261 7.06 1,462,038
- ------------------------------------------------------------------------------------------------------------------------------------
Investment
securities
U.S. Treasury
and other U.S.
Government
agencies 379 5.27 9,000 5.64 -- -- -- -- -- -- 9,379
Obligations of
states and
political
subdivisions 50 8.45 55 8.46 -- -- -- -- -- -- 105
Mortgage-backed
securities -- -- -- -- -- -- -- -- 60,581 9.96 60,581
Other securities 2,230 6.85 8,524 6.03 44,827 4.29 19,441 6.44 -- -- 75,022
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment
securities 2,659 6.65 17,579 5.84 44,827 4.29 19,441 6.44 60,581 9.96 145,087
- ------------------------------------------------------------------------------------------------------------------------------------
Total securities
available for
sale and
investment
securities $11,430 9.03% $558,279 6.49% $275,126 6.62% $133,448 8.68% $628,842 7.34% $1,607,125
====================================================================================================================================
</TABLE>
greater flexibility to take advantage of significant changes or
anticipated changes in interest rates and to manage liquidity.
Securities, excluding mortgage-backed securities, maturing within five
years or less at December 31, 1996, represented 35% of total securities
compared to 61% at December 31, 1995, and 71% at December 31, 1994.
Mortgage-backed securities at year-end 1996 increased to 39% of total
securities compared to 20% at December 31, 1995, and 19% at year-end 1994.
Securities exempt from Federal income taxes represented 11% of year-end total
securities in 1996 and 1995 compared to 8% in 1994.
Average securities decreased $127 million, or 8%, in 1996 from 1995's
average balance compared to an increase of $120 million in 1995 from 1994's
average balance. As a percent of average interest-earning assets, average
securities continued to decline to 26% in 1996 compared to 31% in 1995 and 32%
in 1994. This decrease in the relative level of securities was a result of
increased loan demand.
<PAGE> 19
TABLE 10 - LOAN PORTFOLIO
(In Thousands)
Loans outstanding at the indicated dates are shown in the following table
classified by type of loan.
<TABLE>
<CAPTION>
December 31,
- -------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $1,104,648 $1,010,174 $ 927,551 $ 712,522 $ 757,582
Real estate - construction 170,711 122,765 92,411 70,506 81,320
Real estate - mortgage 1,800,031 1,615,166 1,152,068 1,051,752 929,966
Consumer 904,487 831,197 687,368 583,805 496,615
- -------------------------------------------------------------------------------------------------------
$3,979,877 $3,579,302 $2,859,398 $2,418,585 $2,265,483
=======================================================================================================
</TABLE>
TABLE 11 - REAL ESTATE LOANS
(Dollars in Thousands)
The following table shows the composition of real estate loans outstanding
at December 31, 1996.
<TABLE>
<CAPTION>
Percent of Percent of
Balance Real Estate Loans Total Loans
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial real estate
Construction and land development $ 170,711 8.7% 4.3%
Multifamily 77,332 3.9 1.9
Nonfarm residential 695,386 35.3 17.5
- --------------------------------------------------------------------------------------------
943,429 47.9 23.7
- --------------------------------------------------------------------------------------------
Residential and farmland
Residential 936,845 47.5 23.5
Farmland 90,468 4.6 2.3
- --------------------------------------------------------------------------------------------
1,027,313 52.1 25.8
- --------------------------------------------------------------------------------------------
$1,970,742 100.0% 49.5%
============================================================================================
</TABLE>
LOANS
The loan portfolio is the largest component of earning assets and is also
the highest yielding. Quality growth in the loan portfolio over the past three
years has been a key driver in the Company's overall financial performance. The
trend of steady growth in loans continued throughout 1996, however, at a slower
pace than in 1995. Loans totaled $4.0 billion at December 31, 1996, an increase
of 11%, or $401 million, from the balance at December 31, 1995. During 1995,
the portfolio grew approximately 25% from the balances reported for 1994.
During 1996, acquisitions accounted for only 23% of the loan growth while
approximately 51% of the 1995 loan growth was the result of acquisitions of
other financial institutions. Internal loan growth for 1996 and 1995 was 8% and
12%, respectively.
The portfolio mix at December 31, 1996, consisted of 49% real estate
loans, 28% commercial, financial and agricultural loans and 23% consumer loans,
which is substantially unchanged from the portfolio mix at December 31, 1995.
Diversification of the loan portfolio is a means of reducing the risks
associated with fluctuations in economic conditions. At December 31, 1996,
there were no concentrations of 10% or more of total loans in any single
industry. The geographical concentrations of the loan portfolio are 63% located
in Mississippi, 21% in Louisiana, and 6% in Arkansas.
Loans secured by real estate are the largest category of loans at $2.0
billion at year-end 1996. The largest sub-section of the real estate portion of
the loan portfolio is loans secured by one-to-four family residential
properties. Loans to businesses for intermediate and longer term financing of
land and buildings represent the second largest component within the real
estate portfolio. The mix of the real estate portfolio is substantially
unchanged from that reported in prior years with the exception of a slight
increase in the proportion of loans secured by one-to-four family residential
properties.
One-to-four family residential property loans are underwritten to take
into consideration family incomes available to service debt, credit histories
and the values of the properties being financed. While this group is considered
low risk, it can be adversely impacted by economic patterns.
Loans to businesses for the financing of land and buildings are
underwritten taking into consideration the quantity and quality of the
business' cash flow, its future prospects and the property's value. Sufficient
margin in the financed property is required should liquidation of the property
become necessary to repay the loan.
<PAGE> 20
TABLE 12 - LOAN MATURITIES AND INTEREST RATE SENSITIVITY
(In Thousands)
The following table shows the amounts of loans, excluding consumer and
real estate mortgage loans, in certain categories outstanding as of December
31, 1996 which, based on remaining scheduled repayments of principal, are due
in the periods indicated. Also, the amounts due after one year are classified
according to their sensitivity to changes in interest rates.
<TABLE>
<CAPTION>
Maturing
-----------------------------------------------------
After One But
Within One Year Within Five Years After Five Years Total
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $ 629,447 $ 377,545 $ 97,656 $1,104,648
Real estate - construction 103,919 66,793 -- 170,712
- --------------------------------------------------------------------------------------------------------------
$ 733,366 $ 444,338 $ 97,656 $1,275,360
==============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Interest Sensitivity
---------------------------
Fixed Rate Variable Rate Total
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Due after one, but within five years $304,630 $139,708 $444,338
Due after five years 68,078 29,578 97,656
- ------------------------------------------------------------------------------------
$372,708 $169,286 $541,994
====================================================================================
</TABLE>
Construction and land development loans are made in familiar markets to
developers and builders who have a proven record of success. These loans are
underwritten through the use of feasibility studies, sensitivity analysis of
absorption rates and financial analysis of the developers. Sources of repayment
may be pre-committed permanent loans, sales of developed properties or an
interim or mini-permanent loan commitment. These types of loans are monitored
by on-site inspections and architects' reports. They are considered more risky
than other real estate loans due to their ultimate repayment being sensitive to
interest rate changes, general economic conditions and the availability of
long-term financing.
Commercial, financial and agricultural loans increased to $1.1 billion at
December 31, 1996, from $1.0 billion and $928 million at year-end 1995 and
1994, respectively. The commercial, financial and agricultural loan portfolio
is a diverse group of loans to small, medium and large businesses in a variety
of different industries. The purposes of these loans vary from supporting
seasonal working capital needs to the term financing of equipment. These loans
are underwritten by a thorough evaluation of the prospective borrowers'
management, financial condition and the business' ability to generate
sufficient cash flow to repay the debt in an orderly manner. While some of the
short-term loans may be made on an unsecured basis, most are secured by assets
having an adequate equity margin. Additionally, most loans to closely held
corporations are guaranteed by their owners.
Various Federal and State loan guarantee programs are used to provide
credit enhancements for loans to small businesses. The use of these programs
enables financing to be provided in amounts and on terms which might not be
otherwise available to the small business. All guaranteed loans are subject to
the same underwriting criteria as other types of loans as guarantee programs
are considered a secondary source of repayment.
The commercial loan portfolio is sufficiently diverse to minimize the
impact of a decline in a single industry. It is geographically concentrated in
Mississippi, Louisiana, and Arkansas so it is exposed to the risk of a general
downturn in the economies of the markets in which the Company operates within
those states.
Consumer loans increased $73 million, or 9%, from December 31, 1995, which
represents a substantial slowdown from the rate of growth experienced over the
past three years. The decline in the growth rate of the consumer loan portfolio
reflects a national trend of slowing consumer demand.
The consumer loan portfolio is composed of installment loans, home equity
loans, unsecured revolving credit products, and other similar types of credit
facilities. Consumer credits are underwritten using a computer-based multiple
discriminant analysis which is commonly called credit scoring. This analysis
considers factors such as income, debt levels and credit history. This system
provides uniformity in the decision-making process and better quality control
during the process.
Consumer loans are concentrated in Mississippi, Louisiana, and Arkansas
and would be adversely impacted by an economic recession or other conditions
which would affect consumer incomes.
Additionally, the needs of low to moderate income borrowers is an area of
continued focus and efforts are ongoing to expand the credit facilities
tailored to their special needs. An extensive branch network brings loan
officers in close contact with small business customers and consumers. The
expanded use of government credit enhancement programs has improved the ability
to meet the needs of small businesses and differentiate the Company from
competitors. Consumer credit products will continue to be aggressively marketed
and new ones developed utilizing the high level of technology available;
however, the Company will continue to maintain a close watch on both local and
national delinquency trends.
<PAGE> 21
TABLE 13 - AVERAGE DEPOSITS
(In Thousands)
The daily average amounts of deposits for the periods indicated are
summarized in the following table.
<TABLE>
<CAPTION>
Year Ended December 31,
- -------------------------------------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Demand deposits $ 953,872 $ 919,215 $ 840,515
Savings and interest-bearing transaction deposits 1,843,150 1,710,218 1,592,777
Time deposits 1,953,872 1,809,364 1,563,746
- -------------------------------------------------------------------------------------------------------
Total $4,750,894 $4,438,797 $3,997,038
=======================================================================================================
</TABLE>
TABLE 14 - TIME DEPOSITS OF $100 THOUSAND OR MORE,
MATURITY DISTRIBUTION (In Thousands)
Maturities of time certificates of deposit of $100 thousand or more
outstanding at December 31, 1996, are summarized in the following table.
<TABLE>
<S> <C>
Time remaining until maturity
3 months or less $161,913
Over 3 through 6 months 81,311
Over 6 through 12 months 66,147
Over 12 months 86,276
- ---------------------------------------------
Total $395,647
=============================================
</TABLE>
DEPOSITS
The primary funding source for loans and investments is deposit
liabilities. The mix and repricing alternatives can significantly affect the
cost of this source of funds and therefore impact the margin. Strategies used
to manage deposit liabilities are designed to be flexible so that changes can
be made in consideration of interest rate movements and liquidity issues. Local
retail and commercial customers provide the majority of deposits.
Average deposits increased $312 million to $4.8 billion in 1996 compared
to $4.4 billion in 1995, and $4.0 billion in 1994. Approximately 20% of the
increase in average deposits for 1996 was a result of acquisitions.
Average time deposits increased $144 million, or 8%, from the $1.8 billion
reported in 1995. Average savings deposits and average demand deposits
increased $133 million and $35 million, respectively, in 1996 compared to 1995.
Both average savings deposits and average demand deposits remained at 38% and
20% of average total deposits for 1996 compared to 1995. In spite of the past
two years' merger activity, the deposit mix has remained substantially
unchanged with the exception of a slight shift toward more time deposits.
LIQUIDITY
Liquidity for a financial institution can be expressed in terms of
maintaining sufficient funds available to meet both expected and unanticipated
obligations in a cost effective manner. Adequate liquidity allows the Company
to meet the demands of both the borrower and the depositor on a timely basis,
as well as pursue other business opportunities as they arise. Thus, liquidity
is maintained through the Company's ability to convert assets into cash, manage
the maturities of liabilities and generate funds on a short-term basis either
through the national Federal funds market, backup lines of credit, or through
the national CD market.
Short-term investments totaling $50 million at December 31, 1996, provide
one source of the Company's liquidity. Cash flows from repayments and
maturities from the securities and loan portfolios provide an additional source
of liquidity. At December 31, 1996, $1.8 billion, or 44% of total loans, have
contractual maturities of one year or less. Additional liquidity can be
achieved through the sale of securities classified as available for sale.
The Company relies largely on core deposits to fund loan demand and
long-term investments. Core deposits, defined as total deposits less time
deposits of $100 thousand or more, have increased, ending the year at $4.6
billion which compares to $4.4 billion at the end of 1995. Additional funding
is provided from an established Federal funds market within Mississippi,
Louisiana and other contiguous states. Although the Company prefers to meet
liquidity requirements through internally generated funding sources and through
the matching of maturities of assets and liabilities, it also maintains funding
relationships with numerous other financial institutions.
The consolidated statements of cash flows can be used to review cash flows
from operating, investing and financing activities. Cash and cash equivalents
increased $41 million during 1996 to $385 million at December 31, 1996. Net
cash provided by operating activities of $89 million for 1996 represents a
substantial increase from $232 thousand reported for 1995. Cash flows from
operating activities includes net income, adjusted for various noncash charges
to income, as well as changes in certain balance sheet items. The increase in
net cash provided by operating activities from 1995 to 1996 was primarily due
to a large
<PAGE> 22
TABLE 15 - SHORT-TERM BORROWINGS
(Dollars in Thousands)
The following table presents a summary of the Company's short-term
borrowings at December 31 for each of the last three years by category and the
corresponding interest rates.
<TABLE>
<CAPTION>
Daily Average Maximum
December 31 Average Interest Month-End
Balance Balance Rate Balance
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Federal funds purchased and securities sold
under agreements to repurchase $532,537 $529,398 4.9% $627,785
Other short-term borrowings 10,492 16,337 5.7 44,997
- ----------------------------------------------------------------------------------------
Total short-term borrowings $543,029 $545,735 5.0%
========================================================================================
1995
Federal funds purchased and securities sold
under agreements to repurchase $566,862 $539,384 5.4% $650,296
Other short-term borrowings 32,620 15,809 3.8 33,568
- ----------------------------------------------------------------------------------------
Total short-term borrowings $599,482 $555,193 5.4%
========================================================================================
1994
Federal funds purchased and securities sold
under agreements to repurchase $559,779 $424,091 3.6% $559,779
Other short-term borrowings 5,010 28,519 4.3 54,123
- ----------------------------------------------------------------------------------------
Total short-term borrowings $564,789 $452,610 3.7%
========================================================================================
</TABLE>
use of cash to fund mortgage loans held for sale during 1995. The decrease
in net cash provided by operating activities from 1994 to 1995 was primarily
due to the increase in mortgage loans held for sale in 1995.
Investing activities, primarily loans and securities, used cash of $119
million in 1996. This use of cash was mostly to finance an increase in loan and
securities volumes and was partially offset by cash provided by decreases in
short-term investments. In 1995, investing activities used cash of $152
million. This use of cash was largely a result of increased loan demand and
increases in short-term investments. These uses of cash were partially offset
by cash provided by decreases in securities and interest-bearing bank balances.
Financing activities are the primary funding source of investing
activities. Financing activities include the gathering of deposits and use of
purchased funds as well as issuance and repurchase of the Company's stock.
Financing activities provided $72 million and $169 million in cash in 1996 and
1995, respectively, primarily due to increases in deposits. During 1996, debt
securities were issued which netted cash proceeds of $99 million. Proceeds from
the debt issuance were used to repay certain short-term borrowings and
repurchase the Company's common shares in connection with certain acquisitions.
The parent company requires liquidity to pay dividends to its shareholders
and to meet operating expenses. Dividends and interest on borrowings paid by
the parent company are primarily funded from dividends received from its
banking subsidiaries. The dividends paid by the banking subsidiaries are
subject to certain regulations controlling national banks that restrict the
amount of dividends that may be distributed. The subsidiary banks have
available for payment of dividends in 1997, without prior regulatory approval,
$110.3 million plus their net profits for 1997. The operating expenses of the
parent company are primarily incurred in providing management and other
services for the subsidiaries and are reimbursed monthly to provide the cash
flow necessary for these operations. From time to time the parent company uses
short-term lines of credit and issues long-term debt to meet acquisition and
expansion needs. During 1995, a $300 million registration statement was filed
with the Securities and Exchange Commission allowing the Company the ability to
acquire funds through the issuance of various instruments in the market place.
At December 31, 1996, $100 million in such instruments was outstanding. These
funds were used to reduce its short-term borrowings and to fund acquisitions.
The remainder of these proceeds will be used to fund further acquisitions.
<PAGE> 23
TABLE 16 - ANALYSIS OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
(Dollars in Thousands)
The following table summarizes the activity in the allowance for possible
loan losses over the past five years.
<TABLE>
<CAPTION>
Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for possible loan losses -
beginning balance $ 58,719 $ 55,873 $ 62,032 $ 74,856 $ 87,493
Charge-offs:
Commercial, financial and agricultural 1,278 1,591 7,851 2,881 22,348
Real estate - construction 119 177 132 40 80
Real estate - mortgage 2,786 1,723 1,691 1,846 3,772
Consumer 10,126 8,833 5,234 5,375 7,708
- -------------------------------------------------------------------------------------------------------------------------
Total charge-offs 14,309 12,324 14,908 10,142 33,908
- -------------------------------------------------------------------------------------------------------------------------
Recoveries:
Commercial, financial and agricultural 3,232 2,217 5,163 5,164 2,037
Real estate - construction 71 272 621 1,398 803
Real estate - mortgage 2,459 1,403 2,393 2,077 2,723
Consumer 4,631 4,466 4,098 4,679 5,330
- -------------------------------------------------------------------------------------------------------------------------
Total recoveries 10,393 8,358 12,275 13,318 10,893
- -------------------------------------------------------------------------------------------------------------------------
Net charge-offs (recoveries) 3,916 3,966 2,633 (3,176) 23,015
Provision for possible loan losses 5,340 2,160 (4,750) (16,000) 10,378
Additions due to acquisitions 2,062 4,652 1,224 -- --
- -------------------------------------------------------------------------------------------------------------------------
Allowance for possible loan losses -
ending balance $ 62,205 $ 58,719 $ 55,873 $ 62,032 $ 74,856
=========================================================================================================================
Total loans outstanding:
End of year $ 3,979,877 $ 3,579,302 $ 2,859,398 $ 2,418,585 $ 2,265,483
Average 3,774,490 3,273,408 2,581,724 2,293,416 2,261,034
=========================================================================================================================
Ratios:
Allowance for possible loan losses to end of
year total loans 1.56% 1.64% 1.95% 2.56% 3.30%
Allowance for possible loan losses to net
charge-offs 1,588 1,480 2,122 NM 325
Allowance for possible loan losses to
nonperforming loans 364 262 219 204 189
Net charge-offs (recoveries) to average
total loans .10 .12 .10 (.14) 1.02
Recoveries to prior year charge-offs 84.33 56.06 121.03 39.28 35.21
</TABLE>
NM - Not Meaningful
- --------------------------------------------------------------------------------
CREDIT RISK MANAGEMENT
Asset quality is managed by utilizing a credit process that has as its
basis the separation of the credit administration function from the line
lending function. This process includes a system of loan committees to review
and approve loans, a system of credit quality review committees that monitors
the progress of action plans on loans requiring special attention and an
independent loan review function which reports to the Directors' Loan Review
Committee. Additionally, the Credit Administration Division works to ensure
that the credit process is carried out in accordance with credit policies. This
process assists in the early identification of problem or potential problem
credits and assists in determining the adequacy of the allowance for possible
loan losses.
PROVISION AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
In conjunction with the credit process, the allowance for possible loan
losses (allowance) is maintained at a level that is considered sufficient to
absorb potential losses in the loan portfolio. The allowance is adjusted by the
provision for possible loan losses (provision) and is increased by recoveries
of previously charged-off loans and decreased by loan charge-offs. The
provision is the adjustment to expense necessary to maintain the allowance at
an adequate level. Various factors are taken into consideration in determining
the amount of the provision and the adequacy of the allowance. These factors
include: 1) management's analysis of current and future economic conditions and
their anticipated impact on specific borrowers; 2) the current level of
classified and criticized assets and the associated risk factors with each; 3)
past due and nonperforming assets; 4) the current level of the allowance in
relation to total loans and to historical and current loss levels; and 5)
growth and composition of the loan portfolio.
<PAGE> 24
TABLE 17 - ALLOCATION OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
(Dollars in Thousands)
The following table presents, for analysis purposes only, the allocation
of the allowance by loan categories with respect to individual credits,
historical losses, foreseeable economic conditions and other factors pertaining
to specific industries.
<TABLE>
<CAPTION>
December 31,
- -----------------------------------------------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
Percent Loan Loss Percent Loan Loss Percent Loan Loss
Of Loans Allowance Of Loans Allowance Of Loans Allowance
Outstanding Allocation Outstanding Allocation Outstanding Allocationn
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural 27.8% $18,124 28.2% $13,824 32.4% $13,851
Real estate - construction 4.3 2,050 3.5 2,146 3.2 1,475
Real estate - mortgage 45.2 12,090 45.1 12,741 40.3 10,372
Consumer 22.7 15,265 23.2 13,928 24.1 10,940
Unallocated -- 14,676 -- 16,080 -- 19,235
- -----------------------------------------------------------------------------------------------------------
100.0% $62,205 100.0% $58,719 100.0% $55,873
===========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31,
- ---------------------------------------------------------------------------------
1993 1992
- ---------------------------------------------------------------------------------
Percent Loan Loss Percent Loan Loss
Of Loans Allowance Of Loans Allowance
Outstanding Allocation Outstanding Allocation
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial
and agricultural 29.5% $15,683 33.4% $16,306
Real estate - construction 2.9 2,330 3.6 3,127
Real estate - mortgage 43.5 9,285 41.1 12,596
Consumer 24.1 10,087 21.9 7,915
Unallocated -- 24,647 -- 34,912
- ---------------------------------------------------------------------------------
100.0% $62,032 100.0% $74,856
=================================================================================
</TABLE>
As a result of management's assessment of the adequacy of the allowance
including the growth in loans in 1996, a $5.3 million provision for possible
loan losses was recorded, compared to a $2.2 million provision in 1995. During
1994, a negative provision of $4.8 million was recorded. Additions to the
allowance of $2.1 million, $4.7 million, and $1.2 million resulted from
acquisitions in 1996, 1995 and 1994, respectively.
Net charge-offs remain low at .10% of average loans in 1996 compared to
.12% and .10% of average loans in 1995 and 1994, respectively. Net charge-offs
were $4.0 million for both 1996 and 1995 compared to $2.6 million in 1994.
The allowance at year-end 1996, was $62.2 million, or 1.56% of total
loans, compared to $58.7 million, or 1.64% of total loans, at December 31,
1995, and $55.9 million, or 1.95% of total loans, at December 31, 1994. While
future losses are difficult to predict, management believes that the current
level of the allowance is adequate to cover possible losses in the loan
portfolio based on the Company's allowance methodology.
NONPERFORMING ASSETS
Nonperforming assets consist of loans on which interest is no longer
accrued (nonaccrual), certain restructured loans where the interest rate or
other terms have been materially changed due to the financial condition of the
borrowers (restructured), and other real estate. A loan is placed on nonaccrual
when management believes there is reasonable uncertainty about the full
collection of both principal and interest, or when the loan is contractually
past due ninety days or more, not well secured and not in process of
collection. The policy regarding nonperforming loans is to take appropriate,
timely and aggressive action when necessary to reach a timely resolution.
Nonperforming assets decreased $6.8 million to $22.1 million at year-end
1996 compared to year-end 1995. The decrease was primarily attributable to cash
collections, property sales and restoration of loans to performing status,
while a portion was also due to charge-offs. The year-end 1996 total is
comprised of $17.1 million of nonaccrual and restructured loans and $5.0
million of other real estate. The Company had restructured loans of $694
thousand at year-end 1996 versus none at the end of 1995 and 1994.
An additional $414 thousand of outstanding loans were not considered
nonperforming at December 31, 1996, but the borrowers, in management's
assessment, are experiencing financial difficulties severe enough that serious
doubt exists as to the borrowers' continued ability to comply with the present
terms of these loans.
CAPITAL AND DIVIDENDS
Dividends paid are substantially provided by dividends from the banking
subsidiaries. The approval of the Comptroller of the Currency (OCC) is required
if the total of all dividends declared by a national bank in any calendar year
exceeds the total of its net profits for that year combined with its retained
net profits of the preceding two years. In 1997, the banking subsidiaries have
available for payment of dividends to the Company, without approval of the
Comptroller of the Currency, $110.3 million plus their net profits for 1997.
The two sources of capital are internally generated capital and the
capital markets. Primary reliance historically has been on internally generated
capital. Net income for 1996, 1995 and 1994 added $83.6 million, $72.6 million
and $67.1 million, respectively, to capital. Capital was further increased by
$5.8 million and $1.6 million in 1996 and 1995, respectively, with the issuance
of common stock as a result of the exercise of
<PAGE> 25
TABLE 18 - NONPERFORMING ASSETS
(Dollars in Thousands)
The amounts of the Company's nonperforming assets at the indicated dates
are shown in the following table.
<TABLE>
<CAPTION>
December 31,
- --------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $16,385 $22,452 $25,556 $30,425 $39,456
Restructured loans 694 -- -- 54 249
- --------------------------------------------------------------------------------------------------------------------
Nonperforming loans 17,079 22,452 25,556 30,479 39,705
Other real estate 5,044 6,485 6,689 13,256 17,349
- --------------------------------------------------------------------------------------------------------------------
Nonperforming assets $22,123 $28,937 $32,245 $43,735 $57,054
====================================================================================================================
Accruing loans past due 90 days or more $ 9,711 $ 4,767 $ 3,055 $ 2,935 $ 3,670
====================================================================================================================
Ratios:
Nonperforming assets to loans plus other real estate .56% .81% 1.12% 1.80% 2.50%
Nonperforming assets to total assets .35 .48 .63 .89 1.14
</TABLE>
Interest income of approximately $412 thousand on nonaccrual and restructured
loans at December 31, 1996, would have been recorded in 1996 if such loans had
been in compliance with their original terms. Interest income actually recorded
on such loans in 1996 was $916 thousand.
- --------------------------------------------------------------------------------
executive stock options. Capital was decreased by dividends of $28.0
million, $23.1 million and $18.7 million declared in 1996, 1995 and 1994,
respectively. Capital was also decreased by $1.7 million and increased by $27.3
million as a result of the Company's acquisitions, net of repurchases of its
common stock during 1996 and 1995, respectively. As a result of the
implementation of a repurchase program related to certain acquisitions
accounted for using the purchase accounting method, the Company purchased 1.7
million shares and 2.6 million shares of its common stock during 1996 and 1995,
respectively. These shares were for the purpose of offsetting the 5.1 million
shares issued in the acquisitions of LBO Bancorp, Inc., First Merchants
Financial Corporation, Bank of Gonzales Holding Company, and Tuscaloosa
Bancshares, Inc. over the past two years. The Company currently has the
authorization to purchase up to 1.8 million shares under a repurchase plan for
the purpose of offsetting the shares issued in the acquisition of Jefferson
Guaranty Bancorp.
Capital includes the unrealized gain on securities available for sale, net
of deferred taxes, of $1.6 million at December 31, 1996, compared to $19.1
million at December 31, 1995. Average stockholders' equity to average assets
for 1996 was 9.15% compared to 8.94% in 1995 and 8.70% in 1994.
Under the risk-based capital guidelines, the minimum ratio of total
capital to risk-weighted assets (total capital) is 8%. At least half of the
total capital is to be comprised of tier I capital. Under these guidelines, the
Company's tier I capital and total capital ratios were 11.42% and 12.67%,
respectively, at December 31, 1996, compared to 11.05% and 12.30%,
respectively, at December 31, 1995, and 12.49% and 13.75%, respectively, at
December 31, 1994.
The Company's strategy related to risk-based capital is to maintain
capital levels which will be sufficient to qualify the banking subsidiaries as
"well capitalized." Maintaining capital ratios at the "well capitalized" level
avoids certain restrictions which, for example, could impact the banking
subsidiaries' FDIC assessments, trust services and asset/liability management.
At December 31, 1996, the tier I and total capital ratios for each of the
banking subsidiaries were well above the minimum 6% and 10% levels required to
be categorized as a "well capitalized" insured depository institution.
The Federal Reserve Board and the OCC have established minimum leverage
ratios for bank holding companies and national banks, respectively, requiring
such banking organizations to maintain tier I capital of at least 4% of the
quarterly average assets (net of the allowance for possible loan losses) less
goodwill and other nonqualifying intangible assets. FDICIA also established a
minimum leverage ratio requirement of 5% for "well capitalized" institutions.
The leverage ratios for December 31, 1996, 1995 and 1994, were 8.23%, 7.87% and
8.43%, respectively. The Company's banking subsidiaries have maintained
leverage ratios well above the minimum required by the banks' regulators.
Capital adequacy is continuously monitored to ensure that appropriate
levels of capital are maintained to meet both current operating needs and
anticipated future requirements. The capital guidelines play a crucial role in
a banking organization's plans for business, asset allocations, acquisitions,
and expansion.
<PAGE> 26
OTHER OPERATING INCOME
Growth in noninterest related sources of income is one of the Company's
key long-term strategies. The strategy is to develop new sources of noninterest
related income and to reprice services and products to manage their
profitability. Other operating income includes fees for trust services, deposit
service charges, mortgage loan servicing fees, income from broker/dealer
services and many other corporate and retail products.
During 1996, other operating income was $117.2 million compared to $92.0
million in 1995, an increase of $25.2 million. Other operating income for 1996
included gains of $2.7 million from the disposition of assets covered by lease
financing transactions and additional income of $6.3 million resulting from the
adoption of a new accounting pronouncement. Excluding these items, other
operating income increased $16.2 million, or 18%, from 1995 to 1996.
Approximately $7.1 million of the increase in other operating income for 1996
was due to acquisitions. The remaining increase was due to a 14% increase in
core fee revenues.
Service charges on deposit accounts has historically represented one of
the primary sources of other operating income. Revenues in this area increased
approximately $3.5 million to $35.6 million in 1996 compared to 1995.
Approximately $1.6 million of this increase was a result of acquisitions. The
remaining increase was primarily the result of continued growth in business
volumes. Fees for trust services totaled $16.4 million in 1996, reflecting an
11% increase from 1995. Approximately one-half of the increase relates to
acquisitions, while the remainder was the result of new trust business and an
increase in the value of assets under management.
Other service charges, commissions and fees increased $17.4 million, or
44%, from $39.2 million in 1995 to $56.6 million in 1996. Approximately $4.9
million of this increase was a result of fee income generated by acquired
companies. The adoption of SFAS No. 122 resulted in an increase in mortgage
loan origination income of $6.3 million for 1996 as compared to 1995. The
written covered call option program earned $1.8 million due to premiums
received on expired written option contracts. The remainder of the increase
resulted from increased income from broker/dealer services, mortgage loan
servicing and customer utilization of other retail services.
Other income increased $3.7 million, or 74%, to $8.6 million in 1996 as
compared to 1995. This increase resulted primarily from gains of $2.7 million
from the disposition of assets related to lease financing transactions.
During 1995, other operating income decreased $1.5 million to $92.0
million compared to $93.5 million in 1994. Other operating income for 1995
included gains on sales of securities of $919 thousand compared to $13.6
million for 1994. Excluding these gains, other operating income increased $11.2
million, or 14%, from 1994 to 1995. Approximately $6.2 million of this increase
was due to acquisitions with the balance of the increase due to increases in
core fee revenue sources. Revenue from service charges on deposits increased
$4.5 million primarily as a result of a continued increase in business volumes.
Fees for trust services increased 5% to $14.8 million in 1995 compared to 1994
as a result of new business. Other service charges, commissions and fees
increased $6.5 million, or 20%, to $39.2 million in 1995. Approximately $2.6
million of this increase was the result of fee income generated from acquired
companies. The remaining increase resulted from increased income from core
business services.
OTHER OPERATING EXPENSE
Enhancing operational efficiency without sacrificing quality of service to
customers continues to be a priority. A key measure used in the banking
industry to assess the level of noninterest expense is the efficiency ratio,
which is defined as noninterest expense divided by the sum of tax-equivalent
net interest income plus noninterest income. The efficiency ratio measures the
level of expense required to generate one dollar of revenue. Improvement in the
efficiency ratio is measured by a reduction in the percentage reported. The
efficiency ratios for 1996, 1995 and 1994 were 63.35%, 64.62% and 64.22%,
respectively. The Company's near-term efficiency goal is 60%. In order to
achieve this goal, revenues must continue to increase, primarily through loan
growth and increased fee income, while controlling expense growth to a minimal
level. The Company's plans to consolidate its four independently chartered bank
subsidiaries under one charter is expected to improve efficiency going forward
by streamlining management and consolidating back-office operations. The
consolidation plan, which will be implemented in 1997, resulted in a charge to
1996 other operating expense of $3.8 million.
Other operating expense increased $25.8 million, or 12%, to $237.2 million
in 1996 compared to 1995. Other operating expense for 1995 included the accrual
of $3.5 million for the estimated cost of a proposed settlement of a class
action suit concerning collateral protection insurance which was settled in
1996 without additional expense. Approximately $20.2 million of the increase in
1996 can be attributed to acquisitions. Excluding acquisitions and nonrecurring
charges in both years, expenses grew at a 3% rate in 1996 versus 1995.
Salaries and employee benefits, which account for 55% of other operating
expense, increased $18.1 million in 1996 compared to 1995. Salaries and
employee benefits for the current year include a charge of $2.2 million for
personnel severance costs related to the consolidation plan. Excluding the
effects of acquisitions and the severance accrual, salaries and employee
benefits increased $6.4 million, or 6%, in 1996.
Combined net occupancy and equipment expense increased $3.7 million over
1995, of which approximately $1.7 million was due to acquisitions. The
remaining increase was due to the cost of increased automation to more
effectively and efficiently deliver products and services to customers.
<PAGE> 27
Service fees increased $3.5 million, or 28%, in 1996 compared to 1995
largely as a result of acquisitions, which accounted for $2.2 million, or 63%,
of this increase. The remaining increase in service fees resulted from
increased professional and consulting fees in a continuing effort to enhance
products and their delivery to the customer, and to provide efficiencies within
the organization. This investment is expected to be recovered through increased
operational efficiencies and enhanced revenue in future periods.
The FDIC assessment decreased $4.8 million from 1995 to 1996. This
decrease was the result of the FDIC reducing the premium rate on insured
deposits. The rate for the Company's banking subsidiaries, which all qualify
for the most favorable insurance rates, was virtually eliminated for 1996.
Other expense increased $2.9 million, to $37.4 million in 1996 compared to
$34.5 million in 1995 as a result of costs related to acquisitions, including
$2.9 million due to amortization of goodwill, core deposit intangibles and
mortgage servicing rights. Included in 1995 other expense is the $3.5 million
litigation accrual.
Other operating expense increased $31.4 million, or 17%, in 1995 compared to
1994. Approximately $15.0 million of the increase in 1995 is attributable to
acquisitions. Salaries and employee benefits, which account for 53% of other
operating expense, increased $13.2 million, or 13%, in 1995 compared to 1994,
or $5.3 million, or 6%, excluding the affect of acquisitions. Combined net
occupancy and equipment expense increased $4.4 million, or 17%, over 1994 of
which approximately $2.3 million relates to acquisitions and the remainder was
due to the cost of increased automation. The FDIC assessment decreased $3.9
million, or 44%, from 1994 to 1995 as a result of the FDIC lowering the premium
rate on insured deposits. Other expense increased $14.2 million, to $34.5
million in 1995, of which $5.9 million, or 42% of the increase, is related to
acquisitions and $3.5 million relates to the litigation accrual. Additionally,
net other real estate expenses increased $1.1 million due to a decrease in
gains on the sales of properties and purchased mortgage servicing rights
amortization increased by $1 million.
INCOME TAXES
Income tax expense was $40.6 million in 1996, compared to $35.0 million in
1995 and $32.5 million in 1994. The increase in tax expense between 1996 and
1995 was primarily the result of increased pre-tax earnings. The effective tax
rate was 33% for 1996, 1995 and 1994. These effective tax rates are lower than
the statutory income tax rate primarily due to tax exempt interest income
received on certain loans and debt securities.
OUTLOOK
The Company's growth closely follows the economies of the tri-state area
of Mississippi, Louisiana and Arkansas with the most significant influence
coming from Mississippi where 70% of the Company's assets are located.
Mississippi's economy remains strong along with the other southern states.
Consumer spending and commercial loan demand have been steady, providing the
Company with three straight years of solid loan growth.
Much of the growth in the Mississippi and Louisiana economies has been
driven by advances in the gaming industry. Hotel/lodging and other industries
that benefit from the increase in tourism drawn by gaming have also seen growth
in 1996. Construction spending continues to be strong and is expected to remain
so well into 1997.
As a result of the favorable economic outlook, loan volumes are expected
to continue to grow but at a more moderate level in 1997 as compared to 1996.
Most of the recent growth in the loan portfolio has come from consumers and
small middle market businesses, a trend that is expected to continue. Deposits
began to grow during 1996 after several years of being stable. This trend is
expected to continue at a slow to moderate pace in 1997.
The net interest margin has remained strong for the past two years and is
expected to remain so in 1997. Loan demand continues to exceed the growth in
deposits, contributing favorably to the net interest margin, although loan and
deposit spreads are expected to narrow somewhat in 1997.
Loan quality continued to improve throughout 1996 and is expected to
remain stable through 1997. Loan quality indicators are well within
management's acceptable ranges and are consistent with the current state of the
banking industry as a whole.
The emphasis on fee income in 1996 resulted in substantial growth in this
revenue source. Further growth in fee income is expected in 1997 as the Company
continues to explore nontraditional ways to provide services to an expanding
customer base as well as ways to enhance the wide range of existing banking
services offered. Expense control continues to be an area of intense focus as
the Company moves toward a one-charter organization. Consolidation of the
back-office is critical to improving operating efficiency with such changes
being transparent to the customer.
<PAGE> 28
BUSINESS
The Company is a multi-bank holding company headquartered in Jackson,
Mississippi. The Company and its subsidiaries engage 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.
Complete banking and trust services are offered to the commercial, industrial
and agricultural areas which it serves through its four banking subsidiaries,
Deposit Guaranty National Bank, Commercial National Bank, Deposit Guaranty
National Bank of Louisiana, and Merchants National Bank.
Deposit Guaranty National Bank, a 98%-owned banking subsidiary, is located
throughout Mississippi with 109 branches.
Commercial National Bank is headquartered in Shreveport, Louisiana, and
has 16 branches in the Shreveport/Bossier and West Monroe/Monroe markets.
Deposit Guaranty National Bank of Louisiana is headquartered in Hammond,
Louisiana, with 23 branches in the Hammond, Gonzales and Denham Springs
markets. Merchants National Bank is located in Fort Smith, Arkansas, with six
branches.
Deposit Guaranty's mortgage business includes McAfee Mortgage and
Investment Company, headquartered in Lubbock, Texas, with branches located
throughout Texas; Deposit Guaranty Mortgage Company, a Mississippi business
corporation with branches throughout Mississippi and Louisiana; and First
Mortgage Corporation headquartered in Omaha, Nebraska, with branches in
Nebraska, Oklahoma, Arkansas and Iowa. The mortgage companies act as mortgage
bankers, engaging in mortgage lending, brokerage and servicing.
The Company provides investment advice and brokerage services through its
subsidiaries, Deposit Guaranty Investments, Inc., CNB Investments, Inc.,
Merchants Investment Company, Inc., and ParkSouth Corporation.
The Company provides credit insurance related to extensions of credit by
the Company through G & W Life Insurance Company, a wholly-owned subsidiary.
DIVIDEND AND MARKET INFORMATION
Effective December 5, 1996, the Company's common stock began trading on
the New York Stock Exchange under the symbol "DEP." Prior to that date, the
Company's common stock traded in the over-the-counter market under the Nasdaq
symbol "DEPS" and was quoted on Nasdaq's National Market System. The following
table sets forth the range of the high and low prices of the common stock, as
reported by the New York Stock Exchange and Nasdaq, respectively, and the
dividends declared per share for the periods indicated.
<TABLE>
<CAPTION>
Prices
Dividends -------------------
Per Share High Low
- -----------------------------------------------------------
<S> <C> <C> <C>
1996
First Quarter $ .165 $ 23.75 $ 21.50
Second Quarter .175 24.13 22.00
Third Quarter .175 24.50 22.00
Fourth Quarter .200 31.00 24.00
1995
First Quarter $ .140 $ 17.00 $ 14.75
Second Quarter .150 19.50 16.75
Third Quarter .150 21.13 19.25
Fourth Quarter .165 25.75 20.88
</TABLE>
This table reflects a 2 for 1 stock split which was effective December 2,
1996.
It is the Company's present intention to continue the payment of cash
dividends on the common stock on a quarterly basis, dependent on expected
future normalized earnings, the financial condition of the Company, the
assessment of future capital needs and such other factors as deemed relevant.
As a bank holding company, the Company's ability to pay dividends is to a great
extent dependent upon dividend payments it receives from its subsidiaries. Such
subsidiary dividend payments are subject to the limitations described in the
notes to the consolidated financial statements. On March 3, 1997, there were
6,862 stockholders of record of the Company's common stock.
<PAGE> 29
CONSOLIDATED STATEMENTS OF CONDITION
Deposit Guaranty Corp.
<TABLE>
<CAPTION>
(In Thousands Except Share Data) December 31,
- ---------------------------------------------------------------------------------------
1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks $ 385,009 $ 343,706
Interest-bearing bank balances 1,732 --
Federal funds sold and securities
purchased under agreements to resell 47,640 441,015
Trading account securities 2,505 3,381
Securities available for sale 1,462,038 1,199,391
Investment securities (fair value: 1996 -
$152,412; 1995 - $141,649) 145,087 139,033
Loans 3,979,877 3,579,302
Less: Allowance for possible loan losses (62,205) (58,719)
- ---------------------------------------------------------------------------------------
Net loans 3,917,672 3,520,583
- ---------------------------------------------------------------------------------------
Bank premises and equipment 148,327 144,340
Other assets 272,887 234,750
- ---------------------------------------------------------------------------------------
Total assets $ 6,382,897 $ 6,026,199
=======================================================================================
Liabilities
Deposits:
Noninterest-bearing $ 1,160,914 $ 1,094,627
Interest-bearing 3,864,835 3,686,032
- ---------------------------------------------------------------------------------------
Total deposits 5,025,749 4,780,659
Federal funds purchased, securities
sold under agreements to repurchase
and other short-term borrowings 543,029 599,482
Long-term debt 99,405 --
Other liabilities 133,448 107,005
- ---------------------------------------------------------------------------------------
Total liabilities 5,801,631 5,487,146
- ---------------------------------------------------------------------------------------
Stockholders' equity
Cumulative preferred stock, no par value,
authorized: 25,000,000 shares of class A
voting; and 25,000,000 shares of class B
non-voting; issued and outstanding: none -- --
Common stock, no par value, authorized
100,000,000 shares; issued and outstanding:
1996 - 39,185,394 shares; 1995 - 38,759,286 shares 21,491 21,257
Surplus 174,995 171,073
Retained earnings 383,211 327,633
Unrealized gain on securities available
for sale, net of deferred income taxes 1,569 19,090
- ---------------------------------------------------------------------------------------
Total stockholders' equity 581,266 539,053
- ---------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 6,382,897 $ 6,026,199
=======================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 30
CONSOLIDATED STATEMENTS OF EARNINGS
Deposit Guaranty Corp.
<TABLE>
<CAPTION>
(In Thousands Except Share Data) Year Ended December 31,
- --------------------------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income
Interest and fees on loans $ 327,065 $ 287,742 $ 204,434
Interest on investment securities:
Taxable 10,467 87,896 41,511
Exempt from Federal income tax 1 8,180 8,317
Interest on securities available for sale:
Taxable 72,576 10,095 36,353
Exempt from Federal income tax 11,383 967 104
Interest on trading account securities 416 354 258
Interest on Federal funds sold and securities
purchased under agreements to resell 9,989 6,317 11,111
Interest on bank balances 325 1,153 5,184
- --------------------------------------------------------------------------------------------------
Total interest income 432,222 402,704 307,272
- --------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits 151,375 143,640 109,316
Interest on Federal funds purchased, securities
sold under agreements to repurchase and other
short-term borrowings 27,222 29,792 16,565
Interest on long-term debt 4,091 -- --
- --------------------------------------------------------------------------------------------------
Total interest expense 182,688 173,432 125,881
- --------------------------------------------------------------------------------------------------
Net interest income 249,534 229,272 181,391
Provision for possible loan losses 5,340 2,160 (4,750)
- --------------------------------------------------------------------------------------------------
Net interest income after provision for
possible loan losses 244,194 227,112 186,141
- --------------------------------------------------------------------------------------------------
Other operating income
Service charges on deposit accounts 35,584 32,084 27,572
Fees for trust services 16,413 14,793 14,111
Gains on securities available for sale 12 919 13,621
Other service charges, commissions and fees 56,624 39,250 32,701
Other 8,612 4,943 5,494
- --------------------------------------------------------------------------------------------------
Total other operating income 117,245 91,989 93,499
- --------------------------------------------------------------------------------------------------
Other operating expense
Salaries and employee benefits 129,660 111,556 98,366
Net occupancy 16,073 13,838 12,269
Equipment 17,618 16,196 13,419
Service fees 16,237 12,735 11,217
Communication 10,607 9,100 7,736
FDIC assessment 94 4,906 8,776
Advertising and public relations 9,484 8,668 7,985
Other 37,435 34,453 20,279
- --------------------------------------------------------------------------------------------------
Total other operating expense 237,208 211,452 180,047
- --------------------------------------------------------------------------------------------------
Income before income taxes 124,231 107,649 99,593
Income tax expense 40,621 35,029 32,463
- --------------------------------------------------------------------------------------------------
Net income $ 83,610 $ 72,620 $ 67,130
==================================================================================================
Net income per share $ 2.16 $ 1.89 $ 1.90
Weighted average shares outstanding 38,760,192 38,431,162 35,336,124
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 31
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Deposit Guaranty Corp.
<TABLE>
<CAPTION>
Unrealized
Gain on
Securities
Common Retained Available Treasury
(In Thousands Except Share Data) Stock Surplus Earnings For Sale Stock
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $ 19,383 $ 155,399 $ 221,106 $ -- $ --
Net income for 1994 -- -- 67,130 -- --
Cash dividends declared ($.530 per share) -- -- (18,728) -- --
Purchase and retirement of 76,000 shares
of common stock (42) (1,055) -- -- --
Purchase of 140,000 shares of common stock
by subsidiary -- -- -- -- (2,019)
Issuance of 36,400 shares of common stock
under executive stock option plan 20 262 -- -- --
Tax benefit from exercise of stock options -- 120 -- -- --
Cumulative effect of a change in accounting
principle, net of deferred income taxes
of $18,807 -- -- -- 31,583 --
Net change in unrealized gain on securities
available for sale, net of deferred income
taxes of $17,628 -- -- -- (29,610) --
- --------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 19,361 154,726 269,508 1,973 (2,019)
Net income for 1995 -- -- 72,620 -- --
Cash dividends declared ($.605 per share) -- -- (23,075) -- --
Issuance of 6,114,582 shares of common stock
in acquisitions 3,348 64,094 8,580 -- --
Purchase of 2,645,800 shares and retirement
of 2,785,800 shares of common stock (1,526) (49,253) -- -- 2,019
Issuance of 134,400 shares of common stock
under executive stock option plan 74 1,027 -- -- --
Tax benefit from exercise of stock options -- 479 -- -- --
Net change in unrealized gain on securities
available for sale, net of deferred income
taxes of $10,447 -- -- -- 17,117 --
- --------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 21,257 171,073 327,633 19,090 --
Net income for 1996 -- -- 83,610 -- --
Cash dividends declared ($.715 per share) -- -- (28,000) -- --
Issuance of 1,687,888 shares of common stock
in acquisitions 926 36,523 (32) -- --
Purchase and retirement of 1,629,900 shares
of common stock (894) (38,206) -- -- --
Issuance of 368,120 shares of common stock
under executive stock option plan 202 3,643 -- -- --
Tax benefit from exercise of stock options -- 1,962 -- -- --
Net change in unrealized gain on securities
available for sale, net of deferred income
taxes of $10,656 -- -- -- (17,521) --
- --------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 $ 21,491 $ 174,995 $ 383,211 $ 1,569 $ --
====================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 32
CONSOLIDATED STATEMENTS OF CASH FLOWS
Deposit Guaranty Corp.
<TABLE>
<CAPTION>
(In Thousands) Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 83,610 $ 72,620 $ 67,130
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for possible loan losses 5,340 2,160 (4,750)
Provision for possible losses on other real estate 165 154 1,078
Provision for depreciation and amortization 31,176 25,998 18,405
Provision for deferred income taxes 1,979 (3,259) 898
Amortization (accretion) of premium (discount) on investment
securities, net 563 (23,339) (13,390)
Accretion of discount on securities available for sale, net (3,477) (666) (3,776)
Deferred loan fees and costs (2,677) (2,716) (3,238)
Decrease in other liabilities (7,034) (3,306) (7,152)
(Increase) decrease in other assets (9,378) (11,940) 25,252
Net cash received from (paid for) loans held for resale (19,796) (49,934) 26,652
Gains on securities available for sale (12) (919) (13,621)
Other, net 8,228 (4,621) (6,625)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 88,687 232 86,863
- -------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Net (increase) decrease in interest-bearing bank balances (1,732) 135,298 (65,298)
Proceeds from sales of securities available for sale 1,391,991 423,530 1,656,020
Proceeds from maturities and principal repayments of
investment securities 44,012 816,065 277,324
Proceeds from maturities and principal repayments of securities
available for sale 545,643 174,371 724,466
Purchases of investment securities (52,104) (643,049) (1,130,578)
Purchases of securities available for sale (2,154,049) (492,674) (1,063,787)
Net (increase) decrease in Federal funds sold and securities
purchased under agreements to resell 399,129 (209,410) (15,454)
Net increase in loans (284,040) (348,698) (369,938)
Proceeds from sales of other real estate 4,591 3,578 8,952
Purchases of bank premises and equipment (18,263) (18,551) (17,337)
Proceeds from sales of bank premises and equipment 742 586 2,758
Payment for purchase of common stock of
acquired companies and other acquisition costs (3,593) (19,739) (50,465)
Cash and due from banks of acquired companies 8,304 26,646 14,073
- -------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (119,369) (152,047) (29,264)
- -------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net increase (decrease) in deposits 101,217 238,759 (48,713)
Net increase (decrease) in Federal funds purchased, securities sold
under agreements to repurchase, and other short-term borrowings (66,851) 31,963 45,023
Repayment of line of credit to fund loans held for resale -- (32,955) --
Proceeds from the exercise of common stock options 3,845 1,101 282
Proceeds from the issuance of long-term debt 99,381 -- --
Purchases of common stock (39,100) (48,760) (3,116)
Cash dividends paid (26,507) (21,355) (18,201)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 71,985 168,753 (24,725)
- -------------------------------------------------------------------------------------------------------------------
Increase in cash and due from banks 41,303 16,938 32,874
Cash and due from banks at beginning of year 343,706 326,768 293,894
- -------------------------------------------------------------------------------------------------------------------
Cash and due from banks at year end $ 385,009 $ 343,706 $ 326,768
===================================================================================================================
</TABLE>
INCOME TAXES:
The Company made income tax payments of $38.6 million, $35.5 million and
$28.6 million during the years ended December 31, 1996, 1995 and 1994,
respectively.
INTEREST:
The Company paid $183.3 million, $168.7 million and $126.2 million in
interest on deposits and other borrowings during the years ended December 31,
1996, 1995 and 1994, respectively.
See accompanying notes to consolidated financial statements.
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deposit Guaranty Corp.
NOTE 1 - BUSINESS, BASIS OF FINANCIAL STATEMENT PRESENTATION, ACCOUNTING
POLICIES AND RECENT PRONOUNCEMENTS
BUSINESS
The Company and its subsidiaries are engaged in the general banking
business and activities closely related to banking and provide these services
primarily to customers in Mississippi, Louisiana and Arkansas through its
banking subsidiaries. The Company is subject to the regulations of certain
federal agencies and undergoes periodic examinations by those regulatory
authorities.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the consolidated
financial statements, the Company is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the dates of
the statements of condition and the reported amounts of revenues and expenses
for the years then ended. Actual results could differ significantly from those
estimates.
Material estimates that are particularly susceptible to significant change
in the near-term relate to the determination of the allowance for possible loan
losses and the valuation of real estate acquired in connection with
foreclosures or in satisfaction of loans. In connection with the determination
of the allowance for possible loan losses and real estate owned, the Company
obtains independent appraisals for significant properties.
ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements of the Company include Deposit
Guaranty National Bank (DGNB), a 98%-owned subsidiary, Deposit Guaranty
Arkansas Corp., G & W Life Insurance Co., and Deposit Guaranty Louisiana Corp.
(DGLC, formerly Commercial National Corporation), wholly-owned subsidiaries.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
CASH EQUIVALENTS
The Company considers only cash and amounts due from banks to be cash
equivalents.
TRADING ACCOUNT SECURITIES
Trading account securities are reported at fair value. Realized and
unrealized gains or losses on trading account securities are reflected in other
operating income.
SECURITIES AVAILABLE FOR SALE
Effective January 1, 1994, the Company adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Under this statement, securities
available for sale prior to maturity are reported at fair value with unrealized
gains and losses excluded from earnings and reported as a separate component of
stockholders' equity, net of related deferred income taxes. Premiums are
amortized and discounts are accreted using the interest method. The
amortization of premiums and accretion of discounts on mortgage-backed
securities is periodically adjusted to reflect the actual prepayment experience
of the underlying mortgage loans. Gains or losses on sales of these securities,
computed based on the carrying value of the specific securities sold, are
classified as gains on securities available for sale in other operating income.
INVESTMENT SECURITIES
Investment securities are securities which the Company has the positive
intent and ability to hold to maturity. Investment securities are stated at
cost, adjusted for amortization of premiums and accretion of discounts using
the interest method. The amortization of premiums and discounts on
mortgage-backed securities is periodically adjusted to reflect the actual
prepayment experience of the underlying mortgage loans. Gains and losses on
sales of investment securities are computed based on the adjusted cost of the
specific securities sold.
DERIVATIVE FINANCIAL INSTRUMENTS
TRADING INSTRUMENTS: Derivative financial instruments held for trading are
recorded at fair value. These instruments are used by the Company to generate
additional noninterest income. Realized and unrealized gains and losses on
trading positions are recognized in noninterest income during the period in
which the gain or loss occurs. Interest revenue and expense arising from
trading instruments are included in other operating income.
RISK MANAGEMENT INSTRUMENTS: As part of its asset/liability management
activities, the Company may enter into interest rate futures, forwards, swaps
and option contracts. These derivative financial instruments are categorized as
risk management instruments and are carried at fair value unless the instrument
qualifies for hedge accounting treatment. Fair value adjustments on risk
management instruments carried at fair value are reflected in operating income.
Gains and losses realized on futures and forward contracts qualifying as hedges
are deferred and amortized over the terms of the related assets or liabilities
and are included as adjustments to interest income or interest expense.
Settlements on interest rate swaps and option contracts are recognized over the
lives of the agreements as adjustments to interest income or interest expense.
Interest rate contracts used in connection with securities available for
sale are carried at fair value with gains and losses, net of applicable
deferred income taxes, reported in a separate component of stockholders'
equity, consistent with the reporting of unrealized gains and losses on such
securities.
Premiums paid for interest rate caps and floors qualifying for hedge
accounting are deferred and classified with the assets and liabilities hedged
and are amortized to interest income or expense over the life of the
instrument.
<PAGE> 34
INTEREST AND FEES ON LOANS
Interest on loans is recognized based on the interest method. The
recognition of interest is suspended on commercial loans when principal or
interest is past due ninety days or more and collateral is inadequate to cover
principal and interest or when, in the opinion of management, full collection
is unlikely. Interest on such loans is subsequently recognized only in the
period in which payments are received and, in certain situations, such payments
are applied to reduce principal when loans are unsecured or collateral values
are deficient. A nonaccrual loan is returned to accrual status provided all
principal and interest amounts are reasonably assured of repayment within a
reasonable period and the borrower has demonstrated sustained payment
performance. Nonrefundable loan fees and direct origination costs are deferred
and amortized over the life of the loan as an adjustment of the yield.
Commitment fees are deferred and recognized as noninterest income over the
commitment period.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is maintained at a level considered
adequate to provide for reasonably foreseeable potential losses on loans. The
allowance is based on management's evaluation of the loan portfolio considering
economic conditions, volume and composition of the loan portfolio, past
experience and other relevant factors.
Effective January 1, 1995, the Company adopted the provisions of SFAS No.
114, "Accounting by Creditors for Impairment of a Loan." SFAS No. 114 requires
a creditor to measure impaired and restructured loans at the present value of
expected future cash flows, discounted at the loan's effective interest rate
or, as a practical expedient, at the loan's observable market price or the fair
value of the collateral if the loan is collateral dependent. The difference
between the impaired loan's carrying value and the fair value is recognized as
a valuation adjustment. The Company also adopted the provisions of SFAS No.
118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures" on January 1, 1995. SFAS No. 118 amends SFAS No. 114 by allowing
creditors to use existing methods for recognizing interest income on impaired
loans and by requiring additional disclosures. These statements did not have a
material impact on the consolidated financial statements.
OTHER REAL ESTATE OWNED
Other real estate owned includes assets that have been acquired in
satisfaction of debt. Other real estate owned is reported in other assets and
is recorded at the lower of cost or estimated fair value less estimated costs
to sell. Any valuation adjustments required prior to foreclosure are charged to
the allowance for possible loan losses. Subsequent to acquisition, losses on
the periodic revaluation of the property are charged to current period earnings
as other operating expense. Costs of operating and maintaining the properties,
net of related income and gains (losses) on their disposition, are charged to
other operating expense as incurred.
Expenditures to complete or improve properties are capitalized if the
expenditures are expected to be recovered upon the ultimate sale of the
property.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost. Depreciation and
amortization are computed principally using the straight-line method over the
estimated useful lives of the assets. Any gain or loss resulting from
disposition is included in other operating income. Expenditures for maintenance
and repairs are charged to other operating expense and renewals and betterments
are capitalized.
Effective January 1, 1996, the Company adopted the provisions of SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by the Company be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Measurement of an
impairment loss for long-lived assets and identifiable intangibles that an
entity expects to hold and use is based on the fair value of the asset. This
statement requires that the majority of long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of carrying
amount or fair value less cost to sell. The adoption of SFAS No. 121 did not
have a material impact on the consolidated financial statements.
INTANGIBLE ASSETS
Goodwill, representing the excess of the cost of acquisitions over the fair
value of the net assets acquired, is amortized using the straight-line method
over periods not exceeding 15 years. Core deposit intangibles represent the net
present value of the future economic benefits related to the use of deposits
assumed and are amortized on a straight-line basis generally over ten years.
The Company reviews its intangible assets for possible impairment when there
is a significant event that may detrimentally impact the underlying basis of
the asset.
Mortgage servicing rights represent the right to receive future servicing
income. Mortgage servicing rights are amortized over the period of, and in
proportion to, estimated net servicing income. At least annually, the Company
evaluates the carrying amount of its servicing rights by analyzing the
discounted cash flows of such assets under current market conditions.
Effective January 1, 1996, the Company adopted the provisions of SFAS No.
122, "Accounting for Mortgage Servicing Rights, an Amendment to SFAS No. 65."
SFAS No. 122 provides guidance for recognition of mortgage servicing rights as
an asset when originated or purchased mortgage loans are sold or securitized
with servicing rights retained. This statement also requires that any
impairment of mortgage servicing rights be measured as the difference between
the carrying amount of the servicing rights and their current fair values. SFAS
No. 122 is applied prospectively; therefore, the Company's financial
<PAGE> 35
statements for years prior to 1996 do not reflect the adoption of this
pronouncement. The effect of this change for the year ended December 31, 1996,
was to increase net income by approximately $3.3 million, net of income taxes.
POSTRETIREMENT BENEFITS
The Company accounts for postretirement and postemployment health care and
life insurance benefits using the full accrual method which recognizes the cost
of providing the benefits over the active service period of the employee.
Effective January 1, 1994, the Company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." SFAS No. 112 established standards for
accounting and reporting the cost of benefits provided by an employer to its
former or inactive employees after employment but before retirement. SFAS No.
112 requires an employer to recognize an obligation for such benefits if
certain conditions are met. This statement did not have a material impact on
the consolidated financial statements.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which the
deferred tax assets or liabilities are expected to be settled or realized.
NET INCOME PER SHARE
Net income per share is based on the weighted average number of shares
outstanding during each year.
RECLASSIFICATIONS
Certain prior amounts have been reclassified to conform with the 1996
presentation.
RECENT PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board (FASB) issued SFAS
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." This statement establishes accounting and
reporting standards for transfers and servicing of financial assets and
extinguishment of liabilities. SFAS No. 125 requires that an entity recognize
the financial and servicing assets it controls and the liabilities it has
incurred, derecognize financial assets when control has been surrendered, and
derecognize liabilities when extinguished. Consistent standards are provided by
this statement for distinguishing transfers of financial assets that are sales
from transfers that are secured borrowings. This statement, as amended by SFAS
No. 127, "Deferral of the Effective Date of Certain Provisions of FASB
Statement No. 125," is effective for transfers and servicing of financial
assets and extinguishments of liabilities occurring after December 31, 1996,
and is effective after December 31, 1997, for repurchase agreements,
dollar-roll agreements, securities lending, and similar transactions. The
adoption of this statement will not have a material impact on the consolidated
financial statements.
NOTE 2 - CASH AND DUE FROM BANKS
The Company is required to maintain average reserve balances with the
Federal Reserve Bank based on a percentage of deposits.
The average amount of those reserves for the year ended December 31, 1996, was
approximately $18 million.
NOTE 3 - ACQUISITIONS
Bank mergers and acquisitions completed by the Company during the three
years ended December 31, 1996, along with the related accounting treatment, are
as follows (dollars in millions):
<TABLE>
<CAPTION>
Common Cash Accounting
State Date Assets Shares Issued Paid Treatment
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Columbus
Financial May
Corporation MS 1994 $209 -- $50 Purchase
LBO Bancorp, Jan.
Inc LA 1995 96 1,360,842 -- Purchase
Citizens
National May
Bancshares, Inc. LA 1995 193 2,765,688 -- Pooling
First Merchants
Financial Aug.
Corporation AR 1995 280 1,988,052 4 Purchase
Bank of
Gonzales
Holding June
Company LA 1996 126 1,267,346 -- Purchase
Tuscaloosa Nov.
Bancshares, Inc. LA 1996 41 450,542 -- Purchase
</TABLE>
For those acquisitions accounted for as a purchase business combination, the
results of operations have been included in the financial statements from the
date of acquisition.
In addition to the mergers included in the table above, the Company acquired
a branch operation and two mortgage companies. On March 10, 1995, the Company
purchased the Coahoma County, Mississippi, operations of a local Mississippi
bank. This acquisition added assets of approximately $82 million.
On August 8, 1995, the acquisition of First Mortgage Corp. located in Omaha,
Nebraska, was completed for $15.8 million in a purchase business combination.
At the acquisition date, First Mortgage Corp. had a $1.1 billion mortgage
servicing portfolio and six production offices in Nebraska and Oklahoma.
On June 29, 1996, the Company purchased for $3.6 million, McAfee Mortgage
and Investment Company, located in Lubbock, Texas, in a transaction accounted
for as a purchase business combination. McAfee Mortgage and Investment Company
has 15 offices located throughout Texas and originated approximately $240
million in mortgage loans in 1995.
<PAGE> 36
On January 3, 1997, the Company completed its acquisition of Jefferson
Guaranty Bancorp, a one-bank holding company, located in Metairie, Louisiana,
with approximately $300 million in total assets. The Company paid a combination
of 1,759,688 shares of its common stock and $10 million in cash for all of the
outstanding common stock and common stock equivalents of Jefferson Guaranty
Bancorp. The transaction was accounted for as a purchase business combination.
The Company has been authorized by its Board to purchase in the open market all
or part of the Company's common shares exchanged in the acquisition.
On December 26, 1996, the Company entered into a definitive agreement to
acquire First Capital Bancorp, Inc., a bank holding company located in Monroe,
Louisiana, with approximately $186 million in total assets. Under the terms of
the agreement, the Company's common stock will be exchanged for all of First
Capital Bancorp's outstanding common shares. The exchange rate will be based on
the average market price of the Company's common stock on the ten consecutive
trading days ending on the tenth business day prior to the effective date of
the acquisition. If the average market price remains above $25.50, the Company
will issue 1,568,626 shares. If the average market price is less than $25.50,
the number of shares issued will increase up to a maximum of 1,702,126. The
transaction, which will be accounted for as a pooling of interests business
combination, is subject to the approval of the stockholders of First Capital
Bancorp, Inc. and regulatory authorities and is expected to be consummated
during the first quarter of 1997.
On February 20, 1997, a definitive agreement was reached to acquire NBC
Financial Corporation, a bank holding company located in Baton Rouge,
Louisiana, with approximately $70 million in total assets. Under the terms of
the agreement, 422,581 shares of the Company's common stock will be exchanged
for all of the outstanding common shares of NBC Financial Corporation. The
transaction, which will be accounted for as a purchase business combination, is
subject to the approval of the stockholders of NBC Financial Corporation and
regulatory authorities and is expected to be consummated during the second
quarter of 1997.
NOTE 4 - SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES
On November 27, 1995, the Company transferred investment securities with a
carrying amount of $1.1 billion and a fair value of $1.2 billion to securities
available for sale, as provided for under the FASB's Special Report, "A Guide
to Implementation of Statement 115 on Accounting for Certain Investments in
Debt and Equity Securities."
The amortized cost and estimated fair value of securities available for sale
and investment securities follow (in thousands):
<TABLE>
<CAPTION>
December 31,
- -----------------------------------------------------------------------------
Securities Gross Gross Estimated
available Amortized Unrealized Unrealized Fair
for sale Cost Gains Losses Value
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
U.S. Treasury
and other U.S.
Government
agencies $ 715,808 $ 2,994 $ (7,287) $ 711,515
Obligations of
states and
political
subdivisions 175,977 6,092 (1,236) 180,833
Mortgage-backed
securities 567,235 3,008 (1,982) 568,261
Other securities 1,424 5 -- 1,429
- -----------------------------------------------------------------------------
$1,460,444 $ 12,099 $ (10,505) $1,462,038
=============================================================================
1995
U.S. Treasury
and other U.S.
Government
agencies $ 849,984 $ 19,117 $ (475) $ 868,626
Obligations of
states and
political
subdivisions 136,297 8,304 (114) 144,487
Mortgage-backed
securities 180,848 3,209 (280) 183,777
Other securities 2,477 27 (3) 2,501
- -----------------------------------------------------------------------------
$1,169,606 $ 30,657 $ (872) $1,199,391
=============================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31,
- -----------------------------------------------------------------------
Gross Gross Estimated
Investment Amortized Unrealized Unrealized Fair
securities Cost Gains Losses Value
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
U.S. Treasury
and other U.S.
Government
agencies $ 9,379 $ -- $ (110) $ 9,269
Obligations of
states and
political
subdivisions 105 -- -- 105
Mortgage-backed
securities 60,581 5,047 -- 65,628
Other securities 75,022 2,423 (35) 77,410
- -----------------------------------------------------------------------
$145,087 $ 7,470 $ (145) $152,412
=======================================================================
</TABLE>
<PAGE> 37
<TABLE>
<CAPTION>
December 31,
- -----------------------------------------------------------------------
Gross Gross Estimated
Investment Amortized Unrealized Unrealized Fair
securities Cost Gains Losses Value
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
U.S. Treasury
and other U.S.
Government
agencies $ 9,369 $ 9 $ -- $ 9,378
Mortgage-backed
securities 80,481 2,898 (829) 82,550
Other securities 49,183 549 (11) 49,721
- -----------------------------------------------------------------------
$139,033 $ 3,456 $ (840) $141,649
=======================================================================
</TABLE>
The amortized cost and estimated fair value of securities available for sale
and investment securities at December 31, 1996, by contractual maturity, are
shown below (in thousands). Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
<TABLE>
<CAPTION>
December 31, 1996
- --------------------------------------------------------------------
Estimated
Securities available Amortized Fair
for sale Cost Value
- --------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 8,403 $ 8,771
Due after one year through five years 541,657 540,700
Due after five years through ten years 231,974 230,299
Due after ten years 111,175 114,007
893,209 893,777
Mortgage-backed securities 567,235 568,261
- --------------------------------------------------------------------
$1,460,444 $1,462,038
====================================================================
Investment securities
Due in one year or less $ 2,659 $ 2,729
Due after one year through five years 17,579 17,465
Due after five years through ten years 44,827 47,093
Due after ten years 19,441 19,497
84,506 86,784
Mortgage-backed securities 60,581 65,628
- --------------------------------------------------------------------
$ 145,087 $ 152,412
====================================================================
</TABLE>
Gross gains of $10.8 million, $1.2 million, and $30.8 million and gross
losses of $10.8 million, $338 thousand, and $17.2 million were realized on
sales of securities available for sale in 1996, 1995, and 1994, respectively.
Included in gross gains for 1996 and 1995 were $107 thousand and $829 thousand,
respectively, related to premiums received for exercised written option
contracts on securities available for sale. Included in gross gains and gross
losses for 1994 was $10.5 million and $6.2 million, respectively, related to
the termination of interest rate swap agreements and sales of securities
associated with such agreements.
Securities available for sale and investment securities with a carrying
amount of $1,019.9 million (fair value $1,023.1 million) at December 31, 1996,
and $772.2 million (fair value $793.1 million) at December 31, 1995, were
pledged to secure public and trust deposits, for repurchase agreements, and for
other purposes.
NOTE 5 - LOANS
The Company makes commercial, financial, agribusiness, real estate and
consumer loans to customers. Although the Company has a diversified loan
portfolio, a substantial portion of its loan portfolio is concentrated in the
states of Mississippi, Louisiana and Arkansas. Loans held for sale at December
31, 1996 and 1995, were $295.1 million and $237.1 million, respectively. The
Company services mortgage loans, and at December 31, 1996, 1995 and 1994, the
loan servicing portfolio approximated $3.8 billion, $3.5 billion and $2.0
billion, respectively. The composition of the loan portfolio follows (in
thousands):
<TABLE>
<CAPTION>
December 31,
- --------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------
<S> <C> <C>
Commercial, financial and agricultural $1,104,648 $1,010,174
Real estate - construction 170,711 122,765
Real estate - mortgage 1,800,031 1,615,166
Consumer 904,487 831,197
- --------------------------------------------------------------------
Total loans $3,979,877 $3,597,302
====================================================================
</TABLE>
In the ordinary course of business, the Company makes loans to its directors
and principal officers of its subsidiaries, as well as other related parties.
In the opinion of management, such loans are made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other parties. A summary of changes in such
loans during 1996 follows (in thousands):
<TABLE>
<S> <C>
Balance at January 1 $ 73,770
Additions 220,510
Reductions (including participations sold) (231,041)
- --------------------------------------------------------
Balance at December 31 $ 63,239
========================================================
</TABLE>
Transactions in the allowance for possible loan losses follow (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 $ 58,719 $ 55,873 $ 62,032
Additions due to acquisitions 2,062 4,652 1,224
Loans charged-off (14,309) (12,324) (14,908)
Recoveries on loans
previously charged-off 10,393 8,358 12,275
- ----------------------------------------------------------------------
Net charge-offs (3,916) (3,966) (2,633)
- ----------------------------------------------------------------------
Provision for possible
loan losses 5,340 2,160 (4,750)
- ----------------------------------------------------------------------
Balance at December 31 $ 62,205 $ 58,719 $ 55,873
======================================================================
</TABLE>
<PAGE> 38
The Company's total recorded investment in impaired loans as of December 31,
1996 and 1995, was $11.7 million and $18.7 million, respectively. Included in
the balance of impaired loans at December 31, 1996 and 1995, is $4.0 million
and $5.3 million which have related allowances of $782 thousand and $2.4
million, respectively, for estimated credit losses determined in accordance
with the provisions of SFAS No. 114. The remaining $7.7 million and $13.4
million of the balance of impaired loans at December 31, 1996 and 1995,
respectively, do not require an allowance under the provisions of SFAS No. 114
since the estimated future cash flows or the collateral value was considered
sufficient to cover any future deficiencies in loan payments. However, a
general allowance for possible loan losses is available to absorb any losses on
these loans. The average recorded investment in impaired loans for the years
ended December 31, 1996 and 1995, was $14.5 million and $22.2 million,
respectively. All impaired loans are on nonaccrual status and are subject to
the nonaccrual method for interest income recognition. There was no interest
income recognized in 1996 and 1995 on loans identified as impaired.
Loans on nonaccrual status amounted to approximately $16.4 million at
December 31, 1996, and $22.5 million at December 31, 1995. The effect on
interest income of nonaccrual loans was not material in 1996, 1995 or 1994.
Restructured loans were not significant in 1996 and there were no restructured
loans in 1995 or 1994.
Other real estate owned amounted to approximately $5.0 million at December
31, 1996, and $6.5 million at December 31, 1995. Transactions in the allowance
for possible losses on other real estate follow (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1 $ 1,730 $ 2,024 $ 1,205
Additions due to acquisitions 197 -- --
Provision charged to expense 165 154 1,078
Losses charged to the allowance (856) (448) (259)
- ---------------------------------------------------------------------
Balance at December 31 $ 1,236 $ 1,730 $ 2,024
=====================================================================
</TABLE>
NOTE 6 - BANK PREMISES AND EQUIPMENT
A summary of bank premises and equipment follows (in thousands):
<TABLE>
<CAPTION>
December 31,
- -------------------------------------------------------------
1996 1995
- -------------------------------------------------------------
<S> <C> <C>
Land $ 27,485 $ 24,885
Buildings and leasehold
improvements 177,087 164,383
Furniture and equipment 107,465 109,905
- -------------------------------------------------------------
312,037 299,173
Less: Accumulated depreciation
and amortization (163,710) (154,833)
- -------------------------------------------------------------
Bank premises and equipment, net $ 148,327 $ 144,340
=============================================================
</TABLE>
NOTE 7 - DEPOSITS
The aggregate amount of short-term jumbo certificates of deposit, each with
a minimum denomination of $100,000, was approximately $395.6 million and $390.0
million at December 31, 1996 and 1995, respectively.
NOTE 8 - BORROWED FUNDS
In April 1996, the Company issued $100 million in 7.25% Senior Notes due in
2006. These notes are not callable prior to maturity and no sinking fund is
required. Interest on the notes is paid semi-annually. The notes qualify as
"Tier II Capital" under Federal Reserve Guidelines.
The Company maintains a $50 million line of credit at a commercial bank. The
line of credit, which is for general corporate purposes, bears interest at an
adjustable rate based on LIBOR and expires in May 1997. There is no commitment
fee or compensating balance arrangement relating to this line of credit and
there was no balance outstanding at December 31, 1996. Included in other
short-term borrowings at December 31, 1995, was $27.6 million outstanding under
the line of credit.
Federal funds purchased and securities sold under agreements to repurchase
generally mature within one to four days from the transaction date. Other
borrowed funds consist of term federal funds purchased and treasury tax and
loan deposits and generally are repaid within one to 120 days from the
transaction date.
Information concerning securities sold under agreements to repurchase is
summarized as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
- ----------------------------------------------------------------
<S> <C> <C>
Average balance during the year $280,876 $309,002
Maximum month-end balance
during the year 346,215 374,828
Average interest rate during the year 4.65% 5.00%
</TABLE>
Securities underlying the repurchase agreements remain under the Company's
control.
NOTE 9 - LEASES
Operating leases (primarily for branch bank space) expire at various dates.
Most of these leases may be renewed beyond their present expiration dates.
Future minimum payments under noncancelable operating leases with initial or
remaining terms of one year or more at December 31, 1996, follow (in
thousands):
<TABLE>
<S> <C>
1997 $ 2,207
1998 1,786
1999 1,211
2000 801
2001 614
Thereafter 3,762
----------------------------------------
Total minimum lease payments $10,381
========================================
</TABLE>
<PAGE> 39
At December 31, 1996, the Company leases office space to others with
expirations at various dates through 2005. These leases have an average term of
approximately three years and require total minimum rentals of approximately
$18.2 million. Most of these subleases may be renewed beyond their present
expiration dates.
Rental expense of $7.1 million in 1996, $5.8 million in 1995, and $4.5
million in 1994 included amounts for short-term cancelable leases and minimum
rentals under operating leases.
NOTE 10 - INCOME TAXES
Total income tax expense was allocated as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Income before income taxes $ 40,621 $ 35,029 $ 32,463
Other noncurrent intangible assets,
for recognition of acquired
tax benefits that previously
were included in the valuation
allowance -- (2,949) (550)
Other noncurrent intangible assets,
for recognition of acquired
tax benefits relating to a
prior purchase business
combination -- (181) --
Stockholders' equity, for
compensation expense for
tax purposes in excess of
amount recognized for
financial reporting
purposes (1,962) (479) (120)
Stockholders' equity, for
unrealized gains on securities
available for sale for financial
reporting purposes, including
impact of adopting
SFAS No. 115 (10,656) 10,447 1,179
- ----------------------------------------------------------------------------
$ 28,003 $ 41,867 $ 32,972
============================================================================
</TABLE>
The current and deferred components of income tax expense follow (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------
<S> <C> <C> <C>
Current
Federal $36,900 $ 36,020 $ 29,368
State 1,742 2,268 2,197
Deferred
Federal 1,835 (2,673) 1,079
State 144 (586) (181)
- -------------------------------------------------
$40,621 $ 35,029 $ 32,463
=================================================
</TABLE>
The differences between the income tax expense shown on the consolidated
statements of earnings and the amounts computed by applying the federal income
tax rate of 35% to income before income taxes follow (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- -----------------------------------------------------------
<S> <C> <C> <C>
Amount computed at
statutory tax rates $ 43,481 $37,677 $34,858
Increases (decreases):
Cash surrender value
of life insurance (1,461) (1,834) (1,061)
Tax exempt interest
income (4,840) (3,951) (4,001)
Amortization of
intangible assets 1,406 926 283
State income taxes, net 1,226 1,093 1,311
Other, net 809 1,118 1,073
- -----------------------------------------------------------
$ 40,621 $35,029 $32,463
===========================================================
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the net deferred tax asset follow (in thousands):
<TABLE>
<CAPTION>
December 31,
- -----------------------------------------------------------
1996 1995
- -----------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Allowance for possible loan losses $23,815 $22,289
Other real estate owned 700 986
Deferred compensation 11,503 9,377
Investment tax credit carryforwards 2,398 2,965
Other 5,718 7,286
- -----------------------------------------------------------
Total gross deferred tax asset 44,134 42,903
- -----------------------------------------------------------
Deferred tax liabilities
Bank premises and equipment 4,505 4,076
Pension plan 4,931 4,777
Leveraged leases 225 665
Core deposit intangibles 8,472 8,090
Mortgage servicing rights 7,989 3,659
Unrealized gain on securities available
for sale 970 11,626
State income taxes 514 366
Other 1,060 1,550
- -----------------------------------------------------------
Total gross deferred tax liability 28,666 34,809
- -----------------------------------------------------------
Net deferred tax asset $15,468 $ 8,094
===========================================================
</TABLE>
There was no valuation allowance for the gross deferred tax asset as of
December 31, 1996 and 1995. The valuation allowance for the gross deferred tax
asset as of December 31, 1994, was $3.0 million. The net change in the total
valuation allowance for the year ended December 31, 1995, was a decrease of
$3.0 million. This decrease was due to management's belief that it is now more
likely than not that DGLC will be able to utilize the entire portion of the
investment tax credit carryforwards. The net change in the total valuation
allowance for the
<PAGE> 40
year ended December 31, 1994, was a decrease of $567 thousand. This decrease
was due to the utilization of net operating loss carryforwards.
At December 31, 1996, the Company had investment tax credit carryforwards
for federal income tax purposes of approximately $2.4 million which are
available to reduce DGLC's future federal income taxes, if any, through 2001.
The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment. Based upon the level of historical
taxable income and anticipated future taxable income over the periods which the
deferred tax assets are deductible, management believes it is more likely than
not the Company will realize the benefits of these deductible differences.
Total income taxes resulting from securities transactions included a
provision of $41 thousand, $322 thousand, and $4.8 million in 1996, 1995 and
1994, respectively.
NOTE 11 - EMPLOYEE BENEFIT PLANS
The Company has the following employee benefit plans:
- -- A defined benefit pension plan based upon age, length of employment and
hours of service covering substantially all employees;
- -- A retirement savings plan covering substantially all employees;
- -- Deferred compensation and stock plans covering certain key executives,
directors, and advisory directors;
- -- Stock plan covering certain key executives; and
- -- Employee stock purchase plan available to all full-time employees who have
attained legal majority and have one year of continuous service.
Employee benefit expense (income) related to these plans follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- -----------------------------------------------------------
<S> <C> <C> <C>
Pension plan $ (436) $ (17) $ (750)
Retirement savings plan 2,902 2,693 2,395
Deferred compensation plan 3,695 3,253 2,848
Other plans 793 393 595
- -----------------------------------------------------------
$ 6,954 $6,322 $5,088
===========================================================
</TABLE>
Benefits under the defined benefit pension plan are based on years of
service and the employee's compensation during the last five years of
employment. The Company's funding policy is to contribute an amount which will
satisfy the minimum funding requirements of ERISA and will not exceed the
maximum tax-deductible amount allowed by the IRS. The annual contribution is
determined by an enrolled actuary and incorporates benefits earned to date and
in the future.
The following table sets forth the plan's funded status and amount
recognized in the Company's consolidated statements of condition (in
thousands):
<TABLE>
<CAPTION>
December 31,
- ----------------------------------------------------------------------------
1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit
obligation, including
vested benefits of $88,855
in 1996 and $81,443 in 1995 $ 90,622 $ 83,051
- ----------------------------------------------------------------------------
Projected benefit obligation
for service rendered to date $ 104,546 $ 95,705
Plan assets at fair value, primarily
corporate securities 134,853 121,537
- ----------------------------------------------------------------------------
Plan assets in excess of projected
benefit obligation 30,307 25,832
Unrecognized net gain from
past experience difference
from that assumed (16,818) (10,452)
Prior service cost not yet
recognized in net
periodic pension cost 1,807 28
Unrecognized net asset, net of
amortization over a fifteen-
year period (2,192) (2,740)
- ----------------------------------------------------------------------------
Prepaid pension cost $ 13,104 $ 12,668
============================================================================
</TABLE>
Net pension benefit included the following components (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits
earned during the year $ 3,656 $ 2,781 $ 2,791
Interest cost on projected
benefit obligation 6,954 6,318 5,841
Actual return on plan assets (10,734) (8,571) (8,878)
Net amortization and deferral (312) (545) (504)
- --------------------------------------------------------------------
Net periodic pension benefit $ (436) $ (17) $ (750)
====================================================================
</TABLE>
The weighted-average discount rate used in determining the actuarial present
value of the projected benefit obligations was 7.25% in 1996 and 1995. The rate
of increase in future compensation was 5.0% in 1996 and 1995. The expected
long-term rate of return on plan assets was 9.0% in 1996 and 1995.
Under the retirement savings plan, the Company automatically contributes an
amount equal to 2% of each participant's base salary to the plan. A
participant, in addition, may elect to contribute up to 10% of base salary to
the plan. The Company contributes an additional amount to the plan equal
<PAGE> 41
to 50% of the participant's contribution up to 5% of base salary. Effective
January 1, 1997, employees can contribute up to 15% of base salary.
Participants of the deferred compensation plan can defer a portion of their
compensation for payment after retirement or termination of employment. Life
insurance contracts have been purchased which may be used to fund payments
under the plan.
The incentive stock plan includes the granting of incentive stock options,
nonqualified stock options, stock appreciation rights, and restricted stock
awards. Stock options are granted at a price equal to the market value of the
stock at the date of grant and are exercisable for a period not to exceed ten
years from the date of grant. The maximum number of shares subject to the plan
is 1.91 million. In calculating net income per share, the dilutive effect of
the options outstanding was not material.
The Company accounts for the incentive stock plan under APB Opinion No. 25,
under which no compensation cost has been recognized. Had compensation cost for
the plan been determined consistent with SFAS No. 123, the Company's net income
and net income per share would have been reduced to the following pro forma
amounts:
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------
<S> <C> <C>
Net income:
As reported $83,610 $71,620
Pro forma 82,482 71,364
Net income per share:
As reported $ 2.16 $ 1.89
Pro forma 2.13 1.86
</TABLE>
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1996 and 1995, respectively: risk-free
investment rate of 6.34% and 6.28%, expected dividend yield of 2.55%, expected
life of seven years, and expected volatility of 21.58% and 19.99%.
The following table summarizes the Company's option activity (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- -----------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at
beginning of year 886 848 754
Options issued and assumed 160 180 130
Options exercised and expired (368) (142) (36)
- -----------------------------------------------------------
Options outstanding and
exercisable at end of year 678 886 848
===========================================================
</TABLE>
All options are nonqualified stock options. The exercise prices of the
options are $23.63, $17.75, and $13.88 per share for options issued in 1996,
1995 and 1994, respectively. The weighted average exercise price of all options
outstanding at December 31, 1996, is $15.28.
Participants in the employee stock purchase plan may contribute up to 5% of
their base salary. The Company's contribution to each participant's account is
25% of the participant's contribution. Common stock of the Company is purchased
for the plan in the open market.
The Company also provides certain health care and life insurance benefits
for retired employees. For those employees who have retired and active
employees eligible to retire, as of January 1, 1993, the Company shares in the
cost of these benefits. Employees eligible to retire are those age 55 with ten
years of service. The Company pays 50% of the cost of these benefits for the
retiree and covered spouse until the retiree becomes Medicare eligible (age
65). After the retiree attains age 65, the retiree pays the full cost of these
benefits. Active employees not eligible to retire before January 1, 1993, pay
the full cost of coverage for these benefits at retirement. The plan is
unfunded.
The following table sets forth the amount recognized in the Company's
consolidated statements of condition (in thousands):
<TABLE>
<CAPTION>
December 31,
- -------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retired participants $1,235 $1,117
Fully eligible active plan participants 342 676
Other active plan participants 209 270
- -------------------------------------------------------------------
1,786 2,063
Unrecognized net gain from
past experience different from that
assumed and from changes in
actuarial assumptions 409 215
- -------------------------------------------------------------------
Accrued postretirement benefit cost $2,195 $2,278
===================================================================
</TABLE>
Net periodic postretirement benefit cost included the following components
(in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the period $ 27 $ 20 $ 22
Interest costs on projected benefit
obligation 112 136 150
Net amortization and deferral (52) (29) --
- ------------------------------------------------------------------
Net periodic postretirement
benefit cost $ 87 $ 127 $172
==================================================================
</TABLE>
<PAGE> 42
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.25% in 1996 and 1995. The assumed health care cost trend rate
used in measuring the accumulated postretirement benefit obligation was 10.6%
in 1996 and 11.4% in 1995, graded down to 9.8% in 1997 and graded down each
year to an ultimate rate of 5% in 2008. If the health care cost trend rate
assumptions were increased by 1%, the accumulated postretirement benefit
obligation as of December 31, 1996, would be increased by 1%. The effect of
this change on the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for 1996 would be an increase of 1%.
NOTE 12 - EQUITY RESTRICTIONS
The banking subsidiaries of the Company are subject to certain regulations
controlling national banks that restrict the amount of dividends that may be
distributed and the amount of loans that may be made by the banks to the
parent.
Dividends paid by the Company are substantially provided from dividends
received from the banking subsidiaries. The approval of the Comptroller of the
Currency is required if the total of all dividends declared by a national bank
in any calendar year exceeds the total of its net profits, as defined, for that
year combined with its retained net profits of the preceding two years. The
subsidiary banks have available for payment of dividends in 1997, without
regulatory approval, $110.3 million plus their net profits for 1997.
NOTE 13 - REGULATORY MATTERS
The Company 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 additional
discretionary, actions by regulators that, if undertaken, could have a direct
and material effect on the Company's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company must meet specific capital guidelines that involve quantitative
measures of the Company's assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. The Company'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 Company to maintain minimum amounts and ratios of Total and Tier I
capital (as defined in the regulations) to risk-weighted assets (as defined),
and of Tier I capital (as defined) to average assets (as defined). The minimum
required ratios of Total and Tier I capital to risk-weighted assets and Tier I
capital to average assets are 8.0%, 4.0% and 4.0%, respectively. Management
believes, as of December 31, 1996, that the Company meets all capital adequacy
requirements to which it is subject.
As of December 31, 1996, the most recent notification from the Office of the
Comptroller of the Currency categorized the Company's subsidiary banks as well
capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Company's subsidiary banks must maintain
minimum Total risk-based, Tier I risk-based, and Tier I leverage ratios of
10.0%, 6.0% and 5.0%, respectively. There are no conditions or events since
that notification that management believes have changed the institution's
category.
The Company's and its significant banking subsidiaries' actual capital
amounts and ratios are presented in the following table (in thousands):
<TABLE>
<CAPTION>
December 31,
- ---------------------------------------------------------------------
1996 1995
- ---------------------------------------------------------------------
Amount Rate Amount Rate
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Capital
(to Risk Weighted Assets):
Consolidated $554,254 12.67% $508,855 12.30%
Deposit Guaranty
National Bank 430,478 13.32 382,106 12.19
Commercial
National Bank 109,072 12.79 112,178 15.52
Tier I Capital
(to Risk Weighted Assets):
Consolidated 499,489 11.42 457,069 11.05
Deposit Guaranty
National Bank 390,267 12.07 343,430 10.96
Commercial
National Bank 98,345 11.54 103,050 14.25
Tier I Capital
(to Average Assets):
Consolidated 499,489 8.23 457,069 7.87
Deposit Guaranty
National Bank 390,267 8.96 343,430 8.00
Commercial
National Bank 98,345 9.05 103,050 9.10
</TABLE>
NOTE 14 - OFF-BALANCE SHEET RISK, COMMITMENTS AND CONTINGENCIES
The Company 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
and to reduce its own exposure to fluctuations in interest rates. These
financial instruments include commitments to extend credit, standby and
commercial letters of credit, securities lent, futures and forward contracts,
interest rate contracts and options. Those instruments involve, to varying
degrees, elements of credit and/or interest rate risk in excess of the amounts
recognized in the consolidated financial statements. The contract or notional
amounts of those instruments reflect the extent of involvement the Company has
in particular classes of financial instruments.
<PAGE> 43
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby and commercial letters of credit is represented by the contractual
notional amount of those instruments. The Company uses the same credit policies
in making commitments and conditional obligations as it does for on-balance
sheet instruments. For futures, forward contracts, interest rate contracts, and
options, the contract or notional amounts do not represent exposure to credit
loss. Credit risk for those instruments is controlled by limits and monitoring
procedures.
COMMITMENTS
At December 31, 1996, the financial instruments whose contract amounts
represent credit risk and those whose notional or contract amounts exceed the
amount of on-balance sheet credit risk are listed in the following table (in
thousands):
<TABLE>
<CAPTION>
Contract
Amount
- ------------------------------------------------------
<S> <C>
Financial instruments whose contract
amounts represent credit risk:
Commitments to extend credit $1,367,050
Standby letters of credit 99,825
Commercial letters of credit 4,354
Financial instruments whose notional or
contract amounts exceed the amount
of credit risk:
Commitments to purchase securities 40,155
Commitments to sell securities 7,685
</TABLE>
Commitments to extend credit are agreements to lend money with fixed
expiration dates or other termination clauses. The Company periodically
reassesses the customers' creditworthiness through ongoing credit reviews.
Since many of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. Collateral is obtained based on the Company's assessment of the
customer's creditworthiness.
Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. The credit risk
and collateralization policy involved in issuing standby letters of credit is
essentially the same as that involved in extending loans to customers.
The Company issues commercial letters of credit which are short-term
commitments used to finance commercial contracts for the shipment of goods.
Under these instruments, the Company substitutes its own creditworthiness for
that of the customer by committing to pay a third party under certain
contractual conditions. These instruments are collateralized by the goods being
shipped.
Commitments to purchase and sell securities, futures and forward contracts
are contracts for delayed delivery of securities, foreign currencies or money
market instruments in which the seller agrees to make delivery of a specified
instrument at a specified future date, at a specified price or yield. Risks
arise from the possible inability of counterparties to meet the terms of their
contracts and from movements in interest rates and securities values.
DERIVATIVES
The Company maintains an active trading account in Eurodollar futures and
options in order to maintain a presence in those markets. Trading activities
are confined to relatively small dollar limits on exchange-traded instruments.
Trading activities in those instruments resulted in a net loss of $25 thousand
for 1996. There were no notional amounts outstanding at December 31, 1996.
Trading instruments are recorded at fair value, with realized and unrealized
gains and losses recognized in other operating income. Exposure to market risk
is managed in accordance with risk limits set by senior management. All
positions are netted for risk-management purposes. Credit risk is minimized by
using only exchange-traded futures and options, utilizing a position netting
strategy, and requiring that all positions be fully collateralized.
Risk management derivative instruments are used to manage the Company's
exposure to interest rate and market risk. The notional or contract amounts on
these instruments normally exceed the amount of credit risk to the Company. The
1996 year-end positions of the Company in these instruments are summarized in
the following table (in thousands):
<TABLE>
<CAPTION>
Contract or
Notional Amount
- ------------------------------------------------------------
<S> <C>
Interest rate swap agreements $ 122,622
Interest rate caps 100,000
Interest rate floors 300,000
Forward contracts 130,500
</TABLE>
Interest rate swap agreements are entered into by the Company primarily to
manage interest rate exposure. These are contractual agreements between
counterparties to exchange interest streams based on notional principal amounts
over a set period of time. Interest rate swap agreements normally involve the
exchange of fixed and floating rate interest payment obligations without the
exchange of the underlying principal amounts. The notional or principal amount
does not represent an amount at risk, but is used only as a basis for
determining the actual cash flows related to the interest rate contracts.
Market risk, due to potential fluctuations in interest rates, is inherent in
swap agreements. As of December 31, 1996, the Company had no aggregate
estimated cost of replacement (the cost of replacing an existing contract if
the counterparty defaults) for the interest rate swap contracts. All active
interest rate swap counterparties have collateral arrangements with the
Company.
Interest rate caps with three-year maturities were purchased during 1994 in
anticipation of further increases in interest rates, and were assigned to
certificates of deposit with maturities of three months or less. The interest
rate caps allow the Company
<PAGE> 44
to limit its exposure to unfavorable interest fluctuations over and above a
"capped" rate. A premium is paid for this protection. The risk assumed by the
Company is limited to the amount of the premium and not the notional amount of
the interest rate cap. At December 31, 1996, the unamortized portion of the
interest rate cap premium was $751 thousand.
Interest rate floors with five-year maturities were purchased during 1996
and 1995 in anticipation of decreases in interest rates and were assigned to
floating rate commercial loans. The interest rate floors allow the Company to
limit its exposure to unfavorable interest fluctuations below a particular
rate. A premium is paid for this protection. The risk assumed by the Company is
limited to the amount of the premium and not the notional amount of the
interest rate floor. At December 31, 1996, the unamortized portion of the
interest rate floor was $2.6 million.
Futures and forward contracts are contracts for the delayed delivery of
securities in which the seller agrees to make delivery of a specified
instrument at a specified future date, at a specified price or yield. Risks
arise from the possible inability of the counterparties to meet the terms of
their contracts and from movements in interest rates and securities values. The
Company intends to offset or close out open positions prior to settlement;
therefore, the total contract amounts of futures and forward contracts
represent the extent of the Company's involvement. The Company is subject only
to the change in value of the instruments. Futures contracts settle in cash
daily; therefore, there is minimal risk to the Company.
The Company was a party to a small number of foreign exchange spot and
forward transactions during 1996 and 1995. These contracts generally involve
the exchange of United States currency for a foreign currency. Spot foreign
exchange transactions normally settle within two business days, and forward
transactions can settle up to a year in the future. At December 31, 1996, the
Company had no foreign exchange contracts outstanding.
Option contracts allow the holder of the option to purchase or sell a
financial instrument from/to the seller or writer of the option at a specified
price within a specified period of time. The Company has sold options on
securities held in the available for sale securities portfolio during the year.
The premiums received on those options totaled $1.8 million. Options which have
been sold do not expose the Company to credit risk. At December 31, 1996, the
Company had no option contracts outstanding.
LITIGATION
DGNB is a defendant in a case in which the plaintiffs are some of the
beneficiaries of a trust for which DGNB is the trustee. In an amended
complaint, the plaintiffs claim that DGNB was negligent in its dealings with
the trust property, breached its trust duties by allegedly abusing its
discretion and negligently handling trust assets, engaged in self dealing, and
was grossly negligent in its handling of the trusts. The case seeks actual
damages for waste of trust assets and loss of income and punitive damages, both
in an unspecified amount to be proven at trial, and attorney fees and court
costs. While the ultimate outcome of the lawsuit cannot be predicted with
certainty, management denies all liability and believes that the ultimate
resolution of this matter will not have a material effect on the Company's
consolidated financial statements.
In addition, the Company is subject to numerous other pending and threatened
legal actions arising in the normal course of business, and management believes
that the ultimate resolution of these matters will not have a material effect
on the Company's consolidated financial statements.
NOTE 15 - STOCK SPLIT
The Company declared a two-for-one stock split effective December 2, 1996.
All issuances of shares, shares outstanding, and per share results are
calculated assuming the split occurred at the beginning of the earliest period
presented.
NOTE 16 - FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments,"
requires that the Company disclose estimated fair values for its financial
instruments. Because no market exists for a significant portion of the
financial instruments, fair value estimates are based on judgment regarding
future expected loss experience, current economic conditions, and other
factors.
These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions significantly affect the estimates and as
such, the derived fair value may not be indicative of the value negotiated in
an actual sale and may not be comparable for the Company versus other financial
institutions.
In addition, the fair value estimates are based on existing on-and-off
balance sheet financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that are
not considered financial instruments. For example, the Company has significant
fee generation businesses that are not considered financial instruments and
their value has not been incorporated into the fair value estimates.
Significant assets that are not considered financial assets include trust
services, the mortgage banking operation, brokerage network, deferred tax
assets, bank premises and equipment, core deposit intangibles and goodwill. In
addition, the tax ramifications related to the realization of the unrealized
gains and losses can have a significant effect on fair value estimates and have
not been considered in the estimates. Fair value estimates, methods, and
assumptions are set forth below.
CASH AND SHORT-TERM INVESTMENTS: The carrying amount is a reasonable
estimate of fair value for cash, interest-bearing bank balances, federal funds
sold and securities purchased under agreements to resell due to the maturity of
those instruments being less than six months.
<PAGE> 45
TRADING ACCOUNT SECURITIES: The carrying amount of trading account
securities is fair value which is based on quoted market prices, where
available. If a quoted market price is not available, fair value is estimated
using quoted market prices for similar securities.
SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES: Fair values for
securities available for sale and investment securities are based on quoted
market prices, where available. If quoted market prices are not available, fair
values are based on quoted market prices of comparable instruments.
LOANS: The fair values are estimated for portfolios of loans with similar
characteristics. Loans are segregated by type such as commercial taxable and
nontaxable, residential mortgage and consumer. Each loan category is further
segmented into fixed and adjustable rate interest terms and by performing and
nonperforming categories.
The fair value of performing adjustable-rate loans is the carrying amount
adjusted for the discounted value of the expected future loan losses. The fair
value of performing fixed-rate loans is calculated by discounting cash flows
based on estimated scheduled maturities reduced by expected future loan losses.
The discount rate is estimated using the rate currently offered for similar
loans with similar maturities. The fair value of residential mortgage loans is
based on quoted market prices.
The fair value of nonperforming loans is calculated by discounting expected
cash flows as projected based on historical cash flows of such nonperforming
loans adjusted for expected loan losses. The discount rate is estimated using
the rates currently offered for acceptable credit quality loans with similar
maturities.
DEPOSITS: The fair value of deposits with no stated maturity, such as
noninterest-bearing demand deposits and savings accounts, is equal to the
amount payable on demand, which is also their carrying amount. The fair value
of certificates of deposit is based on the discounted value of contractual cash
flows. The discount rate is estimated using the rates currently offered for
deposits of similar maturities.
SHORT-TERM BORROWINGS: The carrying amounts of federal funds purchased,
securities sold under agreements to repurchase and other short-term borrowings
approximate their fair values due to the short maturity of those instruments.
LONG-TERM DEBT: The fair value of the Company's long-term debt is estimated
using discounted cash flow analyses based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements.
COMMITMENTS: The fair value of commercial commitments to extend credit and
letters of credit is the remaining unamortized amount of the prepaid fee
charged to enter into the agreement or the discounted cash flows of estimated
fees that will be charged over the life of the agreement taking into account
the remaining terms of the agreements and counterparties' credit standing. The
fair value of residential mortgage lending commitments is based on quoted
market prices considering expected funding, the contractual interest rates and
current market rates.
DERIVATIVES: Interest rate swaps, interest rate caps, interest rate floors,
futures, forwards, and option contracts are the primary derivative financial
instruments used by the Company. The fair value of interest rate swap
agreements, interest rate caps, interest rate floors, futures, forwards, and
option contracts are obtained from market quotes. These values represent the
estimated amount the Company would receive or pay to terminate the contracts or
agreements, taking into account current interest rates and, when appropriate,
the current creditworthiness of the counterparties. The estimated fair values
of the Company's financial instruments are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
- -----------------------------------------------------------------------------------------
1996 1995
- -----------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets
Cash and short-term
investments $ 434,381 $ 434,381 $ 784,721 $ 784,721
Trading account
securities 2,505 2,505 3,381 3,381
Securities available
for sale 1,462,038 1,462,038 1,199,391 1,199,391
Investment securities 145,087 152,412 139,033 141,649
Loans 3,917,672 3,919,005 3,520,583 3,539,719
Financial liabilities
Deposits 5,025,749 5,042,909 4,780,659 4,805,225
Short-term
borrowings 543,029 543,029 599,482 599,482
Long-term debt 99,405 100,659 -- --
Commitments
Commitments to
extend credit (1,514) (6,576) (1,621) (5,990)
Letters of credit -- (1,222) -- (1,034)
Commitments to
purchase securities -- (894) -- 121
Commitments to
sell securities -- (18) -- 180
Risk management
derivatives
Interest rate swap
agreements 198 1,607 (88) (1,423)
Forward contracts -- 377 -- (1,623)
Interest rate caps 751 7 1,537 99
Interest rate floors 2,669 2,814 1,288 2,734
</TABLE>
<PAGE> 46
NOTE 17 - DEPOSIT GUARANTY CORP. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
STATEMENTS OF CONDITION
(in Thousands)
<TABLE>
<CAPTION>
December 31,
- --------------------------------------------------------------
1996 1995
- --------------------------------------------------------------
<S> <C> <C>
Assets
Cash on deposit with bank subsidiary $ 47,196 $ 6,446
Investment in subsidiaries:
Bank subsidiaries 637,423 557,731
Nonbank subsidiaries 7,742 7,501
Notes receivable from nonbank
subsidiaries -- 2,990
Cash dividends receivable from
bank subsidiaries 8,376 7,510
Other assets 27,651 20,938
- --------------------------------------------------------------
Total assets $728,388 $603,116
==============================================================
Liabilities
Cash dividends payable $ 8,156 6,664
Short-term borrowings -- 27,600
Long-term debt 99,405 --
Other liabilities 39,561 29,799
- --------------------------------------------------------------
Total liabilities 147,122 64,063
- --------------------------------------------------------------
Stockholders' equity 581,266 539,053
- --------------------------------------------------------------
Total liabilities and
stockholders' equity $728,388 $603,116
==============================================================
</TABLE>
STATEMENTS OF EARNINGS
(in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------
<S> <C> <C> <C>
Income
Cash dividends from
bank subsidiaries $30,620 $24,334 $19,296
Service and management
fees from subsidiaries 34,289 28,114 27,295
Interest from subsidiaries 1,963 557 663
Other 167 108 606
- ------------------------------------------------------------------
Total income 67,039 53,113 47,860
- ------------------------------------------------------------------
Expenses
Interest 4,693 437 1,220
Salaries and employee benefits 25,597 21,118 20,058
Other 18,213 13,968 14,523
- ------------------------------------------------------------------
Total expenses 48,503 35,523 35,801
- ------------------------------------------------------------------
Income before income taxes
and equity in undistributed
income of subsidiaries 18,536 17,590 12,059
Income tax benefit 5,211 4,513 3,738
- ------------------------------------------------------------------
Income before equity in
undistributed income
of subsidiaries 23,747 22,103 15,797
Equity in undistributed income
of subsidiaries:
Bank subsidiaries 59,337 49,691 50,835
Nonbank subsidiaries 526 826 498
- ------------------------------------------------------------------
Net income $83,610 $72,620 $67,130
==================================================================
</TABLE>
STATEMENTS OF CASH FLOWS
(in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
- -------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from
operating activities
Net income $ 83,610 $ 72,620 $ 67,130
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for depreciation
and amortization 3,344 2,986 2,811
Increase in other
liabilities 11,723 5,557 4,505
Increase in other assets (9,129) (3,424) (3,996)
Equity in undistributed
income of
subsidiaries (59,863) (50,517) (51,333)
- -------------------------------------------------------------------------
Net cash provided by
operating activities 29,685 27,222 19,117
- -------------------------------------------------------------------------
Cash flows from
investing activities
Net decrease in securities
purchased from bank
subsidiary under
agreements to resell -- 13,466 2,620
Net (increase) decrease in notes
receivable from nonbank
subsidiary 2,990 750 (2,810)
Payments for investments in and
advances to subsidiaries (174) (9,294) (1,311)
Purchases of premises and
equipment (2,071) (1,086) (1,699)
Proceeds from sales of bank
premises and equipment 301 11 --
Capital contributed to bank
subsidiary -- -- (467)
- -------------------------------------------------------------------------
Net cash provided (used)
by investing activities 1,046 3,847 (3,667)
- -------------------------------------------------------------------------
Cash flows from
financing activities
Increase (decrease) in
short-term borrowings (27,600) 27,600 --
Proceeds from issuance of
long-term debt 99,381 -- --
Proceeds from exercise of
common stock options 3,845 997 282
Purchases of
common stock (39,100) (32,382) (1,097)
Cash dividends paid (26,507) (21,355) (18,201)
- -------------------------------------------------------------------------
Net cash provided (used)
by financing activities 10,019 (25,140) (19,016)
- -------------------------------------------------------------------------
Net increase (decrease)
in cash 40,750 5,929 (3,566)
Cash at beginning of year 6,446 517 4,083
- -------------------------------------------------------------------------
Cash at end of year $ 47,196 $ 6,446 $ 517
=========================================================================
</TABLE>
<PAGE> 47
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Deposit Guaranty Corp.:
We have audited the accompanying consolidated statements of condition of
Deposit Guaranty Corp. and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of earnings, changes in stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1996. 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 financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Deposit
Guaranty Corp. and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for debt securities in 1994 to adopt the
provisions of Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities."
KPMG PEAT MARWICK LLP
Jackson, Mississippi
February 5, 1997,
except for the last
paragraph of Note 3
which is as of
February 20, 1997
<PAGE> 48
ITEM 14. DESCRIPTION OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Exhibit Number Sequential Page Number
------- ------ ----------------------
<S> <C> <C>
Articles of Incorporation 3(a) This document was previously filed
as Exhibit 3(a) to the Company's
Form 10-Q Quarterly Report for the
quarter-ended March 31, 1996 and is
hereby specifically incorporated by
reference herein.
Bylaws 3(b) This document was previously filed
as Exhibit 1 to the Company's Annual
Report on Form 10-K (file number
0-4518) for the fiscal year ended
December 31, 1989 and is hereby
specifically incorporated by
reference herein.
Material Contracts 10
(1) Executive Variable Pay The written description of the
Executive Variable Pay Plan included
under the caption "Executive
Compensation" in the definitive
Proxy Statement of the Company,
dated March 24, 1992 filed with
the Commission pursuant to Rule
14a-6 and is hereby specifically
incorporated by reference herein.
(2) Deferred Income Plan The original plan and an amendment
and Amendment I to the plan were previously filed as
Exhibit to the Company's Annual
Report on Form 10-K (file number
0-4518) for the fiscal year ended
December 31, 1994. Both documents
are hereby specifically incorporated
by reference herein.
(3) Stock-Based, Long-Term Filed herewith.
Incentive Plan
(4) Stock-Based, Long-Term This document was previously
Incentive Plan II previously filed as Exhibit "A" to
the definitive Proxy Statement of
the Company dated March 29, 1993,
filed with the Commission pursuant
to Rule 14a-6 and is hereby
specifically incorporated by
reference herein.
</TABLE>
<PAGE> 49
<TABLE>
<S> <C> <C>
(5) Employment Contracts Filed herewith
Statement Re: Computation of 11 Filed herewith
Per Share Earnings
Subsidiaries of the Company 22 Filed herewith
Independent Auditors' Consent 23 Filed herewith
Financial Data Schedule 27 Filed herewith
</TABLE>
<PAGE> 50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized, in the City of
Jackson, Mississippi, on March 28, 1997.
DEPOSIT GUARANTY CORP.
BY: /s/ E. B. ROBINSON, JR.
-----------------------------------
E. B. Robinson, Jr.
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ E. B. ROBINSON, JR. Chairman of the Board March 19, 1997
- ------------------------------ and Director
E. B. Robinson, Jr.
Principal Executive Officer
/s/ HOWARD L. MCMILLAN, JR. President and Director March 19, 1997
- ------------------------------
Howard L. McMillan, Jr.
/s/ ARLEN L. MCDONALD Executive Vice President March 24, 1997
- ------------------------------
Arlen L. McDonald
Principal Financial Officer
/s/ STEPHEN E. BARKER Controller March 17, 1997
- ------------------------------
Stephen E. Barker
Principal Accounting Officer
Director March __, 1997
- ------------------------------
Michael B. Bemis
/s/ RICHARD H. BREMER Director March 19, 1997
- ------------------------------
Richard H. Bremer
Director March __, 1997
- ------------------------------
Warren A. Hood, Jr.
Director March __, 1997
- ------------------------------
Charles L. Irby
/s/ RICHARD D. MCRAE, JR. Director March 19, 1997
- ------------------------------
Richard D. McRae, Jr.
</TABLE>
<PAGE> 51
<TABLE>
<S> <C> <C>
/s/ W. R. NEWMAN, III Director March 19, 1997
- ------------------------------
W. R. Newman, III
Director March __, 1997
- ------------------------------
John N. Palmer
/s/ STEVEN C. WALKER Director March 19, 1997
- ------------------------------
Steven C. Walker
/s/ J. KELLEY WILLIAMS Director March 27, 1997
- ------------------------------
J. Kelley Williams
</TABLE>
<PAGE> 52
EXHIBIT
The following exhibits are included herein.
<TABLE>
<CAPTION>
Page
Number Description
------ -----------
<S> <C>
54-63 Stock-Based Long-Term Incentive Plan
64-192 Employment Contracts
193-195 Computation of Per Share Earnings
196 Subsidiaries of the Registrant
197 Independent Auditors' Consent
198 Financial Data Schedule
</TABLE>
<PAGE> 53
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10(3) Stock-Based, Long-Term Incentive Plan
10(5) Employment Contracts
11 Computation of Per Share Earnings
21 Deposit Guaranty Corp. List of Subsidiaries
23 Independent Auditors' Consent
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.3
INTRODUCTION
The Deposit Guaranty Corp. Stock-Based Long-Term Incentive Plan (the "Plan")
was adopted by the Board of Directors on December 17, 1985 and was approved by
the shareholders of the Company on April 15, 1986. The Company is the sponsor
of the Plan. The Company's address is 210 East Capitol Street, P. 0. Box 730,
Jackson, Mississippi 39205 and its telephone number is (601) 354-8564.
THE PLAN
The following is a summary of the main provisions of the Plan. Such
summary does not purport to be complete and is qualified in its entirety by
express reference to the Plan, a copy of which may be obtained by any person to
whom this Prospectus is delivered upon request.
Purpose of the Plan; Participation
Participation in the Plan is limited to employees of the Company and
its subsidiaries who are determined by the Board of Directors to be key
employees and in position to make significant contributions toward the success
of the Company and its subsidiaries. The purpose of the Plan is to attract and
retain such employees.
The Plan provides that the Board of Directors will administer the
Plan. However, the Board may delegate all or any portion of its administrative
responsibilities and powers under the Plan (including all of the powers
described below, except for the power to amend, modify, suspend or terminate
the Plan) to the Compensation Committee of the Board. The Plan provides that
the Compensation Committee must be composed of not less than three (3) members
of the Board who are not employees of the Company and who are not eligible to
participate in the Plan.
Under the Plan the Board may, in its discretion, grant incentive
awards in the form of stock options, stock appreciation rights ("SARs") or
restricted stock awards to employees of the Company and its subsidiaries who
are determined by the Board to be key employees. The Board will have full
power to interpret the Plan, resolve questions of fact, select awards to be
made and the key employees who shall receive the awards, formulate the terms
and conditions (not inconsistent with the Plan provisions) of Stock Option or
Restricted Stock Agreements, and make all other determinations required in the
administration of the Plan. The Board may include in any such agreement
provisions pertaining to the effect of the employees' death, disability,
retirement or other termination of employment on awards made to the employee.
Shares Subject to the Plan
The maximum number of shares of Common Stock which may be granted is
three hundred twenty thousand (320,000), subject to adjustments for stock
dividends, stock splits, reorganizations, recapitalizations or similar
adjustments.
1
<PAGE> 2
The shares of Common Stock to be issued by the Company under the Plan, may, at
the discretion of the Board, be issued from the Company's authorized but
unissued Common Stock, or from any available treasury stock. Shares subject to
an option, right or award which terminates are again eligible for grant.
Stock Options
The Plan provides for both Incentive Stock Options ("ISOs") specially
tailored to qualify as such under the provisions of Section 422A of the
Internal Revenue Code of 1954 (the "Code"),, as amended, and for options which
do not qualify as ISOs, referred to as Supplemental Stock Options. The Board
may designate any Option which satisfies the statutory requirements for ISOs as
an ISO and may designate any Option granted as a Supplemental Stock Option, or
the Board may designate a portion of an Option as an ISO and the remaining
portion as a Supplemental Stock Option. The Plan further provides that any
portion of an Option that is not designated as an ISO shall be a Supplemental
Stock Option. An Option may not be assigned or hypothecated.
Each Option granted under the Plan must be evidenced by a written
option agreement specifying the number of shares that may be purchased by
exercising the option and containing certain other essential terms and
conditions consistent with the Plan as the Board shall determine to be
applicable to that particular Option.
To obtain the tax benefits of Section 422A of the Code, the Plan and
the Option Agreements which will be used will establish special rules for ISOs.
These rules require, among other things, that:
(1) An ISO shall not be granted to an employee who, on the date of
grant, owns directly or indirectly (within the meaning of the applicable Code
sections), more than ten percent of the total combined voting power of all
classes of stock of the Company (an exception to this rule applies if the Board
provides in the related Option Agreement that the option price per share of
Common Stock will not be less than 110% of the fair market value of a share of
Common Stock on the date of-grant and that the option period will not extend
past five years from the date of grant);
(2) The options may be exercised only in the order in which they
were granted;
(3) The maximum aggregate fair market value of the stock for which
ISOs may be granted to one employee in any calendar year may not exceed
$100,000 plus any it unused limit carryover," as that term is defined in
Section 422A of the Code.
The following provisions apply with regard to each Option granted
under the Plan (whether it is an ISO or a Supplemental Stock Option):
(1) The option price per share shall be equal to the fair market
value per share on the date of grant, and in no event shall the option price be
less than $1.00 per share;
2
<PAGE> 3
(2) Each Option must be granted within ten years from the date the
Plan is adopted by the Board;
(3) The option exercise price must be paid in full at the time of
exercise, in cash or in such other form as the Board may approve, including
shares of the Company's Common Stock having an aggregate fair market value
equal to the option price.
The Plan provides that Supplemental Stock Options may be exercised at
any time after the date of grant and, except as described in the chart below,
will expire ten years from the date of grant. ISOs issued under the Plan may
be exercised during the period beginning one year after the date of grant and,
except as described in the chart below, ending not later than ten years from
the date of grant. The Board may select at the time of grant a shorter option
period or that the option shall terminate upon the occurrence of any event
specified by the Board. In addition, the Board may permit or require an Option
to be exercisable in installments..
Upon termination of employment, a grantee must exercise all
outstanding Options within the applicable time periods listed below, at the end
of which time the Options will expire:
Event of Termination ISOs Supplemental Stock Options
Retirement 3 months Normal Option Period applies
(ten years from date of grant
unless otherwise provided)
Total & Permanent
Disability 1 year Normal Option Period applies
(ten years from date of grant
unless otherwise provided)
Death 2 years Normal Option Period applies
(ten years from date of grant
unless otherwise provided)
Other Termination of Date of Date of Termination
Employment Termination
Stock Appreciation Rights
Under the Plan SARs may be granted, at the discretion of the Board, in,
connection with the grant of a Supplemental Stock Option or an ISO. However.,
the number of SARs that may be granted under the Plan with respect to each
Option shall not exceed one-half of the shares of Common Stock under such
Option. SARs entitle the grantee to receive the spread or difference between
the fair market value of the stock subject to the Option and the option price.
The SARs must be exercised in tandem with the related Supplemental Stock Option
or ISO.
3
<PAGE> 4
Thus, each grantee who receives a SAR would be entitled to choose whether to
exercise a SAR with respect to a number of shares of the Company's stock or in
lieu thereof, exercise the Supplemental Stock Option or ISO for those shares.
SARs are exercisable only when and to the extent that the related Option is
exercisable, except that a SAR may not be exercised within six months after it
is granted. A SAR shall expire or otherwise terminate simultaneously with the
expiration or termination of the related Option. In addition, SARs shall be
transferable only when the related Option is transferable and under the same
conditions and shall be reduced by the amount of shares purchased pursuant to
each exercise of the Option (and, likewise, the number of shares under the
Option will be reduced by the number of SARs exercised).
Upon the exercise of a SAR, the Company shall pay the employee the
amount by which the fair market value of a share of the Company's Common Stock
on the date of exercise exceeds the fair market value of a share of the
Company's Common Stock on the date the SAR was granted. However, in no event
will such excess amount be permitted to exceed 200% of the fair market value of
a share of Common Stock on the date of grant. A SAR may not be exercised
unless the fair market value of a share of Common Stock on the date of exercise
exceeds the fair market value of a share of Common Stock on the date of grant.
Payment upon exercise shall be in the form of the Company's Common
Stock (at fair market value on the date of exercise), cash or a combination of
cash and Common Stock as the Board may determine.
Restricted Stock Awards
Restricted Stock Awards with respect to the Company's Common Stock
will be made pursuant to Restricted Stock Agreements which describe conditions,
terms and restrictions determined by the Board (including a "substantial risk
of forfeiture" as defined under Section 83 of the Code and restrictions against
transfer) with respect to such shares. Such restrictions could include, for
example, the requirement of continued employment at the same or higher level
with the Company. Except as described below, the shares awarded pursuant to
Restricted Stock Awards shall vest (i.e., become free of forfeiture and
transfer restrictions) according to the following schedule:
lst Annual Anniversary of Grant Date 20% of Award
2nd Annual Anniversary of Grant Date 20% of Award
3rd Annual Anniversary of Grant Date 20% of Award
4th Annual Anniversary of Grant Date 20% of Award
5th Annual Anniversary of Grant Date 20% of Award
The Board has full discretion to revise the above vesting schedule
without obligation to give prior notice before instituting such change.
4
<PAGE> 5
In the event of retirement, total and permanent disability or death,
the plan provides that the full amount of any Restricted Stock Award which has
not vested at the time of such employee's retirement, total and permanent
disability or death shall thereupon immediately vest in the employee unless the
Board determines otherwise in the related Restricted Stock Agreement. If the
employee's employment terminates for any reason other than retirement, total
and permanent disability or death, any Restricted Stock Award which has not
vested at the time of such employee's termination of employment is forfeited.
Except for restrictions on sale, transfer or encumbrance of shares and
the substantial risk of forfeiture, a grantee shall be entitled to all other
rights of a shareholder, including dividend and voting rights. Legended
certificates for restricted shares must be deposited with the Company or its
designee, or in the Board's discretion, delivered to the grantee during the
period in which the restrictions are in effect.
The number of shares granted under Restricted Stock Awards must not
exceed ten percent (10%) of the number of shares of Common Stock available to
the Plan (32,000 shares).
The Plan also provides that in the event of a merger or change in
control (as that term is defined in Rule 405 under the Securities Act of 1933),
the acquisition by any person or entity other than the Company of twenty-five
percent (25%) or more of the Common Stock of the Company through a tender
offer, exchange offer, or otherwise, or a sale of substantially all of the
assets of the Company, the Restricted Stock Awards outstanding as of the date
of such action shall vest in the respective grantee on such date. This
provision, however, shall not apply if the Board (as it is constituted prior to
such event of merger, change in "control," 25% or more stock acquisition or
sale of assets) by a two-thirds vote, so elects.
General Plan Provisions
Each award under the Plan is subject to the condition that if at any
time the Board shall determine that a listing, registration or qualification of
the shares represented thereby is required, or the consent or approval of any
governmental regulatory agency is required or an agreement with the employee
regarding disposition of shares is necessary or desirable, such award shall not
be made until such requirement has been fulfilled or provided for to the
satisfaction of the Board. Furthermore, the Company may, but is not obligated
to, register any stock, to comply with exemptions from registration or take any
other action to remedy or remove any prohibition or limitation on the issuance
of or sale of stock to any Plan participant.
Upon the issuance of the shares of Common Stock under the Plan, the
Company has the right to require the recipient to remit to it any withholding
tax with respect to such shares or indemnify the Company against such taxes.
Cash payments under the Plan will be net of any amount sufficient to satisfy
withholding tax requirements.
The Plan expires ten years from date of its adoption by the Board
(December 17, 1985), unless previously terminated by the Board.
5
<PAGE> 6
The Plan is not subject to any of the provisions of ERISA.
Upon certain changes in the number of outstanding shares of the
Company's Common Stock, the Board shall adjust the number of shares to be
issued under the Plan and equitably adjust shares issuable under outstanding
awards.
The Board may amend, modify, suspend or terminate the Plan at any
time, except that without shareholder approval the Board may not increase the
maximum number of shares of Common Stock which may be issuable under the Plan
(other than increases due to a change in capitalization), change the class of
employees eligible to receive awards, extend the period during which any award
may be exercised, extend the ten-year term of the Plan, or change the minimum
option exercise price or the maximum amount payable on exercise of a SAR. The
termination or any modification, suspension or amendment of the Plan shall not,
without the consent of a participant, adversely affect the participant's right
under an award previously granted. The power to amend, modify, suspend or
terminate the Plan as described above may not be delegated by the Board.
The recipient of a grant under the Plan (other than a Restricted Stock
Award) shall have no rights as a shareholder with respect to such grant unless
and until the issuance of certificates. Nothing in the Plan or in any
agreement entered into pursuant thereto shall confer upon a participant any
continuing employment rights. The existence of the Plan and Options, SARs and
Restricted. Stock Awards under it shall not affect the right of the Board or
shareholders of the Company to make adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or business
nor the issuance of any securities or any other corporate act.
Restrictions on Resale Imposed by the Securities Act of 1933.
Shares of the Company's Common Stock acquired by "affiliates" as that
term is defined in the Rules and Regulations under the Securities Act of 1933
(the "Act") may be subject to restrictions on resale imposed by the Act. Such
shares could be resold under the terms of Rule 144 of the Rules and
Regulations, pursuant to another applicable exemption, if any, from the
registration requirements of the Act, or pursuant to an effective registration
statement filed with the Securities and Exchange Commission. Rule 144, among
other things, limits the number of shares which may be sold in a three-month
period. An "affiliate" is defined as a person that "directly, or indirectly,
through one or more intermediaries, controls, or is controlled by, or is under
common control with" the Company. Directors, executive officers and
substantial shareholders are likely to be deemed "affiliates."
FEDERAL INCOME TAX CONSEQUENCES
The Company understands the Federal income tax consequences of awards
made under the Plan, based on current Federal income tax laws and regulations,
to be as follows:
6
<PAGE> 7
(a) If the requirements for Incentive Stock Option treatment are
satisfied, the grantee normally is not subject to Federal income tax at the
time of grant of the option or at the time of exercise, nor is the Company
allowed a compensation expense deduction. However, if the stock is disposed of
by the grantee within two years after the grant of the ISO or within one year
after issuance to the grantee of the shares upon exercise, the difference
between the fair market value of the stock at the time of exercise and the
exercise price will be taxed to the grantee at ordinary income tax rates, and
the Company will be entitled to a corresponding compensation expense deduction.
Otherwise, any gain or loss upon disposition of the stock will be treated as
long-term capital gain or loss to the grantee, and no deduction is available to
the Company.
(b) In the case of Supplemental Stock Options, the grantee is not subject
to Federal income tax at the time of grant of the option since the option, in
the opinion of the Company, shall not have a readily ascertainable fair market
value at the time of grant, nor is the Company allowed a compensation expense
deduction at such time. Upon exercise, however, a grantee must include in
ordinary income subject to federal income taxation, an amount equal to the
excess, if any, of the fair market value of the option stock at the time the
option is exercised over the exercise price. Any such amounts, to the extent
that they constitute reasonable compensation, will be deductible by the Company
in determining its taxable income. If the grantee sells the option stock at a
price different from its fair market value at the time the option is exercised,
the difference will be taxed to the grantee in accordance with regular capital
gain rules as long-term or short-term capital gain or loss. The subsequent
sale of option stock acquired upon the exercise of a Supplemental Stock Option
will not result in any further tax consequences to the Company.
(c) The grantee of Stock Appreciation Rights ("SARs") will not be subject
to Federal income tax at the time of receipt. Upon the exercise of a SAR,
however, irrespective of whether granted in connection with an Incentive Stock
Option, or a Supplemental Stock Option, the grantee will be deemed to have
received compensation to the extent of any cash received and to the extent of
the fair market value of any shares of stock received. Such compensation will
be taxable to the Grantee as ordinary compensation income and the Company will
be entitled to a compensation expense deduction of a like amount.
(d) The grantee of a Restricted Stock Award will be deemed to have
received compensation at the time all or a portion of the restricted stock
becomes either "transferrable" or no longer subject to a "substantial risk of
forfeiture," as those terms are defined in Section 83 of the Internal Revenue
Code of 1954, as amended (the "Code"). Such compensation income will be an
amount equal to the excess of the fair market value of the stock at the time
the stock becomes either "transferrable" or no longer subject to a "substantial
risk of forfeiture," over the amount, if any, paid for the stock by the
grantee. Alternatively, a grantee may elect to be taxed upon receipt of the
restricted stock even though the restricted stock is both "non-transferrable"
and subject to a "substantial risk of forfeiture," in which case the
compensation income taxable to the I grantee is based on the fair market value
of the stock at the time of election. The Company is entitled to a
compensation expense deduction in an amount equal to the ordinary income
realized by the grantee, and the deduction is allowed at the same time as
compensation income is recognized by the grantee.
7
<PAGE> 8
In addition, because the Plan provides for the immediate vesting of
Restricted Stock Awards in the event of a change in ownership, effective
control of the Company, or in the ownership of a substantial portion of its
assets, the "golden parachute" provisions of the Federal income tax law may
apply to the Company and the grantee upon the occurrence of such an event. If
the golden parachute provisions (contained in Sections 280C and 4999 of the
Code) apply, the Company will not be allowed to deduct certain payments in
excess of a statutorily-defined base amount ("excess parachute payments") if
such excess is not reasonable compensation for personal services actually
rendered or to be rendered by the grantee. Furthermore, a nondeductible twenty
percent (20%) excise tax will be imposed on a grantee receiving any excess
parachute payment. However, due to the limited number of Restricted Stock
Awards authorized under the Plan, the Company believes that it is unlikely that
the golden parachute provisions will be applicable to any Restricted Stock
Awards that may be granted under the Plan.
(e) In each of the foregoing situations where the grantee is deemed to
receive compensation income, the Company must, as a general rule, collect from
the grantee federal withholding income taxes and must also meet withholding,
contribution and matching requirements, where applicable, with regard to Social
Security and Federal unemployment taxes.
MEMBERS OF THE BOARD OF DIRECTORS AND
COMPENSATION COMMITTEE
As of the date of this Prospectus, the following persons served as directors
of the Company:
W. H. Holman, Jr.
Stuart C. Irby, Jr.
Howard L. McMillan, Jr.
Richard D. McRae
W. D. Mounger
W. R. Newman, III
E. B. Robinson,- Jr.
J. W. Underwood
J. Kelley Williams
E. B. Robinson, Jr. is Chairman of the Board and Chief Executive
Officer of the Company and the Company's primary subsidiary, Deposit Guaranty
National Bank (the "Bank"). Howard L. McMillan is President and Chief
Operating officer of the Company. All directors of the Company also serve as
directors of the Bank. In certain instances, officers and directors of the
Company also serve as officers and directors of the Company's other
subsidiaries.
8
<PAGE> 9
As of the date of the Prospectus, the following directors served as
members of the Compensation Committee:
Stuart C. Irby, Jr., Chairman
J. Kelley Williams
W. R. Newman, III
Correspondence to the Board of Directors or the Compensation Committee
should be addressed to the Company, 210 East Capitol Street, P. 0. Box 730,
Jackson, Mississippi 39205 for their attention.
LEGAL MATTERS
The validity of the shares of Common Stock offered pursuant to the
Plan is being passed upon by Watkins Ludlam & Stennis, 20th Floor, Deposit
Guaranty Plaza, Jackson, Mississippi 39201.
INDEMNIFICATION
Under Mississippi corporate law, a corporation is authorized, but not
required, to indemnify directors and officers of the corporation against
expenses actually and reasonably incurred in connection with the defense of any
action, suit or proceeding in which he is made a party by reason of being or
having been a director or officer, except where the director or officer is
adjudged to be liable for negligence or misconduct in the performance of duty
or for a violation of the Mississippi Antitrust and Fair Trade Statutes. A
corporation is also authorized by statute to make any other indemnification
authorized by its articles of incorporation, or by a bylaw or resolution
adopted by the shareholders of the corporation after notice.
Under Article Nine of the Company's Articles of Incorporation the
Company is required to indemnify any person who was or is a party or is
threatened to be made a party to a civil, criminal, administrative or
investigative action (other than an action by or on behalf of the Company)
because he is or was an officer, director, employee or agent of the Company, or
is or was at the request of the Company serving as a director, officer,
employee or agent of another enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred. In case of an action by or on behalf of the Company, the Company is
required to provide indemnity for expenses (including attorneys' fees) actually
and reasonably incurred in connection with such action if such person is not
adjudged to be liable for negligence or misconduct in the performance of his
duty or if a court determines that despite the negligence or misconduct, in
view of all the circumstances, indemnity for expenses is proper.
9
<PAGE> 10
Indemnification may be made in specific cases only if a determination
is made by either a disinterested quorum of the Board of Directors, independent
legal counsel, the shareholders of the Company or a court of competent
jurisdiction that the person seeking indemnification acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests
of the Company, and, with respect to criminal actions, the person had no
reasonable cause to believe his conduct was unlawful. Indemnification under
Article Nine is not extended to suits instituted by the person seeking
indemnification, unless the Board of Directors approves otherwise.
The Company may pay expenses incurred in advance of the final
disposition of an action, if the Board of Directors approves and if the person
seeking indemnification undertakes (or someone undertakes on his behalf) to
repay the Company if it is ultimately determined that he is not entitled to
indemnification under Article Nine.
Insofar as indemnification for liabilities under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the SEC 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 Company
of expenses incurred or paid by a director, officer or controlling person of
the Company 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 Company 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 Securities Act of 1933 and will be
governed by the final adjudication of such issue.
10
<PAGE> 1
EXHIBIT 10.5
CHANGE OF CONTROL TERMINATION AGREEMENT
This Change of Control Termination Agreement (the "Agreement") is
entered into on _________________, 1996, between Deposit Guaranty Corp., a
Mississippi corporation, with its principal place of business located at 210
East Capitol Street, Jackson, Mississippi 39201, (the "Corporation") and Howard
L. McMillan, Jr. of 1200 Meadowbrook Road, Jackson, Mississippi 39110
("Employee").
WITNESSETH:
WHEREAS, the Corporation considers it essential to the best interests
of its stockholders to foster the continuous employment of key management
personnel. In this connection, the Board of Directors of the Corporation (the
"Board") recognizes that, as is the case with many publicly held corporations,
the possibility of a change in control may exist. This possibility, and the
uncertainty and questions that it may raise among key management, may result in
the departure or distraction of key management personnel to the detriment of
the Corporation and its stockholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of key
members of the Corporation's management, including Employee, to the assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a change in control of the Corporation; and
WHEREAS, to induce Employee to remain in the employ of the
Corporation, and in consideration of Employee's agreement set forth below, the
Corporation agrees that Employee shall receive the severance benefits set forth
in this Agreement in the event Employee's employment with the Corporation is
terminated subsequent to a "change in control of the Corporation" (as defined
in Section 2 below) under the circumstances described below. This Agreement is
meant to supersede any other specific written agreements that may have been
entered into between Employee and the Corporation concerning the consequences
of any termination of Employee's employment.
<PAGE> 2
THEREFORE, in consideration of Employee's continued employment and the
parties' agreement to be bound by the terms contained in this Agreement, the
parties agree as follows:
1. TERM OF AGREEMENT. This Agreement shall commence on January
1, 1996, and shall continue in effect through December 31, 1996. However,
commencing on December 31, 1996, and each December 31 afterwards, the term of
this Agreement shall automatically be extended for 1 additional year unless, no
later than the preceding November 1, the Corporation shall have given notice
that it does not wish to extend this Agreement. If a change in control of the
Corporation shall have occurred during the original or any extended term of
this Agreement, this Agreement shall continue in effect for a period of 36
months beyond the month in which the change in control occurred.
Notwithstanding the foregoing, and provided no change of control shall have
occurred, this Agreement shall automatically terminate on the earlier to occur
of (i) Employee's termination of employment with the Corporation, or (ii) the
Corporation's furnishing Employee with notice of termination, irrespective of
the effective date of the termination.
2. CHANGE IN CONTROL. No benefits shall be payable under this
Agreement unless there shall have been a change in control of the Corporation,
as set forth below. For purposes of this Agreement, a "change in control of
the Corporation" shall mean a change of control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Corporation is in fact required to comply
with that regulation, provided that, without limitation, such a change in
control shall be deemed to have occurred if (A) any "person" (as that term is
used in Section 13(d) and 14(d) of the Exchange Act), other than a trustee or
other fiduciary holding securities under an employee benefit plan of the
Corporation or a corporation owned, directly or indirectly, by the stockholders
of the Corporation in substantially the same proportions as their ownership of
stock of the Corporation, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Corporation representing twenty-five percent (25%) or more of the combined
voting power of the Corporation's then outstanding securities; (B) during any
period of
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<PAGE> 3
2 consecutive years (not including any period prior to the execution of this
Agreement), individuals who at the beginning of the period constitute the Board
and any new director (other than a director designated by a person who has
entered into an agreement with the Corporation to effect a transaction
described in clauses (A) or (D) of this Section) whose election by the Board or
nomination for election by the Corporation's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute a
majority; (C) the Corporation enters into an agreement, the consummation of
which would result in the occurrence of a change in control of the Corporation;
or (D) the stockholders of the Corporation approve a merger or consolidation of
the Corporation with any other corporation, other than a merger or
consolidation that would result in the voting securities of the Corporation
outstanding immediately prior to it continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the combined voting power of
the voting securities of the Corporation or such surviving entity outstanding
immediately after the merger or consolidation, or the stockholders of the
Corporation approve a plan of complete liquidation of the Corporation or an
agreement for the sale or disposition by the Corporation of all or
substantially all of the Corporation's assets.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 2 above constituting a change in control of the
Corporation shall have occurred, Employee shall be entitled to the benefits
provided in Subsection 4(iii) below on the termination of Employee's employment
during the 36 months following a Change of Control, unless the termination is
(A) because of Employee's death, Inability to Perform or Retirement, (B) by the
Corporation for Cause or (C) by Employee other than for Good Reason.
(i) INABILITY TO PERFORM; RETIREMENT. If, as a result of
Employee's incapacity due to physical or mental illness, Employee shall have
been absent from the full-time performance of his duties with the Corporation
for 6 consecutive months, and within 30 days after written notice of
termination is given
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<PAGE> 4
Employee has not returned to the full-time performance of Employee's duties,
Employee's employment may be terminated for "inability to perform the essential
functions of his employment." Termination by the Corporation or by Employee of
Employee's employment based on "Retirement" shall mean termination in
accordance with the Corporation's retirement policy, including early
retirement, generally applicable to its salaried employees or in accordance
with any retirement arrangement established with Employee's consent.
(ii) CAUSE. Termination by the Corporation for "Cause"
shall mean termination on (A) the willful and continued failure by Employee to
substantially perform Employee's duties with the Corporation (other than any
such failure resulting from Employee's incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance by
Employee of a Notice of Termination for Good Reason as defined in Subsections
3(iv) and 3(iii), respectively) after a written demand for substantial
performance is delivered to Employee by the Board, specifically identifying the
manner in which the Board believes that Employee has not substantially
performed his duties; or (B) willful misconduct by the Employee clearly
contrary to the interests of the Corporation. Employee may be terminated for
Cause only upon delivery to Employee of a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice to Employee and an opportunity for Employee, together with
Employee's counsel, to be heard before the Board), finding that in the good
faith opinion of the board Employee was guilty of conduct set forth above in
either clause (A) or (B) of the first sentence of this Subsection.
(iii) GOOD REASON. Employee shall be entitled to terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without Employee's express written consent, the occurrence after a
change in control of the Corporation of any of the following circumstances
unless, in the case of paragraphs (A), (E), (F), (G), or (H), the circumstances
are fully corrected prior to the Date of Termination specified in the Notice of
Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in
respect to them:
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<PAGE> 5
(A) a material adverse alteration in the nature
or status of Employee's responsibilities from those in effect
immediately prior to the change in control of the Corporation;
(B) a reduction by the Corporation in Employee's
annual base salary except for across-the-board salary reductions
similarly affecting all key employees of the Corporation and all key
employees of any person in control of the Corporation;
(C) relocation of Employee by Corporation to a
location not within twenty-five (25) miles of his present office or
job location, except for required travel on the Corporation's business
to an extent substantially consistent with his present business travel
obligations;
(D) the failure by the Corporation, without
Employee's consent, to pay any part of Employee's current
compensation, or to pay any part of an installment of deferred
compensation under any deferred compensation program of the
Corporation within 7 days of the date the compensation is due;
(E) the failure by the Corporation to continue in
effect any bonus to which Employee is entitled, or any compensation
plan in which he participates immediately prior to the change in
control of the Corporation, including but not limited to the
Corporation's Stock Option Plans, Executive Deferred Income Plan,
Retirement Income Plan, Retirement Savings Plan, and Flexible Benefit
Plan, or any substitute plans adopted prior to the change of control
in the Corporation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
the plan, or the failure by the Corporation to continue Employee's
participation in it (or in such substitute or alternative plan) on a
basis not less favorable, both in terms of the amount of benefits
provided and the level of his participation relative to other
participants, as existed at the time of the change in control;
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<PAGE> 6
(F) the failure by the Corporation to continue to
provide Employee with benefits substantially similar to those enjoyed
by him under the Corporation's life insurance, medical, health and
accident, or disability plans in which he was participating at the
time of the change in control of the Corporation;
(G) the failure of the Corporation to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 of this
Agreement; or
(H) any purported termination of Employee's
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (iv) below (and, if
applicable, the requirements of Subsection (ii) above); for purposes
of this Agreement, no such purported termination shall be effective.
Employee's rights to terminate his employment pursuant to this
Subsection shall not be affected by his incapacity due to physical or mental
illness. Employee's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
under this Agreement. In the event Employee delivers Notice of Termination
based on circumstances set forth in Paragraphs (A), (E), (F), (G), or (H)
above, which are fully corrected prior to the Date of Termination set forth in
said Notice of Termination, the Notice of Termination shall be deemed withdrawn
and of no further force and effect.
(iv) NOTICE OF TERMINATION. Any purported termination of
Employee's employment by the Corporation or by Employee shall be communicated
by written Notice of Termination to the other party to this Agreement in
accordance with Section 6 of this Agreement. For purpose of this Agreement, a
"Notice of Termination" shall mean a notice that shall indicate the specific
termination provision in this Agreement relied on, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the employment under the provision so indicated.
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<PAGE> 7
(v) DATE OF TERMINATION, ETC. "Date of Termination"
shall mean (A) if Employee's employment is terminated for Inability to Perform,
30 days after Notice of Termination is given (provided that he shall not have
returned to full-time performance of his duties during such 30-day period), and
(B) if Employee's employment is terminated pursuant to Subsection (ii) or (iii)
above or for any other reason (other than Disability), the date specified in
the Notice of Termination (which, in the case of a termination pursuant to
Subsection (ii) above shall not be less than 30 days, and in the case of a
termination pursuant to Subsection (iii) above shall not be less than 15 nor
more than 60 days, respectively, from the date the Notice of Termination is
given). However, if within 15 days after any Notice of Termination is given,
or , if later, prior to the Date of Termination (as determined without regard
to this provision), the party receiving the Notice of Termination notifies the
other party that a dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, by a binding arbitration
award, or by a final judgment, order, or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal has expired and no appeal has been perfected). The Date of Termination
shall be extended by a notice of dispute only if the notice is given in good
faith and the party giving the notice pursues the resolution of the dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute,
the Corporation will continue to pay Employee his full compensation in effect
when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue Employee as a participant in all
compensation, benefit, and insurance plans in which he was participating when
the notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection. Amounts paid under this
Subsection are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement except to the extent otherwise provided in subsection 4(iv).
4. COMPENSATION ON TERMINATION OR DURING DISABILITY. Following a
change in control of the Corporation, as defined by Section 2, on termination
of Employee's employment or during a
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<PAGE> 8
period of disability he shall be entitled to the following results:
(i) During any period that Employee fails to perform his
full-time duties with the Corporation as a result of incapacity due to physical
or mental illness, he shall continue to receive his base salary at the rate in
effect at the commencement of any such period, together with all amounts
payable to him under any compensation plan of the Corporation during the
period, until this Agreement is terminated pursuant to Section 3(i) above.
Thereafter, or in the event Employee's employment shall be terminated by the
Corporation or by Employee for Retirement, or by reason of Employee's death,
Employee's benefits shall be determined under the Corporation's retirement,
insurance, and other compensation programs then in effect in accordance with
the terms of those programs.
(ii) If Employee's employment shall be terminated by the
Corporation for Cause or by Employee other than for Good Reason, Disability,
Death, or Retirement, the Corporation shall pay Employee his full base salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts and benefits to which Employee is
entitled under any compensation plan of the Corporation at the time the
payments are due.
(iii) If within thirty-six (36) months following a Change of
Control Employee's employment by the Corporation shall be terminated (a) by the
Corporation other than for Cause, Retirement or Inability to Perform, or (b) by
Employee for Good Reason, then Employee shall be entitled to the benefits
provided below:
(A) The Corporation shall pay Employee his full
base salary through the Date of Termination at the rate in effect at
the time Notice of Termination is given, plus all other amounts and
benefits to which he is entitled under any compensation plan of the
Corporation, at the time the payments are due, except as otherwise
provided below.
(B) The Corporation also shall pay as severance
pay to Employee a lump sum severance payment (together with the
payments provided in paragraphs C and D, below, the
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<PAGE> 9
"Severance Payments") equal to three (3) times the Employee's annual
base salary in effect immediately prior to the occurrence of the
circumstance giving rise to the Notice of Termination, plus three (3)
times the Employee's average annual bonus for the last three years.
(C) The Corporation also shall pay Employee any
deferred compensation, including, but not limited to deferred bonuses,
allocated or credited to Employee or Employee's account as of the Date
of Termination. Payments made pursuant to the Executives Deferred
Income Plan shall be made as provided by said Plan and shall not be
deemed to be modified by the terms of this Agreement.
(D) Any outstanding options to purchase shares of
Common Stock of the Corporation which are held by Employee under the
Corporation's Stock Option Plans shall be exercisable in accordance
with the terms of the Stock Based Long Term Incentive Plan II.
(E) The Corporation shall provide medical
insurance benefits to Employee for three (3) years from Date of
Termination or until Employee secures employment with another company
providing similar welfare benefits. The Corporation will pay for such
benefits in the same manner as in existence on the Date of
Termination.
(F) The payments provided for in Paragraphs (A),
(B), and (C) above, shall be made no later than the fifth day
following the Date of Termination. However, if the amounts of the
payment cannot be finally determined on or before that day, the
Corporation shall pay Employee an estimate, as determined in good
faith by the Corporation, of the minimum amount of such payments and
shall pay the remainder of those payments (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the
amount can be determined but in no event later than the 30th day after
the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have
been due, the excess shall constitute a loan by the Corporation
repayable on the 5th day after demand by the Corporation (together
with interest at the rate provided in Section 1274(b)(2)(B) of the
Code).
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<PAGE> 10
(iv) In the event that Employee is a "disqualified
individual" within the meaning of Section 280G of the Code, the parties
expressly agree that the payments described in this Section 4 and all other
payments to Employee under any other agreements or arrangements with any
persons that constitute "parachute payments" within the meaning of Section 280G
of the Code are collectively subject to an overall maximum limit. The maximum
limit shall be One Dollar ($1.00) less than the aggregate amount that would
otherwise cause any such payments to be considered a "parachute payment" within
the meaning of Section 280G of the Code, as determined by the Corporation.
Accordingly, to the extent that the payments would be considered a "parachute
payment" with respect to Employee, then the portions of such payments shall be
reduced or eliminated in the following order until the remaining change of
control termination payments with respect to Employee is within the maximum
described in this Subsection (iv):
(A) First, any cash payment to Employee;
(B) Second, any change of control termination
payments not described in this Agreement; and
(C) Third, any forgiveness of Employee
indebtedness to the Corporation.
Employee expressly and irrevocably waives any and all rights to
receive any change in control termination payments that exceed the maximum
limit described in this Subsection (iv).
(v) Employee shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Section 4 be reduced by any compensation earned by
Employee as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by Employee to the
Corporation, or otherwise except as specifically provided in this Section 4.
(vi) In addition to all other amounts payable to Employee
under this Section 4, Employee shall be entitled to receive all benefits
payable to Employee under the
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<PAGE> 11
Corporation's Retirement Savings Plan, its Retirement Income Plan, the
Executives' Deferred Income Plan and any other plan or agreement relating to
retirement benefits.
(vii) Notwithstanding any other provisions of this
Agreement, no payments shall be made hereunder by Corporation which would be in
violation of any law or regulation applicable to Corporation, including,
without limitation, the provisions of Part 359 of Title 12, Code of Federal
Regulations, it being understood and agreed that Corporation's obligations
hereunder shall not exceed any valid limits imposed by a regulatory body.
5. SUCCESSORS; BINDING AGREEMENT. (i) The Corporation will
require any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business and/or
assets of the Corporation to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession had taken place. Failure of
the Corporation to obtain the assumption and agreement prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
entitle Employee to compensation from the Corporation in the same amount and on
the same terms as Employee would have been entitled to under this Agreement if
Employee had terminated his employment for Good Reason following a change in
control of the Corporation, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Corporation" shall
mean the Corporation as defined above and any successor to its business and/or
assets that assumes and agrees to perform this Agreement by operation of law,
or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, heirs, distributees, and legatees. If Employee should die
while any amount would still be payable to Employee, all such amounts, unless
otherwise provided in this Agreement, shall be paid in accordance with the
terms of this Agreement to Employee's legatee or other designee or, if there is
no such designee, to Employee's estate.
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<PAGE> 12
6. NOTICE. For the purpose of this Agreement, all notices and
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been fully given when delivered or mailed by United
States registered or certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Corporation shall be directed to
the attention of the Board with a copy to the Secretary of the Corporation, or
to such other address as either party may have furnished to the other in
writing in accordance with this Agreement, except that notice of a change of
address shall be effective only on receipt.
7. MISCELLANEOUS. No provision of this Agreement may be
modified, waived, or discharged unless the waiver, modification, or discharge
is agreed to in writing and signed by Employee and such officer as may be
specifically designated by the Board. No waiver by either party to this
Agreement at any time of any breach by the other party of, or compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter of this Agreement have been made by either party that are not
expressly set forth in this Agreement. The validity, interpretation,
construction, and performance of this Agreement shall be governed by the laws
of the State of Mississippi. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for shall be paid net of any applicable
withholding or deduction required under federal, state, or local law. The
obligations of the Corporation under Section 4 shall survive the expiration of
the term of this Agreement.
8. VALIDITY. The invalidity or enforceability of any provision
of this Agreement shall not affect the validity or unenforceability of any
other provision of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an
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<PAGE> 13
original but all of which together will constitute one and the same instrument.
10. DISPUTES. Any dispute or controversy arising under or in
connection with this Agreement (a "Dispute") shall be resolved as follows:
(i) Negotiation. In the event of a Dispute, the parties
shall use their best efforts to settle such dispute through informal
negotiations. To this effect, they shall consult and negotiate with
each other, in good faith and, recognizing their mutual interests,
attempt to reach a just and equitable solution satisfactory to both
parties. If they do not reach such solution within a period of
thirty (30) days from the date one par1TYfirst notifies in writing
another of the claim(s) giving rise to the Dispute, then upon written
notice by either party to the other, the Dispute shall be submitted
to mediation as set forth below.
(ii) Mediation. If such Dispute cannot be settled through
negotiation within such thirty (30) day period, the parties agree to
then endeavor to settle the Dispute in an amicable manner by mediation
administered by the American Arbitration Association ("AAA") under its
Commercial Mediation Rules. Such mediation shall occur in Jackson,
Mississippi before a mediator who is skilled in mediating commercial
disputes. AAA shall appoint a mediator meeting the qualifications set
out above. Such mediation shall consist of no more than two sessions
occurring within the twenty (20) days first following the end of the
negotiation period referred to above. Thereafter, any unresolved
Dispute shall be settled by arbitration in the manner set forth below.
The mediator cannot serve as an arbitrator.
(iii) Arbitration. Any Dispute which remains unresolved
following mediation shall be submitted to binding arbitration in
accordance with Title 9 of the United States Code (United States
Arbitration Act). This arbitration shall be administered by AAA in
accordance with its Commercial Arbitration Rules (the
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<PAGE> 14
"Rules"). The situs of the arbitration shall be Jackson, Mississippi
unless otherwise mutually agreed by the parties. The arbitration
shall be expedited such that, unless the parties otherwise agree or
unless necessary to allow the parties to gather and exchange
appropriate documentary or other evidence or information, (a) the
panel shall be selected within 30 days following the filing of the
Notice of Claim with AAA, (b) the hearing shall commence within 45
days following the filing of the Notice of Claim, (c) the hearing
shall be continued as expeditiously as possible until concluded and
(d) the award shall be rendered within 10 days following the
conclusion of the hearing. If the claim or controversy arising from
this Agreement is greater than Five Hundred Thousand Dollars
($500,000) either party hereto shall have the right to proceed
judicially and shall not be required to arbitrate.
(iv) Number and Qualification of Arbitrators. The
arbitration shall be conducted before and decided by a panel of two
arbitrators. Each shall be an attorney licensed to practice law in
any of the United States, having been admitted to practice for no
fewer than fifteen years.
(v) Remedies and Choice of Law. The arbitrators shall
have authority to award any remedy or relief that a court of the State
of Mississippi could award or grant, including, without limitation,
specific performance of any obligations created under this Agreement;
provided however, that the arbitrators shall not have the authority to
award punitive damages against either party.
(vi) Fees and Expenses. The arbitrators shall have the
authority to award to the prevailing party, if any, as determined by
the arbitrators, all of its costs and fees, in such amounts as the
arbitrators deem just. "Costs and Fees" mean all reasonable pre-award
expenses of the arbitration, including the arbitrators' fees,
administrative fees, travel expenses, other out-of-pocket expenses,
witness (including expert
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<PAGE> 15
witness) fees and expenses and attorneys' fees and expenses.
(vii) Finality and Enforcement. Any award rendered by the
arbitrators shall be final, binding and conclusive. The parties
hereby agree to submit to the personal jurisdiction of the courts of
the State of Mississippi for the enforcement of the award. The award
may also be enforced in any other court of competent jurisdiction.
11. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties with respect to its subject matter and supersedes
all prior written or oral agreements or understandings with respect to the
subject matter.
In witness whereof, the parties have executed this agreement at
Jackson, Mississippi the day and year first above written.
DEPOSIT GUARANTY CORP.
By:
---------------------------------
Title:
------------------------------
------------------------------------
HOWARD L. MCMILLAN, JR.
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<PAGE> 16
CHANGE OF CONTROL TERMINATION AGREEMENT
This Change of Control Termination Agreement (the "Agreement") is
entered into on _________________, 1997, between Deposit Guaranty Corp., a
Mississippi corporation, with its principal place of business located at 210
East Capitol Street, Jackson, Mississippi 39201, (the "Corporation") and Steven
C. Walker of 8343 East Wilderness Way, Shreveport, Louisiana 71106
("Employee").
WITNESSETH:
WHEREAS, the Corporation considers it essential to the best interests
of its stockholders to foster the continuous employment of key management
personnel. In this connection, the Board of Directors of the Corporation (the
"Board") recognizes that, as is the case with many publicly held corporations,
the possibility of a change in control may exist. This possibility, and the
uncertainty and questions that it may raise among key management, may result in
the departure or distraction of key management personnel to the detriment of
the Corporation and its stockholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of key
members of the Corporation's management, including Employee, to the assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a change in control of the Corporation; and
WHEREAS, to induce Employee to remain in the employ of the
Corporation, and in consideration of Employee's agreement set forth below, the
Corporation agrees that Employee shall receive the severance benefits set forth
in this Agreement in the event Employee's employment with the Corporation is
terminated subsequent to a "change in control of the Corporation" (as defined
in Section 2 below) under the circumstances described below. This Agreement is
meant to supersede any other specific written agreements that may have been
entered into between Employee and the Corporation concerning the consequences
of any termination of Employee's employment.
THEREFORE, in consideration of Employee's continued employment and the
parties' agreement to be bound by the terms contained in this Agreement, the
parties agree as follows:
1. TERM OF AGREEMENT. This Agreement shall commence on January
1, 1997, and shall continue in effect through December 31, 1997. However,
commencing on December 31, 1997, and each December 31 afterwards, the term of
this Agreement shall automatically be extended for 1 additional year unless, no
later than the preceding November 1, the Corporation shall have given
<PAGE> 17
notice that it does not wish to extend this Agreement. If a change in control
of the Corporation shall have occurred during the original or any extended term
of this Agreement, this Agreement shall continue in effect for a period of 36
months beyond the month in which the change in control occurred.
Notwithstanding the foregoing, and provided no change of control shall have
occurred, this Agreement shall automatically terminate on the earlier to occur
of (i) Employee's termination of employment with the Corporation, or (ii) the
Corporation's furnishing Employee with notice of termination, irrespective of
the effective date of the termination.
2. CHANGE IN CONTROL. No benefits shall be payable under this
Agreement unless there shall have been a change in control of the Corporation,
as set forth below. For purposes of this Agreement, a "change in control of
the Corporation" shall mean a change of control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Corporation is in fact required to comply
with that regulation, provided that, without limitation, such a change in
control shall be deemed to have occurred if (A) any "person" (as that term is
used in Section 13(d) and 14(d) of the Exchange Act), other than a trustee or
other fiduciary holding securities under an employee benefit plan of the
Corporation or a corporation owned, directly or indirectly, by the stockholders
of the Corporation in substantially the same proportions as their ownership of
stock of the Corporation, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Corporation representing twenty-five percent (25%) or more of the combined
voting power of the Corporation's then outstanding securities; (B) during any
period of 2 consecutive years (not including any period prior to the execution
of this Agreement), individuals who at the beginning of the period constitute
the Board and any new director (other than a director designated by a person
who has entered into an agreement with the Corporation to effect a transaction
described in clauses (A) or (D) of this Section) whose election by the Board or
nomination for election by the Corporation's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute a
majority; (C) the Corporation enters into an agreement, the consummation of
which would result in the occurrence of a change in control of the Corporation;
or (D) the stockholders of the Corporation approve a merger or consolidation of
the Corporation with any other corporation, other than a merger or
consolidation that would result in the voting securities of the Corporation
outstanding immediately prior to it continuing to represent (either by
remaining outstanding or by being converted
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<PAGE> 18
into voting securities of the surviving entity) at least fifty percent (50%) of
the combined voting power of the voting securities of the Corporation or such
surviving entity outstanding immediately after the merger or consolidation, or
the stockholders of the Corporation approve a plan of complete liquidation of
the Corporation or an agreement for the sale or disposition by the Corporation
of all or substantially all of the Corporation's assets.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 2 above constituting a change in control of the
Corporation shall have occurred, Employee shall be entitled to the benefits
provided in Subsection 4(iii) below on the termination of Employee's employment
during the 36 months following a Change of Control, unless the termination is
(A) because of Employee's death, Inability to Perform or Retirement, (B) by the
Corporation for Cause or (C) by Employee other than for Good Reason.
(i) INABILITY TO PERFORM; RETIREMENT. If, as a result of
Employee's incapacity due to physical or mental illness, Employee shall have
been absent from the full-time performance of his duties with the Corporation
for 6 consecutive months, and within 30 days after written notice of
termination is given Employee has not returned to the full-time performance of
Employee's duties, Employee's employment may be terminated for "inability to
perform the essential functions of his employment." Termination by the
Corporation or by Employee of Employee's employment based on "Retirement" shall
mean termination in accordance with the Corporation's retirement policy,
including early retirement, generally applicable to its salaried employees or
in accordance with any retirement arrangement established with Employee's
consent.
(ii) CAUSE. Termination by the Corporation for "Cause"
shall mean termination on (A) the willful and continued failure by Employee to
substantially perform Employee's duties with the Corporation (other than any
such failure resulting from Employee's incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance by
Employee of a Notice of Termination for Good Reason as defined in Subsections
3(iv) and 3(iii), respectively) after a written demand for substantial
performance is delivered to Employee by the Board, specifically identifying the
manner in which the Board believes that Employee has not substantially
performed his duties; or (B) willful misconduct by the Employee clearly
contrary to the interests of the Corporation. Employee may be terminated for
Cause only upon delivery to Employee of a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice to Employee and an
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<PAGE> 19
opportunity for Employee, together with Employee's counsel, to be heard before
the Board), finding that in the good faith opinion of the board Employee was
guilty of conduct set forth above in either clause (A) or (B) of the first
sentence of this Subsection.
(iii) GOOD REASON. Employee shall be entitled to terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without Employee's express written consent, the occurrence after a
change in control of the Corporation of any of the following circumstances
unless, in the case of paragraphs (A), (E), (F), (G), or (H), the circumstances
are fully corrected prior to the Date of Termination specified in the Notice of
Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in
respect to them:
(A) a material adverse alteration in the nature
or status of Employee's responsibilities from those in effect
immediately prior to the change in control of the Corporation;
(B) a reduction by the Corporation in Employee's
annual base salary except for across-the-board salary reductions
similarly affecting all key employees of the Corporation and all key
employees of any person in control of the Corporation;
(C) relocation of Employee by Corporation to a
location not within twenty-five (25) miles of his present office or
job location, except for required travel on the Corporation's business
to an extent substantially consistent with his present business travel
obligations;
(D) the failure by the Corporation, without
Employee's consent, to pay any part of Employee's current
compensation, or to pay any part of an installment of deferred
compensation under any deferred compensation program of the
Corporation within 7 days of the date the compensation is due;
(E) the failure by the Corporation to continue in
effect any bonus to which Employee is entitled, or any compensation
plan in which he participates immediately prior to the change in
control of the Corporation, including but not limited to the
Corporation's Stock Option Plans, Executive Deferred Income Plan,
Retirement Income Plan, Retirement Savings Plan, and Flexible Benefit
Plan, or any substitute plans adopted prior to the change of control
in the Corporation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
the plan, or the failure by the Corporation to continue Employee's
participation in it (or in such substitute or alternative plan) on a
basis not less favorable, both in terms of the amount of benefits
provided and the level of his
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<PAGE> 20
participation relative to other participants, as existed at the time
of the change in control;
(F) the failure by the Corporation to continue to
provide Employee with benefits substantially similar to those enjoyed
by him under the Corporation's life insurance, medical, health and
accident, or disability plans in which he was participating at the
time of the change in control of the Corporation;
(G) the failure of the Corporation to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 of this
Agreement; or
(H) any purported termination of Employee's
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (iv) below (and, if
applicable, the requirements of Subsection (ii) above); for purposes
of this Agreement, no such purported termination shall be effective.
Employee's rights to terminate his employment pursuant to this
Subsection shall not be affected by his incapacity due to physical or mental
illness. Employee's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
under this Agreement. In the event Employee delivers Notice of Termination
based on circumstances set forth in Paragraphs (A), (E), (F), (G), or (H)
above, which are fully corrected prior to the Date of Termination set forth in
said Notice of Termination, the Notice of Termination shall be deemed withdrawn
and of no further force and effect.
(iv) NOTICE OF TERMINATION. Any purported termination of
Employee's employment by the Corporation or by Employee shall be communicated
by written Notice of Termination to the other party to this Agreement in
accordance with Section 6 of this Agreement. For purpose of this Agreement, a
"Notice of Termination" shall mean a notice that shall indicate the specific
termination provision in this Agreement relied on, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the employment under the provision so indicated.
(v) DATE OF TERMINATION, ETC. "Date of Termination"
shall mean (A) if Employee's employment is terminated for Inability to Perform,
30 days after Notice of Termination is given (provided that he shall not have
returned to full-time performance of his duties during such 30-day period), and
(B) if Employee's employment is terminated pursuant to Subsection (ii) or (iii)
above or for any other reason (other than Disability), the date specified in
the Notice of Termination (which, in the case of a termination pursuant
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to Subsection (ii) above shall not be less than 30 days, and in the case of a
termination pursuant to Subsection (iii) above shall not be less than 15 nor
more than 60 days, respectively, from the date the Notice of Termination is
given). However, if within 15 days after any Notice of Termination is given,
or , if later, prior to the Date of Termination (as determined without regard
to this provision), the party receiving the Notice of Termination notifies the
other party that a dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, by a binding arbitration
award, or by a final judgment, order, or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal has expired and no appeal has been perfected). The Date of Termination
shall be extended by a notice of dispute only if the notice is given in good
faith and the party giving the notice pursues the resolution of the dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute,
the Corporation will continue to pay Employee his full compensation in effect
when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue Employee as a participant in all
compensation, benefit, and insurance plans in which he was participating when
the notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection. Amounts paid under this
Subsection are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement except to the extent otherwise provided in subsection 4(iv).
4. COMPENSATION ON TERMINATION OR DURING DISABILITY. Following a
change in control of the Corporation, as defined by Section 2, on termination
of Employee's employment or during a period of disability he shall be entitled
to the following results:
(i) During any period that Employee fails to perform his
full-time duties with the Corporation as a result of incapacity due to physical
or mental illness, he shall continue to receive his base salary at the rate in
effect at the commencement of any such period, together with all amounts
payable to him under any compensation plan of the Corporation during the
period, until this Agreement is terminated pursuant to Section 3(i) above.
Thereafter, or in the event Employee's employment shall be terminated by the
Corporation or by Employee for Retirement, or by reason of Employee's death,
Employee's benefits shall be determined under the Corporation's retirement,
insurance, and other compensation programs then in effect in accordance with
the terms of those programs.
(ii) If Employee's employment shall be terminated by the
Corporation for Cause or by Employee other than for Good Reason, Disability,
Death, or Retirement, the Corporation shall pay
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<PAGE> 22
Employee his full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all other amounts and
benefits to which Employee is entitled under any compensation plan of the
Corporation at the time the payments are due.
(iii) If within thirty-six (36) months following a Change of
Control Employee's employment by the Corporation shall be terminated (a) by the
Corporation other than for Cause, Retirement or Inability to Perform, or (b) by
Employee for Good Reason, then Employee shall be entitled to the benefits
provided below:
(A) The Corporation shall pay Employee his full
base salary through the Date of Termination at the rate in effect at
the time Notice of Termination is given, plus all other amounts and
benefits to which he is entitled under any compensation plan of the
Corporation, at the time the payments are due, except as otherwise
provided below.
(B) The Corporation also shall pay as severance
pay to Employee a lump sum severance payment (together with the
payments provided in paragraphs C and D, below, the "Severance
Payments") equal to three (3) times the Employee's annual base salary
in effect immediately prior to the occurrence of the circumstance
giving rise to the Notice of Termination , plus three (3) times the
Employee's average annual bonus for the last three years.
(C) The Corporation also shall pay Employee any
deferred compensation, including, but not limited to deferred bonuses,
allocated or credited to Employee or Employee's account as of the Date
of Termination. Payments made pursuant to the Executives Deferred
Income Plan shall be made as provided by said Plan and shall not be
deemed to be modified by the terms of this Agreement.
(D) Any outstanding options to purchase shares of
Common Stock of the Corporation which are held by Employee under the
Corporation's Stock Option Plans shall be exercisable in accordance
with the terms of the Stock Based Long Term Incentive Plan II.
(E) The Corporation shall provide medical
insurance benefits to Employee for three (3) years from Date of
Termination or until Employee secures employment with another company
providing similar welfare benefits. The Corporation will pay for such
benefits in the same manner as in existence on the Date of
Termination.
(F) The payments provided for in Paragraphs (A),
(B), and (C) above, shall be made no later than the fifth day
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following the Date of Termination. However, if the amounts of the
payment cannot be finally determined on or before that day, the
Corporation shall pay Employee an estimate, as determined in good
faith by the Corporation, of the minimum amount of such payments and
shall pay the remainder of those payments (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the
amount can be determined but in no event later than the 30th day after
the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have
been due, the excess shall constitute a loan by the Corporation
repayable on the 5th day after demand by the Corporation (together
with interest at the rate provided in Section 1274(b)(2)(B) of the
Code).
(iv) In the event that Employee is a "disqualified
individual" within the meaning of Section 280G of the Code, the parties
expressly agree that the payments described in this Section 4 and all other
payments to Employee under any other agreements or arrangements with any
persons that constitute "parachute payments" within the meaning of Section 280G
of the Code are collectively subject to an overall maximum limit. The maximum
limit shall be One Dollar ($1.00) less than the aggregate amount that would
otherwise cause any such payments to be considered a "parachute payment" within
the meaning of Section 280G of the Code, as determined by the Corporation.
Accordingly, to the extent that the payments would be considered a "parachute
payment" with respect to Employee, then the portions of such payments shall be
reduced or eliminated in the following order until the remaining change of
control termination payments with respect to Employee is within the maximum
described in this Subsection (iv):
(A) First, any cash payment to Employee;
(B) Second, any change of control termination
payments not described in this Agreement; and
(C) Third, any forgiveness of Employee
indebtedness to the Corporation.
Employee expressly and irrevocably waives any and all rights to
receive any change in control termination payments that exceed the maximum
limit described in this Subsection (iv).
(v) Employee shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Section 4 be reduced by any compensation earned by
Employee as the result of employment by another employer, by retirement
benefits, by offset against any
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<PAGE> 24
amount claimed to be owed by Employee to the Corporation, or otherwise except
as specifically provided in this Section 4.
(vi) In addition to all other amounts payable to Employee
under this Section 4, Employee shall be entitled to receive all benefits
payable to Employee under the Corporation's Retirement Savings Plan, its
Retirement Income Plan, the Executives' Deferred Income Plan and any other plan
or agreement relating to retirement benefits.
(vii) Notwithstanding any other provisions of this
Agreement, no payments shall be made hereunder by Corporation which would be in
violation of any law or regulation applicable to Corporation, including,
without limitation, the provisions of Part 359 of Title 12, Code of Federal
Regulations, it being understood and agreed that Corporation's obligations
hereunder shall not exceed any valid limits imposed by a regulatory body.
5. SUCCESSORS; BINDING AGREEMENT. (i) The Corporation will
require any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business and/or
assets of the Corporation to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession had taken place. Failure of
the Corporation to obtain the assumption and agreement prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
entitle Employee to compensation from the Corporation in the same amount and on
the same terms as Employee would have been entitled to under this Agreement if
Employee had terminated his employment for Good Reason following a change in
control of the Corporation, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Corporation" shall
mean the Corporation as defined above and any successor to its business and/or
assets that assumes and agrees to perform this Agreement by operation of law,
or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, heirs, distributees, and legatees. If Employee should die
while any amount would still be payable to Employee, all such amounts, unless
otherwise provided in this Agreement, shall be paid in accordance with the
terms of this Agreement to Employee's legatee or other designee or, if there is
no such designee, to Employee's estate.
6. NOTICE. For the purpose of this Agreement, all notices and
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been fully given when delivered or mailed by United
States registered or certified mail, return
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<PAGE> 25
receipt requested, postage prepaid, addressed to the respective addresses set
forth on the first page of this Agreement, provided that all notices to the
Corporation shall be directed to the attention of the Board with a copy to the
Secretary of the Corporation, or to such other address as either party may have
furnished to the other in writing in accordance with this Agreement, except
that notice of a change of address shall be effective only on receipt.
7. MISCELLANEOUS. No provision of this Agreement may be
modified, waived, or discharged unless the waiver, modification, or discharge
is agreed to in writing and signed by Employee and such officer as may be
specifically designated by the Board. No waiver by either party to this
Agreement at any time of any breach by the other party of, or compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter of this Agreement have been made by either party that are not
expressly set forth in this Agreement. The validity, interpretation,
construction, and performance of this Agreement shall be governed by the laws
of the State of Mississippi. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for shall be paid net of any applicable
withholding or deduction required under federal, state, or local law. The
obligations of the Corporation under Section 4 shall survive the expiration of
the term of this Agreement.
8. VALIDITY. The invalidity or enforceability of any provision
of this Agreement shall not affect the validity or unenforceability of any
other provision of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. DISPUTES. Any dispute or controversy arising under or in
connection with this Agreement (a "Dispute") shall be resolved as follows:
(i) Negotiation. In the event of a Dispute, the parties
shall use their best efforts to settle such dispute through informal
negotiations. To this effect, they shall consult and negotiate with
each other, in good faith and, recognizing their mutual interests,
attempt to reach a just and equitable solution satisfactory to both
parties. If they do not reach such solution within a period of thirty
(30) days from the date one party first
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<PAGE> 26
notifies in writing another of the claim(s) giving rise to the
Dispute, then upon written notice by either party to the other, the
Dispute shall be submitted to mediation as set forth below.
(ii) Mediation. If such Dispute cannot be settled through
negotiation within such thirty (30) day period, the parties agree to
then endeavor to settle the Dispute in an amicable manner by mediation
administered by the American Arbitration Association ("AAA") under its
Commercial Mediation Rules. Such mediation shall occur in Jackson,
Mississippi before a mediator who is skilled in mediating commercial
disputes. AAA shall appoint a mediator meeting the qualifications set
out above. Such mediation shall consist of no more than two sessions
occurring within the twenty (20) days first following the end of the
negotiation period referred to above. Thereafter, any unresolved
Dispute shall be settled by arbitration in the manner set forth below.
The mediator cannot serve as an arbitrator.
(iii) Arbitration. Any Dispute which remains unresolved
following mediation shall be submitted to binding arbitration in
accordance with Title 9 of the United States Code (United States
Arbitration Act). This arbitration shall be administered by AAA in
accordance with its Commercial Arbitration Rules (the "Rules"). The
situs of the arbitration shall be Jackson, Mississippi unless
otherwise mutually agreed by the parties. The arbitration shall be
expedited such that, unless the parties otherwise agree or unless
necessary to allow the parties to gather and exchange appropriate
documentary or other evidence or information, (a) the panel shall be
selected within 30 days following the filing of the Notice of Claim
with AAA, (b) the hearing shall commence within 45 days following the
filing of the Notice of Claim, (c) the hearing shall be continued as
expeditiously as possible until concluded and (d) the award shall be
rendered within 10 days following the conclusion of the hearing. If
the claim or controversy arising from this Agreement is greater than
Five Hundred Thousand Dollars ($500,000) either party hereto shall
have the right to proceed judicially and shall not be required to
arbitrate.
(iv) Number and Qualification of Arbitrators. The
arbitration shall be conducted before and decided by a panel of two
arbitrators. Each shall be an attorney licensed to practice law in
any of the United States, having been admitted to practice for no
fewer than fifteen years.
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<PAGE> 27
(v) Remedies and Choice of Law. The arbitrators shall
have authority to award any remedy or relief that a court of the State
of Mississippi could award or grant, including, without limitation,
specific performance of any obligations created under this Agreement;
provided however, that the arbitrators shall not have the authority to
award punitive damages against either party.
(vi) Fees and Expenses. The arbitrators shall have the
authority to award to the prevailing party, if any, as determined by
the arbitrators, all of its costs and fees, in such amounts as the
arbitrators deem just. "Costs and Fees" mean all reasonable pre-award
expenses of the arbitration, including the arbitrators' fees,
administrative fees, travel expenses, other out-of-pocket expenses,
witness (including expert witness) fees and expenses and attorneys'
fees and expenses.
(vii) Finality and Enforcement. Any award rendered by the
arbitrators shall be final, binding and conclusive. The parties
hereby agree to submit to the personal jurisdiction of the courts of
the State of Mississippi for the enforcement of the award. The award
may also be enforced in any other court of competent jurisdiction.
11. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties with respect to its subject matter and supersedes
all prior written or oral agreements or understandings with respect to the
subject matter.
In witness whereof, the parties have executed this agreement at
Jackson, Mississippi the day and year first above written.
DEPOSIT GUARANTY CORP.
By:
------------------------------------
Title:
---------------------------------
--------------------------------------
STEVEN C. WALKER
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CHANGE OF CONTROL TERMINATION AGREEMENT
This Change of Control Termination Agreement (the "Agreement") is
entered into on _________________, 1997, between Deposit Guaranty Corp., a
Mississippi corporation, with its principal place of business located at 210
East Capitol Street, Jackson, Mississippi 39201, (the "Corporation") and
William R. Boone of 4307 Regency Court, Jackson, Mississippi 39211
("Employee").
WITNESSETH:
WHEREAS, the Corporation considers it essential to the best interests
of its stockholders to foster the continuous employment of key management
personnel. In this connection, the Board of Directors of the Corporation (the
"Board") recognizes that, as is the case with many publicly held corporations,
the possibility of a change in control may exist. This possibility, and the
uncertainty and questions that it may raise among key management, may result in
the departure or distraction of key management personnel to the detriment of
the Corporation and its stockholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of key
members of the Corporation's management, including Employee, to the assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a change in control of the Corporation; and
WHEREAS, to induce Employee to remain in the employ of the
Corporation, and in consideration of Employee's agreement set forth below, the
Corporation agrees that Employee shall receive the severance benefits set forth
in this Agreement in the event Employee's employment with the Corporation is
terminated subsequent to a "change in control of the Corporation" (as defined
in Section 2 below) under the circumstances described below. This Agreement is
meant to supersede any other specific written agreements that may have been
entered into between Employee and the Corporation concerning the consequences
of any termination of Employee's employment.
THEREFORE, in consideration of Employee's continued employment and the
parties' agreement to be bound by the terms contained in this Agreement, the
parties agree as follows:
1. TERM OF AGREEMENT. This Agreement shall commence on January
1, 1997, and shall continue in effect through December 31, 1997. However,
commencing on December 31, 1997, and each December 31 afterwards, the term of
this Agreement shall automatically be extended for 1 additional year unless, no
later than the preceding November 1, the Corporation shall have given
<PAGE> 29
notice that it does not wish to extend this Agreement. If a change in control
of the Corporation shall have occurred during the original or any extended term
of this Agreement, this Agreement shall continue in effect for a period of 36
months beyond the month in which the change in control occurred.
Notwithstanding the foregoing, and provided no change of control shall have
occurred, this Agreement shall automatically terminate on the earlier to occur
of (i) Employee's termination of employment with the Corporation, or (ii) the
Corporation's furnishing Employee with notice of termination, irrespective of
the effective date of the termination.
2. CHANGE IN CONTROL. No benefits shall be payable under this
Agreement unless there shall have been a change in control of the Corporation,
as set forth below. For purposes of this Agreement, a "change in control of
the Corporation" shall mean a change of control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Corporation is in fact required to comply
with that regulation, provided that, without limitation, such a change in
control shall be deemed to have occurred if (A) any "person" (as that term is
used in Section 13(d) and 14(d) of the Exchange Act), other than a trustee or
other fiduciary holding securities under an employee benefit plan of the
Corporation or a corporation owned, directly or indirectly, by the stockholders
of the Corporation in substantially the same proportions as their ownership of
stock of the Corporation, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Corporation representing twenty-five percent (25%) or more of the combined
voting power of the Corporation's then outstanding securities; (B) during any
period of 2 consecutive years (not including any period prior to the execution
of this Agreement), individuals who at the beginning of the period constitute
the Board and any new director (other than a director designated by a person
who has entered into an agreement with the Corporation to effect a transaction
described in clauses (A) or (D) of this Section) whose election by the Board or
nomination for election by the Corporation's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute a
majority; (C) the Corporation enters into an agreement, the consummation of
which would result in the occurrence of a change in control of the Corporation;
or (D) the stockholders of the Corporation approve a merger or consolidation of
the Corporation with any other corporation, other than a merger or
consolidation that would result in the voting securities of the Corporation
outstanding immediately prior to it continuing to represent (either by
remaining outstanding or by being converted
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<PAGE> 30
into voting securities of the surviving entity) at least fifty percent (50%) of
the combined voting power of the voting securities of the Corporation or such
surviving entity outstanding immediately after the merger or consolidation, or
the stockholders of the Corporation approve a plan of complete liquidation of
the Corporation or an agreement for the sale or disposition by the Corporation
of all or substantially all of the Corporation's assets.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 2 above constituting a change in control of the
Corporation shall have occurred, Employee shall be entitled to the benefits
provided in Subsection 4(iii) below on the termination of Employee's employment
during the 36 months following a Change of Control, unless the termination is
(A) because of Employee's death, Inability to Perform or Retirement, (B) by the
Corporation for Cause or (C) by Employee other than for Good Reason.
(i) INABILITY TO PERFORM; RETIREMENT. If, as a result of
Employee's incapacity due to physical or mental illness, Employee shall have
been absent from the full-time performance of his duties with the Corporation
for 6 consecutive months, and within 30 days after written notice of
termination is given Employee has not returned to the full-time performance of
Employee's duties, Employee's employment may be terminated for "inability to
perform the essential functions of his employment." Termination by the
Corporation or by Employee of Employee's employment based on "Retirement" shall
mean termination in accordance with the Corporation's retirement policy,
including early retirement, generally applicable to its salaried employees or
in accordance with any retirement arrangement established with Employee's
consent.
(ii) CAUSE. Termination by the Corporation for "Cause"
shall mean termination on (A) the willful and continued failure by Employee to
substantially perform Employee's duties with the Corporation (other than any
such failure resulting from Employee's incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance by
Employee of a Notice of Termination for Good Reason as defined in Subsections
3(iv) and 3(iii), respectively) after a written demand for substantial
performance is delivered to Employee by the Board, specifically identifying the
manner in which the Board believes that Employee has not substantially
performed his duties; or (B) willful misconduct by the Employee clearly
contrary to the interests of the Corporation. Employee may be terminated for
Cause only upon delivery to Employee of a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice to Employee and an
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opportunity for Employee, together with Employee's counsel, to be heard before
the Board), finding that in the good faith opinion of the board Employee was
guilty of conduct set forth above in either clause (A) or (B) of the first
sentence of this Subsection.
(iii) GOOD REASON. Employee shall be entitled to terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without Employee's express written consent, the occurrence after a
change in control of the Corporation of any of the following circumstances
unless, in the case of paragraphs (A), (E), (F), (G), or (H), the circumstances
are fully corrected prior to the Date of Termination specified in the Notice of
Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in
respect to them:
(A) a material adverse alteration in the nature
or status of Employee's responsibilities from those in effect
immediately prior to the change in control of the Corporation;
(B) a reduction by the Corporation in Employee's
annual base salary except for across-the-board salary reductions
similarly affecting all key employees of the Corporation and all key
employees of any person in control of the Corporation;
(C) relocation of Employee by Corporation to a
location not within twenty-five (25) miles of his present office or
job location, except for required travel on the Corporation's business
to an extent substantially consistent with his present business travel
obligations;
(D) the failure by the Corporation, without
Employee's consent, to pay any part of Employee's current
compensation, or to pay any part of an installment of deferred
compensation under any deferred compensation program of the
Corporation within 7 days of the date the compensation is due;
(E) the failure by the Corporation to continue in
effect any bonus to which Employee is entitled, or any compensation
plan in which he participates immediately prior to the change in
control of the Corporation, including but not limited to the
Corporation's Stock Option Plans, Executive Deferred Income Plan,
Retirement Income Plan, Retirement Savings Plan, and Flexible Benefit
Plan, or any substitute plans adopted prior to the change of control
in the Corporation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
the plan, or the failure by the Corporation to continue Employee's
participation in it (or in such substitute or alternative plan) on a
basis not less favorable, both in terms of the amount of benefits
provided and the level of his
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participation relative to other participants, as existed at the time
of the change in control;
(F) the failure by the Corporation to continue to
provide Employee with benefits substantially similar to those enjoyed
by him under the Corporation's life insurance, medical, health and
accident, or disability plans in which he was participating at the
time of the change in control of the Corporation;
(G) the failure of the Corporation to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 of this
Agreement; or
(H) any purported termination of Employee's
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (iv) below (and, if
applicable, the requirements of Subsection (ii) above); for purposes
of this Agreement, no such purported termination shall be effective.
Employee's rights to terminate his employment pursuant to this
Subsection shall not be affected by his incapacity due to physical or mental
illness. Employee's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
under this Agreement. In the event Employee delivers Notice of Termination
based on circumstances set forth in Paragraphs (A), (E), (F), (G), or (H)
above, which are fully corrected prior to the Date of Termination set forth in
said Notice of Termination, the Notice of Termination shall be deemed withdrawn
and of no further force and effect.
(iv) NOTICE OF TERMINATION. Any purported termination of
Employee's employment by the Corporation or by Employee shall be communicated
by written Notice of Termination to the other party to this Agreement in
accordance with Section 6 of this Agreement. For purpose of this Agreement, a
"Notice of Termination" shall mean a notice that shall indicate the specific
termination provision in this Agreement relied on, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the employment under the provision so indicated.
(v) DATE OF TERMINATION, ETC. "Date of Termination"
shall mean (A) if Employee's employment is terminated for Inability to Perform,
30 days after Notice of Termination is given (provided that he shall not have
returned to full-time performance of his duties during such 30-day period), and
(B) if Employee's employment is terminated pursuant to Subsection (ii) or (iii)
above or for any other reason (other than Disability), the date specified in
the Notice of Termination (which, in the case of a termination pursuant
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to Subsection (ii) above shall not be less than 30 days, and in the case of a
termination pursuant to Subsection (iii) above shall not be less than 15 nor
more than 60 days, respectively, from the date the Notice of Termination is
given). However, if within 15 days after any Notice of Termination is given,
or , if later, prior to the Date of Termination (as determined without regard
to this provision), the party receiving the Notice of Termination notifies the
other party that a dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, by a binding arbitration
award, or by a final judgment, order, or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal has expired and no appeal has been perfected). The Date of Termination
shall be extended by a notice of dispute only if the notice is given in good
faith and the party giving the notice pursues the resolution of the dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute,
the Corporation will continue to pay Employee his full compensation in effect
when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue Employee as a participant in all
compensation, benefit, and insurance plans in which he was participating when
the notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection. Amounts paid under this
Subsection are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement except to the extent otherwise provided in subsection 4(iv).
4. COMPENSATION ON TERMINATION OR DURING DISABILITY. Following a
change in control of the Corporation, as defined by Section 2, on termination
of Employee's employment or during a period of disability he shall be entitled
to the following results:
(i) During any period that Employee fails to perform his
full-time duties with the Corporation as a result of incapacity due to physical
or mental illness, he shall continue to receive his base salary at the rate in
effect at the commencement of any such period, together with all amounts
payable to him under any compensation plan of the Corporation during the
period, until this Agreement is terminated pursuant to Section 3(i) above.
Thereafter, or in the event Employee's employment shall be terminated by the
Corporation or by Employee for Retirement, or by reason of Employee's death,
Employee's benefits shall be determined under the Corporation's retirement,
insurance, and other compensation programs then in effect in accordance with
the terms of those programs.
(ii) If Employee's employment shall be terminated by the
Corporation for Cause or by Employee other than for Good Reason, Disability,
Death, or Retirement, the Corporation shall pay
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Employee his full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all other amounts and
benefits to which Employee is entitled under any compensation plan of the
Corporation at the time the payments are due.
(iii) If within thirty-six (36) months following a Change of
Control Employee's employment by the Corporation shall be terminated (a) by the
Corporation other than for Cause, Retirement or Inability to Perform, or (b) by
Employee for Good Reason, then Employee shall be entitled to the benefits
provided below:
(A) The Corporation shall pay Employee his full
base salary through the Date of Termination at the rate in effect at
the time Notice of Termination is given, plus all other amounts and
benefits to which he is entitled under any compensation plan of the
Corporation, at the time the payments are due, except as otherwise
provided below.
(B) The Corporation also shall pay as severance
pay to Employee a lump sum severance payment (together with the
payments provided in paragraphs C and D, below, the "Severance
Payments") equal to three (3) times the Employee's annual base salary
in effect immediately prior to the occurrence of the circumstance
giving rise to the Notice of Termination , plus three (3) times the
Employee's average annual bonus for the last three years.
(C) The Corporation also shall pay Employee any
deferred compensation, including, but not limited to deferred bonuses,
allocated or credited to Employee or Employee's account as of the Date
of Termination. Payments made pursuant to the Executives Deferred
Income Plan shall be made as provided by said Plan and shall not be
deemed to be modified by the terms of this Agreement.
(D) Any outstanding options to purchase shares of
Common Stock of the Corporation which are held by Employee under the
Corporation's Stock Option Plans shall be exercisable in accordance
with the terms of the Stock Based Long Term Incentive Plan II.
(E) The Corporation shall provide medical
insurance benefits to Employee for three (3) years from Date of
Termination or until Employee secures employment with another company
providing similar welfare benefits. The Corporation will pay for such
benefits in the same manner as in existence on the Date of
Termination.
(F) The payments provided for in Paragraphs (A),
(B), and (C) above, shall be made no later than the fifth day
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following the Date of Termination. However, if the amounts of the
payment cannot be finally determined on or before that day, the
Corporation shall pay Employee an estimate, as determined in good
faith by the Corporation, of the minimum amount of such payments and
shall pay the remainder of those payments (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the
amount can be determined but in no event later than the 30th day after
the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have
been due, the excess shall constitute a loan by the Corporation
repayable on the 5th day after demand by the Corporation (together
with interest at the rate provided in Section 1274(b)(2)(B) of the
Code).
(iv) In the event that Employee is a "disqualified
individual" within the meaning of Section 280G of the Code, the parties
expressly agree that the payments described in this Section 4 and all other
payments to Employee under any other agreements or arrangements with any
persons that constitute "parachute payments" within the meaning of Section 280G
of the Code are collectively subject to an overall maximum limit. The maximum
limit shall be One Dollar ($1.00) less than the aggregate amount that would
otherwise cause any such payments to be considered a "parachute payment" within
the meaning of Section 280G of the Code, as determined by the Corporation.
Accordingly, to the extent that the payments would be considered a "parachute
payment" with respect to Employee, then the portions of such payments shall be
reduced or eliminated in the following order until the remaining change of
control termination payments with respect to Employee is within the maximum
described in this Subsection (iv):
(A) First, any cash payment to Employee;
(B) Second, any change of control termination
payments not described in this Agreement; and
(C) Third, any forgiveness of Employee
indebtedness to the Corporation.
Employee expressly and irrevocably waives any and all rights to
receive any change in control termination payments that exceed the maximum
limit described in this Subsection (iv).
(v) Employee shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Section 4 be reduced by any compensation earned by
Employee as the result of employment by another employer, by retirement
benefits, by offset against any
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amount claimed to be owed by Employee to the Corporation, or otherwise except
as specifically provided in this Section 4.
(vi) In addition to all other amounts payable to Employee
under this Section 4, Employee shall be entitled to receive all benefits
payable to Employee under the Corporation's Retirement Savings Plan, its
Retirement Income Plan, the Executives' Deferred Income Plan and any other plan
or agreement relating to retirement benefits.
(vii) Notwithstanding any other provisions of this
Agreement, no payments shall be made hereunder by Corporation which would be in
violation of any law or regulation applicable to Corporation, including,
without limitation, the provisions of Part 359 of Title 12, Code of Federal
Regulations, it being understood and agreed that Corporation's obligations
hereunder shall not exceed any valid limits imposed by a regulatory body.
5. SUCCESSORS; BINDING AGREEMENT. (i) The Corporation will
require any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business and/or
assets of the Corporation to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession had taken place. Failure of
the Corporation to obtain the assumption and agreement prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
entitle Employee to compensation from the Corporation in the same amount and on
the same terms as Employee would have been entitled to under this Agreement if
Employee had terminated his employment for Good Reason following a change in
control of the Corporation, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Corporation" shall
mean the Corporation as defined above and any successor to its business and/or
assets that assumes and agrees to perform this Agreement by operation of law,
or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, heirs, distributees, and legatees. If Employee should die
while any amount would still be payable to Employee, all such amounts, unless
otherwise provided in this Agreement, shall be paid in accordance with the
terms of this Agreement to Employee's legatee or other designee or, if there is
no such designee, to Employee's estate.
6. NOTICE. For the purpose of this Agreement, all notices and
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been fully given when delivered or mailed by United
States registered or certified mail, return
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receipt requested, postage prepaid, addressed to the respective addresses set
forth on the first page of this Agreement, provided that all notices to the
Corporation shall be directed to the attention of the Board with a copy to the
Secretary of the Corporation, or to such other address as either party may have
furnished to the other in writing in accordance with this Agreement, except
that notice of a change of address shall be effective only on receipt.
7. MISCELLANEOUS. No provision of this Agreement may be
modified, waived, or discharged unless the waiver, modification, or discharge
is agreed to in writing and signed by Employee and such officer as may be
specifically designated by the Board. No waiver by either party to this
Agreement at any time of any breach by the other party of, or compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter of this Agreement have been made by either party that are not
expressly set forth in this Agreement. The validity, interpretation,
construction, and performance of this Agreement shall be governed by the laws
of the State of Mississippi. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for shall be paid net of any applicable
withholding or deduction required under federal, state, or local law. The
obligations of the Corporation under Section 4 shall survive the expiration of
the term of this Agreement.
8. VALIDITY. The invalidity or enforceability of any provision
of this Agreement shall not affect the validity or unenforceability of any
other provision of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. DISPUTES. Any dispute or controversy arising under or in
connection with this Agreement (a "Dispute") shall be resolved as follows:
(i) Negotiation. In the event of a Dispute, the parties
shall use their best efforts to settle such dispute through informal
negotiations. To this effect, they shall consult and negotiate with
each other, in good faith and, recognizing their mutual interests,
attempt to reach a just and equitable solution satisfactory to both
parties. If they do not reach such solution within a period of thirty
(30) days from the date one party first
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notifies in writing another of the claim(s) giving rise to the
Dispute, then upon written notice by either party to the other, the
Dispute shall be submitted to mediation as set forth below.
(ii) Mediation. If such Dispute cannot be settled through
negotiation within such thirty (30) day period, the parties agree to
then endeavor to settle the Dispute in an amicable manner by mediation
administered by the American Arbitration Association ("AAA") under its
Commercial Mediation Rules. Such mediation shall occur in Jackson,
Mississippi before a mediator who is skilled in mediating commercial
disputes. AAA shall appoint a mediator meeting the qualifications set
out above. Such mediation shall consist of no more than two sessions
occurring within the twenty (20) days first following the end of the
negotiation period referred to above. Thereafter, any unresolved
Dispute shall be settled by arbitration in the manner set forth below.
The mediator cannot serve as an arbitrator.
(iii) Arbitration. Any Dispute which remains unresolved
following mediation shall be submitted to binding arbitration in
accordance with Title 9 of the United States Code (United States
Arbitration Act). This arbitration shall be administered by AAA in
accordance with its Commercial Arbitration Rules (the "Rules"). The
situs of the arbitration shall be Jackson, Mississippi unless
otherwise mutually agreed by the parties. The arbitration shall be
expedited such that, unless the parties otherwise agree or unless
necessary to allow the parties to gather and exchange appropriate
documentary or other evidence or information, (a) the panel shall be
selected within 30 days following the filing of the Notice of Claim
with AAA, (b) the hearing shall commence within 45 days following the
filing of the Notice of Claim, (c) the hearing shall be continued as
expeditiously as possible until concluded and (d) the award shall be
rendered within 10 days following the conclusion of the hearing. If
the claim or controversy arising from this Agreement is greater than
Five Hundred Thousand Dollars ($500,000) either party hereto shall
have the right to proceed judicially and shall not be required to
arbitrate.
(iv) Number and Qualification of Arbitrators. The
arbitration shall be conducted before and decided by a panel of two
arbitrators. Each shall be an attorney licensed to practice law in
any of the United States, having been admitted to practice for no
fewer than fifteen years.
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(v) Remedies and Choice of Law. The arbitrators shall
have authority to award any remedy or relief that a court of the State
of Mississippi could award or grant, including, without limitation,
specific performance of any obligations created under this Agreement;
provided however, that the arbitrators shall not have the authority to
award punitive damages against either party.
(vi) Fees and Expenses. The arbitrators shall have the
authority to award to the prevailing party, if any, as determined by
the arbitrators, all of its costs and fees, in such amounts as the
arbitrators deem just. "Costs and Fees" mean all reasonable pre-award
expenses of the arbitration, including the arbitrators' fees,
administrative fees, travel expenses, other out-of-pocket expenses,
witness (including expert witness) fees and expenses and attorneys'
fees and expenses.
(vii) Finality and Enforcement. Any award rendered by the
arbitrators shall be final, binding and conclusive. The parties
hereby agree to submit to the personal jurisdiction of the courts of
the State of Mississippi for the enforcement of the award. The award
may also be enforced in any other court of competent jurisdiction.
11. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties with respect to its subject matter and supersedes
all prior written or oral agreements or understandings with respect to the
subject matter.
In witness whereof, the parties have executed this agreement at
Jackson, Mississippi the day and year first above written.
DEPOSIT GUARANTY CORP.
By:
------------------------------------
Title:
---------------------------------
--------------------------------------
WILLIAM R. BOONE
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CHANGE OF CONTROL TERMINATION AGREEMENT
This Change of Control Termination Agreement (the "Agreement") is
entered into on _________________, 1997, between Deposit Guaranty Corp., a
Mississippi corporation, with its principal place of business located at 210
East Capitol Street, Jackson, Mississippi 39201, (the "Corporation") and
Thomas M. Hontzas of 3853 Sleepy Hollow, Jackson, Mississippi 39211
("Employee").
WITNESSETH:
WHEREAS, the Corporation considers it essential to the best interests
of its stockholders to foster the continuous employment of key management
personnel. In this connection, the Board of Directors of the Corporation (the
"Board") recognizes that, as is the case with many publicly held corporations,
the possibility of a change in control may exist. This possibility, and the
uncertainty and questions that it may raise among key management, may result in
the departure or distraction of key management personnel to the detriment of
the Corporation and its stockholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of key
members of the Corporation's management, including Employee, to the assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a change in control of the Corporation; and
WHEREAS, to induce Employee to remain in the employ of the
Corporation, and in consideration of Employee's agreement set forth below, the
Corporation agrees that Employee shall receive the severance benefits set forth
in this Agreement in the event Employee's employment with the Corporation is
terminated subsequent to a "change in control of the Corporation" (as defined
in Section 2 below) under the circumstances described below. This Agreement is
meant to supersede any other specific written agreements that may have been
entered into between Employee and the Corporation concerning the consequences
of any termination of Employee's employment.
THEREFORE, in consideration of Employee's continued employment and the
parties' agreement to be bound by the terms contained in this Agreement, the
parties agree as follows:
1. TERM OF AGREEMENT. This Agreement shall commence on January
1, 1997, and shall continue in effect through December 31, 1997. However,
commencing on December 31, 1997, and each December 31 afterwards, the term of
this Agreement shall automatically be extended for 1 additional year unless, no
later than the preceding November 1, the Corporation shall have given
<PAGE> 41
notice that it does not wish to extend this Agreement. If a change in control
of the Corporation shall have occurred during the original or any extended term
of this Agreement, this Agreement shall continue in effect for a period of 36
months beyond the month in which the change in control occurred.
Notwithstanding the foregoing, and provided no change of control shall have
occurred, this Agreement shall automatically terminate on the earlier to occur
of (i) Employee's termination of employment with the Corporation, or (ii) the
Corporation's furnishing Employee with notice of termination, irrespective of
the effective date of the termination.
2. CHANGE IN CONTROL. No benefits shall be payable under this
Agreement unless there shall have been a change in control of the Corporation,
as set forth below. For purposes of this Agreement, a "change in control of
the Corporation" shall mean a change of control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Corporation is in fact required to comply
with that regulation, provided that, without limitation, such a change in
control shall be deemed to have occurred if (A) any "person" (as that term is
used in Section 13(d) and 14(d) of the Exchange Act), other than a trustee or
other fiduciary holding securities under an employee benefit plan of the
Corporation or a corporation owned, directly or indirectly, by the stockholders
of the Corporation in substantially the same proportions as their ownership of
stock of the Corporation, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Corporation representing twenty-five percent (25%) or more of the combined
voting power of the Corporation's then outstanding securities; (B) during any
period of 2 consecutive years (not including any period prior to the execution
of this Agreement), individuals who at the beginning of the period constitute
the Board and any new director (other than a director designated by a person
who has entered into an agreement with the Corporation to effect a transaction
described in clauses (A) or (D) of this Section) whose election by the Board or
nomination for election by the Corporation's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute a
majority; (C) the Corporation enters into an agreement, the consummation of
which would result in the occurrence of a change in control of the Corporation;
or (D) the stockholders of the Corporation approve a merger or consolidation of
the Corporation with any other corporation, other than a merger or
consolidation that would result in the voting securities of the Corporation
outstanding immediately prior to it continuing to represent (either by
remaining outstanding or by being converted
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into voting securities of the surviving entity) at least fifty percent (50%) of
the combined voting power of the voting securities of the Corporation or such
surviving entity outstanding immediately after the merger or consolidation, or
the stockholders of the Corporation approve a plan of complete liquidation of
the Corporation or an agreement for the sale or disposition by the Corporation
of all or substantially all of the Corporation's assets.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 2 above constituting a change in control of the
Corporation shall have occurred, Employee shall be entitled to the benefits
provided in Subsection 4(iii) below on the termination of Employee's employment
during the 36 months following a Change of Control, unless the termination is
(A) because of Employee's death, Inability to Perform or Retirement, (B) by the
Corporation for Cause or (C) by Employee other than for Good Reason.
(i) INABILITY TO PERFORM; RETIREMENT. If, as a result of
Employee's incapacity due to physical or mental illness, Employee shall have
been absent from the full-time performance of his duties with the Corporation
for 6 consecutive months, and within 30 days after written notice of
termination is given Employee has not returned to the full-time performance of
Employee's duties, Employee's employment may be terminated for "inability to
perform the essential functions of his employment." Termination by the
Corporation or by Employee of Employee's employment based on "Retirement" shall
mean termination in accordance with the Corporation's retirement policy,
including early retirement, generally applicable to its salaried employees or
in accordance with any retirement arrangement established with Employee's
consent.
(ii) CAUSE. Termination by the Corporation for "Cause"
shall mean termination on (A) the willful and continued failure by Employee to
substantially perform Employee's duties with the Corporation (other than any
such failure resulting from Employee's incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance by
Employee of a Notice of Termination for Good Reason as defined in Subsections
3(iv) and 3(iii), respectively) after a written demand for substantial
performance is delivered to Employee by the Board, specifically identifying the
manner in which the Board believes that Employee has not substantially
performed his duties; or (B) willful misconduct by the Employee clearly
contrary to the interests of the Corporation. Employee may be terminated for
Cause only upon delivery to Employee of a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice to Employee and an
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opportunity for Employee, together with Employee's counsel, to be heard before
the Board), finding that in the good faith opinion of the board Employee was
guilty of conduct set forth above in either clause (A) or (B) of the first
sentence of this Subsection.
(iii) GOOD REASON. Employee shall be entitled to terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without Employee's express written consent, the occurrence after a
change in control of the Corporation of any of the following circumstances
unless, in the case of paragraphs (A), (E), (F), (G), or (H), the circumstances
are fully corrected prior to the Date of Termination specified in the Notice of
Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in
respect to them:
(A) a material adverse alteration in the nature
or status of Employee's responsibilities from those in effect
immediately prior to the change in control of the Corporation;
(B) a reduction by the Corporation in Employee's
annual base salary except for across-the-board salary reductions
similarly affecting all key employees of the Corporation and all key
employees of any person in control of the Corporation;
(C) relocation of Employee by Corporation to a
location not within twenty-five (25) miles of his present office or
job location, except for required travel on the Corporation's business
to an extent substantially consistent with his present business travel
obligations;
(D) the failure by the Corporation, without
Employee's consent, to pay any part of Employee's current
compensation, or to pay any part of an installment of deferred
compensation under any deferred compensation program of the
Corporation within 7 days of the date the compensation is due;
(E) the failure by the Corporation to continue in
effect any bonus to which Employee is entitled, or any compensation
plan in which he participates immediately prior to the change in
control of the Corporation, including but not limited to the
Corporation's Stock Option Plans, Executive Deferred Income Plan,
Retirement Income Plan, Retirement Savings Plan, and Flexible Benefit
Plan, or any substitute plans adopted prior to the change of control
in the Corporation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
the plan, or the failure by the Corporation to continue Employee's
participation in it (or in such substitute or alternative plan) on a
basis not less favorable, both in terms of the amount of benefits
provided and the level of his
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participation relative to other participants, as existed at the time
of the change in control;
(F) the failure by the Corporation to continue to
provide Employee with benefits substantially similar to those enjoyed
by him under the Corporation's life insurance, medical, health and
accident, or disability plans in which he was participating at the
time of the change in control of the Corporation;
(G) the failure of the Corporation to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 of this
Agreement; or
(H) any purported termination of Employee's
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (iv) below (and, if
applicable, the requirements of Subsection (ii) above); for purposes
of this Agreement, no such purported termination shall be effective.
Employee's rights to terminate his employment pursuant to this
Subsection shall not be affected by his incapacity due to physical or mental
illness. Employee's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
under this Agreement. In the event Employee delivers Notice of Termination
based on circumstances set forth in Paragraphs (A), (E), (F), (G), or (H)
above, which are fully corrected prior to the Date of Termination set forth in
said Notice of Termination, the Notice of Termination shall be deemed withdrawn
and of no further force and effect.
(iv) NOTICE OF TERMINATION. Any purported termination of
Employee's employment by the Corporation or by Employee shall be communicated
by written Notice of Termination to the other party to this Agreement in
accordance with Section 6 of this Agreement. For purpose of this Agreement, a
"Notice of Termination" shall mean a notice that shall indicate the specific
termination provision in this Agreement relied on, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the employment under the provision so indicated.
(v) DATE OF TERMINATION, ETC. "Date of Termination"
shall mean (A) if Employee's employment is terminated for Inability to Perform,
30 days after Notice of Termination is given (provided that he shall not have
returned to full-time performance of his duties during such 30-day period), and
(B) if Employee's employment is terminated pursuant to Subsection (ii) or (iii)
above or for any other reason (other than Disability), the date specified in
the Notice of Termination (which, in the case of a termination pursuant
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to Subsection (ii) above shall not be less than 30 days, and in the case of a
termination pursuant to Subsection (iii) above shall not be less than 15 nor
more than 60 days, respectively, from the date the Notice of Termination is
given). However, if within 15 days after any Notice of Termination is given,
or , if later, prior to the Date of Termination (as determined without regard
to this provision), the party receiving the Notice of Termination notifies the
other party that a dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, by a binding arbitration
award, or by a final judgment, order, or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal has expired and no appeal has been perfected). The Date of Termination
shall be extended by a notice of dispute only if the notice is given in good
faith and the party giving the notice pursues the resolution of the dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute,
the Corporation will continue to pay Employee his full compensation in effect
when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue Employee as a participant in all
compensation, benefit, and insurance plans in which he was participating when
the notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection. Amounts paid under this
Subsection are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement except to the extent otherwise provided in subsection 4(iv).
4. COMPENSATION ON TERMINATION OR DURING DISABILITY. Following a
change in control of the Corporation, as defined by Section 2, on termination
of Employee's employment or during a period of disability he shall be entitled
to the following results:
(i) During any period that Employee fails to perform his
full-time duties with the Corporation as a result of incapacity due to physical
or mental illness, he shall continue to receive his base salary at the rate in
effect at the commencement of any such period, together with all amounts
payable to him under any compensation plan of the Corporation during the
period, until this Agreement is terminated pursuant to Section 3(i) above.
Thereafter, or in the event Employee's employment shall be terminated by the
Corporation or by Employee for Retirement, or by reason of Employee's death,
Employee's benefits shall be determined under the Corporation's retirement,
insurance, and other compensation programs then in effect in accordance with
the terms of those programs.
(ii) If Employee's employment shall be terminated by the
Corporation for Cause or by Employee other than for Good Reason, Disability,
Death, or Retirement, the Corporation shall pay
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Employee his full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all other amounts and
benefits to which Employee is entitled under any compensation plan of the
Corporation at the time the payments are due.
(iii) If within thirty-six (36) months following a Change of
Control Employee's employment by the Corporation shall be terminated (a) by the
Corporation other than for Cause, Retirement or Inability to Perform, or (b) by
Employee for Good Reason, then Employee shall be entitled to the benefits
provided below:
(A) The Corporation shall pay Employee his full
base salary through the Date of Termination at the rate in effect at
the time Notice of Termination is given, plus all other amounts and
benefits to which he is entitled under any compensation plan of the
Corporation, at the time the payments are due, except as otherwise
provided below.
(B) The Corporation also shall pay as severance
pay to Employee a lump sum severance payment (together with the
payments provided in paragraphs C and D, below, the "Severance
Payments") equal to three (3) times the Employee's annual base salary
in effect immediately prior to the occurrence of the circumstance
giving rise to the Notice of Termination , plus three (3) times the
Employee's average annual bonus for the last three years.
(C) The Corporation also shall pay Employee any
deferred compensation, including, but not limited to deferred bonuses,
allocated or credited to Employee or Employee's account as of the Date
of Termination. Payments made pursuant to the Executives Deferred
Income Plan shall be made as provided by said Plan and shall not be
deemed to be modified by the terms of this Agreement.
(D) Any outstanding options to purchase shares of
Common Stock of the Corporation which are held by Employee under the
Corporation's Stock Option Plans shall be exercisable in accordance
with the terms of the Stock Based Long Term Incentive Plan II.
(E) The Corporation shall provide medical
insurance benefits to Employee for three (3) years from Date of
Termination or until Employee secures employment with another company
providing similar welfare benefits. The Corporation will pay for such
benefits in the same manner as in existence on the Date of
Termination.
(F) The payments provided for in Paragraphs (A),
(B), and (C) above, shall be made no later than the fifth day
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following the Date of Termination. However, if the amounts of the
payment cannot be finally determined on or before that day, the
Corporation shall pay Employee an estimate, as determined in good
faith by the Corporation, of the minimum amount of such payments and
shall pay the remainder of those payments (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the
amount can be determined but in no event later than the 30th day after
the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have
been due, the excess shall constitute a loan by the Corporation
repayable on the 5th day after demand by the Corporation (together
with interest at the rate provided in Section 1274(b)(2)(B) of the
Code).
(iv) In the event that Employee is a "disqualified
individual" within the meaning of Section 280G of the Code, the parties
expressly agree that the payments described in this Section 4 and all other
payments to Employee under any other agreements or arrangements with any
persons that constitute "parachute payments" within the meaning of Section 280G
of the Code are collectively subject to an overall maximum limit. The maximum
limit shall be One Dollar ($1.00) less than the aggregate amount that would
otherwise cause any such payments to be considered a "parachute payment" within
the meaning of Section 280G of the Code, as determined by the Corporation.
Accordingly, to the extent that the payments would be considered a "parachute
payment" with respect to Employee, then the portions of such payments shall be
reduced or eliminated in the following order until the remaining change of
control termination payments with respect to Employee is within the maximum
described in this Subsection (iv):
(A) First, any cash payment to Employee;
(B) Second, any change of control termination
payments not described in this Agreement; and
(C) Third, any forgiveness of Employee
indebtedness to the Corporation.
Employee expressly and irrevocably waives any and all rights to
receive any change in control termination payments that exceed the maximum
limit described in this Subsection (iv).
(v) Employee shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Section 4 be reduced by any compensation earned by
Employee as the result of employment by another employer, by retirement
benefits, by offset against any
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amount claimed to be owed by Employee to the Corporation, or otherwise except
as specifically provided in this Section 4.
(vi) In addition to all other amounts payable to Employee
under this Section 4, Employee shall be entitled to receive all benefits
payable to Employee under the Corporation's Retirement Savings Plan, its
Retirement Income Plan, the Executives' Deferred Income Plan and any other plan
or agreement relating to retirement benefits.
(vii) Notwithstanding any other provisions of this
Agreement, no payments shall be made hereunder by Corporation which would be in
violation of any law or regulation applicable to Corporation, including,
without limitation, the provisions of Part 359 of Title 12, Code of Federal
Regulations, it being understood and agreed that Corporation's obligations
hereunder shall not exceed any valid limits imposed by a regulatory body.
5. SUCCESSORS; BINDING AGREEMENT. (i) The Corporation will
require any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business and/or
assets of the Corporation to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession had taken place. Failure of
the Corporation to obtain the assumption and agreement prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
entitle Employee to compensation from the Corporation in the same amount and on
the same terms as Employee would have been entitled to under this Agreement if
Employee had terminated his employment for Good Reason following a change in
control of the Corporation, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Corporation" shall
mean the Corporation as defined above and any successor to its business and/or
assets that assumes and agrees to perform this Agreement by operation of law,
or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, heirs, distributees, and legatees. If Employee should die
while any amount would still be payable to Employee, all such amounts, unless
otherwise provided in this Agreement, shall be paid in accordance with the
terms of this Agreement to Employee's legatee or other designee or, if there is
no such designee, to Employee's estate.
6. NOTICE. For the purpose of this Agreement, all notices and
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been fully given when delivered or mailed by United
States registered or certified mail, return
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receipt requested, postage prepaid, addressed to the respective addresses set
forth on the first page of this Agreement, provided that all notices to the
Corporation shall be directed to the attention of the Board with a copy to the
Secretary of the Corporation, or to such other address as either party may have
furnished to the other in writing in accordance with this Agreement, except
that notice of a change of address shall be effective only on receipt.
7. MISCELLANEOUS. No provision of this Agreement may be
modified, waived, or discharged unless the waiver, modification, or discharge
is agreed to in writing and signed by Employee and such officer as may be
specifically designated by the Board. No waiver by either party to this
Agreement at any time of any breach by the other party of, or compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter of this Agreement have been made by either party that are not
expressly set forth in this Agreement. The validity, interpretation,
construction, and performance of this Agreement shall be governed by the laws
of the State of Mississippi. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for shall be paid net of any applicable
withholding or deduction required under federal, state, or local law. The
obligations of the Corporation under Section 4 shall survive the expiration of
the term of this Agreement.
8. VALIDITY. The invalidity or enforceability of any provision
of this Agreement shall not affect the validity or unenforceability of any
other provision of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. DISPUTES. Any dispute or controversy arising under or in
connection with this Agreement (a "Dispute") shall be resolved as follows:
(i) Negotiation. In the event of a Dispute, the parties
shall use their best efforts to settle such dispute through informal
negotiations. To this effect, they shall consult and negotiate with
each other, in good faith and, recognizing their mutual interests,
attempt to reach a just and equitable solution satisfactory to both
parties. If they do not reach such solution within a period of thirty
(30) days from the date one party first
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notifies in writing another of the claim(s) giving rise to the
Dispute, then upon written notice by either party to the other, the
Dispute shall be submitted to mediation as set forth below.
(ii) Mediation. If such Dispute cannot be settled through
negotiation within such thirty (30) day period, the parties agree to
then endeavor to settle the Dispute in an amicable manner by mediation
administered by the American Arbitration Association ("AAA") under its
Commercial Mediation Rules. Such mediation shall occur in Jackson,
Mississippi before a mediator who is skilled in mediating commercial
disputes. AAA shall appoint a mediator meeting the qualifications set
out above. Such mediation shall consist of no more than two sessions
occurring within the twenty (20) days first following the end of the
negotiation period referred to above. Thereafter, any unresolved
Dispute shall be settled by arbitration in the manner set forth below.
The mediator cannot serve as an arbitrator.
(iii) Arbitration. Any Dispute which remains unresolved
following mediation shall be submitted to binding arbitration in
accordance with Title 9 of the United States Code (United States
Arbitration Act). This arbitration shall be administered by AAA in
accordance with its Commercial Arbitration Rules (the "Rules"). The
situs of the arbitration shall be Jackson, Mississippi unless
otherwise mutually agreed by the parties. The arbitration shall be
expedited such that, unless the parties otherwise agree or unless
necessary to allow the parties to gather and exchange appropriate
documentary or other evidence or information, (a) the panel shall be
selected within 30 days following the filing of the Notice of Claim
with AAA, (b) the hearing shall commence within 45 days following the
filing of the Notice of Claim, (c) the hearing shall be continued as
expeditiously as possible until concluded and (d) the award shall be
rendered within 10 days following the conclusion of the hearing. If
the claim or controversy arising from this Agreement is greater than
Five Hundred Thousand Dollars ($500,000) either party hereto shall
have the right to proceed judicially and shall not be required to
arbitrate.
(iv) Number and Qualification of Arbitrators. The
arbitration shall be conducted before and decided by a panel of two
arbitrators. Each shall be an attorney licensed to practice law in
any of the United States, having been admitted to practice for no
fewer than fifteen years.
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(v) Remedies and Choice of Law. The arbitrators shall
have authority to award any remedy or relief that a court of the State
of Mississippi could award or grant, including, without limitation,
specific performance of any obligations created under this Agreement;
provided however, that the arbitrators shall not have the authority to
award punitive damages against either party.
(vi) Fees and Expenses. The arbitrators shall have the
authority to award to the prevailing party, if any, as determined by
the arbitrators, all of its costs and fees, in such amounts as the
arbitrators deem just. "Costs and Fees" mean all reasonable pre-award
expenses of the arbitration, including the arbitrators' fees,
administrative fees, travel expenses, other out-of-pocket expenses,
witness (including expert witness) fees and expenses and attorneys'
fees and expenses.
(vii) Finality and Enforcement. Any award rendered by the
arbitrators shall be final, binding and conclusive. The parties
hereby agree to submit to the personal jurisdiction of the courts of
the State of Mississippi for the enforcement of the award. The award
may also be enforced in any other court of competent jurisdiction.
11. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties with respect to its subject matter and supersedes
all prior written or oral agreements or understandings with respect to the
subject matter.
In witness whereof, the parties have executed this agreement at
Jackson, Mississippi the day and year first above written.
DEPOSIT GUARANTY CORP.
By:
------------------------------------
Title:
---------------------------------
--------------------------------------
THOMAS M. HONTZAS
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CHANGE OF CONTROL TERMINATION AGREEMENT
This Change of Control Termination Agreement (the "Agreement") is
entered into on _________________, 1997, between Deposit Guaranty Corp., a
Mississippi corporation, with its principal place of business located at 210
East Capitol Street, Jackson, Mississippi 39201, (the "Corporation") and
W. Parks Johnson of 108 Woodland Hills Boulevard, Madison, Mississippi 39110
("Employee").
WITNESSETH:
WHEREAS, the Corporation considers it essential to the best interests
of its stockholders to foster the continuous employment of key management
personnel. In this connection, the Board of Directors of the Corporation (the
"Board") recognizes that, as is the case with many publicly held corporations,
the possibility of a change in control may exist. This possibility, and the
uncertainty and questions that it may raise among key management, may result in
the departure or distraction of key management personnel to the detriment of
the Corporation and its stockholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of key
members of the Corporation's management, including Employee, to the assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a change in control of the Corporation; and
WHEREAS, to induce Employee to remain in the employ of the
Corporation, and in consideration of Employee's agreement set forth below, the
Corporation agrees that Employee shall receive the severance benefits set forth
in this Agreement in the event Employee's employment with the Corporation is
terminated subsequent to a "change in control of the Corporation" (as defined
in Section 2 below) under the circumstances described below. This Agreement is
meant to supersede any other specific written agreements that may have been
entered into between Employee and the Corporation concerning the consequences
of any termination of Employee's employment.
THEREFORE, in consideration of Employee's continued employment and the
parties' agreement to be bound by the terms contained in this Agreement, the
parties agree as follows:
1. TERM OF AGREEMENT. This Agreement shall commence on January
1, 1997, and shall continue in effect through December 31, 1997. However,
commencing on December 31, 1997, and each December 31 afterwards, the term of
this Agreement shall automatically be extended for 1 additional year unless, no
later than the preceding November 1, the Corporation shall have given
<PAGE> 53
notice that it does not wish to extend this Agreement. If a change in control
of the Corporation shall have occurred during the original or any extended term
of this Agreement, this Agreement shall continue in effect for a period of 36
months beyond the month in which the change in control occurred.
Notwithstanding the foregoing, and provided no change of control shall have
occurred, this Agreement shall automatically terminate on the earlier to occur
of (i) Employee's termination of employment with the Corporation, or (ii) the
Corporation's furnishing Employee with notice of termination, irrespective of
the effective date of the termination.
2. CHANGE IN CONTROL. No benefits shall be payable under this
Agreement unless there shall have been a change in control of the Corporation,
as set forth below. For purposes of this Agreement, a "change in control of
the Corporation" shall mean a change of control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Corporation is in fact required to comply
with that regulation, provided that, without limitation, such a change in
control shall be deemed to have occurred if (A) any "person" (as that term is
used in Section 13(d) and 14(d) of the Exchange Act), other than a trustee or
other fiduciary holding securities under an employee benefit plan of the
Corporation or a corporation owned, directly or indirectly, by the stockholders
of the Corporation in substantially the same proportions as their ownership of
stock of the Corporation, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Corporation representing twenty-five percent (25%) or more of the combined
voting power of the Corporation's then outstanding securities; (B) during any
period of 2 consecutive years (not including any period prior to the execution
of this Agreement), individuals who at the beginning of the period constitute
the Board and any new director (other than a director designated by a person
who has entered into an agreement with the Corporation to effect a transaction
described in clauses (A) or (D) of this Section) whose election by the Board or
nomination for election by the Corporation's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute a
majority; (C) the Corporation enters into an agreement, the consummation of
which would result in the occurrence of a change in control of the Corporation;
or (D) the stockholders of the Corporation approve a merger or consolidation of
the Corporation with any other corporation, other than a merger or
consolidation that would result in the voting securities of the Corporation
outstanding immediately prior to it continuing to represent (either by
remaining outstanding or by being converted
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into voting securities of the surviving entity) at least fifty percent (50%) of
the combined voting power of the voting securities of the Corporation or such
surviving entity outstanding immediately after the merger or consolidation, or
the stockholders of the Corporation approve a plan of complete liquidation of
the Corporation or an agreement for the sale or disposition by the Corporation
of all or substantially all of the Corporation's assets.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 2 above constituting a change in control of the
Corporation shall have occurred, Employee shall be entitled to the benefits
provided in Subsection 4(iii) below on the termination of Employee's employment
during the 36 months following a Change of Control, unless the termination is
(A) because of Employee's death, Inability to Perform or Retirement, (B) by the
Corporation for Cause or (C) by Employee other than for Good Reason.
(i) INABILITY TO PERFORM; RETIREMENT. If, as a result of
Employee's incapacity due to physical or mental illness, Employee shall have
been absent from the full-time performance of his duties with the Corporation
for 6 consecutive months, and within 30 days after written notice of
termination is given Employee has not returned to the full-time performance of
Employee's duties, Employee's employment may be terminated for "inability to
perform the essential functions of his employment." Termination by the
Corporation or by Employee of Employee's employment based on "Retirement" shall
mean termination in accordance with the Corporation's retirement policy,
including early retirement, generally applicable to its salaried employees or
in accordance with any retirement arrangement established with Employee's
consent.
(ii) CAUSE. Termination by the Corporation for "Cause"
shall mean termination on (A) the willful and continued failure by Employee to
substantially perform Employee's duties with the Corporation (other than any
such failure resulting from Employee's incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance by
Employee of a Notice of Termination for Good Reason as defined in Subsections
3(iv) and 3(iii), respectively) after a written demand for substantial
performance is delivered to Employee by the Board, specifically identifying the
manner in which the Board believes that Employee has not substantially
performed his duties; or (B) willful misconduct by the Employee clearly
contrary to the interests of the Corporation. Employee may be terminated for
Cause only upon delivery to Employee of a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice to Employee and an
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opportunity for Employee, together with Employee's counsel, to be heard before
the Board), finding that in the good faith opinion of the board Employee was
guilty of conduct set forth above in either clause (A) or (B) of the first
sentence of this Subsection.
(iii) GOOD REASON. Employee shall be entitled to terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without Employee's express written consent, the occurrence after a
change in control of the Corporation of any of the following circumstances
unless, in the case of paragraphs (A), (E), (F), (G), or (H), the circumstances
are fully corrected prior to the Date of Termination specified in the Notice of
Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in
respect to them:
(A) a material adverse alteration in the nature
or status of Employee's responsibilities from those in effect
immediately prior to the change in control of the Corporation;
(B) a reduction by the Corporation in Employee's
annual base salary except for across-the-board salary reductions
similarly affecting all key employees of the Corporation and all key
employees of any person in control of the Corporation;
(C) relocation of Employee by Corporation to a
location not within twenty-five (25) miles of his present office or
job location, except for required travel on the Corporation's business
to an extent substantially consistent with his present business travel
obligations;
(D) the failure by the Corporation, without
Employee's consent, to pay any part of Employee's current
compensation, or to pay any part of an installment of deferred
compensation under any deferred compensation program of the
Corporation within 7 days of the date the compensation is due;
(E) the failure by the Corporation to continue in
effect any bonus to which Employee is entitled, or any compensation
plan in which he participates immediately prior to the change in
control of the Corporation, including but not limited to the
Corporation's Stock Option Plans, Executive Deferred Income Plan,
Retirement Income Plan, Retirement Savings Plan, and Flexible Benefit
Plan, or any substitute plans adopted prior to the change of control
in the Corporation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
the plan, or the failure by the Corporation to continue Employee's
participation in it (or in such substitute or alternative plan) on a
basis not less favorable, both in terms of the amount of benefits
provided and the level of his
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participation relative to other participants, as existed at the time
of the change in control;
(F) the failure by the Corporation to continue to
provide Employee with benefits substantially similar to those enjoyed
by him under the Corporation's life insurance, medical, health and
accident, or disability plans in which he was participating at the
time of the change in control of the Corporation;
(G) the failure of the Corporation to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 of this
Agreement; or
(H) any purported termination of Employee's
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (iv) below (and, if
applicable, the requirements of Subsection (ii) above); for purposes
of this Agreement, no such purported termination shall be effective.
Employee's rights to terminate his employment pursuant to this
Subsection shall not be affected by his incapacity due to physical or mental
illness. Employee's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
under this Agreement. In the event Employee delivers Notice of Termination
based on circumstances set forth in Paragraphs (A), (E), (F), (G), or (H)
above, which are fully corrected prior to the Date of Termination set forth in
said Notice of Termination, the Notice of Termination shall be deemed withdrawn
and of no further force and effect.
(iv) NOTICE OF TERMINATION. Any purported termination of
Employee's employment by the Corporation or by Employee shall be communicated
by written Notice of Termination to the other party to this Agreement in
accordance with Section 6 of this Agreement. For purpose of this Agreement, a
"Notice of Termination" shall mean a notice that shall indicate the specific
termination provision in this Agreement relied on, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the employment under the provision so indicated.
(v) DATE OF TERMINATION, ETC. "Date of Termination"
shall mean (A) if Employee's employment is terminated for Inability to Perform,
30 days after Notice of Termination is given (provided that he shall not have
returned to full-time performance of his duties during such 30-day period), and
(B) if Employee's employment is terminated pursuant to Subsection (ii) or (iii)
above or for any other reason (other than Disability), the date specified in
the Notice of Termination (which, in the case of a termination pursuant
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to Subsection (ii) above shall not be less than 30 days, and in the case of a
termination pursuant to Subsection (iii) above shall not be less than 15 nor
more than 60 days, respectively, from the date the Notice of Termination is
given). However, if within 15 days after any Notice of Termination is given,
or , if later, prior to the Date of Termination (as determined without regard
to this provision), the party receiving the Notice of Termination notifies the
other party that a dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, by a binding arbitration
award, or by a final judgment, order, or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal has expired and no appeal has been perfected). The Date of Termination
shall be extended by a notice of dispute only if the notice is given in good
faith and the party giving the notice pursues the resolution of the dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute,
the Corporation will continue to pay Employee his full compensation in effect
when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue Employee as a participant in all
compensation, benefit, and insurance plans in which he was participating when
the notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection. Amounts paid under this
Subsection are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement except to the extent otherwise provided in subsection 4(iv).
4. COMPENSATION ON TERMINATION OR DURING DISABILITY. Following a
change in control of the Corporation, as defined by Section 2, on termination
of Employee's employment or during a period of disability he shall be entitled
to the following results:
(i) During any period that Employee fails to perform his
full-time duties with the Corporation as a result of incapacity due to physical
or mental illness, he shall continue to receive his base salary at the rate in
effect at the commencement of any such period, together with all amounts
payable to him under any compensation plan of the Corporation during the
period, until this Agreement is terminated pursuant to Section 3(i) above.
Thereafter, or in the event Employee's employment shall be terminated by the
Corporation or by Employee for Retirement, or by reason of Employee's death,
Employee's benefits shall be determined under the Corporation's retirement,
insurance, and other compensation programs then in effect in accordance with
the terms of those programs.
(ii) If Employee's employment shall be terminated by the
Corporation for Cause or by Employee other than for Good Reason, Disability,
Death, or Retirement, the Corporation shall pay
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Employee his full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all other amounts and
benefits to which Employee is entitled under any compensation plan of the
Corporation at the time the payments are due.
(iii) If within thirty-six (36) months following a Change of
Control Employee's employment by the Corporation shall be terminated (a) by the
Corporation other than for Cause, Retirement or Inability to Perform, or (b) by
Employee for Good Reason, then Employee shall be entitled to the benefits
provided below:
(A) The Corporation shall pay Employee his full
base salary through the Date of Termination at the rate in effect at
the time Notice of Termination is given, plus all other amounts and
benefits to which he is entitled under any compensation plan of the
Corporation, at the time the payments are due, except as otherwise
provided below.
(B) The Corporation also shall pay as severance
pay to Employee a lump sum severance payment (together with the
payments provided in paragraphs C and D, below, the "Severance
Payments") equal to three (3) times the Employee's annual base salary
in effect immediately prior to the occurrence of the circumstance
giving rise to the Notice of Termination , plus three (3) times the
Employee's average annual bonus for the last three years.
(C) The Corporation also shall pay Employee any
deferred compensation, including, but not limited to deferred bonuses,
allocated or credited to Employee or Employee's account as of the Date
of Termination. Payments made pursuant to the Executives Deferred
Income Plan shall be made as provided by said Plan and shall not be
deemed to be modified by the terms of this Agreement.
(D) Any outstanding options to purchase shares of
Common Stock of the Corporation which are held by Employee under the
Corporation's Stock Option Plans shall be exercisable in accordance
with the terms of the Stock Based Long Term Incentive Plan II.
(E) The Corporation shall provide medical
insurance benefits to Employee for three (3) years from Date of
Termination or until Employee secures employment with another company
providing similar welfare benefits. The Corporation will pay for such
benefits in the same manner as in existence on the Date of
Termination.
(F) The payments provided for in Paragraphs (A),
(B), and (C) above, shall be made no later than the fifth day
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following the Date of Termination. However, if the amounts of the
payment cannot be finally determined on or before that day, the
Corporation shall pay Employee an estimate, as determined in good
faith by the Corporation, of the minimum amount of such payments and
shall pay the remainder of those payments (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the
amount can be determined but in no event later than the 30th day after
the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have
been due, the excess shall constitute a loan by the Corporation
repayable on the 5th day after demand by the Corporation (together
with interest at the rate provided in Section 1274(b)(2)(B) of the
Code).
(iv) In the event that Employee is a "disqualified
individual" within the meaning of Section 280G of the Code, the parties
expressly agree that the payments described in this Section 4 and all other
payments to Employee under any other agreements or arrangements with any
persons that constitute "parachute payments" within the meaning of Section 280G
of the Code are collectively subject to an overall maximum limit. The maximum
limit shall be One Dollar ($1.00) less than the aggregate amount that would
otherwise cause any such payments to be considered a "parachute payment" within
the meaning of Section 280G of the Code, as determined by the Corporation.
Accordingly, to the extent that the payments would be considered a "parachute
payment" with respect to Employee, then the portions of such payments shall be
reduced or eliminated in the following order until the remaining change of
control termination payments with respect to Employee is within the maximum
described in this Subsection (iv):
(A) First, any cash payment to Employee;
(B) Second, any change of control termination
payments not described in this Agreement; and
(C) Third, any forgiveness of Employee
indebtedness to the Corporation.
Employee expressly and irrevocably waives any and all rights to
receive any change in control termination payments that exceed the maximum
limit described in this Subsection (iv).
(v) Employee shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Section 4 be reduced by any compensation earned by
Employee as the result of employment by another employer, by retirement
benefits, by offset against any
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amount claimed to be owed by Employee to the Corporation, or otherwise except
as specifically provided in this Section 4.
(vi) In addition to all other amounts payable to Employee
under this Section 4, Employee shall be entitled to receive all benefits
payable to Employee under the Corporation's Retirement Savings Plan, its
Retirement Income Plan, the Executives' Deferred Income Plan and any other plan
or agreement relating to retirement benefits.
(vii) Notwithstanding any other provisions of this
Agreement, no payments shall be made hereunder by Corporation which would be in
violation of any law or regulation applicable to Corporation, including,
without limitation, the provisions of Part 359 of Title 12, Code of Federal
Regulations, it being understood and agreed that Corporation's obligations
hereunder shall not exceed any valid limits imposed by a regulatory body.
5. SUCCESSORS; BINDING AGREEMENT. (i) The Corporation will
require any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business and/or
assets of the Corporation to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession had taken place. Failure of
the Corporation to obtain the assumption and agreement prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
entitle Employee to compensation from the Corporation in the same amount and on
the same terms as Employee would have been entitled to under this Agreement if
Employee had terminated his employment for Good Reason following a change in
control of the Corporation, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Corporation" shall
mean the Corporation as defined above and any successor to its business and/or
assets that assumes and agrees to perform this Agreement by operation of law,
or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, heirs, distributees, and legatees. If Employee should die
while any amount would still be payable to Employee, all such amounts, unless
otherwise provided in this Agreement, shall be paid in accordance with the
terms of this Agreement to Employee's legatee or other designee or, if there is
no such designee, to Employee's estate.
6. NOTICE. For the purpose of this Agreement, all notices and
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been fully given when delivered or mailed by United
States registered or certified mail, return
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receipt requested, postage prepaid, addressed to the respective addresses set
forth on the first page of this Agreement, provided that all notices to the
Corporation shall be directed to the attention of the Board with a copy to the
Secretary of the Corporation, or to such other address as either party may have
furnished to the other in writing in accordance with this Agreement, except
that notice of a change of address shall be effective only on receipt.
7. MISCELLANEOUS. No provision of this Agreement may be
modified, waived, or discharged unless the waiver, modification, or discharge
is agreed to in writing and signed by Employee and such officer as may be
specifically designated by the Board. No waiver by either party to this
Agreement at any time of any breach by the other party of, or compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter of this Agreement have been made by either party that are not
expressly set forth in this Agreement. The validity, interpretation,
construction, and performance of this Agreement shall be governed by the laws
of the State of Mississippi. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for shall be paid net of any applicable
withholding or deduction required under federal, state, or local law. The
obligations of the Corporation under Section 4 shall survive the expiration of
the term of this Agreement.
8. VALIDITY. The invalidity or enforceability of any provision
of this Agreement shall not affect the validity or unenforceability of any
other provision of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. DISPUTES. Any dispute or controversy arising under or in
connection with this Agreement (a "Dispute") shall be resolved as follows:
(i) Negotiation. In the event of a Dispute, the parties
shall use their best efforts to settle such dispute through informal
negotiations. To this effect, they shall consult and negotiate with
each other, in good faith and, recognizing their mutual interests,
attempt to reach a just and equitable solution satisfactory to both
parties. If they do not reach such solution within a period of thirty
(30) days from the date one party first
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notifies in writing another of the claim(s) giving rise to the
Dispute, then upon written notice by either party to the other, the
Dispute shall be submitted to mediation as set forth below.
(ii) Mediation. If such Dispute cannot be settled through
negotiation within such thirty (30) day period, the parties agree to
then endeavor to settle the Dispute in an amicable manner by mediation
administered by the American Arbitration Association ("AAA") under its
Commercial Mediation Rules. Such mediation shall occur in Jackson,
Mississippi before a mediator who is skilled in mediating commercial
disputes. AAA shall appoint a mediator meeting the qualifications set
out above. Such mediation shall consist of no more than two sessions
occurring within the twenty (20) days first following the end of the
negotiation period referred to above. Thereafter, any unresolved
Dispute shall be settled by arbitration in the manner set forth below.
The mediator cannot serve as an arbitrator.
(iii) Arbitration. Any Dispute which remains unresolved
following mediation shall be submitted to binding arbitration in
accordance with Title 9 of the United States Code (United States
Arbitration Act). This arbitration shall be administered by AAA in
accordance with its Commercial Arbitration Rules (the "Rules"). The
situs of the arbitration shall be Jackson, Mississippi unless
otherwise mutually agreed by the parties. The arbitration shall be
expedited such that, unless the parties otherwise agree or unless
necessary to allow the parties to gather and exchange appropriate
documentary or other evidence or information, (a) the panel shall be
selected within 30 days following the filing of the Notice of Claim
with AAA, (b) the hearing shall commence within 45 days following the
filing of the Notice of Claim, (c) the hearing shall be continued as
expeditiously as possible until concluded and (d) the award shall be
rendered within 10 days following the conclusion of the hearing. If
the claim or controversy arising from this Agreement is greater than
Five Hundred Thousand Dollars ($500,000) either party hereto shall
have the right to proceed judicially and shall not be required to
arbitrate.
(iv) Number and Qualification of Arbitrators. The
arbitration shall be conducted before and decided by a panel of two
arbitrators. Each shall be an attorney licensed to practice law in
any of the United States, having been admitted to practice for no
fewer than fifteen years.
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(v) Remedies and Choice of Law. The arbitrators shall
have authority to award any remedy or relief that a court of the State
of Mississippi could award or grant, including, without limitation,
specific performance of any obligations created under this Agreement;
provided however, that the arbitrators shall not have the authority to
award punitive damages against either party.
(vi) Fees and Expenses. The arbitrators shall have the
authority to award to the prevailing party, if any, as determined by
the arbitrators, all of its costs and fees, in such amounts as the
arbitrators deem just. "Costs and Fees" mean all reasonable pre-award
expenses of the arbitration, including the arbitrators' fees,
administrative fees, travel expenses, other out-of-pocket expenses,
witness (including expert witness) fees and expenses and attorneys'
fees and expenses.
(vii) Finality and Enforcement. Any award rendered by the
arbitrators shall be final, binding and conclusive. The parties
hereby agree to submit to the personal jurisdiction of the courts of
the State of Mississippi for the enforcement of the award. The award
may also be enforced in any other court of competent jurisdiction.
11. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties with respect to its subject matter and supersedes
all prior written or oral agreements or understandings with respect to the
subject matter.
In witness whereof, the parties have executed this agreement at
Jackson, Mississippi the day and year first above written.
DEPOSIT GUARANTY CORP.
By:
------------------------------------
Title:
---------------------------------
--------------------------------------
W. PARKS JOHNSON
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CHANGE OF CONTROL TERMINATION AGREEMENT
This Change of Control Termination Agreement (the "Agreement") is
entered into on _________________, 1997, between Deposit Guaranty Corp., a
Mississippi corporation, with its principal place of business located at 210
East Capitol Street, Jackson, Mississippi 39201, (the "Corporation") and
James S. Lenoir of 109 Park Lane, Ridgeland, Mississippi 39157 ("Employee").
WITNESSETH:
WHEREAS, the Corporation considers it essential to the best interests
of its stockholders to foster the continuous employment of key management
personnel. In this connection, the Board of Directors of the Corporation (the
"Board") recognizes that, as is the case with many publicly held corporations,
the possibility of a change in control may exist. This possibility, and the
uncertainty and questions that it may raise among key management, may result in
the departure or distraction of key management personnel to the detriment of
the Corporation and its stockholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of key
members of the Corporation's management, including Employee, to the assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a change in control of the Corporation; and
WHEREAS, to induce Employee to remain in the employ of the
Corporation, and in consideration of Employee's agreement set forth below, the
Corporation agrees that Employee shall receive the severance benefits set forth
in this Agreement in the event Employee's employment with the Corporation is
terminated subsequent to a "change in control of the Corporation" (as defined
in Section 2 below) under the circumstances described below. This Agreement is
meant to supersede any other specific written agreements that may have been
entered into between Employee and the Corporation concerning the consequences
of any termination of Employee's employment.
THEREFORE, in consideration of Employee's continued employment and the
parties' agreement to be bound by the terms contained in this Agreement, the
parties agree as follows:
1. TERM OF AGREEMENT. This Agreement shall commence on January
1, 1997, and shall continue in effect through December 31, 1997. However,
commencing on December 31, 1997, and each December 31 afterwards, the term of
this Agreement shall automatically be extended for 1 additional year unless, no
later than the preceding November 1, the Corporation shall have given
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notice that it does not wish to extend this Agreement. If a change in control
of the Corporation shall have occurred during the original or any extended term
of this Agreement, this Agreement shall continue in effect for a period of 36
months beyond the month in which the change in control occurred.
Notwithstanding the foregoing, and provided no change of control shall have
occurred, this Agreement shall automatically terminate on the earlier to occur
of (i) Employee's termination of employment with the Corporation, or (ii) the
Corporation's furnishing Employee with notice of termination, irrespective of
the effective date of the termination.
2. CHANGE IN CONTROL. No benefits shall be payable under this
Agreement unless there shall have been a change in control of the Corporation,
as set forth below. For purposes of this Agreement, a "change in control of
the Corporation" shall mean a change of control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Corporation is in fact required to comply
with that regulation, provided that, without limitation, such a change in
control shall be deemed to have occurred if (A) any "person" (as that term is
used in Section 13(d) and 14(d) of the Exchange Act), other than a trustee or
other fiduciary holding securities under an employee benefit plan of the
Corporation or a corporation owned, directly or indirectly, by the stockholders
of the Corporation in substantially the same proportions as their ownership of
stock of the Corporation, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Corporation representing twenty-five percent (25%) or more of the combined
voting power of the Corporation's then outstanding securities; (B) during any
period of 2 consecutive years (not including any period prior to the execution
of this Agreement), individuals who at the beginning of the period constitute
the Board and any new director (other than a director designated by a person
who has entered into an agreement with the Corporation to effect a transaction
described in clauses (A) or (D) of this Section) whose election by the Board or
nomination for election by the Corporation's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute a
majority; (C) the Corporation enters into an agreement, the consummation of
which would result in the occurrence of a change in control of the Corporation;
or (D) the stockholders of the Corporation approve a merger or consolidation of
the Corporation with any other corporation, other than a merger or
consolidation that would result in the voting securities of the Corporation
outstanding immediately prior to it continuing to represent (either by
remaining outstanding or by being converted
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into voting securities of the surviving entity) at least fifty percent (50%) of
the combined voting power of the voting securities of the Corporation or such
surviving entity outstanding immediately after the merger or consolidation, or
the stockholders of the Corporation approve a plan of complete liquidation of
the Corporation or an agreement for the sale or disposition by the Corporation
of all or substantially all of the Corporation's assets.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 2 above constituting a change in control of the
Corporation shall have occurred, Employee shall be entitled to the benefits
provided in Subsection 4(iii) below on the termination of Employee's employment
during the 36 months following a Change of Control, unless the termination is
(A) because of Employee's death, Inability to Perform or Retirement, (B) by the
Corporation for Cause or (C) by Employee other than for Good Reason.
(i) INABILITY TO PERFORM; RETIREMENT. If, as a result of
Employee's incapacity due to physical or mental illness, Employee shall have
been absent from the full-time performance of his duties with the Corporation
for 6 consecutive months, and within 30 days after written notice of
termination is given Employee has not returned to the full-time performance of
Employee's duties, Employee's employment may be terminated for "inability to
perform the essential functions of his employment." Termination by the
Corporation or by Employee of Employee's employment based on "Retirement" shall
mean termination in accordance with the Corporation's retirement policy,
including early retirement, generally applicable to its salaried employees or
in accordance with any retirement arrangement established with Employee's
consent.
(ii) CAUSE. Termination by the Corporation for "Cause"
shall mean termination on (A) the willful and continued failure by Employee to
substantially perform Employee's duties with the Corporation (other than any
such failure resulting from Employee's incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance by
Employee of a Notice of Termination for Good Reason as defined in Subsections
3(iv) and 3(iii), respectively) after a written demand for substantial
performance is delivered to Employee by the Board, specifically identifying the
manner in which the Board believes that Employee has not substantially
performed his duties; or (B) willful misconduct by the Employee clearly
contrary to the interests of the Corporation. Employee may be terminated for
Cause only upon delivery to Employee of a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice to Employee and an
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opportunity for Employee, together with Employee's counsel, to be heard before
the Board), finding that in the good faith opinion of the board Employee was
guilty of conduct set forth above in either clause (A) or (B) of the first
sentence of this Subsection.
(iii) GOOD REASON. Employee shall be entitled to terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without Employee's express written consent, the occurrence after a
change in control of the Corporation of any of the following circumstances
unless, in the case of paragraphs (A), (E), (F), (G), or (H), the circumstances
are fully corrected prior to the Date of Termination specified in the Notice of
Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in
respect to them:
(A) a material adverse alteration in the nature
or status of Employee's responsibilities from those in effect
immediately prior to the change in control of the Corporation;
(B) a reduction by the Corporation in Employee's
annual base salary except for across-the-board salary reductions
similarly affecting all key employees of the Corporation and all key
employees of any person in control of the Corporation;
(C) relocation of Employee by Corporation to a
location not within twenty-five (25) miles of his present office or
job location, except for required travel on the Corporation's business
to an extent substantially consistent with his present business travel
obligations;
(D) the failure by the Corporation, without
Employee's consent, to pay any part of Employee's current
compensation, or to pay any part of an installment of deferred
compensation under any deferred compensation program of the
Corporation within 7 days of the date the compensation is due;
(E) the failure by the Corporation to continue in
effect any bonus to which Employee is entitled, or any compensation
plan in which he participates immediately prior to the change in
control of the Corporation, including but not limited to the
Corporation's Stock Option Plans, Executive Deferred Income Plan,
Retirement Income Plan, Retirement Savings Plan, and Flexible Benefit
Plan, or any substitute plans adopted prior to the change of control
in the Corporation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
the plan, or the failure by the Corporation to continue Employee's
participation in it (or in such substitute or alternative plan) on a
basis not less favorable, both in terms of the amount of benefits
provided and the level of his
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participation relative to other participants, as existed at the time
of the change in control;
(F) the failure by the Corporation to continue to
provide Employee with benefits substantially similar to those enjoyed
by him under the Corporation's life insurance, medical, health and
accident, or disability plans in which he was participating at the
time of the change in control of the Corporation;
(G) the failure of the Corporation to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 of this
Agreement; or
(H) any purported termination of Employee's
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (iv) below (and, if
applicable, the requirements of Subsection (ii) above); for purposes
of this Agreement, no such purported termination shall be effective.
Employee's rights to terminate his employment pursuant to this
Subsection shall not be affected by his incapacity due to physical or mental
illness. Employee's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
under this Agreement. In the event Employee delivers Notice of Termination
based on circumstances set forth in Paragraphs (A), (E), (F), (G), or (H)
above, which are fully corrected prior to the Date of Termination set forth in
said Notice of Termination, the Notice of Termination shall be deemed withdrawn
and of no further force and effect.
(iv) NOTICE OF TERMINATION. Any purported termination of
Employee's employment by the Corporation or by Employee shall be communicated
by written Notice of Termination to the other party to this Agreement in
accordance with Section 6 of this Agreement. For purpose of this Agreement, a
"Notice of Termination" shall mean a notice that shall indicate the specific
termination provision in this Agreement relied on, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the employment under the provision so indicated.
(v) DATE OF TERMINATION, ETC. "Date of Termination"
shall mean (A) if Employee's employment is terminated for Inability to Perform,
30 days after Notice of Termination is given (provided that he shall not have
returned to full-time performance of his duties during such 30-day period), and
(B) if Employee's employment is terminated pursuant to Subsection (ii) or (iii)
above or for any other reason (other than Disability), the date specified in
the Notice of Termination (which, in the case of a termination pursuant
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to Subsection (ii) above shall not be less than 30 days, and in the case of a
termination pursuant to Subsection (iii) above shall not be less than 15 nor
more than 60 days, respectively, from the date the Notice of Termination is
given). However, if within 15 days after any Notice of Termination is given,
or , if later, prior to the Date of Termination (as determined without regard
to this provision), the party receiving the Notice of Termination notifies the
other party that a dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, by a binding arbitration
award, or by a final judgment, order, or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal has expired and no appeal has been perfected). The Date of Termination
shall be extended by a notice of dispute only if the notice is given in good
faith and the party giving the notice pursues the resolution of the dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute,
the Corporation will continue to pay Employee his full compensation in effect
when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue Employee as a participant in all
compensation, benefit, and insurance plans in which he was participating when
the notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection. Amounts paid under this
Subsection are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement except to the extent otherwise provided in subsection 4(iv).
4. COMPENSATION ON TERMINATION OR DURING DISABILITY. Following a
change in control of the Corporation, as defined by Section 2, on termination
of Employee's employment or during a period of disability he shall be entitled
to the following results:
(i) During any period that Employee fails to perform his
full-time duties with the Corporation as a result of incapacity due to physical
or mental illness, he shall continue to receive his base salary at the rate in
effect at the commencement of any such period, together with all amounts
payable to him under any compensation plan of the Corporation during the
period, until this Agreement is terminated pursuant to Section 3(i) above.
Thereafter, or in the event Employee's employment shall be terminated by the
Corporation or by Employee for Retirement, or by reason of Employee's death,
Employee's benefits shall be determined under the Corporation's retirement,
insurance, and other compensation programs then in effect in accordance with
the terms of those programs.
(ii) If Employee's employment shall be terminated by the
Corporation for Cause or by Employee other than for Good Reason, Disability,
Death, or Retirement, the Corporation shall pay
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Employee his full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all other amounts and
benefits to which Employee is entitled under any compensation plan of the
Corporation at the time the payments are due.
(iii) If within thirty-six (36) months following a Change of
Control Employee's employment by the Corporation shall be terminated (a) by the
Corporation other than for Cause, Retirement or Inability to Perform, or (b) by
Employee for Good Reason, then Employee shall be entitled to the benefits
provided below:
(A) The Corporation shall pay Employee his full
base salary through the Date of Termination at the rate in effect at
the time Notice of Termination is given, plus all other amounts and
benefits to which he is entitled under any compensation plan of the
Corporation, at the time the payments are due, except as otherwise
provided below.
(B) The Corporation also shall pay as severance
pay to Employee a lump sum severance payment (together with the
payments provided in paragraphs C and D, below, the "Severance
Payments") equal to three (3) times the Employee's annual base salary
in effect immediately prior to the occurrence of the circumstance
giving rise to the Notice of Termination , plus three (3) times the
Employee's average annual bonus for the last three years.
(C) The Corporation also shall pay Employee any
deferred compensation, including, but not limited to deferred bonuses,
allocated or credited to Employee or Employee's account as of the Date
of Termination. Payments made pursuant to the Executives Deferred
Income Plan shall be made as provided by said Plan and shall not be
deemed to be modified by the terms of this Agreement.
(D) Any outstanding options to purchase shares of
Common Stock of the Corporation which are held by Employee under the
Corporation's Stock Option Plans shall be exercisable in accordance
with the terms of the Stock Based Long Term Incentive Plan II.
(E) The Corporation shall provide medical
insurance benefits to Employee for three (3) years from Date of
Termination or until Employee secures employment with another company
providing similar welfare benefits. The Corporation will pay for such
benefits in the same manner as in existence on the Date of
Termination.
(F) The payments provided for in Paragraphs (A),
(B), and (C) above, shall be made no later than the fifth day
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following the Date of Termination. However, if the amounts of the
payment cannot be finally determined on or before that day, the
Corporation shall pay Employee an estimate, as determined in good
faith by the Corporation, of the minimum amount of such payments and
shall pay the remainder of those payments (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the
amount can be determined but in no event later than the 30th day after
the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have
been due, the excess shall constitute a loan by the Corporation
repayable on the 5th day after demand by the Corporation (together
with interest at the rate provided in Section 1274(b)(2)(B) of the
Code).
(iv) In the event that Employee is a "disqualified
individual" within the meaning of Section 280G of the Code, the parties
expressly agree that the payments described in this Section 4 and all other
payments to Employee under any other agreements or arrangements with any
persons that constitute "parachute payments" within the meaning of Section 280G
of the Code are collectively subject to an overall maximum limit. The maximum
limit shall be One Dollar ($1.00) less than the aggregate amount that would
otherwise cause any such payments to be considered a "parachute payment" within
the meaning of Section 280G of the Code, as determined by the Corporation.
Accordingly, to the extent that the payments would be considered a "parachute
payment" with respect to Employee, then the portions of such payments shall be
reduced or eliminated in the following order until the remaining change of
control termination payments with respect to Employee is within the maximum
described in this Subsection (iv):
(A) First, any cash payment to Employee;
(B) Second, any change of control termination
payments not described in this Agreement; and
(C) Third, any forgiveness of Employee
indebtedness to the Corporation.
Employee expressly and irrevocably waives any and all rights to
receive any change in control termination payments that exceed the maximum
limit described in this Subsection (iv).
(v) Employee shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Section 4 be reduced by any compensation earned by
Employee as the result of employment by another employer, by retirement
benefits, by offset against any
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amount claimed to be owed by Employee to the Corporation, or otherwise except
as specifically provided in this Section 4.
(vi) In addition to all other amounts payable to Employee
under this Section 4, Employee shall be entitled to receive all benefits
payable to Employee under the Corporation's Retirement Savings Plan, its
Retirement Income Plan, the Executives' Deferred Income Plan and any other plan
or agreement relating to retirement benefits.
(vii) Notwithstanding any other provisions of this
Agreement, no payments shall be made hereunder by Corporation which would be in
violation of any law or regulation applicable to Corporation, including,
without limitation, the provisions of Part 359 of Title 12, Code of Federal
Regulations, it being understood and agreed that Corporation's obligations
hereunder shall not exceed any valid limits imposed by a regulatory body.
5. SUCCESSORS; BINDING AGREEMENT. (i) The Corporation will
require any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business and/or
assets of the Corporation to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession had taken place. Failure of
the Corporation to obtain the assumption and agreement prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
entitle Employee to compensation from the Corporation in the same amount and on
the same terms as Employee would have been entitled to under this Agreement if
Employee had terminated his employment for Good Reason following a change in
control of the Corporation, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Corporation" shall
mean the Corporation as defined above and any successor to its business and/or
assets that assumes and agrees to perform this Agreement by operation of law,
or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, heirs, distributees, and legatees. If Employee should die
while any amount would still be payable to Employee, all such amounts, unless
otherwise provided in this Agreement, shall be paid in accordance with the
terms of this Agreement to Employee's legatee or other designee or, if there is
no such designee, to Employee's estate.
6. NOTICE. For the purpose of this Agreement, all notices and
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been fully given when delivered or mailed by United
States registered or certified mail, return
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receipt requested, postage prepaid, addressed to the respective addresses set
forth on the first page of this Agreement, provided that all notices to the
Corporation shall be directed to the attention of the Board with a copy to the
Secretary of the Corporation, or to such other address as either party may have
furnished to the other in writing in accordance with this Agreement, except
that notice of a change of address shall be effective only on receipt.
7. MISCELLANEOUS. No provision of this Agreement may be
modified, waived, or discharged unless the waiver, modification, or discharge
is agreed to in writing and signed by Employee and such officer as may be
specifically designated by the Board. No waiver by either party to this
Agreement at any time of any breach by the other party of, or compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter of this Agreement have been made by either party that are not
expressly set forth in this Agreement. The validity, interpretation,
construction, and performance of this Agreement shall be governed by the laws
of the State of Mississippi. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for shall be paid net of any applicable
withholding or deduction required under federal, state, or local law. The
obligations of the Corporation under Section 4 shall survive the expiration of
the term of this Agreement.
8. VALIDITY. The invalidity or enforceability of any provision
of this Agreement shall not affect the validity or unenforceability of any
other provision of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. DISPUTES. Any dispute or controversy arising under or in
connection with this Agreement (a "Dispute") shall be resolved as follows:
(i) Negotiation. In the event of a Dispute, the parties
shall use their best efforts to settle such dispute through informal
negotiations. To this effect, they shall consult and negotiate with
each other, in good faith and, recognizing their mutual interests,
attempt to reach a just and equitable solution satisfactory to both
parties. If they do not reach such solution within a period of thirty
(30) days from the date one party first
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notifies in writing another of the claim(s) giving rise to the
Dispute, then upon written notice by either party to the other, the
Dispute shall be submitted to mediation as set forth below.
(ii) Mediation. If such Dispute cannot be settled through
negotiation within such thirty (30) day period, the parties agree to
then endeavor to settle the Dispute in an amicable manner by mediation
administered by the American Arbitration Association ("AAA") under its
Commercial Mediation Rules. Such mediation shall occur in Jackson,
Mississippi before a mediator who is skilled in mediating commercial
disputes. AAA shall appoint a mediator meeting the qualifications set
out above. Such mediation shall consist of no more than two sessions
occurring within the twenty (20) days first following the end of the
negotiation period referred to above. Thereafter, any unresolved
Dispute shall be settled by arbitration in the manner set forth below.
The mediator cannot serve as an arbitrator.
(iii) Arbitration. Any Dispute which remains unresolved
following mediation shall be submitted to binding arbitration in
accordance with Title 9 of the United States Code (United States
Arbitration Act). This arbitration shall be administered by AAA in
accordance with its Commercial Arbitration Rules (the "Rules"). The
situs of the arbitration shall be Jackson, Mississippi unless
otherwise mutually agreed by the parties. The arbitration shall be
expedited such that, unless the parties otherwise agree or unless
necessary to allow the parties to gather and exchange appropriate
documentary or other evidence or information, (a) the panel shall be
selected within 30 days following the filing of the Notice of Claim
with AAA, (b) the hearing shall commence within 45 days following the
filing of the Notice of Claim, (c) the hearing shall be continued as
expeditiously as possible until concluded and (d) the award shall be
rendered within 10 days following the conclusion of the hearing. If
the claim or controversy arising from this Agreement is greater than
Five Hundred Thousand Dollars ($500,000) either party hereto shall
have the right to proceed judicially and shall not be required to
arbitrate.
(iv) Number and Qualification of Arbitrators. The
arbitration shall be conducted before and decided by a panel of two
arbitrators. Each shall be an attorney licensed to practice law in
any of the United States, having been admitted to practice for no
fewer than fifteen years.
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(v) Remedies and Choice of Law. The arbitrators shall
have authority to award any remedy or relief that a court of the State
of Mississippi could award or grant, including, without limitation,
specific performance of any obligations created under this Agreement;
provided however, that the arbitrators shall not have the authority to
award punitive damages against either party.
(vi) Fees and Expenses. The arbitrators shall have the
authority to award to the prevailing party, if any, as determined by
the arbitrators, all of its costs and fees, in such amounts as the
arbitrators deem just. "Costs and Fees" mean all reasonable pre-award
expenses of the arbitration, including the arbitrators' fees,
administrative fees, travel expenses, other out-of-pocket expenses,
witness (including expert witness) fees and expenses and attorneys'
fees and expenses.
(vii) Finality and Enforcement. Any award rendered by the
arbitrators shall be final, binding and conclusive. The parties
hereby agree to submit to the personal jurisdiction of the courts of
the State of Mississippi for the enforcement of the award. The award
may also be enforced in any other court of competent jurisdiction.
11. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties with respect to its subject matter and supersedes
all prior written or oral agreements or understandings with respect to the
subject matter.
In witness whereof, the parties have executed this agreement at
Jackson, Mississippi the day and year first above written.
DEPOSIT GUARANTY CORP.
By:
------------------------------------
Title:
---------------------------------
--------------------------------------
JAMES S. LENOIR
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CHANGE OF CONTROL TERMINATION AGREEMENT
This Change of Control Termination Agreement (the "Agreement") is
entered into on _________________, 1997, between Deposit Guaranty Corp., a
Mississippi corporation, with its principal place of business located at 210
East Capitol Street, Jackson, Mississippi 39201, (the "Corporation") and
Arlen L. McDonald of 1 Ashley Park Drive, Mississippi 39206 ("Employee").
WITNESSETH:
WHEREAS, the Corporation considers it essential to the best interests
of its stockholders to foster the continuous employment of key management
personnel. In this connection, the Board of Directors of the Corporation (the
"Board") recognizes that, as is the case with many publicly held corporations,
the possibility of a change in control may exist. This possibility, and the
uncertainty and questions that it may raise among key management, may result in
the departure or distraction of key management personnel to the detriment of
the Corporation and its stockholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of key
members of the Corporation's management, including Employee, to the assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a change in control of the Corporation; and
WHEREAS, to induce Employee to remain in the employ of the
Corporation, and in consideration of Employee's agreement set forth below, the
Corporation agrees that Employee shall receive the severance benefits set forth
in this Agreement in the event Employee's employment with the Corporation is
terminated subsequent to a "change in control of the Corporation" (as defined
in Section 2 below) under the circumstances described below. This Agreement is
meant to supersede any other specific written agreements that may have been
entered into between Employee and the Corporation concerning the consequences
of any termination of Employee's employment.
THEREFORE, in consideration of Employee's continued employment and the
parties' agreement to be bound by the terms contained in this Agreement, the
parties agree as follows:
1. TERM OF AGREEMENT. This Agreement shall commence on January
1, 1997, and shall continue in effect through December 31, 1997. However,
commencing on December 31, 1997, and each December 31 afterwards, the term of
this Agreement shall automatically be extended for 1 additional year unless, no
later than the preceding November 1, the Corporation shall have given
<PAGE> 77
notice that it does not wish to extend this Agreement. If a change in control
of the Corporation shall have occurred during the original or any extended term
of this Agreement, this Agreement shall continue in effect for a period of 36
months beyond the month in which the change in control occurred.
Notwithstanding the foregoing, and provided no change of control shall have
occurred, this Agreement shall automatically terminate on the earlier to occur
of (i) Employee's termination of employment with the Corporation, or (ii) the
Corporation's furnishing Employee with notice of termination, irrespective of
the effective date of the termination.
2. CHANGE IN CONTROL. No benefits shall be payable under this
Agreement unless there shall have been a change in control of the Corporation,
as set forth below. For purposes of this Agreement, a "change in control of
the Corporation" shall mean a change of control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Corporation is in fact required to comply
with that regulation, provided that, without limitation, such a change in
control shall be deemed to have occurred if (A) any "person" (as that term is
used in Section 13(d) and 14(d) of the Exchange Act), other than a trustee or
other fiduciary holding securities under an employee benefit plan of the
Corporation or a corporation owned, directly or indirectly, by the stockholders
of the Corporation in substantially the same proportions as their ownership of
stock of the Corporation, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Corporation representing twenty-five percent (25%) or more of the combined
voting power of the Corporation's then outstanding securities; (B) during any
period of 2 consecutive years (not including any period prior to the execution
of this Agreement), individuals who at the beginning of the period constitute
the Board and any new director (other than a director designated by a person
who has entered into an agreement with the Corporation to effect a transaction
described in clauses (A) or (D) of this Section) whose election by the Board or
nomination for election by the Corporation's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute a
majority; (C) the Corporation enters into an agreement, the consummation of
which would result in the occurrence of a change in control of the Corporation;
or (D) the stockholders of the Corporation approve a merger or consolidation of
the Corporation with any other corporation, other than a merger or
consolidation that would result in the voting securities of the Corporation
outstanding immediately prior to it continuing to represent (either by
remaining outstanding or by being converted
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into voting securities of the surviving entity) at least fifty percent (50%) of
the combined voting power of the voting securities of the Corporation or such
surviving entity outstanding immediately after the merger or consolidation, or
the stockholders of the Corporation approve a plan of complete liquidation of
the Corporation or an agreement for the sale or disposition by the Corporation
of all or substantially all of the Corporation's assets.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 2 above constituting a change in control of the
Corporation shall have occurred, Employee shall be entitled to the benefits
provided in Subsection 4(iii) below on the termination of Employee's employment
during the 36 months following a Change of Control, unless the termination is
(A) because of Employee's death, Inability to Perform or Retirement, (B) by the
Corporation for Cause or (C) by Employee other than for Good Reason.
(i) INABILITY TO PERFORM; RETIREMENT. If, as a result of
Employee's incapacity due to physical or mental illness, Employee shall have
been absent from the full-time performance of his duties with the Corporation
for 6 consecutive months, and within 30 days after written notice of
termination is given Employee has not returned to the full-time performance of
Employee's duties, Employee's employment may be terminated for "inability to
perform the essential functions of his employment." Termination by the
Corporation or by Employee of Employee's employment based on "Retirement" shall
mean termination in accordance with the Corporation's retirement policy,
including early retirement, generally applicable to its salaried employees or
in accordance with any retirement arrangement established with Employee's
consent.
(ii) CAUSE. Termination by the Corporation for "Cause"
shall mean termination on (A) the willful and continued failure by Employee to
substantially perform Employee's duties with the Corporation (other than any
such failure resulting from Employee's incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance by
Employee of a Notice of Termination for Good Reason as defined in Subsections
3(iv) and 3(iii), respectively) after a written demand for substantial
performance is delivered to Employee by the Board, specifically identifying the
manner in which the Board believes that Employee has not substantially
performed his duties; or (B) willful misconduct by the Employee clearly
contrary to the interests of the Corporation. Employee may be terminated for
Cause only upon delivery to Employee of a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice to Employee and an
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opportunity for Employee, together with Employee's counsel, to be heard before
the Board), finding that in the good faith opinion of the board Employee was
guilty of conduct set forth above in either clause (A) or (B) of the first
sentence of this Subsection.
(iii) GOOD REASON. Employee shall be entitled to terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without Employee's express written consent, the occurrence after a
change in control of the Corporation of any of the following circumstances
unless, in the case of paragraphs (A), (E), (F), (G), or (H), the circumstances
are fully corrected prior to the Date of Termination specified in the Notice of
Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in
respect to them:
(A) a material adverse alteration in the nature
or status of Employee's responsibilities from those in effect
immediately prior to the change in control of the Corporation;
(B) a reduction by the Corporation in Employee's
annual base salary except for across-the-board salary reductions
similarly affecting all key employees of the Corporation and all key
employees of any person in control of the Corporation;
(C) relocation of Employee by Corporation to a
location not within twenty-five (25) miles of his present office or
job location, except for required travel on the Corporation's business
to an extent substantially consistent with his present business travel
obligations;
(D) the failure by the Corporation, without
Employee's consent, to pay any part of Employee's current
compensation, or to pay any part of an installment of deferred
compensation under any deferred compensation program of the
Corporation within 7 days of the date the compensation is due;
(E) the failure by the Corporation to continue in
effect any bonus to which Employee is entitled, or any compensation
plan in which he participates immediately prior to the change in
control of the Corporation, including but not limited to the
Corporation's Stock Option Plans, Executive Deferred Income Plan,
Retirement Income Plan, Retirement Savings Plan, and Flexible Benefit
Plan, or any substitute plans adopted prior to the change of control
in the Corporation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
the plan, or the failure by the Corporation to continue Employee's
participation in it (or in such substitute or alternative plan) on a
basis not less favorable, both in terms of the amount of benefits
provided and the level of his
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participation relative to other participants, as existed at the time
of the change in control;
(F) the failure by the Corporation to continue to
provide Employee with benefits substantially similar to those enjoyed
by him under the Corporation's life insurance, medical, health and
accident, or disability plans in which he was participating at the
time of the change in control of the Corporation;
(G) the failure of the Corporation to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 of this
Agreement; or
(H) any purported termination of Employee's
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (iv) below (and, if
applicable, the requirements of Subsection (ii) above); for purposes
of this Agreement, no such purported termination shall be effective.
Employee's rights to terminate his employment pursuant to this
Subsection shall not be affected by his incapacity due to physical or mental
illness. Employee's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
under this Agreement. In the event Employee delivers Notice of Termination
based on circumstances set forth in Paragraphs (A), (E), (F), (G), or (H)
above, which are fully corrected prior to the Date of Termination set forth in
said Notice of Termination, the Notice of Termination shall be deemed withdrawn
and of no further force and effect.
(iv) NOTICE OF TERMINATION. Any purported termination of
Employee's employment by the Corporation or by Employee shall be communicated
by written Notice of Termination to the other party to this Agreement in
accordance with Section 6 of this Agreement. For purpose of this Agreement, a
"Notice of Termination" shall mean a notice that shall indicate the specific
termination provision in this Agreement relied on, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the employment under the provision so indicated.
(v) DATE OF TERMINATION, ETC. "Date of Termination"
shall mean (A) if Employee's employment is terminated for Inability to Perform,
30 days after Notice of Termination is given (provided that he shall not have
returned to full-time performance of his duties during such 30-day period), and
(B) if Employee's employment is terminated pursuant to Subsection (ii) or (iii)
above or for any other reason (other than Disability), the date specified in
the Notice of Termination (which, in the case of a termination pursuant
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to Subsection (ii) above shall not be less than 30 days, and in the case of a
termination pursuant to Subsection (iii) above shall not be less than 15 nor
more than 60 days, respectively, from the date the Notice of Termination is
given). However, if within 15 days after any Notice of Termination is given,
or , if later, prior to the Date of Termination (as determined without regard
to this provision), the party receiving the Notice of Termination notifies the
other party that a dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, by a binding arbitration
award, or by a final judgment, order, or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal has expired and no appeal has been perfected). The Date of Termination
shall be extended by a notice of dispute only if the notice is given in good
faith and the party giving the notice pursues the resolution of the dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute,
the Corporation will continue to pay Employee his full compensation in effect
when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue Employee as a participant in all
compensation, benefit, and insurance plans in which he was participating when
the notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection. Amounts paid under this
Subsection are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement except to the extent otherwise provided in subsection 4(iv).
4. COMPENSATION ON TERMINATION OR DURING DISABILITY. Following a
change in control of the Corporation, as defined by Section 2, on termination
of Employee's employment or during a period of disability he shall be entitled
to the following results:
(i) During any period that Employee fails to perform his
full-time duties with the Corporation as a result of incapacity due to physical
or mental illness, he shall continue to receive his base salary at the rate in
effect at the commencement of any such period, together with all amounts
payable to him under any compensation plan of the Corporation during the
period, until this Agreement is terminated pursuant to Section 3(i) above.
Thereafter, or in the event Employee's employment shall be terminated by the
Corporation or by Employee for Retirement, or by reason of Employee's death,
Employee's benefits shall be determined under the Corporation's retirement,
insurance, and other compensation programs then in effect in accordance with
the terms of those programs.
(ii) If Employee's employment shall be terminated by the
Corporation for Cause or by Employee other than for Good Reason, Disability,
Death, or Retirement, the Corporation shall pay
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Employee his full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all other amounts and
benefits to which Employee is entitled under any compensation plan of the
Corporation at the time the payments are due.
(iii) If within thirty-six (36) months following a Change of
Control Employee's employment by the Corporation shall be terminated (a) by the
Corporation other than for Cause, Retirement or Inability to Perform, or (b) by
Employee for Good Reason, then Employee shall be entitled to the benefits
provided below:
(A) The Corporation shall pay Employee his full
base salary through the Date of Termination at the rate in effect at
the time Notice of Termination is given, plus all other amounts and
benefits to which he is entitled under any compensation plan of the
Corporation, at the time the payments are due, except as otherwise
provided below.
(B) The Corporation also shall pay as severance
pay to Employee a lump sum severance payment (together with the
payments provided in paragraphs C and D, below, the "Severance
Payments") equal to three (3) times the Employee's annual base salary
in effect immediately prior to the occurrence of the circumstance
giving rise to the Notice of Termination , plus three (3) times the
Employee's average annual bonus for the last three years.
(C) The Corporation also shall pay Employee any
deferred compensation, including, but not limited to deferred bonuses,
allocated or credited to Employee or Employee's account as of the Date
of Termination. Payments made pursuant to the Executives Deferred
Income Plan shall be made as provided by said Plan and shall not be
deemed to be modified by the terms of this Agreement.
(D) Any outstanding options to purchase shares of
Common Stock of the Corporation which are held by Employee under the
Corporation's Stock Option Plans shall be exercisable in accordance
with the terms of the Stock Based Long Term Incentive Plan II.
(E) The Corporation shall provide medical
insurance benefits to Employee for three (3) years from Date of
Termination or until Employee secures employment with another company
providing similar welfare benefits. The Corporation will pay for such
benefits in the same manner as in existence on the Date of
Termination.
(F) The payments provided for in Paragraphs (A),
(B), and (C) above, shall be made no later than the fifth day
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following the Date of Termination. However, if the amounts of the
payment cannot be finally determined on or before that day, the
Corporation shall pay Employee an estimate, as determined in good
faith by the Corporation, of the minimum amount of such payments and
shall pay the remainder of those payments (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the
amount can be determined but in no event later than the 30th day after
the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have
been due, the excess shall constitute a loan by the Corporation
repayable on the 5th day after demand by the Corporation (together
with interest at the rate provided in Section 1274(b)(2)(B) of the
Code).
(iv) In the event that Employee is a "disqualified
individual" within the meaning of Section 280G of the Code, the parties
expressly agree that the payments described in this Section 4 and all other
payments to Employee under any other agreements or arrangements with any
persons that constitute "parachute payments" within the meaning of Section 280G
of the Code are collectively subject to an overall maximum limit. The maximum
limit shall be One Dollar ($1.00) less than the aggregate amount that would
otherwise cause any such payments to be considered a "parachute payment" within
the meaning of Section 280G of the Code, as determined by the Corporation.
Accordingly, to the extent that the payments would be considered a "parachute
payment" with respect to Employee, then the portions of such payments shall be
reduced or eliminated in the following order until the remaining change of
control termination payments with respect to Employee is within the maximum
described in this Subsection (iv):
(A) First, any cash payment to Employee;
(B) Second, any change of control termination
payments not described in this Agreement; and
(C) Third, any forgiveness of Employee
indebtedness to the Corporation.
Employee expressly and irrevocably waives any and all rights to
receive any change in control termination payments that exceed the maximum
limit described in this Subsection (iv).
(v) Employee shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Section 4 be reduced by any compensation earned by
Employee as the result of employment by another employer, by retirement
benefits, by offset against any
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amount claimed to be owed by Employee to the Corporation, or otherwise except
as specifically provided in this Section 4.
(vi) In addition to all other amounts payable to Employee
under this Section 4, Employee shall be entitled to receive all benefits
payable to Employee under the Corporation's Retirement Savings Plan, its
Retirement Income Plan, the Executives' Deferred Income Plan and any other plan
or agreement relating to retirement benefits.
(vii) Notwithstanding any other provisions of this
Agreement, no payments shall be made hereunder by Corporation which would be in
violation of any law or regulation applicable to Corporation, including,
without limitation, the provisions of Part 359 of Title 12, Code of Federal
Regulations, it being understood and agreed that Corporation's obligations
hereunder shall not exceed any valid limits imposed by a regulatory body.
5. SUCCESSORS; BINDING AGREEMENT. (i) The Corporation will
require any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business and/or
assets of the Corporation to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession had taken place. Failure of
the Corporation to obtain the assumption and agreement prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
entitle Employee to compensation from the Corporation in the same amount and on
the same terms as Employee would have been entitled to under this Agreement if
Employee had terminated his employment for Good Reason following a change in
control of the Corporation, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Corporation" shall
mean the Corporation as defined above and any successor to its business and/or
assets that assumes and agrees to perform this Agreement by operation of law,
or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, heirs, distributees, and legatees. If Employee should die
while any amount would still be payable to Employee, all such amounts, unless
otherwise provided in this Agreement, shall be paid in accordance with the
terms of this Agreement to Employee's legatee or other designee or, if there is
no such designee, to Employee's estate.
6. NOTICE. For the purpose of this Agreement, all notices and
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been fully given when delivered or mailed by United
States registered or certified mail, return
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receipt requested, postage prepaid, addressed to the respective addresses set
forth on the first page of this Agreement, provided that all notices to the
Corporation shall be directed to the attention of the Board with a copy to the
Secretary of the Corporation, or to such other address as either party may have
furnished to the other in writing in accordance with this Agreement, except
that notice of a change of address shall be effective only on receipt.
7. MISCELLANEOUS. No provision of this Agreement may be
modified, waived, or discharged unless the waiver, modification, or discharge
is agreed to in writing and signed by Employee and such officer as may be
specifically designated by the Board. No waiver by either party to this
Agreement at any time of any breach by the other party of, or compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter of this Agreement have been made by either party that are not
expressly set forth in this Agreement. The validity, interpretation,
construction, and performance of this Agreement shall be governed by the laws
of the State of Mississippi. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for shall be paid net of any applicable
withholding or deduction required under federal, state, or local law. The
obligations of the Corporation under Section 4 shall survive the expiration of
the term of this Agreement.
8. VALIDITY. The invalidity or enforceability of any provision
of this Agreement shall not affect the validity or unenforceability of any
other provision of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. DISPUTES. Any dispute or controversy arising under or in
connection with this Agreement (a "Dispute") shall be resolved as follows:
(i) Negotiation. In the event of a Dispute, the parties
shall use their best efforts to settle such dispute through informal
negotiations. To this effect, they shall consult and negotiate with
each other, in good faith and, recognizing their mutual interests,
attempt to reach a just and equitable solution satisfactory to both
parties. If they do not reach such solution within a period of thirty
(30) days from the date one party first
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notifies in writing another of the claim(s) giving rise to the
Dispute, then upon written notice by either party to the other, the
Dispute shall be submitted to mediation as set forth below.
(ii) Mediation. If such Dispute cannot be settled through
negotiation within such thirty (30) day period, the parties agree to
then endeavor to settle the Dispute in an amicable manner by mediation
administered by the American Arbitration Association ("AAA") under its
Commercial Mediation Rules. Such mediation shall occur in Jackson,
Mississippi before a mediator who is skilled in mediating commercial
disputes. AAA shall appoint a mediator meeting the qualifications set
out above. Such mediation shall consist of no more than two sessions
occurring within the twenty (20) days first following the end of the
negotiation period referred to above. Thereafter, any unresolved
Dispute shall be settled by arbitration in the manner set forth below.
The mediator cannot serve as an arbitrator.
(iii) Arbitration. Any Dispute which remains unresolved
following mediation shall be submitted to binding arbitration in
accordance with Title 9 of the United States Code (United States
Arbitration Act). This arbitration shall be administered by AAA in
accordance with its Commercial Arbitration Rules (the "Rules"). The
situs of the arbitration shall be Jackson, Mississippi unless
otherwise mutually agreed by the parties. The arbitration shall be
expedited such that, unless the parties otherwise agree or unless
necessary to allow the parties to gather and exchange appropriate
documentary or other evidence or information, (a) the panel shall be
selected within 30 days following the filing of the Notice of Claim
with AAA, (b) the hearing shall commence within 45 days following the
filing of the Notice of Claim, (c) the hearing shall be continued as
expeditiously as possible until concluded and (d) the award shall be
rendered within 10 days following the conclusion of the hearing. If
the claim or controversy arising from this Agreement is greater than
Five Hundred Thousand Dollars ($500,000) either party hereto shall
have the right to proceed judicially and shall not be required to
arbitrate.
(iv) Number and Qualification of Arbitrators. The
arbitration shall be conducted before and decided by a panel of two
arbitrators. Each shall be an attorney licensed to practice law in
any of the United States, having been admitted to practice for no
fewer than fifteen years.
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(v) Remedies and Choice of Law. The arbitrators shall
have authority to award any remedy or relief that a court of the State
of Mississippi could award or grant, including, without limitation,
specific performance of any obligations created under this Agreement;
provided however, that the arbitrators shall not have the authority to
award punitive damages against either party.
(vi) Fees and Expenses. The arbitrators shall have the
authority to award to the prevailing party, if any, as determined by
the arbitrators, all of its costs and fees, in such amounts as the
arbitrators deem just. "Costs and Fees" mean all reasonable pre-award
expenses of the arbitration, including the arbitrators' fees,
administrative fees, travel expenses, other out-of-pocket expenses,
witness (including expert witness) fees and expenses and attorneys'
fees and expenses.
(vii) Finality and Enforcement. Any award rendered by the
arbitrators shall be final, binding and conclusive. The parties
hereby agree to submit to the personal jurisdiction of the courts of
the State of Mississippi for the enforcement of the award. The award
may also be enforced in any other court of competent jurisdiction.
11. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties with respect to its subject matter and supersedes
all prior written or oral agreements or understandings with respect to the
subject matter.
In witness whereof, the parties have executed this agreement at
Jackson, Mississippi the day and year first above written.
DEPOSIT GUARANTY CORP.
By:
------------------------------------
Title:
---------------------------------
--------------------------------------
ARLEN L. MCDONALD
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CHANGE OF CONTROL TERMINATION AGREEMENT
This Change of Control Termination Agreement (the "Agreement") is
entered into on _________________, 1997, between Deposit Guaranty Corp., a
Mississippi corporation, with its principal place of business located at 210
East Capitol Street, Jackson, Mississippi 39201, (the "Corporation") and
W. Stan Pratt of 107 Overlook Place, Madison, Mississippi 39110 ("Employee").
WITNESSETH:
WHEREAS, the Corporation considers it essential to the best interests
of its stockholders to foster the continuous employment of key management
personnel. In this connection, the Board of Directors of the Corporation (the
"Board") recognizes that, as is the case with many publicly held corporations,
the possibility of a change in control may exist. This possibility, and the
uncertainty and questions that it may raise among key management, may result in
the departure or distraction of key management personnel to the detriment of
the Corporation and its stockholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of key
members of the Corporation's management, including Employee, to the assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a change in control of the Corporation; and
WHEREAS, to induce Employee to remain in the employ of the
Corporation, and in consideration of Employee's agreement set forth below, the
Corporation agrees that Employee shall receive the severance benefits set forth
in this Agreement in the event Employee's employment with the Corporation is
terminated subsequent to a "change in control of the Corporation" (as defined
in Section 2 below) under the circumstances described below. This Agreement is
meant to supersede any other specific written agreements that may have been
entered into between Employee and the Corporation concerning the consequences
of any termination of Employee's employment.
THEREFORE, in consideration of Employee's continued employment and the
parties' agreement to be bound by the terms contained in this Agreement, the
parties agree as follows:
1. TERM OF AGREEMENT. This Agreement shall commence on January
1, 1997, and shall continue in effect through December 31, 1997. However,
commencing on December 31, 1997, and each December 31 afterwards, the term of
this Agreement shall automatically be extended for 1 additional year unless, no
later than the preceding November 1, the Corporation shall have given
<PAGE> 89
notice that it does not wish to extend this Agreement. If a change in control
of the Corporation shall have occurred during the original or any extended term
of this Agreement, this Agreement shall continue in effect for a period of 36
months beyond the month in which the change in control occurred.
Notwithstanding the foregoing, and provided no change of control shall have
occurred, this Agreement shall automatically terminate on the earlier to occur
of (i) Employee's termination of employment with the Corporation, or (ii) the
Corporation's furnishing Employee with notice of termination, irrespective of
the effective date of the termination.
2. CHANGE IN CONTROL. No benefits shall be payable under this
Agreement unless there shall have been a change in control of the Corporation,
as set forth below. For purposes of this Agreement, a "change in control of
the Corporation" shall mean a change of control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Corporation is in fact required to comply
with that regulation, provided that, without limitation, such a change in
control shall be deemed to have occurred if (A) any "person" (as that term is
used in Section 13(d) and 14(d) of the Exchange Act), other than a trustee or
other fiduciary holding securities under an employee benefit plan of the
Corporation or a corporation owned, directly or indirectly, by the stockholders
of the Corporation in substantially the same proportions as their ownership of
stock of the Corporation, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Corporation representing twenty-five percent (25%) or more of the combined
voting power of the Corporation's then outstanding securities; (B) during any
period of 2 consecutive years (not including any period prior to the execution
of this Agreement), individuals who at the beginning of the period constitute
the Board and any new director (other than a director designated by a person
who has entered into an agreement with the Corporation to effect a transaction
described in clauses (A) or (D) of this Section) whose election by the Board or
nomination for election by the Corporation's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute a
majority; (C) the Corporation enters into an agreement, the consummation of
which would result in the occurrence of a change in control of the Corporation;
or (D) the stockholders of the Corporation approve a merger or consolidation of
the Corporation with any other corporation, other than a merger or
consolidation that would result in the voting securities of the Corporation
outstanding immediately prior to it continuing to represent (either by
remaining outstanding or by being converted
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into voting securities of the surviving entity) at least fifty percent (50%) of
the combined voting power of the voting securities of the Corporation or such
surviving entity outstanding immediately after the merger or consolidation, or
the stockholders of the Corporation approve a plan of complete liquidation of
the Corporation or an agreement for the sale or disposition by the Corporation
of all or substantially all of the Corporation's assets.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 2 above constituting a change in control of the
Corporation shall have occurred, Employee shall be entitled to the benefits
provided in Subsection 4(iii) below on the termination of Employee's employment
during the 36 months following a Change of Control, unless the termination is
(A) because of Employee's death, Inability to Perform or Retirement, (B) by the
Corporation for Cause or (C) by Employee other than for Good Reason.
(i) INABILITY TO PERFORM; RETIREMENT. If, as a result of
Employee's incapacity due to physical or mental illness, Employee shall have
been absent from the full-time performance of his duties with the Corporation
for 6 consecutive months, and within 30 days after written notice of
termination is given Employee has not returned to the full-time performance of
Employee's duties, Employee's employment may be terminated for "inability to
perform the essential functions of his employment." Termination by the
Corporation or by Employee of Employee's employment based on "Retirement" shall
mean termination in accordance with the Corporation's retirement policy,
including early retirement, generally applicable to its salaried employees or
in accordance with any retirement arrangement established with Employee's
consent.
(ii) CAUSE. Termination by the Corporation for "Cause"
shall mean termination on (A) the willful and continued failure by Employee to
substantially perform Employee's duties with the Corporation (other than any
such failure resulting from Employee's incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance by
Employee of a Notice of Termination for Good Reason as defined in Subsections
3(iv) and 3(iii), respectively) after a written demand for substantial
performance is delivered to Employee by the Board, specifically identifying the
manner in which the Board believes that Employee has not substantially
performed his duties; or (B) willful misconduct by the Employee clearly
contrary to the interests of the Corporation. Employee may be terminated for
Cause only upon delivery to Employee of a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice to Employee and an
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opportunity for Employee, together with Employee's counsel, to be heard before
the Board), finding that in the good faith opinion of the board Employee was
guilty of conduct set forth above in either clause (A) or (B) of the first
sentence of this Subsection.
(iii) GOOD REASON. Employee shall be entitled to terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without Employee's express written consent, the occurrence after a
change in control of the Corporation of any of the following circumstances
unless, in the case of paragraphs (A), (E), (F), (G), or (H), the circumstances
are fully corrected prior to the Date of Termination specified in the Notice of
Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in
respect to them:
(A) a material adverse alteration in the nature
or status of Employee's responsibilities from those in effect
immediately prior to the change in control of the Corporation;
(B) a reduction by the Corporation in Employee's
annual base salary except for across-the-board salary reductions
similarly affecting all key employees of the Corporation and all key
employees of any person in control of the Corporation;
(C) relocation of Employee by Corporation to a
location not within twenty-five (25) miles of his present office or
job location, except for required travel on the Corporation's business
to an extent substantially consistent with his present business travel
obligations;
(D) the failure by the Corporation, without
Employee's consent, to pay any part of Employee's current
compensation, or to pay any part of an installment of deferred
compensation under any deferred compensation program of the
Corporation within 7 days of the date the compensation is due;
(E) the failure by the Corporation to continue in
effect any bonus to which Employee is entitled, or any compensation
plan in which he participates immediately prior to the change in
control of the Corporation, including but not limited to the
Corporation's Stock Option Plans, Executive Deferred Income Plan,
Retirement Income Plan, Retirement Savings Plan, and Flexible Benefit
Plan, or any substitute plans adopted prior to the change of control
in the Corporation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
the plan, or the failure by the Corporation to continue Employee's
participation in it (or in such substitute or alternative plan) on a
basis not less favorable, both in terms of the amount of benefits
provided and the level of his
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participation relative to other participants, as existed at the time
of the change in control;
(F) the failure by the Corporation to continue to
provide Employee with benefits substantially similar to those enjoyed
by him under the Corporation's life insurance, medical, health and
accident, or disability plans in which he was participating at the
time of the change in control of the Corporation;
(G) the failure of the Corporation to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 of this
Agreement; or
(H) any purported termination of Employee's
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (iv) below (and, if
applicable, the requirements of Subsection (ii) above); for purposes
of this Agreement, no such purported termination shall be effective.
Employee's rights to terminate his employment pursuant to this
Subsection shall not be affected by his incapacity due to physical or mental
illness. Employee's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
under this Agreement. In the event Employee delivers Notice of Termination
based on circumstances set forth in Paragraphs (A), (E), (F), (G), or (H)
above, which are fully corrected prior to the Date of Termination set forth in
said Notice of Termination, the Notice of Termination shall be deemed withdrawn
and of no further force and effect.
(iv) NOTICE OF TERMINATION. Any purported termination of
Employee's employment by the Corporation or by Employee shall be communicated
by written Notice of Termination to the other party to this Agreement in
accordance with Section 6 of this Agreement. For purpose of this Agreement, a
"Notice of Termination" shall mean a notice that shall indicate the specific
termination provision in this Agreement relied on, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the employment under the provision so indicated.
(v) DATE OF TERMINATION, ETC. "Date of Termination"
shall mean (A) if Employee's employment is terminated for Inability to Perform,
30 days after Notice of Termination is given (provided that he shall not have
returned to full-time performance of his duties during such 30-day period), and
(B) if Employee's employment is terminated pursuant to Subsection (ii) or (iii)
above or for any other reason (other than Disability), the date specified in
the Notice of Termination (which, in the case of a termination pursuant
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to Subsection (ii) above shall not be less than 30 days, and in the case of a
termination pursuant to Subsection (iii) above shall not be less than 15 nor
more than 60 days, respectively, from the date the Notice of Termination is
given). However, if within 15 days after any Notice of Termination is given,
or , if later, prior to the Date of Termination (as determined without regard
to this provision), the party receiving the Notice of Termination notifies the
other party that a dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, by a binding arbitration
award, or by a final judgment, order, or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal has expired and no appeal has been perfected). The Date of Termination
shall be extended by a notice of dispute only if the notice is given in good
faith and the party giving the notice pursues the resolution of the dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute,
the Corporation will continue to pay Employee his full compensation in effect
when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue Employee as a participant in all
compensation, benefit, and insurance plans in which he was participating when
the notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection. Amounts paid under this
Subsection are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement except to the extent otherwise provided in subsection 4(iv).
4. COMPENSATION ON TERMINATION OR DURING DISABILITY. Following a
change in control of the Corporation, as defined by Section 2, on termination
of Employee's employment or during a period of disability he shall be entitled
to the following results:
(i) During any period that Employee fails to perform his
full-time duties with the Corporation as a result of incapacity due to physical
or mental illness, he shall continue to receive his base salary at the rate in
effect at the commencement of any such period, together with all amounts
payable to him under any compensation plan of the Corporation during the
period, until this Agreement is terminated pursuant to Section 3(i) above.
Thereafter, or in the event Employee's employment shall be terminated by the
Corporation or by Employee for Retirement, or by reason of Employee's death,
Employee's benefits shall be determined under the Corporation's retirement,
insurance, and other compensation programs then in effect in accordance with
the terms of those programs.
(ii) If Employee's employment shall be terminated by the
Corporation for Cause or by Employee other than for Good Reason, Disability,
Death, or Retirement, the Corporation shall pay
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Employee his full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all other amounts and
benefits to which Employee is entitled under any compensation plan of the
Corporation at the time the payments are due.
(iii) If within thirty-six (36) months following a Change of
Control Employee's employment by the Corporation shall be terminated (a) by the
Corporation other than for Cause, Retirement or Inability to Perform, or (b) by
Employee for Good Reason, then Employee shall be entitled to the benefits
provided below:
(A) The Corporation shall pay Employee his full
base salary through the Date of Termination at the rate in effect at
the time Notice of Termination is given, plus all other amounts and
benefits to which he is entitled under any compensation plan of the
Corporation, at the time the payments are due, except as otherwise
provided below.
(B) The Corporation also shall pay as severance
pay to Employee a lump sum severance payment (together with the
payments provided in paragraphs C and D, below, the "Severance
Payments") equal to three (3) times the Employee's annual base salary
in effect immediately prior to the occurrence of the circumstance
giving rise to the Notice of Termination , plus three (3) times the
Employee's average annual bonus for the last three years.
(C) The Corporation also shall pay Employee any
deferred compensation, including, but not limited to deferred bonuses,
allocated or credited to Employee or Employee's account as of the Date
of Termination. Payments made pursuant to the Executives Deferred
Income Plan shall be made as provided by said Plan and shall not be
deemed to be modified by the terms of this Agreement.
(D) Any outstanding options to purchase shares of
Common Stock of the Corporation which are held by Employee under the
Corporation's Stock Option Plans shall be exercisable in accordance
with the terms of the Stock Based Long Term Incentive Plan II.
(E) The Corporation shall provide medical
insurance benefits to Employee for three (3) years from Date of
Termination or until Employee secures employment with another company
providing similar welfare benefits. The Corporation will pay for such
benefits in the same manner as in existence on the Date of
Termination.
(F) The payments provided for in Paragraphs (A),
(B), and (C) above, shall be made no later than the fifth day
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following the Date of Termination. However, if the amounts of the
payment cannot be finally determined on or before that day, the
Corporation shall pay Employee an estimate, as determined in good
faith by the Corporation, of the minimum amount of such payments and
shall pay the remainder of those payments (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the
amount can be determined but in no event later than the 30th day after
the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have
been due, the excess shall constitute a loan by the Corporation
repayable on the 5th day after demand by the Corporation (together
with interest at the rate provided in Section 1274(b)(2)(B) of the
Code).
(iv) In the event that Employee is a "disqualified
individual" within the meaning of Section 280G of the Code, the parties
expressly agree that the payments described in this Section 4 and all other
payments to Employee under any other agreements or arrangements with any
persons that constitute "parachute payments" within the meaning of Section 280G
of the Code are collectively subject to an overall maximum limit. The maximum
limit shall be One Dollar ($1.00) less than the aggregate amount that would
otherwise cause any such payments to be considered a "parachute payment" within
the meaning of Section 280G of the Code, as determined by the Corporation.
Accordingly, to the extent that the payments would be considered a "parachute
payment" with respect to Employee, then the portions of such payments shall be
reduced or eliminated in the following order until the remaining change of
control termination payments with respect to Employee is within the maximum
described in this Subsection (iv):
(A) First, any cash payment to Employee;
(B) Second, any change of control termination
payments not described in this Agreement; and
(C) Third, any forgiveness of Employee
indebtedness to the Corporation.
Employee expressly and irrevocably waives any and all rights to
receive any change in control termination payments that exceed the maximum
limit described in this Subsection (iv).
(v) Employee shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Section 4 be reduced by any compensation earned by
Employee as the result of employment by another employer, by retirement
benefits, by offset against any
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amount claimed to be owed by Employee to the Corporation, or otherwise except
as specifically provided in this Section 4.
(vi) In addition to all other amounts payable to Employee
under this Section 4, Employee shall be entitled to receive all benefits
payable to Employee under the Corporation's Retirement Savings Plan, its
Retirement Income Plan, the Executives' Deferred Income Plan and any other plan
or agreement relating to retirement benefits.
(vii) Notwithstanding any other provisions of this
Agreement, no payments shall be made hereunder by Corporation which would be in
violation of any law or regulation applicable to Corporation, including,
without limitation, the provisions of Part 359 of Title 12, Code of Federal
Regulations, it being understood and agreed that Corporation's obligations
hereunder shall not exceed any valid limits imposed by a regulatory body.
5. SUCCESSORS; BINDING AGREEMENT. (i) The Corporation will
require any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business and/or
assets of the Corporation to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession had taken place. Failure of
the Corporation to obtain the assumption and agreement prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
entitle Employee to compensation from the Corporation in the same amount and on
the same terms as Employee would have been entitled to under this Agreement if
Employee had terminated his employment for Good Reason following a change in
control of the Corporation, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Corporation" shall
mean the Corporation as defined above and any successor to its business and/or
assets that assumes and agrees to perform this Agreement by operation of law,
or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, heirs, distributees, and legatees. If Employee should die
while any amount would still be payable to Employee, all such amounts, unless
otherwise provided in this Agreement, shall be paid in accordance with the
terms of this Agreement to Employee's legatee or other designee or, if there is
no such designee, to Employee's estate.
6. NOTICE. For the purpose of this Agreement, all notices and
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been fully given when delivered or mailed by United
States registered or certified mail, return
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receipt requested, postage prepaid, addressed to the respective addresses set
forth on the first page of this Agreement, provided that all notices to the
Corporation shall be directed to the attention of the Board with a copy to the
Secretary of the Corporation, or to such other address as either party may have
furnished to the other in writing in accordance with this Agreement, except
that notice of a change of address shall be effective only on receipt.
7. MISCELLANEOUS. No provision of this Agreement may be
modified, waived, or discharged unless the waiver, modification, or discharge
is agreed to in writing and signed by Employee and such officer as may be
specifically designated by the Board. No waiver by either party to this
Agreement at any time of any breach by the other party of, or compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter of this Agreement have been made by either party that are not
expressly set forth in this Agreement. The validity, interpretation,
construction, and performance of this Agreement shall be governed by the laws
of the State of Mississippi. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for shall be paid net of any applicable
withholding or deduction required under federal, state, or local law. The
obligations of the Corporation under Section 4 shall survive the expiration of
the term of this Agreement.
8. VALIDITY. The invalidity or enforceability of any provision
of this Agreement shall not affect the validity or unenforceability of any
other provision of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. DISPUTES. Any dispute or controversy arising under or in
connection with this Agreement (a "Dispute") shall be resolved as follows:
(i) Negotiation. In the event of a Dispute, the parties
shall use their best efforts to settle such dispute through informal
negotiations. To this effect, they shall consult and negotiate with
each other, in good faith and, recognizing their mutual interests,
attempt to reach a just and equitable solution satisfactory to both
parties. If they do not reach such solution within a period of thirty
(30) days from the date one party first
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notifies in writing another of the claim(s) giving rise to the
Dispute, then upon written notice by either party to the other, the
Dispute shall be submitted to mediation as set forth below.
(ii) Mediation. If such Dispute cannot be settled through
negotiation within such thirty (30) day period, the parties agree to
then endeavor to settle the Dispute in an amicable manner by mediation
administered by the American Arbitration Association ("AAA") under its
Commercial Mediation Rules. Such mediation shall occur in Jackson,
Mississippi before a mediator who is skilled in mediating commercial
disputes. AAA shall appoint a mediator meeting the qualifications set
out above. Such mediation shall consist of no more than two sessions
occurring within the twenty (20) days first following the end of the
negotiation period referred to above. Thereafter, any unresolved
Dispute shall be settled by arbitration in the manner set forth below.
The mediator cannot serve as an arbitrator.
(iii) Arbitration. Any Dispute which remains unresolved
following mediation shall be submitted to binding arbitration in
accordance with Title 9 of the United States Code (United States
Arbitration Act). This arbitration shall be administered by AAA in
accordance with its Commercial Arbitration Rules (the "Rules"). The
situs of the arbitration shall be Jackson, Mississippi unless
otherwise mutually agreed by the parties. The arbitration shall be
expedited such that, unless the parties otherwise agree or unless
necessary to allow the parties to gather and exchange appropriate
documentary or other evidence or information, (a) the panel shall be
selected within 30 days following the filing of the Notice of Claim
with AAA, (b) the hearing shall commence within 45 days following the
filing of the Notice of Claim, (c) the hearing shall be continued as
expeditiously as possible until concluded and (d) the award shall be
rendered within 10 days following the conclusion of the hearing. If
the claim or controversy arising from this Agreement is greater than
Five Hundred Thousand Dollars ($500,000) either party hereto shall
have the right to proceed judicially and shall not be required to
arbitrate.
(iv) Number and Qualification of Arbitrators. The
arbitration shall be conducted before and decided by a panel of two
arbitrators. Each shall be an attorney licensed to practice law in
any of the United States, having been admitted to practice for no
fewer than fifteen years.
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(v) Remedies and Choice of Law. The arbitrators shall
have authority to award any remedy or relief that a court of the State
of Mississippi could award or grant, including, without limitation,
specific performance of any obligations created under this Agreement;
provided however, that the arbitrators shall not have the authority to
award punitive damages against either party.
(vi) Fees and Expenses. The arbitrators shall have the
authority to award to the prevailing party, if any, as determined by
the arbitrators, all of its costs and fees, in such amounts as the
arbitrators deem just. "Costs and Fees" mean all reasonable pre-award
expenses of the arbitration, including the arbitrators' fees,
administrative fees, travel expenses, other out-of-pocket expenses,
witness (including expert witness) fees and expenses and attorneys'
fees and expenses.
(vii) Finality and Enforcement. Any award rendered by the
arbitrators shall be final, binding and conclusive. The parties
hereby agree to submit to the personal jurisdiction of the courts of
the State of Mississippi for the enforcement of the award. The award
may also be enforced in any other court of competent jurisdiction.
11. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties with respect to its subject matter and supersedes
all prior written or oral agreements or understandings with respect to the
subject matter.
In witness whereof, the parties have executed this agreement at
Jackson, Mississippi the day and year first above written.
DEPOSIT GUARANTY CORP.
By:
------------------------------------
Title:
---------------------------------
--------------------------------------
W. STAN PRATT
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CHANGE OF CONTROL TERMINATION AGREEMENT
This Change of Control Termination Agreement (the "Agreement") is
entered into on _________________, 1997, between Deposit Guaranty Corp., a
Mississippi corporation, with its principal place of business located at 210
East Capitol Street, Jackson, Mississippi 39201, (the "Corporation") and E. B.
Robinson of 3826 Redbud Road, Jackson, Mississippi 39211 ("Employee").
WITNESSETH:
WHEREAS, the Corporation considers it essential to the best interests
of its stockholders to foster the continuous employment of key management
personnel. In this connection, the Board of Directors of the Corporation (the
"Board") recognizes that, as is the case with many publicly held corporations,
the possibility of a change in control may exist. This possibility, and the
uncertainty and questions that it may raise among key management, may result in
the departure or distraction of key management personnel to the detriment of
the Corporation and its stockholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of key
members of the Corporation's management, including Employee, to the assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a change in control of the Corporation; and
WHEREAS, to induce Employee to remain in the employ of the
Corporation, and in consideration of Employee's agreement set forth below, the
Corporation agrees that Employee shall receive the severance benefits set forth
in this Agreement in the event Employee's employment with the Corporation is
terminated subsequent to a "change in control of the Corporation" (as defined
in Section 2 below) under the circumstances described below. This Agreement is
meant to supersede any other specific written agreements that may have been
entered into between Employee and the Corporation concerning the consequences
of any termination of Employee's employment.
<PAGE> 101
THEREFORE, in consideration of Employee's continued employment and the
parties' agreement to be bound by the terms contained in this Agreement, the
parties agree as follows:
1. TERM OF AGREEMENT. This Agreement shall commence on January
1, 1997, and shall continue in effect through December 31, 1997. However,
commencing on December 31, 1997, and each December 31 afterwards, the term of
this Agreement shall automatically be extended for 1 additional year unless, no
later than the preceding November 1, the Corporation shall have given
notice that it does not wish to extend this Agreement. If a change in control
of the Corporation shall have occurred during the original or any extended term
of this Agreement, this Agreement shall continue in effect for a period of 36
months beyond the month in which the change in control occurred.
Notwithstanding the foregoing, and provided no change of control shall have
occurred, this Agreement shall automatically terminate on the earlier to occur
of (i) Employee's termination of employment with the Corporation, or (ii) the
Corporation's furnishing Employee with notice of termination, irrespective of
the effective date of the termination.
2. CHANGE IN CONTROL. No benefits shall be payable under this
Agreement unless there shall have been a change in control of the Corporation,
as set forth below. For purposes of this Agreement, a "change in control of
the Corporation" shall mean a change of control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Corporation is in fact required to comply
with that regulation, provided that, without limitation, such a change in
control shall be deemed to have occurred if (A) any "person" (as that term is
used in Section 13(d) and 14(d) of the Exchange Act), other than a trustee or
other fiduciary holding securities under an employee benefit plan of the
Corporation or a corporation owned, directly or indirectly, by the stockholders
of the Corporation in substantially the same proportions as their ownership of
stock of the Corporation, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Corporation representing twenty-five percent (25%) or more of the combined
voting power of the Corporation's then outstanding securities; (B) during any
period of
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2 consecutive years (not including any period prior to the execution of this
Agreement), individuals who at the beginning of the period constitute the Board
and any new director (other than a director designated by a person who has
entered into an agreement with the Corporation to effect a transaction
described in clauses (A) or (D) of this Section) whose election by the Board or
nomination for election by the Corporation's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute a
majority; (C) the Corporation enters into an agreement, the consummation of
which would result in the occurrence of a change in control of the Corporation;
or (D) the stockholders of the Corporation approve a merger or consolidation of
the Corporation with any other corporation, other than a merger or
consolidation that would result in the voting securities of the Corporation
outstanding immediately prior to it continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the combined voting power of
the voting securities of the Corporation or such surviving entity outstanding
immediately after the merger or consolidation, or the stockholders of the
Corporation approve a plan of complete liquidation of the Corporation or an
agreement for the sale or disposition by the Corporation of all or
substantially all of the Corporation's assets.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 2 above constituting a change in control of the
Corporation shall have occurred, Employee shall be entitled to the benefits
provided in Subsection 4(iii) below on the termination of Employee's employment
during the 36 months following a Change of Control, unless the termination is
(A) because of Employee's death, Inability to Perform or Retirement, (B) by the
Corporation for Cause or (C) by Employee other than for Good Reason.
(i) INABILITY TO PERFORM; RETIREMENT. If, as a result of
Employee's incapacity due to physical or mental illness, Employee shall have
been absent from the full-time performance of his duties with the Corporation
for 6 consecutive months, and within 30 days after written notice of
termination is given
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Employee has not returned to the full-time performance of Employee's duties,
Employee's employment may be terminated for "inability to perform the essential
functions of his employment." Termination by the Corporation or by Employee of
Employee's employment based on "Retirement" shall mean termination in
accordance with the Corporation's retirement policy, including early
retirement, generally applicable to its salaried employees or in accordance
with any retirement arrangement established with Employee's consent.
(ii) CAUSE. Termination by the Corporation for "Cause"
shall mean termination on (A) the willful and continued failure by Employee to
substantially perform Employee's duties with the Corporation (other than any
such failure resulting from Employee's incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance by
Employee of a Notice of Termination for Good Reason as defined in Subsections
3(iv) and 3(iii), respectively) after a written demand for substantial
performance is delivered to Employee by the Board, specifically identifying the
manner in which the Board believes that Employee has not substantially
performed his duties; or (B) willful misconduct by the Employee clearly
contrary to the interests of the Corporation. Employee may be terminated for
Cause only upon delivery to Employee of a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice to Employee and an opportunity for Employee, together with
Employee's counsel, to be heard before the Board), finding that in the good
faith opinion of the board Employee was guilty of conduct set forth above in
either clause (A) or (B) of the first sentence of this Subsection.
(iii) GOOD REASON. Employee shall be entitled to terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without Employee's express written consent, the occurrence after a
change in control of the Corporation of any of the following circumstances
unless, in the case of paragraphs (A), (E), (F), (G), or (H), the circumstances
are fully corrected prior to the Date of Termination specified in the Notice of
Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in
respect to them:
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(A) a material adverse alteration in the nature
or status of Employee's responsibilities from those in effect
immediately prior to the change in control of the Corporation;
(B) a reduction by the Corporation in Employee's
annual base salary except for across-the-board salary reductions
similarly affecting all key employees of the Corporation and all key
employees of any person in control of the Corporation;
(C) relocation of Employee by Corporation to a
location not within twenty-five (25) miles of his present office or
job location, except for required travel on the Corporation's business
to an extent substantially consistent with his present business travel
obligations;
(D) the failure by the Corporation, without
Employee's consent, to pay any part of Employee's current
compensation, or to pay any part of an installment of deferred
compensation under any deferred compensation program of the
Corporation within 7 days of the date the compensation is due;
(E) the failure by the Corporation to continue in
effect any bonus to which Employee is entitled, or any compensation
plan in which he participates immediately prior to the change in
control of the Corporation, including but not limited to the
Corporation's Stock Option Plans, Executive Deferred Income Plan,
Retirement Income Plan, Retirement Savings Plan, and Flexible Benefit
Plan, or any substitute plans adopted prior to the change of control
in the Corporation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
the plan, or the failure by the Corporation to continue Employee's
participation in it (or in such substitute or alternative plan) on a
basis not less favorable, both in terms of the amount of benefits
provided and the level of his participation relative to other
participants, as existed at the time of the change in control;
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(F) the failure by the Corporation to continue to
provide Employee with benefits substantially similar to those enjoyed
by him under the Corporation's life insurance, medical, health and
accident, or disability plans in which he was participating at the
time of the change in control of the Corporation;
(G) the failure of the Corporation to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 of this
Agreement; or
(H) any purported termination of Employee's
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (iv) below (and, if
applicable, the requirements of Subsection (ii) above); for purposes
of this Agreement, no such purported termination shall be effective.
Employee's rights to terminate his employment pursuant to this
Subsection shall not be affected by his incapacity due to physical or mental
illness. Employee's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
under this Agreement. In the event Employee delivers Notice of Termination
based on circumstances set forth in Paragraphs (A), (E), (F), (G), or (H)
above, which are fully corrected prior to the Date of Termination set forth in
said Notice of Termination, the Notice of Termination shall be deemed withdrawn
and of no further force and effect.
(iv) NOTICE OF TERMINATION. Any purported termination of
Employee's employment by the Corporation or by Employee shall be communicated
by written Notice of Termination to the other party to this Agreement in
accordance with Section 6 of this Agreement. For purpose of this Agreement, a
"Notice of Termination" shall mean a notice that shall indicate the specific
termination provision in this Agreement relied on, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the employment under the provision so indicated.
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(v) DATE OF TERMINATION, ETC. "Date of Termination"
shall mean (A) if Employee's employment is terminated for Inability to Perform,
30 days after Notice of Termination is given (provided that he shall not have
returned to full-time performance of his duties during such 30-day period), and
(B) if Employee's employment is terminated pursuant to Subsection (ii) or (iii)
above or for any other reason (other than Disability), the date specified in
the Notice of Termination (which, in the case of a termination pursuant
to Subsection (ii) above shall not be less than 30 days, and in the case of a
termination pursuant to Subsection (iii) above shall not be less than 15 nor
more than 60 days, respectively, from the date the Notice of Termination is
given). However, if within 15 days after any Notice of Termination is given,
or , if later, prior to the Date of Termination (as determined without regard
to this provision), the party receiving the Notice of Termination notifies the
other party that a dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, by a binding arbitration
award, or by a final judgment, order, or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal has expired and no appeal has been perfected). The Date of Termination
shall be extended by a notice of dispute only if the notice is given in good
faith and the party giving the notice pursues the resolution of the dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute,
the Corporation will continue to pay Employee his full compensation in effect
when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue Employee as a participant in all
compensation, benefit, and insurance plans in which he was participating when
the notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection. Amounts paid under this
Subsection are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement except to the extent otherwise provided in subsection 4(iv).
4. COMPENSATION ON TERMINATION OR DURING DISABILITY. Following a
change in control of the Corporation, as defined by Section 2, on termination
of Employee's employment or during a
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period of disability he shall be entitled to the following results:
(i) During any period that Employee fails to perform his
full-time duties with the Corporation as a result of incapacity due to physical
or mental illness, he shall continue to receive his base salary at the rate in
effect at the commencement of any such period, together with all amounts
payable to him under any compensation plan of the Corporation during the
period, until this Agreement is terminated pursuant to Section 3(i) above.
Thereafter, or in the event Employee's employment shall be terminated by the
Corporation or by Employee for Retirement, or by reason of Employee's death,
Employee's benefits shall be determined under the Corporation's retirement,
insurance, and other compensation programs then in effect in accordance with
the terms of those programs.
(ii) If Employee's employment shall be terminated by the
Corporation for Cause or by Employee other than for Good Reason, Disability,
Death, or Retirement, the Corporation shall pay
Employee his full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all other amounts and
benefits to which Employee is entitled under any compensation plan of the
Corporation at the time the payments are due.
(iii) If within thirty-six (36) months following a Change of
Control Employee's employment by the Corporation shall be terminated (a) by the
Corporation other than for Cause, Retirement or Inability to Perform, or (b) by
Employee for Good Reason, then Employee shall be entitled to the benefits
provided below:
(A) The Corporation shall pay Employee his full
base salary through the Date of Termination at the rate in effect at
the time Notice of Termination is given, plus all other amounts and
benefits to which he is entitled under any compensation plan of the
Corporation, at the time the payments are due, except as otherwise
provided below.
(B) The Corporation also shall pay as severance
pay to Employee a lump sum severance payment (together with the
payments provided in paragraphs C and D, below, the
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"Severance Payments") equal to three (3) times the Employee's annual
base salary in effect immediately prior to the occurrence of the
circumstance giving rise to the Notice of Termination , plus three (3)
times the Employee's average annual bonus for the last three years.
(C) The Corporation also shall pay Employee any
deferred compensation, including, but not limited to deferred bonuses,
allocated or credited to Employee or Employee's account as of the Date
of Termination. Payments made pursuant to the Executives Deferred
Income Plan shall be made as provided by said Plan and shall not be
deemed to be modified by the terms of this Agreement.
(D) Any outstanding options to purchase shares of
Common Stock of the Corporation which are held by Employee under the
Corporation's Stock Option Plans shall be exercisable in accordance
with the terms of the Stock Based Long Term Incentive Plan II.
(E) The Corporation shall provide medical
insurance benefits to Employee for three (3) years from Date of
Termination or until Employee secures employment with another company
providing similar welfare benefits. The Corporation will pay for such
benefits in the same manner as in existence on the Date of
Termination.
(F) The payments provided for in Paragraphs (A),
(B), and (C) above, shall be made no later than the fifth day
following the Date of Termination. However, if the amounts of the
payment cannot be finally determined on or before that day, the
Corporation shall pay Employee an estimate, as determined in good
faith by the Corporation, of the minimum amount of such payments and
shall pay the remainder of those payments (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the
amount can be determined but in no event later than the 30th day after
the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have
been due, the excess shall constitute a loan by the Corporation
repayable on the 5th day after demand by the Corporation (together
with interest at the rate provided in Section 1274(b)(2)(B) of the
Code).
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(iv) Employee shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Section 4 be reduced by any compensation earned by
Employee as the result of employment by another employer, by retirement
benefits, by offset against any
amount claimed to be owed by Employee to the Corporation, or otherwise except
as specifically provided in this Section 4.
(v) In addition to all other amounts payable to Employee
under this Section 4, Employee shall be entitled to receive all benefits
payable to Employee under the
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Corporation's Retirement Savings Plan, its Retirement Income Plan, the
Executives' Deferred Income Plan and any other plan or agreement relating to
retirement benefits.
(vi) Notwithstanding any other provisions of this
Agreement, no payments shall be made hereunder by Corporation which would be in
violation of any law or regulation applicable to Corporation, including,
without limitation, the provisions of Part 359 of Title 12, Code of Federal
Regulations, it being understood and agreed that Corporation's obligations
hereunder shall not exceed any valid limits imposed by a regulatory body.
5. CERTAIN ADDITIONAL PAYMENTS BY THE CORPORATION. Anything in
this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by Employee or for Employee's
benefit whether paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 5) (a "Payment") would be
subject to the excise tax imposed by Section 499 of the Code or any interest or
penalties are incurred by Employee with respect to such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), payment (a "Gross-Up Payment")
in an amount such that after payment by Employee of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest or penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Employee
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(a) Subject to the provisions of Section 5(c), all determinations
required to be made under this Section 5, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick, LLP, (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Corporation and Employee within 15 business days of
the receipt of notice form Employee that there has been a Payment, or such
earlier time as is requested by the Corporation. In the event that
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Accounting Firm is serving as accountant or auditor for the individual, entity
or group affecting the Change of Control, Employee shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Corporation. Any Gross-Up Payment, as determined pursuant to
this Section 5, shall be paid by the Corporation to Employee within five days
of the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by Employee, it shall not result in
the imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the corporation and Employee. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the
Corporation should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Corporation
exhausts its remedies pursuant to Section 5(c) and Employee thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shal
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Corporation to or for the benefit of
Employee.
(b) Employee will notify the Corporation in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Corporation of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after Employee is
informed in writing of such claim and shall apprise the Corporation of the
nature of such claim and the date on which such claim is requested to be paid.
Employee will not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the corporation (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Corporation notifies Employee in writing prior to
the expiration of such period that it desires to contest such claim, Employee
will:
(i) give the Corporation any information reasonably
requested by the Corporation relationg to such claim,
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(ii) take such action in connection with contesting such
claim as the Corporation shall reasonably request in writing from time
to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Corporation.
(iii) cooperate with the corporation in good faith in order
effectively to contest such claim, and
(iv) permit the Corporation to participate in any
proceedings relating to such claim;
provided, however, that the Corporation shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold Employee harmless on
an after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provision
of this Section 5(c), the Corporation shall control all proceeding taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceeding, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct claim Employee to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Corporation
shall determine; provided, however, that if the Corporation shall advance the
amount of such payment to Employee, on an interest-free basis and shall
indemnify and hold Employee harmless, on an after-tax basis, from any Excise
Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance and further provided that any extension of the statute
of limitations relating to payment of taxes for Employee's taxable year with
respect to which such contested amount is claimed to be due is limited solely
to such contested amount. Furthermore, the corporation's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Employee
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will be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by Employee of an amount advanced by the
Corporation pursuant to Section 5(c), Employee becomes entitled to receive any
refund with respect to such claim, Employee will (subject to the Corporation's
complying with the requirements of Section 5(c) promptly pay to the Corporation
the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by Employee of an
amount advanced by the Corporation pursuant to Section 5(c), a determination is
made the Employee will not be entitled to any refund with respect to such claim
and the Corporation does not notify Employee in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
6. SUCCESSORS; BINDING AGREEMENT. (i) The Corporation will
require any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business and/or
assets of the Corporation to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession had taken place. Failure of
the Corporation to obtain the assumption and agreement prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
entitle Employee to compensation from the Corporation in the same amount and on
the same terms as Employee would have been entitled to under this Agreement if
Employee had terminated his employment for Good Reason following a change in
control of the Corporation, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Corporation" shall
mean the Corporation as defined above and any successor to its business and/or
assets that assumes and agrees to perform this Agreement by operation of law,
or otherwise.
-14-
<PAGE> 114
(ii) This Agreement shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, heirs, distributees, and legatees. If Employee should die
while any amount would still be payable to Employee, all such amounts, unless
otherwise provided in this Agreement, shall be paid in accordance with the
terms of this Agreement to Employee's legatee or other designee or, if there is
no such designee, to Employee's estate.
7. NOTICE. For the purpose of this Agreement, all notices and
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been fully given when delivered or mailed by United
States registered or certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Corporation shall be directed to
the attention of the Board with a copy to the Secretary of the Corporation, or
to such other address as either party may have furnished to the other in
writing in accordance with this Agreement, except that notice of a change of
address shall be effective only on receipt.
8. MISCELLANEOUS. No provision of this Agreement may be
modified, waived, or discharged unless the waiver, modification, or discharge
is agreed to in writing and signed by Employee and such officer as may be
specifically designated by the Board. No waiver by either party to this
Agreement at any time of any breach by the other party of, or compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter of this Agreement have been made by either party that are not
expressly set forth in this Agreement. The validity, interpretation,
construction, and performance of this Agreement shall be governed by the laws
of the State of Mississippi. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for shall be paid net of any applicable
withholding or deduction required under federal, state, or local law. The
obligations of the Corporation under
-15-
<PAGE> 115
Section 4 shall survive the expiration of the term of this Agreement.
9. VALIDITY. The invalidity or enforceability of any provision
of this Agreement shall not affect the validity or unenforceability of any
other provision of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. DISPUTES. Any dispute or controversy arising under or in
connection with this Agreement (a "Dispute") shall be resolved as follows:
(i) Negotiation. In the event of a Dispute, the parties
shall use their best efforts to settle such dispute through informal
negotiations. To this effect, they shall consult and negotiate with
each other, in good faith and, recognizing their mutual interests,
attempt to reach a just and equitable solution satisfactory to both
parties. If they do not reach such solution within a period of thirty
(30) days from the date one party first notifies in writing another
of the claim(s) giving rise to the Dispute, then upon written notice
by either party to the other, the Dispute shall be submitted to
mediation as set forth below.
(ii) Mediation. If such Dispute cannot be settled through
negotiation within such thirty (30) day period, the parties agree to
then endeavor to settle the Dispute in an amicable manner by mediation
administered by the American Arbitration Association ("AAA") under its
Commercial Mediation Rules. Such mediation shall occur in Jackson,
Mississippi before a mediator who is skilled in mediating commercial
disputes. AAA shall appoint a mediator meeting the qualifications set
out above. Such mediation shall consist of no more than two sessions
occurring within the twenty (20) days first following the end of the
negotiation period
-16-
<PAGE> 116
referred to above. Thereafter, any unresolved Dispute shall be
settled by arbitration in the manner set forth below. The mediator
cannot serve as an arbitrator.
(iii) Arbitration. Any Dispute which remains unresolved
following mediation shall be submitted to binding arbitration in
accordance with Title 9 of the United States Code (United States
Arbitration Act). This arbitration shall be administered by AAA in
accordance with its Commercial Arbitration Rules (the "Rules"). The
situs of the arbitration shall be Jackson, Mississippi unless
otherwise mutually agreed by the parties. The arbitration shall be
expedited such that, unless the parties otherwise agree or unless
necessary to allow the parties to gather and exchange appropriate
documentary or other evidence or information, (a) the panel shall be
selected within 30 days following the filing of the Notice of Claim
with AAA, (b) the hearing shall commence within 45 days following the
filing of the Notice of Claim, (c) the hearing shall be continued as
expeditiously as possible until concluded and (d) the award shall be
rendered within 10 days following the conclusion of the hearing. If
the claim or controversy arising from this Agreement is greater than
Five Hundred Thousand Dollars ($500,000) either party hereto shall
have the right to proceed judicially and shall not be required to
arbitrate.
(iv) Number and Qualification of Arbitrators. The
arbitration shall be conducted before and decided by a panel of two
arbitrators. Each shall be an attorney licensed to practice law in
any of the United States, having been admitted to practice for no
fewer than fifteen years.
(v) Remedies and Choice of Law. The arbitrators shall
have authority to award any remedy or relief that a court of the State
of Mississippi could award or grant, including, without limitation,
specific performance of any obligations created under this Agreement;
provided however, that the arbitrators shall not have the authority to
award punitive damages against either party.
-17-
<PAGE> 117
(vi) Fees and Expenses. The arbitrators shall have the
authority to award to the prevailing party, if any, as determined by
the arbitrators, all of its costs and fees, in such amounts as the
arbitrators deem just. "Costs and Fees" mean all reasonable pre-award
expenses of the arbitration, including the arbitrators' fees,
administrative fees, travel expenses, other out-of-pocket expenses,
witness (including expert witness) fees and expenses and attorneys'
fees and expenses.
(vii) Finality and Enforcement. Any award rendered by the
arbitrators shall be final, binding and conclusive. The parties
hereby agree to submit to the personal jurisdiction of the courts of
the State of Mississippi for the enforcement of the award. The award
may also be enforced in any other court of competent jurisdiction.
11. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties with respect to its subject matter and supersedes
all prior written or oral agreements or understandings with respect to the
subject matter.
In witness whereof, the parties have executed this agreement at
Jackson, Mississippi the day and year first above written.
DEPOSIT GUARANTY CORP.
By:
------------------------------------
Title:
---------------------------------
--------------------------------------
E. B. Robinson
-18-
<PAGE> 1
Exhibit 11
Deposit Guaranty Corp.
Computation of Per Share Earnings
December 31, 1996
<TABLE>
<CAPTION>
Year Ended December 31, 1996
------------------------------
Fully
Primary Diluted
------------ ------------
<S> <C> <C>
Computation of weighted average
shares outstanding:
Common stock outstanding,
January 1, 1996 38,759,286 38,759,286
Common stock issued due to
mergers 710,689 710,689
Common stock issued due to
exercise of options 180,287 180,287
Shares purchased by
the Company (890,070) (890,070)
------------ ------------
Weighted average shares
outstanding 38,760,192 38,760,192
============ ============
Computation of net income:
Net income $ 83,610,000 $ 83,610,000
============ ============
Computation of per share
earnings:
Net income divided by weighted
average shares outstanding $ 2.16 $ 2.16
============ ============
</TABLE>
Note - Additional weighted average shares outstanding for options under the
Company's incentive stock plan were 123,238 and 132,318 for calculating primary
and fully diluted net income per share, respectively. The dilutive effect of
such options was, therefore, not material
<PAGE> 2
Deposit Guaranty Corp.
Computation of Per Share Earnings
December 31, 1995
<TABLE>
<CAPTION>
Year Ended December 31, 1995
------------------------------
Fully
Primary Diluted
------------ ------------
<S> <C> <C>
Computation of weighted average
shares outstanding:
Common stock outstanding,
January 1, 1995 35,156,104 35,156,104
Common stock issued due to
mergers 4,791,030 4,791,030
Common stock issued due to
exercise of options 60,752 60,752
Shares purchased by
the Company (1,576,724) (1,576,724)
------------ ------------
Weighted average shares
outstanding 38,431,162 38,431,162
============ ============
Computation of net income:
Net income $ 72,620,000 $ 72,620,000
============ ============
Computation of per share
earnings:
Net income divided by weighted
average shares outstanding $ 1.89 $ 1.89
============ ============
</TABLE>
Note - Additional weighted average shares outstanding for options under the
Company's incentive stock plan were 348,870 and 424,124 for calculating primary
and fully diluted net income per share, respectively. The dilutive effect of
such options was, therefore, not material
<PAGE> 3
Deposit Guaranty Corp.
Computation of Per Share Earnings
December 31, 1994
<TABLE>
<CAPTION>
Year Ended December 31, 1994
------------------------------
Fully
Primary Diluted
------------ ------------
<S> <C> <C>
Computation of weighted average
shares outstanding:
Common stock outstanding,
January 1, 1994 35,335,704 35,335,704
Common stock issued due to
exercise of options 13,714 13,714
Shares purchased by
the Company (13,294) (13,294)
------------ ------------
Weighted average shares
outstanding 35,336,124 35,336,124
============ ============
Computation of net income:
Net income $ 67,130,000 $ 67,130,000
============ ============
Computation of per share
earnings:
Net income divided by weighted
average shares outstanding $ 1.90 $ 1.90
============ ============
</TABLE>
Note - Additional weighted average shares outstanding for options under the
Company's incentive stock plan were 256,904 and 255,536 for calculating primary
and fully diluted net income per share, respectively. The dilutive effect of
such options was, therefore, not material
<PAGE> 1
Exhibit 21
DEPOSIT GUARANTY CORP.
LIST OF SUBSIDIARIES
The following is a list of all subsidiaries of the Company as of December 31,
1996, and the jurisdiction in which they were organized. Each subsidiary does
business under its own name.
<TABLE>
<CAPTION>
NAME JURISDICTION WHERE ORGANIZED
- ---- ----------------------------
<S> <C>
Deposit Guaranty National Bank Mississippi
Deposit Guaranty Mortgage Company of Florida
Florida, Inc. (inactive)
G & W Life Insurance Company Mississippi
Deposit Guaranty Louisiana Corp. Louisiana
CNC Acquisition Corp. (inactive) Louisiana
Deposit Guaranty Arkansas Corp. Arkansas
Deposit Guaranty Mortgage Company Mississippi
Maxiprop, Inc. Mississippi
First Mortgage Corp. Nebraska
Deposit Guaranty Investments, Inc. Mississippi
Deposit Guaranty Student Loans, Inc. Alabama
Deposit Guaranty Leasing Company Mississippi
Commercial National Bank in Shreveport Louisiana
CNB Investments, Inc. Louisiana
Commercial National Investment Services, Inc. Louisiana
Deposit Guaranty National Bank of Louisiana Louisiana
Merchants National Bank of Fort Smith Arkansas
Merchants Investment Center, Inc. Arkansas
McAfee Mortgage & Investment Company Texas
Deposit Guaranty Nebraska Corp. Nebraska
Deposit Guaranty Mortgage Services, Inc. Mississippi
ParkSouth Corporation Mississippi
</TABLE>
<PAGE> 1
EXHIBIT 23
Independent Auditors' Consent
The Board of Directors
Deposit Guaranty Corp.:
We consent to incorporation by reference in the registration statements (Nos.
33-38655, 33-7937 and 33-4912) on Form S-8 of Deposit Guaranty Corp. of our
report dated February 5, 1997, except for the last paragraph of Note 3 which is
as of February 20, 1997, relating to the consolidated statements of condition of
Deposit Guaranty Corp. and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of earnings, changes in stockholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1996, which report appears in the December 31, 1996 annual report on Form 10-K
of Deposit Guaranty Corp.
Our report refers to a change in the method of accounting for debt securities.
KPMG PEAT MARWICK LLP
Jackson, Mississippi
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 385,009
<INT-BEARING-DEPOSITS> 1,732
<FED-FUNDS-SOLD> 47,640
<TRADING-ASSETS> 2,505
<INVESTMENTS-HELD-FOR-SALE> 1,462,038
<INVESTMENTS-CARRYING> 145,087
<INVESTMENTS-MARKET> 152,412
<LOANS> 3,979,877
<ALLOWANCE> (62,205)
<TOTAL-ASSETS> 6,382,897
<DEPOSITS> 5,025,749
<SHORT-TERM> 543,029
<LIABILITIES-OTHER> 133,448
<LONG-TERM> 99,405
0
0
<COMMON> 21,491
<OTHER-SE> 559,775
<TOTAL-LIABILITIES-AND-EQUITY> 6,382,897
<INTEREST-LOAN> 327,065
<INTEREST-INVEST> 94,427
<INTEREST-OTHER> 10,730
<INTEREST-TOTAL> 432,222
<INTEREST-DEPOSIT> 151,375
<INTEREST-EXPENSE> 182,688
<INTEREST-INCOME-NET> 249,534
<LOAN-LOSSES> 5,340
<SECURITIES-GAINS> 12
<EXPENSE-OTHER> 237,208
<INCOME-PRETAX> 124,231
<INCOME-PRE-EXTRAORDINARY> 124,231
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,610
<EPS-PRIMARY> 2.16
<EPS-DILUTED> 2.16
<YIELD-ACTUAL> 4.77
<LOANS-NON> 16,385
<LOANS-PAST> 9,711
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 414
<ALLOWANCE-OPEN> 58,719
<CHARGE-OFFS> 14,309
<RECOVERIES> 10,393
<ALLOWANCE-CLOSE> 62,205
<ALLOWANCE-DOMESTIC> 62,205
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 14,676
</TABLE>
