SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
C U R R E N T R E P O R T
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
December 7, 1997
Date of Report (Date Of Earliest Event Reported)
DEPOSIT GUARANTY CORP.
(Exact Name Of Registrant As Specified In Its Charter)
Mississippi
(State Or Other Jurisdiction Of Incorporation)
0-4518 64-0472169
(Commission File Number) (IRS Employer Identification No.)
210 East Capitol Street
Jackson, Mississippi 39201
(Address Of Principal Executive Offices) (Zip Code)
(601) 354-8564
(Registrant's Telephone Number, including Area Code)
NOT APPLICABLE
(Former Name Or Former Address, If Changed Since Last Report)
ITEM 5. OTHER EVENTS.
On December 7, 1997, Deposit Guaranty Corp., a Mississippi
corporation ("Deposit Guaranty"), entered into an Agreement and Plan of
Merger (the "Merger Agreement") with First American Corporation, a
Tennessee corporation ("First American"), providing for, among other
things, the merger (the "Merger") of Deposit Guaranty with and into First
American. The Merger is intended to constitute a tax-free reorganization
for federal income tax purposes and to be accounted for as a
pooling-of-interests. The Merger Agreement is filed herewith as Exhibit
2.1 and is incorporated by reference herein.
Pursuant to the terms of the Merger Agreement, each share of
Deposit Guaranty common stock, no par value ("Deposit Guaranty Common
Stock"), outstanding immediately prior to the effective time of the
Merger, will (subject to certain exceptions) be converted into the right
to receive 1.17 shares (the "Exchange Ratio") of First American common
stock, par value $2.50 per share, together with the number of First
American rights associated therewith (with cash being paid in lieu of
fractional share interests). The Exchange Ratio is subject to adjustment
in certain circumstances as set forth in the Merger Agreement. Pursuant
to applicable law, Deposit Guaranty shareholders will have dissenters'
appraisal rights in connection with the Merger.
Consummation of the Merger is subject to various conditions,
including the approval by the shareholders of Deposit Guaranty of the
Merger Agreement, approval by the shareholders of First American of the
Merger Agreement and of an amendment to First American's charter to
increase the number of authorized shares of common stock of First
American, and the receipt of all requisite regulatory approvals.
Following consummation of the Merger, Mr. E.B. Robinson, Jr.,
Chairman of the Board and Chief Executive Officer of Deposit Guaranty,
will be appointed Vice Chairman of the Board of Directors and Chief
Operating Officer of First American, President of First American National
Bank, a wholly owned subsidiary of First American, and a member of First
American's Policy Team. Mr. Howard L. McMillan, Jr., President and Chief
Operating Officer of Deposit Guaranty, will be appointed Chairman of
Deposit Guaranty System.
Following consummation of the Merger, four other members of
the Board of Directors of Deposit Guaranty will be appointed to the Board
of Directors of First American. All Deposit Guaranty directors not
appointed to the Board of Directors of First American will be appointed
as members of community advisory boards of Deposit Guaranty National
Bank, a wholly owned subsidiary of Deposit Guaranty, for a period of not
less than thirty-six months after the effective time of the Merger.
In connection with the Merger Agreement, First American and
Deposit Guaranty entered into a Stock Option Agreement dated December 7,
1997 (the "Option Agreement"), pursuant to which Deposit Guaranty granted
First American an option to purchase, under certain circumstances, up to
8,122,730 shares of Deposit Guaranty Common Stock at a price, subject to
certain adjustments, of $52.375 per share (the "Option"). The Option will
become exercisable only upon the occurrence of certain events, none of
which has occurred as of the date hereof. The Option was granted by
Deposit Guaranty as a condition to First American's entering into the
Merger Agreement. The Option Agreement is filed herewith as Exhibit 99.1
and is incorporated by reference herein.
The joint press release issued by Deposit Guaranty and First
American with respect to the Merger is filed herewith as Exhibit 99.2.
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS.
(c) Exhibits
2.1 Agreement and Plan of Merger, dated as of
December 7, 1997, by and between First American
Corporation and Deposit Guaranty Corp.
99.1 Stock Option Agreement, dated
December 7, 1997, between Deposit
Guaranty Corp. and First American
Corporation.
99.2 Press Release issued by First
American Corporation and Deposit
Guaranty Corp. on December 8, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunder duly authorized.
Dated: December 15, 1997
Deposit Guaranty Corp.
By: /s/ E.B. Robinson, Jr.
_____________________________
Name: E.B. Robinson, Jr.
Title: President and Chief
Executive Officer
EXHIBIT INDEX
Exhibit
Number Description
2.1 Agreement and Plan of Merger, dated as of
December 7, 1997, by and between First American
Corporation and Deposit
Guaranty Corp.
99.1 Stock Option Agreement, dated December
7, 1997, between Deposit Guaranty Corp.
and First American Corporation.
99.2 Press Release issued by First American
Corporation and Deposit Guaranty Corp.
on December 8, 1997.
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of
December 7, 1997, between First American Corporation, a Tennessee
corporation ("Parent"), and Deposit Guaranty Corp., a Mississippi
corporation (the "Company"). (Parent and the Company are sometimes
collectively referred to herein as the "Constituent Corporations".)
WHEREAS, the Boards of Directors of Parent and the Company
have determined that it is in the best interests of their respective
companies and their shareholders to consummate the business combination
transaction provided for herein in which the Company will, subject to the
terms and conditions set forth herein, merge (the "Merger") with and into
Parent; and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also to
prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and
intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Subject to the terms and conditions of this
Agreement, in accordance with the Mississippi Business Corporation Act
(the "MBCA") and the Tennessee Business Corporation Act. (the "TBCA") at
the Effective Time (as defined in Section 1.2 hereof), the Company shall
merge with and into Parent. Parent shall be the surviving corporation
(hereinafter sometimes called the "Surviving Corporation") in the Merger,
and shall continue its corporate existence under the laws of the State of
Tennessee. The name of the Surviving Corporation shall continue to be
First American Corporation. Upon consummation of the Merger, the separate
corporate existence of the Company shall terminate. Parent may at any
time change the method of effecting the combination with the Company
(including without limitation the provisions of this Article I) if
and to the extent it deems such change to be desirable, including without
limitation to provide for a merger of the Company into a wholly-owned
subsidiary of Parent; provided, however, that no such change shall (A)
alter or change the amount or kind of consideration to be issued to
holders of Company Common Stock as provided for in this Agreement (the
"Merger Consideration"), (B) adversely affect the tax treatment of the
Company's shareholders as a result of receiving the Merger Consideration
or (C) materially impede or delay consummation of the transactions
contemplated by this Agreement.
1.2. Effective Time. The Merger shall become effective as set
forth in the articles of merger (the "Articles of Merger") which shall be
filed with the Secretary of State of the State of Mississippi (the
"Mississippi Secretary") and the Secretary of State of the State of
Tennessee (the "Tennessee Secretary") on the Closing Date (as defined in
Section 10.1 hereof). The term "Effective Time" shall be the date and
time when the Merger becomes effective, as set forth in the Articles of
Merger.
1.3. Effects of the Merger. At and after the Effective Time,
the Merger shall have the effects set forth in Section 11.06 of the MBCA
and Section 21-108 of the TBCA.
1.4. Conversion of Company Common Stock.
(a) At the Effective Time, subject to Section 2.2(e)
and Section 9.1(g) hereof, each share of the common stock, no par value, of
the Company (the "Company Common Stock") issued and outstanding immediately
prior to the Effective Time (other than Dissenting Shares (as defined
herein) and other than shares of Company Common Stock held directly or
indirectly by Parent or the Company or any of their respective Subsidiaries
(as defined below) (except for Trust Account Shares and DPC shares, as such
terms are defined in Section 1.4(b) hereof)) shall, by virtue of this
Agreement and without any action on the part of the holder thereof, be
converted into and exchangeable for 1.17 shares (the "Exchange Ratio") of
the common stock, par value $2.50 per share, of Parent ("Parent Common
Stock") (together with the number of Parent Rights (as defined in Section
5.2 hereof) associated therewith). All of the shares of Company Common
Stock converted into Parent Common Stock pursuant to this Article I shall
no longer be outstanding and shall automatically be cancelled and shall
cease to exist, and each certificate (each a "Certificate") previously
representing any such shares of Company Common Stock shall thereafter only
represent the right to receive (i) the number of whole shares of Parent
Common Stock and (ii) the cash in lieu of fractional shares into which the
shares of Company Common Stock represented by such Certificate have been
converted pursuant to this Section 1.4(a) and Section 2.2(e) hereof.
Certificates previously representing shares of Company Common Stock shall
be exchanged for certificates representing whole shares of Parent Common
Stock and cash in lieu of fractional shares issued in consideration
therefor upon the surrender of such Certificates in accordance with Section
2.2 hereof, without any interest thereon. If, between the date of this
Agreement and the Effective Time, the shares of Parent Common Stock shall
be changed into a different number or class of shares by reason of any
reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or a stock dividend thereon shall be declared with
a record date within said period, the Exchange Ratio shall be adjusted
accordingly.
(b) At the Effective Time, all shares
of Company Common Stock that are owned directly or indirectly by Parent
or the Company or any of their respective Subsidiaries (other than shares
of Company Common Stock (x) held directly or indirectly in trust
accounts, managed accounts and the like or otherwise held in a fiduciary
capacity for the benefit of third parties (any such shares, and shares of
Parent Common Stock which are similarly held, whether held directly or
indirectly by Parent or the Company, as the case may be, being referred
to herein as "Trust Account Shares") and (y) held by Parent or the
Company or any of their respective Subsidiaries in respect of a debt
previously contracted (any such shares of Company Common Stock, and
shares of Parent Common Stock which are similarly held, whether held
directly or indirectly by Parent or the Company, being referred to herein
as "DPC Shares")) shall be cancelled and shall cease to exist and no
stock of Parent or other consideration shall be delivered in exchange
therefor. All shares of Parent Common Stock that are owned by the Company
or any of its Subsidiaries (other than Trust Account Shares and DPC
Shares) shall become treasury stock of Parent.
(c) Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock which are
outstanding immediately prior to the Effective Time and with respect to
which dissenters' rights shall have been properly demanded in accordance
with Article 13 of the MBCA ("Dissenting Shares") shall not be converted
into the right to receive, or be exchangeable for, Parent Common Stock or
cash in lieu of fractional shares but, instead, the holders thereof shall
be entitled to payment of the appraised value of such Dissenting Shares
in accordance with the provisions of Article 13 of the MBCA; provided,
however, that (i) if any holder of Dissenting Shares shall subsequently
deliver a written withdrawal of his demand for appraisal of such shares,
or (ii) if any holder fails to establish his entitlement to dissenters'
rights as provided in Article 13 of the MBCA, such holder or holders (as
the case may be) shall forfeit the right to appraisal of such shares of
Company Common Stock and each of such shares shall thereupon be deemed to
have been converted into the right to receive, and to have become
exchangeable for, as of the Effective Time, Parent Common Stock and/or
cash in lieu of fractional shares, without any interest thereon, as
provided in Section 1.4(a) and Article II hereof.
1.5. Stock Options. (a) At the Effective Time, each option
granted by the Company to purchase shares of Company Common Stock (each a
"Company Option") which is outstanding and unexercised immediately prior
thereto shall cease to represent a right to acquire shares of Company
Common Stock and shall be converted automatically into an option to
purchase shares of Parent Common Stock in an amount and at an exercise
price determined as provided below (and otherwise subject to the terms of
the Stock-Based, Long-Term Incentive Plan and the Stock-Based, Long-Term
Incentive Plan II (the "Company Option Plans"), the agreements evidencing
grants thereunder and any other agreements between the Company and an
optionee regarding Company Options):
(1) the number of shares of Parent Common
Stock to be subject to the new option shall be equal
to the product of the number of shares of Company Common Stock
subject to the original option and the Exchange Ratio, provided
that any fractional shares of Parent Common Stock resulting from
such multiplication shall be rounded down to the nearest whole
share; and
(2) the exercise price per share of Parent Common Stock under
the new option shall be equal to the exercise price per share of
Company Common Stock under the original option divided by the
Exchange Ratio, provided that such exercise price shall be rounded
up to the nearest cent.
The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code")) shall be and is intended
to be effected in a manner which is consistent with Section 424(a) of the
Code and, to the extent it is not so consistent, such Section 424(a)
shall override anything to the contrary contained herein. The duration
and other terms of the new option shall be the same as the original
option except that all references to the Company shall be deemed to be
references to Parent.
(b) Prior to the Effective Time, Parent shall reserve for
issuance the number of shares of Parent Common Stock necessary to satisfy
Parent's obligations under this Section 1.5. Promptly after the Effective
Time (but in no event later than five business days thereafter), Parent
shall file with the Securities and Exchange Commission (the "SEC") a
registration statement on an appropriate form under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the shares of
Parent Common Stock subject to options to acquire Parent Common Stock
issued pursuant to Section 1.5(a) hereof, and shall use its best efforts
to maintain the current status of the prospectus contained therein, as
well as comply with applicable state securities or "blue sky" laws, for
so long as such options remain outstanding.
1.6. Parent Common Stock. Except for shares of Parent Common
Stock owned by the Company or any of its Subsidiaries (other than Trust
Account Shares and DPC Shares), which shall be converted into treasury
stock of Parent as contemplated by Section 1.4 hereof, the shares of Parent
Common Stock issued and outstanding immediately prior to the Effective Time
shall be unaffected by the Merger and such shares shall remain issued and
outstanding.
1.7. Charter. At the Effective Time, the Restated Charter of
Parent, as in effect at the Effective Time, shall be the Charter of the
Surviving Corporation.
1.8. By-Laws. At the Effective Time, the By-Laws of Parent,
as in effect immediately prior to the Effective Time, shall be the
By-Laws of the Surviving Corporation until thereafter amended in
accordance with applicable law.
1.9. Directors and Officers. Except as provided in Section
7.10 hereof, the directors and officers of Parent immediately prior to
the Effective Time shall be the directors and officers of the Surviving
Corporation, each to hold office in accordance with the Restated Charter
and By-Laws of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified.
1.10. Tax Consequences; Accounting Treatment. It is intended
that the Merger shall (i) constitute a reorganization within the meaning
of Section 368(a) of the Code and that this Agreement shall constitute a
"plan of reorganization" for the purposes of Section 368 of the Code, and
(ii) be accounted for as a "pooling of interests" under GAAP (as defined
herein).
ARTICLE II
EXCHANGE OF SHARES
2.1. Parent to Make Shares Available. At or prior to the
Effective Time, Parent shall deposit, or shall cause to be deposited,
with a bank or trust company (which may be a Subsidiary of Parent) (the
"Exchange Agent") selected by Parent and reasonably satisfactory to the
Company, for the benefit of the holders of Certificates, for exchange in
accordance with this Article II, certificates representing the shares of
Parent Common Stock and the cash in lieu of fractional shares (such cash
and certificates for shares of Parent Common Stock, together with any
dividends or distributions with respect thereto, being hereinafter
referred to as the "Exchange Fund") to be issued pursuant to Section 1.4
and paid pursuant to Section 2.2(a) in exchange for outstanding shares of
Company Common Stock.
2.2. Exchange of Shares. (a) As soon as practicable after the
Effective Time, and in no event more than three business days thereafter,
the Exchange Agent shall mail to each holder of record of a Certificate
or Certificates a form letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent) and instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing the shares of
Parent Common Stock and the cash in lieu of fractional shares into which
the shares of Company Common Stock represented by such Certificate or
Certificates shall have been converted pursuant to this Agreement. The
Company shall have the right to review both the letter of transmittal and
the instructions prior to the Effective Time and provide reasonable
comments thereon. Upon surrender of a Certificate for exchange and
cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor (x) a certificate representing
that number of whole shares of Parent Common Stock to which such holder
of Company Common Stock shall have become entitled pursuant to the
provisions of Article I hereof and (y) a check representing the amount of
cash in lieu of fractional shares, if any, which such holder has the
right to receive in respect of the Certificate surrendered pursuant to
the provisions of this Article II, and the Certificate so surrendered
shall forthwith be cancelled. No interest will be paid or accrued on the
cash in lieu of fractional shares and unpaid dividends and distributions,
if any, payable to holders of Certificates.
(b) No dividends or other distributions declared
after the Effective Time with respect to Parent Common Stock and payable
to the holders of record thereof shall be paid to the holder of any
unsurrendered Certificate until the holder thereof shall surrender such
Certificate in accordance with this Article II. After the surrender of a
Certificate in accordance with this Article II, the record holder thereof
shall be entitled to receive any such dividends or other distributions,
without any interest thereon, which theretofore had become payable with
respect to shares of Parent Common Stock represented by such Certificate.
(c) If any certificate representing shares of Parent
Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the Certificate so surrendered
shall be properly endorsed (or accompanied by an appropriate instrument
of transfer) and otherwise in proper form for transfer, and that the
person requesting such exchange shall pay to the Exchange Agent in
advance any transfer or other taxes required by reason of the issuance of
a certificate representing shares of Parent Common Stock in any name
other than that of the registered holder of the Certificate surrendered,
or required for any other reason, or shall establish to the satisfaction
of the Exchange Agent that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no
transfers on the stock transfer books of the Company of the shares of
Company Common Stock which were issued and outstanding immediately prior
to the Effective Time. If, after the Effective Time, Certificates
representing such shares are presented for transfer to the Exchange
Agent, they shall be cancelled and exchanged for certificates
representing shares of Parent Common Stock as provided in this Article
II.
(e) Notwithstanding anything to the contrary
contained herein, no certificates or scrip representing fractional shares
of Parent Common Stock shall be issued upon the surrender for exchange of
Certificates, no dividend or distribution with respect to Parent Common
Stock shall be payable on or with respect to any fractional share, and
such fractional share interests shall not entitle the owner thereof to
vote or to any other rights of a shareholder of Parent. In lieu of the
issuance of any such fractional share, Parent shall pay to each former
stockholder of the Company who otherwise would be entitled to receive a
fractional share of Parent Common Stock an amount in cash determined by
multiplying (i) the average of the closing sale prices of Parent Common
Stock on the Nasdaq National Market (the "NASDAQ/NMS") as reported by The
Wall Street Journal for the five trading days immediately preceding the
date on which the Effective Time shall occur by (ii) the fraction of a
share of Parent Common Stock which such holder would otherwise be
entitled to receive pursuant to Section 1.4 hereof.
(f) Any portion of the Exchange Fund that remains
unclaimed by the stockholders of the Company for twelve months after the
Effective Time shall be paid to Parent. Any stockholders of the Company
who have not theretofore complied with this Article II shall thereafter
look only to Parent for payment of their shares of Parent Common Stock,
cash in lieu of fractional shares and unpaid dividends and distributions
on the Parent Common Stock deliverable in respect of each share of
Company Common Stock such stockholder holds as determined pursuant to
this Agreement, in each case, without any interest thereon.
Notwithstanding the foregoing, none of Parent, the Company, the Exchange
Agent or any other person shall be liable to any former holder of shares
of Company Common Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar
laws.
(g) In the event any Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such Certificate to be lost, stolen or
destroyed and, if required by Parent, the posting by such person of a
bond in such amount as Parent may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the shares of Parent Common Stock and cash in lieu of
fractional shares deliverable in respect thereof pursuant to this
Agreement.
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
3.1. Disclosure Schedules. Prior to the execution and
delivery of this Agreement, the Company has delivered to Parent, and
Parent has delivered to the Company, a schedule (in the case of the
Company, the "Company Disclosure Schedule," and in the case of Parent,
the "Parent Disclosure Schedule") setting forth, among other things,
items the disclosure of which is necessary or appropriate either in
response to an express disclosure requirement contained in a provision
hereof or as an exception to one or more of such party's representations
or warranties contained in Article IV, in the case of the Company, or
Article V, in the case of Parent, or to one or more of such party's
covenants contained in Article VI; provided, however, that
notwithstanding anything in this Agreement to the contrary (a) no such
item is required to be set forth in the Disclosure Schedule as an
exception to a representation or warranty if its absence would not result
in the related representation or warranty being deemed untrue or
incorrect under the standard established by Section 3.2, and (b) the mere
inclusion of an item in a Disclosure Schedule as an exception to a
representation or warranty shall not be deemed an admission by a party
that such item represents a material exception or material fact, event or
circumstance or that such item has had or would have a Material Adverse
Effect (as defined herein) with respect to either the Company or Parent,
respectively.
3.2. Standards. (a) No representation or warranty of the
Company contained in Article IV or of Parent contained in Article V shall
be deemed untrue or incorrect for any purpose under this Agreement, and
no party hereto shall be deemed to have breached a representation or
warranty for any purpose under this Agreement, in any case as a
consequence of the existence or absence of any fact, circumstance or
event unless such fact, circumstance or event, individually or when taken
together with all other facts, circumstances or events inconsistent with
any representations or warranties contained in Article IV, in the case of
the Company, or Article V, in the case of Parent, has had a Material
Adverse Effect with respect to the Company or Parent, respectively.
(b) As used in this Agreement, the
term "Material Adverse Effect" means, with respect to Parent or the
Company, as the case may be, a material adverse effect on (i) the
business, results of operations or financial condition of such party and
its Subsidiaries taken as a whole, other than any such effect
attributable to or resulting from (w) any change in banking or similar
laws, rules or regulations of general applicability or interpretations
thereof by courts or governmental authorities, (x) any change in GAAP or
regulatory accounting principles applicable to banks, thrifts or their
holding companies generally, (y) any action or omission of the Company or
Parent or any Subsidiary of either of them taken with the express prior
written consent of the other party hereto, or (z) any expenses incurred
by such party which expenses are contemplated by or reasonably incurred
in connection with this Agreement or the transactions contemplated hereby
or (ii) the ability of such party and its Subsidiaries to consummate the
transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to Article III, the Company hereby represents and
warrants to Parent as follows:
4.1. Corporate Organization. (a) The Company is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Mississippi. The Company has the corporate power and
authority to own or lease all of its properties and assets and to carry
on its business as it is now being conducted, and is duly licensed or
qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties
and assets owned or leased by it makes such licensing or qualification
necessary. The Company is duly registered as a bank holding company under
the Bank Holding Company Act of 1956, as amended (the "BHC Act"). The
Articles of Incorporation and By-laws of the Company, copies of which
have previously been made available to Parent, are true and correct
copies of such documents as in effect as of the date of this Agreement.
As used in this Agreement, the word "Subsidiary" when used with respect
to any party means any corporation, partnership or other organization,
whether incorporated or unincorporated, which is consolidated with such
party for financial reporting purposes.
(b) Deposit Guaranty National Bank
(the "Company Bank") is a national banking association duly organized,
validly existing and in good standing under the laws of the United States
of America. The deposit accounts of the Company Bank are insured by the
Federal Deposit Insurance Corporation (the "FDIC") through the Bank
Insurance Fund and the Savings Association Insurance Fund to the fullest
extent permitted by law, and all premiums and assessments required to be
paid in connection therewith have been paid when due. Each of the
Company's other Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Each of the Company's Subsidiaries has the
corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted and is
duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or the
location of the properties and assets owned or leased by it makes such
licensing or qualification necessary. Except as set forth on Section
4.1(b) of the Company Disclosure Schedule, the articles of incorporation,
by-laws and similar governing documents of each Subsidiary of the
Company, copies of which have previously been made available to Parent,
are true and correct copies of such documents as in effect as of the date
of this Agreement.
(c) The minute books of the Company
and each of its Subsidiaries contain true and correct records of all
meetings and other corporate actions held or taken since December 31,
1995 of their respective stockholders and Boards of Directors (including
committees of their respective Boards of Directors).
4.2. Capitalization. (a) The authorized capital stock of the
Company consists of 100,000,000 shares of Company Common Stock,
25,000,000 shares of Class A Voting Preferred stock, no par value (the
"Company Class A Preferred Stock"), and 25,000,000 shares of Class B
Non-Voting Preferred stock, no par value (the "Company Class B Preferred
Stock" and, together with the Company Class A Preferred Stock, the
"Company Preferred Stock"). As of November 30, 1997, there were
40,817,741 shares of Company Common Stock outstanding and no shares of
Company Common Stock held by the Company as treasury stock. As of
November 30, 1997, there were (i) no shares of Company Common Stock
reserved for issuance upon exercise of outstanding stock options or
otherwise except for (x) 1,883,230 shares of Company Common Stock
reserved for issuance pursuant to the Company Option Plans and described
in Section 4.2(a) of the Company Disclosure Schedule, (y) 808,435 shares
of Company Common Stock reserved for issuance upon consummation of the
merger of Victory Bancshares, Inc. (the "Victory Merger") with and into
the Company pursuant to the Agreement and Plan of Merger (the "Victory
Merger Agreement"), dated as of September 24, 1997, among the Company,
the Company Bank, Victory Bancshares, Inc., and Victory Bank and Trust
Company, and (z) 8,122,730 shares of Company Common Stock reserved for
issuance upon exercise of the option (the "Option") to be issued to
Parent pursuant to the Stock Option Agreement, to be entered into on the
date hereof, between Parent and Company (the "Stock Option Agreement"),
and (ii) no shares of Company Preferred Stock issued or outstanding, held
in the Company's treasury or reserved for issuance upon exercise of
outstanding stock options or otherwise. All of the issued and outstanding
shares of Company Common Stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof. Except as
referred to above or reflected in Section 4.2(a) of the Company
Disclosure Schedule, the Company does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any
shares of Company Common Stock or Company Preferred Stock or any other
equity security of the Company or any securities representing the right
to purchase or otherwise receive any shares of Company Common Stock or
any other equity security of the Company. The names of the optionees, the
date of each option to purchase Company Common Stock granted, the number
of shares subject to each such option, the expiration date of each such
option, and the price at which each such option may be exercised under
the Company Option Plans are set forth in Section 4.2(a) of the Company
Disclosure Schedule.
(b) Section 4.2(b) of the Company
Disclosure Schedule sets forth a true and correct list of all of the
Subsidiaries of the Company. Except as set forth in Section 4.2(b) of the
Company Disclosure Schedule, the Company owns, directly or indirectly,
all of the issued and outstanding shares of the capital stock of each of
such Subsidiaries, free and clear of all liens, charges, encumbrances and
security interests whatsoever, and all of such shares are duly authorized
and validly issued and are fully paid, nonassessable (subject, however,
in the case of the Company Bank, to the provisions of Section 55 of Title
12 of the United States Code) and free of preemptive rights, with no
personal liability attaching to the ownership thereof. No Subsidiary of
the Company has or is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for
the purchase or issuance of any shares of capital stock or any other
equity security of such Subsidiary or any securities representing the
right to purchase or otherwise receive any shares of capital stock or any
other equity security of such Subsidiary. Assuming compliance by Parent
with Section 1.5 hereof, and except as provided in Section 4.2(b) of the
Company Disclosure Schedule, at the Effective Time, there will not be any
outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character by which the Company or any of its
Subsidiaries will be bound calling for the purchase or issuance of any
shares of the capital stock of the Company or any of its Subsidiaries.
Except for its Subsidiaries, the Company does not own (other than in a
bona fide fiduciary capacity or in satisfaction of a debt previously
contracted) beneficially, directly or indirectly, any shares of any
equity securities or similar interests of any person, or any interest in
a partnership or joint venture of any kind.
4.3. Authority; No Violation. (a) The Company has full
corporate power and authority to execute and deliver this Agreement and
the Stock Option Agreement and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this
Agreement and the Stock Option Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
approved by the Board of Directors of the Company. The Board of Directors
of the Company has directed that this Agreement and the transactions
contemplated hereby be submitted to the Company's stockholders for
approval at a meeting of such stockholders and, except for the adoption
of this Agreement by the requisite vote of the Company's stockholders, no
other corporate proceedings on the part of the Company are necessary to
approve this Agreement and the Stock Option Agreement and to consummate
the transactions contemplated hereby and thereby. This Agreement has
been, and the Stock Option Agreement will be, duly and validly executed
and delivered by the Company and (assuming due authorization, execution
and delivery by Parent) this Agreement constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance
with its terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally.
(b) Except as set forth in Section 4.3(b) of the
Company Disclosure Schedule, neither the execution and delivery of this
Agreement or the Stock Option Agreement by the Company, nor the
consummation by the Company of the transactions contemplated hereby or
thereby, nor compliance by the Company with any of the terms or
provisions hereof or thereof, will (i) violate any provision of the
Articles of Incorporation or By-Laws of the Company or the certificate of
incorporation, by-laws or similar governing documents of any of its
Subsidiaries, or (ii) assuming that the consents and approvals referred
to in Section 4.4 hereof are duly obtained, (x) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to the Company or any of its Subsidiaries, or any
of their respective properties or assets, or (y) violate, conflict with,
result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or
a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any lien, pledge, security
interest, charge or other encumbrance upon any of the respective
properties or assets of the Company or any of its Subsidiaries under, any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument
or obligation to which the Company or any of its Subsidiaries is a party,
or by which they or any of their respective properties or assets may be
bound or affected.
4.4. Consents and Approvals. Except for (a) the filing of
applications and notices, as applicable, with the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board") under the BHC
Act and approval of such applications and notices, (b) the filing of such
applications, filings, authorizations, orders and approvals as may be
required under applicable state law, (c) the filing with the SEC of a
joint proxy statement in definitive form relating to the meetings of the
Company's stockholders and Parent's stockholders to be held in connection
with this Agreement and the transactions contemplated hereby (the "Proxy
Statement") and the filing and declaration of effectiveness of the
registration statement on Form S-4 (the "S-4") in which the Proxy
Statement will be included as a prospectus, (d) the approval of this
Agreement by the requisite vote of the stockholders of the Company, (e)
the filing of the Articles of Merger with the Mississippi Secretary
pursuant to the MBCA and with the Tennessee Secretary pursuant to the
TBCA, (f) approval for quotation of the Parent Common Stock to be issued
in the Merger on the NASDAQ/NMS, and (g) such filings, authorizations or
approvals as may be set forth in Section 4.4 of the Company Disclosure
Schedule, no consents or approvals of or filings or registrations with
any court, administrative agency or commission or other governmental
authority or instrumentality (each a "Governmental Entity") or with any
third party are necessary in connection with (1) the execution and
delivery by the Company of this Agreement and the Stock Option Agreement
and (2) the consummation by the Company of the Merger and the other
transactions contemplated hereby and thereby.
4.5. Reports. The Company and each of its Subsidiaries have
timely filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were
required to file since December 31, 1995 with (i) the Federal Reserve
Board, (ii) the FDIC, (iii) the Office of the Comptroller of the Currency
(the "OCC"), (iv) any state banking commissions or any other state
regulatory authority (each a "State Regulator") and (v) any other
self-regulatory organization ("SRO") (collectively, the "Regulatory
Agencies"), and have paid all fees and assessments due and payable in
connection therewith. Except for normal examinations conducted by a
Regulatory Agency in the regular course of the business of the Company
and its Subsidiaries, and except as set forth in Section 4.5 of the
Company Disclosure Schedule, no Regulatory Agency has initiated any
proceeding or, to the knowledge of the Company, investigation into the
business or operations of the Company or any of its Subsidiaries since
December 31, 1995. There is no unresolved violation, criticism, or
exception by any Regulatory Agency with respect to any report or
statement relating to any examinations of the Company or any of its
Subsidiaries.
4.6. Financial Statements. The Company has previously made
available to Parent copies of (a) the consolidated statements of
condition of the Company and its Subsidiaries as of December 31 for the
fiscal years 1995 and 1996, and the related consolidated statements of
earnings, changes in stockholders' equity and cash flows for the fiscal
years 1994 through 1996, inclusive, as reported in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996 filed
with the SEC under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), in each case accompanied by the audit report of KPMG
Peat Marwick LLP, independent public accountants with respect to the
Company, and (b) the unaudited consolidated statements of condition of
the Company and its Subsidiaries as of September 30, 1997 and December
31, 1996 and the unaudited consolidated statements of earnings and cash
flows for the nine-month period ended September 30, 1997 as reported in
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1997 filed with the SEC under the Exchange Act. The
December 31, 1996 consolidated statement of condition of the Company
(including the related notes, where applicable) fairly presents the
consolidated financial position of the Company and its Subsidiaries as of
the date thereof, and the other financial statements referred to in this
Section 4.6 (including the related notes, where applicable) fairly
present, and the financial statements to be filed with the SEC after the
date hereof will fairly present (subject, in the case of the unaudited
statements, to recurring audit adjustments normal in nature and amount),
the results of the consolidated operations and consolidated financial
position of the Company and its Subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth; each of such
statements (including the related notes, where applicable) complies, and
the financial statements to be filed with the SEC after the date hereof
will comply, with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto; and each
of such statements (including the related notes, where applicable) has
been, and the financial statements to be filed with the SEC after the
date hereof will be, prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied during the periods
involved, except as indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q. The books and records of
the Company and its Subsidiaries have been, and are being, maintained in
accordance with GAAP and any other applicable legal and accounting
requirements.
4.7. Broker's Fees. Neither the Company nor any Subsidiary of
the Company nor any of their respective officers or directors has
employed any broker or finder or incurred any liability for any broker's
fees, commissions or finder's fees in connection with any of the
transactions contemplated by this Agreement or the Stock Option
Agreement, except that the Company has engaged, and will pay a fee or
commission to, Credit Suisse First Boston Corporation ("First Boston") in
accordance with the terms of a letter agreement between First Boston and
the Company, a true and correct copy of which has been previously made
available by the Company to Parent.
4.8. Absence of Certain Changes or Events. (a) Except as may
be set forth in Section 4.8(a) of the Company Disclosure Schedule, or as
disclosed in any Company Report (as defined in Section 4.12) filed with
the SEC prior to the date of this Agreement, since December 31, 1996,
there has been no change or development or combination of changes or
developments which, individually or in the aggregate, has had a Material
Adverse Effect on the Company.
(b) Except as set forth in Section
4.8(b) of the Company Disclosure Schedule or as disclosed in any Company
Report filed with the SEC prior to the date of this Agreement, since
December 31, 1996, the Company and its Subsidiaries have carried on their
respective businesses in the ordinary course consistent with their past
practices.
(c) Except as set forth in Section
4.8(c) of the Company Disclosure Schedule, since September 30, 1997,
neither the Company nor any of its Subsidiaries has (i) increased the
wages, salaries, compensation, pension, or other fringe benefits or
perquisites payable to any executive officer, employee, or director from
the amount thereof in effect as of September 30, 1997 (which amounts have
been previously disclosed to Parent), granted any severance or
termination pay, entered into any contract to make or grant any severance
or termination pay, or paid any bonus (except (x) for salary increases
and bonus payments made in the ordinary course of business consistent
with past practices and (y) the Company may adopt the severance plan
described in Section 6.1(j) of the Company Disclosure Schedule), (ii)
suffered any strike, work stoppage, slow-down, or other labor
disturbance, (iii) been a party to a collective bargaining agreement,
contract or other agreement or understanding with a labor union or
organization, or (iv) had any union organizing activities.
4.9. Legal Proceedings. (a) Except as set forth in Section
4.9 of the Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries is a party to any, and there are no pending or, to the
Company's knowledge, threatened, legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations
of any nature against the Company or any of its Subsidiaries or
challenging the validity or propriety of the transactions contemplated by
this Agreement.
(b) Except as set forth in Section 4.9(b) of the
Company Disclosure Schedule, there is no injunction, order, judgment,
decree, or regulatory restriction imposed upon the Company, any of its
Subsidiaries or the assets of the Company or any of its Subsidiaries.
4.10. Taxes. (a) Except as set forth in Section 4.10(a) of
the Company Disclosure Schedule, each of the Company and its Subsidiaries
has (i) duly and timely filed (including applicable extensions granted
without penalty) all Tax Returns (as hereinafter defined) required to be
filed at or prior to the Effective Time, and such Tax Returns are true
and correct, and (ii) paid in full or made adequate provision in the
financial statements of the Company (in accordance with GAAP) for all
Taxes (as hereinafter defined) shown to be due on such Tax Returns.
Except as set forth in Section 4.10(a) of the Company Disclosure
Schedule, (i) as of the date hereof neither the Company nor any of its
Subsidiaries has requested any extension of time within which to file any
Tax Returns in respect of any fiscal year which have not since been filed
and no request for waivers of the time to assess any Taxes are pending or
outstanding, and (ii) as of the date hereof, with respect to each taxable
period of the Company and its Subsidiaries, the federal and state income
Tax Returns of the Company and its Subsidiaries have been audited by the
Internal Revenue Service or appropriate state tax authorities or the time
for assessing and collecting income Tax with respect to such taxable
period has closed and such taxable period is not subject to review.
(b) For the purposes of this Agreement, "Taxes"
shall mean all taxes, charges, fees, levies, penalties or other
assessments imposed by any United States federal, state, local or foreign
taxing authority, including, but not limited to income, excise, property,
sales, transfer, franchise, payroll, withholding, social security or
other taxes, including any interest, penalties or additions attributable
thereto. For purposes of this Agreement, "Tax Return" shall mean any
return, report, information return or other document (including any
related or supporting information) with respect to Taxes.
4.11. Employees. (a) Section 4.11(a) of the Company
Disclosure Schedule sets forth a true and correct list of each deferred
compensation plan, incentive compensation plan, equity compensation plan,
"welfare" plan, fund or program (within the meaning of section 3(1) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA")); "pension" plan, fund or program (within the meaning of
section 3(2) of ERISA); each employment, termination or severance
agreement; and each other employee benefit plan, fund, program, agreement
or arrangement, in each case, that is sponsored, maintained or
contributed to or required to be contributed to (the "Plans") by the
Company, any of its Subsidiaries or by any trade or business, whether or
not incorporated (an "ERISA Affiliate"), all of which together with the
Company would be deemed a "single employer" within the meaning of Section
4001 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or Section 414(b), (c), (m) or (o) of the Code, for the benefit
of any employee or former employee of the Company, any Subsidiary or any
ERISA Affiliate.
(b) The Company has heretofore made available to
Parent with respect to each of the Plans true and correct copies of each
of the following documents if applicable: (i) the Plan document; (ii) the
actuarial report for such Plan for each of the last two years, (iii) the
most recent determination letter from the Internal Revenue Service for
such Plan and (iv) the most recent summary plan description and related
summaries of material modifications.
(c) Except as set forth in Section 4.11(c) of the
Company Disclosure Schedule: each of the Plans is in compliance with the
applicable provisions of the Code and ERISA; each of the Plans intended
to be "qualified" within the meaning of section 401(a) of the Code has
received a favorable determination letter from the IRS and to the
knowledge of the Company, nothing has occurred which could reasonably be
expected to result in the revocation of such letter; no Plan has an
accumulated or waived funding deficiency within the meaning of section
412 of the Code; neither the Company nor any ERISA Affiliate has
incurred, directly or indirectly, any liability to or on account of a
Plan pursuant to Title IV of ERISA (other than PBGC premiums); to the
knowledge of the Company no proceedings have been instituted to terminate
any Plan that is subject to Title IV of ERISA; no "reportable event," as
such term is defined in section 4043(c) of ERISA, has occurred with
respect to any Plan (other than a reportable event with respect to which
the thirty day notice period has been waived); no condition exists that
presents a material risk to the Company of incurring a liability to or on
account of a Plan pursuant to Title IV of ERISA; no Plan is a
multiemployer plan (within the meaning of section 4001(a)(3) of ERISA)
and no Plan is a multiple employer plan as defined in Section 413 of the
Code; and there are no pending, or to the knowledge of the Company,
threatened or anticipated claims (other than routine claims for benefits)
by, on behalf of or against any of the Plans or any trusts related
thereto.
(d) Except as set forth in Section 4.11(d) of the
Company Disclosure Schedule or as otherwise contemplated by this
Agreement or any other agreements entered into by any party hereto in
connection with the execution hereof: neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated
hereby will (either alone or in conjunction with any other event) (i)
result in any payment (including, without limitation, severance,
unemployment compensation, "excess parachute payment" within the meaning
of Section 280G of the Code, forgiveness of indebtedness or otherwise)
becoming due to any officer, director or employee of the Company or any
of its Subsidiaries under any Plan or otherwise, (ii) increase any
benefits payable under any Plan or (iii) result in any acceleration of
the time of payment or vesting of any such benefits.
4.12. SEC Reports. The Company has previously made available
to Parent a true and correct copy of each (a) final registration
statement, prospectus, report, schedule and definitive proxy statement
filed since December 31, 1995 by the Company with the SEC pursuant to the
Securities Act or the Exchange Act (the "Company Reports") and (b)
communication mailed by the Company to its stockholders since December
31, 1995, and no such registration statement, prospectus, report,
schedule, proxy statement or communication contained any untrue statement
of a material fact or omitted to state any material fact required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances in which they were made, not misleading,
except that information as of a later date shall be deemed to modify
information as of an earlier date. The Company has timely filed all
Company Reports and other documents required to be filed by it under the
Securities Act and the Exchange Act, and, as of their respective dates,
all Company Reports complied with the published rules and regulations of
the SEC with respect thereto.
4.13. Company Information. The information relating to the
Company and its Subsidiaries which is provided to Parent by the Company
or its representatives for inclusion in the Proxy Statement and the S-4,
or in any other document filed with any other regulatory agency in
connection herewith, will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances in which they are made, not
misleading. The Proxy Statement (except for such portions thereof that
relate only to Parent or any of its Subsidiaries) will comply with the
provisions of the Exchange Act and the rules and regulations thereunder.
4.14. Compliance with Applicable Law. The Company and each of
its Subsidiaries hold, and have at all times held, all licenses,
franchises, permits and authorizations necessary for the lawful conduct
of their respective businesses under and pursuant to all, and have
complied with and are not in default in any respect under any, applicable
law, statute, order, rule, regulation, policy and/or guideline of any
Governmental Entity relating to the Company or any of its Subsidiaries,
and neither the Company nor any of its Subsidiaries has received notice
of any violations of any of the above.
4.15. Certain Contracts. (a) Except as set forth in Section
4.15(a) of the Company Disclosure Schedule, neither the Company nor any
of its Subsidiaries is a party to or bound by any contract (whether
written or oral) (i) with respect to the employment of any directors or
consultants, (ii) which, upon the consummation of the transactions
contemplated by this Agreement, will (either alone or upon the occurrence
of any additional acts or events) result in any payment or benefits
(whether of severance pay or otherwise) becoming due, or the acceleration
or vesting of any rights to any payment or benefits, from Parent, the
Company, the Surviving Corporation or any of their respective
Subsidiaries to any director or consultant thereof, (iii) which is a
material contract (as defined in Item 601(b)(10) of Regulation S-K of the
SEC) to be performed after the date of this Agreement that has not been
filed or incorporated by reference in the Company Reports, (iv) which is
a consulting agreement (including data processing, software programming
and licensing contracts) not terminable on 90 days or less notice
involving the payment of more than $500,000 per annum, or (v) which
materially restricts the conduct of any line of business by the Company
or any of its Subsidiaries. Each contract, arrangement, commitment or
understanding of the type described in this Section 4.15(a), whether or
not set forth in Section 4.15(a) of the Company Disclosure Schedule, is
referred to herein as a "Company Contract". The Company has previously
delivered or made available to Parent true and correct copies of each
Company Contract.
(b) Except as set forth in Section
4.15(b) of the Company Disclosure Schedule, (i) each Company Contract
described in clause (iii) of Section 4.15(a) is valid and binding and in
full force and effect, (ii) the Company and each of its Subsidiaries has
performed all obligations required to be performed by it to date under
each Company Contract described in clause (iii) of Section 4.15(a), (iii)
no event or condition exists which constitutes or, after notice or lapse
of time or both, would constitute, a default on the part of the Company
or any of its Subsidiaries under any Company Contract described in clause
(iii) of Section 4.15(a), and (iv) no other party to any Company Contract
described in clause (iii) of Section 4.15(a) is, to the knowledge of the
Company, in default in any respect thereunder.
4.16. Agreements with Regulatory Agencies. Except as set
forth in Section 4.16 of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries is subject to any cease-and-desist or
other order issued by, or is a party to any written agreement, consent
agreement or memorandum of understanding with, or is a party to any
commitment letter or similar undertaking to, or is subject to any order
or directive by, or is a recipient of any extraordinary supervisory
letter from, or has adopted any board resolutions at the request of
(each, whether or not set forth on Section 4.16 of the Company Disclosure
Schedule, a "Regulatory Agreement"), any Regulatory Agency or other
Governmental Entity that restricts the conduct of its business or that
in any manner relates to its capital adequacy, its credit policies, its
management or its business, nor has the Company or any of its
Subsidiaries been advised by any Regulatory Agency or other Governmental
Entity that it is considering issuing or requesting any Regulatory
Agreement.
4.17. Business Combination Provision; Takeover Laws. Assuming
the accuracy of the representation contained in Section 5.5 hereof, the
Company has taken all action required to be taken by it in order to
exempt this Agreement and the Stock Option Agreement and the transactions
contemplated hereby and thereby from, and this Agreement and the Stock
Option Agreement and the transactions contemplated hereby and thereby are
exempt from, the requirements of any "moratorium", "control share", "fair
price" or other anti-takeover laws and regulations (collectively,
"Takeover Laws") of the State of Mississippi, including the Mississippi
Shareholder Protection Act and the Mississippi Control Share Act. The
transactions contemplated by this Agreement have been approved by the
Board of Directors of the Company for purposes of, and, assuming the
accuracy of the representation contained in Section 5.5 hereof, are
exempt from, Article Seventh of the Company's Articles of Incorporation
(such approval including approval of the majority of the Continuing
Directors of the Company, as such term is defined in such Article
Seventh).
4.18. Administration of Fiduciary Accounts. The Company and
each of its Subsidiaries has properly administered all accounts for which
it acts as a fiduciary, including but not limited to accounts for which
it serves as a trustee, agent, custodian, personal representative,
guardian, conservator or investment advisor, in accordance with the terms
of the governing documents and applicable state and federal law and
regulation and common law. Neither the Company nor any of its
Subsidiaries nor any of their respective directors, officers or employees
has committed any breach of trust with respect to any such fiduciary
account, and the accountings for each such fiduciary account are true and
correct and accurately reflect the assets of such fiduciary account.
4.19. Environmental Matters. Except as set
forth in Section 4.19 of the Company Disclosure Schedule:
(a) Each of the Company and its
Subsidiaries and, to the knowledge of the Company, each of the
Participation Facilities and the Loan Properties (each as hereinafter
defined), are in compliance with all applicable federal, state and local
laws, including common law, regulations and ordinances, and with all
applicable decrees, orders and contractual obligations relating to
pollution or the discharge of, or exposure to, Hazardous Materials (as
hereinafter defined) in the environment or workplace ("Environmental
Laws");
(b) There is no suit, claim, action or
proceeding, pending or, to the knowledge of the Company, threatened,
before any Governmental Entity or other forum in which the Company, any
of its Subsidiaries, any Participation Facility or any Loan Property, has
been or, with respect to threatened proceedings, may be, named as a
defendant (x) for alleged noncompliance (including by any predecessor)
with any Environmental Laws, or (y) relating to the release, threatened
release or exposure to any Hazardous Material whether or not occurring at
or on a site owned, leased or operated by the Company or any of its
Subsidiaries, any Participation Facility or any Loan Property;
(c) To the knowledge of the Company,
during the period of (x) the Company's or any of its Subsidiaries'
ownership or operation of any of their respective current or former
properties, (y) the Company's or any of its Subsidiaries' participation
in the management of any Participation Facility, or (z) the Company's or
any of its Subsidiaries' interest in a Loan Property, there has been no
release of Hazardous Materials in, on, under or affecting any such
property. To the knowledge of the Company, prior to the period of (x) the
Company's or any of its Subsidiaries' ownership or operation of any of
their respective current or former properties, (y) the Company's or any
of its Subsidiaries' participation in the management of any Participation
Facility, or (z) the Company's or any of its Subsidiaries' interest in a
Loan Property, there was no release of Hazardous Materials in, on, under
or affecting any such property, Participation Facility or Loan Property;
and
(d) The following definitions apply for purposes of
this Section 4.19: (x) "Hazardous Materials" means any chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum or other
regulated substances or materials, (y) "Loan Property" means any property
in which the Company or any of its Subsidiaries holds a security
interest, and, where required by the context, said term means the owner
or operator of such property; and (z) "Participation Facility" means any
facility in which the Company or any of its Subsidiaries participates in
the management and, where required by the context, said term means the
owner or operator of such property.
4.20. Opinion. Prior to the execution of this Agreement, the
Company has received an opinion from First Boston to the effect that as
of the date thereof and based upon and subject to the matters set forth
therein, the Exchange Ratio is fair to the stockholders of the Company
from a financial point of view. Such opinion has not been amended or
rescinded as of the date of this Agreement.
4.21. Approvals. As of the date of this Agreement, the
Company knows of no reason why all regulatory approvals required for the
consummation of the transactions contemplated hereby (including, without
limitation, the Merger) should not be obtained.
4.22. Loan Portfolio. (a) Except as set forth in Section 4.22
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to any written or oral (i) loan agreement, note
or borrowing arrangement (including, without limitation, leases, credit
enhancements, commitments, guarantees and interest-bearing assets)
(collectively, "Loans"), other than Loans the unpaid principal balance of
which does not exceed $100,000, under the terms of which the obligor was,
as of October 31, 1997, over 90 days delinquent in payment of principal
or interest or in default of any other provision, or (ii) as of June 30,
1997, Loan with any director, executive officer or five percent or
greater stockholder of the Company or any of its Subsidiaries, or to the
knowledge of the Company, any person, corporation or enterprise
controlling, controlled by or under common control with any of the
foregoing. Section 4.22 of the Company Disclosure Schedule sets forth (i)
all of the Loans in original principal amount in excess of $100,000 of
the Company or any of its Subsidiaries that as of October 31, 1997, were
classified by any bank examiner (whether regulatory or internal) as
"Other Loans Specially Mentioned", "Special Mention", "Substandard",
"Doubtful", "Loss", "Classified", "Criticized", "Credit Risk Assets",
"Concerned Loans", "Watch List" or words of similar import, together with
the principal amount of and accrued and unpaid interest on each such Loan
and the identity of the borrower thereunder, (ii) by category of Loan
(i.e., commercial, consumer, etc.), all of the other Loans of the Company
and its Subsidiaries that as of October 31, 1997, were classified as
such, together with the aggregate principal amount of and accrued and
unpaid interest on such Loans by category and (iii) each asset of the
Company that as of October 31, 1997, was classified as "Other Real Estate
Owned" and the book value thereof.
(b) Each Loan in original principal
amount in excess of $100,000 (i) is evidenced by notes, agreements or
other evidences of indebtedness which are true, genuine and what they
purport to be, (ii) to the extent secured, has been secured by valid
liens and security interests which have been perfected and (iii) is the
legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
4.23. Property. Each of the Company and its Subsidiaries has
good and marketable title free and clear of all liens, encumbrances,
mortgages, pledges, charges, defaults or equitable interests to all of
the properties and assets, real and personal, tangible or intangible,
which are reflected on the consolidated statement of financial condition
of the Company as of September 30, 1997 or acquired after such date,
except (i) liens for taxes not yet due and payable or contested in good
faith by appropriate proceedings, (ii) pledges to secure deposits and
other liens incurred in the ordinary course of business, (iii) such
imperfections of title, easements and encumbrances, if any, as do not
interfere with the use of the respective property as such property is
used on the date of this Agreement, (iv) for dispositions and
encumbrances of, or on, such properties or assets in the ordinary course
of business or (v) mechanics', materialmen's, workmen's, repairmen's,
warehousemen's, carrier's and other similar liens and encumbrances
arising in the ordinary course of business. All leases pursuant to which
the Company or any Subsidiary of the Company, as lessee, leases real or
personal property are valid and enforceable in accordance with their
respective terms and neither the Company nor any of its Subsidiaries nor,
to the knowledge of the Company, any other party thereto, is in default
thereunder.
4.24. Accounting for the Merger; Reorganization. As of the
date of this Agreement, the Company has no reason to believe that the
Merger will fail to qualify (i) for pooling-of-interests treatment under
GAAP or (ii) as a reorganization under Section 368(a) of the Code.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT
Subject to Article III, Parent hereby represents and warrants
to the Company as follows:
5.1. Corporate Organization. (a) Parent is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Tennessee. Parent has the corporate power and authority to own
or lease all of its properties and assets and to carry on its business as
it is now being conducted, and is duly licensed or qualified to do
business in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties and assets
owned or leased by it makes such licensing or qualification necessary.
Parent is duly registered as a bank holding company under the BHC Act and
as a savings and loan holding company under the Home Owner's Loan Act, as
amended ("HOLA"). The Restated Charter and By-laws of Parent, copies of
which have previously been made available to the Company, are true and
correct copies of such documents as in effect as of the date of this
Agreement.
(b) Each Subsidiary of Parent that is a bank or
savings institution (each a "Parent Bank" and collectively, the "Parent
Banks") is a bank or savings institution duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization.
The deposit accounts of the Parent Banks are insured by the FDIC through
the Bank Insurance Fund or Savings Association Insurance Fund to the
fullest extent permitted by law, and all premiums and assessments
required in connection therewith have been paid when due. Each of
Parent's other Subsidiaries is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation.
Each Subsidiary of Parent has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it
is now being conducted, and is duly licensed or qualified to do business
in each jurisdiction in which the nature of the business conducted by it
or the character or location of the properties and assets owned or leased
by it makes such licensing or qualification necessary. The articles of
incorporation, charter, by-laws and similar governing documents of the
Parent Banks, copies of which have previously been made available to the
Company, are true and correct copies of such documents as in effect as of
the date of this Agreement.
(c) The minute books of Parent and
each of its Subsidiaries contain true and correct records of all meetings
and other corporate actions held or taken since December 31, 1995 of
their respective stockholders and Boards of Directors (including
committees of their respective Boards of Directors).
5.2. Capitalization. (a) As of the date of this Agreement,
the authorized capital stock of Parent consists of 100,000,000 shares of
Parent Common Stock and 2,500,000 shares of preferred stock, no par value
("Parent Preferred Stock"). As of October 31, 1997, there were 58,402,763
shares of Parent Common Stock and no shares of Parent Preferred Stock
issued and outstanding, and no shares of Parent Common Stock held in
Parent's treasury. As of the date of this Agreement, no shares of Parent
Common Stock or Parent Preferred Stock were reserved for issuance, except
as set forth in Section 5.2(a) of the Parent Disclosure Schedule and
except for 5,000,000 shares of Parent Series A Junior Preferred Stock
reserved for issuance upon exercise of the rights (the "Parent Rights")
distributed to holders of Parent Common Stock pursuant to the Rights
Agreement, dated as of December 14, 1988, between Parent and First
American National Bank, as Rights Agent (the "Parent Rights Agreement").
All of the issued and outstanding shares of Parent Common Stock have been
duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the
ownership thereof. As of the date of this Agreement, except as referred
to above or reflected in Section 5.2(a) of the Parent Disclosure Schedule
and the Parent Rights Agreement, Parent does not have and is not bound by
any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any
shares of Parent Common Stock or Parent Preferred Stock or any other
equity securities of Parent or any securities representing the right to
purchase or otherwise receive any shares of Parent Common Stock or Parent
Preferred Stock. The shares of Parent Common Stock to be issued pursuant
to the Merger will be duly authorized and validly issued and, at the
Effective Time, all such shares will be fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the
ownership thereof.
(b) Section 5.2(b) of the Parent
Disclosure Schedule sets forth a true and correct list of all of the
Parent Subsidiaries as of the date of this Agreement. Except for INVEST
Financial Corporation ("INVEST") and except as set forth in Section
5.2(b) of the Parent Disclosure Schedule, as of the date of this
Agreement, Parent owns, directly or indirectly, all (or 98.25% in the
case of INVEST) of the issued and outstanding shares of capital stock of
each of the Subsidiaries of Parent, free and clear of all liens, charges,
encumbrances and security interests whatsoever, and all of such shares
are duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights, with no personal liability attaching to
the ownership thereof. As of the date of this Agreement, no Subsidiary of
Parent has or is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character with any
party that is not a direct or indirect Subsidiary of Parent calling for
the purchase or issuance of any shares of capital stock or any other
equity security of such Subsidiary or any securities representing the
right to purchase or otherwise receive any shares of capital stock or any
other equity security of such Subsidiary.
5.3. Authority; No Violation. (a) Parent has full corporate
power and authority to execute and deliver this Agreement and the Stock
Option Agreement and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Stock
Option Agreement and the consummation of the transactions contemplated
hereby and thereby have been duly and validly approved by the Board of
Directors of Parent. The Board of Directors of Parent has directed that
the Parent Vote Matters (as defined in Section 5.4) be submitted to
Parent's stockholders for approval at a meeting of such stockholders and,
except for the approval of the Parent Vote Matters by the requisite vote
of Parent's stockholders, no other corporate proceedings on the part of
Parent are necessary to approve this Agreement and the Stock Option
Agreement and to consummate the transactions contemplated hereby and
thereby. Each of this Agreement and the Stock Option Agreement has been
duly and validly executed and delivered by Parent and (assuming due
authorization, execution and delivery by the Company) this Agreement
constitutes a valid and binding obligation of Parent, enforceable against
Parent in accordance with its terms, except as enforcement may be limited
by general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally.
(b) Except as set forth in Section 5.3(b) of the
Parent Disclosure Schedule, neither the execution and delivery of this
Agreement or the Stock Option Agreement by Parent, nor the consummation
by Parent of the transactions contemplated hereby or thereby, nor
compliance by Parent with any of the terms or provisions hereof or
thereof, will (i) violate any provision of the Restated Charter or
By-Laws of Parent, or the articles of incorporation or by-laws or similar
governing documents of any of its Subsidiaries or (ii) assuming that the
consents and approvals referred to in Section 5.4 are duly obtained, (x)
violate any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets, or (y)
violate, conflict with, result in a breach of any provision of or the
loss of any benefit under, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation
under, accelerate the performance required by, or result in the creation
of any lien, pledge, security interest, charge or other encumbrance upon
any of the respective properties or assets of Parent or any of its
Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement
or other instrument or obligation to which Parent or any of its
Subsidiaries is a party, or by which they or any of their respective
properties or assets may be bound or affected.
5.4. Consents and Approvals. Except for (a) the filing of
applications and notices, as applicable, with the Federal Reserve Board
under the BHC Act, and approval of such applications and notices, (b)
such applications, filings, authorizations, orders and approvals as may
be required under applicable state law, (c) the filing with the SEC of
the Proxy Statement and the filing and declaration of effectiveness of
the S-4, (d) the approval and adoption of this Agreement and the approval
of an amendment (the "Charter Amendment") to Parent's Restated Charter to
increase the number of shares of Parent Common Stock authorized for
issuance thereunder to a number of shares sufficient to enable Parent to
consummate the Merger and the other transactions contemplated by this
Agreement, in each case by the requisite vote of the stockholders of
Parent (the approval of this Agreement and the Charter Amendment being
referred to herein as the "Parent Vote Matters"), (e) the filing of the
Articles of Merger with the Mississippi Secretary and the Tennessee
Secretary, (f) such filings and approvals as are required to be made or
obtained under the securities or "Blue Sky" laws of various states in
connection with the issuance of the shares of Parent Common Stock
pursuant to this Agreement, (g) approval for quotation of the Parent
Common Stock to be issued in the Merger on the NASDAQ/NMS, and (h) such
filings, authorizations or approvals as may be set forth in Section 5.4
of the Parent Disclosure Schedule, no consents or approvals of or filings
or registrations with any Governmental Entity or with any third party are
necessary in connection with (1) the execution and delivery by Parent of
this Agreement and (2) the consummation by Parent of the Merger and the
other transactions contemplated hereby.
5.5. Reports. Parent and each of its Subsidiaries have timely
filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were
required to file since December 31, 1995 with any Regulatory Agency, and
have paid all fees and assessments due and payable in connection
therewith. Except for normal examinations conducted by a Regulatory
Agency in the regular course of the business of Parent and its
Subsidiaries, and except as set forth in Section 5.5 of Parent Disclosure
Schedule, no Regulatory Agency has initiated any proceeding or, to the
knowledge of Parent, investigation into the business or operations of
Parent or any of its Subsidiaries since December 31, 1995. There is no
unresolved violation, criticism, or exception by any Regulatory Agency
with respect to any report or statement relating to any examinations of
Parent or any of its Subsidiaries.
5.6. Financial Statements. Parent has previously made
available to the Company copies of (a) the consolidated balance sheets of
Parent and its Subsidiaries as of December 31 for the fiscal years 1995
and 1996 and the related consolidated statements of income, changes in
shareholders' equity and cash flows for the fiscal years 1994 through
1996, inclusive, as reported in Parent's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 filed with the SEC under the
Exchange Act, in each case accompanied by the audit report of KPMG Peat
Marwick LLP, independent public accountants with respect to Parent, and
(b) the unaudited consolidated balance sheet of Parent and its
Subsidiaries as of September 30, 1997 and September 30, 1996 and the
related unaudited consolidated statements of income, changes in
shareholders' equity and cash flows for the nine-month periods then ended
as reported in Parent's Quarterly Report on Form 10-Q for the period
ended September 30, 1997 filed with the SEC under the Exchange Act. The
December 31, 1996 consolidated balance sheet of Parent (including the
related notes, where applicable) fairly presents the consolidated
financial position of Parent and its Subsidiaries as of the date thereof,
and the other financial statements referred to in this Section 5.6
(including the related notes, where applicable) fairly present and the
financial statements to be filed with the SEC after the date hereof will
fairly present (subject, in the case of the unaudited statements, to
recurring audit adjustments normal in nature and amount), the results of
the consolidated operations and changes in shareholders' equity and
consolidated financial position of Parent and its Subsidiaries for the
respective fiscal periods or as of the respective dates therein set
forth; each of such statements (including the related notes, where
applicable) complies, and the financial statements to be filed with the
SEC after the date hereof will comply, with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto; and each of such statements (including the related
notes, where applicable) has been, and the financial statements to be
filed with the SEC after the date hereof will be, prepared in accordance
with GAAP consistently applied during the periods involved, except as
indicated in the notes thereto or, in the case of unaudited statements,
as permitted by Form 10-Q. The books and records of Parent and its
Subsidiaries have been, and are being, maintained in accordance with GAAP
and any other applicable legal and accounting requirements.
5.7. Broker's Fees. Neither Parent nor any Subsidiary of
Parent, nor any of their respective officers or directors, has employed
any broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with any of the transactions
contemplated by this Agreement or the Stock Option Agreement, except that
Parent has engaged, and will pay a fee or commission to, Morgan Stanley &
Co. Incorporated ("Morgan Stanley").
5.8. Absence of Certain Changes or Events. Except as may be
set forth in Section 5.8 of the Parent Disclosure Schedule, or as
disclosed in any Parent Report (as defined in Section 5.12) filed with
the SEC prior to the date of this Agreement, since December 31, 1996,
there has been no change or development or combination of changes or
developments which, individually or in the aggregate, has had a Material
Adverse Effect on Parent.
5.9. Legal Proceedings. (a) Except as set forth in Section
5.9 of the Parent Disclosure Schedule or in Parent's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997, neither Parent nor
any of its Subsidiaries is a party to any and there are no pending or, to
Parent's knowledge, threatened, legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations
of any nature against Parent or any of its Subsidiaries or challenging
the validity or propriety of the transactions contemplated by this
Agreement.
(b) There is no injunction, order,
judgment, decree, or regulatory restriction imposed upon Parent, any of
its Subsidiaries or the assets of Parent or any of its Subsidiaries.
5.10. Taxes. Except as set forth in Section 5.10 of the
Parent Disclosure Schedule, each of Parent and its Subsidiaries has (i)
duly and timely filed (including applicable extensions granted without
penalty) all Tax Returns required to be filed at or prior to the
Effective Time, and such Tax Returns are true and correct, and (ii) paid
in full or made adequate provision in the financial statements of Parent
(in accordance with GAAP) for all Taxes shown to be due on such Tax
Returns. Except as set forth in Section 5.10 of the Parent Disclosure
Schedule, (i) as of the date hereof, neither Parent nor any of its
Subsidiaries has requested any extension of time within which to file any
Tax Returns in respect of any fiscal year which have not since been filed
and no request for waivers of the time to assess any Taxes are pending or
outstanding, and (ii) as of the date hereof, with respect to each taxable
period of Parent and its Subsidiaries, the federal and state income Tax
Returns of Parent and its Subsidiaries have been audited by the Internal
Revenue Service or appropriate state tax authorities or the time for
assessing and collecting income Tax with respect to such taxable period
has closed and such taxable period is not subject to review.
5.11. Employees. (a) Section 5.11(a) of the Parent Disclosure
Schedule sets forth a true and correct list of each deferred compensation
plan, incentive compensation plan, equity compensation plan, "welfare"
plan, fund or program (within the meaning of section 3(1) of the ERISA);
"pension" plan, fund or program (within the meaning of section 3(2) of
ERISA); each employment, termination or severance agreement; and each
other employee benefit plan, fund, program, agreement or arrangement, in
each case, that is sponsored, maintained or contributed to or required to
be contributed to as of the date of this Agreement (the "Parent Plans")
by Parent, any of its Subsidiaries or by any trade or business, whether
or not incorporated (a "Parent ERISA Affiliate"), all of which together
with Parent would be deemed a "single employer" within the meaning of
Section 4001 of ERISA, for the benefit of any employee or former employee
of Parent, any Subsidiary or any Parent ERISA Affiliate.
(b) Except as set forth in Section 5.11(b) of the Parent
Disclosure Schedule: each of the Parent Plans is in compliance with the
applicable provisions of the Code and ERISA; each of the Parent Plans
intended to be "qualified" within the meaning of section 401(a) of the
Code has received a favorable determination letter from the IRS; no
Parent Plan has an accumulated or waived funding deficiency within the
meaning of section 412 of the Code; neither Parent nor any Parent ERISA
Affiliate has incurred, directly or indirectly, any liability to or on
account of a Parent Plan pursuant to Title IV of ERISA (other than PBGC
premiums); to the knowledge of Parent no proceedings have been instituted
to terminate any Parent Plan that is subject to Title IV of ERISA; no
"reportable event," as such term is defined in section 4043(c) of ERISA,
has occurred with respect to any Parent Plan (other than a reportable
event with respect to which the thirty day notice period has been
waived); and no condition exists that presents a material risk to Parent
of incurring a liability to or on account of a Parent Plan pursuant to
Title IV of ERISA; no Parent Plan is a multiemployer plan (within the
meaning of section 4001(a)(3) of ERISA and no Parent Plan is a multiple
employer plan as defined in Section 413 of the Code; and there are no
pending, or, to the knowledge of Parent, threatened or anticipated claims
(other than routine claims for benefits) by, on behalf of or against any
of the Parent Plans or any trusts related thereto.
5.12. SEC Reports. Parent has previously made available to
the Company a true and correct copy of each (a) final registration
statement, prospectus, report, schedule and definitive proxy statement
filed since December 31, 1995 by Parent with the SEC pursuant to the
Securities Act or the Exchange Act (the "Parent Reports") and (b)
communication mailed by Parent to its shareholders since December 31,
1995, and no such registration statement, prospectus, report, schedule,
proxy statement or communication contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances in which they were made, not misleading, except that
information as of a later date shall be deemed to modify information as
of an earlier date. Parent has timely filed all Parent Reports and other
documents required to be filed by it under the Securities Act and the
Exchange Act, and, as of their respective dates, all Parent Reports
complied with the published rules and regulations of the SEC with respect
thereto.
5.13. Parent Information. The information relating to Parent
and its Subsidiaries to be contained in the Proxy Statement and the S-4,
or in any other document filed with any other regulatory agency in
connection herewith, will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances in which they are made, not
misleading. The Proxy Statement (except for such portions thereof that
relate only to the Company or any of its Subsidiaries) will comply with
the provisions of the Exchange Act and the rules and regulations
thereunder. The S-4 will comply with the provisions of the Securities Act
and the rules and regulations thereunder.
5.14. Compliance with Applicable Law. Parent and each of its
Subsidiaries holds, and has at all times held, all licenses, franchises,
permits and authorizations necessary for the lawful conduct of their
respective businesses under and pursuant to all, and have complied with
and are not in default in any respect under any, applicable law, statute,
order, rule, regulation, policy and/or guideline of any Governmental
Entity relating to Parent or any of its Subsidiaries and neither Parent
nor any of its Subsidiaries knows of, or has received notice of violation
of, any violations of any of the above.
5.15. Ownership of Company Common Stock; Affiliates and
Associates. As of the date hereof, neither Parent nor any of its
affiliates or associates (as such terms are defined under the Exchange
Act) (i) beneficially owns, directly or indirectly, or (ii) is a party to
any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock of the
Company (other than Trust Account Shares and DPC Shares).
5.16. Agreements with Regulatory Agencies. Except as set
forth in Section 5.16 of the Parent Disclosure Schedule or as disclosed
in Parent's Annual Report on Form 10-K for the year ended December 31,
1996, neither Parent nor any of its Subsidiaries is subject to any
cease-and-desist or other order issued by, or is a party to any written
agreement, consent agreement or memorandum of understanding with, or is a
party to any commitment letter or similar undertaking to, or is subject
to any order or directive by, or is a recipient of any extraordinary
supervisory letter from, or has adopted any board resolutions at the
request of (each, whether or not set forth in Section 5.16 of the Parent
Disclosure Schedule, a "Parent Regulatory Agreement"), any Regulatory
Agency or other Governmental Entity that restricts the conduct of its
business or that in any manner relates to its capital adequacy, its
credit policies, its management or its business, nor has Parent or any of
its Subsidiaries been advised by any Regulatory Agency or other
Governmental Entity that it is considering issuing or requesting any
Parent Regulatory Agreement.
5.17. Environmental Matters. Except as set forth in Section
5.17 of the Parent Disclosure Schedule:
(a) Each of Parent and its Subsidiaries and, to the
knowledge of Parent, each of the Participation Facilities and the Loan
Properties (each as hereinafter defined), are in compliance with all
Environmental Laws;
(b) There is no suit, claim, action or proceeding,
pending or, to the knowledge of Parent, threatened, before any
Governmental Entity or other forum in which Parent, any of its
Subsidiaries, any Participation Facility or any Loan Property, has been
or, with respect to threatened proceedings, may be, named as a defendant
(x) for alleged noncompliance (including by any predecessor) with any
Environmental Laws, or (y) relating to the release, threatened release or
exposure to any Hazardous Material whether or not occurring at or on a
site owned, leased or operated by Parent or any of its Subsidiaries, any
Participation Facility or any Loan Property;
(c) To the knowledge of Parent during the period of
(x) Parent's or any of its Subsidiaries' ownership or operation of any of
their respective current or former properties, (y) Parent's or any of its
Subsidiaries' participation in the management of any Participation
Facility, or (z) Parent's or any of its Subsidiaries' interest in a Loan
Property, there has been no release of Hazardous Materials in, on, under
or affecting any such property. To the knowledge of Parent, prior to the
period of (x) Parent's or any of its Subsidiaries' ownership or operation
of any of their respective current or former properties, (y) Parent's or
any of its Subsidiaries' participation in the management of any
Participation Facility, or (z) Parent's or any of its Subsidiaries'
interest in a Loan Property, there was no release of Hazardous Materials
in, on, under or affecting any such property, Participation Facility or
Loan Property; and
(d) The following definitions apply for purposes of
this Section 5.17: (x) "Loan Property" means any property in which Parent
or any of its Subsidiaries holds a security interest, and, where required
by the context, said term means the owner or operator of such property;
and (y) "Participation Facility" means any facility in which Parent or
any of its Subsidiaries participates in the management and, where
required by the context, said term means the owner or operator of such
property.
5.18. Opinion. Prior to the execution of this Agreement,
Parent has received an opinion from Morgan Stanley to the effect that as
of the date thereof and based upon and subject to the matters set forth
therein, the Exchange Ratio pursuant to this Agreement is fair from a
financial point of view to Parent. Such opinion has not been amended or
rescinded as of the date of this Agreement.
5.19. Approvals. As of the date of this Agreement, Parent
knows of no reason why all regulatory approvals required for the
consummation of the transactions contemplated hereby (including, without
limitation, the Merger) should not be obtained.
5.20. Loan Portfolio. (a) Except as set forth in Section 5.20
of Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries
is a party to any written or oral (i) Loan, other than Loans the unpaid
principal balance of which does not exceed $100,000, under the terms of
which the obligor was, as of October 31, 1997, over 90 days delinquent in
payment of principal or interest or in default of any other provision, or
(ii) Loan with any director, executive officer or five percent or greater
stockholder of Parent or any of its Subsidiaries, or to the knowledge of
Parent, any person, corporation or enterprise controlling, controlled by
or under common control with any of the foregoing. Section 5.20 of Parent
Disclosure Schedule sets forth (i) all of the Loans in original principal
amount in excess of $100,000 of Parent or any of its Subsidiaries that as
of October 31, 1997, were classified by any bank examiner (whether
regulatory or internal) as "Other Loans Specially Mentioned", "Special
Mention", "Substandard", "Doubtful", "Loss", "Classified", "Criticized",
"Credit Risk Assets", "Concerned Loans", "Watch List" or words of similar
import, together with the principal amount of and accrued and unpaid
interest on each such Loan and the identity of the borrower thereunder,
(ii) by category of Loan (i.e., commercial, consumer, etc.), all of the
other Loans of Parent and its Subsidiaries that as of October 31, 1997,
were classified as such, together with the aggregate principal amount of
and accrued and unpaid interest on such Loans by category and (iii) each
asset of Parent that as of October 31, 1997, was classified as "Other
Real Estate Owned" and the book value thereof.
(b) Each Loan in original principal amount in excess
of $100,000 (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and what they purport to be, (ii) to
the extent secured, has been secured by valid liens and security
interests which have been perfected and (iii) is the legal, valid and
binding obligation of the obligor named therein, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
5.21. Property. Each of Parent and its Subsidiaries has good
and marketable title free and clear of all liens, encumbrances,
mortgages, pledges, charges, defaults or equitable interests to all of
the properties and assets, real and personal, tangible or intangible, and
which are reflected on the consolidated statement of financial condition
of Parent as of September 30, 1997 or acquired after such date, except
(i) liens for taxes not yet due and payable or contested in good faith by
appropriate proceedings, (ii) pledges to secure deposits and other liens
incurred in the ordinary course of business, (iii) such imperfections of
title, easements and encumbrances, if any, as do not interfere with the
use of the respective property as such property is used on the date of
this Agreement, (iv) for dispositions and encumbrances of, or on, such
properties or assets in the ordinary course of business or (v)
mechanics', materialmen's, workmen's, repairmen's, warehousemen's,
carrier's and other similar liens and encumbrances arising in the
ordinary course of business. All leases pursuant to which Parent or any
Subsidiary of Parent, as lessee, leases real or personal property are
valid and enforceable in accordance with their respective terms and
neither Parent nor any of its Subsidiaries nor, to the knowledge of
Parent, any other party thereto is in default thereunder.
5.22. Accounting for the Merger; Reorganization. As of the
date of this Agreement, Parent has no reason to believe that the Merger
will fail to qualify (i) for pooling-of-interests treatment under GAAP or
(ii) as a reorganization under Section 368(a) of the Code.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1. Covenants of the Company. During the period from the
date of this Agreement and continuing until the Effective Time, except as
expressly contemplated or permitted by this Agreement, the Stock
Option Agreement or the Victory Merger Agreement or with the prior
written consent of Parent, the Company and its Subsidiaries shall carry
on their respective businesses in the ordinary course consistent with
past practice. Without limiting the generality of the foregoing, and
except as set forth in Section 6.1 of the Company Disclosure Schedule or
as otherwise contemplated by this Agreement, the Stock Option Agreement
or the Victory Merger Agreement or as consented to in writing by Parent,
the Company shall not, and shall not permit any of its Subsidiaries to:
(a) solely in the case of the Company,
declare or pay any dividends on, or make other distributions in respect
of, any of its capital stock, other than normal quarterly dividends not
in excess of $0.23 per share of Company Common Stock;
(b) (i) repurchase, redeem or otherwise acquire
(except for the acquisition of Trust Account Shares and DPC Shares, as
such terms are defined in Section 1.4(b) hereof) any shares of the
capital stock of the Company or any Subsidiary of the Company, or any
securities convertible into or exercisable for any shares of the capital
stock of the Company or any Subsidiary of the Company, except for
purchases of Company Common Stock pursuant to the Company's employee
stock purchase plan (the "ESPP") and, subject to the terms and conditions
of this Agreement, pursuant to the Company's Automatic Dividend
Reinvestment Plan (the "DRIP"), in each case consistent with past
practice, (ii) split, combine or reclassify any shares of its capital
stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (iii) issue, deliver or sell, or authorize or propose
the issuance, delivery or sale of, any shares of its capital stock or any
securities convertible into or exercisable for, or any rights, warrants
or options to acquire, any such shares, or enter into any agreement with
respect to any of the foregoing, other than pursuant to the ESPP and,
subject to the terms and conditions of this Agreement, pursuant to the
DRIP, except, in the case of clauses (ii) and (iii), for the issuance of
Company Common Stock (x) upon the exercise or fulfillment of rights or
options issued or existing pursuant to employee benefit plans, programs
or arrangements, all to the extent outstanding and in existence on the
date of this Agreement and in accordance with their present terms, (y)
upon the consummation of the Victory Merger or (z) pursuant to the Stock
Option Agreement;
(c) amend its Articles of Incorporation, By-laws or
other similar governing documents;
(d) authorize or permit any of its officers,
directors, employees or agents to directly or indirectly solicit,
initiate, facilitate or encourage any inquiries relating to, or the
making of any proposal which constitutes, a "takeover proposal" (as
defined below), or participate in any discussions or negotiations, or
provide third parties with any nonpublic information, relating to any
such inquiry or proposal or otherwise facilitate any effort or attempt to
make a takeover proposal; provided, however, that the Company may
communicate information about any such takeover proposal to its
stockholders if, in the judgment of the Company's Board of Directors,
based upon the advice of outside counsel, such communication is required
under applicable law, provided further, however, that the Company may,
and may authorize and permit its officers, directors, employees or agents
to, (i) provide or cause to be provided such information, and (ii)
participate in such discussions or negotiations, if the Board of
Directors of the Company, after having consulted with and considered the
advice of outside counsel, has determined that the failure to do so could
cause the members of such Board of Directors to breach their fiduciary
duties under applicable laws. The Company will immediately cease and
cause to be terminated any existing activities, discussions or
negotiations previously conducted with any parties other than Parent with
respect to any of the foregoing. The Company will take all actions
necessary or advisable to inform the appropriate individuals or entities
referred to in the first sentence hereof of the obligations undertaken in
this Section 6.1(d). The Company will notify Parent immediately if any
such inquiries or takeover proposals are received by, any such
information is requested from, or any such negotiations or discussions
are sought to be initiated or continued with, the Company, and the
Company will promptly (within 24 hours) inform Parent in writing of all
of the relevant details with respect to the foregoing including the
material terms and conditions of such request or takeover proposal and
the identity of the person or group making such request or proposal. The
Company will keep Parent fully informed of the status and details
(including amendments or proposed amendments) of any such request or
takeover proposal. As used in this Agreement, "takeover proposal" shall
mean any tender or exchange offer, proposal for a merger, consolidation
or other business combination involving the Company or any Subsidiary of
the Company or any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets
of, the Company or any Subsidiary of the Company other than the
transactions contemplated or permitted by this Agreement and the Stock
Option Agreement;
(e) make any capital expenditures other than those
which (i) are made in the ordinary course of business or are necessary to
maintain existing assets in good repair and (ii) in any event are in an
amount of no more than $500,000 in the aggregate;
(f) enter into any new line of business;
(g) acquire or agree to acquire, by
merging or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire any
assets, which would be material, individually or in the aggregate, to the
Company, or which could reasonably be expected to impede or delay
consummation of the Merger, other than in connection with foreclosures,
settlements in lieu of foreclosure or troubled loan or debt
restructurings in the ordinary course of business consistent with past
practices;
(h) take any action that is intended
or may reasonably be expected to result in any of its representations and
warranties set forth in this Agreement being or becoming untrue, or in
any of the conditions to the Merger set forth in Article VIII not being
satisfied;
(i) change its methods of accounting
in effect at September 30, 1997, except as required by changes in GAAP or
regulatory accounting principles as concurred to by the Company's
independent auditors;
(j) (i) except as set forth in Section 7.7 hereof,
as required by applicable law or as required to maintain qualification
pursuant to the Code, adopt, amend, or terminate any employee benefit
plan (including, without limitation, any Plan) or any agreement,
arrangement, plan or policy between the Company or any Subsidiary of the
Company and one or more of its current or former directors, officers or
employees except that the Company may adopt the amendments to the
Company's deferred income plans as set forth in Section 6.1(j) of the
Company Disclosure Schedule (such plans, which are listed on Section
4.11(a) of the Company Disclosure Schedule, the "Deferred Income Plans")
or (ii) except for normal increases in the ordinary course of business
consistent with past practice or except as required by applicable law,
increase in any manner the compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any Plan
or agreement as in effect as of the date hereof (including, without
limitation, the granting of stock options, stock appreciation rights,
restricted stock, restricted stock units or performance units or shares);
provided, however, that nothing contained herein shall prohibit the
Company (x) from paying 1997 bonuses under its incentive bonus plans
listed in Section 4.11(a) of the Company Disclosure Schedule under the
heading "Management Incentive Compensation Plans" (the "Bonus Plans")
consistent with past practice, except that in determining the amounts of
such bonuses, the Company shall be entitled to disregard the effect
(including, without limitation, the cost) of any actions reasonably taken
by the Company or any of its Subsidiaries in contemplation of the Merger
or at the request of Parent, or (y) on or prior to the Closing Date, from
paying pro-rata 1998 bonuses under the Bonus Plans in respect of the
period from January 1, 1998 through the Closing Date based on the
Company's annualized performance (without regard to the effect
(including, without limitation, the cost) of any actions reasonably taken
by the Company or any of its Subsidiaries in contemplation of the Merger
or at the request of Parent) from January 1, 1998 through the end of the
last full month prior to consummation of the Merger;
(k) take or cause to be taken any
action which would disqualify the Merger as a "pooling of interests" for
accounting purposes or a reorganization under Section 368(a) of the Code;
(l) other than activities in the
ordinary course of business consistent with past practice, sell, lease,
encumber, assign or otherwise dispose of, or agree to sell, lease,
encumber, assign or otherwise dispose of, any of its material assets,
properties or other rights or agreements;
(m) other than in the ordinary course
of business consistent with past practice, incur any indebtedness for
borrowed money or assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other
individual, corporation or other entity;
(n) file any application to relocate
or terminate the operations of any banking office of it
or any of its Subsidiaries;
(o) create, renew, amend or terminate
or give notice of a proposed renewal, amendment or termination of, any
material contract, agreement or lease for goods, services or office space
to which the Company or any of its Subsidiaries is a party or by which
the Company or any of its Subsidiaries or their respective properties is
bound, other than the renewal in the ordinary course of business of any
lease the term of which expires prior to the Closing Date, or amend or
waive the provisions of any confidentiality or standstill agreement to
which the Company or any of its affiliates is a party as of the date
hereof;
(p) take any action or enter into any
agreement that could reasonably be expected to jeopardize or materially
delay the receipt of any Requisite Regulatory Approval (as defined in
Section 8.1(c)); or
(q) agree or commit to do any of the foregoing.
6.2. Covenants of Parent. Except as set forth in Section 6.2
of the Parent Disclosure Schedule or as otherwise contemplated by this
Agreement or consented to in writing by the Company, Parent shall not,
and shall not permit any of its Subsidiaries to:
(a) solely in the case of Parent,
declare or pay any dividends on or make any other distributions in
respect of any of its capital stock other than its current quarterly
dividends; provided, however, that nothing contained herein shall
prohibit Parent from increasing the quarterly cash dividend on the Parent
Common Stock in a manner consistent with past practice;
(b) take any action that is intended
or may reasonably be expected to result in any of its representations and
warranties set forth in this Agreement being or becoming untrue, or in
any of the conditions to the Merger set forth in Article VIII not being
satisfied;
(c) take any action or enter into any agreement that
could reasonably be expected to jeopardize or materially delay the
receipt of any Requisite Regulatory Approval;
(d) change its methods of accounting
in effect at September 30, 1997, except in accordance with changes in
GAAP or regulatory accounting principles as concurred to by Parent's
independent auditors;
(e) take or cause to be taken any
action which would disqualify the Merger as a "pooling of interests" for
accounting purposes or a reorganization under Section 368(a) of the Code;
or
(f) agree to do any of the foregoing.
6.3. Conduct of Parent's Business. During the period from the
date of this Agreement and continuing until the Effective Time, except as
expressly contemplated or permitted by this Agreement, or with the prior
written consent of the Company, Parent shall, and shall cause its
Subsidiaries to, carry on their respective businesses in the ordinary
course consistent with past practice.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Regulatory Matters. (a) Parent and the Company shall
promptly prepare and file with the SEC the Proxy Statement and Parent
shall promptly prepare and file with the SEC the S-4, in which the Proxy
Statement will be included as a prospectus. Each of the Company and
Parent shall use its reasonable best efforts to have the S-4 declared
effective under the Securities Act as promptly as practicable after such
filing, and each of the Company and Parent shall thereafter mail the
Proxy Statement to its respective stockholders. Parent shall also use its
reasonable best efforts to obtain all necessary state securities law or
"Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement.
(b) The parties hereto shall cooperate with each
other and use their reasonable best efforts to promptly prepare and file
all necessary documentation, to effect all applications, notices,
petitions and filings, and to obtain as promptly as practicable all
permits, consents, approvals and authorizations of all third parties and
Governmental Entities which are necessary or advisable to consummate the
transactions contemplated by this Agreement (including without limitation
the Merger). The Company and Parent shall have the right to review in
advance, and to the extent practicable each will consult the other on, in
each case subject to applicable laws relating to the exchange of
information, all the information relating to the Company or Parent, as
the case may be, and any of their respective Subsidiaries, which appears
in any filing made with, or written materials submitted to, any third
party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each
of the parties hereto shall act reasonably and as promptly as
practicable. The parties hereto agree that they will consult with each
other with respect to the obtaining of all permits, consents, approvals
and authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the transactions contemplated by
this Agreement and each party will keep the other apprised of the status
of matters relating to completion of the transactions contemplated
herein.
(c) Parent and the Company shall, upon
request, furnish each other with all information concerning themselves,
their Subsidiaries, directors, officers and stockholders and such other
matters as may be reasonably necessary or advisable in connection with
the Proxy Statement, the S-4 or any other statement, filing, notice or
application made by or on behalf of Parent, the Company or any of their
respective Subsidiaries to any Governmental Entity in connection with the
Merger and the other transactions contemplated by this Agreement.
(d) Parent and the Company shall
promptly furnish each other with copies of written communications
received by Parent or the Company, as the case may be, or any of their
respective Subsidiaries, Affiliates or Associates (as such terms are
defined in Rule 12b-2 under the Exchange Act as in effect on the date of
this Agreement) from, or delivered by any of the foregoing to, any
Governmental Entity in respect of the transactions contemplated hereby.
7.2. Access to Information. (a) Upon reasonable notice and
subject to applicable laws relating to the exchange of information, each
party shall, and shall cause each of its Subsidiaries to, afford to the
officers, employees, accountants, counsel and other representatives of
the other party, access, during normal business hours during the period
prior to the Effective Time, to all its properties, books, contracts,
commitments, records, officers, employees, accountants, counsel and other
representatives and, during such period, it shall, and shall cause its
Subsidiaries to, make available to the other party all information
concerning its business, properties and personnel as the other party may
reasonably request. Neither party nor any of its Subsidiaries shall be
required to provide access to or to disclose information where such
access or disclosure would violate or prejudice the rights of its
customers, jeopardize any attorney-client privilege or contravene any
law, rule, regulation, order, judgment, decree, fiduciary duty or binding
agreement entered into prior to the date of this Agreement. The parties
hereto will make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply.
(b) All information furnished to
Parent pursuant to Section 7.2(a) shall be subject to, and Parent shall
hold all such information in confidence in accordance with, the
provisions of the confidentiality agreement (the "Confidentiality
Agreement"), between Parent and the Company. The Company shall have the
same obligations to Parent under the Confidentiality Agreement with
respect to information furnished to the Company pursuant to Section
7.2(a) as if the Company were the receiving party under such agreement.
(c) No investigation by either of the
parties or their respective representatives shall affect the
representations, warranties, covenants or agreements of the other set
forth herein.
7.3. Stockholder Meetings. The Company and Parent each shall
take all steps necessary to duly call, give notice of, convene and hold a
meeting of its respective stockholders to be held as soon as is
reasonably practicable after the date on which the S-4 becomes effective
for the purpose of voting upon the approval and adoption of this
Agreement, in the case of the Company, and the Parent Vote Matters, in
the case of Parent. The Company will, through its Board of Directors,
recommend to its stockholders approval of this Agreement and the
transactions contemplated hereby and such other matters as may be
submitted to its stockholders in connection with this Agreement,
provided, however, that the Board of Directors of the Company may fail to
make such recommendation, or withdraw, modify or change any such
recommendation in a manner adverse to Parent, if such Board of Directors,
after having consulted with and considered the advice of outside counsel,
has determined that the making of such recommendation, or the failure to
withdraw, modify or change its recommendation, could cause the members of
such Board of Directors to breach their fiduciary duties under applicable
law. The Parent will, through its Board of Directors, recommend to its
stockholders approval of the Parent Vote Matters and such other matters
as may be submitted to its stockholders in connection with this
Agreement. The Company and Parent shall coordinate and cooperate with
respect to the foregoing matters, with a view towards, among other
things, holding the respective meetings of each party's stockholders on
the same day.
7.4. Legal Conditions to Merger. Each of Parent and the
Company shall, and shall cause its Subsidiaries to, use their reasonable
best efforts (a) to take, or cause to be taken, all actions necessary,
proper or advisable to comply promptly with all legal requirements which
may be imposed on such party or its Subsidiaries with respect to the
Merger and, subject to the conditions set forth in Article VIII hereof,
to consummate the transactions contemplated by this Agreement and (b) to
obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any
Governmental Entity and any other third party which is required to be
obtained by the Company or Parent or any of their respective Subsidiaries
in connection with the Merger and the other transactions contemplated by
this Agreement, and to comply with the terms and conditions of such
consent, authorization, order or approval.
7.5. Affiliates. (a) Each of Parent and the Company shall use
its reasonable best efforts to cause each director, executive officer and
other person who is an "affiliate" (for purposes of Rule 145 under the
Securities Act and for purposes of qualifying the Merger for
"pooling-of-interests" accounting treatment) of such party to deliver to
the other party hereto, as soon as practicable after the date of this
Agreement, a written agreement, in the form of Exhibit 7.5(a) hereto (in
the case of affiliates of Parent) or 7.5(b) hereto (in the case of
affiliates of the Company).
(b)Parent shall publish, not later
than 15 days after the end of the first full calendar month following the
month in which the Effective Time occurs, financial results covering at
least 30 days of post-Merger combined operations as contemplated by SEC
Accounting Series Release No. 135.
7.6. Stock Exchange Listing. Parent shall use its reasonable
best efforts to cause the shares of Parent Common Stock to be issued in
the Merger to be approved for quotation on the NASDAQ/NMS, subject to
official notice of issuance, as of the Effective Time.
7.7. Employee Benefit Plans; Existing Agreements. (a) As of
the Effective Time, the employees of the Company and its Subsidiaries
(the "Company Employees") shall be eligible to participate in Parent's
employee benefit plans in which similarly situated employees of Parent or
Parent Bank participate, to the same extent as similarly situated
employees of Parent or Parent Bank (it being understood that inclusion of
Company Employees in Parent's employee benefit plans may occur at
different times with respect to different plans), provided, however, that
Company Employees will not be entitled to participate in any severance
plan or program of Parent during the one-year period following the
Effective Time to the extent that such employees are covered by the
severance arrangements set forth on Section 7.7(d) of the Company
Disclosure Schedule during such one-year period. Notwithstanding the
foregoing, Parent agrees to provide or to cause one of its Subsidiaries
to provide Company Employees, for a period of one year following the
Effective Time, with employee benefit plans or arrangements that are, in
the aggregate, not less favorable than those provided to Company
Employees immediately prior to the Effective Time.
(b) With respect to each Parent Plan
that is an "employee benefit plan," as defined in Section 3(3)of ERISA,
for purposes of determining eligibility to participate, vesting, and
entitlement to benefits, including for severance benefits and vacation
entitlement (but not for accrual of pension benefits), service with the
Company (or predecessor employers to the extent the Company provides past
service credit) shall be treated as service with Parent; provided
however, that such service shall not be recognized to the extent that
such recognition would result in a duplication of benefits. Such service
also shall apply for purposes of satisfying any waiting periods, evidence
of insurability requirements, or the application of any preexisting
condition limitations. Each Parent Plan shall waive pre-existing
condition limitations to the same extent waived under the applicable
Company Plan. Company Employees shall be given credit for amounts paid
under a corresponding benefit plan during the same period for purposes of
applying deductibles, copayments and out-of-pocket maximums as though
such amounts had been paid in accordance with the terms and conditions of
the Parent Plan.
(c) As of the Effective Time, Parent
shall assume and honor and shall cause the appropriate Subsidiaries of
Parent to assume and to honor in accordance with their terms all
employment, severance and other compensation agreements and arrangements
existing prior to the execution of this Agreement which are between the
Company or any of its Subsidiaries and any director, officer or employee
thereof and which have been disclosed in the Company Disclosure Schedule.
Parent acknowledges and agrees that the Merger constitutes a "Change in
Control" for all purposes pursuant to those agreements and arrangements
indicated on Section 4.11 of the Company Disclosure Schedule. The
provisions of this Section 7.7(c) are intended to be for the benefit of,
and shall be enforceable by, each such director, officer or employee.
(d) Parent and the Company agree that,
prior to the Effective Time, the Company shall adopt a severance plan
substantially as provided in Section 7.7(d) of the Company Disclosure
Schedule. Parent agrees to maintain and to cause each of its Subsidiaries
to maintain such plan, without modification.
(e) Parent agrees that, during the one
year period following the Effective Time, no Company Employee who is an
"affiliate" as contemplated by Section 7.5(a) of this Agreement shall be
involuntarily terminated other than for "Cause" (as such term is defined
in the Change of Control Termination Agreements listed on Section 4.11(a)
of the Company Disclosure Schedule (regardless of whether such Company
Employee is a party to any such agreement)), unless such Company Employee
has been given written notice of such involuntary termination at least 60
days prior to the date of termination (provided, that no such notice may
be given prior to the Effective Time). This Section 7.7(e) is intended to
be for the benefit of, and shall be enforceable by, each such Company
Employee.
(f) Parent agrees that, from and after the Effective
Time, Parent shall assume and agree to perform all of the Company's
obligations under the Deferred Income Plans (as such Deferred Income
Plans may be amended pursuant to Section 6.1(j) hereof). Without limiting
the generality of the foregoing, Parent agrees not to terminate or amend
the Deferred Income Plans with respect to amounts deferred thereunder as
of the Effective Time in any manner adverse to the interests of any of
the participants in such plans, including, without limitation, the rights
of such participants to continue to accrue interest on amounts deferred
under the Deferred Income Plans at the most favorable interest rates
provided for in the applicable deferral agreement. The provisions of this
Section 7.7(f) are intended to be for the benefit of, and shall be
enforceable by, each participant in the Deferred Income Plans.
(g) As soon as practicable after the
date of this Agreement, the Company and Parent shall establish a
committee (the "Committee") consisting of the persons set forth in
Section 7.7(g) of the Company Disclosure Schedule. The Committee shall
operate in accordance with the procedures set forth in Section 7.7(g) of
the Company Disclosure Schedule. The Committee shall direct the payment
of retention and other compensatory payments or severance to Company
Employees from and after the Effective Time in amounts and on such terms
and conditions as are determined by the Committee. Parent shall pay or
cause to be paid all such amounts as directed by the Committee, provided,
however, that in no event shall Parent be required to pay or cause to be
paid an amount in excess of $10 million in the aggregate (the "Section
7.7(g) Amount") pursuant to this Section 7.7(g), provided further,
however, that the Section 7.7(g) Amount shall be reduced on a
dollar-for-dollar basis to the extent that the amounts paid pursuant to
the severance arrangements set forth in Section 7.7(d) of the Company
Disclosure Schedule exceed $13.5 million, but in no event shall the
Section 7.7(g) Amount be less than $8.5 million. Parent's obligation to
make the payments contemplated by this Section 7.7(g) is intended to be
for the benefit of, and shall be enforceable by, each of the Company
Employees to whom the Committee has made an award.
7.8. Indemnification. (a) In the event of any threatened or
actual claim, action, suit, proceeding or investigation, whether civil,
criminal or administrative, including, without limitation, any such
claim, action, suit, proceeding or investigation in which any person who
is now, or has been at any time prior to the date of this Agreement, or
who becomes prior to the Effective Time, a director, officer or employee
of the Company or any of its Subsidiaries (the "Indemnified Parties") is,
or is threatened to be, made a party based in whole or in part on, or
arising in whole or in part out of, or pertaining to (i) the fact that he
is or was a director, officer or employee of the Company, any of the
Subsidiaries of the Company or any of their respective predecessors or
affiliates or (ii) this Agreement or any of the transactions contemplated
hereby, whether in any case asserted or arising before or after the
Effective Time, the parties hereto agree to cooperate and use their best
efforts to defend against and respond thereto. It is understood and
agreed that after the Effective Time, Parent shall indemnify and hold
harmless, as and to the extent permitted by law, each such Indemnified
Party against any losses, claims, damages, liabilities, costs, expenses
(including reasonable attorney's fees and expenses in advance of the
final disposition of any claim, suit, proceeding or investigation to each
Indemnified Party to the fullest extent permitted by law upon receipt of
any undertaking required by applicable law), judgments, fines and amounts
paid in settlement in connection with any such threatened or actual
claim, action, suit, proceeding or investigation, and in the event of any
such threatened or actual claim, action, suit, proceeding or
investigation (whether asserted or arising before or after the Effective
Time), the Indemnified Parties may retain counsel reasonably satisfactory
to them after consultation with Parent; provided, however, that (1)
Parent shall have the right to assume the defense thereof and upon such
assumption Parent shall not be liable to any Indemnified Party for any
legal expenses of other counsel or any other expenses subsequently
incurred by any Indemnified Party in connection with the defense thereof,
except that if Parent elects not to assume such defense or counsel for
the Indemnified Parties reasonably advises that there are issues which
raise conflicts of interest between Parent and the Indemnified Parties,
the Indemnified Parties may retain counsel reasonably satisfactory to
them after consultation with Parent, and Parent shall pay the reasonable
fees and expenses of such counsel for the Indemnified Parties, (2) Parent
shall in all cases be obligated pursuant to this paragraph to pay for
only one firm of counsel for all Indemnified Parties, (3) Parent shall
not be liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld) and (4) Parent
shall have no obligation hereunder to any Indemnified Party when and if a
court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and nonappealable, that
indemnification of such Indemnified Party in the manner contemplated
hereby is prohibited by applicable law. Any Indemnified Party wishing to
claim Indemnification under this Section 7.8, upon learning of any such
claim, action, suit, proceeding or investigation, shall promptly notify
Parent thereof, provided that the failure to so notify shall not affect
the obligations of Parent under this Section 7.8 except to the extent
such failure to notify materially prejudices Parent. Parent's obligations
under this Section 7.8 shall continue in full force and effect without
time limit from and after the Effective Time.
(b) Parent shall cause the persons
serving as officers and directors of the Company immediately prior to the
Effective Time to be covered for a period of three years from the
Effective Time by the directors' and officers' liability insurance policy
maintained by the Company (provided that Parent may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are not less advantageous than such policy) with respect
to acts or omissions occurring prior to the Effective Time which were
committed by such officers and directors in their capacity as such;
provided, however, that in no event shall Parent be required to expend on
an annual basis more than 200% of the current amount expended by the
Company (the "Insurance Amount") to maintain or procure insurance
coverage, and further provided that if Parent is unable to maintain or
obtain the insurance called for by this Section 7.8(b), Parent shall use
all reasonable efforts to obtain as much comparable insurance as is
available for the Insurance Amount.
(c) In the event Parent or any of its successors or
assigns (i) consolidates with or merges into any other person and shall
not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all or
substantially all of its properties and assets to any person, then, and
in each such case, to the extent necessary, proper provision shall be
made so that the successors and assigns of Parent assume the obligations
set forth in this section.
(d) The provisions of this Section 7.8 are intended
to be for the benefit of, and shall be enforceable by, each Indemnified
Party and his or her heirs and representatives.
7.9. Additional Agreements. In case at any time after the
Effective Time any further action is necessary or desirable to carry out
the purposes of this Agreement or to vest the Surviving Corporation with
full title to all properties, assets, rights, approvals, immunities and
franchises of any of the parties to the Merger, the proper officers and
directors of each party to this Agreement and their respective
Subsidiaries shall take all such necessary action as may be reasonably
requested by Parent.
7.10. Directorships. Parent shall cause its Board of
Directors to be expanded by five members and shall appoint those persons
mutually agreed upon by Parent and the Company from among those persons
currently serving on the Company's Board of Directors (such persons, and
any substitute person as provided in the last sentence of this paragraph,
the "Nominees") to fill the vacancies on Parent's Board of Directors
created by such increase as of the Effective Time. In the event any
Nominee shall be appointed or elected to a class of directors of Parent
the term of which class of directors expires prior to December 31, 1999,
Parent shall include such person on the list of nominees for director
presented by the Board of Directors of Parent and for which said Board
shall solicit proxies at the annual meeting of stockholders of Parent
following the Effective Time at which directors are elected for such
class. In the event that any Nominee is unable to serve as a director of
Parent as a result of illness, death, resignation or any other reason,
Parent shall elect a member of the Advisory Boards established pursuant
to Section 7.12 hereof selected by Parent as a substitute nominee in
accordance with this Section 7.10.
7.11. Coordination of Dividends. After the date of this
Agreement each of Parent and the Company shall coordinate with the other
the declaration of any dividends in respect of the Parent Common Stock
and the Company Common Stock and the record dates and payments dates
relating thereto, it being the intention of the parties that the holders
of Parent Common Stock or Company Common Stock shall not receive more
than one dividend, or fail to receive one dividend, for any single
calendar quarter with respect to their shares of Parent Common Stock
and/or Company Common Stock and any shares of Parent Common Stock any
holder of Company Common Stock receives in exchange therefor in the
Merger.
7.12. Advisory Boards. Promptly following the Effective Time,
Parent shall cause, for a period of not less than thirty-six months after
the Effective Time, those persons who are members of the Board of
Directors of the Company (other than any such persons who shall be
appointed to the Board of Directors of Parent pursuant to Section 7.10)
and those persons who are members of the Board of Directors of the
Company Bank to be appointed or elected as members of one of the Company
Bank's existing community advisory boards. In addition, following the
Effective Time, Parent shall cause those persons who are members of such
community advisory boards as of the Effective Time to continue to be
members of such boards for a period of not less than thirty-six months
after the Effective Time. From and after the Effective Time, such
advisory boards shall meet four times per year. Each such advisory
director shall be paid retainers and meeting fees which, in the
aggregate, on an annual basis, are no less than the retainers and meeting
fees (in respect of four meetings per year) paid to members of the
Company Bank's Jackson Advisory Board during calendar year 1997 (assuming
all meetings were attended) and which fees have been previously described
to Parent.
7.13. Foundation. At or prior to the Effective Time, Parent
shall establish, and contribute $15 million to, a charitable foundation
for the benefit of the communities served by the Company and its
Subsidiaries, which foundation shall be administered by a board to be
appointed by the Board of Directors of the Company, in consultation with
Parent, prior to the Effective Time.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1. Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of
the following conditions:
(a) Stockholder Approvals. This Agreement shall have
been approved and adopted by the requisite vote of the stockholders of
the Company under applicable law, and the Parent Vote Matters shall have
been approved by the requisite votes of the stockholders of Parent under
applicable law.
(b) Listing of Shares. The shares of
Parent Common Stock which shall be issued to the stockholders of the
Company upon consummation of the Merger shall have been authorized for
quotation on the NASDAQ/NMS, subject to official notice of issuance.
(c) Other Approvals. All regulatory
approvals required to consummate the transactions contemplated hereby
(including the Merger) shall have been obtained and shall remain in full
force and effect and all statutory waiting periods in respect thereof
shall have expired (all such approvals and the expiration of all such
waiting periods being referred to herein as the "Requisite Regulatory
Approvals").
(d) S-4. The S-4 shall have become
effective under the Securities Act and no stop order suspending the
effectiveness of the S-4 shall have been issued and no proceedings for
that purpose shall have been initiated or threatened by the SEC.
(e) No Injunctions or Restraints;
Illegality. No order, injunction or decree issued by any court or agency
of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in
effect. No statute, rule, regulation, order, injunction or decree shall
have been enacted, entered, promulgated or enforced by any Governmental
Entity which prohibits, restricts or makes illegal consummation of the
Merger.
8.2. Conditions to Obligations of Parent. The obligation of
Parent to effect the Merger is also subject to the satisfaction or waiver
by Parent at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties.
(i) Subject to Section 3.2, the representations and warranties of the
Company set forth in this Agreement (other than those set forth in
Section 4.2) shall be true and correct as of the date of this Agreement
and (except to the extent such representations and warranties speak as of
an earlier date) as of the Closing Date as though made on and as of the
Closing Date; and (ii) the representations and warranties of the Company
set forth in Section 4.2 of this Agreement shall be true and correct in
all material respects (without giving effect to Section 3.2 of this
Agreement) as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date. Parent
shall have received a certificate signed on behalf of the Company by the
Chief Executive Officer and the Chief Financial Officer of the Company to
the foregoing effect.
(b) Performance of Obligations of the
Company. The Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or
prior to the Closing Date, and Parent shall have received a certificate
signed on behalf of the Company by the Chief Executive Officer and the
Chief Financial Officer of the Company to such effect.
(c) No Pending Governmental Actions.
No proceeding initiated by any Governmental Entity seeking an Injunction
shall be pending.
(d) Federal Tax Opinion. Parent shall have received
an opinion from Wachtell, Lipton, Rosen & Katz, counsel to Parent
("Parent's Counsel"), in form and substance reasonably satisfactory to
Parent, dated the Effective Time, substantially to the effect that, on
the basis of facts, representations and assumptions set forth in such
opinion which are consistent with the state of facts existing at the
Effective Time, the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code and that, accordingly, for federal
income tax purposes:
(i) No gain or loss will be recognized
by Parent or the Company as a result of the Merger;
(ii) No gain or loss will be recognized by the
shareholders of the Company who exchange all of their Company
Common Stock solely for Parent Common Stock pursuant to the Merger
(except with respect to cash received in lieu of a fractional share
interest in Parent Common Stock); and
(iii) The aggregate tax basis of the Parent Common
Stock received by shareholders who exchange all of their Company
Common Stock solely for Parent Common Stock pursuant to the Merger
will be the same as the aggregate tax basis of the Company Common
Stock surrendered in exchange therefor (reduced by any amount
allocable to a fractional share interest for which cash is
received).
In rendering such opinion, Parent's Counsel may require and rely upon
representations and covenants, including those contained in certificates
of officers of Parent, the Company and others, reasonably satisfactory in
form and substance to such counsel.
(e) Pooling of Interests. Parent shall have received
a letter from KPMG Peat Marwick LLP addressed to Parent, to the effect
that the Merger will qualify for "pooling of interests" accounting
treatment.
8.3. Conditions to Obligations of the Company. The obligation
of the Company to effect the Merger is also subject to the satisfaction
or waiver by the Company at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. (i) Subject to
Section 3.2, the representations and warranties of Parent set forth in
this Agreement (other than those set forth in Section 5.2) shall be true
and correct as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date; and (ii)
the representations and warranties of Parent set forth in Section 5.2 of
this Agreement shall be true and correct in all material respects
(without giving effect to Section 3.2 of this Agreement) as of the date
of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date. The Company shall have received a
certificate signed on behalf of Parent by the Chief Executive Officer and
the principal financial officer of Parent to the foregoing effect.
(b) Performance of Obligations of
Parent. Parent shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or
prior to the Closing Date, and the Company shall have received a
certificate signed on behalf of Parent by the Chief Executive Officer and
the principal financial officer of Parent to such effect.
(c) No Pending Governmental Actions.
No proceeding initiated by any Governmental Entity seeking an Injunction
shall be pending.
(d) Federal Tax Opinion. The Company
shall have received an opinion from Skadden, Arps, Slate, Meagher & Flom
LLP (the "Company's Counsel"), in form and substance reasonably
satisfactory to the Company, dated the Effective Time, substantially to
the effect that, on the basis of facts, representations and assumptions
set forth in such opinion which are consistent with the state of facts
existing at the Effective Time, the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code and that,
accordingly, for federal income tax purposes:
(i) No gain or loss will be recognized by Parent
or the Company as a result of the Merger;
(ii) No gain or loss will be recognized by the
shareholders of the Company who exchange all of their Company
Common Stock solely for Parent Common Stock pursuant to the Merger
(except with respect to cash received in
lieu of a fractional share interest in Parent
Common Stock); and
(iii) The aggregate tax basis of the Parent Common
Stock received by shareholders who exchange all of their Company
Common Stock solely for Parent Common Stock pursuant to the Merger
will be the same as the aggregate tax basis of the Company Common
Stock surrendered in exchange therefor (reduced by any amount
allocable to a fractional share interest for which cash is
received).
In rendering such opinion, the Company's Counsel may require and rely
upon representations and covenants, including those contained in
certificates of officers of Parent, the Company and others, reasonably
satisfactory in form and substance to such counsel.
(e) Pooling of Interests. The Company
shall have received a letter from KPMG Peat Marwick LLP addressed to
Parent, to the effect that the Merger will qualify for "pooling of
interests" accounting treatment.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1. Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Merger by the stockholders of
both the Company and Parent:
(a) by mutual consent of the Company and Parent in a
written instrument, if the Board of Directors of each so determines by a
vote of a majority of the members of its entire Board;
(b) by either Parent or the Company upon written
notice to the other party (i) 60 days after the date on which any request
or application for a Requisite Regulatory Approval shall have been denied
or withdrawn at the request or recommendation of the Governmental Entity
which must grant such Requisite Regulatory Approval, unless within the
60-day period following such denial or withdrawal a petition for
rehearing or an amended application has been filed with the applicable
Governmental Entity, provided, however, that no party shall have the
right to terminate this Agreement pursuant to this Section 9.1(b)(i) if
such denial or request or recommendation for withdrawal shall be due to
the failure of the party seeking to terminate this Agreement to perform
or observe the covenants and agreements of such party set forth herein or
(ii) if any Governmental Entity of competent jurisdiction shall have
issued a final nonappealable order enjoining or otherwise prohibiting the
Merger;
(c) by either Parent or the Company if
the Merger shall not have been consummated on or before September 30,
1998, unless the failure of the Closing to occur by such date shall be
due to the failure of the party seeking to terminate this Agreement to
perform or observe the covenants and agreements of such party set forth
herein;
(d) by either Parent or the Company
(provided that the terminating party shall not be in material breach of
any of its obligations under Section 7.3) if any approval of the
stockholders of either of the Company or Parent required for the
consummation of the Merger shall not have been obtained by reason of the
failure to obtain the required vote at a duly held meeting of such
stockholders or at any adjournment or postponement thereof;
(e) by either Parent or the Company (provided that
the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein)
if there shall have been a material breach of any of the representations
or warranties set forth in this Agreement on the part of the other party,
which breach is not cured within thirty days following written notice to
the party committing such breach, or which breach, by its nature, cannot
be cured prior to the Closing; provided, however, that neither party
shall have the right to terminate this Agreement pursuant to this Section
9.1(e) unless the breach of representation or warranty, together with all
other such breaches, would entitle the party receiving such
representation not to consummate the transactions contemplated hereby
under Section 8.2(a) (in the case of a breach of representation or
warranty by the Company) or Section 8.3(a) (in the case of a breach of
representation or warranty by Parent);
(f) by either Parent or the Company
(provided that the terminating party is not then in material breach of
any representation, warranty, covenant or other agreement contained
herein) if there shall have been a material breach of any of the
covenants or agreements set forth in this Agreement on the part of the
other party, which breach shall not have been cured within thirty days
following receipt by the breaching party of written notice of such breach
from the other party hereto, or which breach, by its nature, cannot be
cured prior to the Closing;
(g) by the Board of Directors of
Parent, if the Board of Directors of the Company shall have failed to
recommend in the Proxy Statement that the Company's stockholders approve
and adopt this Agreement, or shall have withdrawn, modified or changed in
a manner adverse to Parent its approval or recommendation of this
Agreement and the transactions contemplated hereby; or
(h) by the Company at any time during
the ten-day period commencing two days after the Determination Date (as
defined below), if either (x) both of the following conditions are
satisfied:
(1) the Average Closing Price (as defined below) shall be
less than the product of 0.80 and the Starting Price; and
(2) (i) the number obtained by dividing the Average Closing
Price by the Starting Price (such number being referred to herein
as the "Parent Ratio") shall be less than (ii) the number obtained
by dividing the Index Price on the Determination Date by the Index
Price on the Starting Date and subtracting 0.15 from such quotient
(such number being referred to herein as the "Index Ratio");
or (y) the Average Closing Price shall be less than the product of 0.75
and the Starting Price; subject to the following four sentences. If the
Company elects to exercise its termination right pursuant to the
immediately preceding sentence, it shall give prompt written notice to
Parent which notice shall specify which of clauses (x) or (y) is
applicable (or if both would be applicable, which clause is being
invoked); provided that such notice of election to terminate may be
withdrawn at any time within the aforementioned ten-day period. During
the five-day period commencing with its receipt of such notice, Parent
shall have the option in the case of a termination invoked under clause
(x), of adjusting the Exchange Ratio to equal the lesser of (i) a number
equal to a quotient (rounded to the nearest one-ten-thousandth), the
numerator of which is the product of 0.80, the Starting Price and the
Exchange Ratio (as then in effect) and the denominator of which is the
Average Closing Price, and (ii) a number equal to a quotient (rounded to
the nearest one-ten-thousandth), the numerator of which is the Index
Ratio multiplied by the Exchange Ratio (as then in effect) and the
denominator of which is the Parent Ratio. During such five-day period,
Parent shall have the option, in the case of a termination invoked under
clause (y), to elect to increase the Exchange Ratio to equal a number
equal to a quotient (rounded to the nearest one-ten-thousandth), the
numerator of which is the product of 0.75, the Starting Price and the
Exchange Ratio (as then in effect) and the denominator of which is the
Average Closing Price. If Parent makes an election contemplated by either
of the two preceding sentences, within such five-day period, it shall
give prompt written notice to the Company of such election and the
revised Exchange Ratio, whereupon no termination shall have occurred
pursuant to this Section 9.1(g) and this Agreement shall remain in effect
in accordance with its terms (except as the Exchange Ratio shall have
been so modified), and any references in this Agreement to "Exchange
Ratio" shall thereafter be deemed to refer to the Exchange Ratio as
adjusted pursuant to this Section 9.1(g). For purposes of this Section
9.1(g), the following terms shall have the meanings indicated:
"Average Closing Price" means the average of the last reported sale
prices per share of Parent Common Stock as reported on NASDAQ/NMS (as
reported in The Wall Street Journal or, if not reported therein, in
another mutually agreed upon authoritative source) for the 20 consecutive
trading days on NASDAQ/NMS ending at the close of trading on the
Determination Date.
"Determination Date" means the fifth business day prior to the date
on which the approval of the Federal Reserve Board required for
consummation of the Merger shall be received, without regard to any
requisite waiting periods in respect thereof.
"Index Group" means the group of each of the 34 bank holding
companies listed below, the common stock of all of which shall be
publicly traded and as to which there shall not have been, since the
Starting Date and before the Determination Date, an announcement of a
proposal for such company to be acquired or for such company to acquire
another company or companies in transactions with a value exceeding 25%
of the acquiror's market capitalization as of the Starting Date. In the
event that the common stock of any such company ceases to be publicly
traded or any such announcement is made with respect to any such company,
such company will be removed from the Index Group, and the weights (which
have been determined based on the number of outstanding shares of common
stock) redistributed proportionately for purposes of determining the
Index Price. The 34 bank holding companies and the weights attributed to
them are as follows:
BANK HOLDING COMPANY WEIGHTING
AmSouth Bancorporation.......................................... 1.1%
BankAmerica Corporation......................................... 9.1
Banc One Corporation............................................ 7.7
BB&T Corporation................................................ 1.8
The Bank of New York Company, Inc............................... 4.9
BankBoston Corporation.......................................... 1.9
Comerica, Inc................................................... 1.4
Crestar Financial Corporation................................... 1.4
Fifth Third Bancorp............................................. 2.0
First Chicago NBD Corporation................................... 3.8
Fleet Financial Group........................................... 3.3
Firstar Corporation............................................. 1.9
First Union Corporation......................................... 7.4
First Virginia Banks, Inc....................................... 0.7
Huntington Bancshares, Inc...................................... 2.5
Hibernia Corporation............................................ 1.7
KeyCorp......................................................... 2.9
Mellon Bank Corporation......................................... 3.3
Mercantile Bancorporation, Inc.................................. 1.7
NationsBank Corporation......................................... 9.2
National City Corporation....................................... 2.8
Norwest Corporation............................................. 9.8
PNC Bank Corporation............................................ 4.0
Regions Financial Corporation................................... 1.8
Star Banc Corporation........................................... 1.1
SunTrust Banks, Inc............................................. 2.8
UnionBanCal Corporation......................................... 0.7
Union Planters Corporation...................................... 0.9
U.S. Bancorp.................................................... 3.2
Wachovia Corporation............................................ 2.1
Wells Fargo & Company........................................... 1.1
100.0%
"Index Price" on a given date means the weighted average (weighted
in accordance with the factors listed above) of the closing prices of the
companies comprising the Index Group.
"Starting Date" means December 5, 1997.
"Starting Price" shall mean the last reported sale price per share
of Parent Common Stock on the Starting Date, as reported by NASDAQ/NMS
(as reported in The Wall Street Journal or, if not reported therein, in
another mutually agreed upon authoritative source).
If any company belonging to the Index Group or Parent declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the
Starting Date and the Determination Date, the prices for the common stock
of such company or Parent shall be appropriately adjusted for the
purposes of applying this Section 9.1(g).
9.2. Effect of Termination. In the event of termination of
this Agreement by either Parent or the Company as provided in Section
9.1, this Agreement shall forthwith become void and have no effect except
(i) Sections 7.2(b), 9.2 and 10.3 shall survive any termination of this
Agreement and (ii) that notwithstanding anything to the contrary
contained in this Agreement, no party shall be relieved or released from
any liabilities or damages arising out of its willful breach of any
provision of this Agreement.
9.3. Amendment. Subject to compliance with applicable law,
this Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors, at any time before or
after approval of the matters presented in connection with the Merger by
the stockholders of either the Company or Parent; provided, however, that
after any approval of the transactions contemplated by this Agreement by
the Company's stockholders, there may not be, without further approval of
such stockholders, any amendment of this Agreement which reduces the
amount or changes the form of the consideration to be delivered to the
Company stockholders hereunder other than as contemplated by this
Agreement. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
9.4. Extension; Waiver. At any time prior to the Effective
Time, each of the parties hereto, by action taken or authorized by its
Board of Directors, may, to the extent legally allowed, (a) extend the
time for the performance of any of the obligations or other acts of the
other party hereto, (b) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions of the other party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in a written instrument signed on behalf
of such party, but such extension or waiver or failure to insist on
strict compliance with an obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE X
GENERAL PROVISIONS
10.1. Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") will take place at
10:00 a.m. on the first day which is (a) the last business day of month
and (b) at least two business days after the satisfaction or waiver
(subject to applicable law) of the latest to occur of the conditions set
forth in Article VIII hereof (other than those conditions which relate to
actions to be taken at the Closing)(the "Closing Date"), at such time,
date and place as is agreed to by the parties hereto.
10.2. Nonsurvival of Representations, Warranties and
Agreements. None of the representations, warranties, covenants and
agreements in this Agreement or in any instrument delivered pursuant to
this Agreement (other than pursuant to the Stock Option Agreement which
shall terminate in accordance with its terms) shall survive the Effective
Time, except for those covenants and agreements contained herein and
therein which by their terms apply in whole or in part after the
Effective Time.
10.3. Expenses. All costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses.
10.4. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation), mailed by registered or certified mail
(return receipt requested) or delivered by an express courier (with
confirmation) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent, to:
First American Corporation
First American Center
Nashville, Tennessee 37237-0700
Attention: Chief Executive Officer
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 W. 52nd Street
New York, New York 10019
Attention: Edward D. Herlihy, Esq.
and
(b) if to the Company, to:
Deposit Guaranty Corp.
210 East Capital Street
Jackson, Mississippi 39201
Attention: Chief Executive Officer
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom LLP
919 Third Avenue
New York, New York 10022
Attn: William S. Rubenstein, Esq.
10.5. Interpretation. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference shall be to
a Section of or Exhibit or Schedule to this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". The
phrases "the date of this Agreement", "the date hereof" and terms of
similar import, unless the context otherwise requires, shall be deemed to
refer to December 7, 1997.
10.6. Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
10.7. Entire Agreement. This Agreement (including the
documents and the instruments referred to herein) constitutes the entire
agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter
hereof, other than the Stock Option Agreement and the Confidentiality
Agreement.
10.8. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York, without
regard to any applicable conflicts of law.
10.9. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that the provisions contained
in 7.2(b) of this Agreement were not performed in accordance with its
specific terms or was otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of Section 7.2(b) of this Agreement and to enforce specifically
the terms and provisions thereof in any court of the United States or any
state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
10.10. Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad
as is enforceable.
10.11. Publicity. Except as otherwise required by law or the
rules of the New York Stock Exchange or the NASDAQ/NMS, so long as this
Agreement is in effect, neither Parent nor the Company shall, or shall
permit any of its Subsidiaries to, issue or cause the publication of any
press release or other public announcement with respect to, or otherwise
make any public statement concerning, the transactions contemplated by
this Agreement without the consent of the other party, which consent
shall not be unreasonably withheld.
10.12. Assignment; Third Party Beneficiaries. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their
respective successors and assigns. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred
to herein) is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
IN WITNESS WHEREOF, Parent and the Company have caused this
Agreement to be executed by their respective officers thereunto duly
authorized as of the date first above written.
FIRST AMERICAN CORPORATION
By /s/ Dennis C. Bottorff
________________________________
Name: Dennis C. Bottorff
Title: Chairman, President and
Chief Executive Officer
DEPOSIT GUARANTY CORP.
By /s/ E.B. Robinson, Jr.
________________________________
Name: E.B. Robinson, Jr.
Title: President and Chief
Executive Officer
AGREEMENT AND PLAN OF MERGER
Between
FIRST AMERICAN CORPORATION
and
DEPOSIT GUARANTY CORP.
Dated as of December 7, 1997
TABLE OF CONTENTS
ARTICLE I
THE MERGER
1.1. The Merger....................................................1
1.2. Effective Time................................................2
1.3. Effects of the Merger.........................................2
1.4. Conversion of Company Common Stock............................2
1.5. Stock Options.................................................4
1.6. Parent Common Stock...........................................5
1.7. Charter. .....................................................6
1.8. By-Laws .....................................................6
1.9. Directors and Officers........................................6
1.10. Tax Consequences; Accounting Treatment........................6
ARTICLE II
EXCHANGE OF SHARES
2.1. Parent to Make Shares Available...............................6
2.2. Exchange of Shares............................................7
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
3.1. Disclosure Schedules..........................................9
3.2. Standards....................................................10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1. Corporate Organization.......................................11
4.2. Capitalization...............................................12
4.3. Authority; No Violation......................................14
4.4. Consents and Approvals.......................................15
4.5. Reports ....................................................16
4.6. Financial Statements.........................................17
4.7. Broker's Fees................................................18
4.8. Absence of Certain Changes or Events.........................18
4.9. Legal Proceedings............................................19
4.10. Taxes ....................................................19
4.11. Employees....................................................20
4.12. SEC Reports..................................................22
4.13. Company Information..........................................22
4.14. Compliance with Applicable Law...............................23
4.15. Certain Contracts............................................23
4.16. Agreements with Regulatory Agencies..........................24
4.17. Business Combination Provision;
Take-over Laws....................................24
4.18. Administration of Fiduciary Accounts.........................25
4.19. Environmental Matters........................................25
4.20. Opinion. ....................................................26
4.21. Approvals....................................................26
4.22. Loan Portfolio...............................................27
4.23. Property ....................................................28
4.24. Accounting for the Merger;
Reorganization....................................28
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT
5.1. Corporate Organization.......................................29
5.2. Capitalization...............................................30
5.3. Authority; No Violation......................................31
5.4. Consents and Approvals.......................................32
5.5. Reports ....................................................33
5.6. Financial Statements.........................................34
5.7. Broker's Fees................................................35
5.8. Absence of Certain Changes or Events.........................35
5.9. Legal Proceedings............................................35
5.10. Taxes ....................................................35
5.11. Employees....................................................36
5.12. SEC Reports..................................................37
5.13. Parent Information...........................................37
5.14. Compliance with Applicable Law...............................38
5.15. Ownership of Company Common Stock;
Affiliates and Associates.........................38
5.16. Agreements with Regulatory Agencies..........................38
5.17. Environmental Matters........................................39
5.18. Opinion ....................................................40
5.19. Approvals....................................................40
5.20. Loan Portfolio...............................................40
5.21. Property ....................................................41
5.22. Accounting for the Merger;
Reorganization....................................42
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1. Covenants of the Company.....................................42
6.2. Covenants of Parent..........................................47
6.3. Conduct of Parent's Business.................................48
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Regulatory Matters...........................................48
7.2. Access to Information........................................49
7.3. Stockholder Meetings.........................................50
7.4. Legal Conditions to Merger...................................51
7.5. Affiliates...................................................51
7.6. Stock Exchange Listing.......................................52
7.7. Employee Benefit Plans; Existing
Agreements........................................52
7.8. Indemnification..............................................55
7.9. Additional Agreements........................................57
7.10. Directorships................................................57
7.11. Coordination of Dividends....................................58
7.12. Advisory Boards..............................................58
7.13. Foundation...................................................58
ARTICLE VIII
CONDITIONS PRECEDENT
8.1. Conditions to Each Party's
Obligation To Effect the Merger...................59
8.2. Conditions to Obligations of Parent..........................60
8.3. Conditions to Obligations of the Company.....................61
ARTICLE IX
TERMINATION AND AMENDMENT
9.1. Termination..................................................63
9.2. Effect of Termination........................................68
9.3. Amendment....................................................69
9.4. Extension; Waiver............................................69
ARTICLE X
GENERAL PROVISIONS
10.1. Closing ....................................................69
10.2. Nonsurvival of Representations,
Warranties and Agreements.........................70
10.3. Expenses ....................................................70
10.4. Notices ....................................................70
10.5. Interpretation...............................................71
10.6. Counterparts.................................................71
10.7. Entire Agreement.............................................71
10.8. Governing Law................................................72
10.9. Enforcement of Agreement.....................................72
10.10.Severability.................................................72
10.11.Publicity....................................................72
10.12.Assignment; Third Party Beneficiaries........................72
EXHIBIT 99.1
******
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated December 7, 1997, between
Deposit Guaranty Corp., a Mississippi corporation ("Issuer"), and First
American Corporation, a Tennessee corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement
and Plan of Merger of even date herewith (the "Merger Agreement"), which
agreement has been executed by the parties hereto immediately prior to
this Stock Option Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant
Grantee the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the Merger
Agreement, the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms
hereof, up to 8,122,730 fully paid and nonassessable shares of Issuer's
Common Stock, no par value ("Common Stock"), at a price of $52.375 per
share (the "Option Price"); provided, however, that in no event shall the
number of shares of Common Stock for which this Option is exercisable
exceed 19.9% of the Issuer's issued and outstanding shares of Common
Stock without giving effect to any shares subject to or issued pursuant
to the Option. The number of shares of Common Stock that may be received
upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock
are either (i) issued or otherwise become outstanding after the date of
this Agreement (other than pursuant to this Agreement) or (ii) redeemed,
repurchased, retired or otherwise cease to be outstanding after the date
of the Agreement, the number of shares of Common Stock subject to the
Option shall be increased or decreased, as appropriate, so that, after
such issuance, such number equals 19.9% of the number of shares of Common
Stock then issued and outstanding without giving effect to any shares
subject or issued pursuant to the Option. Nothing contained in this
Section 1(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if, both an
Initial Triggering Event (as hereinafter defined) and a Subsequent
Triggering Event (as hereinafter defined) shall have occurred prior to
the occurrence of an Exercise Termination Event (as hereinafter defined),
provided that the Holder shall have sent the written notice of such
exercise (as provided in subsection (e) of this Section 2) within 90 days
following such Subsequent Triggering Event. Each of the following shall
be an "Exercise Termination Event": (i) the Effective Time (as defined in
the Merger Agreement) of the Merger; (ii) termination of the Merger
Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event except a
termination by Grantee pursuant to Section 9.1(f) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of termination is
non-volitional); or (iii) the passage of 12 months after termination of
the Merger Agreement if such termination follows the occurrence of an
Initial Triggering Event or is a termination by Grantee pursuant to
Section 9.1(f) of the Merger Agreement (unless the breach by Issuer
giving rise to such right of termination is non-volitional). The term
"Holder" shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written
consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person
(the term "person" for purposes of this Agreement having the
meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and
the rules and regulations thereunder) other than Grantee or any of
its Subsidiaries (each a "Grantee Subsidiary") or the Board of
Directors of Issuer shall have recommended that the shareholders of
Issuer approve or accept any Acquisition Transaction. For purposes
of this Agreement, "Acquisition Transaction" shall mean with
respect to any person except Grantee or any Grantee subsidiary (w)
a merger or consolidation, or any similar transaction, involving
Issuer or any Significant Subsidiary (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) of Issuer, (x) a purchase, lease or other
acquisition or assumption of all or a substantial portion of the
assets or deposits of Issuer or any Significant Subsidiary of
Issuer, (y) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of Issuer, or (z) any
substantially similar transaction; provided, however, that in no
event shall (i) any merger, consolidation, purchase or similar
transaction involving only the Issuer and one or more of its
Subsidiaries, or involving only any two or more of such
Subsidiaries, or (ii) any merger, consolidation or similar
transaction as to which the common stockholders of Issuer
immediately prior thereto own in the aggregate at least 60% of the
common stock of the surviving corporation or its publicly-held
parent corporation immediately following consummation thereof be
deemed to be an Acquisition Transaction, provided that any such
transaction is not entered into in violation of the terms of the
Merger Agreement;
(ii) Issuer or any Issuer Subsidiary, without having
received Grantee's prior written consent, shall have authorized,
recommended, proposed or publicly announced its intention to
authorize, recommend or propose, to engage in an Acquisition
Transaction with any person other than Grantee or a Grantee
Subsidiary, or the Board of Directors of Issuer shall have publicly
withdrawn or modified, or publicly announced its intention to
withdraw or modify, in any manner adverse to Grantee, its
recommendation that the shareholders of Issuer approve the
transactions contemplated by the Merger Agreement in anticipation
of engaging in an Acquisition Transaction;
(iii) Any person other than Grantee, any Grantee
Subsidiary or any Issuer Subsidiary acting in a fiduciary capacity
in the ordinary course of its business shall have acquired
beneficial ownership or the right to acquire beneficial ownership
of 10% or more of the outstanding shares of Common Stock (the term
"beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act, and the
rules and regulations thereunder);
(iv) Any person other than Grantee or any Grantee
Subsidiary shall have made a bona fide proposal to Issuer or its
shareholders by public announcement or written communication that
is or becomes the subject of public disclosure to engage in an
Acquisition Transaction;
(v) After an overture is made by a third party to
Issuer or its shareholders to engage in an Acquisition Transaction,
Issuer shall have breached any covenant or obligation contained in
the Merger Agreement and such breach (x) would entitle Grantee to
terminate the Merger Agreement and (y) shall not have been cured
prior to the Notice Date (as defined below); or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to which
Grantee has given its prior written consent, shall have filed an
application or notice with the Federal Reserve Board, or other
federal or state bank regulatory authority, which application or
notice has been accepted for processing, for approval to engage in
an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either
of the following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial
ownership of 25% or more of the then outstanding Common
Stock; or
(ii) The occurrence of the Initial Triggering Event
described in paragraph (i) of subsection (b) of this Section
2, except that the percentage referred to in clause (y) shall
be 25%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
of which it has notice (together, a "Triggering Event"), it being
understood that the giving of such notice by Issuer shall not be a
condition to the right of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the date
of which being herein referred to as the "Notice Date") specifying (i)
the total number of shares it will purchase pursuant to such exercise and
(ii) a place and date not earlier than three business days nor later than
60 business days from the Notice Date for the closing of such purchase
(the "Closing Date"); provided that if prior notification to or approval
of the Federal Reserve Board or any other regulatory agency is required
in connection with such purchase, the Holder shall promptly file the
required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run pursuant
to this sentence shall run instead from the date on which any required
notification periods have expired or been terminated or such approvals
have been obtained and any requisite waiting period or periods shall have
passed. Any exercise of the Option shall be deemed to occur on the Notice
Date relating thereto.
(f) At the closing referred to in subsection (e) of this
Section 2, the Holder shall pay to Issuer the aggregate purchase price
for the shares of Common Stock purchased pursuant to the exercise of the
Option in immediately available funds by wire transfer to a bank account
designated by Issuer, provided that failure or refusal of Issuer to
designate such a bank account shall not preclude the Holder from
exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this Section
2, Issuer shall deliver to the Holder a certificate or certificates
representing the number of shares of Common Stock purchased by the Holder
and, if the Option should be exercised in part only, a new Option
evidencing the rights of the Holder thereof to purchase the balance of
the shares purchasable hereunder, and the Holder shall deliver to Issuer
this Agreement and a letter agreeing that the Holder will not offer to
sell or otherwise dispose of such shares in violation of applicable law
or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate
is subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale
restrictions arising under the Securities Act of 1933, as
amended. A copy of such agreement is on file at the principal
office of Issuer and will be provided to the holder hereof
without charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act"),
in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the Holder shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of
counsel, in form and substance reasonably satisfactory to Issuer, to the
effect that such legend is not required for purposes of the 1933 Act;
(ii) the reference to the provisions to this Agreement in the above
legend shall be removed by delivery of substitute certificate(s) without
such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend shall be
removed in its entirety if the conditions in the preceding clauses (i)
and (ii) are both satisfied. In addition, such certificates shall bear
any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the
written notice of exercise of the Option provided for under subsection
(e) of this Section 2 and the tender of the applicable purchase price in
immediately available funds, the Holder shall be deemed to be the holder
of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be
closed or that certificates representing such shares of Common Stock
shall not then be actually delivered to the Holder. Issuer shall pay all
expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation,
issue and delivery of stock certificates under this Section 2 in the name
of the Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common
Stock; (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or
by any other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by Issuer; (iii) promptly to take all
action as may from time to time be required (including (x) complying with
all premerger notification, reporting and waiting period requirements
specified in 15 U.S.C. ss. 18a and regulations promulgated thereunder and
(y) in the event, under the Bank Holding Company Act of 1956, as amended
(the "BHCA"), or the Change in Bank Control Act of 1978, as amended, or
any state banking law, prior approval of or notice to the Federal Reserve
Board or to any state regulatory authority is necessary before the Option
may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal
Reserve Board or such state regulatory authority as they may require) in
order to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and (iv)
promptly to take all action provided herein to protect the rights of the
Holder against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal office of
Issuer, for other Agreements providing for Options of different
denominations entitling the holder thereof to purchase, on the same terms
and subject to the same conditions as are set forth herein, in the
aggregate the same number of shares of Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any
Stock Option Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional
contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option pursuant to
Section 1 of this Agreement, the number of shares of Common Stock
purchasable upon the exercise of the Option and the Option Price shall be
subject to adjustment from time to time as provided in this Section 5. In
the event of any change in, or distributions in respect of, the Common
Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of
shares, distributions on or in respect of the Common Stock that would be
prohibited under the terms of the Merger Agreement, or the like, the type
and number of shares of Common Stock purchasable upon exercise hereof and
the Option Price shall be appropriately adjusted in such manner as shall
fully preserve the economic benefits provided hereunder and proper
provision shall be made in any agreement governing any such transaction
to provide for such proper adjustment and the full satisfaction of the
Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the
request of Grantee delivered within 90 days of such Subsequent Triggering
Event (whether on its own behalf or on behalf of any subsequent holder of
this Option (or part thereof) or any of the shares of Common Stock issued
pursuant hereto), promptly prepare, file and keep current a shelf
registration statement under the 1933 Act covering this Option and any
shares issued and issuable pursuant to this Option and shall use its
reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other
disposition of this Option and any shares of Common Stock issued upon
total or partial exercise of this Option ("Option Shares") in accordance
with any plan of disposition requested by Grantee. Issuer will use its
reasonable best efforts to cause such registration statement first to
become effective and then to remain effective for such period not in
excess of 180 days from the day such registration statement first becomes
effective or such shorter time as may be reasonably necessary to effect
such sales or other dispositions. Grantee shall have the right to demand
two such registrations. The foregoing notwithstanding, if, at the time of
any request by Grantee for registration of the Option or Option Shares as
provided above, Issuer is in registration with respect to an underwritten
public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the
inclusion of the Holder's Option or Option Shares would interfere with
the successful marketing of the shares of Common Stock offered by Issuer,
the number of Option Shares otherwise to be covered in the registration
statement contemplated hereby may be reduced; provided, however, that
after any such required reduction the number of Option Shares to be
included in such offering for the account of the Holder shall constitute
at least 25% of the total number of shares to be sold by the Holder and
Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for
the balance as promptly as practicable and no reduction shall thereafter
occur. Each such Holder shall provide all information reasonably
requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement
relating to the sale of such shares, but only to the extent of obligating
itself in respect of representations, warranties, indemnities and other
agreements customarily included in secondary offering underwriting
agreements for the Issuer. Upon receiving any request under this Section
6 from any Holder, Issuer agrees to send a copy thereof to any other
person known to Issuer to be entitled to registration rights under this
Section 6, in each case by promptly mailing the same, postage prepaid, to
the address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no event
shall Issuer be obligated to effect more than two registrations pursuant
to this Section 6 by reason of the fact that there shall be more than one
Grantee as a result of any assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase
Event (as defined below), (i) following a request of the Holder,
delivered prior to an Exercise Termination Event, Issuer (or any
successor thereto) shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
Market/Offer Price (as defined below) exceeds (B) the Option Price,
multiplied by the number of shares for which this Option may then be
exercised and (ii) at the request of the owner of Option Shares from time
to time (the "Owner"), delivered within 90 days of such occurrence (or
such later period as provided in Section 10), Issuer shall repurchase
such number of the Option Shares from the Owner as the Owner shall
designate at a price (the "Option Share Repurchase Price") equal to the
Market/Offer Price multiplied by the number of Option Shares so
designated. The term "Market/Offer Price" shall mean the highest of (i)
the price per share of Common Stock at which a tender offer or exchange
offer therefor has been made, (ii) the price per share of Common Stock to
be paid by any third party pursuant to an agreement with Issuer, (iii)
the highest closing price for shares of Common Stock within the six-month
period immediately preceding the date the Holder gives notice of the
required repurchase of this Option or the Owner gives notice of the
required repurchase of Option Shares, as the case may be, or (iv) in the
event of a sale of all or a substantial portion of Issuer's assets, the
sum of the price paid in such sale for such assets and the current market
value of the remaining assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner,
as the case may be, and reasonably acceptable to the Issuer, divided by
the number of shares of Common Stock of Issuer outstanding at the time of
such sale. In determining the Market/Offer Price, the value of
consideration other than cash shall be determined by a nationally
recognized investment banking firm selected by the Holder or Owner, as
the case may be, and reasonably acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option and any
Option Shares pursuant to this Section 7 by surrendering for such purpose
to Issuer, at its principal office, this Agreement or certificates for
Option Shares, as applicable, accompanied by a written notice or notices
stating that the Holder or the Owner, as the case may be, elects to
require Issuer to repurchase this Option and/or the Option Shares in
accordance with the provisions of this Section 7. Within the latter to
occur of (x) five business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such notice or
notices relating thereto and (y) the time that is immediately prior to
the occurrence of a Repurchase Event, Issuer shall deliver or cause to be
delivered to the Holder the Option Repurchase Price and/or to the Owner
the Option Share Repurchase Price therefor or the portion thereof, if
any, that Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable
law or regulation from repurchasing the Option and/or the Option Shares
in full, Issuer shall immediately so notify the Holder and/or the Owner
and thereafter deliver or cause to be delivered, from time to time, to
the Holder and/or the Owner, as appropriate, the portion of the Option
Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business
days after the date on which Issuer is no longer so prohibited; provided,
however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable law or regulation from delivering to the Holder and/or
the Owner, as appropriate, the Option Repurchase Price and the Option
Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its best efforts to obtain all required regulatory and
legal approvals and to file any required notices as promptly as
practicable in order to accomplish such repurchase), the Holder or Owner
may revoke its notice of repurchase of the Option or the Option Shares
either in whole or to the extent of the prohibition, whereupon, in the
latter case, Issuer shall promptly (i) deliver to the Holder and/or the
Owner, as appropriate, that portion of the Option Repurchase Price or the
Option Share Repurchase Price that Issuer is not prohibited from
delivering; and (ii) deliver, as appropriate, either (A) to the Holder, a
new Stock Option Agreement evidencing the right of the Holder to purchase
that number of shares of Common Stock obtained by multiplying the number
of shares of Common Stock for which the surrendered Stock Option
Agreement was exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the Option Repurchase
Price less the portion thereof theretofore delivered to the Holder and
the denominator of which is the Option Repurchase Price, or (B) to the
Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall
be deemed to have occurred (i) upon the consummation of any merger,
consolidation or similar transaction involving Issuer or any purchase,
lease or other acquisition of all or a substantial portion of the assets
of Issuer, other than any such transaction which would not constitute an
Acquisition Transaction pursuant to the provisos to Section 2(b)(i)
hereof or (ii) upon the acquisition by any person of beneficial ownership
of 50% or more of the then outstanding shares of Common Stock, provided
that no such event shall constitute a Repurchase Event unless a
Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event. The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7 shall not
terminate upon the occurrence of an Exercise Termination Event unless no
Subsequent Triggering Event shall have occurred prior to the occurrence
of an Exercise Termination Event.
8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate with or
merge into any person, other than Grantee or one of its Subsidiaries, and
shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or
one of its Subsidiaries, to merge into Issuer and Issuer shall be the
continuing or surviving corporation, but, in connection with such merger,
the then outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding voting
shares and voting share equivalents of the merged company, or (iii) to
sell or otherwise transfer all or substantially all of its assets to any
person, other than Grantee or one of its Subsidiaries, then, and in each
such case, the agreement governing such transaction shall make proper
provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be
converted into, or exchanged for, an option (the "Substitute Option"), at
the election of the Holder, of either (x) the Acquiring Corporation (as
hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or merger
with Issuer (if other than Issuer), (ii) Issuer in a merger in
which Issuer is the continuing or surviving person, and (iii) the
transferee of all or substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon exercise
of the Substitute Option.
(3) "Assigned Value" shall mean the Market/Offer Price,
as defined in Section 7.
(4) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the one year
immediately preceding the consolidation, merger or sale in
question, but in no event higher than the closing price of the
shares of Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided that if Issuer is the
issuer of the Substitute Option, the Average Price shall be
computed with respect to a share of common stock issued by the
person merging into Issuer or by any company which controls or is
controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the
Option, provided, that if the terms of the Substitute Option cannot, for
legal reasons, be the same as the Option, such terms shall be as similar
as possible and in no event less advantageous to the Holder. The issuer
of the Substitute Option shall also enter into an agreement with the then
Holder or Holders of the Substitute Option in substantially the same form
as this Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for
such number of shares of Substitute Common Stock as is equal to the
Assigned Value multiplied by the number of shares of Common Stock for
which the Option is then exercisable, divided by the Average Price. The
exercise price of the Substitute Option per share of Substitute Common
Stock shall then be equal to the Option Price multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock for
which the Option is then exercisable and the denominator of which shall
be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be
exercisable for more than 19.9% of the shares of Substitute Common Stock
outstanding prior to exercise but for this clause (e), the issuer of the
Substitute Option (the "Substitute Option Issuer") shall make a cash
payment to Holder equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this clause (e) over
(ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be
determined by a nationally recognized investment banking firm selected by
the Holder or the Owner, as the case may be, and reasonably acceptable to
the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option
(the "Substitute Option Holder"), the Substitute Option Issuer shall
repurchase the Substitute Option from the Substitute Option Holder at a
price (the "Substitute Option Repurchase Price") equal to the amount by
which (i) the Highest Closing Price (as hereinafter defined) exceeds (ii)
the exercise price of the Substitute Option, multiplied by the number of
shares of Substitute Common Stock for which the Substitute Option may
then be exercised and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"),
the Substitute Option Issuer shall repurchase the Substitute Shares at a
price (the "Substitute Share Repurchase Price") equal to the Highest
Closing Price multiplied by the number of Substitute Shares so
designated. The term "Highest Closing Price" shall mean the highest
closing price for shares of Substitute Common Stock within the six-month
period immediately preceding the date the Substitute Option Holder gives
notice of the required repurchase of the Substitute Option or the
Substitute Share Owner gives notice of the required repurchase of
the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share
Owner, as the case may be, may exercise its respective right to require
the Substitute Option Issuer to repurchase the Substitute Option and the
Substitute Shares pursuant to this Section 9 by surrendering for such
purpose to the Substitute Option Issuer, at its principal office, the
agreement for such Substitute Option (or, in the absence of such an
agreement, a copy of this Agreement) and certificates for Substitute
Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may
be, elects to require the Substitute Option Issuer to repurchase the
Substitute Option and/or the Substitute Shares in accordance with the
provisions of this Section 9. As promptly as practicable, and in any
event within five business days after the surrender of the Substitute
Option and/or certificates representing Substitute Shares and the receipt
of such notice or notices relating thereto, the Substitute Option Issuer
shall deliver or cause to be delivered to the Substitute Option Holder
the Substitute Option Repurchase Price and/or to the Substitute Share
Owner the Substitute Share Repurchase Price therefor or, in either case,
the portion thereof which the Substitute Option Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation from repurchasing the
Substitute Option and/or the Substitute Shares in part or in full, the
Substitute Option Issuer following a request for repurchase pursuant to
this Section 9 shall immediately so notify the Substitute Option Holder
and/or the Substitute Share Owner and thereafter deliver or cause to be
delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute
Share Repurchase Price, respectively, which it is no longer prohibited
from delivering, within five business days after the date on which the
Substitute Option Issuer is no longer so prohibited; provided, however,
that if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation from delivering to the
Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the Substitute Option Repurchase Price and the Substitute
Share Repurchase Price, respectively, in full (and the Substitute Option
Issuer shall use its best efforts to obtain all required regulatory and
legal approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder or Substitute Share Owner may
revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall
promptly (i) deliver to the Substitute Option Holder or Substitute Share
Owner, as appropriate, that portion of the Substitute Option Repurchase
Price or the Substitute Share Repurchase Price that the Substitute Option
Issuer is not prohibited from delivering; and (ii) deliver, as
appropriate, either (A) to the Substitute Option Holder, a new Substitute
Option evidencing the right of the Substitute Option Holder to purchase
that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which
the surrendered Substitute Option was exercisable at the time of delivery
of the notice of repurchase by a fraction, the numerator of which is the
Substitute Option Repurchase Price less the portion thereof theretofore
delivered to the Substitute Option Holder and the denominator of which is
the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so
prohibited from repurchasing.
10. The 90-day period for exercise of certain rights under
Sections 2, 6, 7 and 13 shall be extended: (i) to the extent necessary to
obtain all regulatory approvals for the exercise of such rights and for
the expiration of all statutory waiting periods; and (ii) to the extent
necessary to avoid liability under Section 16(b) of the 1934 Act by
reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Issuer and no other
corporate proceedings on the part of Issuer are necessary to authorize
this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from
the date hereof through the termination of this Agreement in accordance
with its terms will have reserved for issuance upon the exercise of the
Option, that number of shares of Common Stock equal to the maximum number
of shares of Common Stock at any time and from time to time issuable
hereunder, and all such shares, upon issuance pursuant hereto, will be
duly authorized, validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority
to enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This Agreement has
been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock
or other securities acquired by Grantee upon exercise of the Option will
not be, acquired with a view to the public distribution thereof and will
not be transferred or otherwise disposed of except in a transaction
registered or exempt from registration under the 1933 Act.
13. Neither of the parties hereto may assign any of its
rights or obligations under this Option Agreement or the Option created
hereunder to any other person, without the express written consent of the
other party, except that in the event a Subsequent Triggering Event shall
have occurred prior to an Exercise Termination Event, Grantee, subject to
the express provisions hereof, may assign in whole or in part its rights
and obligations hereunder within 90 days following such Subsequent
Triggering Event (or such later period as provided in Section 10);
provided, however, that until the date 15 days following the date on
which the Federal Reserve Board approves an application by Grantee under
the BHCA to acquire the shares of Common Stock subject to the Option,
Grantee may not assign its rights under the Option except in (i) a widely
dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares
of Issuer, (iii) an assignment to a single party (e.g., a broker or
investment banker) for the purpose of conducting a widely dispersed
public distribution on Grantee's behalf, or (iv) any other manner
approved by the Federal Reserve Board.
14. Each of Grantee and Issuer will use its best efforts to
make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement, including without limitation
making application to authorize for quotation the shares of Common Stock
issuable hereunder on the New York Stock Exchange or such other exchange
or market on which the shares of Issuer may be listed upon official
notice of issuance and applying to the Federal Reserve Board under the
BHCA for approval to acquire the shares issuable hereunder, but Grantee
shall not be obligated to apply to state banking authorities for approval
to acquire the shares of Common Stock issuable hereunder until such time,
if ever, as it deems appropriate to do so.
15. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto
and that the obligations of the parties hereto shall be enforceable by
either party hereto through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained
in this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions and covenants and restrictions
contained in this Agreement shall remain in full force and effect, and
shall in no way be affected, impaired or invalidated. If for any reason
such court or regulatory agency determines that the Holder is not
permitted to acquire, or Issuer is not permitted to repurchase pursuant
to Section 7, the full number of shares of Common Stock provided in
Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5 hereof),
it is the express intention of Issuer to allow the Holder to acquire or
to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when
delivered in person, by cable, telegram, telecopy or telex, or by
registered or certified mail (postage prepaid, return receipt requested)
at the respective addresses of the parties set forth in the Merger
Agreement.
18. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, regardless of the laws
that might otherwise govern under applicable principles of conflicts of
laws thereof.
19. This Agreement may be executed in two counterparts, each
of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
20. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses incurred by
it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
21. Except as otherwise expressly provided herein or in the
Merger Agreement, this Agreement contains the entire agreement between
the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereof,
written or oral. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than
the parties hereto, and their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
DEPOSIT GUARANTY CORP.
By: /s/ E.B. Robinson, Jr.
_____________________________
Name: E.B. Robinson, Jr.
Title: President and Chief Executive
Officer
FIRST AMERICAN CORPORATION
By: /s/ Dennis C. Bottorff
_____________________________
Name: Dennis C. Bottorff
Title: Chairman, President and Chief
Executive Officer
[Stock Option Agreement]
EXHIBIT 99.2
NEWS RELEASE
Financial Contact: First American: Carroll Kimball,
Telephone: 615/748-2455, Fax: 615/748-2755
Deposit Guaranty: Joe Powell,
Telephone: 601/354-8018, Fax: 601/354/8192
Media Contact: First American, Vicki Kessler,
Telephone: 615/748-2912, Fax: 615/748-2535
Deposit Guaranty, Pam Kloha,
Telephone: 601/968-4759, Fax: 601/368-4644
For Immediate Release
FIRST AMERICAN AND DEPOSIT GUARANTY
ANNOUNCE MERGER AGREEMENT
NASHVILLE, TENN., Dec. 8, 1997 - First American Corporation
(NASDAQ:FATN) and Deposit Guaranty Corp. (NYSE:DEP) today announced the signing
of a definitive agreement under which Deposit Guaranty will be merger into First
American.
ACQUISITION OVERVIEW:
Under the terms of the agreement, Deposit Guaranty shareholders
will receive, in a tax-free exchange, 1.17 shares of First American
common stock for each share of Deposit Guaranty common stock. The value
of the transaction is $2.7 billion and represents an exchange value of
$64.06 for each common share of Deposit Guaranty stock, based on First
American's closing share price of $54.75 on Friday, Dec. 5, 1997. The
merger will be accounted for as a pooling-of-interests and is expected to
be neutral to earnings in 1998 and 6 percent accretive to First
American's consensus earnings estimate in 1999.
Dennis C. Bottorff, chairman and CEO of First American, said,
"First American has set strategic goals to become one of the highest
performing, most highly valued financial services institutions in the
industry. We believe this combination with Deposit Guaranty will enhance
our ability to attain those goals.
"We anticipate the combined company's return on equity will
increase 250 - 300 basis points from 16.8 percent in the third quarter to
more than 19.0 percent pro forma. An improving net interest margin,
resulting from the lower cost of funds in the Deposit Guaranty markets,
along with improving productivity in the core banking business, will fuel
the ROE increase. We expect the efficiency in the core banking business
to improve to less than 50 percent, driven by additional cost and revenue
synergies," Bottorff said.
E.B. Robinson, Jr., chairman and CEO of Deposit Guaranty Corp.,
said, "Deposit Guaranty sought a merger partner who would generate
superior value for our shareholders. First American is a financial
services provider of the future rather than a bank of the past. First
American is farther down the road with customer profitability and
distribution management than most in the country and we concluded that
the fit of the two organizations was excellent. Deposit Guaranty believes
both shareholder groups will win in this merger as the enhanced revenue
and lower costs of distributions occur in the future," he said.
While First American expects the merger to be accretive to earnings
by 6 percent in 1999, if the benefits of earnings on excess capital were
included in the earnings, the merger should, on a pro forma basis, be
accretive by 10 percent. These expectations are based on estimated cost
savings of 25 percent ($68 million) and revenue synergies of 7.5 percent
($20 million) of Deposit Guaranty's cost base which should be fully
phased in during 1999. The company expects to incur restructuring and
merger-related, pre-tax charges of approximately $102 million.
Included in the restructuring and merger-related costs is $15
million to fund a charitable foundation dedicated to supporting the
communities Deposit Guaranty serves. A board of trustees, which will be
led by Mr. Robinson, will administer the foundation.
Cost savings are expected to be achieved primarily from the
consolidation of back-office processing and support functions, and
through improvements in the efficiency of the retail distribution system.
The revenue enhancements should result from utilizing First American's
customer profitability and distribution management technology, increased
investment product sales resulting from the integration of its investment
products sales structure with Deposit Guaranty's branch system, and a
more proactive small business focus throughout the Deposit Guaranty
franchise.
The combined company, which will be headquartered in Nashville,
Tenn., will have assets of approximately $17.4 billion, deposits of $13
billion and stockholders' equity of $1.5 billion. It will operate in
Tennessee, Mississippi, Louisiana, Arkansas, Virginia, and Kentucky and
will be the 4th largest financial services institution in the Mid-South
region in total assets.
Subject to regulatory and stockholder approvals, the transaction is
expected to close in the second quarter of 1998.
MANAGEMENT STRUCTURE:
Dennis C. Bottorff will remain chairman and CEO of First American
Corporation (Corporation). E.B. Robinson, Jr. will be named vice chairman
and chief operating officer of the Corporation. Dale W. Polley will
remain president of the Corporation. Robert A. McCabe, Jr. will remain
vice chairman of the Corporation and president of First American
Enterprises. Howard L. McMillan, Jr., currently president of Deposit
Guaranty, will be named chairman of the Deposit Guaranty operating units.
DEPOSIT GUARANTY FRANCHISE OVERVIEW:
Deposit Guaranty is a $6.8 billion financial services holding
company headquartered in Jackson, Miss., with 171 banking offices and 195
ATMs in its three state operating areas of Mississippi, Louisiana and
Arkansas. Approximately 3,500 people work for Deposit Guaranty. The
corporation is the parent company of Deposit Guaranty National Bank, and
has mortgage offices in Oklahoma, Nebraska, Texas, Indiana and Iowa.
Deposit Guaranty has previously announced plans to acquire Victory
Bancshares (total assets of $118 million) in Memphis, Tenn., which is
scheduled to close during the first quarter of 1998.
FIRST AMERICAN FRANCHISE OVERVIEW:
First American is a $10.6 billion financial services holding
company headquartered in Nashville, Tenn., with 169 banking offices and
440 ATMs. Approximately 4,200 people work for First American. The
corporation is the parent company of First American National Bank, First
American Federal Savings Bank of Virginia and First American Enterprises
Inc. The company also owns 98 percent of INVEST Financial Corporation.
Through INVEST, the company has approximately 1,900 representatives
selling mutual funds, annuities and other investments and insurance
products in more than 1,000 investment centers throughout the U.S.
TO THE EXTENT THAT STATEMENTS IN THIS REPORT RELATE TO THE PLANS,
OBJECTIVES OR FUTURE PERFORMANCE OF FIRST AMERICAN CORPORATION, THESE
STATEMENTS ARE CONSIDERED TO BE FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH
STATEMENTS ARE BASED ON MANAGEMENT'S CURRENT EXPECTATIONS AND THE CURRENT
ECONOMIC ENVIRONMENT. ACTUAL STRATEGIES AND RESULTS IN FUTURE PERIODS MAY
DIFFER MATERIALLY FROM THOSE CURRENTLY EXPECTED DUE TO VARIOUS RISKS AND
UNCERTAINTIES. ADDITIONAL DISCUSSIONS OF FACTORS AFFECTING FIRST
AMERICAN'S BUSINESS AND PROSPECTS IS CONTAINED IN THE COMPANY'S PERIODIC
FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
XXXX
FIRST AMERICAN CORPORATION DEPOSIT GUARANTY CORPORATION
December 8, 1997
Deal Summary Fact Sheet
STRUCTURE:
o Pooling of interests
o Tax-free exchange
o Definitive agreement signed
o Due diligence completed
TERMS:
o 1.17 shares of First American common stock for each common
share of Deposit Guaranty
o 19.9% stock option from DEP and FATN
o Deposit Guaranty has the right to terminate the
agreement if First American's stock price on average
for the 20 business days preceding consummation either:
(1) Declines by more than 25%, or
(2) Declines by more than 20% and more than 15%
relative to a specified bank index
PRICING: (Based on closing share prices as of Dec. 5, 1997)
o FATN closing price (12/5/97): $54.75
o DEP closing price (12/5/97): $52.38
o Purchase price: $2.7 billion
o Purchase price per share: $64.06
o Price/Book: 4.19x
o Price/1998 EPS consensus: 25.33x
o Pricing compares favorably to recent transactions based on
contribution analysis, implied ROA, price-to-earnings
adjusted for synergies and earnings contribution.
TIMING:
o Expected to close in the second quarter of 1998
o Subject to shareholder (both organizations) and regulatory
approvals
ACQUISITION RATIONALE:
o Aids in FATN becoming one of the highest performing, most
highly valued companies in the industry
o Neutral to earnings in 1998; 6% accretive in 1999 (based
on IBES consensus estimates)
o 250 - 300 basis point expected increase in ROE
o Expected improvement in productivity
o Opportunity to increase net interest margin
o Low cost source of funds in Mississippi, Louisiana and
Arkansas markets
o 32.5% expected synergies (25% cost, 7.5% revenue); fully
phased in during 1999
o Broadened geographic presence
o Opportunity to capitalize on FATN customer profitability and
distribution management technologies
