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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) May 4, 1998
MERCHANTS CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Mississippi 0-10898 64-0655603
----------- ------- ----------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification number)
810 South St., Vicksburg, MS 39180
- ---------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (601) 636-3752
-------------
<PAGE> 2
ITEM 5. OTHER EVENTS
On May 4, 1998, the Registrant and BancorpSouth, Inc., Tupelo, Mississippi
("BancorpSouth") jointly announced that Registrant and BancorpSouth entered
into an Agreement and Plan of Merger (the "Agreement"). The Agreement was
executed on behalf of the Registrant and BancorpSouth on May 2, 1998. The
Agreement was approved by the Boards of Directors of both companies.
The Agreement provides for the merger of Registrant with and into BancorpSouth
(with BancorpSouth surviving the merger) and the conversion of all outstanding
shares of common stock of Registrant into shares of the common stock of
BancorpSouth. In addition, each outstanding and unexercised option to purchase
a share of Registrant's common stock will be converted into and become an
option to purchase BancorpSouth common stock.
In connection with the acquisition, Registrant and BancorpSouth entered into a
Stock Option Agreement ("Option Agreement") whereby Registrant granted
BancorpSouth an option to purchase 19.9% of Registrant's common stock at a
price of $63 per share. The Option Agreement is exercisable upon the
occurrence of certain transactions, all of which generally involve significant
sales of Registrant's assets and/or voting control to third parties.
Consummation of the transactions contemplated by the Agreement is subject to
approval by Registrant's shareholders, the receipt of regulatory approvals, and
other conditions. For information regarding the terms of the transaction,
reference is made to the Agreement, the Option Agreement, and the news release
attached to this Report as Exhibits 2, 10 and 99, respectively.
1
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements -- not applicable.
(b) Pro forma financial information -- not applicable.
(c) Exhibits:
(2) Agreement and Plan of Merger, dated May 2, 1998
(10) Stock Option Agreement, dated May 2, 1998
(99) News release issued by BancorpSouth, Inc., dated
May 4, 1998
2
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SIGNATURES
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 thereunto duly authorized.
/s/ Arthur R. Bardwell
-------------------------------------------
Arthur R. Bardwell, Chief Financial Officer
Date: May 12, 1998
3
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
(2) Agreement and Plan of Merger, dated May 2, 1998
(10) Stock Option Agreement, dated May 2, 1998
(99) News release issued by BancorpSouth, Inc., dated May 4, 1998
</TABLE>
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EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
BETWEEN
BANCORPSOUTH, INC.
AND
MERCHANTS CAPITAL CORPORATION
DATED AS OF MAY 2, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PAGE
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ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
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. Articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.8. By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.9. Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.10. Tax Consequences; \C Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1. Parent to Make Shares Available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2. Exchange of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III DISCLOSURE SCHEDULES; STANDARDS FOR
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2. Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1. Corporate Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2. Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3. Authority; No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.4. Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.5. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.7. Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.8. Absence of Certain Changes or Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.9. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.10. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.11. Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.12. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.13. Company Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.14. Compliance with Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.15. Certain Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.16. Agreements with Regulatory Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.17. Business Combination Provision; Takeover Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
i
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<TABLE>
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4.18. Administration of Fiduciary Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.19. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.20. Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.21. Loan Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.22. Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.23. Accounting for the Merger; Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.1. Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.2. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.3. Authority; No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.4. Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.5. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.7. Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.8. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.11. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.12. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.13. Parent Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.14. Compliance with Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.15. Ownership of Company Common Stock; Affiliates and Associates . . . . . . . . . . . . . . . . . . . . 28
5.16. Agreements with Regulatory Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.17. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.18. Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.19. Loan Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.20. Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.21. Accounting for the Merger; Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VI COVENANTS RELATING TO CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.1. Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.2. Covenants of Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.3. Conduct of Parent's Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VII ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.1. Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.2. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.3. Shareholder Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.4. Legal Conditions to Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.5. Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.6. Stock Exchange Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.7. Employee Benefit Plans; Existing Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
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<TABLE>
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7.8. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.9. Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.10. Coordination of Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.11. Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.12. Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VIII CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1. Conditions to Each Party's Obligation To Effect the Merger . . . . . . . . . . . . . . . . . . . . . 41
8.2. Conditions to Obligations of Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.3. Conditions to Obligations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE IX TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.3. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.4. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE X GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.2. Nonsurvival of Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . . . 48
10.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.4. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.5. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.6. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.7. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.8. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.9. Enforcement of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.11. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.12. Assignment; Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 2, 1998 (this
"Agreement"), between BancorpSouth, Inc., a Mississippi corporation (the
"Parent") and Merchants Capital Corporation, a Mississippi corporation (the
"Company" and collectively with Parent, the "Holding Companies").
WHEREAS, Parent is the parent corporation of BancorpSouth
Bank, a Mississippi state bank ("BancorpSouth Bank"), and the Company is the
parent corporation of Merchants Bank, a Mississippi state bank ("Merchants
Bank" and together with BancorpSouth Bank, the "Banks");
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 (i) the Company will merge with and into Parent
(the "Holding Company Merger") and (ii) Merchants Bank will merge with and into
BancorpSouth Bank (the "Bank Merger"), each subject to the terms and conditions
set forth herein (collectively, the "Merger"); 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, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger.
(a) Subject to the terms and conditions of this
Agreement, in accordance with the Mississippi Business Corporation Act (the
"MBCA"), 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 Holding
Company Merger, and shall continue its corporate existence under the laws of
the State of Mississippi. The name of the Surviving Corporation shall continue
to be BancorpSouth, Inc. Upon consummation of the Holding Company Merger, the
separate corporate existence of the Company shall terminate.
<PAGE> 6
(b) Subject to the terms and conditions of this
Agreement, in accordance with the Mississippi Banking Act (the "MBA"), at the
Effective Time (as defined in Section 1.2 hereof), Merchants Bank shall merge
with and into BancorpSouth Bank. BancorpSouth Bank shall be the surviving
banking corporation (hereinafter sometimes called the "Surviving Bank") in the
Bank Merger, and shall continue its corporate existence under the laws of the
State of Mississippi. The name of the Surviving Bank shall continue to be
BancorpSouth Bank. Upon consummation of the Bank Merger, the separate corporate
existence of Merchants Bank shall terminate.
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") with respect to the Holding Company Merger, and the Mississippi
Department of Banking and Consumer Finance (the "Mississippi Department") with
respect to the Bank Merger, each 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 Sections 79-4-11.01 and
81-5-85 of the Mississippi Code.
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, par
value $5.00, 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 3.768 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)
2
<PAGE> 7
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 other than any stock dividend
due to be paid to the Parent shareholders on May 15, 1998, 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
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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.
(d) The Parent may terminate this Agreement if
cash payments in respect of fractional shares or dissenter's rights
exceed the amount permissible for the utilization of pooling of
interests accounting treatment.
(e) At the Effective Time, all shares of
Merchants Bank common stock, par value $15.00 per share ("Merchants
Bank Common Stock"), shall be cancelled and shall cease to exist and
no stock of Parent, BancorpSouth Bank, or other consideration shall be
delivered in exchange therefor.
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 replaced by an option issued under
the appropriate stock option plan of the Parent:
(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.
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(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.
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. Articles. At the Effective Time, the Amended and
Restated Articles of Incorporation of Parent, as in effect at the Effective
Time, shall be the articles of incorporation of the Surviving Corporation. At
the Effective Time, the Amended and Restated Articles of Association of
BancorpSouth Bank, as in effect at the Effective Time, shall be the articles of
association of the Surviving Bank.
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. 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 Articles of Incorporation and By-Laws of the Surviving Corporation
until their respective successors are duly elected or appointed and qualified.
The directors and officers of BancorpSouth Bank immediately prior to the
Effective Time shall be the directors and officers of the Surviving Bank, each
to hold office in accordance with the Restated Articles of Association and
By-Laws of the Surviving Bank 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 (the "Exchange Agent") selected by Parent and reasonably
satisfactory to the Company, for
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<PAGE> 10
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
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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) $22.5625
(the "BancorpSouth Price") 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 shareholders of the Company for twelve months after
the Effective Time shall be paid to Parent. Any shareholders 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 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.
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(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. The parties acknowledge that as
of the date of this Agreement, the Company has delivered those portions of the
Company Disclosure Schedule specifically referred to herein, and the Parent has
delivered those portions of the Parent Disclosure Schedule (and, with the
Company Disclosure Schedule, the "Disclosure Schedules") specifically referred
to herein. Notwithstanding anything in this Agreement to the contrary, 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 could be reasonably expected to 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 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 such representation or warranty contained in Article
IV, in the case of the Company, or Article V, in the case of Parent,
has had or could be reasonably expected to have 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
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principles applicable to banks 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
such 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) Merchants Bank is a Mississippi state bank
duly organized, validly existing and in good standing under the laws
of the State of Mississippi. The deposit accounts of Merchants 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
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<PAGE> 14
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. 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, 1996 of their
respective shareholders 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 1,000,000 shares of Company Common Stock. As of December
31, 1997, there were 742,651 shares of Company Common Stock
outstanding and no shares of Company Common Stock held by the Company
as treasury stock. There are (i) no shares of Company Common Stock
reserved for issuance upon exercise of outstanding stock options or
otherwise except for (x) 26,250 shares of Company Common Stock
reserved for issuance pursuant to the Company Option Plans under which
options to acquire 2,050 shares of Company Common Stock are
outstanding, and (y) 148,450 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). 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 for
options outstanding under the Company Option Plan, 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
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, if any, shall be set forth in Section 4.2(a) of the Company
Disclosure Schedule.
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(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(a) 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 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, upon the receipt of shareholder approval of the
Agreement, 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 shareholders for approval at a meeting
of such shareholders and, except for the adoption of this Agreement by
the requisite vote of the Company's shareholders, 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
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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) 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
with the FDIC under the Federal Deposit Insurance Act, as amended (the "FDIA"),
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 proxy statement in
definitive form relating to the meetings of the Company's shareholders to be
held in connection with this Agreement and the transactions contemplated hereby
(the "Proxy Statement") and the filing and declaration of effectiveness of a
post-effective amendment to the shelf registration statement on Form S-4 (such
shelf registration statement and any post-effective amendment thereto relating
to this transaction, 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 shareholders of the Company, (e) the filing of the Articles of Merger with
the Mississippi Secretary and the Mississippi Department and (f) approval for
listing of the Parent Common Stock to be issued in the Merger on the New York
Stock Exchange ("NYSE"), no consents or approvals of or filings or
registrations with any court, administrative agency or commission or other
governmental authority or
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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) any Federal Reserve Bank, (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, 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. Except as set forth in Section 4.5 of the
Company Disclosure Schedule, 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 1996
and 1997, and the related consolidated statements of earnings, changes in
shareholders' equity and cash flows for the fiscal years 1996 through 1997,
inclusive, as reported in the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1997 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 May & Company, independent public accountants with
respect to the Company. The December 31, 1997 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
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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-QSB. 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.
4.8. Absence of Certain Changes or Events.
(a) Since December 31, 1997, except as set forth
in Section 4.8 of the Company Disclosure Schedule, (i) 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 and (ii) the Company and its Subsidiaries have
carried on their respective businesses in the ordinary course
consistent with their past practices.
(b) Neither the Company nor any of its
Subsidiaries has, except as set forth in Section 4.8 of the Company
Disclosure Schedule, (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 December 31, 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 for salary increases and
bonus payments made in the ordinary course of business consistent with
past practices, (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) 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.
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(b) 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) 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 of the Company
Disclosure Schedule, 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 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(l) 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
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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 are 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
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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, 1996 by the Company with the SEC pursuant to the Securities
Act or the Exchange Act (the "Company Reports"), if any, and (b) communication
sent by the Company to its shareholders since December 31, 1996, 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 contained in the Company Reports
as of a later date shall be deemed to modify information contained in the
Company Reports 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. Except as disclosed
in connection with Section 4.5, 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.
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4.15. Certain Contracts.
(a) Except as set forth in Section 4.15 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 $50,000 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) 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) (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. 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, 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
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<PAGE> 23
Regulatory Agency or other Governmental Entity that it is considering issuing
or requesting any Regulatory Agreement.
4.17. Business Combination Provision; Takeover Laws. 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.
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.
(a) Except as set forth in Section 4.19 of the
Company Disclosure Schedule, 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;
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(c) Except as set forth in Section 4.19 of the
Company Disclosure Schedule, 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. 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.
4.21. Loan Portfolio.
(a) Except as set forth in Section 4.21 of the
Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to any written or oral 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 March 31, 1998, over 90 days delinquent in payment
of principal or interest or in default of any other provision.
Section 4.21 of the Company Disclosure Schedule sets forth all of the
Loans in original principal amount in excess of $100,000 of the
Company or any of its Subsidiaries that as of March 31, 1998, were
classified as "Doubtful" or "Loss", or words of similar
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<PAGE> 25
import, together with the principal amount of and accrued and unpaid
interest on each such Loan and the identity of the borrower
thereunder.
(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.
4.22. 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 December 31, 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.
4.23. 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.
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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
Mississippi. 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. The Amended and Restated Articles of Incorporation 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) BancorpSouth Bank is a Mississippi state bank
validly existing and in good standing. The deposit accounts of
BancorpSouth Bank 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 Association, by-laws and similar governing
documents of the BancorpSouth Bank, 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, 1996 of their
respective shareholders and Boards of Directors (including committees
of their respective Boards of Directors).
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<PAGE> 27
5.2. Capitalization.
(a) The authorized capital stock of Parent
consists of 500,000,000 shares of Parent Common Stock. As of March 6,
1998, there were 22,329,777 shares of Parent Common Stock issued and
outstanding, and as of December 31, 1997, 125,350 shares of Parent
Common Stock were held in Parent's treasury. As of the date of this
Agreement, no shares of Parent Common Stock were reserved for
issuance, except with respect to employee benefit plans, stock option
plans, the Parent's rights plan, and the stock dividend payable on May
15, 1998. 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. Except as referred to
above with respect to reserved shares and for the Parent's dividend
reinvestment plan, 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 any other equity securities of
Parent or any securities representing the right to purchase or
otherwise receive any shares of Parent Common 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. Parent owns, directly
or indirectly, all 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
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<PAGE> 28
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, and 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) 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 Amended and
Restated Articles of Incorporation 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 the FDIC under the FDIA, 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 filing of the Articles of Merger with the Mississippi Secretary and the
Mississippi Department, (e) 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
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Agreement and (f) approval for listing of the Parent Common Stock to be issued
in the Merger on the NYSE, 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, 1996 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, 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, 1996. 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 the consolidated balance sheets of Parent
and its Subsidiaries as of December 31 for the fiscal years 1996 and 1997 and
the related consolidated statements of income, changes in shareholders' equity
and cash flows for the fiscal years 1996 through 1997, 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. The December 31, 1997 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.
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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.
5.8. Absence of Certain Changes or Events. Except as may
be 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, 1997, 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 the Company's annual
report on Form 10-K for the year ended December 31, 1997 or as
disclosed pursuant to Section 5.16 hereto, 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, 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 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.
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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) 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 and to the knowledge of the Parent, nothing has occurred which
could reasonably be expected to result in the revocation of such
letter; 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); 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, 1996 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, 1996, and no
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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 other than matters addressed by
Section 5.16 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
disclosed to the Company orally or in writing, 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, a "Parent Regulatory Agreement"), any
Regulatory Agency or other
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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.
(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.
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5.18. 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.
5.19. Loan Portfolio.
(a) Except as set forth in Section 5.19 of the
Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries
is a party to any written or oral 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 March 31, 1998, over 90 days
delinquent in payment of principal or interest or in default of any
other provision. Section 5.19 of the Parent Disclosure Schedule sets
forth all Loans in original principal amounts in excess of $100,000 of
Parent or any of its Subsidiaries that were as of March 31, 1998,
classified as "Doubtful" or "Loss", 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.
(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.
5.20. 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 December 31,
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.
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5.21. 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 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 as consented to in writing by Parent, the Company shall not, and
shall not permit any of its Subsidiaries to:
(a) with respect to the Company only, declare or
pay any dividends on, or make other distributions in respect of any of
its capital stock during any period, at a rate in excess of $0.325 per
share per quarter; provided, that if the aggregate dividends so paid
expressed as a percentage of Company's net income is less than the
amount paid in dividends by Parent expressed as a percentage of
Parent's net income, Company shall be permitted to pay a special
dividend equal to the difference between the two percentages;
(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, (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, 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 or (y) pursuant
to the Stock Option Agreement;
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(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
shareholders 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 are set forth in Section 6.1 of the Company Disclosure
Schedule or (i) are made in the ordinary course of business or are
necessary to maintain existing assets in good
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repair and (ii) in any event are in an amount of no more than $100,000
in the aggregate;
(f) enter into any new line of business other
than the sale of annuities;
(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) except as contemplated by Article III hereto,
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
December 31, 1997, except as required by changes in GAAP or regulatory
accounting principles as concurred to by the Company's independent
auditors;
(j) except as set forth in Section 7.7 hereof, as
required by applicable law or as required to maintain qualification
pursuant to the Code, (i) 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 (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).
(k) take or permit 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;
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(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 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) except as contemplated by Article III hereto,
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;
(b) 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;
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(c) change its methods of accounting in effect at
December 31, 1997, except in accordance with changes in GAAP or
regulatory accounting principles as concurred to by Parent's
independent auditors;
(d) take or permit 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
(e) agree or commit 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 the Company shall thereafter mail the Proxy Statement to its
shareholders. 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
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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 shareholders 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. Such party shall identify the nature of the limitation
on access and disclosure, and the parties hereto will make
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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 dated February 4, 1998 (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
Confidentiality Agreement.
(c) Notwithstanding anything in the
Confidentiality Agreement or any other agreement to the contrary, 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 and the parties
shall remain responsible for the same.
7.3. Shareholder Meeting. The Company shall take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
shareholders 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. The Company will, through its Board of Directors,
recommend to its shareholders approval of this Agreement and the transactions
contemplated hereby and such other matters as may be submitted to its
shareholders in connection with this Agreement.
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. 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
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agreement, in the form of Exhibit 7.5(a) hereto (in the case of affiliates of
Parent) or Exhibit 7.5(b) hereto (in the case of affiliates of the Company).
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 listing on the NYSE, 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 BancorpSouth Bank
participate, to the same extent as similarly situated employees of
Parent or BancorpSouth 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).
(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 or 401(K)
eligibility), 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 or increase 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.
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(d) Parent and the Company agree to cooperate and
take all reasonable actions to effect the merger of any employee
benefit plan that is intended to be qualified under Section 401(a) of
the Code into the appropriate tax-qualified retirement plan of Parent
after the Merger is completed, so that such plan merger satisfies the
requirements of Section 414(l) of the Code; provided, however, that
Parent shall not be obligated to effect such a merger of a plan unless
such plan is fully funded under Section 412 of the Code and Section
302 of ERISA, to the extent applicable, and the merger would not
jeopardize the tax-qualified status of any Parent Plan.
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
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<PAGE> 44
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 125% 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.
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<PAGE> 45
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. 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 Company Common Stock and the
record dates and payments dates relating thereto, it being the intention of the
parties that the holders of Company Common Stock may (to the extent allowed by
law and declared) receive one, but not more than one, dividend for any single
calendar quarter with respect to their shares of Company Common Stock and any
shares of Parent Common Stock any holder of Company Common Stock receives in
exchange therefor in the Merger.
7.11. Employment Agreements. [INTENTIONALLY OMITTED].
7.12. Year 2000. In the event the transactions
contemplated hereby are not consummated by March 31, 1999 or this Agreement is
terminated pursuant to Article IX hereof, Parent hereby agrees to provide on an
arms-length basis at fair market value consulting services, data processing,
and related computer support to Company in connection with its Year 2000
compliance program through December 31, 2000.
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) Shareholder Approvals. This Agreement shall
have been approved and adopted by the requisite vote of the
shareholders of the Company under applicable law.
(b) Listing of Shares. The shares of Parent
Common Stock which shall be issued to the shareholders of the Company
upon consummation of the
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<PAGE> 46
Merger shall have been authorized for listing on the NYSE, 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
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<PAGE> 47
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 Waller Lansden Dortch & Davis, PLLC, 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) Employment Agreements. Each of Howell N.
Gage, Jr. and Joel Horton shall have entered into written employment
agreements with Parent containing non-competition provisions
satisfactory to the Parent in its reasonable discretion.
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<PAGE> 48
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 Gerrish & McCreary, P.C. (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
44
<PAGE> 49
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) Fairness Opinion. Prior to the mailing of the
Company proxy statement, the Company shall have received an opinion
from Southard Financial to the effect that as of the date thereof and
based upon and subject to the matters set forth therein, the Merger is
fair to the shareholders of the Company from a financial point of
view.
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 shareholders 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
45
<PAGE> 50
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 March 31, 1999, 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 Company may not terminate if it is in material breach of any
of its obligations under Section 7.3) if any approval of the
shareholders of the Company 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 shareholders 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 any of the representations or warranties set forth in this
Agreement on the part of the other party shall be untrue or incorrect
in any material respect, which is not cured within thirty days
following written notice to the party making such representation, or
which, 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 representation or
warranty, together with all other representations and warranties that
are untrue or incorrect, would entitle the party receiving such
representation not to consummate the transactions contemplated hereby
under Section 8.2(a) (in the case of a representation or warranty by
the Company) or Section 8.3(a) (in the case of a 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; or
(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 shareholders 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.
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<PAGE> 51
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
shareholders of the Company; provided, however, that after any approval of the
transactions contemplated by this Agreement by the Company's shareholders,
there may not be, without further approval of such shareholders, any amendment
of this Agreement which reduces the amount or changes the form of the
consideration to be delivered to the Company shareholders 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. (Central Standard Time) 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 last 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 Waller Lansden
Dortch & Davis, PLLC, 511 Union Street, Suite 2100, Nashville, Tennessee 37219,
or at such other time, date and place as is agreed to by the parties hereto.
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<PAGE> 52
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):
<TABLE>
<S> <C>
(a) if to Parent, to:
BancorpSouth, Inc.
One Mississippi Plaza
Tupelo, Mississippi 38801
Attention: Aubrey B. Patterson
with a copy (which shall not constitute notice) to:
Waller Lansden Dortch & Davis
A Professional Limited Liability Company
511 Union Street, Suite 2100
Nashville, Tennessee 37219
Attention: Ralph W. Davis, Esq.
and
(b) if to the Company, to:
Merchants Capital Corporation
820 South Street
Vicksburg, Mississippi 39180
Attention: Howell N. Gage, Jr.
</TABLE>
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<PAGE> 53
with a copy (which shall not constitute notice) to:
Gerrish & McCreary, P.C.
700 Colonial Road
Suite 200
Memphis, Tennessee 38117
Attn: Jeffrey C. Gerrish, 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
in such specific provision. 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 May 2, 1998.
10.6. Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same instrument 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 Mississippi, without
regard to its principles of conflicts of laws.
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 were 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.
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<PAGE> 54
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 NYSE, 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
such 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.
[NEXT PAGE IS SIGNATURE PAGE.]
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<PAGE> 55
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.
BANCORPSOUTH, INC.
By: /s/ Aubrey B. Patterson
----------------------------------------------
Name: Aubrey B. Patterson
Title: President and Chief Executive Officer
MERCHANTS CAPITAL CORPORATION
By: /s/ Howell N. Gage
----------------------------------------------
Name: Howell N. Gage
Title: Chairman
51
<PAGE> 1
EXHIBIT 10
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 May 2, 1998, between Merchants
Capital Corporation, a Mississippi corporation ("Issuer"), and BancorpSouth,
Inc., a Mississippi 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 148,150 fully paid and nonassessable shares of Issuer's
Common Stock, $5.00 par value ("Common Stock"), at a price of $63.00 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.
<PAGE> 2
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 Section 9.1(g) of the Merger Agreement; 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) or Section 9.1(g) of the Merger
Agreement. The term "Holder" shall mean the Grantee or any future
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
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<PAGE> 3
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;
(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.
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<PAGE> 4
(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
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<PAGE> 5
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.
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<PAGE> 6
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. Sections 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,
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<PAGE> 7
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
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<PAGE> 8
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)
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<PAGE> 9
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
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<PAGE> 10
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.
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<PAGE> 11
(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.
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<PAGE> 12
(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.
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<PAGE> 13
(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.
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<PAGE> 14
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 and is enforceable against Issuer in
accordance with its terms.
(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
14
<PAGE> 15
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 any
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.
15
<PAGE> 16
18. This Agreement shall be governed by and construed in
accordance with the laws of the State of Mississippi, 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.
MERCHANTS CAPITAL CORPORATION
BY: /s/ Howell N. Gage
----------------------------------------
Name: Howell N. Gage
Title: Chairman
BANCORPSOUTH, INC.
BY: /s/ Aubrey B. Patterson
----------------------------------------
Name: Aubrey B. Patterson
Title: Chairman and Chief Executive Officer
16
<PAGE> 1
EXHIBIT 99
MONDAY, MAY 4, 8:58 AM EASTERN TIME
COMPANY PRESS RELEASE
BANCORPSOUTH, INC. ANNOUNCES MERGER WITH MERCHANTS CAPITAL CORP.
TUPELO, Miss. -- (BUSINESS WIRE) -- May 4, 1998 -- The holding companies of
Bank of Mississippi, headquartered in Tupelo, and Merchants Bank of Vicksburg
have entered into a binding agreement to merge.
BancorpSouth, Inc., (NYSE: BXS - news) holding company of BancorpSouth Bank
which does business in Mississippi as Bank of Mississippi, and Merchants
Capital Corp. [OTC BB:MCBKB-news], holding company of Merchants Bank, today
announced the signing of a definitive agreement to merge Merchants Capital
Corp. into BancorpSouth, subject to approval of the shareholders of Merchants
Capital Corp. and federal and state regulatory authorities.
Under the terms of the agreement, shareholders of Merchants Capital will
receive 1.884 shares of BancorpSouth Inc. common stock in exchange for each
share of Merchants Capital Corp. common stock. The exchange rate will be
adjusted to reflect BancorpSouth's previously announced two-for-one stock split
effected in the form of a 100% stock dividend that will be issued on May 15,
1998.
On a post-split basis, Merchants' shareholders will receive 3.768 shares of
BancorpSouth stock for each share of Merchants' Capital Corp. common stock.
The subsidiary banks of the two bank holding companies will also be merged.
The transaction will be structured as a pooling of interests and as a tax-free
exchange to the shareholders of Merchants Capital. In connection with the
transaction, BancorpSouth has been granted an option to acquire up to 19% of
the common stock of Merchants, subject to certain limitations, terms, and
conditions set forth in a stock option agreement between Merchants and
BancorpSouth.
The merger represents an in-market transaction between BancorpSouth and
Merchants. The combination of the two banks will give Bank of Mississippi a
more significant share of the Vicksburg and Warren County banking market. Bank
of Mississippi currently operates two branch offices in Vicksburg while
Merchants operates four Vicksburg locations. Merchants also operates two
additional branch offices in Utica and Edwards in Hinds County and a loan
production office in Jackson, Miss.
As of March 31, 1998, BancorpSouth's total assets were $4.4 billion while
Merchants Capital Corp. assets totaled $222.2 million. The combining of the
two banks is expected to result in a reduction of duplicative operating
expenses. The merger is expected to be slightly dilutive to BancorpSouth's
1998 earnings per share but antidilutive in 1999.
Based on the closing price of BancorpSouth's common stock as traded on the New
York Stock Exchange, the transaction is valued at $63,136,000.
<PAGE> 2
BancorpSouth has a total of 134 offices servicing 55 Mississippi and Tennessee
communities.
BancorpSouth Chairman and CEO Aubrey B. Patterson said, "Merchants Bank is a
truly outstanding institution. It is a bulwark of the Vicksburg business
community, and Merchants' philosophy of planting deep roots in the Vicksburg
market mirrors that a Bank of Mississippi. Like us, they have strong ties to
the state and local economy, and they will bring great strength to our company.
Together, we can lend a higher level of service to the Vicksburg, Edwards and
Utica markets."
Merchants' Chairman and CEO Howell N. Gage said, "Merchants is quite pleased to
affiliate with such a fine company and such capable people. Bank of
Mississippi is an extremely well run bank which shares our commitments of
service to customers, concern for employees and development of the communities
we serve. This merger will allow us to carry forward these commitments while
remaining viable and competitive in the rapidly changing financial services
industry."
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 BancorpSouth Inc.'s
business and prospects are contained in the company's periodic filings with the
Securities and Exchange Commission.
Based on IBES consensus estimates of earnings for 1998 and 1999, the merger of
BancorpSouth, Inc. and Merchants Capital is expected to impact BancorpSouth's
earnings as follows:
1998 - Dilutive by 3.0%
1999 - Accretive by 1.3%
14% Expected synergies (100% cost)
- ---------------
Contact:
BancorpSouth, Inc., Tupelo
Harry Baxter, 601/680-2410
http://www.bancorpsouth.com
or
Merchants Capital Corp.
Howell N. Gage, 601/630-2211
