<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10, 1998
REGISTRATION NO. 333-28081
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
-----------------
BANCORPSOUTH, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MISSISSIPPI 6712 64-0659571
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
ONE MISSISSIPPI PLAZA
TUPELO, MISSISSIPPI 38801
(601) 680-2000
(Address, Including Zip Code, and Telephone Number, including
Area Code, of registrant's principal executive offices)
AUBREY B. PATTERSON
BANCORPSOUTH, INC.
ONE MISSISSIPPI PLAZA
TUPELO, MISSISSIPPI 38801
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-----------------
With copies to:
THEODORE W. LENZ, ESQ. PAUL S. WARE, ESQ.
WALLER LANSDEN DORTCH & DAVIS, PLLC BRADLEY ARANT ROSE & WHITE LLP
511 UNION STREET, SUITE 2100 2001 PARK PLACE, SUITE 1400
NASHVILLE, TENNESSEE 37219 BIRMINGHAM, ALABAMA 35203-2736
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Post-Effective Amendment becomes
effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
--------------------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
<PAGE> 2
[HIGHLAND BANK LOGO] [ALABAMA BANCORP LOGO] [FIRST COMMUNITY BANK LOGO]
MERGERS PROPOSED -- YOUR VOTE IS VERY IMPORTANT
Alabama Bancorp., Inc. and its subsidiary banks, Highland Bank and
First Community Bank of The South, have entered into a merger agreement with
BancorpSouth, Inc. The merger agreement provides that, subject to shareholder
and regulatory approval and other conditions, Alabama Bancorp will merge into
BancorpSouth. In addition, Highland Bank and First Community Bank of The South
will merge into BancorpSouth Bank, a subsidiary of BancorpSouth. The combined
companies would have banking operations in Mississippi, Tennessee and Alabama,
and, based upon the companies' June 30, 1998 balance sheets, total assets of
about $4.8 billion, deposits of about $4.1 billion and shareholders' equity of
about $406.1 million.
If the mergers are completed, shareholders of Alabama Bancorp, Highland
Bank and First Community Bank of The South will receive shares of BancorpSouth
common stock in exchange for their shares of common stock of Alabama Bancorp,
Highland Bank and First Community Bank of The South. BancorpSouth common stock
is listed on the New York Stock Exchange under the symbol "BXS." On _______,
1998, the closing price per share of BancorpSouth common stock reported on the
New York Stock Exchange was $______.
The mergers cannot be completed without the approval of shareholders of
each of Alabama Bancorp, Highland Bank and First Community Bank of The South.
Each of these companies has scheduled a special meeting for its shareholders to
vote on the mergers. In addition, shareholders of Alabama Bancorp will vote upon
the approval of certain change of control payments that will be made to Mr.
Larry R. Mathews, the President of Alabama Bancorp, upon completion of the
mergers, as provided in Mr. Mathews' employment agreement with Alabama Bancorp.
The dates, times and places of the special meetings are as follows:
Alabama Bancorp: ______________, 1998
______ __.m. (local time)
2211 Highland Avenue
Birmingham, Alabama
Highland Bank: ______________, 1998
______ __.m. (local time)
2211 Highland Avenue
Birmingham, Alabama
First Community Bank of The South: ______________, 1998
______ __.m. (local time)
2211 Highland Avenue
Birmingham, Alabama
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend your
special shareholders meeting, please take the time to vote by completing and
mailing the enclosed proxy card to us. If you sign, date and mail your proxy
card without indicating how you want to vote, your proxy will be counted as a
vote in favor of the mergers and, for shareholders of Alabama Bancorp, as a vote
in favor of approving the payments to Mr. Mathews under his employment
agreement. If you don't return your card, the effect will be a vote against the
mergers and the payments to Mr. Mathews.
The attached Prospectus Supplement/Proxy Statement provides you with
detailed information about the proposed mergers, the companies involved and the
change of control payments
<PAGE> 3
to Mr. Mathews. You can also obtain information about BancorpSouth from
documents it has filed with the Securities and Exchange Commission. We encourage
you to read this entire document carefully.
The Boards of Directors of each of Alabama Bancorp, Highland Bank and
First Community Bank of The South unanimously recommend that shareholders vote
in favor of their respective merger. In addition, the Board of Directors of
Alabama Bancorp unanimously recommends that the Alabama Bancorp shareholders
vote in favor of approving the change of control payments to Mr. Mathews.
Very truly yours,
Elton B. Stephens
Chairman
---------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSIONER HAS APPROVED OR DISAPPROVED OF THE SHARES OF BANCORPSOUTH COMMON
STOCK TO BE ISSUED UNDER THIS PROSPECTUS SUPPLEMENT/PROXY STATEMENT OR
DETERMINED IF THIS PROSPECTUS SUPPLEMENT/PROXY STATEMENT IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
SHARES OF BANCORPSOUTH COMMON STOCK ARE NOT SAVINGS OR DEPOSIT ACCOUNTS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
<PAGE> 4
[ALABAMA BANCORP LOGO]
NOTICE OF SPECIAL SHAREHOLDERS MEETING
TO BE HELD ON ________, 1998
TO THE SHAREHOLDERS OF ALABAMA BANCORP., INC.:
This serves as notice to you that a special meeting of shareholders of
Alabama Bancorp., Inc. will be held on ___________, 1998 at ____ __.m., local
time, for the purpose of considering and voting upon the following matters:
1. Mergers. Approval and adoption of the Agreement and Plan of Merger,
dated as of June 19, 1998, among Alabama Bancorp, Highland Bank, First Community
Bank of The South and BancorpSouth, Inc., and the transactions contemplated in
that agreement, including the merger of Alabama Bancorp with and into
BancorpSouth and the mergers of Highland Bank and First Community Bank of The
South with and into BancorpSouth Bank.
2. Change of Control Payments. To consider and vote upon a proposal to
approve certain change of control payments that will be made to Mr. Larry R.
Mathews, the President of Alabama Bancorp, upon completion of the mergers with
BancorpSouth, as provided in Mr. Mathews' employment agreement with Alabama
Bancorp. These payments are more completely described in the accompanying
Prospectus Supplement/Proxy Statement. A copy of Mr. Mathews' employment
agreement is attached hereto as Annex F.
3. Other Matters. To consider and vote on other matters that properly
come before the special meeting or any adjournments or postponements of the
special meeting.
Only holders of record of Alabama Bancorp common stock at the close of
business on ________, 1998 are entitled to notice of and to vote at the special
meeting or any adjournments or postponements of the special meeting.
Under Section 262 of the Delaware General Corporation Law (the "DGCL"),
holders of Alabama Bancorp common stock who comply with the requirements of
Section 262 of the DGCL will have the right to dissent from the merger and to
obtain payment of the fair value of their shares. A copy of Section 262 of the
DGCL is attached as Annex B to the attached Prospectus Supplement/Proxy
Statement. In addition, please see the section entitled "THE MERGERS -
Dissenters' Rights" in the attached Prospectus Supplement/Proxy Statement for a
discussion of the procedures to be followed in asserting these dissenters'
rights.
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING. All shareholders are cordially invited
to attend the special meeting. To ensure your representation at the special
meeting, please complete and promptly mail the enclosed proxy in the enclosed
return envelope. This will not prevent you from voting in person, but will help
to secure a quorum and avoid added solicitation costs. Your proxy may be revoked
at any time before it is voted. Please review the Prospectus Supplement/Proxy
Statement accompanying this notice for more complete information regarding the
merger and the special meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Larry R. Mathews
President
__________, 1998
THE BOARD OF DIRECTORS OF ALABAMA BANCORP UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR APPROVAL OF (1) THE MERGER AGREEMENT AND (2) THE CHANGE OF
CONTROL PAYMENTS TO MR. MATHEWS.
<PAGE> 5
[HIGHLAND BANK LOGO]
NOTICE OF SPECIAL SHAREHOLDERS MEETING
TO BE HELD ON ________, 1998
TO THE SHAREHOLDERS OF HIGHLAND BANK:
This serves as notice to you that a special meeting of shareholders of
Highland Bank will be held on ___________, 1998 at ____ __.m., local time, for
the purpose of considering and voting upon the following matters:
1. Mergers. Approval and adoption of the Agreement and Plan of Merger,
dated as of June 19, 1998, among Alabama Bancorp., Inc., Highland Bank, First
Community Bank of The South and BancorpSouth, Inc., and the transactions
contemplated in that agreement, including the merger of Alabama Bancorp with and
into BancorpSouth and the mergers of Highland Bank and First Community Bank of
The South with and into BancorpSouth Bank.
2. Other Matters. To consider and vote on other matters that properly
come before the special meeting or any adjournments or postponements of the
special meeting.
Only holders of record of Highland Bank common stock at the close of
business on ________, 1998 are entitled to notice of and to vote at the special
meeting or any adjournments or postponements of the special meeting.
Under Article 13 of the Alabama Business Corporation Act (the "ABCA"),
holders of Highland Bank common stock who comply with the requirements set forth
in Article 13 of the ABCA will have the right to dissent from the merger and to
obtain payment of the fair value of their shares. A copy of Article 13 of the
ABCA is attached as Annex C to the attached Prospectus Supplement/Proxy
Statement. In addition, please see the section entitled "THE MERGERS -
Dissenters' Rights" in the attached Prospectus Supplement/Proxy Statement for a
discussion of the procedures to be followed in asserting these dissenters'
rights.
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING. All shareholders are cordially invited
to attend the special meeting. To ensure your representation at the special
meeting, please complete and promptly mail the enclosed proxy in the enclosed
return envelope. This will not prevent you from voting in person, but will help
to secure a quorum and avoid added solicitation costs. Your proxy may be revoked
at any time before it is voted. Please review the Prospectus Supplement/Proxy
Statement accompanying this notice for more complete information regarding the
merger and the special meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Larry R. Mathews
President and Chief Executive Officer
__________, 1998
THE BOARD OF DIRECTORS OF HIGHLAND BANK UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
<PAGE> 6
[FIRST COMMUNITY BANK LOGO]
NOTICE OF SPECIAL SHAREHOLDERS MEETING
TO BE HELD ON ________, 1998
TO THE SHAREHOLDERS OF FIRST COMMUNITY BANK OF THE SOUTH:
This serves as notice to you that a special meeting of shareholders of
First Community Bank of The South will be held on ___________, 1998 at ____
__.m., local time, for the purpose of considering and voting upon the following
matters:
1. Mergers. Approval and adoption of the Agreement and Plan of Merger,
dated as of June 19, 1998, among Alabama Bancorp., Inc., Highland Bank, First
Community Bank of The South and BancorpSouth, Inc., and the transactions
contemplated in that agreement, including the merger of Alabama Bancorp with and
into BancorpSouth and the mergers of Highland Bank and First Community Bank of
The South with and into BancorpSouth Bank.
2. Other Matters. To consider and vote on other matters that properly
come before the special meeting or any adjournments or postponements of the
special meeting.
Only holders of record of First Community Bank common stock at the
close of business on ________, 1998 are entitled to notice of and to vote at the
special meeting or any adjournments or postponements of the special meeting.
Under Article 13 of the Alabama Business Corporation Act (the "ABCA"),
holders of First Community Bank common stock who comply with the requirement set
forth in Article 13 of the ABCA will have the right to dissent from the merger
and to obtain payment of the fair value of their shares. A copy of Article 13 of
the ABCA is attached as Annex C to the attached Prospectus Supplement/Proxy
Statement. In addition, please see the section entitled "THE MERGERS -
Dissenters' Rights" in the attached Prospectus Supplement/Proxy Statement for a
discussion of the procedures to be followed in asserting these dissenters'
rights.
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING. All shareholders are cordially invited
to attend the special meeting. To ensure your representation at the special
meeting, please complete and promptly mail the enclosed proxy in the enclosed
return envelope. This will not prevent you from voting in person, but will help
to secure a quorum and avoid added solicitation costs. Your proxy may be revoked
at any time before it is voted. Please review the Prospectus Supplement/Proxy
Statement accompanying this notice for more complete information regarding the
merger and the special meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Elton B. Stephens
Chairman
__________, 1998
THE BOARD OF DIRECTORS OF FIRST COMMUNITY BANK OF THE SOUTH UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGERS........................................................................ 6
SUMMARY........................................................................................................ 7
SELECTED FINANCIAL DATA........................................................................................ 19
THE SPECIAL MEETINGS........................................................................................... 26
General............................................................................................... 26
Proxies............................................................................................... 27
Solicitation Of Proxies............................................................................... 28
Record Date And Voting Rights......................................................................... 28
Recommendation Of The Boards Of Directors............................................................. 31
Dissenters' Rights.................................................................................... 31
THE MERGERS.................................................................................................... 39
Description Of The Mergers............................................................................ 39
Background Of The Mergers............................................................................. 41
Reasons For The Mergers; Recommendation Of The Boards Of Directors.................................... 43
Fairness Opinion...................................................................................... 46
Regulatory Approval................................................................................... 52
Accounting Treatment.................................................................................. 52
Certain Federal Income Tax Consequences............................................................... 52
Interests Of Certain Persons In The Mergers........................................................... 54
Comparison Of Rights Of Shareholders.................................................................. 55
Restrictions On Resales By Affiliates................................................................. 55
THE MERGER AGREEMENT........................................................................................... 57
Exchange Of Certificates.............................................................................. 57
Conditions To The Mergers............................................................................. 58
Termination Of The Merger Agreement................................................................... 59
Conduct Of Business Prior To The Mergers And Other Covenants.......................................... 60
Amendment Of The Merger Agreement; Waiver; Expenses................................................... 62
Stock Option Agreement................................................................................ 62
PROPOSAL TO APPROVE CHANGE OF CONTROL PAYMENTS................................................................. 65
PRICE RANGE OF COMMON STOCK AND DIVIDENDS...................................................................... 67
Market Prices......................................................................................... 67
Dividends............................................................................................. 68
ALABAMA BANCORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS..................................................................................................... 70
Results Of Operations and Financial Condition......................................................... 70
Average Balances And Interest Rates, Interest Yield/Rates On Taxable Equivalents...................... 74
Liabilities And Stockholders' Equity.................................................................. 74
Rate/Volume Analysis.................................................................................. 75
Allowance and Provision For Loan Losses............................................................... 75
Noninterest Income.................................................................................... 76
Noninterest Expense................................................................................... 77
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
Income Taxes.......................................................................................... 78
Loans................................................................................................. 78
Nonperforming Assets.................................................................................. 79
Securities............................................................................................ 79
Deposits.............................................................................................. 79
Liquidity............................................................................................. 80
Capital............................................................................................... 80
Interest Sensitivity.................................................................................. 81
Year 2000............................................................................................. 82
INFORMATION ABOUT ALABAMA BANCORP, HIGHLAND BANK AND FIRST COMMUNITY BANK OF THE SOUTH......................... 83
General............................................................................................... 83
Employees............................................................................................. 84
Description Of Properties............................................................................. 84
Legal Proceedings..................................................................................... 84
Supervision And Regulation............................................................................ 84
Risk-Based Capital Guidelines......................................................................... 85
Source Of Strength.................................................................................... 86
Certain Relationships And Related Party Transactions.................................................. 86
Principal Shareholders And Management................................................................. 87
COMPARISON OF RIGHTS OF SHAREHOLDERS........................................................................... 92
Change Of Control..................................................................................... 92
Board Of Directors.................................................................................... 93
Removal Of Directors.................................................................................. 93
Authorized Capital Stock.............................................................................. 94
Rights Of Shareholders To Call Special Meetings....................................................... 94
WHERE YOU CAN FIND MORE INFORMATION............................................................................ 95
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION.................................................... 96
LEGAL MATTERS.................................................................................................. 97
EXPERTS........................................................................................................ 97
ALABAMA BANCORP AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS............................................. F-1
PROSPECTUS, DATED ____________, 1998........................................................................... P-1
ANNEX A - AGREEMENT AND PLAN OF MERGER................................................................... A-1
ANNEX B - PROVISIONS OF SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW,
RELATING TO DISSENTERS' APPRAISAL RIGHTS....................................................... B-1
ANNEX C - PROVISIONS OF ARTICLE 13 OF THE ALABAMA BUSINESS CORPORATION ACT,
RELATING TO DISSENTERS' RIGHTS................................................................. C-1
ANNEX D - FAIRNESS OPINION OF ALEX SHESHUNOFF & CO. INVESTMENT BANKING................................... D-1
ANNEX E - STOCK OPTION AGREEMENT......................................................................... E-1
ANNEX F - EMPLOYMENT AGREEMENT BETWEEN ALABAMA BANCORP AND MR. LARRY R. MATHEWS.......................... F-1
ANNEX G - PERFORMANCE REWARD AGREEMENT BETWEEN ALABAMA BANCORP AND MR. LARRY R.
MATHEWS........................................................................................ G-1
</TABLE>
5
<PAGE> 9
QUESTIONS AND ANSWERS
ABOUT THE MERGERS
Q: WHAT DO I NEED TO DO NOW?
A: Just indicate on the enclosed proxy card how you want to vote, and sign
and mail the proxy card in the enclosed return envelope as soon as
possible so that your shares may be represented at the applicable
special shareholders meeting. If you sign and send in your proxy but
don't indicate how you want to vote, your proxy will be counted as a
vote in favor of your merger. If you don't vote on your merger or if
you abstain, the effect will be a vote against the merger.
You are invited to your special shareholders meeting to vote your
shares in person, rather than signing and mailing your proxy card. If
you do sign your proxy card, you can take back your proxy at any time
until the special shareholders meeting and either change your vote or
attend the special shareholders meeting and vote in person.
EACH OF THE BOARDS OF DIRECTORS OF ALABAMA BANCORP, HIGHLAND BANK AND
FIRST COMMUNITY BANK OF THE SOUTH UNANIMOUSLY RECOMMENDS VOTING IN
FAVOR OF THE PROPOSED MERGERS.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A: Only if you provide instructions to your broker on how to vote by
following the directions your broker provides. Without instructions
from you to your broker, your shares will not be voted and this will
effectively be a vote against your merger.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the mergers are completed, you will be sent written
instructions on how to exchange your shares of common stock of Alabama
Bancorp, Highland Bank and First Community Bank of The South for
BancorpSouth common stock.
Q. WHOM DO I CONTACT IF I HAVE QUESTIONS ABOUT MY MERGER?
A: If you have more questions about the mergers, you should contact:
Alabama Bancorp., Inc.
2211 Highland Avenue
Birmingham, Alabama 35255
Attention: Larry R. Mathews
Phone Number: (205) 933-8080.
6
<PAGE> 10
SUMMARY
This summary highlights selected information from this document. It
does not contain all of the information that is important to you. You should
carefully read this entire document and the documents to which it refers you in
order to understand fully the mergers and the change of control payments to Mr.
Mathews, and to obtain a more complete description of the companies and the
legal terms of the mergers. See "WHERE YOU CAN FIND MORE INFORMATION." Each item
in this summary includes a page reference that directs you to a more complete
description in this document of the topic discussed.
THE COMPANIES (PAGE 83)
BANCORPSOUTH, INC.
One Mississippi Plaza
Tupelo, Mississippi 38801
(601) 680-2000
BancorpSouth is incorporated in the State of Mississippi and is a bank
holding company. Through its wholly-owned bank subsidiary, BancorpSouth Bank,
and its banking-related subsidiaries, BancorpSouth serves customers primarily in
Mississippi and west Tennessee. BancorpSouth Bank conducts a commercial banking
and trust business through 137 offices in 69 municipalities or communities in 43
counties throughout Mississippi and west Tennessee. It operates under the trade
names "Bank of Mississippi" in Mississippi and "Volunteer Bank" in Tennessee.
BancorpSouth's principal assets are the stock of its subsidiaries. As of June
30, 1998, BancorpSouth had total assets of about $4.5 billion, deposits of about
$3.9 billion and shareholders' equity of about $378.9 million.
On May 2, 1998, BancorpSouth entered into a merger agreement with
Merchants Capital Corporation, a bank holding company based in Vicksburg,
Mississippi. The merger agreement provides for the merger of Merchants Capital
Corporation into BancorpSouth, and the merger of Merchants Bank (a wholly-owned
subsidiary of Merchants Capital Corporation) into BancorpSouth Bank. Merchants
Bank operates six banking locations in the Vicksburg, Mississippi area and a
loan production office in Jackson, Mississippi. As of June 30, 1998, Merchants
Capital Corporation and its subsidiaries had total assets of about $222.2
million and total deposits of about $184.8 million.
On August 12, 1998, BancorpSouth entered into a merger agreement with
The First Corporation, a bank holding company based in Opelika, Alabama. The
merger agreement provides for the merger of The First Corporation into
BancorpSouth, and the merger of The First National Bank of Opelika, Alabama (a
wholly-owned subsidiary of The First Corporation) into BancorpSouth Bank. The
First National Bank of Opelika operates two banking locations in Opelika,
Alabama and one banking location in Auburn, Alabama. As of June 30, 1998, The
First Corporation and its subsidiaries had total assets of about $147.2 million
and total deposits of about $125.5 million.
These mergers, which are subject to regulatory approval and other
conditions described in the merger agreement, are expected to be completed
during 1998. The parties have structured the mergers as tax-free exchanges of
common stock and intend to account for the mergers as a pooling of interests.
ALABAMA BANCORP., INC.
2211 Highland Avenue
Birmingham, Alabama 35255
(205) 939-4229
Alabama Bancorp is incorporated in the State of Delaware and is a bank
holding company. It is based in Birmingham, Alabama and is the controlling
shareholder of Highland Bank and First
7
<PAGE> 11
Community Bank of The South. Alabama Bancorp's principal assets are the stock of
its subsidiaries. As of June 30, 1998, Alabama Bancorp and its subsidiaries had
total assets of about $279.1 million, deposits of about $242.8 million and
shareholders' equity of about $19.0 million.
HIGHLAND BANK
2211 Highland Avenue
Birmingham, Alabama 35205-2901
(205) 933-8080
Highland Bank is an Alabama state bank and a subsidiary of Alabama
Bancorp. Highland Bank provides banking and other financial services at seven
locations in the Birmingham, Alabama area. As of June 30, 1998, Highland Bank
had total assets of about $206.3 million, deposits of about $193.3 million and
shareholders' equity of about $15.3 million.
FIRST COMMUNITY BANK OF THE SOUTH
307 Jones Street
Fort Deposit, Alabama 36032
(334) 227-4306
First Community Bank is an Alabama state bank and a subsidiary of
Alabama Bancorp. First Community Bank provides banking and other financial
services at four locations in the Fort Deposit, Alabama area. As of June 30,
1998, First Community Bank had total assets of about $70.2 million, deposits of
about $59.1 million and shareholders' equity of about $5.6 million.
THE MERGERS (PAGE 39)
BancorpSouth, Alabama Bancorp, Highland Bank and First Community Bank
entered into a merger agreement whereby Alabama Bancorp will merge into
BancorpSouth, and whereby Highland Bank and First Community Bank will merge into
BancorpSouth Bank, subject to shareholder and regulatory approval and other
conditions. The merger agreement is attached to this Prospectus Supplement/Proxy
Statement as Annex A. You should read it carefully.
If these mergers are completed, the businesses and operations of
BancorpSouth and Alabama Bancorp will be combined into a single, larger company
and Highland Bank and First Community Bank will combine with BancorpSouth Bank
into a single, larger bank. The parties hope to complete the mergers by the end
of October 1998, after obtaining approvals from the shareholders of Alabama
Bancorp, Highland Bank and First Community Bank, the Federal Deposit Insurance
Corporation and Mississippi and Alabama banking authorities.
If the mergers are completed:
1. Alabama Bancorp shareholders will receive a maximum of
176.2398 shares and a minimum of 130.2642 shares of
BancorpSouth common stock for each share of Alabama Bancorp
common stock they own;
2. Highland Bank shareholders will receive a maximum of 1.5485
shares and a minimum of 1.1445 shares of BancorpSouth common
stock for each share of Highland Bank common stock they own;
and
3. First Community Bank shareholders will receive a maximum of
11.2597 shares and a minimum of 8.3224 shares of BancorpSouth
common stock for each share of First Community Bank common
stock they own.
BancorpSouth won't issue any fractional shares of BancorpSouth common
stock. Instead, you will receive cash equal to $21.5625 multiplied by the
fraction of a share of BancorpSouth common stock to which you otherwise would be
entitled.
8
<PAGE> 12
The number of shares of BancorpSouth common stock to be exchanged for
each share (which is referred to as the exchange ratio) of common stock of
Alabama Bancorp, Highland Bank and First Community Bank will be determined based
upon the average closing price of BancorpSouth common stock on the New York
Stock Exchange over the last 10 consecutive full trading days ending on the
third business day before the special meetings. The exchange ratios for each
merger will be determined as follows:
<TABLE>
<CAPTION>
Exchange Ratio
--------------
<S> <C>
Alabama Bancorp.................... $3,304.5000 / (average closing price)
Highland Bank...................... $ 29.0347 / (average closing price)
First Community Bank............... $ 211.1193 / (average closing price)
</TABLE>
For example, if the average closing price of BancorpSouth common stock
is equal to $24.00, the exchange ratio for Alabama Bancorp common stock would be
about 137.6875 (or $3,304.50 / $24.00), and 137.6875 shares of BancorpSouth
common stock would be issued for each share of Alabama Bancorp common stock. In
addition, the exchange ratio for Highland Bank common stock would be about
1.2098 (or $29.0347/$24.00) and the exchange ratio for First Community Bank
common stock would be about 8.7966 (or $211.1193/$24.00). If the average closing
price is equal to $19.00, the exchange ratio for each share of Alabama Bancorp
common stock would be about 173.9211 (or $3,304.50 / $19.00), and 173.9211
shares of BancorpSouth common stock would be issued for each share of Alabama
Bancorp common stock. In addition, the exchange ratio for Highland Bank common
stock would be about 173.9211 (or $29.0347/$19.00) and the exchange ratio for
First Community Bank common stock would be about 11.1115 (or $211.1193/$19.00).
The exchange ratios will be fixed on the third business day before the
special meetings. Until that time, fluctuations in the market price of
BancorpSouth common stock will cause the exchange ratios to increase or
decrease, depending upon whether the market price decreases or increases. After
the exchange ratios become fixed, the market value of the BancorpSouth common
stock received in the merger may increase or decrease.
The range of exchange ratios is designed to reduce the risk of
fluctuations in the market price of BancorpSouth common stock prior to
completion of the mergers. The following table shows the market value of the
consideration that shareholders of Alabama Bancorp, Highland Bank and First
Community Bank will receive in the mergers for each share of Alabama Bancorp,
Highland Bank or First Community Bank common stock (assuming that the exchange
ratio formulas result in a number between the minimum and maximum exchange ratio
amounts).
<TABLE>
<CAPTION>
Minimum Maximum
--------------------------------- ----------------------------------
Market Value Market Value
of Shares of Shares
Exchange Ratio Received(1) Exchange Ratio Received(1)
-------------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
Alabama Bancorp.................. 130.2642 $3,304.5000 176.2398 $3,304.5000
Highland Bank.................... 1.1445 $ 29.0347 1.5485 $ 29.0347
First Community Bank............. 8.3224 $ 211.1193 11.2597 $ 211.1193
</TABLE>
- --------------------
(1) Assumes that the average closing price per share of BancorpSouth common
stock for purposes of computing the exchange ratios is not less than
about $18.75 or more than about $25.368, which would result in the
minimum and maximum exchange ratios.
Each of the applicable exchange ratios is limited by a minimum and
maximum amount, even if the exchange ratio formula results in a number outside
of that range. For example, the exchange ratio for Alabama Bancorp common stock
cannot be more than 176.2398 or less than 130.2642. If the average closing price
of BancorpSouth common stock is equal to $18.00, the exchange ratio for Alabama
Bancorp common stock would be 176.2398, even though the exchange ratio formula
would result in about 183.5833 (or $3,304.50 / $18.00).
9
<PAGE> 13
SPECIAL SHAREHOLDERS MEETINGS (PAGE 26)
Special meetings of the shareholders of each of Alabama Bancorp,
Highland Bank and First Community Bank will be held on ______, 1998 at the
following times and places. At the special meetings, shareholders will be asked
to approve the merger agreement among Alabama Bancorp, Highland Bank, First
Community Bank and BancorpSouth. In addition, shareholders of Alabama Bancorp
will be asked to approve certain change of control payments to Mr. Larry R.
Mathews, the President of Alabama Bancorp, that will result from the mergers
under the terms of Mr. Mathews' employment agreement with Alabama Bancorp.
Alabama Bancorp: ______________, 1998
______ __.m. (local time)
2211 Highland Avenue
Birmingham, Alabama
Highland Bank: _______, 1998
______ __.m. (local time)
2211 Highland Avenue
Birmingham, Alabama
First Community Bank : _______, 1998
______ __.m. (local time)
2211 Highland Avenue
Birmingham, Alabama
RECOMMENDATION TO SHAREHOLDERS (PAGE 43)
The Boards of Directors of Alabama Bancorp, Highland Bank and First
Community Bank believe that the mergers between Alabama Bancorp and BancorpSouth
and between their subsidiary banks are fair to their respective shareholders and
in their best interests, and unanimously recommend that you vote "FOR" the
proposal to approve the merger agreement. In addition, the Board of Directors of
Alabama Bancorp unanimously recommends that shareholders of Alabama Bancorp vote
"FOR" the proposal to approve the change of control payments to Mr. Mathews.
RECORD DATE; VOTING POWER (PAGE 28)
You can vote at the special meeting for shareholders of each of Alabama
Bancorp, Highland Bank and First Community Bank if you owned common stock of the
relevant company as of the close of business on the record date set forth below.
Each share of common stock of Alabama Bancorp, Highland Bank and First Community
Bank is entitled to one vote.
<TABLE>
<CAPTION>
First
Alabama Highland Community
Bancorp Bank Bank
------- ---- ----
<S> <C> <C> <C>
Record date........................... _________, 1998 _________, 1998 _________, 1998
Shares outstanding on
the record date.................. 20,799 2,132,942 71,385
</TABLE>
VOTE REQUIRED (PAGE 28)
In order for the mergers to be approved, a majority of the outstanding
shares of common stock of Alabama Bancorp and at least two-thirds of the
outstanding shares of common stock of each of Highland Bank and First Community
Bank must be voted in favor of their respective merger. Alabama Bancorp, the
controlling shareholder of Highland Bank and First Community Bank,
10
<PAGE> 14
intends to vote all of its shares in favor of the mergers. In addition, each
company expects that its officers and directors will vote all of their shares in
favor of its respective merger.
In order for the change of control payments to Mr. Mathews to be
approved, the holders of more than 75% of the shares of Alabama Bancorp common
stock entitled to vote at the special meeting (excluding shares held by Mr.
Mathews) must be voted in favor of approving the payments. Alabama Bancorp
expects that its officers and directors will vote all of their shares in favor
of approving the change of control payments to Mr. Mathews. Shareholders of
Highland Bank and First Community Bank will not vote on the change of control
payments to Mr. Mathews.
The following chart describes the voting requirements for the mergers.
<TABLE>
<CAPTION>
First
Alabama Highland Community
Bancorp Bank Bank
------- ---- ----
<S> <C> <C> <C>
Number of shares outstanding on
September __, 1998........................... 20,799 2,132,942 71,385
Number of votes necessary to approve
the mergers.................................. 10,400 1,421,962 47,591
Percentage of votes that Alabama
Bancorp can cast............................. -- 87.69% 96.0%
Percentage of votes that officers and
directors can cast .......................... 76.04% (1) 7.32% 1.43%
</TABLE>
- ------------
(1) Based on beneficial ownership.
BACKGROUND OF THE MERGERS (PAGE 41)
During 1996 and 1997, management of Alabama Bancorp received
unsolicited inquiries from BancorpSouth and several other financial institutions
(or consultants or brokers on behalf of institutions) about the possibility of a
business combination with Alabama Bancorp. Representatives of Alabama Bancorp
and BancorpSouth engaged in informal discussions during 1997. Management of
Alabama Bancorp indicated to BancorpSouth and the other financial institutions
that Alabama Bancorp was not interested in engaging in such a transaction at
that time.
In April 1998, Alabama Bancorp received a written proposal from a
financial institution (other than BancorpSouth) desiring to acquire Alabama
Bancorp. Management of Alabama Bancorp contacted BancorpSouth about its interest
in acquiring Alabama Bancorp and, in May 1998, BancorpSouth submitted a written
acquisition proposal to Alabama Bancorp. Alabama Bancorp engaged legal counsel
and a financial advisory firm, and conducted a due diligence review and
evaluation of BancorpSouth and the other potential acquirers. In June 1998,
BancorpSouth amended its original proposal to increase the purchase price that
it was willing to pay to acquire Alabama Bancorp and its subsidiaries. The other
potential acquirer declined to increase the amount of its offer, which was below
the amount of BancorpSouth's increased proposal. On June 19, 1998, the Boards of
Directors of Alabama Bancorp, Highland Bank and First Community Bank met
separately with their legal counsel and financial advisors to discuss the
acquisition proposals. At these meetings, the Boards approved the proposed
mergers with BancorpSouth and BancorpSouth Bank. Each of the parties executed
the merger agreement on June 19, 1998.
REASONS FOR THE MERGERS (PAGE 43)
The mergers will combine the strengths of BancorpSouth and Alabama
Bancorp and that of their subsidiary banks. The combined companies resulting
from the mergers should be able to
11
<PAGE> 15
achieve superior financial performance compared to the individual companies on
their own. One reason for this is that the combined companies should be able to
reduce costs substantially by eliminating overlap in the companies' operations
and by applying BancorpSouth's investments in technology to Alabama Bancorp's
operations. Another reason is that the companies should have opportunities to
increase revenue by bringing a larger universe of customers in contact with a
broader range of products and services. The competitiveness of the financial
services industry is increasing continually, and the greater strength realized
through combining the companies should enable them to provide superior products
and services to their customers and substantial benefits to their shareholders.
FEDERAL INCOME TAX CONSEQUENCES (PAGE 52)
The parties have structured the mergers with the intent that Alabama
Bancorp, Highland Bank, First Community Bank, their respective shareholders,
BancorpSouth and its shareholders will not recognize any gain or loss for U.S.
federal income tax purposes in the mergers, except in connection with cash
received instead of fractional shares by shareholders of Alabama Bancorp,
Highland Bank or First Community Bank, or with respect to shareholders of
Alabama Bancorp, Highland Bank and First Community Bank who dissent from their
merger under applicable state law. The mergers are conditioned on receipt of
legal opinions that this will be the case, but these opinions won't bind the
Internal Revenue Service, which could take a different view. Determining the
actual tax consequences of the mergers to you can be complicated. They will
depend on your specific situation and many variables not within the companies'
control. You should consult your own tax advisor for a full understanding of the
mergers' tax consequences.
ACCOUNTING TREATMENT (PAGE 52)
The parties expect that the merger of Alabama Bancorp into BancorpSouth
will qualify as a pooling of interests, which means that, for accounting and
financial reporting purposes, BancorpSouth will treat the combined companies as
if they had always been one company. However, the parties expect to use the
purchase method of accounting for BancorpSouth's acquisition of the shares of
Highland Bank common stock and First Community Bank common stock that are not
owned by Alabama Bancorp.
FAIRNESS OPINION (PAGE 46)
Alex Sheshunoff & Co. Investment Banking rendered an opinion to the
respective Boards of Directors of Alabama Bancorp, Highland Bank and First
Community Bank that, as of the date of the opinion, the applicable exchange
ratio was fair from a financial point of view to the respective shareholders of
Alabama Bancorp, Highland Bank and First Community Bank. This opinion is
attached as Annex D to this document. You should read it carefully.
INTERESTS OF CERTAIN PERSONS IN THE MERGERS (PAGE 54)
Directors and officers of Alabama Bancorp, Highland Bank and First
Community Bank will be issued shares of BancorpSouth common stock in the mergers
as follows:
<TABLE>
<CAPTION>
First
Alabama Highland Community
Bancorp Bank Bank
------- ---- ----
<S> <C> <C> <C>
Shares of common stock
beneficially owned by officers and
directors on September ___, 1998............... 15,815.25 156,206.00 1,022.00
Maximum number of shares of BancorpSouth common
stock that may be received by officers and
directors...................................... 2,787,276.50 241,885.00 11,507.41
Minimum number of shares of BancorpSouth common
stock that may be received by officers and
directors...................................... 2,060,160.89 178,777.77 8,505.49
</TABLE>
12
<PAGE> 16
Mr. Larry R. Mathews, who is Alabama Bancorp's President and Highland
Bank's President and Chief Executive Officer, will become Alabama Division
President of BancorpSouth Bank after the mergers. In addition, BancorpSouth
agreed to cooperate with Alabama Bancorp, Highland Bank and First Community Bank
in establishing a "stay pay" bonus program, whereby certain employees of Alabama
Bancorp, Highland Bank and First Community Bank would be paid up to three months
of compensation as an incentive to remain employed with the companies through
the completion of the mergers.
Mr. Mathews' employment agreement with Alabama Bancorp provides that
upon a change of control of Alabama Bancorp (such as the proposed merger with
BancorpSouth), Alabama Bancorp will pay Mr. Mathews a cash bonus equal to the
greater of $1 million or 2% of the value of the purchase price paid for Alabama
Bancorp. Based upon the total purchase price to be paid by BancorpSouth, Mr.
Mathews will be paid about $1,540,000 in cash upon completion of the mergers.
Copies of Mr. Mathews' employment agreement and performance reward agreement are
attached to this document as Annex F and Annex G.
CHANGE OF CONTROL PAYMENTS (PAGE 65)
Section 280G of the U.S. Internal Revenue Code provides that payments
to an individual in connection with a change of control may be considered an
excess parachute payment if the payments exceed a certain amount. This would
result in the recipient of the payments being subject to a 20% excise tax on the
amount by which the payments exceed reasonable compensation to the individual.
In addition, the company and its acquirer would not be permitted to deduct the
payments for federal income tax purposes. Section 280G provides for an
exemption, however, for payments by small business corporations whose capital
stock is not readily tradeable (such as Alabama Bancorp) if the payment is
approved by the affirmative vote of the holders of more than 75% of the
corporation's voting stock (excluding shares held by the individual receiving
the payment).
Accordingly, in order to qualify for this exemption, at the Alabama
Bancorp special shareholders meeting, shareholders of Alabama Bancorp will be
asked to approve the change of control payments that will be made to Mr. Mathews
upon completion of the mergers, as provided in his employment agreement with
Alabama Bancorp. The holders of more than 75% of the shares of Alabama Bancorp
common stock entitled to vote at the meeting (excluding shares held by Mr.
Mathews) must approve the change of control payment to Mr. Mathews in order for
Alabama Bancorp to qualify for the small business corporation exemption in
Section 280G and avoid the excise tax and loss of deduction.
DISSENTERS' RIGHTS (PAGE 31)
Alabama Bancorp Shareholders. Delaware law permits you to dissent from
your merger and to have the fair value of your Alabama Bancorp common stock
appraised by a court and paid to you in cash. To do this, you must follow
certain procedures, including filing certain notices with Alabama Bancorp and
refraining from voting your shares in favor of your merger. If you dissent from
the merger, your shares of Alabama Bancorp common stock will not be exchanged
for shares of BancorpSouth common stock in the merger, and your only right will
be to receive the appraised fair value of your shares of Alabama Bancorp common
stock in cash.
Highland Bank and First Community Bank Shareholders. Alabama law
permits you to dissent from your merger and to have the fair value of your
Highland Bank common stock or First Community Bank common stock appraised by a
court and paid to you in cash. To do this, you must follow certain procedures,
including filing certain notices with Highland Bank or First Community Bank, as
applicable, and refraining from voting your shares in favor of your merger. If
you dissent from the merger, your shares of Highland Bank common stock or First
Community Bank common stock will not be exchanged for shares of BancorpSouth
common stock in the merger, and your only right will be to receive the appraised
fair value of your shares of Highland Bank common stock or First Community Bank
common stock in cash.
13
<PAGE> 17
REGULATORY APPROVAL (PAGE 52)
The companies cannot complete the mergers unless they obtain the
approval of the FDIC. The U.S. Department of Justice has input into the FDIC's
approval process. Federal law requires the companies to wait for up to 30 days
before completing the mergers after the FDIC has approved them. BancorpSouth
expects to obtain approval from the FDIC on or about September 16, 1998, and
that the waiting period will have expired by October 2, 1998.
In addition, the mergers are subject to the approval of the Mississippi
Department of Banking and Consumer Finance and the Alabama Banking Department.
The companies have filed all of the required notices with these state regulatory
authorities.
While the companies are not aware of any reason why they shouldn't
obtain the remaining regulatory approvals in a timely manner, they cannot be
certain when they will obtain the approvals or that the companies will obtain
them.
CONDITIONS TO COMPLETION OF THE MERGERS (PAGE 58)
The completion of the mergers depends on a number of conditions being
met, including the following:
1. Shareholders of Alabama Bancorp, Highland Bank and First
Community Bank approving the mergers;
2. The New York Stock Exchange having authorized for listing the
shares of BancorpSouth common stock to be issued to
shareholders of Alabama Bancorp, Highland Bank and First
Community Bank in the mergers;
3. Receipt of all required regulatory approvals, including that
of the FDIC, and the expiration of any regulatory waiting
periods;
4. The absence of any governmental order blocking completion of
the mergers, or of any proceedings by a government body trying
to block it;
5. Receipt of opinions of legal counsel to each company that the
U.S. federal income tax treatment in the mergers will
generally be as described in this document;
6. Receipt of letters from the certified public accountants to
each company opining that the merger of Alabama Bancorp into
BancorpSouth will qualify for pooling of interests accounting
treatment under applicable accounting standards if the merger
is consummated in accordance with the merger agreement;
7. Mr. Larry R. Mathews, the President of Alabama Bancorp and the
President and Chief Executive Officer of Highland Bank,
entering into an employment agreement with BancorpSouth Bank,
or the existing employment agreement between Alabama Bancorp
and Mr. Mathews having been amended to delete a provision that
would terminate Mr. Mathews' covenant not to compete upon
completion of the mergers; and
8. Shareholders of Alabama Bancorp approving the change of
control payments to Mr. Mathews under the terms of his
employment agreement with Alabama Bancorp.
In cases where the law permits, a party to the merger agreement could
elect to waive a condition that has not been satisfied and complete the mergers
although it is entitled not to. The companies cannot be certain whether or when
any of these conditions will be satisfied (or waived, where permissible), or
that the mergers will be completed.
14
<PAGE> 18
TERMINATION OF THE MERGER AGREEMENT (PAGE 59)
The companies can agree at any time to terminate the merger agreement
without completing the mergers, even if the shareholders of Alabama Bancorp,
Highland Bank and First Community Bank have already voted to approve it. Also,
BancorpSouth can terminate the merger agreement if Alabama Bancorp's, Highland
Bank's or First Community Bank's Board of Directors withdraws, or modifies in
any way adverse to BancorpSouth, its recommendation that its respective
shareholders approve the mergers.
Moreover, either company can terminate the merger agreement in the
following circumstances:
1. After a final decision by a governmental authority to prohibit
the mergers, or after the rejection of an application for a
governmental approval required to complete the mergers (but in
the latter case, only after waiting 60 days);
2. If the mergers aren't completed by January 31, 1999;
3. If the shareholders of Alabama Bancorp, Highland Bank or First
Community Bank do not approve the mergers; or
4. If the other party violates, in a significant way, any of its
representations, warranties or obligations contained in the
merger agreement.
Generally, a party can only terminate the merger agreement in one of the
preceding four situations if that party isn't in violation of the merger
agreement or if its violations of the merger agreement aren't the cause of the
event permitting termination.
In addition, if the computed amount of the exchange ratio for shares of
common stock of Alabama Bancorp, Highland Bank and First Community Bank is less
than the applicable minimum exchange ratio, BancorpSouth can elect to terminate
the merger agreement unless Alabama Bancorp agrees to lower the minimum exchange
ratio amount. This would occur if the average closing price per share of
BancorpSouth common stock used to compute the exchange ratios was more than
about $25.368. Similarly, if the computed exchange ratio is more than the
maximum exchange ratio, Alabama Bancorp can elect to terminate the merger
agreement unless BancorpSouth agrees to increase the maximum exchange ratio
amount. This would occur if the average closing price per share of BancorpSouth
common stock used to compute the exchange ratios was less than about $18.75.
For example, if the average closing price of BancorpSouth common stock
was equal to $25.62, the exchange ratio applied to each share of Alabama Bancorp
common stock would be about 129. Since the minimum exchange ratio for Alabama
Bancorp is 130.2642, BancorpSouth would have the right to terminate the merger
agreement unless Alabama Bancorp agrees to decrease the minimum exchange ratio
to an amount proposed by BancorpSouth that is not less than 129 or more than
130.2642. If the average closing price of BancorpSouth common stock was equal to
$18.36, the exchange ratio applied to each share of Alabama Bancorp common stock
would be about 180. Since the maximum exchange ratio for Alabama Bancorp is
176.2398, Alabama Bancorp would have the right to terminate the merger agreement
unless BancorpSouth agrees to increase the maximum exchange ratio to an amount
proposed by Alabama Bancorp that is not less than 176.2398 or more than 180.
BANCORPSOUTH'S OPTION TO PURCHASE ALABAMA BANCORP COMMON STOCK (PAGE 62)
To induce BancorpSouth to enter into the merger agreement, Alabama
Bancorp granted a stock option to BancorpSouth to purchase up to 5,167 shares of
Alabama Bancorp common stock at a
15
<PAGE> 19
price of $2,400 per share. The number of shares of Alabama Bancorp common stock
that may be acquired upon exercise of the stock option may not exceed 19.9% of
the issued and outstanding shares of Alabama Bancorp common stock (without
counting shares that are exerciseable under the stock option).
BancorpSouth cannot exercise the stock option unless certain specific
events take place. These events are generally related to a competing transaction
involving a merger, business combination or other acquisition of Alabama Bancorp
or its stock or assets. As of the date of this Prospectus Supplement/Proxy
Statement, the companies are not aware that any event of that kind has occurred.
The stock option could have the effect of discouraging other companies that
might want to combine with or acquire Alabama Bancorp from doing so. The stock
option agreement is attached as Annex E to this Prospectus Supplement/Proxy
Statement.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (PAGE 67)
Shares of BancorpSouth common stock are listed on the New York Stock
Exchange. On June 19, 1998, the last full trading day prior to the public
announcement of the mergers, BancorpSouth common stock closed at $21.5625 per
share. On _____, 1998, BancorpSouth common stock closed at $_____ per share. Of
course, the market price of BancorpSouth common stock will fluctuate after
completion of the mergers, while each of the exchange ratios will be fixed prior
to the completion of the mergers. You should obtain current stock price
quotations for BancorpSouth common stock.
There is no established trading market for shares of Alabama Bancorp
common stock, Highland Bank common stock or First Community Bank common stock,
each of which is inactively traded in private transactions. Therefore, reliable
information is not available about the prices at which shares of Alabama Bancorp
common stock, Highland Bank common stock and First Community Bank common stock
have been bought and sold.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE (PAGE 96)
This document, and other documents to which you are referred in this
document, contain forward-looking statements that are subject to risks and
uncertainties. These forward-looking statements include information about
possible or assumed future results of the companies' operations or the
performance of the combined companies after the mergers. Forward-looking
statements generally include any of the words "believes," "expects,"
"anticipates" or similar expressions. Many possible events or factors could
affect the future financial results and performance of each of the companies and
the combined company after the mergers and could cause those results or
performance to differ materially from those expressed in forward-looking
statements. These possible events or factors include the following:
1. Problems or delays in bringing the companies together, either
before or after the mergers are consummated;
2. Legal and regulatory risks and uncertainties;
3. Economic, political and competitive forces affecting the
companies' businesses, markets, constituencies or securities;
and
4. Inaccuracies in the companies' analyses of these risks and
forces, and lack of success of strategies developed to deal
with them.
16
<PAGE> 20
COMPARATIVE UNAUDITED PER SHARE DATA
The following table shows information, for the periods indicated, about
BancorpSouth's, Alabama Bancorp's, Highland Bank's and First Community Bank's
historical net income per share, dividends per share and book value per share.
The table also provides similar information that reflects the merger of
BancorpSouth and Alabama Bancorp (which is referred to as "pro forma"
information). In presenting the comparative pro forma information for certain
time periods, it is assumed that Alabama Bancorp and BancorpSouth had been
merged throughout those periods for accounting and financial reporting purposes
(a method which is referred to as the "pooling of interests" method of
accounting). In addition, the table provides "pro forma equivalent" information
for each of Alabama Bancorp, Highland Bank and First Community Bank, which was
obtained by multiplying the BancorpSouth and Alabama Bancorp pro forma amounts
by an assumed exchange ratio equal to the midpoint of the range of the
applicable exchange ratio. It is intended to reflect the fact that shareholders
will be receiving more than one share of BancorpSouth common stock for each
share of common stock exchanged in the mergers.
<TABLE>
<CAPTION>
BOOK VALUE PER SHARE: DECEMBER 31, 1997 JUNE 30, 1998
----------------- -------------
<S> <C> <C>
BancorpSouth historical (1)............................... $ 8.09 $ 8.48
Alabama Bancorp historical................................ 848.60 912.26
Highland Bank historical.................................. 6.63 7.16
First Community Bank historical........................... 73.97 77.93
BancorpSouth and Alabama Bancorp pro
forma (2)............................................ 8.03 8.42
Alabama Bancorp pro forma equivalent (3).................. 1,230.61 1,289.64
Highland Bank pro forma equivalent (4).................... 10.81 11.33
First Community Bank pro forma equivalent (5)............. 78.62 82.39
</TABLE>
<TABLE>
<CAPTION>
SIX-MONTHS
NET INCOME PER SHARE: YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------- --------------
1995 1996 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
BancorpSouth historical (1)............................... $ 0.84 $ 1.02 $ 1.02 $ 0.59
Alabama Bancorp historical................................ 92.70 87.79 88.95 53.85
Highland Bank historical.................................. 0.89 0.94 0.77 0.50
First Community Bank historical........................... 9.93 8.57 7.48 3.52
BancorpSouth and Alabama Bancorp pro
forma (2)............................................ 0.82 0.97 0.97 0.56
Alabama Bancorp pro forma equivalent (3).................. 125.31 149.10 148.62 85.89
Highland Bank pro forma equivalent (4).................... 1.10 1.31 1.31 0.75
First Community Bank pro forma equivalent (5)............. 8.01 9.53 9.50 5.49
</TABLE>
17
<PAGE> 21
<TABLE>
<CAPTION>
SIX-MONTHS
CASH DIVIDENDS PER SHARE: YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------- --------------
1995 1996 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
BancorpSouth historical (1)............................... $ 0.31 $ 0.35 $ 0.395 $ 0.22
Alabama Bancorp historical................................ 26.25 26.25 26.25 --
Highland Bank historical.................................. 0.44 0.53 0.56 --
First Community Bank historical........................... 6.26 4.95 3.15 --
BancorpSouth and Alabama Bancorp pro forma (2)............ 0.31 0.35 0.395 0.22
Alabama Bancorp pro forma equivalent (3).................. 47.51 53.64 60.53 33.72
Highland Bank pro forma equivalent (4).................... 0.42 0.47 0.53 0.30
First Community Bank pro forma equivalent (5)............. 3.04 3.43 3.87 2.15
</TABLE>
- --------------------
(1) Adjusted to reflect a two-for-one stock split of BancorpSouth common
stock, effected in the form of a 100% stock dividend as of May 15,
1998.
(2) Presented as if the merger of Alabama Bancorp into BancorpSouth had
been effective throughout the periods presented.
(3) Calculated by multiplying the BancorpSouth and Alabama Bancorp pro
forma amount by 153.252, the midpoint of the range of the Alabama
Bancorp exchange ratio.
(4) Calculated by multiplying the BancorpSouth and Alabama Bancorp pro
forma amount by 1.3465, the midpoint of the range of the Highland Bank
exchange ratio.
(5) Calculated by multiplying the BancorpSouth and Alabama Bancorp pro
forma amount by 9.791, the midpoint of the range of the First Community
Bank exchange ratio.
18
<PAGE> 22
SELECTED FINANCIAL DATA
The following tables show summarized unaudited historical consolidated
financial data for BancorpSouth and for Alabama Bancorp and also show similar
pro forma information reflecting the merger of the two companies. The pro forma
information reflects the "pooling of interests" method of accounting for the
merger of Alabama Bancorp into BancorpSouth.
BancorpSouth and Alabama Bancorp expect to incur merger-related
expenses as a result of combining the companies. The companies also anticipate
that the mergers will provide the combined company with financial benefits such
as reduced operating expenses and the opportunity to earn more revenue. However,
none of these anticipated expenses or benefits has been factored into the pro
forma income statement information. For that reason, the pro forma information,
while helpful in illustrating the financial attributes of the combined company
under one set of assumptions, doesn't attempt to predict or suggest future
results. Also, the information set forth for the six-month period ended June 30,
1998 doesn't indicate what the results will be for the full 1998 fiscal year.
The information in the following tables is based on the historical
financial information of BancorpSouth that has been presented in its prior
filings with the Securities and Exchange Commission (and which has been
incorporated by reference into this Prospectus Supplement/Proxy Statement) and
on the historical financial information of Alabama Bancorp included in this
Prospectus Supplement/Proxy Statement. All of the summary financial information
provided in the following tables should be read in connection with this
historical financial information. See "WHERE YOU CAN FIND MORE INFORMATION." The
financial information as of or for the interim periods ended June 30, 1998 and
1997 has not been audited and in the respective opinions of management reflects
all adjustments (consisting only of normal recurring adjustments) necessary to a
fair presentation of such data.
19
<PAGE> 23
BancorpSouth, Inc.
Selected Historical Consolidated Financial Data
(in thousands except per share amounts)
<TABLE>
<CAPTION>
For the Six
Months Ended
June 30,
For the Years Ended December 31, (Unaudited)
-------------------------------------------------------------- -----------------------
EARNINGS SUMMARY: 1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Interest revenue ............. $ 193,869 $ 207,895 $ 252,427 $ 277,919 $ 307,094 $ 147,992 $ 165,833
Interest expense ............. 78,715 85,029 114,457 126,505 144,055 69,249 81,163
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest revenue ....... 115,154 122,866 137,970 151,414 163,039 78,743 84,670
Provision for credit losses .. 9,032 5,946 6,206 8,804 9,008 3,649 6,013
Other revenue ................ 26,776 26,012 31,240 40,745 43,667 21,178 23,323
Other expense ................ 93,176 99,372 111,750 118,472 131,988 60,754 62,343
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income tax and
accounting change ....... 39,722 43,560 51,254 64,883 65,710 35,518 39,637
Applicable income taxes ...... 10,216 12,832 15,750 22,000 20,360 11,631 13,240
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before accounting
change...................... 29,506 30,728 35,504 42,883 45,350 23,887 26,397
Accounting change, net of tax 3,429 -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income ................... $ 32,935 $ 30,728 $ 35,504 $ 42,883 $ 45,350 $ 23,887 $ 26,397
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA:
Basic earnings ............... $ 0.83 $ 0.75 $ 0.85 $ 1.02 $ 1.02 $ 0.54 $ 0.59
Diluted earnings ............. 0.82 0.75 0.84 1.01 1.01 0.53 0.59
Cash dividends ............... 0.27 0.2775 0.31 0.35 0.395 0.19 0.22
Book value ................... 5.91 6.22 6.86 7.51 8.09 7.79 8.48
BALANCE SHEET DATA (PERIOD END):
Total assets ................. $2,802,044 $3,019,118 $3,306,159 $3,617,239 $4,180,143 $3,821,106 $4,504,403
Loans, net of unearned income 1,785,933 2,025,614 2,295,166 2,469,334 2,759,027 2,584,607 2,907,802
Allowance for credit losses .. 27,468 30,830 34,636 37,272 39,877 38,721 42,256
Securities ................... 664,741 746,861 679,058 760,805 939,631 895,702 1,161,991
Deposits ..................... 2,466,285 2,598,669 2,863,612 3,161,379 3,540,255 3,342,763 3,852,327
Long-term debt
Parent ..................... 24,508 24,508 24,508 -- -- -- --
Subsidiaries ............... -- 23,520 49,116 55,778 47,539 48,928 170,928
Total stockholders' equity ... 233,168 252,852 288,095 315,324 360,422 346,089 378,866
BALANCE SHEET DATA (AVERAGES):
Total assets ................. $2,659,785 $2,884,539 $3,151,297 $3,452,921 $3,853,818 $3,760,026 $4,319,651
Total stockholders' equity ... $ 218,504 $ 240,929 $ 268,395 $ 299,749 $ 344,166 $ 335,672 $ 367,461
Average number of diluted
shares outstanding ......... 40,103 40,780 42,031 42,259 44,789 44,723 45,066
SELECTED RATIOS (ANNUALIZED):
Return on average assets ..... 1.24% 1.07% 1.13% 1.24% 1.18% 1.27% 1.22%
Return on average
stockholders' equity ....... 15.07 12.75 13.23 14.31 13.18 14.23 14.37
Net interest margin .......... 4.89 4.76 4.86 4.81 4.64 4.70 4.33
Net charge-offs to average
loans....................... 0.34 0.14 0.15 0.26 0.27 0.22 0.26
Tier 1 capital to
risk-weighted assets ....... 11.00 11.31 12.11 12.14 12.49 12.69 12.11
Total capital to risk-weighted
assets...................... 13.70 13.49 13.97 13.39 13.74 13.94 13.36
Leverage ratio ............... 8.30 8.33 8.56 8.56 8.82 8.87 8.38
</TABLE>
20
<PAGE> 24
Alabama Bancorp, Inc.
Selected Historical Consolidated Financial Data
(in thousands except per share amounts)
<TABLE>
<CAPTION>
For the Six
Months Ended
June 30,
For the Years Ended December 31, (Unaudited)
---------------------------------------------------------- ---------------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS SUMMARY:
Interest revenue ............. $ 11,787 $ 13,105 $ 17,424 $ 17,970 $ 18,801 $ 9,030 $ 9,959
Interest expense ............. 5,186 6,206 9,655 9,511 9,813 4,665 5,221
--------- --------- --------- --------- --------- --------- ---------
Net interest revenue ....... 6,601 6,899 7,769 8,459 8,988 4,365 4,738
Provision for credit losses .. 112 296 72 401 179 85 117
Other revenue ................ 1,562 1,421 1,735 1,852 1,946 902 1,219
Other expense ................ 6,209 5,749 6,882 7,064 7,863 3,948 4,037
--------- --------- --------- --------- --------- --------- ---------
Income before income tax ... 1,842 2,275 2,550 2,846 2,892 1,234 1,803
Applicable income taxes ...... 530 594 622 1,020 1,042 447 683
--------- --------- --------- --------- --------- --------- ---------
Net income ................... $ 1,312 $ 1,681 $ 1,928 $ 1,826 $ 1,850 $ 787 $ 1,120
========= ========= ========= ========= ========= ========= =========
PER SHARE DATA:
Basic earnings ............... $ 63.07 $ 80.82 $ 92.70 $ 87.79 $ 88.95 $ 37.84 $ 53.85
Diluted earnings ............. 63.07 80.82 92.70 87.79 88.95 37.84 53.85
Cash dividends ............... 19.71 26.25 26.25 26.25 26.20 -- --
Book value ................... 577.91 584.40 723.73 769.70 848.60 802.54 912.26
BALANCE SHEET DATA (PERIOD END):
Total assets ................. $ 173,282 $ 221,013 $ 250,793 $ 248,107 $ 282,209 $ 258,308 $ 279,104
Loans, net of unearned income 100,179 124,489 143,261 157,964 176,845 162,928 183,341
Allowance for credit losses .. 1,580 1,664 1,621 1,549 1,519 1,515 1,597
Securities ................... 60,262 70,993 85,530 68,686 73,039 64,808 74,190
Deposits ..................... 153,739 202,458 228,563 224,162 248,050 230,061 242,825
Long-term debt ............... 1,100 2,667 2,667 2,425 11,183 6,254 10,687
Total stockholders' equity ... 12,020 12,155 15,053 16,009 17,650 16,828 18,974
BALANCE SHEET DATA (AVERAGES):
Total assets ................. $ 154,353 $ 197,765 $ 235,054 $ 245,321 $ 257,923 $ 249,368 $ 273,930
Total stockholders' equity ... $ 10,572 $ 12,706 $ 13,722 $ 15,475 $ 17,092 $ 16,692 $ 18,235
Average number of diluted
shares outstanding ......... 21 21 21 21 21 21 21
SELECTED RATIOS (ANNUALIZED):
Return on average assets ..... 0.78% 0.85% 0.82% 0.74% 0.72% 0.64% 0.82%
Return on average
stockholders' equity ....... 12.41 13.23 14.05 11.80 10.82 9.51 12.39
Net interest margin .......... 4.52 4.05 3.71 3.47 3.62 3.65 3.45
Net charge-offs to average
loans ...................... (0.21) 0.31 0.18 0.19 0.13 0.07 0.02
Tier 1 capital to
risk-weighted assets ....... 11.03 9.59 9.83 10.07 9.98 10.15 10.38
Total capital to risk-weighted
assets ..................... 12.28 10.79 10.80 11.04 10.82 11.05 11.25
Leverage ratio ............... 7.43 6.22 5.91 6.57 6.57 6.89 6.84
</TABLE>
21
<PAGE> 25
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Historical
---------------------------------
BancorpSouth Alabama Bancorp Adjustments Pro Forma
------------ --------------- ----------- ---------
(In thousands)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks................. $ 292,772 $ 11,550 $ 304,322
Held-to-maturity securities............. 533,419 36,912 570,331
Available-for-sale securities........... 406,212 36,127 442,339
Federal funds sold...................... -- 10,718 10,718
Loans and leases........................ 2,852,885 176,864 3,029,749
Less: Unearned discount............... 93,858 19 93,877
Allowance for credit losses..... 39,877 1,519 41,396
---------- -------- ----------
Net loans and leases.................. 2,719,150 175,326 2,894,476
Mortgages held for sale................. 39,134 -- 39,134
Premises and equipment, net............. 101,373 6,383 107,756
Other assets............................ 88,083 5,193 $ 6,155 (1) 99,431
---------- -------- ------- ----------
Total assets.......................... $4,180,143 $282,209 $ 6,155 $4,468,507
========== ======== ======= ==========
LIABILITIES
Deposits
Non-interest bearing.................. $ 467,962 $ 37,931 $ 505,893
Interest bearing...................... 3,072,293 210,119 3,282,412
---------- -------- ----------
Total deposits........................ 3,540,255 248,050 3,788,305
Short-term borrowings................... 177,450 9,000 186,450
Long-term debt.......................... 47,539 3,797 51,336
Other liabilities....................... 54,477 1,597 56,074
---------- -------- ----------
Total liabilities..................... 3,819,721 262,444 4,082,165
Minority interest in subsidiary banks... -- 2,115 $(2,115)(1) --
STOCKHOLDERS' EQUITY
Common stock............................ 111,980 5 959 (1)
7,963 (2) 120,907
Capital surplus......................... 95,699 6,927 7,311 (1)
(7,963)(2) 101,974
Unrealized gain on available-for-sale
securities.......................... 4,482 528 5,010
Retained earnings....................... 150,580 10,190 160,770
Less cost of treasury stock............. (2,319) -- (2,319)
---------- -------- ------- ----------
Total stockholders' equity............ 360,422 17,650 8,270 386,342
---------- -------- ------- ----------
Total liabilities and stockholders'
equity.............................. $4,180,143 $282,209 $ 6,155 $4,468,507
========== ======== ======= ==========
</TABLE>
- ----------------------
(1) Redemption of minority interests in subsidiary banks by issuing
BancorpSouth common stock.
(2) Reclassification of capital accounts to reflect the exchange of Alabama
Bancorp common stock for BancorpSouth common stock.
22
<PAGE> 26
Pro Forma Condensed Consolidated Balance Sheet
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Historical
----------------------------------
BancorpSouth Alabama Bancorp Adjustments Pro Forma
------------ --------------- ----------- ---------
(In thousands)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks................. $ 164,675 $ 10,006 $ 174,681
Held-to-maturity securities............. 784,279 38,875 823,154
Available-for-sale securities........... 377,712 35,316 413,028
Federal funds sold...................... 47,000 1,915 48,915
Loans and leases........................ 3,005,395 183,558 3,188,953
Less: Unearned discount............... 97,593 9 97,602
Allowance for credit losses..... 42,256 1,597 43,853
--------- ------- ----------
Net loans and leases.................. 2,865,546 181,952 3,047,498
Mortgages held for sale................. 59,415 -- 59,415
Premises and equipment, net............. 106,153 6,285 112,438
Other assets............................ 99,623 4,743 $ 5,993 (1) 110,359
---------- -------- ------- ----------
Total assets.......................... $4,504,403 $279,092 $ 5,993 $4,789,488
========== ======== ======= ==========
LIABILITIES
Deposits
Non-interest bearing.................. $ 488,974 $ 36,876 $ 525,850
Interest bearing...................... 3,363,353 205,937 3,569,290
---------- -------- ----------
Total deposits........................ 3,852,327 242,813 4,095,140
Short-term borrowings................... 47,680 2,376 50,056
Long-term debt.......................... 170,928 10,687 181,615
Other liabilities....................... 54,602 1,966 56,568
---------- -------- ----------
Total liabilities..................... 4,125,537 257,842 4,383,379
---------- -------- ---------
Minority interest in subsidiary banks... -- 2,276 $(2,276)(1) --
STOCKHOLDERS' EQUITY
Common stock............................ 111,980 5 959 (1) 112,944
7,963 (2)
Capital surplus......................... 96,130 6,927 7,311 (1) 110,368
(7,963) (2)
Unrealized gain on available-for-sale
securities.......................... 6,092 732 6,824
Retained earnings....................... 165,666 11,310 176,976
Less cost of treasury stock............. (1,002) -- (1,002)
---------- -------- ------- ---------
Total stockholders' equity............ 378,866 18,974 8,270 406,110
---------- --------- ------- ---------
Total liabilities and stockholders'
equity.............................. $4,504,403 $279,092 $5,994 $4,789,489
========== ======== ======= ==========
</TABLE>
- -------------------------
(1) Redemption of minority interests in subsidiary banks by issuing
BancorpSouth common stock.
(2) Reclassification of capital accounts to reflect the exchange of Alabama
Bancorp common stock for BancorpSouth common stock.
23
<PAGE> 27
Pro Forma Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------------------------------------------------------------------------------
1995 1996
-------------------------------------------------- ---------------------------------------------------
Alabama Alabama
BancorpSouth Bancorp BancorpSouth Bancorp
Historical Historical Adjustments Pro Forma Historical Historical Adjustments Pro Forma
------------ ---------- ----------- --------- ------------ ---------- ----------- ---------
(In thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest revenue....... $252,427 $17,424 $269,851 $277,919 $17,970 $295,889
Interest expense....... 114,457 9,655 124,112 126,505 9,511 136,016
-------- ------- -------- -------- ------- --------
Net interest revenue... 137,970 7,769 145,739 151,414 8,459 159,873
Provision for credit
losses............... 6,206 72 6,278 8,804 401 9,205
-------- ------- -------- -------- ------- --------
Net interest revenue,
after provision for
credit losses........ 131,764 7,697 139,461 142,610 8,058 150,668
Other revenue.......... 31,240 1,735 32,975 40,745 1,852 42,597
Other expense.......... 111,750 6,882 $(256)(1) 118,472 7,064 $(278)(1)
....................... 400 (2) 118,776 400 (2) 125,658
-------- ------- ----- -------- -------- ------- ----- --------
Income before income
tax.................. 51,254 2,550 (144) 53,660 64,883 2,846 (122) 67,607
Applicable income
taxes................ 15,750 622 -- 16,372 22,000 1,020 -- 23,020
-------- ------- ----- -------- -------- ------- ----- --------
Net income............. $ 35,504 $ 1,928 $(144) $ 37,288 $ 42,883 $ 1,826 $(122) $ 44,587
======== ======= ===== ======== ======== ======= ===== ========
EARNINGS PER SHARE
Basic................ $ 0.85 $ 92.70 $ 0.82 $ 1.02 $ 87.79 $ 0.98
Diluted.............. $ 0.84 $ 92.70 $ 0.82 $ 1.02 $ 87.79 $ 0.97
AVERAGE SHARES
Basic................ 41,749 21 45,320 41,991 21 45,562
Diluted.............. 42,031 21 45,602 42,259 21 45,830
</TABLE>
<TABLE>
<CAPTION>
For the year ended December 31, 1997
-------------------------------------------------
Alabama
BancorpSouth Bancorp
Historical Historical Adjustments Pro Forma
------------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
Interest revenue................ $307,094 $18,801 $325,895
Interest expense................ 144,055 9,813 153,868
-------- ------- --------
Net interest revenue............ 163,039 8.988 172,027
Provision for credit losses..... 9,008 179 9,187
-------- ------- --------
Net interest revenue, after
provision for credit losses... 154,031 8,809 162,840
Other revenue................... 43,667 1,946 45,613
Other expense................... 131,988 7,863 $ (98)(1)
400 (2) 140,153
-------- ------- ----- --------
Income before income tax........ 65,710 2,892 (302) 68,300
Applicable income taxes......... 20,360 1,042 -- 21,402
-------- ------- ----- --------
Net income...................... $ 45,350 $ 1,850 $(302) $ 46,898
======== ======= ===== ========
EARNINGS PER SHARE
Basic......................... $ 1.02 $ 88.95 $ 0.98
Diluted....................... $ 1.01 $ 88.95 $ 0.97
AVERAGE SHARES
Basic......................... 44,427 21 47,998
Diluted....................... 44,789 21 48,360
</TABLE>
- -------------------------
(1) Minority interest in net income of consolidated subsidiaries.
(2) Amortization of cost in excess of book value of minority interest
purchased.
24
<PAGE> 28
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
For the six months ended June 30,
----------------------------------------------------------------------------------------------
1997 1998
----------------------------------------------- ----------------------------------------------
Alabama Alabama
BancorpSouth Bancorp BancorpSouth Bancorp
Historical Historical Adjustments Pro Forma Historical Historical Adjustments Pro Forma
------------ ---------- ----------- --------- ------------ ---------- ----------- ---------
(In thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest revenue................ $147,992 $9,030 $157,022 $165,833 $9,959 $175,792
Interest expense................ 69,249 4,665 73,914 81,163 5,221 86,384
-------- ------ -------- -------- ------ --------
Net interest revenue............ 78,743 4,365 83,108 84,670 4,738 89,408
Provision for credit losses..... 3,649 85 3,734 6,013 117 6,130
-------- ------ -------- -------- ------ --------
Net interest revenue, after
provision for credit losses... 75,094 4,280 79,374 78,657 4,621 83,278
Other revenue................... 21,178 902 22,080 23,323 1,219 24,542
Other expense................... 60,754 3,948 $ (98)(1) 62,343 4,037 $(142)(1)
400 (2) 65,004 400 (2) 66,638
-------- ------ ----- -------- -------- ------ ----- --------
Income before income tax........ 35,518 1,234 (302) 36,450 39,637 1,803 (258) 41,182
Applicable income taxes......... 11,631 447 -- 12,078 13,240 683 -- 13,923
-------- ------ ----- -------- -------- ------ ----- --------
Net income...................... $ 23,887 $ 787 $(302) $ 24,372 $ 26,397 $1,120 $(258) $ 27,259
======== ====== ===== ======== ======== ====== ===== ========
</TABLE>
- -----------------------------
(1) Minority interest in net income of consolidated subsidiaries.
(2) Amortization of cost in excess of book value of minority interest
purchased.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
EARNINGS PER SHARE
Basic......................... $ 0.54 $37.84 $ 0.51 $ 0.59 $53.85 $ 0.57
Diluted....................... $ 0.53 $37.84 $ 0.50 $ 0.59 $53.85 $ 0.56
AVERAGE SHARES
Basic......................... 44,407 21 47,978 44,551 21 48,122
Diluted....................... 44,723 21 48,294 45,066 21 48,637
</TABLE>
25
<PAGE> 29
THE SPECIAL MEETINGS
GENERAL
This Prospectus Supplement/Proxy Statement is first being mailed, on or
about __________, 1998, to the following:
1. Holders (the "Alabama Bancorp Shareholders") of shares of
common stock, $0.25 par value per share ("Alabama Bancorp
Common Stock"), of Alabama Bancorp., Inc., a Delaware
corporation ("Alabama Bancorp");
2. Holders (the "Highland Bank Shareholders") of shares of common
stock, $0.06 par value per share ("Highland Bank Common
Stock"), of Highland Bank, an Alabama banking corporation
("Highland Bank"); and
3. Holders (the "First Community Bank Shareholders") of shares of
common stock, $5.00 par value per share ("First Community Bank
Common Stock"), of First Community Bank of The South, an
Alabama banking corporation ("First Community Bank").
This Prospectus Supplement/Proxy Statement is accompanied by a Notice
of Special Meeting from, and form of proxy that is solicited by, the respective
Boards of Directors of Alabama Bancorp (the "Alabama Bancorp Board"), Highland
Bank (the "Highland Bank Board") and First Community Bank (the "First Community
Bank Board") for use at the respective special meetings of Alabama Bancorp
Shareholders, Highland Bank Shareholders and First Community Bank Shareholders,
and at any adjournments or postponements thereof.
A special meeting of Alabama Bancorp Shareholders (the "Alabama Bancorp
Special Meeting") is to be held as follows:
___________, 1998
______ _.m. (local time)
2211 Highland Avenue
Birmingham, Alabama.
A special meeting of Highland Bank Shareholders (the "Highland Bank
Special Meeting") is to be held as follows:
___________, 1998
______ _.m. (local time)
2211 Highland Avenue
Birmingham, Alabama.
A special meeting of First Community Bank Shareholders (the "First
Community Bank Special Meeting") is to be held as follows:
___________, 1998
______ _.m. (local time)
2211 Highland Avenue
Birmingham, Alabama.
At each of the special shareholders meetings, the respective
shareholders will consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated as of June 19, 1998 (the "Merger
Agreement"), among Alabama Bancorp, Highland Bank, First Community Bank and
BancorpSouth, Inc., a Mississippi corporation ("BancorpSouth"), and the
transactions
26
<PAGE> 30
contemplated thereby, including the merger of Alabama Bancorp with and into
BancorpSouth (the "Holding Company Merger") and the mergers of Highland Bank and
First Community Bank with and into BancorpSouth Bank (the "Bank Mergers," and
together with the Holding Company Merger, the "Mergers").
In addition, at the Alabama Bancorp Special Meeting, Alabama Bancorp
Shareholders will consider and vote upon a proposal to approve certain payments
that will be made to Mr. Larry R. Mathews, the President of Alabama Bancorp,
upon completion of the Mergers in accordance with the terms of Mr. Mathews'
Employment Agreement, dated as of January 1, 1998 (the "Mathews Employment
Agreement"), with Alabama Bancorp. The Mathews Employment Agreement provides
that upon a change of control of Alabama Bancorp (such as the Holding Company
Merger), Alabama Bancorp will pay Mr. Mathews a cash bonus equal to the greater
of $1 million or 2% of the value of the purchase price paid for Alabama Bancorp
(the "Change of Control Payments"). Based upon the total consideration to be
paid by BancorpSouth in the Mergers, Mr. Mathews would be paid about $1,540,000
in cash upon completion of the Mergers.
PROXIES
Alabama Bancorp Shareholders, Highland Bank Shareholders and First
Community Bank Shareholders may use the accompanying proxy solicited by their
respective boards of directors if any such shareholder is unable to attend the
Alabama Bancorp Special Meeting, Highland Bank Special Meeting or First
Community Bank Special Meeting, as applicable, in person or wishes to have his
or her shares voted by proxy even if such shareholder does attend the meeting.
Alabama Bancorp Shareholders, Highland Bank Shareholders and First Community
Bank Shareholders may revoke any proxy given pursuant to this solicitation by
delivering to the respective corporate Secretary of their company prior to the
taking of the vote at the special meetings, a written notice revoking the proxy
or a duly executed proxy relating to the same shares bearing a later date or by
attending the meeting and voting in person; however, attendance at the special
meetings will not in and of itself constitute a revocation of a proxy.
All written notices of revocation and other communications with respect
to the revocation of proxies should be addressed to the following:
<TABLE>
<CAPTION>
Alabama Bancorp: Highland Bank: First Community Bank:
<S> <C> <C>
Alabama Bancorp., Inc. Highland Bank First Community Bank of The South
2211 Highland Avenue 2211 Highland Avenue 307 Jones Street
Birmingham, Alabama 35255 Birmingham, Alabama 35205 Fort Deposit, Alabama 36032
Attention: Secretary Attention: Secretary Attention: Secretary
</TABLE>
For such notice of revocation or later proxy to be valid, however, it
must actually be received by Alabama Bancorp, Highland Bank or First Community
Bank, as applicable, prior to the vote of the shareholders at the respective
special shareholders meeting. All shares represented by valid proxies received
pursuant to this solicitation, and not revoked before they are exercised, will
be voted in the manner specified therein. If no specification is made, the
proxies will be voted in favor of approval of the Merger Agreement. In addition,
proxies of Alabama Bancorp Shareholders will be voted in favor of the Change of
Control Payments.
Alabama Bancorp, Highland Bank and First Community Bank are currently
unaware of any other matters that may be presented for action at the respective
special meetings. If other matters do properly come before the special meetings,
however, shares represented by proxies will be voted (or not voted) by the
persons named in the proxies in their discretion.
27
<PAGE> 31
SOLICITATION OF PROXIES
The cost of soliciting proxies from the Alabama Bancorp Shareholders,
Highland Bank Shareholders and First Community Bank Shareholders will be borne
by the parties to the Merger Agreement. In addition to the solicitation of
proxies by mail, Alabama Bancorp, Highland Bank and First Community Bank will
request banks, brokers and other record holders to send proxies and proxy
material to the beneficial owners of the stock and secure their voting
instructions, if necessary. Alabama Bancorp, Highland Bank and First Community
Bank will reimburse such record holders for their reasonable expenses in so
doing. If necessary, each of Alabama Bancorp, Highland Bank and First Community
Bank may also use several of its regular employees, who will not be specially
compensated, to solicit proxies from Alabama Bancorp Shareholders, Highland Bank
Shareholders and First Community Bank Shareholders, either personally or by
telephone, telegram, facsimile or special delivery letter.
RECORD DATE AND VOTING RIGHTS
ALABAMA BANCORP
The Alabama Bancorp Board has fixed ____________, 1998 as the record
date (the "Alabama Bancorp Record Date") for the determination of the Alabama
Bancorp Shareholders entitled to receive notice of and to vote at the Alabama
Bancorp Special Meeting. Accordingly, only Alabama Bancorp Shareholders of
record at the close of business on the Alabama Bancorp Record Date will be
entitled to notice of and to vote at the Alabama Bancorp Special Meeting. At the
close of business on the Alabama Bancorp Record Date, there were 20,799 shares
of Alabama Bancorp Common Stock entitled to vote at the Alabama Bancorp Special
Meeting held by approximately 23 holders of record.
The presence, in person or by proxy, of shares of Alabama Bancorp
Common Stock representing a majority of the votes entitled to be cast at the
Alabama Bancorp Special Meeting is necessary to constitute a quorum. Each share
of Alabama Bancorp Common Stock outstanding on the Alabama Bancorp Record Date
entitles its holder to one vote as to the approval of (1) the Merger Agreement
and the Mergers, (2) the Change of Control Payments, and (3) any other proposal
that may properly come before the Alabama Bancorp Special Meeting.
Alabama Bancorp will count shares of Alabama Bancorp Common Stock
present in person at the Alabama Bancorp Special Meeting but not voting, and
shares of Alabama Bancorp Common Stock for which it has received proxies but
with respect to which holders of such shares have abstained, as present at the
Alabama Bancorp Special Meeting for purposes of determining the presence or
absence of a quorum for the transaction of business. Abstentions are counted as
present at the Alabama Bancorp Special Meeting for purposes of determining
whether a quorum exists and have the effect of a vote "against" any matter as to
which they are specified. Proxies submitted by brokers that do not indicate a
vote for some or all of the proposals because they don't have discretionary
voting authority and haven't received instructions as to how to vote on those
proposals (so-called "broker non-votes") will be counted as present at the
Alabama Bancorp Special Meeting for purposes of determining whether a quorum
exists and have the effect of a vote "against" any proposal as to which
instructions on how to vote were not provided.
Under the Delaware General Corporation Law (the "DGCL"), approval of
the Merger Agreement requires the affirmative vote of the holders of a majority
of all votes entitled to be cast on the Merger Agreement at the Alabama Bancorp
Special Meeting. Because approval of the Merger Agreement requires the
affirmative vote of the holders of a majority of outstanding shares of Alabama
Bancorp Common Stock, abstentions and broker non-votes will have the same effect
as negative votes. Accordingly, the Alabama Bancorp Board urges Alabama Bancorp
Shareholders to complete, date and sign the accompanying proxy and return it
promptly in the enclosed, postage-paid envelope.
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In addition, Section 280G of the U.S. Internal Revenue Code of 1986, as
amended (the "Code"), requires that the Change of Control Payments be approved
by the affirmative vote of the holders of more than 75% of the shares of Alabama
Bancorp Common Stock entitled to vote at the Alabama Bancorp Special Meeting
(excluding shares of Alabama Bancorp Common Stock beneficially owned by Mr.
Mathews), in order for Alabama Bancorp to qualify for an exemption in the Code
from excise taxes and loss of deductibility imposed upon excess change of
control payments. Because approval of the Change of Control Payments requires
the affirmative vote of the holders of more than 75% of the outstanding shares
of Alabama Bancorp Common Stock (excluding Mr. Mathews' shares), abstentions and
broker non-votes will have the same effect as negative votes. Accordingly, the
Alabama Bancorp Board urges Alabama Bancorp Shareholders to complete, date and
sign the accompanying proxy and return it promptly in the enclosed, postage-paid
envelope.
As of the Alabama Bancorp Record Date, approximately 15,815.25 shares
of Alabama Bancorp Common Stock, or approximately 76.04% of the shares entitled
to vote at the Alabama Bancorp Special Meeting, were beneficially owned by
directors and executive officers of Alabama Bancorp. It is expected that each
director and executive officer of Alabama Bancorp will vote the shares of
Alabama Bancorp Common Stock beneficially owned by him or her for approval of
(1) the Merger Agreement and the Mergers, and (2) the Change of Control
Payments.
HIGHLAND BANK
The Highland Bank Board has fixed ____________, 1998 as the record date
(the "Highland Bank Record Date") for the determination of the Highland Bank
Shareholders entitled to receive notice of and to vote at the Highland Bank
Special Meeting. Accordingly, only Highland Bank Shareholders of record at the
close of business on the Highland Bank Record Date will be entitled to notice of
and to vote at the Highland Bank Special Meeting. At the close of business on
the Highland Bank Record Date, there were 2,132,942 shares of Highland Bank
Common Stock entitled to vote at the Highland Bank Special Meeting held by
approximately 104 holders of record.
The presence, in person or by proxy, of shares of Highland Bank Common
Stock representing a majority of the votes entitled to be cast on the Merger
Agreement and the Mergers on the Highland Bank Record Date is necessary to
constitute a quorum at the Highland Bank Special Meeting. Each share of Highland
Bank Common Stock outstanding on the Highland Bank Record Date entitles its
holder to one vote as to the approval of the Merger Agreement and the Mergers
and any other proposal that may properly come before the Highland Bank Special
Meeting.
Highland Bank will count shares of Highland Bank Common Stock present
in person at the Highland Bank Special Meeting but not voting, and shares of
Highland Bank Common Stock for which it has received proxies but with respect to
which holders of such shares have abstained, as present at the Highland Bank
Special Meeting for purposes of determining the presence or absence of a quorum
for the transaction of business. Abstentions are counted as present at the
Highland Bank Special Meeting for purposes of determining whether a quorum
exists and have the effect of a vote "against" any matter as to which they are
specified. Proxies submitted by brokers that do not indicate a vote for some or
all of the proposals because they don't have discretionary voting authority and
haven't received instructions as to how to vote on those proposals (so-called
"broker non-votes") will be counted as present at the Highland Bank Special
Meeting for purposes of determining whether a quorum exists and have the effect
of a vote "against" any proposal as to which instructions on how to vote were
not provided.
Under the Alabama Business Corporation Act (the "ABCA") and the Alabama
Banking Code (the "ABC"), approval of the Merger Agreement requires the
affirmative vote of the holders of two-thirds of all votes entitled to be cast
on the Merger Agreement at the Highland Bank Special Meeting. Because approval
of the Merger Agreement requires the affirmative vote of the holders of
two-thirds of the outstanding shares of Highland Bank Common Stock, abstentions
and broker non-votes will have the same effect as negative votes. Accordingly,
the Highland Bank Board urges
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Highland Bank Shareholders to complete, date and sign the accompanying proxy and
return it promptly in the enclosed, postage-paid envelope.
As of the Highland Bank Record Date, approximately 156,206 shares of
Highland Bank Common Stock, or approximately 7.32% of the shares entitled to
vote at the Highland Bank Special Meeting, were beneficially owned by directors
and executive officers of Highland Bank, and 1,870,455 shares of Highland Bank
Common Stock, or approximately 87.69% of the shares entitled to vote at the
Highland Bank Special Meeting, were beneficially owned by Alabama Bancorp. It is
expected that Alabama Bancorp and each director and executive officer of
Highland Bank will vote the shares of Highland Bank Common Stock beneficially
owned by such person for approval of the Merger Agreement and the Mergers.
FIRST COMMUNITY BANK
The First Community Bank Board has fixed ____________, 1998 as the
record date (the "First Community Bank Record Date") for the determination of
the First Community Bank Shareholders entitled to receive notice of and to vote
at the First Community Bank Special Meeting. Accordingly, only First Community
Bank Shareholders of record at the close of business on the First Community Bank
Record Date will be entitled to notice of and to vote at the First Community
Bank Special Meeting. At the close of business on the First Community Bank
Record Date, there were 71,385 shares of First Community Bank Common Stock
entitled to vote at the First Community Bank Special Meeting held by
approximately 19 holders of record.
The presence, in person or by proxy, of shares of First Community Bank
Common Stock representing a majority of the votes entitled to be cast on the
Merger Agreement and the Mergers on the First Community Bank Record Date is
necessary to constitute a quorum at the First Community Bank Special Meeting.
Each share of First Community Bank Common Stock outstanding on the First
Community Bank Record Date entitles its holder to one vote as to the approval of
the Merger Agreement and the Mergers and any other proposal that may properly
come before the First Community Bank Special Meeting.
First Community Bank will count shares of First Community Bank Common
Stock present in person at the First Community Bank Special Meeting but not
voting, and shares of First Community Bank Common Stock for which it has
received proxies but with respect to which holders of such shares have
abstained, as present at the First Community Bank Special Meeting for purposes
of determining the presence or absence of a quorum for the transaction of
business. Abstentions are counted as present at the First Community Bank Special
Meeting for purposes of determining whether a quorum exists and have the effect
of a vote "against" any matter as to which they are specified. Proxies submitted
by brokers that do not indicate a vote for some or all of the proposals because
they don't have discretionary voting authority and haven't received instructions
as to how to vote on those proposals (so-called "broker non-votes") will be
counted as present at the First Community Bank Special Meeting for purposes of
determining whether a quorum exists and have the effect of a vote "against" any
proposal as to which instructions on how to vote were not provided.
Under the ABCA and the ABC, approval of the Merger Agreement requires
the affirmative vote of the holders of two-thirds of all votes entitled to be
cast on the Merger Agreement at the First Community Bank Special Meeting.
Because approval of the Merger Agreement requires the affirmative vote of the
holders of two-thirds of the outstanding shares of First Community Bank Common
Stock, abstentions and broker non-votes will have the same effect as negative
votes. Accordingly, the First Community Bank Board urges First Community Bank
Shareholders to complete, date and sign the accompanying proxy and return it
promptly in the enclosed, postage-paid envelope.
As of the First Community Bank Record Date, approximately 1,022 shares
of First Community Bank Common Stock, or approximately 1.43% of the shares
entitled to vote at the First Community Bank Special Meeting, were beneficially
owned by directors and executive officers of First Community Bank, and 68,313
shares of First Community Bank Common Stock, or approximately 96.0% of the
shares entitled to vote at the First Community Bank Special Meeting, were
beneficially owned by Alabama Bancorp. It is expected that Alabama Bancorp and
each director
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and executive officer of First Community Bank will vote the shares of First
Community Bank Common Stock beneficially owned by such person for approval of
the Merger Agreement and the Mergers.
RECOMMENDATION OF THE BOARDS OF DIRECTORS
ALABAMA BANCORP
The Alabama Bancorp Board has unanimously approved the Merger Agreement
and the Mergers. The Alabama Bancorp Board believes that the Mergers are fair to
and in the best interests of Alabama Bancorp and the Alabama Bancorp
Shareholders and unanimously recommends that the Alabama Bancorp Shareholders
vote "FOR" approval and adoption of the Merger Agreement and Mergers. See "THE
MERGERS -- Reasons for the Mergers."
In addition, the Alabama Bancorp Board has unanimously approved the
Change of Control Payments, and unanimously recommends that the Alabama Bancorp
Shareholders vote "FOR" approval of the Change of Control Payments. See
"PROPOSAL TO APPROVE CHANGE OF CONTROL PAYMENTS."
HIGHLAND BANK
The Highland Bank Board has unanimously approved the Merger Agreement
and the Mergers. The Highland Bank Board believes that the Mergers are fair to
and in the best interests of Highland Bank and the Highland Bank Shareholders
and unanimously recommends that the Highland Bank Shareholders vote "FOR"
approval and adoption of the Merger Agreement and the Mergers. See "THE MERGERS
- -- Reasons for the Mergers."
FIRST COMMUNITY BANK
The First Community Bank Board has unanimously approved the Merger
Agreement and the Mergers. The First Community Bank Board believes that the
Mergers are fair to and in the best interests of First Community Bank and the
First Community Bank Shareholders and unanimously recommends that the First
Community Bank Shareholders vote "FOR" approval and adoption of the Merger
Agreement and Mergers. See "THE MERGERS -- Reasons for the Mergers."
DISSENTERS' RIGHTS
ALABAMA BANCORP APPRAISAL RIGHTS
Any holder of Alabama Bancorp Common Stock is entitled to appraisal
rights under Section 262 of the DGCL ("Section 262") as a result of the Mergers.
All references in Section 262 and in this summary to an "Alabama Bancorp
Shareholder" are to the record holder of Alabama Bancorp Common Stock as to
which appraisal rights are being asserted. A person having a beneficial interest
in shares of Alabama Bancorp Common Stock that are held of record in the name of
another person, such as a broker or nominee, must act promptly to cause the
record holder to follow the steps summarized below properly and in a timely
manner to perfect whatever appraisal rights the beneficial owner may have.
The following discussion is not a complete statement of the law
pertaining to appraisal rights under the DGCL. Any Alabama Bancorp Shareholder
who wishes to exercise such appraisal rights or who wishes to preserve his or
her right to do so, should review Section 262, a copy of which is attached as
Annex B to this Prospectus Supplement/Proxy Statement, and the following
discussion carefully because failure to timely and properly comply with the
procedures specified will result in the complete loss of appraisal rights under
the DGCL.
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The availability of appraisal rights is conditioned upon compliance
with applicable law. Accordingly, any Alabama Bancorp Shareholder who wishes to
dissent from the Mergers and receive the value of such Alabama Bancorp
Shareholder's Alabama Bancorp Common Stock in cash should consult with his or
her counsel.
Under the DGCL, any Alabama Bancorp Shareholder who follows the
procedures set forth in Section 262 will be entitled to have his or her shares
of Alabama Bancorp Common Stock appraised by the Delaware Court of Chancery (the
"Chancery Court") and to receive payment of the "fair value" of such shares,
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, as determined by such court. In order for an Alabama Bancorp
Shareholder to perfect his or her appraisal rights, such Alabama Bancorp
Shareholder's Alabama Bancorp Common Stock must not be voted in favor of
adopting the Merger Agreement. Because a proxy which does not contain voting
instructions will, unless revoked, be voted for approval of the Merger
Agreement, an Alabama Bancorp Shareholder who votes by proxy and who wishes to
exercise his or her appraisal rights must (1) vote against approval of the
Merger Agreement, or (2) abstain from voting on approval of the Merger
Agreement. However, an Alabama Bancorp Shareholder's failure to vote against the
Mergers will not constitute a waiver of his or her appraisal or similar rights.
Additionally, a vote against the Mergers by an Alabama Bancorp Shareholder will
not be deemed to satisfy all of the notice requirements under Delaware law with
respect to appraisal rights.
Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to the
meeting, must notify each of its stockholders entitled to appraisal rights that
such appraisal rights are available and include in such notice a copy of Section
262. This Prospectus Supplement/Proxy Statement constitutes such notice to the
Alabama Bancorp Shareholders.
Each Alabama Bancorp Shareholder electing to demand the appraisal of
his or her shares of Alabama Bancorp Common Stock must deliver to Alabama
Bancorp, before the taking of the vote on the Merger Agreement, a written demand
for appraisal of such shares. Such written demand:
1. Should be sent to Alabama Bancorp, 2211 Highland Avenue,
Birmingham, Alabama 35255, Attention: Secretary;
2. Must be received by Alabama Bancorp prior to the vote being
taken on the Merger Agreement at the Alabama Bancorp Special
Meeting; and
3. Will be sufficient if it reasonably informs Alabama Bancorp of
the identity of the Alabama Bancorp Shareholder and that the
Alabama Bancorp Shareholder intends thereby to demand the
appraisal of his or her shares of Alabama Bancorp Common
Stock.
Appraisal rights may be exercised only by an Alabama Bancorp
Shareholder who holds his or her shares of Alabama Bancorp Common Stock on the
date of making the demand for appraisal and who continuously holds such shares
through the Effective Date. A vote against adoption of the Merger Agreement, in
person or by proxy, will not in and of itself constitute a demand for appraisal
satisfying the requirements of Section 262. An Alabama Bancorp Shareholder
wishing to take such action must do so by a separate written demand.
Only a holder of record of Alabama Bancorp Common Stock is entitled to
assert appraisal rights for the shares of Alabama Bancorp Common Stock
registered in such Alabama Bancorp Shareholder's name. A demand for appraisal
should be exercised by or on behalf of the Alabama Bancorp Shareholder of
record, fully and correctly, as his or her name appears on his or her
certificates representing the shares of Alabama Bancorp Common Stock. If such
Alabama Bancorp Shareholder's shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution of the demand
should be made in that capacity, and if the shares are owned of
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record by more than one person, as in a joint tenancy or a tenancy in common,
the demand should be executed by or on behalf of all joint owners. An authorized
agent, including one or more joint owners, may execute a demand for appraisal on
behalf of a holder of record; however, the agent must identify the record owner
or owners and expressly disclose the fact that, in executing the demand, the
agent is acting as agent for such owner or owners. A record holder, such as a
broker, who holds shares of Alabama Bancorp Common Stock as nominee for several
beneficial owners may exercise appraisal rights with respect to the shares held
for one or more beneficial owners while not exercising such rights with respect
to the shares held for other beneficial owners. In such case, the written demand
should set forth the number of shares as to which appraisal is sought. Where no
number of shares is expressly mentioned, the demand will be presumed to cover
all shares held in the name of the record owner. Alabama Bancorp Shareholders
who hold their shares of Alabama Bancorp Common Stock in brokerage accounts or
other nominee forms and who wish to exercise appraisal rights are urged to
consult with their brokers to determine the appropriate procedures for the
making of a demand for appraisal by such a nominee.
Within ten days after the effective date of the Holding Company Merger,
BancorpSouth must send a notice stating the date on which the Holding Company
Merger has become effective to each person who has made demand for appraisal and
otherwise satisfied the foregoing provisions of Section 262. Within 120 days
after the effective date of the Holding Company Merger, but not thereafter,
BancorpSouth or any Alabama Bancorp Shareholder who is entitled to appraisal
rights and who has complied with the provisions of Section 262 may file a
petition in the Chancery Court demanding a determination of the "fair value" of
the shares. Notwithstanding the foregoing, at any time within 60 days after the
effective date of the Holding Company Merger any Alabama Bancorp Shareholder has
the right to withdraw his or her previously made demand for appraisal and accept
the Holding Company Merger consideration. After such 60-day period, an Alabama
Bancorp Shareholder may only withdraw his or her demand for appraisal of the
Alabama Bancorp Common Stock with the consent of BancorpSouth.
Within 120 days after the effective date of the Holding Company Merger,
any Alabama Bancorp Shareholder who has complied with the requirements for
exercise of appraisal rights will be entitled, upon written request, to receive
from BancorpSouth, as the surviving corporation of the Holding Company Merger, a
statement setting forth the aggregate number of shares not voted in favor of
adoption of the Holding Company Merger and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such statement must be mailed within ten days after a written request therefor
has been received by BancorpSouth or within ten days after expiration of the
period for delivery of demands for appraisal, whichever is later.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Chancery Court will determine whether the Alabama Bancorp
Shareholder is entitled to appraisal rights and, if he or she is so entitled to
appraisal rights, the Chancery Court will determine the "fair value" of their
shares, exclusive of any element of value arising from the accomplishment or
expectation of the Holding Company Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
Alabama Bancorp Shareholders considering seeking appraisal should be aware that
the fair value of their shares as determined under Section 262 could be more
than, the same as, or less than the consideration they would receive pursuant to
the Merger Agreement if they did not seek appraisal of their shares, and that
investment banking opinions as to fairness are not necessarily opinions as to
"fair value" under Section 262. The Delaware Supreme Court has stated that
"proof of value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in court" should
be considered in the appraisal proceeding. The Chancery Court will also
determine the amount of interest, if any, to be paid upon the amounts to be
received by persons whose shares have been appraised. The costs of the action
may be determined by the Chancery Court and borne by the parties as the Chancery
Court deems equitable. Upon application of a stockholder, the Chancery Court may
also order that all or a portion of the expenses incurred by any stockholder in
connection with an appraisal, including,
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without limitation, reasonable attorneys' fees and the fees and expenses of
experts utilized in the appraisal proceeding be charged pro rata against the
value of all the shares entitled to appraisal.
Any Alabama Bancorp Shareholder who has duly demanded an appraisal in
compliance with Section 262 will not, after the effective date of the Holding
Company Merger, be entitled to vote the shares of Alabama Bancorp Common Stock
subject to such demand for any purpose or be entitled to the payment of
dividends or other distributions on such shares (except dividends or other
distributions payable to stockholders of record as of a date prior to the
effective date of the Holding Company Merger).
If any Alabama Bancorp Shareholder who demands appraisal of his or her
shares under Section 262 fails to perfect, or effectively withdraws or loses,
his or her right to appraisal, the shares of such Alabama Bancorp Shareholder
will be converted into the right to receive BancorpSouth Common Stock and/or
cash in accordance with the Merger Agreement. An Alabama Bancorp Shareholder
will fail to perfect, and therefore lose, his or her right to appraisal if no
petition for appraisal is filed within 120 days after the effective date of the
Holding Company Merger, or if the Alabama Bancorp delivers to BancorpSouth a
written withdrawal of his demand for appraisal and his acceptance of the
Mergers, except that any such attempt to withdraw made more than 60 days after
the effective date of the Holding Company Merger will require the written
approval of BancorpSouth.
Failure to follow the steps required by Section 262 of the DGCL for
perfecting appraisal rights will result in loss of such rights.
HIGHLAND BANK AND FIRST COMMUNITY BANK DISSENTERS' RIGHTS
Any holder of Highland Bank Common Stock or First Community Bank Common
Stock is entitled to dissenters' rights under Article 13 of the ABCA ("Article
13") as a result of the Bank Mergers. All references in Article 13 and in this
summary to a "Highland Bank Shareholder" or to a "First Community Bank
Shareholder" are to the record holders of Highland Bank Common Stock or First
Community Bank Common Stock as to which dissenters' rights are being asserted. A
person having a beneficial interest in shares of Highland Bank Common Stock or
First Community Bank Common Stock that are held of record in the name of another
person, such as a broker or nominee, must act promptly to cause the record
holder to follow the steps summarized below properly and in a timely manner to
perfect whatever dissenters' rights the beneficial owner may have.
The following discussion is not a complete statement of the law
pertaining to dissenters' rights under the ABCA. Any Highland Bank Shareholder
or First Community Bank Shareholder who wishes to exercise such dissenters'
rights or who wishes to preserve his or her right to do so, should review
Article 13, a copy of which is attached as Annex C to this Prospectus
Supplement/Proxy Statement and the following discussion carefully because
failure to timely and properly comply with the procedures specified will result
in the complete loss of dissenters' rights under the ABCA.
The availability of dissenters' rights is conditioned upon compliance
with applicable law. Accordingly, any Highland Bank Shareholder or First
Community Bank Shareholder who wishes to dissent from the Mergers and receive
the value of his or her Highland Bank Common Stock or First Community Bank
Common Stock in cash should consult with his or her counsel.
A Highland Bank Shareholder's or First Community Bank Shareholder's
failure to vote against the Mergers will not constitute a waiver of his or her
appraisal or similar rights. A vote against the Mergers will not be deemed to
satisfy all of the notice requirements under Alabama law with respect to
appraisal rights.
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In order to be eligible to exercise the right to dissent, a Highland
Bank Shareholder or First Community Bank Shareholder must:
1. Give notice in writing to Highland Bank or First Community Bank,
respectively, prior to the vote on the Mergers that such Highland Bank
Shareholder or First Community Bank Shareholder intends to demand payment for
his or her shares of Highland Bank Common Stock or First Community Bank Common
Stock if the Mergers are consummated, and
2. Not vote such shares of Highland Bank Common Stock or First
Community Bank Common Stock in favor of the Mergers.
If the Mergers are approved at the Highland Bank Special Meeting or
First Community Bank Special Meeting, BancorpSouth must deliver a written notice
(the "Dissenters' Notice") to all Highland Bank Shareholders and First Community
Bank Shareholders who satisfied the requirements referred to in the preceding
paragraph within ten days after the Effective Date. This notice must:
1. State where the payment demand ("Payment Demand") must be sent
and where Highland Bank Certificates or First Community Bank
Certificates must be deposited;
2. Inform holders of shares of Highland Bank Common Stock and
First Community Bank Common Stock to what extent transfer of
the shares will be restricted after the payment demand is
received;
3. Supply a form for demanding payment that includes the date of
the first announcement to the news media or to Highland Bank
Shareholders and First Community Bank Shareholders of the
terms of the Mergers and requires that the Highland Bank
Shareholder and First Community Bank Shareholder asserting
dissenters' rights certify whether he or she acquired
beneficial ownership of the shares of Highland Bank Common
Stock or First Community Bank Common Stock before that date;
4. Set a date by which BancorpSouth must receive the Payment
Demand, which date may not be fewer than 30 nor more than 60
days after the date the Dissenters' Notice is delivered; and
5. Be accompanied by a copy of Article 13 of the ABCA.
A shareholder who is sent a Dissenters' Notice must demand payment in
accordance with the terms of the Dissenters' Notice and certify that he or she
acquired beneficial ownership of the shares of Highland Bank Common Stock or
First Community Bank Common Stock, as applicable, before the date required to be
set forth in the Dissenters' Notice. The dissenting shareholder must, within 20
days of making such demand for payment, submit his or her stock certificates to
BancorpSouth. BancorpSouth shall make a notation on the shareholder's stock
certificates indicating that a demand for payment has been made and shall return
such certificates to the shareholder. Failure to submit the Highland Bank Common
Stock certificates or First Community Bank Common Stock certificates to
BancorpSouth for notation will result in the forfeiture by such shareholder of
the right to receive payment for such shares, unless a court of competent
jurisdiction otherwise directs for good and sufficient cause.
A Highland Bank Shareholder or First Community Bank Shareholder who
demands payment and deposits his or her stock certificates in accordance with
the previous paragraph retains all other rights of a Highland Bank Shareholder
or First Community Bank Shareholder, as applicable, until those rights are
canceled or modified by the consummation of the Mergers.
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A shareholder who does not demand payment or deposit his or her stock
certificates where required, in each case by the date set forth in the
Dissenters' Notice, is not entitled to payment for his or her shares of Highland
Bank Common Stock or First Community Bank Common Stock.
As soon as the Mergers are effective, or upon receipt of a Payment
Demand, BancorpSouth is required to offer to pay each dissenting Highland Bank
Shareholder or First Community Bank Shareholder who has complied with his or her
obligations under Section 10-2B-13.23 of the ABCA the amount BancorpSouth
estimates to be the fair value of such Highland Bank Shareholder's or First
Community Bank Shareholder's shares of Highland Bank Common Stock or First
Community Bank Common Stock, plus accrued interest. This offer of payment must
be accompanied by the following:
1. Highland Bank's or First Community Bank's consolidated balance
sheet as of the end of a fiscal year ending not more than 16
months before the date of the offer of payment, an income
statement for that year and the latest available interim
financial statements, if any;
2. A statement of BancorpSouth's estimate of the fair value of
the shares of Highland Bank Common Stock or First Community
Bank Common Stock;
3. An explanation of how the interest was calculated;
4. A statement of the dissenting shareholder's right to demand
payment under ABCA Section 10-2B-13.28; and
5. A copy of Article 13 of the ABCA.
Each dissenter who agrees to accept BancorpSouth's offer of payment in
full satisfaction of his or her demand must surrender to BancorpSouth his or her
certificate or certificates in accordance with the terms of the Dissenters'
Notice. Upon receipt of the certificate or certificates, BancorpSouth will pay
the dissenter the fair value of his or her shares, plus accrued interest.
BancorpSouth may elect to withhold an offer of payment from a dissenter
who was not the beneficial owner of the shares of Highland Bank Common Stock or
First Community Bank Common Stock on the date set forth in the Dissenters'
Notice as the date of the first announcement to news media or to the Highland
Bank Shareholders or First Community Bank Shareholders of the terms of the
Mergers.
To the extent BancorpSouth elects to withhold payment as described in
the immediately preceding paragraph, after consummation of the Mergers,
BancorpSouth shall estimate the fair value of the shares of Highland Bank Common
Stock or First Community Bank Common Stock, plus accrued interest, and shall pay
this amount to each dissenting Highland Bank Shareholder and First Community
Bank Shareholder, respectively, who agrees to accept it in full satisfaction of
such shareholder's demand. BancorpSouth shall send with its offer a statement of
its estimate of the fair value of the shares of Highland Bank Common Stock or
First Community Bank Common Stock, an explanation of how the interest was
calculated and a statement of the dissenting Highland Bank Shareholder's or
First Community Bank Shareholder's right to demand payment pursuant to ABCA
Section 13.28.
A dissenting shareholder may notify BancorpSouth in writing of such
shareholder's own estimate of the fair value of his or her shares of Highland
Bank Common Stock or First Community Bank Common Stock and amount of interest
due, and demand payment of such estimate (less any payments previously made) or
reject BancorpSouth's offer and demand payment of the fair value of such shares
and interest due, if:
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1. The dissenting shareholder believes that the amount offered to
be paid by BancorpSouth is less than the fair value of such
shares or that the interest due is incorrectly calculated;
2. BancorpSouth fails to make payment within 60 days after the
date set forth demanding payment; or
3. BancorpSouth, having failed to take the proposed corporate
action, does not release the transfer restrictions imposed on
the shares of Highland Bank Common Stock or First Community
Bank Common Stock within 60 days after the date set for
demanding payment.
However, a dissenting shareholder waives the right to demand such payment unless
such shareholder notifies BancorpSouth of such demand in writing within 30 days
after BancorpSouth offered payment for such shareholder's shares of Highland
Bank Common Stock or First Community Bank Common Stock.
If BancorpSouth does not take the proposed corporate action within 60
days after the date set for demanding payment of such dissenting shareholder's
shares of Highland Bank Common Stock or First Community Bank Common Stock,
BancorpSouth shall release the transfer restrictions imposed on such shares of
common stock. If BancorpSouth, after releasing the transfer restrictions imposed
upon the shareholder's shares of Highland Bank Common Stock or First Community
Bank Common Stock, takes the proposed corporate action, a new Dissenters' Notice
must be delivered to the shareholder and the payment demand procedure discussed
above must be repeated.
If a demand for payment under Section 10-2B-13.28 of the ABCA remains
unsettled, BancorpSouth must commence a proceeding within 60 days after
receiving the Payment Demand and petition the court to determine the fair value
of the shares of Highland Bank Common Stock or First Community Bank Common Stock
and accrued interest. If BancorpSouth does not commence this proceeding within
this 60-day period, it shall pay each dissenting Highland Bank Shareholder whose
demand remains unsettled the amount demanded.
BancorpSouth must commence any such proceeding relating to Highland
Bank Common Stock in the circuit court of Jefferson County, Alabama and must
commence any such proceeding relating to First Community Bank Common Stock in
the circuit court of Lowndes County, Alabama (each, the "Circuit Court").
BancorpSouth must make all dissenting shareholders whose demands remain
unsettled parties to the proceeding and all parties must be served with a copy
of the petition. After the dissenting shareholders have been properly served a
copy of the petition, BancorpSouth shall deposit with the clerk of court an
amount sufficient to pay unsettled claims of all dissenting shareholders in an
amount equal to its prior estimate of fair value, plus accrued interest. The
Circuit Court may appoint one or more persons as appraisers to receive evidence
and recommend a decision on the question of fair value. The appraisers shall
have the powers described in the order appointing them, or in any amendment to
it. Dissenting shareholders are entitled to the same discovery rights as parties
to other civil proceedings.
Each dissenting Highland Bank Shareholder or First Community Bank
Shareholder made a party to the proceeding is entitled to judgment for the
amount the Circuit Court finds the fair value of such shareholder's shares of
Highland Bank Common Stock or First Community Bank Common Stock, plus interest.
The Circuit Court in an appraisal proceeding shall determine all costs
of the proceeding including the compensation and expense of appraisers appointed
by the Circuit Court. The Circuit Court shall assess these costs against
BancorpSouth, except that the Circuit Court may assess costs against all or some
of the dissenting shareholders, in amounts the Circuit Court finds equitable, to
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<PAGE> 41
the extent the court finds the dissenting shareholders acted arbitrarily,
vexatiously or not in good faith in demanding payment.
The Circuit Court may also assess the reasonable fees and expenses of
counsel and experts for the respective parties, in amounts the court finds
equitable, as follows:
1. Against BancorpSouth and in favor of any and all dissenting
shareholders if the court finds that BancorpSouth did not
substantially comply with the requirements of ABCA Sections
10-2B-13.20 through 10-2B-13.28; or
2. Against either BancorpSouth or a dissenting shareholder, in
favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted
arbitrarily, vexatiously or not in good faith with respect to
the rights provided by Article 13 of the ABCA.
If the Circuit Court finds that the services of counsel for any
dissenting shareholder were of substantial benefit to other dissenting
shareholders similarly situated, and that the fees for those services should not
be assessed against BancorpSouth, the Circuit Court may award to these counsel
reasonable fees to be paid out of the amounts awarded the dissenting
shareholders who were benefited.
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<PAGE> 42
THE MERGERS
DESCRIPTION OF THE MERGERS
At the effective time of the Mergers (the "Effective Time"), Alabama
Bancorp will merge into BancorpSouth, the separate corporate existence of
Alabama Bancorp will cease, and BancorpSouth will be the surviving corporation
(the "Surviving Corporation") and will continue to exist as a Mississippi
corporation. In addition, each of Highland Bank and First Community Bank will
merge into BancorpSouth Bank, and BancorpSouth Bank will be the surviving bank
(the "Surviving Bank") and shall continue its existence under the laws of the
State of Mississippi. Subject to the satisfaction or waiver of certain
conditions set forth in the Merger Agreement, the Holding Company Merger will
become effective upon the filing of articles of merger (the "Articles of
Merger") in the offices of the Secretary of State of the State of Delaware and
the offices of the Secretary of State of the State of Mississippi in accordance
with the DGCL and the Mississippi Business Corporation Act (the "MBCA"), and the
Bank Mergers will become effective upon the filing of Articles of Merger in the
offices of the Mississippi Department of Banking and Consumer Finance, the
Secretary of State of the State of Alabama and the Alabama Banking Department.
See "THE MERGER AGREEMENT-- Conditions to the Mergers."
The Holding Company Merger will have the effects set forth in Sections
4-11-01 and 81-5-85 of the Mississippi Code and Section 252 of the DGCL. The
Bank Mergers will have the effects set forth in Sections 10-2B-11.01 et seq. of
the ABCA, Sections 5-7A-1 et seq. of the Alabama Banking Code ("ABC") and
Sections 5-13B-20 et seq. of the ABC.
BancorpSouth's amended and restated articles of incorporation (the
"BancorpSouth Articles") and bylaws (the "BancorpSouth Bylaws") as in effect at
the Effective Time will be those of the Surviving Corporation, while
BancorpSouth Bank's amended and restated articles of incorporation and bylaws
will be those of the Surviving Bank.
At the Effective Time, automatically by virtue of the Mergers and
without any action on the part of any party or shareholder, each share of
Alabama Bancorp Common Stock, Highland Bank Common Stock and First Community
Bank Common Stock (excluding shares with respect to which appraisal or
dissenters' rights have been properly demanded in accordance with Section 262 of
the DGCL and Article 13 of the ABCA, as applicable ("Dissenting Shares"), or
held by Alabama Bancorp or any of its subsidiaries, in each case, other than
shares held in a fiduciary capacity ("Trust Account Shares") or in respect of a
debt previously contracted ("DPC Shares")) issued and outstanding immediately
prior to the Effective Time will become and be converted into the right to
receive shares of common stock, $2.50 par value per share (the "BancorpSouth
Common Stock"), of BancorpSouth in the amounts set forth below. If, prior to the
Effective Time, shares of BancorpSouth Common Stock are changed into a different
number or class of shares due to any reclassification, recapitalization,
split-up, combination, exchange of shares or readjustment, or if a stock
dividend is declared on the shares of Alabama Bancorp Common Stock, Highland
Bank Common Stock and First Community Bank Common Stock with a record date prior
to the Effective Time, the applicable exchange ratio will be adjusted
accordingly.
<TABLE>
<CAPTION>
Minimum Number of Maximum Number of
Shares to be Received Shares to be Received
--------------------- ---------------------
<S> <C> <C>
Alabama Bancorp Exchange Ratio................... 130.2642 176.2398
Highland Bank Exchange Ratio..................... 1.1445 1.5485
First Community Bank Exchange Ratio.............. 8.3224 11.2597
</TABLE>
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<PAGE> 43
The market price of BancorpSouth Common Stock is expected to fluctuate
between the date of this Prospectus Supplement/Proxy Statement, the date on
which the Mergers are consummated and thereafter, and may decrease. Each of the
exchange ratios is flexible within a specified range in order to assure that,
within the range, the market value of BancorpSouth Common Stock received by you
will remain the same despite fluctuations in the market price between the date
of this Proxy Statement/Prospectus Supplement and the Effective Time. For
further information concerning the historical market prices of BancorpSouth
Common Stock, Alabama Bancorp Common Stock, Highland Bank Common Stock and First
Community Bank Common Stock, see "PRICE RANGE OF COMMON STOCK AND DIVIDENDS." No
assurance can be given concerning the market price of BancorpSouth Common Stock
before or after the Effective Time.
For purposes of calculating the exchange ratios:
1. "Alabama Bancorp Exchange Ratio" means the quotient,
rounded to the nearest 1/10,000, equal to (x)
$3,304.50, divided by (y) the Average Closing Price (as
defined in paragraph 4 below);
2. "Highland Bank Exchange Ratio" means the quotient,
rounded to the nearest 1/10,000, equal to (x) $29.0347,
divided by (y) the Average Closing Price;
3. "First Community Bank Exchange Ratio" means the
quotient, rounded to the nearest 1/10,000, equal to (x)
$211.1193, divided by (y) the Average Closing Price;
4. "Average Closing Price" means the average of the daily
last sale prices of BancorpSouth Common Stock as
reported on the New York Stock Exchange Composite
Transactions tape (as reported in the Wall Street
Journal or, if not reported therein, in another
mutually agreed upon authoritative source) for the 10
consecutive full trading days in which shares of
BancorpSouth Common Stock are traded on the New York
Stock Exchange ending at the close of trading on the
third business day prior to each of the Alabama Bancorp
Special Meeting, the Highland Bank Special Meeting and
the First Community Bank Special Meeting.
In the event that, without giving effect to the minimum and maximum
exchange ratio limitations, the exchange ratios computed in accordance with the
formulas in the Merger Agreement exceed the maximum exchange ratios (or
176.2398, 1.5485 or 11.2597 for Alabama Bancorp, Highland Bank and First
Community Bank, respectively), then Alabama Bancorp may, at its option and
without penalty, terminate the Merger Agreement by giving prior written notice
to BancorpSouth, unless within 24 hours after such notice is given,
BancorpSouth agrees to increase the maximum exchange ratios to amounts proposed
by Alabama Bancorp that are not greater than the computed amounts of the
exchange ratios. If, however, these computed exchange ratios are less than the
minimum exchange ratios (or 130.2642, 1.1445 or 8.3224, for Alabama Bancorp,
Highland Bank and First Community Bank, respectively), then BancorpSouth may,
at its option and without penalty, terminate the Merger Agreement by giving
prior written notice to Alabama Bancorp, unless within 24 hours after such
notice is given, Alabama Bancorp agrees to lower the minimum exchange ratios to
amounts proposed by BancorpSouth that are not less than the computed amounts of
the exchange ratios. See "THE MERGER AGREEMENT -- Termination of the Merger
Agreement."
At the Effective Time, Alabama Bancorp Shareholders, Highland Bank
Shareholders and First Community Bank Shareholders, other than those who perfect
appraisal rights under the DGCL or dissenters' rights under the ABCA, as
applicable (see "THE SPECIAL MEETING -- Dissenters' Rights"), will cease to be,
and will have no rights as, Alabama Bancorp Shareholders, Highland Bank
Shareholders and First Community Bank Shareholders, respectively, other than to
receive the consideration to be issued to them in the Mergers (the "Merger
Consideration"). After the Effective Time, there will be no transfers on the
stock transfer books of Alabama Bancorp, Highland Bank or First Community Bank
of shares of Alabama Bancorp Common Stock, Highland Bank Common Stock and First
Community Bank Common Stock, respectively. If, after the Effective Time, Alabama
Bancorp Certificates, Highland Bank Certificates and First Community Bank
Certificates (each as defined herein) are presented for transfer to SunTrust
Bank, Atlanta (the "Exchange Agent"), they will be canceled and exchanged for
certificates representing shares of BancorpSouth Common Stock as provided in the
Merger Agreement.
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<PAGE> 44
In addition, at the Effective Time, all employee stock options to
purchase shares of Highland Bank Common Stock (each, an "Employee Stock Option")
that are then outstanding and unexercised will cease to represent rights to
acquire such shares and will be replaced by a stock option issued under
BancorpSouth's appropriate stock option plan. The duration and other terms of
the new option will be the same as the original Employee Stock Option, except
that all references to Highland Bank will be deemed to be references to
BancorpSouth. The number of shares of BancorpSouth Common Stock purchasable upon
exercise of such Employee Stock Option will be equal to the number of shares of
Highland Bank Common Stock purchasable under such Employee Stock Option
immediately prior to the Effective Time multiplied by the applicable exchange
ratio, and rounding down to the nearest whole share. The per share exercise
price under each such Employee Stock Option will be adjusted by dividing such
exercise price by the applicable exchange ratio, and rounding up to the nearest
cent. Notwithstanding the foregoing, any Employee Stock Options that are
"incentive stock options" under Section 422 of the Code will be adjusted in a
manner consistent with Section 422(a) of the Code. In connection with the
conversion of the Employee Stock Options in the Mergers, BancorpSouth will
reserve for issuance a sufficient number of shares of BancorpSouth Common Stock
necessary to satisfy Highland Bank's obligations with respect to the Employee
Stock Options.
At the Effective Time, all shares of Alabama Bancorp Common Stock,
Highland Bank Common Stock and First Community Bank Common Stock held by Alabama
Bancorp, Highland Bank or First Community Bank, or by any of their subsidiaries,
other than Trust Account Shares or DPC Shares, will be canceled and will cease
to exist, and no BancorpSouth Common Stock or other consideration will be
delivered in exchange for such shares. Also at the Effective Time, all shares of
BancorpSouth Common Stock held by Alabama Bancorp, Highland Bank or First
Community Bank or their subsidiaries, other than Trust Account Shares or DPC
Shares, will become treasury stock and all other shares of BancorpSouth Common
Stock outstanding as of the Effective Time will remain outstanding.
Alabama Bancorp Dissenting Shares, Highland Bank Dissenting Shares and
First Community Bank Dissenting Shares (collectively, "Dissenting Shares") will
not be converted into the right to receive, or be exchangeable for, the Merger
Consideration. Instead, the holders of Dissenting Shares will be entitled to
payment of the appraised value of the Dissenting Shares in accordance with
Section 262 of the DGCL and Article 13 of the ABCA, as applicable.
Notwithstanding the foregoing, if any holder of Dissenting Shares subsequently
delivers a written withdrawal of such holder's demand for appraisal thereof, or
if any such holder fails to establish such holder's entitlement to dissenters'
rights under Section 262 of the DGCL and Article 13 of the ABCA, as applicable,
such holder will forfeit the right to appraisal and such shares will be deemed
to have been converted into the right to receive, and to have become
exchangeable for, the Merger Consideration. See "THE SPECIAL MEETING --
Dissenters' Rights."
BACKGROUND OF THE MERGERS
During 1996, management of Alabama Bancorp received several unsolicited
inquiries regarding a possible business combination with Alabama Bancorp from
several financial institutions, or consultants or brokers on behalf of financial
institutions, other than BancorpSouth. In response to such unsolicited
inquiries, however, management of Alabama Bancorp indicated that it had no
present interest in such a transaction, and no further discussions were
conducted.
In the first part of 1997, management of Alabama Bancorp received
additional unsolicited inquiries from other institutions, including
BancorpSouth, interested in possible business combinations with Alabama Bancorp.
Management of Alabama Bancorp again indicated that it had no present interest in
such a transaction, but, at the request of representatives of BancorpSouth,
agreed to meet with such representatives in Birmingham, Alabama. Accordingly, in
June 1997, Larry R. Mathews, President of Alabama Bancorp, and James T.
Stephens, Vice Chairman of the Board of Directors of Alabama Bancorp, met in
Birmingham, Alabama with Aubrey B. Patterson, Chairman of
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<PAGE> 45
the Board and Chief Executive Officer of BancorpSouth, and L. Nash Allen, Chief
Financial Officer of BancorpSouth. The parties discussed the banking industry
generally and the business and operating philosophies of their respective
companies. No formal proposals were made or discussed at such time, and no
further discussions or meetings were scheduled at that time. Between June 1997
and Spring 1998, representatives of BancorpSouth and Alabama Bancorp exchanged
several telephone calls; however, no formal negotiations or discussions were
conducted or ongoing.
In mid-April 1998, Alabama Bancorp received a specific written proposal
from a financial institution (other than BancorpSouth) regarding the possible
acquisition of Alabama Bancorp. Subsequent to receipt of this written proposal,
Mr. Mathews contacted Mr. Allen regarding whether BancorpSouth was interested in
discussing a possible business combination involving their companies.
Thereafter, in mid-May 1998, Mr. Patterson and Mr. Allen met in Birmingham with
Mr. Mathews and Mr. Stephens, at which time BancorpSouth presented a written
proposal regarding the acquisition of Alabama Bancorp. At that time, the
proposal from BancorpSouth represented a premium for the acquisition of Alabama
Bancorp that was approximately 20% below the proposal made by the other
institution in April 1998.
Subsequent to receiving these proposals, Mr. Stephens informed the
Board of Directors of Alabama Bancorp of the two specific proposals regarding a
possible business combination with Alabama Bancorp. Mr. Stephens and the other
directors of Alabama Bancorp discussed the contacts by BancorpSouth and the
other institution and the appropriate response to them. Subsequent to these
discussions, the Board of Directors of Alabama Bancorp authorized Mr. Mathews
and Mr. Stephens to meet with representatives of both companies to explore the
details of a possible transaction. The Board of Directors also authorized and
directed Mr. Mathews and Mr. Stephens to engage special legal counsel and a
financial advisor to assist the Board of Directors in its assessment and
analysis of the proposals.
On or about May 10, 1998, Mr. Mathews engaged Alex Sheshunoff & Co.
Investment Banking ("Sheshunoff") to advise Alabama Bancorp in connection with
the evaluation of the specific proposals and the possible acquisition of Alabama
Bancorp. In addition, on or about May 10, 1998, Mr. Mathews retained the law
firm of Bradley Arant Rose & White LLP ("Special Counsel") as special counsel to
Alabama Bancorp with respect to the proposals and the possible sale of Alabama
Bancorp.
During the last two weeks of May 1998 and the first week of June 1998,
management of Alabama Bancorp, in conjunction with representatives of Sheshunoff
and Special Counsel, conducted certain preliminary due diligence reviews of the
entities that had made specific proposals; however, because the BancorpSouth
proposal was approximately 20% below the other proposal, management's analysis
and review focused primarily on the other institution and its proposal. During
this three week period, Mr. Mathews engaged in negotiations with the other
entity, which resulted, on or about June 4, 1998, in an increased proposed
purchase price approximately 20% greater than in the original proposal from such
entity.
From June 4, 1998 through June 9, 1998, management of Alabama Bancorp,
along with representatives of Special Counsel and Sheshunoff, conducted
additional due diligence with respect to the other institution. These parties
also reviewed a draft of a definitive merger agreement proposed by the other
institution. On or about June 9, 1998, Mr. Allen, on behalf of BancorpSouth,
telephoned Mr. Mathews regarding the possibility of BancorpSouth increasing its
proposal to acquire Alabama Bancorp. Mr. Mathews indicated to Mr. Allen that the
previous proposal from BancorpSouth was significantly lower than another
proposal currently being reviewed by management. Subsequent to this
conversation, Mr. Mathews received a second telephone call from Mr. Allen
communicating a proposal to acquire Alabama Bancorp for $77 million in
BancorpSouth common stock. Mr. Mathews and Mr. Stephens communicated this
information to representatives of Special Counsel and Sheshunoff, and the
parties reviewed and discussed the proposal, as well as conducted additional due
diligence and analysis of BancorpSouth and its financial condition, relative to
the other proposal. It was determined that Mr. Mathews would communicate to
representatives of
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<PAGE> 46
the other institution the fact of receipt of the proposal from BancorpSouth and
the fact that it was now significantly greater than the other proposal, although
neither the identity of BancorpSouth nor the exact amount of its proposal was
disclosed. On or about June 10, 1998, Mr. Mathews communicated such information
to the other institution, which indicated that it would not increase its offer.
On June 11, 1998, representatives of BancorpSouth and its counsel met
in Birmingham, Alabama with Mr. Mathews, Mr. Stephens and Special Counsel. The
parties discussed the BancorpSouth proposal and its elements, including the
anticipated treatment of employee benefit matters, the treatment of certain
Highland Bank stock options, employment and stay pay arrangements, Mr. Mathews'
current employment agreement, and accounting and tax treatment expected in the
proposed transaction. The parties also discussed additional due diligence
activities, when such activities could be conducted and concluded and the time
frame for executing a definitive agreement. Following these discussions, Alabama
Bancorp and BancorpSouth executed a confidentiality agreement regarding further
due diligence review, and agreed to commence on-site due diligence of Alabama
Bancorp by BancorpSouth over the weekend of June 13 and June 14, 1998.
From June 13, 1998 through June 16, 1998, representatives of
BancorpSouth conducted on-site due diligence of Alabama Bancorp and its
subsidiary banks. Also during this period, representatives of Sheshunoff and
Special Counsel conducted additional due diligence of BancorpSouth and
BancorpSouth Bank, including reviewing public filings and discussing operations
and the financial condition and prospects with certain management of
BancorpSouth.
Between June 16, 1998 and June 19, 1998, representatives of
BancorpSouth and Alabama Bancorp engaged in discussions and negotiations with
respect to the draft Merger Agreement and Stock Option Agreement. On June 19,
1998 each of the Boards of Directors of Alabama Bancorp, Highland Bank and First
Community Bank held a special meeting to consider the proposed transaction with
BancorpSouth. At these meetings, Messrs. Mathews and Stephens, together with
representatives of Sheshunoff and Special Counsel, outlined the terms and
conditions of the proposed transaction. Representatives from Special Counsel
advised each of the Boards of Directors with regard to their fiduciary duties to
their respective shareholders in the context of evaluating the terms of the
transaction. Management of Alabama Bancorp also summarized their findings with
respect to the due diligence investigation of BancorpSouth. In addition,
Sheshunoff made a presentation to each of the Boards of Directors and discussed
in detail the methodologies and considerations underlying its analyses and
delivered its oral opinion as to the fairness of the consideration to be
received in the transaction from a financial point of view to the shareholders
of Alabama Bancorp, Highland Bank and First Community Bank. Members of the
Boards of Directors asked detailed questions of management and Sheshunoff and
deliberated upon the merits of the transaction. Thereafter, each of the Boards
of Directors unanimously approved the Merger Agreement and the Mergers, and, in
the case of the Board of Directors of Alabama Bancorp, the Stock Option
Agreement. During the evening of June 19, 1998, representatives of BancorpSouth
met in Birmingham, Alabama with representatives of Alabama Bancorp, and the
parties executed and delivered the Merger Agreement and the Stock Option
Agreement.
REASONS FOR THE MERGERS; RECOMMENDATION OF THE BOARDS OF DIRECTORS
The Board of Directors of BancorpSouth (the "BancorpSouth Board")
believes that the market areas of Alabama Bancorp and its subsidiary banks are
comparable to certain of BancorpSouth's existing market areas. In addition, it
perceives that economies of scale and cost savings available through combining
administrative functions and increased competitiveness resulting from combined
marketing efforts and budgets, should significantly enhance the operations and
financial results of BancorpSouth and BancorpSouth Bank. In addition, the
BancorpSouth Board believes that the Mergers should strengthen both Highland
Bank's and First Community Bank's ability (as a part of BancorpSouth Bank) to
compete and be successful in their existing markets, in that BancorpSouth Bank
offers services that are not currently available to customers of either Highland
Bank or First
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Community Bank, and BancorpSouth Bank possesses technology that is not currently
possessed by either Highland Bank or First Community Bank.
The Alabama Bancorp Board, Highland Bank Board and First Community Bank
Board separately deliberated and approved the Merger Agreement at separate
meetings held by each Board. In reaching their determination to approve and
adopt the Merger Agreement, the Alabama Bancorp Board, the Highland Bank Board
and the First Community Bank Board each consulted with their respective
management and financial and legal advisors, and considered a number of factors.
The following is a discussion of the information and factors considered by the
Alabama Bancorp Board, the Highland Bank Board and the First Community Bank
Board in reaching this determination. This discussion is not intended to be
exhaustive but includes all of the material factors considered by these Boards.
In the course of their deliberations with respect to the Mergers, each of these
boards discussed the anticipated impact of the Mergers on their respective
company, shareholders and various other constituencies, and no material
disadvantages expected to result from the Mergers were identified during these
discussions. In reaching their determination to approve and recommend the
Mergers, none of these Boards assigned any relative or specific weights to the
factors considered in reaching such determination, and individual directors may
have given differing weights to different factors.
The following include the material factors that were considered by each
of the Alabama Bancorp Board, the Highland Bank Board and the First Community
Bank Board:
1. Their review, based in part on presentations by their
respective management and financial advisor, of the business,
operations, technology, dividends, financial condition and
earnings of BancorpSouth on an historical and a prospective
basis and of the combined company on a pro forma basis, and
the historical stock price performance of BancorpSouth Common
Stock and the potential impact on the market value of
BancorpSouth Common Stock following the Mergers;
2. The resulting relative interests of their shareholders in the
common stock of the combined companies following the Mergers;
3. The fact that the Mergers would allow their shareholders to
become shareholders in a well-capitalized company, whose stock
is traded on the New York Stock Exchange with sufficient
trading volume to provide liquidity for shareholders;
4. The presentations of Sheshunoff to each of the Alabama Bancorp
Board, Highland Bank Board and First Community Bank Board, the
financial information reviewed by Sheshunoff at the meetings
of the companies' boards of directors, each held on June 19,
1998, and the opinion of Sheshunoff rendered on June 19, 1998,
that, as of such date and based upon and subject to the
procedures followed, assumptions made, matters considered, and
limitations on the analyses undertaken, the Alabama Bancorp
Exchange Ratio, Highland Bank Exchange Ratio and First
Community Bank Exchange Ratio was fair from a financial point
of view to Alabama Bancorp Shareholders, Highland Bank
Shareholders and First Community Bank Shareholders,
respectively (see "--Fairness Opinion");
5. The process conducted by their management and financial
advisor in exploring and determining the potential value which
could be realized by their shareholders in a business
combination transaction, including the contacts with certain
bank holding companies determined to be the most likely
companies to be both interested in and financially and
otherwise capable of engaging in a business combination
transaction with Alabama Bancorp and its subsidiaries, the
terms of the proposals received from such bank holding
companies and the fact that the indicated value of the
exchange ratios in the BancorpSouth proposal was higher as of
June 19, 1998 than the
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<PAGE> 48
indicated values of the per share consideration offered in the
other submitted proposal (see "-- Background of the Mergers");
6. The terms of the Merger Agreement and the Mergers, including
the amount and form of consideration to be received by Alabama
Bancorp Shareholders, Highland Bank Shareholders and First
Community Bank Shareholders in the Mergers, and the
expectation that the Mergers will be a tax-free transaction to
Alabama Bancorp, Highland Bank, First Community Bank, Alabama
Bancorp Shareholders, Highland Bank Shareholders, First
Community Bank Shareholders and BancorpSouth to the extent
Alabama Bancorp Shareholders, Highland Bank Shareholders and
First Community Bank Shareholders receive shares of
BancorpSouth Common Stock;
7. The current and prospective economic and competitive
environment facing the financial services industry generally,
and Alabama Bancorp, Highland Bank or First Community Bank in
particular, including the continued rapid consolidation in the
industry and the increasing importance of operational scale
and financial resources in maintaining efficiency and
remaining competitive over the long term and in being able to
capitalize on technological developments which significantly
impact industry competition;
8. Their review, based in part on the presentations of
Sheshunoff, of alternatives to the Mergers for enhancing
shareholder value, the range of possible values to Alabama
Bancorp Shareholders, Highland Bank Shareholders and First
Community Bank Shareholders obtainable through implementation
of such alternatives, and the timing and likelihood of
actually achieving such value, and the Alabama Bancorp
Board's, Highland Bank Board's or First Community Bank Board's
belief, based upon such review, that such alternatives were
not likely to result in greater value for Alabama Bancorp
Shareholders, Highland Bank Shareholders and First Community
Bank Shareholders, respectively, than the value to be realized
in the Mergers. In this regard, the Alabama Bancorp Board,
Highland Bank Board and First Community Bank Board considered,
among other things, variables relating to the ability to
continue to generate revenue growth, improved profitability
and superior stockholder returns on a stand-alone basis, and
the availability of attractive acquisition opportunities for
Alabama Bancorp, Highland Bank and First Community Bank,
respectively;
9. The general impact that the Mergers could be expected to have
on the respective constituencies served by Alabama Bancorp,
Highland Bank and First Community Bank, including their
customers, employees and communities;
10. The anticipated cost savings, operating efficiencies and
opportunities for revenue enhancement available to the
combined companies from the Mergers, and the likelihood of the
foregoing being achieved following consummation of the
Mergers;
11. The fact that Mr. Larry R. Mathews, President of Alabama
Bancorp and President and Chief Executive Officer of Highland
Bank, would serve as Alabama Division President of
BancorpSouth Bank following the Mergers and would be entitled
to the Change of Control Payments upon completion of the
Mergers, and that the directors and officers of Alabama
Bancorp, Highland Bank and First Community Bank might be
deemed to have interests in the Mergers other than their
interests generally as Alabama Bancorp Shareholders, Highland
Bank Shareholders or First Community Bank Shareholders (see
"-- Interests of Certain Persons in the Mergers"); and
12. The terms of the Stock Option Agreement, dated as of June 19,
1998, by and between BancorpSouth and Alabama Bancorp (the
"Stock Option Agreement"), including the
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risk that the Stock Option Agreement might discourage third
parties from offering to acquire Alabama Bancorp, Highland
Bank or First Community Bank by increasing the cost of such an
acquisition, and recognizing that the execution of the Stock
Option Agreement was a condition to BancorpSouth's willingness
to enter into the Merger Agreement (see "THE MERGER AGREEMENT
-- Stock Option Agreement").
THE ALABAMA BANCORP BOARD BELIEVES THE MERGERS ARE FAIR TO, AND IN THE
BEST INTERESTS OF, ALABAMA BANCORP AND THE ALABAMA BANCORP SHAREHOLDERS. THE
ALABAMA BANCORP BOARD UNANIMOUSLY RECOMMENDS THAT ALABAMA BANCORP SHAREHOLDERS
VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE CONSUMMATION OF THE
MERGERS.
THE HIGHLAND BANK BOARD BELIEVES THE MERGERS ARE FAIR TO, AND IN THE
BEST INTERESTS OF, HIGHLAND BANK AND THE HIGHLAND BANK SHAREHOLDERS. THE
HIGHLAND BANK BOARD UNANIMOUSLY RECOMMENDS THAT HIGHLAND BANK SHAREHOLDERS VOTE
TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE CONSUMMATION OF THE MERGERS.
THE FIRST COMMUNITY BANK BOARD BELIEVES THE MERGERS ARE FAIR TO, AND IN
THE BEST INTERESTS OF, FIRST COMMUNITY BANK AND THE FIRST COMMUNITY BANK
SHAREHOLDERS. THE FIRST COMMUNITY BANK BOARD UNANIMOUSLY RECOMMENDS THAT FIRST
COMMUNITY BANK SHAREHOLDERS VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT AND
THE CONSUMMATION OF THE MERGERS.
FAIRNESS OPINION
Alabama Bancorp, Highland Bank and First Community Bank retained
Sheshunoff to provide its opinion of the fairness from a financial viewpoint, of
the Merger Consideration to be received by Alabama Bancorp Shareholders,
Highland Bank Shareholders and First Community Bank Shareholders, respectively,
in connection with the Mergers. Sheshunoff was not retained to market these
companies and did not participate in negotiation of the terms and conditions of
the Merger Agreement. As part of its investment banking business, Sheshunoff is
regularly engaged in the valuation of securities in connection with mergers and
acquisitions and valuations for estate, corporate and other purposes. The
companies retained Sheshunoff based upon its experience as a financial advisor
in mergers and acquisitions of financial institutions and its knowledge of
financial institutions. On June 19, 1998, Sheshunoff rendered its oral opinion
that, as of such date, the Merger Consideration was fair, from a financial point
of view, to the Alabama Bancorp Shareholders, the Highland Bank Shareholders and
the First Community Bank Shareholders. Sheshunoff rendered its written Fairness
Opinion Letter (the "Opinion Letter") as of June 19, 1998.
The full text of Sheshunoff's Opinion Letter, which sets forth, among
other things, assumptions made, procedures followed, matters considered, and
limitations on the review undertaken, is attached as Annex D to this Prospectus
Supplement/Proxy Statement. Alabama Bancorp Shareholders, Highland Bank
Shareholders and First Community Bank Shareholders are urged to read the Opinion
Letter carefully and in its entirety. The Opinion Letter is addressed to the
Boards of Directors of each of Alabama Bancorp, Highland Bank and First
Community Bank and does not constitute a recommendation to any Alabama Bancorp
Shareholder, Highland Bank Shareholder or First Community Bank Shareholder as to
how such shareholder should vote at the respective special shareholders
meetings.
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In connection with its Opinion Letter, Sheshunoff:
1. Reviewed the Merger Agreement;
2. Reviewed certain publicly available financial statements and other
information concerning Alabama Bancorp and BancorpSouth,
respectively;
3. Reviewed certain internal financial statements and other financial
and operating data of Alabama Bancorp provided to Sheshunoff by
Alabama Bancorp's management;
4. Reviewed the reported market prices and trading activity for
BancorpSouth Common Stock;
5. Discussed the past and current operations, financial condition, and
future prospects of Alabama Bancorp with its executive management;
6. Compared Alabama Bancorp and BancorpSouth from a financial point of
view with certain other banking companies that Sheshunoff deemed to
be relevant;
7. Compared the financial performance of BancorpSouth and the market
prices and trading activity of BancorpSouth Common Stock with that
of certain other indices of publicly traded equity securities;
8. Reviewed the financial terms, to the extent publicly available, of
certain comparable merger transactions in the Southeastern United
States and in Alabama; and
9. Performed such other analyses and reviews as Sheshunoff deemed
appropriate.
In connection with its review, Sheshunoff relied upon and assumed the
accuracy and completeness of all of the foregoing information provided to it or
made publicly available, and Sheshunoff did not assume any responsibility for
independent verification of such information. With respect to internal
confidential financial projections provided by Alabama Bancorp, Sheshunoff
assumed that such projections were reasonably prepared on the basis reflecting
the best currently available estimates and judgments of the future financial
performance of Alabama Bancorp and its subsidiaries and did not independently
verify the validity of such assumptions. Sheshunoff did not make any independent
evaluation or appraisal of the assets or liabilities of Alabama Bancorp, nor was
Sheshunoff furnished with any such appraisals. Sheshunoff did not examine any
individual loan files of Alabama Bancorp or its subsidiary banks. Sheshunoff is
not an expert in the evaluation of loan portfolios for the purposes of assessing
the adequacy of the allowance for losses with respect thereto and has assumed
that such allowances for each of the banks are, in the aggregate, adequate to
cover such losses.
With respect to BancorpSouth, Sheshunoff relied solely upon publicly
available data regarding BancorpSouth's financial condition and performance.
Sheshunoff did not meet with or discuss this publicly available information with
the management of BancorpSouth. Sheshunoff did not conduct any independent
evaluation or appraisal of the assets, liabilities or business prospects of
BancorpSouth, was not furnished with any evaluations or appraisals, and did not
review any individual credit files of BancorpSouth.
The Opinion Letter is necessarily based on economic, market and other
conditions as in effect on, and the information made available to Sheshunoff as
of July 17, 1998.
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<PAGE> 51
In connection with rendering its Opinion Letter, Sheshunoff performed a
variety of financial analyses. The preparation of an opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances
and, therefore, such an Opinion Letter is not readily susceptible to partial
analysis or summary description. Moreover, the evaluation of fairness, from a
financial point of view, of the consideration to be received by the Alabama
Bancorp Shareholders, Highland Bank Shareholders and First Community Bank
Shareholders is to some extent subjective, based on the experience and judgment
of Sheshunoff, and not merely the result of mathematical analysis of financial
data. Accordingly, notwithstanding the separate factors summarized below,
Sheshunoff believes that its analyses must be considered as a whole and that
selecting portions of its analyses and of the factors considered by it, without
considering all analyses and factors, could create an incomplete view of the
evaluation process underlying its opinion. The ranges of valuations resulting
from any particular analysis described below should not be taken to be
Sheshunoff's view of the actual value of Alabama Bancorp.
In performing its analyses, Sheshunoff made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of Alabama Bancorp. The analyses
performed by Sheshunoff are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by such analyses, nor are they appraisals. In addition, Sheshunoff's analyses
should not be viewed as determinative of the opinions of the management or
Boards of Directors of Alabama Bancorp, Highland Bank or First Community Bank
with respect to the value of such entities.
The following is a summary of the analyses performed by Sheshunoff in
connection with its Opinion Letter. The following discussion contains financial
information concerning Alabama Bancorp and BancorpSouth as of March 31, 1998 and
market information as of July 17, 1998.
Analysis of Selected Transactions. Sheshunoff performed an analysis of
premiums paid in selected pending or recently completed acquisitions of banking
organizations in Alabama and in the Southeastern United States, with comparable
characteristics to Alabama Bancorp and BancorpSouth transaction. Two sets of
comparable transactions were analyzed to ensure a thorough comparison.
The first set of comparable transactions (the "State Transactions")
consisted of a group of comparable transactions based upon the geographical
market area of Alabama. The State Transactions specifically consisted of three
mergers and acquisitions of banks located in Alabama with total assets between
$150 million and $500 million, which sold between June 1, 1997 and July 17,
1998, for which pricing information was available. The analysis yielded
multiples of the State Transactions' purchase price relative to: (i) book value
ranging from 2.08 times to 2.33 times with an average of 2.24 times and a median
of 2.30 times (compared with the multiple implied in the Mergers of 4.06 times
June 30, 1998 book value); (ii) last 12 months earnings ranging from 19.3 times
to 22.7 times with an average of 20.7 times and a median of 20.1 times (compared
with the multiple implied in the Mergers of 35.2 times last 12 months earnings
as of June 30, 1998); (iii) total assets ranging between 21.0% and 28.1% with an
average of 24.9% and a median of 25.6% (compared with the multiple implied in
the Mergers of 27.6% of June 30, 1998 total assets); and (iv) total deposits
ranging from 25.1% to 34.0% with an average of 29.9% and a median of 30.7%
(compared with the multiple implied in the Mergers of 31.7% of deposits as of
June 30, 1998).
The second set of comparable transactions (the "Southeastern
Transactions") consisted of a narrowly defined group of comparable transactions
based upon the profitability, asset size and geographical market area of Alabama
Bancorp. The Southeastern Transactions specifically consisted of 28 mergers and
acquisitions of banks in the Southeast United States with total assets between
$150 million and $500 million and which sold between June 1, 1997 and July 17,
1998, for which pricing information was available. The analysis yielded
multiples of the regional transactions' purchase price relative to: (i) book
value ranging from 1.51 times to 5.59 times with an average of 2.97 times and a
median of 2.97 times (compared with the multiple implied in the Mergers of 4.06
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<PAGE> 52
times June 30, 1998 book value); (ii) last 12 months earnings ranging from 15.4
times to 36.5 times with an average of 23.5 times and a median of 22.4 times
(compared with the multiple implied in the Mergers of 35.2 times last 12 months
earnings as of June 30, 1998); (iii) total assets ranging between 15.1% and
60.6% with an average of 28.2% and a median of 27.5% (compared with the multiple
implied in the Mergers of 27.6% of June 30, 1998 total assets); and (iv) total
deposits ranging from 17.2% to 68.5% with an average of 32.6% and a median of
31.4% (compared with the multiple implied in the Mergers of 31.7% of deposits as
of June 30, 1998.
Discounted Cash Flow Analysis. Using discounted cash flow analysis,
Sheshunoff estimated the present value of the future stream of after-tax cash
flow that Alabama Bancorp could produce through the year 2002, under various
circumstances, assuming that Alabama Bancorp performed in accordance with the
earnings/return projections of management. Sheshunoff estimated the terminal
value for Alabama Bancorp at the end of the period by applying multiples of
earnings ranging from 24 times to 26 times and then discounting the cash flow
streams, dividends paid to the shareholders (assuming all earnings in excess of
that required to maintain a tangible equity to tangible asset percentage of 6.0%
are paid out in dividends) and terminal value using discount rates ranging from
12% to 16% chosen to reflect different assumptions regarding the required rates
of return of Alabama Bancorp and the inherent risk surrounding the underlying
projections. This discounted cash flow analysis indicated a range of $1,732.20
per share to $2,215.49 per share based on 20,799 fully diluted shares
outstanding, compared to the value of the Merger Consideration for Alabama
Bancorp of $3,304.50 per share, based on the total Merger Consideration of $77
million.
Sheshunoff also performed a cash flow analysis using an estimated
terminal value for Alabama Bancorp at the end of the period by applying
multiples of book value ranging from 2.40 times to 2.60 times and then
discounting the cash flow streams, dividends paid to the shareholders (assuming
all earnings in excess of that required to maintain a tangible equity to
tangible asset percentage of 6.0% are paid out in dividends) and terminal value
using discount rates ranging from 12% to 16% chosen to reflect different
assumptions regarding the required rates of return of Alabama Bancorp and the
inherent risk surrounding the underlying projections. This discounted cash flow
analysis indicated a range of $1,464.16 per share to $2,030.19 per share,
compared to the value of the Merger Consideration for Alabama Bancorp of
$3,304.50 per share, based on the total Merger Consideration of $77 million.
Comparable Company Analysis. Sheshunoff compared selected stock market
results of BancorpSouth to the publicly available corresponding data of other
composites which Sheshunoff deemed to be relevant, including SNL Securities,
L.P.'s ("SNL") index of all publicly traded banks, the SNL index of banks with
assets between $1 billion and $5 billion and the S&P 500. Results from indexing
the SNL's index of all publicly traded banks, the SNL index of banks with assets
between $1 billion and $5 billion, the S&P 500 and BancorpSouth Common Stock
from December 1, 1996 to July 17, 1998 revealed that the price of BancorpSouth
Common Stock outperformed the price movements of the SNL index of all publicly
traded banks and the S&P 500, but under-performed the SNL index of banks with
assets between $1 billion and $5 billion.
Analysis of Allocation of Purchase Price Between Highland Bank and
First Community Bank. Sheshunoff performed an analysis of the allocation of the
Merger Consideration between Highland Bank Shareholders and First Community Bank
Shareholders.
The allocation of the Merger Consideration between Highland Bank and
First Community Bank is as follows:
<TABLE>
<S> <C>
First Community Bank of The South.................................. $15,070,750
Highland Bank ..................................................... $61,929,250
Total Purchase Price .............................................. $77,000,000
</TABLE>
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In performing its analysis of the allocation of the Merger
Consideration, Sheshunoff compared premiums paid in selected pending or recently
completed acquisitions of banking organizations in Alabama and in the
Southeastern United States to the premiums derived from the allocation of the
Merger Consideration to each subsidiary bank.
The first set of comparable transactions (the "Subsidiary State
Transactions") consisted of a group of comparable transactions based upon the
geographical market area of Alabama. The Subsidiary State Transactions
specifically consisted of ten mergers and acquisitions of banks located in
Alabama with assets less than $250 million which sold between June 1, 1997 and
July l7, 1998. The analysis yielded multiples of the Subsidiary State
Transactions' purchase price relative to: (i) book value ranging from 1.30 times
to 3.46 times with an average of 2.28 times and a median of 2.30 times (compared
with the implied multiples in the Mergers of 4.06 times June 30, 1998 book value
for Highland Bank and of 2.71 times June 30, 1998 book value for First Community
Bank); (ii) last 12 months earnings range from 14.2 times to 35.1 times with an
average of 22.8 times and a median of 22.7 times (compared with the implied
multiples in the Mergers of 31.2 times last 12 months earnings as of June 30,
1998 for Highland Bank and 26.3 times last 12 months earnings as of June 30,
1998 for First Community Bank); (iii) total assets ranging between 13.0% and
45.8% with an average of 25.8% and a median of 26.3% (compared with the implied
multiples in the Mergers of 29.9% of June 30, 1998 total assets for Highland
Bank and 21.5% of June 30, 1998 for First Community Bank); and (iv) total
deposits ranging from 14.6% to 54.7% with an average of 30.3% and a median of
30.7% (compared with the implied multiples in the Mergers of 33.6% of deposits
as of June 30, 1998 for Highland Bank and 25.5% of deposits as of June 30, 1998
for First Community Bank).
The second set of comparable transactions (the "Subsidiary Southeastern
Transactions") consisted of a narrowly defined group of comparable transactions
based upon the profitability, asset size and geographical market area of
Highland Bank and First Community Bank. The Subsidiary Southeastern Transactions
specifically consisted of 94 mergers and acquisitions of banks in the Southeast
with total assets less than $250 million and which sold between June l, 1997 and
July 17, 1998. The analysis yielded multiples of the Subsidiary Southeastern
Transactions' purchase price relative to: (i) book value ranging from 1.14 times
to 5.59 times with an average of 2.66 times and a median of 2.68 times (compared
with the multiples implied in the Mergers of 4.06 times June 30, 1998 book value
for Highland Bank and 2.71 times June 30, 1998 book value for First Community
Bank), (ii) last 12 months earnings ranging from 12.4 times to 57.0 times with
an average of 23.3 times and a median of 21.4 times (compared with the multiples
implied in the Mergers of 31.2 times last 12 months earnings as of June 30, 1998
for Highland Bank and 26.3 times last 12 months earnings as of June 30, 1998 for
First Community Bank); (iii) total assets ranging between 11.6% and 60.6% with
an average of 26.2% and a median of 25.9% (compared with the multiples implied
in the Mergers of 29.9% of June 30, 1998 total assets for Highland Bank and
27.6% of June 30, 1998 total assets for First Community Bank); and (iv) total
deposits ranging from 13.4% to 68.5% with an average of 30.3% and a median of
30.6% (compared with the multiples implied in the Mergers of 33.6% of deposits
as of June 30, 1998 for Highland Bank and 23.5% of deposits as of June 30, 1998
for First Community Bank).
Discounted Cash Flow Analysis of Highland Bank and First Community
Bank. Using discounted cash flow analysis, Sheshunoff estimated the present
value of the future after-tax cash flow streams that Highland Bank and First
Community Bank could produce through the year 2002, under various circumstances,
assuming that each subsidiary bank performed in accordance with the
earnings/return projections of management.
Sheshunoff estimated the terminal value for Highland Bank at the end of
the period by applying multiples of earnings ranging from 24 times to 26 times
and then discounting the cash flow streams, dividends paid to Highland Bank
Shareholders (assuming all earnings in excess of that required to maintain a
tangible equity to asset percentage of 6.0% are paid out in dividends) and
terminal value using discount rates ranging from 12% to 16% chosen to reflect
different assumptions
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regarding the required rates of return of Highland Bank and the inherent risk
surrounding the underlying projections. This discounted cash flow analysis
indicated a range of $15.74 per share to $19.96 per share based on 2,152,442
fully-diluted shares outstanding, compared to the value of the Merger
Consideration for Highland Bank of $28.77 per share, based on the allocation of
$61,929,250 of the Merger Consideration to Highland Bank.
Sheshunoff also performed a cash flow analysis using an estimated
terminal value for Highland Bank at the end of the period by applying multiples
of book value ranging from 2.20 times to 2.60 times and then discounting the
cash flow streams, dividends paid to Highland Bank Shareholders (assuming all
earnings in excess of that required to maintain a tangible equity to tangible
asset percentage of 6.0% are paid out in dividends) and terminal value using
discount rates range from 12% to 16% chosen to reflect different assumptions
regarding the required rates of return of Highland Bank and the inherent risk
surrounding the underlying projections. This discounted cash flow analysis
indicated a range of $11.52 per share to $15.67 per share based on 2,152,442
fully-diluted shares outstanding, compared to the value of the Merger
Consideration for Highland Bank of $28.77 per share, based on the allocation of
$61,929,250 of the Merger Consideration to Highland Bank.
Sheshunoff estimated the terminal value for First Community Bank at the
end of the period by applying multiples of earnings ranging from 24 times to 26
times and then discounting the cash flow streams, dividends paid to First
Community Bank Shareholders (assuming all earnings in excess of that required to
maintain a tangible equity to asset percentage of 6.0% are paid out in
dividends) and terminal value using discount rates ranging from 13% to 17%
chosen to reflect different assumptions regarding the required rates of return
of First Community Bank and the inherent risk surrounding the underlying
projections. This discounted cash flow analysis indicated a range of $141.32 per
share to $174.45 per share based on 71,385 fully-diluted shares outstanding,
compared to the value of the Merger Consideration for First Community Bank of
$211.12 per share, based on the allocation of $15,070,750 of the Merger
Consideration to First Community Bank.
Sheshunoff also performed a cash flow analysis using an estimated
terminal value for First Community Bank at the end of the period by applying
multiples of book value ranging from 2.20 times to 2.60 times and then
discounting the cash flow streams, dividends paid to First Community Bank
Shareholders (assuming all earnings in excess of that required to maintain a
tangible equity to tangible asset percentage of 6.0% are paid out in dividends)
and terminal value using discount rates ranging from 13% to 17% chosen to
reflect different assumptions regarding the required rates of return of First
Community Bank and the inherent risk surrounding the underlying projections.
This discounted cash flow analysis indicated a range of $106.98 per share to
$138.99 per share based on 71,385 fully-diluted shares outstanding, compared to
the value of the Merger Consideration for First Community Bank of $211.12 per
share, based on the allocation of $15,070,750 of the Merger Consideration to
First Community Bank.
No company or transaction used in the comparable company and comparable
transaction analyses is identical to Alabama Bancorp, Highland Bank, First
Community Bank, BancorpSouth or the Mergers. Accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
Alabama Bancorp, Highland Bank, First Community Bank and BancorpSouth, and other
factors that could affect the public trading value of the companies to which
they are being compared. Mathematical analysis (such as determining the average
or median) is not in itself a meaningful method of using comparable transaction
data or comparable company data.
Pursuant to an engagement letter dated June 18, 1998 between Alabama
Bancorp and Sheshunoff, Alabama Bancorp agreed to pay Sheshunoff a fee of
$100,000. Alabama Bancorp also agreed to indemnify and hold harmless Sheshunoff
and its officers and employees against certain liabilities in connection with
its services under the engagement letter, except for liabilities resulting
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from the negligence of Sheshunoff. Sheshunoff has provided Alabama Bancorp with
valuations for various purposes over the past five years and received aggregate
fees of $7,500 for its services.
REGULATORY APPROVAL
Consummation of the Mergers is conditioned on, among other things, the
receipt of approvals by governmental authorities required in connection with the
Mergers ("Requisite Regulatory Approvals"), including approvals by the Federal
Deposit Insurance Corporation ("FDIC"), the Mississippi Department of Banking
and Consumer Finance and the Alabama Banking Department.
As a state non-member bank, BancorpSouth Bank must file an application
with the FDIC for approval of the Mergers pursuant to Sections 18(c) and 18(d)
of the Federal Deposit Insurance Act. The FDIC may disapprove the application if
it finds that the Mergers tend to create or result in a monopoly, substantially
lessen competition or would be in restraint of trade. BancorpSouth Bank filed
such application with the FDIC on July 31, 1998. Following approval of the
application by the FDIC, the United States Department of Justice would have
between 15 and 30 calendar days to submit any adverse comments with regard to
the Mergers relating to competitive factors. Such approval is expected to be
obtained from the FDIC on or about September 16, 1998, and the waiting period is
expected to have expired by October 2, 1998.
BancorpSouth must file an application with the Mississippi Department
of Banking and Consumer Finance for approval of the Bank Mergers. BancorpSouth
expects to file such application on or about September 9, 1998.
Alabama Bancorp, Highland Bank, First Community Bank and BancorpSouth
also must file an application with the Alabama Banking Department for approval
of the Mergers. Such application consists primarily of providing to the Alabama
Banking Department a copy of the application filed with the FDIC, and paying any
applicable application fees. Such application was provided to the Alabama
Banking Department on August 3, 1998.
ACCOUNTING TREATMENT
It is intended that the Holding Company Merger will be accounted for as
a "pooling of interests" under generally accepted accounting principles
("GAAP"). However, the parties expect to use the purchase method of accounting
for BancorpSouth's acquisition in the Bank Mergers of the 12.31% of the
outstanding shares of Highland Bank Common Stock and the 4.0% of the outstanding
shares of First Community Bank Common Stock that are not held by Alabama
Bancorp, which would result in the recognition and amortization of goodwill by
BancorpSouth with respect to a portion of the Merger Consideration exchanged for
such shares. The Mergers are conditioned upon receipt by BancorpSouth of a
letter from each of KPMG Peat Marwick LLP, certified public accountants for
BancorpSouth, and Ernst & Young LLP, certified public accountants for Alabama
Bancorp, to the effect that the Holding Company Merger will qualify for pooling
of interests accounting treatment under applicable accounting standards if it is
consummated in accordance with the Merger Agreement (collectively, the "Pooling
Letters"). The unaudited pro forma financial information included in this
Prospectus Supplement/Proxy Statement reflects the Holding Company Merger using
the "pooling of interests" method of accounting. See "SUMMARY -- Comparative
Unaudited Per Share Data" and "SELECTED FINANCIAL DATA."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated U.S. federal
income tax consequences of the Mergers to Alabama Bancorp Shareholders, Highland
Bank Shareholders and First Community Bank Shareholders who hold Alabama Bancorp
Common Stock, Highland Bank Common Stock and First Community Bank Common Stock,
respectively, as a capital asset. The summary is based on the Code, Treasury
regulations thereunder, and administrative rulings and court decisions in effect
as of the date hereof, all of which are subject to change at any time, possibly
with retroactive effect. This summary is not a complete description of all of
the consequences of the Mergers and, in particular, may not address U.S. federal
income tax considerations applicable to shareholders subject to special
treatment under U.S. federal income tax law (including, for example, non-U.S.
persons, financial institutions, dealers in securities, insurance companies,
tax-exempt
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entities, holders who acquired Alabama Bancorp Common Stock, Highland Bank
Common Stock and First Community Bank Common Stock pursuant to the exercise of
an employee stock option or right or otherwise as compensation, and holders who
hold Alabama Bancorp Common Stock, Highland Bank Common Stock and First
Community Bank Common Stock, as part of a hedge, straddle or conversion
transaction). In addition, no information is provided herein with respect to the
tax consequences of the Mergers under applicable foreign, state or local laws.
SHAREHOLDERS OF ALABAMA BANCORP, HIGHLAND BANK AND FIRST COMMUNITY BANK ARE
URGED TO CONSULT WITH THEIR TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE
MERGERS TO THEM, INCLUDING THE EFFECTS OF U.S. FEDERAL, STATE AND LOCAL, FOREIGN
AND OTHER TAX LAWS.
BancorpSouth has received an opinion of Waller Lansden Dortch & Davis,
A Professional Limited Liability Company, special counsel to BancorpSouth, dated
the date hereof, addressing the U.S. federal income tax consequences of the
Mergers described below. Such opinion has been rendered on the basis of facts,
representations and assumptions set forth or referred to in such opinion which
are consistent with the expected state of facts existing at the Effective Time.
In rendering this opinion, such counsel has required and relied upon
representations and covenants, including those contained in certificates of
officers of Alabama Bancorp, Highland Bank, First Community Bank and
BancorpSouth. The opinion is to the effect that, for U.S. federal income tax
purposes:
1. The Mergers will be treated as a reorganization within the meaning
of Section 368(a) of the Code;
2. No gain or loss will be recognized by BancorpSouth or Alabama
Bancorp, Highland Bank or First Community Bank as a result of the
Mergers;
3. No gain or loss will be recognized by the Alabama Bancorp
Shareholders, Highland Bank Shareholders or First Community Bank
Shareholders who exchange all of their respective common stock
solely for BancorpSouth Common Stock pursuant to the Mergers (except
with respect to cash received in lieu of a fractional share interest
in BancorpSouth Common Stock); and
4. The aggregate tax basis of the BancorpSouth Common Stock received by
Alabama Bancorp Shareholders, Highland Bank Shareholders and First
Community Bank Shareholders who exchange all of their respective
shares of common stock solely for BancorpSouth Common Stock pursuant
to the Mergers will be the same as the aggregate tax basis of the
Alabama Bancorp Common Stock, Highland Bank Common Stock or First
Community Bank Common Stock, as applicable, surrendered in exchange
therefor (reduced by any amount allocable to a fractional share
interest for which cash is received).
Alabama Bancorp's obligation to consummate the Mergers is conditioned
upon the receipt of an opinion of Bradley Arant Rose & White LLP, and
BancorpSouth's obligation to consummate the Mergers is conditioned upon the
receipt of an opinion of Waller Lansden Dortch & Davis, A Professional Limited
Liability Company, in each case dated as of the Effective Time, opining as to
the same U.S. federal income tax consequences discussed in the immediately
preceding paragraph and as further described under the caption "THE MERGER
AGREEMENT -- Conditions to the Mergers." None of the tax opinions to be
delivered to the parties in connection with the Mergers as described herein are
binding on the Internal Revenue Service (the "IRS") or the courts, and the
parties do not intend to request a ruling from the IRS with respect to the
Mergers. Accordingly, there can be no assurance that the IRS will not challenge
the conclusions reflected in such opinions or that a court will not sustain such
challenge.
Generally, cash received by an Alabama Bancorp Shareholder, a Highland
Bank Shareholder or a First Community Bank Shareholder in lieu of a
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fractional share interest in BancorpSouth Common Stock will be treated as
received in redemption of such fractional share interest, and such Alabama
Bancorp Shareholder, Highland Bank Shareholder or First Community Bank
Shareholder should generally recognize capital gain or loss for federal income
tax purposes measured by the difference between the amount of cash received and
the portion of the tax basis of the share of Alabama Bancorp Common Stock,
Highland Bank Common Stock or First Community Bank Common Stock, as applicable,
treated as redeemed. Such gain or loss should be a long-term capital gain or
loss if the holding period for shares of Alabama Bancorp Common Stock, Highland
Bank Common Stock or First Community Bank Common Stock, as applicable, is
greater than one year at the Effective Time. Generally, in the case of
individual shareholders, such capital gain will be taxed at a maximum rate of
20% (10%, if the gain would be taxed at 15% if it were treated as ordinary
income) if such shareholder's holding period is more than one year. The holding
period of a share of BancorpSouth Common Stock received in the Mergers
(including a fractional share interest deemed received and redeemed as described
above) will include the holder's holding period in the Alabama Bancorp Common
Stock, Highland Bank Common Stock or First Community Bank Common Stock
surrendered in exchange therefor.
INTERESTS OF CERTAIN PERSONS IN THE MERGERS
Certain members of management of Alabama Bancorp, Highland Bank and
First Community Bank and the Alabama Bancorp Board, Highland Bank Board and
First Community Bank Board may be deemed to have certain interests in the
Mergers that are in addition to their interests as shareholders generally. The
Alabama Bancorp Board, Highland Bank Board and First Community Bank Board were
aware of these interests and considered them, among other matters, in approving
the Merger Agreement and the transactions contemplated thereby.
In particular, Mr. Larry R. Mathews, who is Alabama Bancorp's President
and Highland Bank's President and Chief Executive Officer, will become Alabama
Division President of BancorpSouth Bank after the Merger. Mr. Mathews will enter
into an employment agreement with BancorpSouth Bank effective upon completion of
the Merger, or alternatively, the parties will amend the existing employment
agreement between Alabama Bancorp and Mr. Mathews to delete a provision in the
agreement that would terminate Mr. Mathews' covenant not to compete upon
completion of the Mergers.
In addition, the Mathews Employment Agreement provides that upon a
change of control of Alabama Bancorp (such as the Holding Company Merger),
Alabama Bancorp will pay Mr. Mathews a lump sum equal to the greater of $1
million or 2% of the value of the purchase price paid for Alabama Bancorp. Based
upon the total Merger Consideration to be paid by BancorpSouth, Mr. Mathews
would be paid about $1,540,000 in cash upon completion of the Mergers. The
Mathews Employment Agreement has been amended to condition Mr. Mathews' right to
receive the Change of Control Payments upon the approval of such payments by
more than 75% of the shares of Alabama Bancorp Common Stock entitled to vote at
the Alabama Bancorp Special Meeting (excluding any shares beneficially owned by
Mr. Mathews). At the Alabama Bancorp Special Meeting, Alabama Bancorp
Shareholders will be asked to approve the Change of Control Payments in order
for Alabama Bancorp to qualify for an exemption in the Code from excise taxes
and loss of deductibility imposed upon excess change of control payments. See
"PROPOSAL TO APPROVE CHANGE OF CONTROL PAYMENTS."
BancorpSouth agreed to cooperate with Alabama Bancorp, Highland Bank
and First Community Bank in establishing a "stay pay" bonus program, whereby
certain employees of Alabama Bancorp, Highland Bank and First Community Bank
would be paid up to three months of compensation as an incentive to remain
employed with the companies through the completion of the Mergers.
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Directors and officers of Alabama Bancorp, Highland Bank and First
Community Bank will be issued shares of Bancorp Common Stock in the Mergers as
follows:
<TABLE>
<CAPTION>
First
Alabama Highland Community
Bancorp Bank Bank
------- ---- ----
<S> <C> <C> <C>
Beneficial ownership by officers and
directors ................................... 15,815.25 156,206.00 1,022.00
Shares of BancorpSouth Common Stock
to be received at the Effective Time
(based on current beneficial ownership):
Minimum .................................. 2,060,160.89 178,777.77 8,505.49
Maximum .................................. 2,787,276.50 241,885.00 11,507.41
</TABLE>
COMPARISON OF RIGHTS OF SHAREHOLDERS
At the Effective Time, Alabama Bancorp Shareholders, Highland Bank
Shareholders and First Community Bank Shareholders will automatically become
BancorpSouth Shareholders (except for those shareholders who exercise
Dissenters' Rights). BancorpSouth is a Mississippi corporation governed by
provisions of the MBCA, the BancorpSouth Articles and the BancorpSouth Bylaws.
Alabama Bancorp is a Delaware corporation governed by provisions of the DGCL,
the Certificate of Incorporation of Alabama Bancorp., Inc. (the "Alabama Bancorp
Articles") and the Bylaws of Alabama Bancorp (the "Alabama Bancorp Bylaws").
First Community Bank and Highland Bank are Alabama banking corporations governed
by provisions of the ABCA and the ABC. Highland Bank is also governed by the
Articles of Incorporation of Highland Bank (the "Highland Bank Articles") and
the Bylaws of Highland Bank (the "Highland Bank Bylaws"), while First Community
Bank is governed by the Articles of Incorporation of First Community Bank (the
"First Community Bank Articles") and the Bylaws of First Community Bank (the
"First Community Bank Bylaws"). See "COMPARISON OF RIGHTS OF SHAREHOLDERS."
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of BancorpSouth Common Stock issuable to Alabama Bancorp
Shareholders, Highland Bank Shareholders and First Community Bank Shareholders
upon consummation of the Mergers have been registered under the Securities Act
of 1933 (the "Securities Act"). Such securities may be traded freely without
restriction by those shareholders who are not deemed to be "affiliates" of
Alabama Bancorp, Highland Bank, First Community Bank or BancorpSouth, as that
term is defined in the rules promulgated under the Securities Act.
Shares of BancorpSouth Common Stock received by those Alabama Bancorp
Shareholders, Highland Bank Shareholders and First Community Bank Shareholders
who are deemed to be affiliates of Alabama Bancorp, Highland Bank or First
Community Bank at the time of the Alabama Bancorp Special Meeting, Highland Bank
Special Meeting or First Community Bank Special Meeting may be resold without
registration under the Securities Act only as permitted by Rule 145 under the
Securities Act or as otherwise permitted thereunder. Securities and Exchange
Commission (the "SEC") guidelines regarding qualifying for the "pooling of
interests" method of accounting also limit sales of shares of the acquiring and
acquired company by affiliates of either company in a business combination. SEC
guidelines also indicate that the "pooling of interests" method of accounting
generally will not be challenged on the basis of sales by affiliates of the
acquiring or acquired company if such affiliates do not dispose of any of the
shares of the corporation they own, or shares of a corporation they receive in
connection with a merger, during the period beginning 30 days before the merger
is consummated and ending when financial results covering at least 30 days of
post-merger operations of the combined companies have been published.
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<PAGE> 59
Each of the parties has agreed in the Merger Agreement to use its
reasonable best efforts to cause each person who is an affiliate (for purposes
of Rule 145 under the Securities Act and for purposes of qualifying the Holding
Company Merger for "pooling of interests" accounting treatment) of such party to
deliver to the other party a written agreement intended to ensure compliance
with the Securities Act (in the case of Alabama Bancorp, Highland Bank and First
Community Bank affiliates) and to preserve the ability of the Holding Company
Merger to be accounted for as a "pooling-of-interests."
BancorpSouth has agreed in the Merger Agreement to use its best efforts
to publish, not later than 15 days after the end of the first full calendar
month following the month in which the Effective Time occurs, financial results
covering at least 30 days of post-Mergers combined operations, as contemplated
by Accounting Series Release No. 135 issued by the SEC.
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<PAGE> 60
THE MERGER AGREEMENT
The following summary of certain terms and provisions of the Merger
Agreement is qualified in its entirety by reference to the Merger Agreement,
which is incorporated into this document by reference and, with the exception of
certain exhibits and schedules thereto, is attached as Annex A to this
Prospectus Supplement/Proxy Statement.
EXCHANGE OF CERTIFICATES
At or prior to the Effective Time, BancorpSouth will deposit, or will
cause to be deposited, with the Exchange Agent, certificates representing the
shares of BancorpSouth Common Stock (collectively, "BancorpSouth Certificates")
and cash to be paid in lieu of fractional shares to which a holder of
certificates formerly representing Alabama Bancorp Common Stock ("Alabama
Bancorp Certificates"), Highland Bank Common Stock ("Highland Bank
Certificates") and First Community Bank Common Stock ("First Community Bank
Certificates") (Alabama Bancorp Certificates, Highland Bank Certificates and
First Community Bank Certificates, collectively referred to as the "Alabama
Certificates") would otherwise be entitled based on the applicable exchange
ratio (such cash and BancorpSouth Certificates, together with any dividends or
distributions with respect thereto, the "Exchange Fund").
As soon as practicable, but in no event more than three business days
after the date on which the Effective Time occurs (the "Effective Date"), the
Exchange Agent will mail to each holder of record of an Alabama Certificate a
letter of transmittal for use in exchanging such shareholder's Alabama
Certificates for the Merger Consideration. Upon surrender of an Alabama
Certificate for exchange and cancellation to the Exchange Agent, together with a
duly executed letter of transmittal, the holder of an Alabama Certificate will
be entitled to receive in exchange for such Alabama Certificate a BancorpSouth
Certificate representing the number of whole shares of BancorpSouth Common Stock
to which such holder has become entitled pursuant to the Merger Agreement and a
check in the amount of cash in lieu of fractional shares, if any, of
BancorpSouth Common Stock to which such holder has become entitled pursuant to
the Merger Agreement. Alabama Certificates so surrendered will immediately be
canceled. No interest will be paid or accrued on any cash to be paid upon such
surrender, whether in lieu of fractional shares of BancorpSouth Common Stock or
with respect to unpaid dividends or distributions thereon.
ALABAMA BANCORP SHAREHOLDERS, HIGHLAND BANK SHAREHOLDERS AND FIRST
COMMUNITY BANK SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL
THEY RECEIVE THE TRANSMITTAL MATERIALS FROM THE EXCHANGE AGENT.
No fractional shares of BancorpSouth Common Stock, and no BancorpSouth
Certificates or scrip representing such fractional shares, will be issued in the
Mergers, nor will any dividend or distribution be payable on or with respect
thereto, nor will any such fractional share entitle the holder thereof to vote
or to any other rights of a BancorpSouth Shareholder. Instead, BancorpSouth will
pay to each Alabama Bancorp Shareholder, Highland Bank Shareholder and First
Community Bank Shareholder who would otherwise be entitled to a fractional share
of BancorpSouth Common Stock (after taking into account all Alabama Certificates
delivered by such shareholder) an amount in cash to be paid in lieu of
fractional shares (without interest) determined by multiplying such fraction by
$21.5625.
Any part of the Exchange Fund that remains unclaimed by Alabama Bancorp
Shareholders, Highland Bank Shareholders and First Community Bank Shareholders
for 12 months after the Effective Time will be paid to BancorpSouth, and after
such time Alabama Bancorp Shareholders, Highland Bank Shareholders and First
Community Bank Shareholders may look only to BancorpSouth for payment of the
Merger Consideration and unpaid dividends and distributions, if any, on Alabama
Bancorp Common Stock, Highland Bank Common Stock or First Community Bank Common
Stock deliverable in respect of each share of Alabama Bancorp Common Stock,
Highland
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Common Stock or First Community Bank Common Stock held by such shareholder, in
each case, without interest thereon. None of Alabama Bancorp, Highland Bank,
First Community Bank, BancorpSouth or the Exchange Agent, or any other person,
will be liable to any former Alabama Bancorp Shareholder, Highland Bank
Shareholder or First Community Bank Shareholder for any amounts properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
In the event that any Alabama Certificate is lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming the same,
and if required by BancorpSouth, the posting of a bond by such person in an
amount that BancorpSouth or the Exchange Agent may direct as indemnity against
any claim that may be made against it with respect to such Alabama Certificate,
the Exchange Agent will issue in exchange for such Alabama Certificate the
shares of BancorpSouth Common Stock and cash in lieu of fractional shares
deliverable in respect thereof.
No dividends or other distributions with respect to BancorpSouth Common
Stock declared after the Effective Time and payable to BancorpSouth Shareholders
of record will be paid to the holder of any unsurrendered Alabama Certificate
until the holder thereof surrenders such Alabama Certificate in accordance with
the Merger Agreement. After the proper surrender of an Alabama Certificate, the
record holder thereof will be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of BancorpSouth Stock represented by such Alabama
Certificate.
CONDITIONS TO THE MERGERS
The obligations of Alabama Bancorp and BancorpSouth to consummate the
Mergers are subject to the satisfaction (or waiver, where legally allowed), at
or prior to the Effective Time, of a number of conditions, which are set forth
in the Merger Agreement. These conditions include:
1. Approval of the Merger Agreement by Alabama Bancorp Shareholders,
Highland Bank Shareholders and First Community Bank Shareholders;
2. Receipt of the Requisite Regulatory Approvals, the absence of any
legal prohibition to consummation of the Mergers;
3. BancorpSouth's receipt of the Pooling Letters;
4. The accuracy of the parties' representations and performance of the
parties' obligations under the Merger Agreement;
5. Mr. Larry R. Mathews, the President of Alabama Bancorp and the
President and Chief Executive Officer of Highland Bank, entering
into an employment agreement with BancorpSouth Bank, or the existing
employment agreement between Alabama Bancorp and Mr. Mathews having
been amended to delete a provision that would terminate Mr. Mathews'
covenant not to compete upon completion of the Mergers;
6. Shareholders of Alabama Bancorp approving the Change of Control
Payments to Mr. Mathews;
7. Highland Bank redeeming all of its outstanding shares of preferred
stock at a redemption price of not more than $100 per share; and
8. Alabama Bancorp conveying to a third party for fair value all of its
shares of capital stock of EBSCO Industries, Inc. and Shrewsbury
Bank.
In addition, the obligation of each party to consummate the Mergers is
conditioned upon receipt of an opinion from their respective legal counsel to
the effect that 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:
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1. No gain or loss will be recognized by BancorpSouth, Alabama Bancorp,
Highland Bank or First Community Bank as a result of the Mergers;
2. No gain or loss will be recognized by Alabama Bancorp Shareholders,
Highland Bank Shareholders or First Community Bank Shareholders who
exchange all of their respective shares of common stock solely for
BancorpSouth Common Stock pursuant to the Mergers (except with
respect to cash received in lieu of a fractional share interest in
BancorpSouth Common Stock); and
3. The aggregate tax basis of the BancorpSouth Common Stock received by
Alabama Bancorp Shareholders, Highland Bank Shareholders and First
Community Bank Shareholders who exchange all of their respective
shares of common stock solely for BancorpSouth Common Stock pursuant
to the Mergers will be the same as the aggregate tax basis of the
Alabama Bancorp Common Stock, Highland Bank Common Stock or First
Community Bank Common Stock, as applicable, surrendered in exchange
therefor (reduced by any amount allocable to a fractional share
interest for which cash is received).
Further, the obligation of Alabama Bancorp to consummate the Mergers is
conditioned upon receipt by Alabama Bancorp of an opinion from Sheshunoff to the
effect that as of the date of the opinion and based upon and subject to the
matters set forth in the opinion, the Mergers are fair to the Alabama Bancorp
Shareholders, the Highland Bank Shareholders and the First Community Bank
Shareholders from a financial point of view. See "THE MERGERS--Fairness
Opinion."
The parties cannot guarantee that the Requisite Regulatory Approvals
will be obtained or that all of the other conditions precedent to the Mergers
will be satisfied or, where legally permitted, waived by the party permitted to
do so.
TERMINATION OF THE MERGER AGREEMENT
The Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the Mergers by the Alabama Bancorp
Shareholders, Highland Bank Shareholders or First Community Bank Shareholders,
as set forth in the Merger Agreement, including by mutual consent of
BancorpSouth and Alabama Bancorp. In addition, the Merger Agreement may be
terminated by either party if a governmental entity issues a final order
prohibiting the Mergers or (subject to a 60 day waiting period) rejects an
application for a Requisite Regulatory Approval, the Mergers are not consummated
on or before January 31, 1999, Alabama Bancorp Shareholders, Highland Bank
Shareholders or First Community Bank Shareholders fail to approve the Mergers or
the other party materially breaches its representations or covenants set forth
in the Merger Agreement and fails to cure that breach within the prescribed time
limit. BancorpSouth may terminate the Merger Agreement if the Alabama Bancorp
Board, Highland Bank Board or First Community Bank Board have withdrawn,
modified or changed in a manner adverse to BancorpSouth their approvals of, or
recommendations to their shareholders that such shareholders approve the Merger
Agreement and the transactions contemplated thereby.
In the event that, without giving effect to the minimum and maximum
exchange ratio limitations, the exchange ratios computed in accordance with the
formulas in the Merger Agreement exceed the maximum exchange ratios (or
176.2398, 1.5485 or 11.2597 for Alabama Bancorp, Highland Bank and First
Community Bank, respectively), then Alabama Bancorp may, at its option and
without penalty, terminate the Merger Agreement by giving prior written notice
to BancorpSouth, unless written 24 hours after such notice is given,
BancorpSouth agrees to increase the maximum exchange ratios to amounts proposed
by Alabama Bancorp that are not greater than the computed amounts of the
exchange ratios. If, however, these exchange ratios are less than the minimum
exchange ratios (or 130.2642, 1.1445 or 8.3224, for Alabama Bancorp, Highland
Bank and First Community Bank, respectively), then BancorpSouth may, at its
option and without penalty, terminate the Merger Agreement by giving prior
written notice to Alabama Bancorp, unless within 24 hours after such notice is
given, Alabama Bancorp agrees to lower the minimum exchange ratios to amounts
proposed by BancorpSouth that are not less than the computed amounts of the
exchange ratios.
In the event of termination of the Merger Agreement pursuant to its
terms, the Merger Agreement will become void and have no effect, except with
respect to the parties' obligations with respect to confidential information and
expenses as set forth in the Merger Agreement and except
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that termination will not relieve or release a breaching party from liability or
damages for its willful breach of the Merger Agreement.
CONDUCT OF BUSINESS PRIOR TO THE MERGERS AND OTHER COVENANTS
In the Merger Agreement, each of the parties agreed that, prior to the
Effective Time and except as expressly contemplated or permitted by the Merger
Agreement or the Stock Option Agreement or with the prior written consent of the
other party, such party and its subsidiaries will carry on their businesses in
the ordinary course consistent with past practice. Each of the parties also
agreed to refrain from engaging in, or permitting its subsidiaries to engage in,
certain activities which are described in the Merger Agreement.
Alabama Bancorp, Highland Bank and First Community Bank agreed to
refrain from:
1. Declaring or paying dividends at a rate inconsistent with past
practice;
2. Issuing or acquiring their capital stock;
3. Issuing any options or other securities convertible into or
exchangeable for their capital stock;
4. Amending their certificates or articles of incorporation or bylaws;
5. Making any capital expenditure in excess of $100,000;
6. Engaging in a material acquisition of another business;
7. Adopting or amending any employee benefit plan or compensation
arrangement;
8. Entering into any loans in an original principal amount in excess
of $2,000,000;
9. Incurring any indebtedness other than in the ordinary course of
business consistent with past practice;
10. Disposing of any material assets other than in the ordinary course
of business consistent with past practice; or
11. Entering into, renewing, amending or terminating any material
contract.
In addition, Alabama Bancorp, Highland Bank and First Community Bank
agreed that, prior to the Effective Time, they will not authorize or permit any
of their officers, directors, employees or agents to, directly or indirectly,
solicit, initiate, facilitate, encourage or participate in any inquiries,
proposals, discussions or negotiations relating to a tender or exchange offer,
merger, consolidation or other business combination involving Alabama Bancorp,
Highland Bank and First Community Bank or the acquisition of a substantial
portion of their capital stock or assets (a "Takeover Proposal"). The companies
agreed to immediately cease and terminate any existing activities, discussions
or negotiations previously conducted with any parties other than BancorpSouth
with respect to any Takeover Proposal, and to notify BancorpSouth immediately if
they receive any Takeover Proposal, inquiry or request for information. The
companies also agreed to promptly inform BancorpSouth in writing of all of the
relevant details with respect to any Takeover Proposal or request for
information, including the material terms and conditions and the identity of the
person or group making such request or proposal, and to keep BancorpSouth fully
informed of the status and details (including amendments or proposed amendments)
of any such request or Takeover Proposal.
Alabama Bancorp, Highland Bank and First Community Bank further agreed
that each would not provide third parties with any nonpublic information
relating to any such Takeover Proposal. They may, however, communicate
information about any such Takeover Proposal to their respective shareholders
if, in the judgment of their respective boards of directors, such communication
is required under applicable law. In addition, they may, and may authorize and
permit their officers, directors, employees or agents to, provide or cause to be
provided such information and participate in such discussions or negotiations if
their respective boards of directors
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has determined that the failure to do so could cause the members of the board to
breach their fiduciary duties under applicable laws.
The Merger Agreement also contains certain other agreements relating to
the conduct of the parties prior to the Effective Time, including, among other
things, those requiring each party:
1. To apply for and obtain all consents and approvals required to
consummate the Mergers;
2. Except for privileged or confidential information, to afford to the
other party and its representatives access during normal business
hours to all of such party's information concerning its business,
properties and personnel as such other party may reasonably request;
3. To cause each director, executive officer and other person who is an
"affiliate" of such party for purposes of Rule 145 under the
Securities Act and for purposes of qualifying the Holding Company
Merger for "pooling-of-interests" accounting treatment, to deliver
to the other party to the Holding Company Merger a written agreement
intended to ensure compliance with the Securities Act (in the case
of Alabama Bancorp, Highland Bank and First Community Bank
affiliates) and to preserve the ability of the Holding Company
Merger to be accounted for as a "pooling-of-interests"; and
4. To take all actions required to comply with any legal requirements
to consummate the Mergers.
Each of Alabama Bancorp, Highland Bank and First Community Bank also
agreed to call and hold special shareholders meetings and to recommend for
approval to their respective shareholders, through their respective Boards of
Directors, the Merger Agreement and the Mergers.
BancorpSouth also agreed that employees of Alabama Bancorp, Highland
Bank and First Community Bank ("Alabama Employees") will be eligible to
participate in BancorpSouth's employee benefit plans in a manner comparable to
that of similarly situated employees of BancorpSouth or BancorpSouth Bank, with
prior service with Alabama Bancorp, Highland Bank and First Community Bank to be
treated as service with BancorpSouth for all such purposes (other than for
accrual of pension benefits and 401(k) plan eligibility) and except to the
extent that such treatment would result in a duplication or increase in
benefits. Alabama Employees are to be given credit for amounts paid under an
employee benefit plan period for purposes of applying deductibles, co-payments
and out-of-pocket maximums as though such amounts had been paid in accordance
with the terms and conditions of BancorpSouth's employee benefit plan.
At the Effective Time, BancorpSouth and its subsidiaries are to assume
and honor all employment, severance and other compensation agreements and
arrangements existing prior to June 19, 1998 between Alabama Bancorp, Highland
Bank and First Community Bank and any director, officer or employee thereof that
were disclosed to BancorpSouth. The parties also agreed to cooperate and take
all reasonable actions after the Effective Time to effect the merger of any
Alabama Bancorp, Highland Bank and First Community Bank employee benefit plan
that is intended to be qualified under Section 401(a) of the Code into
BancorpSouth's appropriate tax-qualified retirement plan, so that the merger of
such plan satisfies the requirements of Section 414(l) of the Code, unless the
Alabama Bancorp plan is not fully funded under Section 412 of the Code and
Section 302 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the merger of the plan would jeopardize the tax-qualified status
of a BancorpSouth plan.
In addition, BancorpSouth agreed to provide indemnification to the
officers, directors and employees of Alabama Bancorp, Highland Bank and First
Community Bank to the full extent permitted by law from and after the Effective
Time and to provide, for a period of three years after the Effective Time,
directors' and officers' liability insurance for the directors and officers of
Alabama Bancorp to the maximum extent available at an annual premium not to
exceed 125% of the amount
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expended by Alabama Bancorp as of the date of the Merger Agreement. BancorpSouth
also agreed to cause the shares of BancorpSouth Common Stock to be issued in the
Mergers to be approved for listing on the New York Stock Exchange.
AMENDMENT OF THE MERGER AGREEMENT; WAIVER; EXPENSES
Subject to compliance with applicable law, the Merger Agreement may be
amended by the parties thereto, 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 Mergers by the Alabama Bancorp
Shareholders, Highland Bank Shareholders and First Community Bank Shareholders;
provided, however, that after any approval of the transactions contemplated by
the Merger Agreement by the Alabama Bancorp Shareholders, Highland Bank
Shareholders and First Community Bank Shareholders, there may not be, without
further approval of such shareholders, any amendment of the Merger Agreement
which reduces the amount or changes the form of the Merger Consideration. The
Merger Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties thereto.
Prior to the Effective Time, each of the parties to the Merger
Agreement may extend the time for the performance of any of the obligations or
other acts of the other party to the Merger Agreement, waive any inaccuracies in
the representations or warranties of the other party contained in the Merger
Agreement or waive compliance with any of the agreements or conditions of the
other party contained in the Merger Agreement.
Each party to the Merger Agreement will bear all expenses incurred by
it in connection with the Merger Agreement and the Mergers.
STOCK OPTION AGREEMENT
Concurrently with the execution of the Merger Agreement, BancorpSouth
and Alabama Bancorp executed and delivered the Stock Option Agreement, pursuant
to which Alabama Bancorp granted to BancorpSouth an option (the "Option") to
purchase from Alabama Bancorp up to 5,167 shares of Alabama Bancorp Common Stock
(the "Option Shares") (subject to adjustment in certain circumstances, but in no
event to exceed 19.9% of the shares of Alabama Bancorp Common Stock issued and
outstanding immediately prior to exercise thereof), at a price of $2,400 per
share. Alabama Bancorp approved and entered into the Stock Option Agreement as
an inducement to BancorpSouth to enter into the Merger Agreement. The Stock
Option Agreement is included as Annex E to this Prospectus Supplement/Proxy
Statement and this description is qualified in its entirety by reference to the
full text of such agreement.
The Stock Option Agreement is intended to increase the likelihood that
the Mergers will be consummated. Consequently, certain aspects of the Stock
Option Agreement may have the effect of discouraging persons who might now or at
any other time prior to the Effective Time be interested in acquiring all of or
a significant interest in Alabama Bancorp from considering or proposing such an
acquisition. The acquisition of Alabama Bancorp other than by BancorpSouth could
cause the Option to become exercisable. The existence of the Option could
significantly increase the cost to a potential acquirer of acquiring Alabama
Bancorp compared to its cost had the Stock Option Agreement and the Merger
Agreement not been entered into. Such increased cost might discourage a
potential acquirer from considering or proposing an acquisition or might result
in a potential acquirer proposing to pay a lower per share price to acquire
Alabama Bancorp than it might otherwise have proposed to pay. The exercise or
repurchase of the Option may prohibit any other acquirer of Alabama Bancorp from
accounting for an acquisition thereof using the "pooling of interests"
accounting method for a period of two years.
The number of shares of Alabama Bancorp Common Stock subject to the
Option will be increased or decreased, as appropriate, to the extent that
additional shares of Alabama Bancorp
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Common Stock are either (1) issued or otherwise become outstanding after June
19, 1998 or (2) redeemed, repurchased, retired or otherwise cease to be
outstanding after June 19, 1998, such that, after such issuance, the number of
Option Shares will continue to equal 19.9% of the shares of Alabama Bancorp
Common Stock then issued and outstanding. In the event of any change in, or
distributions in respect of, the number of shares of Alabama Bancorp Common
Stock that would be prohibited by the Merger Agreement, the type and number of
Option Shares purchasable upon exercise of the Option, and the option price,
will also be adjusted in such a manner as will fully preserve the economic
benefits of the Option.
The Stock Option Agreement provides that BancorpSouth may exercise the
Option, in whole or in part, subject to regulatory approval, if both an Initial
Triggering Event (as defined in Section 2(b) of the Stock Option Agreement) and
a Subsequent Triggering Event (as defined in Section 2(c) of the Stock Option
Agreement) have occurred prior to the occurrence of an Exercise Termination
Event (as defined in Section 2(a) of the Stock Option Agreement), provided that
BancorpSouth has sent to Alabama Bancorp written notice of such exercise within
90 days following such Subsequent Triggering Event (subject to extension as
provided in the Stock Option Agreement). The terms "Initial Triggering Event"
and "Subsequent Triggering Event" generally relate to attempts by one or more
third parties to acquire a significant interest in Alabama Bancorp. Any exercise
of the Option will be deemed to occur on the date such notice of exercise is
sent.
As of the date of this Prospectus Supplement/Proxy Statement,
BancorpSouth is not aware that an Initial Triggering Event or Subsequent
Triggering Event has occurred.
Immediately prior to the occurrence of a Repurchase Event (as defined
in Section 7(d) of the Stock Option Agreement), (1) following a request of
BancorpSouth, delivered prior to an Exercise Termination Event (as defined in
Section 2(a) of the Stock Option Agreement), Alabama Bancorp (or any successor
thereto) will repurchase the Option from BancorpSouth at a price (the "Option
Repurchase Price") equal to the amount by which the Market/Offer Price (as
defined in Section 7(a) of the Stock Option Agreement) exceeds the option
exercise price, multiplied by the number of shares for which the Option may then
be exercised and (2) at the request of BancorpSouth from time to time, delivered
within 90 days of such occurrence (or such longer period as necessary to obtain
any required regulatory approvals or to avoid liability under Section 16(b) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")), Alabama
Bancorp will repurchase such number of the Option Shares from BancorpSouth as
BancorpSouth designates at a price (the "Option Share Repurchase Price") equal
to the Market/Offer Price multiplied by the number of Option Shares so
designated.
Within 90 days after the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Date (as defined in Section 2(a) of
the Stock Option Agreement), subject to extension as provided in the Stock
Option Agreement, BancorpSouth may request Alabama Bancorp to prepare, file and
keep current with respect to the Option Shares, a registration statement with
the SEC. Alabama Bancorp is required to use its reasonable best efforts to cause
such registration statement to become effective and then to remain effective for
180 days or such shorter time as may be reasonably necessary to effect such
sales or other disposition of Option Shares. BancorpSouth has the right to
demand two such registrations.
Neither BancorpSouth nor Alabama Bancorp may assign any of its rights
and obligations under the Stock Option Agreement or the Option to any other
person without the express written consent of the other party, except that if a
Subsequent Triggering Event occurs prior to an Exercise Termination Event,
BancorpSouth, subject to the terms of the Stock Option Agreement, may assign, in
whole or in part, its rights and obligations thereunder, within 90 days (subject
to extension to obtain necessary regulatory approvals or to avoid liability
under Section 16(b) of the Exchange Act) of such Subsequent Triggering Event;
provided that until the date 15 days after the date on which the Board of
Governors of the Federal Reserve System ("Federal Reserve") approves an
application
63
<PAGE> 67
by BancorpSouth to acquire the Option Shares, BancorpSouth may not assign its
rights under the Option except in:
1. A widely dispersed public distribution;
2. A private placement in which no one party acquires the right to
purchase in excess of 2% of the voting shares of Alabama Bancorp;
3. An assignment to a single party for the purpose of conducting a
widely dispersed public distribution on BancorpSouth's behalf; or
4. Any other manner approved by the Federal Reserve.
Certain rights and obligations of Alabama Bancorp under the Stock
Option Agreement are subject to receipt of required regulatory approvals. The
approval of the Federal Reserve is required for the acquisition by BancorpSouth
of more than 5% of the outstanding shares of Alabama Bancorp Common Stock.
Accordingly, BancorpSouth has included or will include in its applications with
the Federal Reserve a request for approval of the right of BancorpSouth to
exercise its rights under the Stock Option Agreement, including its right to
purchase more than 5% of the outstanding shares of Alabama Bancorp Common Stock.
64
<PAGE> 68
PROPOSAL TO APPROVE CHANGE OF CONTROL PAYMENTS
Section 3(c) of the Mathews Employment Agreement provides that upon a
"change of control" of Alabama Bancorp (such as the Holding Company Merger),
Alabama Bancorp will pay Mr. Mathews a cash bonus equal to the greater of (1) $1
million, or (2) 2% of the fair value of the purchase price paid in connection
with a change of control of Alabama Bancorp, minus any earnings by Mr. Mathews
under the Performance Award Agreement, dated as of January 1, 1998 (the
"Performance Award Agreement"), between Mr. Mathews and Alabama Bancorp. Based
upon the total Merger Consideration to be paid by BancorpSouth, Mr. Mathews
would be paid about $1,540,000 in cash upon completion of the Mergers.
The definition of a "change of control" of Alabama Bancorp in the
Mathews Employment Agreement includes (1) the acquisition by a third party of
20% or more of Alabama Bancorp's or Highland Bank's voting securities, and (2)
approval by the Alabama Bancorp Shareholders of a merger involving Alabama
Bancorp that results in Alabama Bancorp Shareholders holding less than
two-thirds of the outstanding voting securities of the surviving corporation.
Upon completion of the Holding Company Merger, Alabama Bancorp Shareholders
would hold less than two-thirds of the outstanding shares of BancorpSouth Common
Stock. Mr. Mathews will not be paid the Change of Control Payments in connection
with the Mergers if the Alabama Bancorp Shareholders, Highland Bank Shareholders
and the First Community Bank Shareholders do not approve the Merger Agreement.
The Mathews Employment Agreement has been amended to condition Mr.
Mathews' right to receive the Change of Control Payments upon the approval of
such payments by more than 75% of the shares of Alabama Bancorp Common Stock
entitled to vote at the Alabama Bancorp Special Meeting (excluding shares
beneficially owned by Mr. Mathews).
A copy of the Mathews Employment Agreement is attached as Annex F. A
copy of the Performance Award Agreement is attached as Annex G. We encourage you
to read them.
Section 280G of the Code provides that payments to an individual in
connection with a change of control may be considered an excess parachute
payment if the total payments received in connection with the change of control
exceed three times the individual's average taxable compensation during the
prior five years. This would result in the recipient of the payments being
subject, under Section 4999 of the Code, to a 20% excise tax on the amount by
which the payments exceed the amount of reasonable compensation to the
individual. In addition, the company and its acquirer would not be able to
deduct the payments for federal income tax purposes. Section 280G provides for
an exemption, however, for payments by small business corporations whose capital
stock is not readily tradeable (such as Alabama Bancorp) if the payment is
approved by the affirmative vote of the holders of more than 75% of the
corporation's voting stock (excluding shares beneficially owned by the
individual receiving the payment), following adequate disclosure to the
shareholders of all material facts concerning the payments.
Accordingly, in order to qualify for the small business corporation
exemption in Section 280G of the Code, Alabama Bancorp is seeking approval by
the Alabama Bancorp Shareholders of the Change of Control Payments to Mr.
Mathews. The holders of more than 75% of the shares of Alabama Bancorp Common
Stock entitled to vote at the Alabama Bancorp Special Meeting (excluding shares
beneficially owned by Mr. Mathews) must approve the Change of Control Payments
to Mr. Mathews in order for Alabama Bancorp to qualify for the small business
corporation exemption in Section 280G and avoid the resulting excise tax and
loss of deduction.
In addition, BancorpSouth's obligation to complete the Mergers is
conditioned upon prior approval of the Change of Control Payments by the Alabama
Bancorp Shareholders. If the Change of Control Payments are not approved by the
Alabama Bancorp Shareholders, BancorpSouth could elect not to complete the
Mergers.
65
<PAGE> 69
THE ALABAMA BANCORP BOARD UNANIMOUSLY RECOMMENDS THAT ALABAMA
BANCORP SHAREHOLDERS VOTE TO APPROVE THE CHANGE OF CONTROL PAYMENTS.
66
<PAGE> 70
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
MARKET PRICES
ALABAMA BANCORP, HIGHLAND BANK AND FIRST COMMUNITY BANK
There is no established trading market for shares of Alabama Bancorp
Common Stock, Highland Bank Common Stock or First Community Bank Common Stock,
which are inactively traded in private transactions. Therefore, reliable
information is not available about the prices at which shares of Alabama Bancorp
Common Stock, Highland Bank Common Stock and First Community Bank Common Stock,
have been bought and sold. As of _______________, 1998, Alabama Bancorp Common
Stock, Highland Bank Common Stock and First Community Bank Common Stock was held
of record by approximately 23, 104 and 19 persons, respectively.
BANCORPSOUTH
BancorpSouth is listed on the New York Stock Exchange under the symbol
"BXS." As of __________, 1998, BancorpSouth Common Stock was held of record by
approximately ________ persons. The following table sets forth the high and low
closing sale prices for BancorpSouth Common Stock as reported on the New York
Stock Exchange since May 15, 1997 and on the Nasdaq Stock Market before May 15,
1997 for the periods indicated:
<TABLE>
<CAPTION>
HIGH (1) LOW (1)
---- ---
<S> <C> <C>
1998
----
First Quarter................................................................... $ 24.0000 $ 20.6250
Second Quarter.................................................................. 23.0625 20.3125
Third Quarter (through August 5, 1998).......................................... 22.4375 19.0625
1997
----
First Quarter................................................................... $ 15.0000 $ 13.25000
Second Quarter.................................................................. 14.7500 13.25000
Third Quarter................................................................... 18.0000 14.50000
Fourth Quarter.................................................................. 24.1875 17.59375
1996
----
First Quarter................................................................... $ 12.750 $ 11.2500
Second Quarter.................................................................. 12.875 10.6875
Third Quarter................................................................... 12.000 10.7500
Fourth Quarter.................................................................. 14.250 11.8750
</TABLE>
----------------------
(1) Adjusted to reflect a two-for-one stock split of the
BancorpSouth Common Stock, effected in the form of a
100% stock dividend as of May 15, 1998.
67
<PAGE> 71
DIVIDENDS
The following table sets forth cash dividends declared per share of
BancorpSouth Common Stock, Alabama Bancorp Common Stock, Highland Bank Common
Stock and First Community Bank Common Stock, respectively, for the periods
indicated. The ability of any of these companies to pay dividends to its
respective shareholders is subject to certain restrictions, as described below.
BANCORPSOUTH
<TABLE>
<CAPTION>
DIVIDENDS
PER SHARE(1)
------------
<S> <C>
1998
----
First Quarter........................................... $0.11
Second Quarter.......................................... 0.11
Third Quarter (through _______, 1998)................... 0.11
1997
----
First Quarter........................................... $0.095
Second Quarter.......................................... 0.095
Third Quarter........................................... 0.095
Fourth Quarter.......................................... 0.11
1996
----
First Quarter........................................... $0.085
Second Quarter.......................................... 0.085
Third Quarter........................................... 0.085
Fourth Quarter.......................................... 0.095
</TABLE>
------------------------
(1) Adjusted to reflect a two-for-one stock split of the
BancorpSouth Common Stock, effected in the form of a
100% stock dividend as of May 15, 1998.
ALABAMA BANCORP
<TABLE>
<CAPTION>
DIVIDENDS
PER SHARE
---------
<S> <C>
1998
----
First Quarter........................................... --
Second Quarter.......................................... --
Third Quarter (through _______, 1998)................... --
1997
----
First Quarter........................................... --
Second Quarter.......................................... --
Third Quarter........................................... --
Fourth Quarter.......................................... $26.25
1996
----
First Quarter........................................... --
Second Quarter.......................................... --
Third Quarter........................................... --
Fourth Quarter.......................................... $26.25
</TABLE>
68
<PAGE> 72
HIGHLAND BANK
<TABLE>
<CAPTION>
DIVIDENDS
PER SHARE
---------
<S> <C>
1998
----
First Quarter........................................... --
Second Quarter.......................................... --
Third Quarter (through _______, 1998)................... --
1997
----
First Quarter........................................... --
Second Quarter.......................................... --
Third Quarter........................................... --
Fourth Quarter.......................................... $0.56
1996
----
First Quarter........................................... --
Second Quarter.......................................... --
Third Quarter........................................... --
Fourth Quarter.......................................... $0.53
</TABLE>
FIRST COMMUNITY BANK
<TABLE>
<CAPTION>
DIVIDENDS
PER SHARE
---------
<S> <C>
1998
----
First Quarter........................................... --
Second Quarter.......................................... --
Third Quarter (through _______, 1998)................... --
1997
----
First Quarter........................................... --
Second Quarter.......................................... --
Third Quarter........................................... --
Fourth Quarter.......................................... $3.15
1996
----
First Quarter........................................... --
Second Quarter.......................................... --
Third Quarter........................................... --
Fourth Quarter.......................................... $4.95
</TABLE>
Dividends paid by Alabama Bancorp on the Alabama Bancorp Common
Stock are at the discretion of Alabama Bancorp's Board of Directors and are
affected by certain legal restrictions on the payment of dividends as described
below, Alabama Bancorp's earnings and financial condition and other relevant
factors. The current policy of Alabama Bancorp is to pay dividends on an annual
basis.
There are certain limitations on the payment of dividends to
Alabama Bancorp by Highland Bank and First Community Bank. As state banking
corporations, the amount of dividends that Highland Bank and First Community
Bank may declare in one year, without approval of the Alabama Banking
Department, is $3,194,000. Under the foregoing laws and regulations, at June 30,
1998, approximately $2,375,000 was available for payment of dividends to Alabama
Bancorp by Highland Bank, and approximately $819,000 was available for payment
of dividends to Alabama Bancorp by First Community Bank.
69
<PAGE> 73
ALABAMA BANCORP MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements of Alabama Bancorp and its subsidiaries and
related Notes appearing elsewhere in this Prospectus Supplement/Proxy Statement.
The information is presented on a consolidated basis for Alabama Bancorp and its
subsidiaries.
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1998 AS
COMPARED TO THE SIX MONTH PERIOD ENDED JUNE 30, 1997
Alabama Bancorp and its subsidiaries reported net income of
approximately $1,120,000 or $53.85 per share for the six months ended June 30,
1998, compared to net income of approximately $787,000 or $37.84 per share for
the six months ended June 30, 1997. Net income increased 42.3% in 1998 as
compared to the comparable period in 1997.
The most significant factors affecting net income for the periods
mentioned include: (1) an increase in loans, net of unearned interest of 12.53%
from the comparable period in 1997; (2) an increase in average interest-earning
assets as a percentage of average assets to 93.79% in 1998 from 92.91% in 1997;
and (3) an increase in noninterest income of 34.99% from the comparable period
in 1997.
Net earnings for the six months ended June 30, 1998 resulted in an
annualized return on average assets of 0.82% compared to 0.64% in 1997. The
annualized return on average stockholders' equity was 12.39% in 1998 and 9.51%
in 1997.
Net Interest Income. Net interest income is the difference between
interest and fees earned on loans, securities and other interest-earning assets
(interest income) and interest paid on deposits (interest expense) and
represents the principal source of earnings for Alabama Bancorp and its
subsidiaries. Net interest income is affected by changes in the volume of
interest-earning assets and interest-bearing liabilities, and the rates earned
or paid thereon.
For the purposes of this earnings analysis, net interest income has
been adjusted to a taxable equivalent basis for certain investments included in
interest-earning assets. Interest-earning assets, including loans, have been
presented as averages, net of unearned income.
Net interest income on a tax equivalent basis for the six months ended
June 30, 1998 increased 8.52% to $4,738,000 from $4,366,000 for the same period
in 1997. The annualized net interest margin decreased to 3.45% for the six
months ended June 30, 1998 from 3.65% for the six months ended June 30, 1997.
The annualized net yield on interest-earning assets was 7.85% in 1998 compared
to 7.87% in 1997. The net interest spread and net yield on interest-earning
assets are affected by several factors, including Federal Reserve monetary
policies, competitive pressures and the composition of interest-earning assets
and interest-bearing liabilities. The annualized net interest margin and the
annualized net yield on interest-earning assets for 1998 and 1997 remained
virtually consistent when considering the stability of interest rates in 1998
and 1997.
Interest income on a tax equivalent basis increased approximately
$928,000 to $9,959,000 for the six months ended June 30, 1998 from $9,031,000
for the comparable period in 1997. This increase was attributable primarily to
the increase of 10.9% in the average interest-earning assets for the period
ended June 30, 1998 as compared to the period ended June 30, 1997. The
annualized yield on average loans was 8.68% for the six months ended June 30,
1998 compared to 8.64% for the six months ended June 30, 1997. For the periods
ended June 30, 1998 and 1997, investment securities
70
<PAGE> 74
represented 28.5% and 27.1%, respectively, of interest-earning assets. For the
six months ended June 30, 1998 and 1997, the annualized yield on investment
securities on a tax equivalent basis was 6.10% and 6.23%, respectively.
Interest-earning assets as a percentage of total average assets increased from
92.91% in 1997 to 93.79% in 1998.
Interest expense increased approximately $556,000 or 11.9% to
approximately $5,221,000 for the six months ended June 30, 1998, from
approximately $4,665,000 for the comparable 1997 period. The fluctuation in
interest expense from 1997 to 1998 was primarily attributable to the increase in
the volume of interest-bearing liabilities. The annualized average rate paid on
interest-bearing liabilities was 4.83% and 4.72% for the six months ended June
30, 1998 and 1997, respectively. During the six months ended June 30, 1998, the
volume of interest-bearing liabilities averaged $217.9 million, or 11.1% higher
than the $196.1 million average for the six months ended June 30, 1997.
Interest-bearing demand deposits represented 35.05% of interest-bearing
liabilities during the 1998 period as compared to 36.40% during the period ended
June 30, 1997. The annualized yields paid on these deposits were 4.77% and 4.68%
for the six months ended June 30, 1998 and 1997, respectively. Time deposits
represented 53.49% of interest-bearing liabilities during the 1998 period as
compared to 53.77% during the period ended 1997. The annualized yields paid on
time deposits during the six months ended June 30, 1998 and 1997 were 5.65% and
5.57%, respectively.
Noninterest Income. Alabama Bancorp derives a significant portion of
its noninterest income from traditional retail banking services including
various account charges and service fees.
Noninterest income from deposit accounts is significantly affected by
competitive pricing of these services and the volume of noninterest-bearing
accounts. Service charge income was $625,000 and $597,000 for the six months
ended June 30, 1998 and 1997, respectively.
Noninterest Expense. Noninterest expense was $4,037,000 for the six
months ended June 30, 1998, 2.25% higher than the six months ended June 30,
1997. Noninterest expense for the six months ended June 30, 1997 was $3,948,000.
Annualized noninterest expense as a percentage of average assets was 2.97% in
1998 and 3.19% in 1997. Salaries and employee benefits amounted to $2,146,000
and $2,051,000 for the six months ended June 30, 1998 and 1997, respectively.
Occupancy expense was $597,000 in 1998 and $609,000 in 1997. Other expense
decreased $40,000 or 3.4% to $1,137,000 for the six months ended June 30, 1998.
Other expense for the six months ended June 30, 1997 was $1,177,000.
Income Taxes. The provision for income taxes for the six months ended
June 30, 1998 and 1997 was $683,000 and $449,000, respectively. Alabama Bancorp
is subject to federal and state taxes at combined rates of approximately 39.5%.
These rates are reduced or increased for certain nontaxable income or
nondeductible expenses.
There were no tax credits or loss carryforwards available in 1998 or
1997 for financial reporting purposes. Alabama Bancorp accounts for income taxes
under Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, which requires an asset and liability approach for financial accounting
and reporting for income taxes.
FINANCIAL CONDITION FOR THE PERIOD ENDED JUNE 30, 1998 AS COMPARED TO
THE PERIOD ENDED JUNE 30, 1997
Securities. Alabama Bancorp's investment securities portfolio increased
14.48% or $9.4 million to $74,191,000 as of June 30, 1998 from $64,808,000 at
June 30, 1997. Alabama Bancorp maintains an investment strategy of seeking
portfolio yields within acceptable risk levels, as well as providing liquidity.
Alabama Bancorp maintains two classifications of securities: available for sale
and investment securities. Securities available for sale represent those
securities that Alabama Bancorp intends to hold for an indefinite period of time
or that may be sold in response to changes in
71
<PAGE> 75
interest rates, liquidity needs, prepayment risk and other similar factors.
Investment securities represent those securities that Alabama Bancorp plans to
hold until maturity.
Loans. Loans, net of unearned interest, increased $20.4 million or
12.53% to $183.3 million at June 30, 1998 from $162.9 million for the comparable
1997 period. The allowance for loan losses was $1.6 million and $1.5 million as
of June 30, 1998 and 1997, respectively. The most significant concentration of
loans consisted of commercial, agricultural and industrial loans.
Alabama Bancorp seeks to maintain adequate liquidity and minimize
exposure to interest rate volatility. Contractual maturities may vary
significantly from actual maturities due to loan extensions, early pay-offs due
to refinancing or other factors. Fluctuations in interest rates are also a major
factor in early loan pay-offs. The uncertainties, particularly with respect to
interest rates, of future events make it difficult to predict actual maturities.
Alabama Bancorp has not maintained records related to trends of early-payoff
since management does not believe such trends would present a significantly more
accurate estimate of actual maturities than contractual maturities.
Deposits. Total deposits increased $12.7 million or 5.55% to $242.8
million at June 30, 1998 from $230.1 million for the comparable 1997 period.
Time deposits at June 30, 1998 and 1997 were $117.6 million and $112.9 million,
respectively. Time deposits represent 48.4% and 49.1% of total deposits at June
30, 1998 and 1997, respectively. Interest-bearing demand deposits increased $3.7
million or 5.13% to $75.5 million for the period ended June 30, 1998 from $71.8
million for the comparable period in 1997. Savings as a percentage of total
deposits remained at a consistent level in 1998 and 1997. Savings totaled $12.9
million at June 30, 1998 and $12.8 million at June 30, 1997. Demand deposits
were $36.9 million and $32.6 million at June 30, 1998 and 1997, respectively.
RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED DECEMBER 31, 1997, 1996 AND
1995
Earnings Summary. Alabama Bancorp reported net income of approximately
$1,850,000 or $88.95 per share for the year ended December 31, 1997, compared to
net income of approximately $1,826,000 or $87.79 per share for the year ended
December 31, 1996. Net income for 1995 was approximately $1,928,000 or $92.70
per share. Net income increased 1.31% in 1997, decreased 5.29% in 1996, and
increased 14.69% in 1995. The most significant factors affecting net income for
the periods mentioned include: (1) average loan growth in 1997 of 11.7%
following an increase of 11.5% in 1996; and (2) loan provisions of $179,000 and
$401,000 were made in the years ending December 31, 1997 and 1996, while the
provision for loan losses was $72,000 for the year ended December 31, 1995. The
higher provision in 1996 was in response to the charge off of two loans.
Net earnings in 1997 resulted in an annualized return on average assets
of 0.72% compared to 0.74% and 0.82% during 1996 and 1995, respectively. The
return on average stockholders' equity was 10.82% in 1997, 11.80% in 1996, and
14.05% in 1995.
Net Interest Income. Net interest income on a tax equivalent basis
increased 6.25% to $8.99 million in 1997 from $8.46 million in 1996 and 8.88% in
1996 from $7.77 million in 1995. The net interest margin between
interest-earning assets and interest-bearing liabilities increased to 3.62% for
the year ended December 31, 1997 from 3.54% for the year ended December 31,
1996. The net interest margin in 1995 was 3.31%. The net yield on
interest-earning assets was 7.91% in 1997 compared to 8.00% in 1996 and 8.18% in
1995. The net interest margin and net yield on interest-earning assets are
affected by several factors, including Federal Reserve monetary policies,
competitive pressures and the composition of interest-earning assets and
interest-bearing liabilities.
Interest income increased approximately $831,000 to $18.8 million for
the year ended December 31, 1997 from $18.0 million for the comparable period in
1996. Interest income for 1995 was $17.4 million. These increases were
attributable primarily to the increase in the average interest-earning assets of
4.37% and 4.41% for the year ended December 31, 1997 and 1996, respectively. The
yield on average loans was 8.67% for the year
72
<PAGE> 76
ended December 31, 1997 compared to 8.96% and 9.12% for the comparable periods
ended December 31, 1996 and 1995, respectively. For the year ended December 31,
1997, investment securities represented 30.42% of average interest-earning
assets. For the comparable 1996 and 1995 periods, investment securities
represented 29.86% and 38.82%, respectively, of average interest-earning assets.
For the years ended December 31, 1997, 1996 and 1995, the yield on investment
securities on a tax equivalent basis was 6.17%, 6.36% and 6.89%, respectively.
Interest-earning assets as a percentage of total average assets increased from
93.73% in 1995 to 93.76% in 1996 and then decreased to 93.08% in 1997.
Interest expense increased approximately $302,000 or 3.18% to
approximately $9.81 million for the year ended December 31, 1997, from
approximately $9.51 million for the comparable 1996 period. Interest expense for
1995 was $9.66 million. The fluctuations in interest expense from 1995 through
1997 were attributable to increases and decreases in the volume of
interest-bearing liabilities. The average rate paid on interest-bearing
liabilities was 4.70%, 4.77% and 5.02% for the years ended December 31, 1997,
1996 and 1995, respectively. During the year ended December 31, 1997, the volume
of interest-bearing liabilities averaged $204.0 million, or 4.27% more than the
$195.7 million average for the year ended December 31, 1996. The volume of
interest-bearing liabilities averaged $188.3 million in 1995. Interest-bearing
demand deposits represented 35.96% of interest-bearing liabilities for the year
ended December 31, 1997 as compared to 36.37% and 32.73% for the years ended
December 31, 1996 and 1995, respectively. The yields paid on these deposits were
4.65%, 4.77% and 5.02% for the years ended December 31, 1997, 1996 and 1995,
respectively. Time deposits represented 53.68% of average interest-bearing
liabilities for the year ended December 31, 1997 as compared to 56.68% and
60.50% for the years ended December 31, 1996 and 1995, respectively. The yields
paid on time deposits during the years ended December 31, 1997, 1996 and 1995
were 5.47%, 5.67% and 5.82%, respectively.
73
<PAGE> 77
AVERAGE BALANCES AND INTEREST RATES, INTEREST YIELD/RATES ON TAXABLE EQUIVALENTS
The following table details average balances of interest-earning assets
and interest-bearing liabilities, the taxable equivalent amount of interest
earned/paid thereon, and the taxable equivalent yield/rate for each of the three
years ended December 31, 1997.
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------ ---------------------------------- -------------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
---------- ---------- -------- ------------ --------- -------- ---------- ---------- ---------
(In thousands)
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans........................... $165,347 $14,339 8.67% $147,989 $13,051 8.81% $132,696 $11,928 8.99%
Investment securities-Taxable... 68,549 4,108 5.99 72,253 4,552 6.30 77,111 4,831 6.26
Federal funds sold.............. 5,301 291 5.49 6,906 367 5.31 10,506 665 6.33
FHLB stock...................... 866 63 7.27 -- -- -- -- -- --
Total interest-earning assets... 240,063 18,801 7.83 227,148 17,970 7.91 220,313 17,424 7.91
Total assets.................... 257,923 245,321 235,054
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------ -------------------------------- --------------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
---------- ---------- -------- --------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing liabilities:
Savings deposits............... $ 12,744 $ 359 2.82% $ 13,021 $ 371 2.85% $ 12,741 $ 378 2.97%
Interest-bearing demand
deposits....................... 73,379 2,733 3.72 71,173 2,652 3.73 61,636 2,439 3.96
Time deposits.................. 109,534 6,221 5.68 110,907 6,283 5.67 113,926 6,632 5.82
Other.......................... 749 30 4.00 -- -- -- -- -- --
Total deposits................. 196,406 9,343 4.76 195,101 9,306 4.77 188,303 9,449 5.02
Other borrowings............... 7,629 470 6.16 2,667 205 7.69 2,667 206 7.72
Total interest-bearing
liabilities................ 204,035 9,813 4.80 197,768 9,511 4.81 190,970 9,655 5.06
Total liabilities and
stockholders' equity....... 257,923 245,321 235,054
Net interest income............ 8,988 8,459 7,769
Net interest spread............ 3.03 3.10 2.85
Net interest margin............ 3.74 3.72 3.53
</TABLE>
74
<PAGE> 78
RATE/VOLUME ANALYSIS
The following table provides the components of changes in net interest
income in the format of a rate/volume analysis and analyzes the dollar amount of
changes in interest income and interest expense for major components of
interest-earning assets and interest-bearing liabilities.
<TABLE>
<CAPTION>
1997 1996
---------------------------------- -----------------------------------
Volume Rate Total Volume Rate Total
---------- -------- ---------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
(In thousands)
Interest-bearing assets:
Loans, Net of unearned income.................. $1,508 $(212) $1,296 $1,352 $ (237) $1,115
Investment securities - Taxable................ (343) (38) (381) (140) (139) (279)
Federal funds sold............................. (88) 4 (84) (177) (113) (290)
------ ----- ------ ------ ------ ------
Total interest-earning assets.................. 1,077 (246) 831 1,035 (489) 546
------ ----- ------ ------ ------ ------
Interest-bearing liabilities:
Savings deposits............................... (4) 16 12 18 (11) 7
Interest-bearing demand deposit................ (392) 96 (296) 307 (522) (215)
Time deposits.................................. (101) 348 247 175 176 351
Other borrowings............................... (381) 116 (265) 1 0 1
------ ----- ------ ------ ------ ------
Total interest-bearing liabilities............. (878) 576 (302) 501 (357) 144
------ ----- ------ ------ ------ ------
Net change in interest income.................. $ 199 $ 330 $ 529 $1,536 $(846) $ 690
====== ===== ====== ====== ====== ======
</TABLE>
ALLOWANCE AND PROVISION FOR LOAN LOSSES
The provision for loan losses was $179,000 in 1997, $401,000 in 1996
and $72,000 in 1995. The following table summarizes information concerning the
allowance for loan losses for the three years ended December 31, 1997. Alabama
Bancorp management's estimate of the allowance for loan losses and the provision
for loan losses is based on evaluation of the collectibility of loans, past loan
loss experience, changes in the nature and volume of the loan portfolio, current
economic conditions that may affect a borrower's ability to pay, review of
specific problem loans and the relationship of the allowance for loan losses to
outstanding loans.
Net charge-offs for the year ended December 31, 1997 totaled $209,000,
a decrease of $72,000 from $281,000 as of the year ended December 31, 1996. The
net charge-offs for 1995 and 1994 were $236,000 and $329,000, respectively.
Alabama Bancorp management considers the allowance for loan losses as of
December 31, 1997 to be adequate.
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<PAGE> 79
The following table summarizes information concerning the allowance for
loan losses:
<TABLE>
<CAPTION>
1997 1996 1995
--------- ------------- ---------
(In thousands)
<S> <C> <C> <C>
Loans, net of unearned income
outstanding - year end ................... $ 176,845 $ 157,964 $ 143,261
Average net loans - during year .............. 165,347 147,989 132,696
Allowance for loan losses:
Balance - beginning of year .............. 1,549 1,429 1,593
Provision charged to expense ............. 179 401 72
Recoveries on loans previously charged off 312 235 186
Loans charged off ........................ (521) (516) (422)
--------- --------- ---------
Balance - end of year .................... $ 1,519 $ 1,549 $ 1,429
========= ========= =========
For the period:
Net charge-offs as a % of average loans .. 0.13% 0.19% 0.18%
Provision for loan losses as a % of net
charge-offs .............................. 85.65% 142.70% 30.51%
Provision for loan losses as a % of net
average loans ............................ 0.11% 0.27% 0.05%
Period End:
Allowance as a % of loans, net of unearned
income ............................... 0.86% 0.98% 0.99%
</TABLE>
NONINTEREST INCOME
Alabama Bancorp and its subsidiaries derive a significant portion of
their noninterest income from traditional retail banking services including
various account charges and service fees.
Noninterest income from deposit accounts is significantly affected by
competitive pricing of these services and the volume of various deposit
accounts. Service charge income decreased 2.0% to $1,265,000 in 1997 from
$1,291,000 in 1996, and increased 16.5% in 1996 from $1,108,000 in 1995.
The gains realized on the sale of investment securities were $13,000,
$17,000 and $79,000 for the years ended December 31, 1997, 1996 and 1995.
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<PAGE> 80
The following table presents an analysis of noninterest income for
1997, 1996 and 1995 together with the amount and percent change from the prior
year for 1997 and 1996:
<TABLE>
<CAPTION>
Change from Prior Year
-----------------------------------------
Year Ended December 31 1997 1996
------------------------------- ------------------ -------------------
1997 1996 1995 Amount % Amount %
--------- --------- --------- ---------- ------- ---------- ------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Service charges....................... $1,265 $1,291 $1,108 $(26) (2.01)% $ 183 16.52%
Net investment securities gains....... 13 17 79 (4) (23.53) (62) (78.48)
Other................................. 668 544 548 124 22.79 (4) (0.73)
------ ------ ------
Total noninterest income.............. $1,946 $1,852 $1,735 94 5.08 117 6.74
====== ====== ======
</TABLE>
NONINTEREST EXPENSE
Noninterest expense was $7,863,000 in 1997, 11.31% higher than 1996.
Noninterest expense for the years ending December 31, 1996 and 1995 was
$7,064,000 and $6,882,000, respectively. Noninterest expense as a percentage of
average assets was 3.05% in 1997, 2.79% in 1996, and 2.84% in 1995. Salaries and
employee benefits increased $598,000 or 17.26% in 1997 and increased $325,000 or
10.35% in 1996. Net occupancy expense was $1,212,000 in 1997, $1,138,000 in 1996
and $946,000 in 1995. Other expense increased $163,000 or 7.48% to $2,341,000
for the year ended December 31, 1997 from $2,178,000 for the comparable 1996
period. Other expenses for the year ended December 31, 1995 were $2,307,000.
The following table presents an analysis of noninterest expense for
1997, 1996 and 1995 together with the amount and percent change from the prior
year for 1997 and 1996:
<TABLE>
<CAPTION>
Change from Prior Year
-----------------------------------------
Year Ended December 31 1997 1996
------------------------------- ------------------ -------------------
1997 1996 1995 Amount % Amount %
--------- --------- --------- ---------- ------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries and employee benefits............ $4,063 $3,465 $3,140 $598 17.26% $325 10.35%
Net occupancy expense..................... 1,212 1,138 946 74 6.50 192 20.30
FDIC insurance expense.................... 22 5 233 17 340 (228) (97.85)
Minority interest in net income of
consolidated subsidiaries............... 225 278 256 (53) (19.06) 22 8.59
Other expenses............................ 2,341 2,178 2,307 163 7.48 (129) (5.59)
------ ------ ------
Total noninterest expense................. $7,863 $7,064 $6,882 799 11.31 182 2.64
====== ====== ======
</TABLE>
77
<PAGE> 81
INCOME TAXES
The provision for income taxes for the years ended December 31, 1997,
1996 and 1995 was $1,042,000, $1,020,000 and $622,000, respectively. Alabama
Bancorp and its subsidiaries are subject to federal and state taxes at combined
rates of approximately 39.5%. These rates are reduced or increased for certain
nontaxable income or nondeductible expenses.
There were no tax credits or loss carryforwards available in 1997, 1996
or 1995 for financial reporting purposes. Effective January 1, 1993, Alabama
Bancorp adopted Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes, which requires an asset and liability approach for financial
accounting and reporting for income taxes.
LOANS
Loans, net of unearned interest, increased $18.9 million or 11.95% to
$176.8 million at December 31, 1997 from $157.9 million for the comparable 1996
period. Loans, net of unearned interest, was $143.3 million at December 31,
1995. The allowance for loan losses was $1,519,000 for 1997, $1,549,000 for
1996, and $1,429,000 for 1995. The most significant concentration of loans
consisted of commercial, agricultural and industrial loans.
A summary of the loan portfolio at December 31, 1995, 1996 and 1997
follows:
<TABLE>
<CAPTION>
December 31,
---------------------------------------------
1997 1996 1995
------------- --------------- ------------
(In thousands)
<S> <C> <C> <C>
Commercial, agricultural and industrial........................ $ 94,293 $ 80,851 $ 77,349
Real estate.................................................... 70,003 63,054 56,968
Consumer....................................................... 12,384 13,904 7,755
Other.......................................................... 184 223 1,447
-------- -------- --------
Total Loans.................................................... 176,864 158,032 143,519
Unearned income................................................ (19) (68) (258)
-------- -------- --------
Total loans, net of unearned income............................ $176,845 $157,964 $143,261
======== ======== ========
</TABLE>
A summary of loan interest rate sensitivity at December 31, 1997
follows:
<TABLE>
<CAPTION>
December 31, 1997
--------------------
Fixed rate loan maturity: (In thousands)
<S> <C>
Three months or less.............................................. $ 11,631
Over three through twelve months.................................. 18,146
Over one through five years....................................... 50,373
Over five years................................................... 12,455
---------
Total fixed rate loans.......................... 92,605
Variable rate loans repricing in three months or less................. 46,037
Variable rate loans repricing annually or more frequently, but
less frequently than quarterly........................................ 38,203
---------
Total loans, net of unearned income................................... $ 176,845
=========
</TABLE>
78
<PAGE> 82
NONPERFORMING ASSETS
The following table summarizes Alabama Bancorp and its subsidiaries'
nonaccrual loans and other real estate owned as of December 31 for the last five
years.
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- ------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans....................... $775 $1,187 $1,586 $923 $898
Other real estate owned................ 559 154 60 291 84
</TABLE>
SECURITIES
Alabama Bancorp and its subsidiaries' investment securities portfolio
increased 6.34% or $4.35 million to $73,039,000 as of December 31, 1997 from
$68,686,000 at December 31, 1996. Alabama Bancorp and its subsidiaries maintain
an investment strategy of seeking portfolio yields within acceptable risk
levels, as well as providing liquidity. Alabama Bancorp and its subsidiaries
maintain two classifications of securities: (1) available for sale and (2)
investment securities. Securities available for sale represent those securities
that Alabama Bancorp and its subsidiaries intend to hold for an indefinite
period of time or that may be sold in response to changes in interest rates,
liquidity needs, prepayment risk and other similar factors. Investment
securities represent those securities that Alabama Bancorp and its subsidiaries
plan to hold until maturity.
DEPOSITS
Total deposits increased $23.9 million or 10.66% to $248.1 million at
December 31, 1997 from $224.2 million for the comparable 1996 period. Total
deposits at December 31, 1995 were $228.6 million. Time deposits at December 31,
1997, 1996 and 1995 were $116.3 million $108.3 million, and $115.3 million,
respectively. Time deposits represented 46.9%, 48.3% and 50.4% of total deposits
at December 31, 1997, 1996 and 1995, respectively. Interest bearing demand
deposits increased 13.63% in 1997 to $81.3 million while increasing 3.20% in
1996 to $71.5 million. Savings as a percentage of total deposits was 5.07%,
5.61% and 5.62% at December 31, 1997, 1996 and 1995, respectively. Savings
totaled $12.57 million at December 31, 1997, $12.56 million at December 31, 1996
and $12.8 million at December 31,1995. Non-interest bearing demand deposits were
$37.9 million, $31.8 million and $31.2 million at December 31, 1997, 1996 and
1995, respectively.
A summary of the daily average balance of interest-bearing deposits
follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------- -------------- -----------
(In thousands)
<S> <C> <C> <C>
Interest-bearing demand...................... $ 49,407 $ 45,699 $ 34,724
Money market demand.......................... 23,972 25,474 26,913
Savings...................................... 12,744 13,021 12,740
Time......................................... 109,534 110,907 113,926
Other........................................ 749 -- --
-------- -------- --------
Total........................................ $196,406 $195,101 $188,303
======== ======== ========
</TABLE>
79
<PAGE> 83
Maturities of time deposits of $100,000 or more at December 31, 1997
are as follows:
<TABLE>
<CAPTION>
December 31, 1997
-----------------
(In thousands)
<S> <C>
Three months or less ................... $34,106
Over three through six months .......... 2,259
Over six through twelve months ......... 5,238
Over twelve months ..................... 5,686
-------
Total .............................. $47,289
=======
</TABLE>
LIQUIDITY
Of primary importance to depositors, creditors and regulators is the
ability to have readily available funds sufficient to repay fully maturing
liabilities. Alabama Bancorp and its subsidiaries liquidity, represented by cash
and due from banks, is a result of its operating, investing and financing
activities. In order to insure funds are available at all times, Alabama Bancorp
and its subsidiaries devote resources to projecting on a monthly basis the
amount of funds which will be required and maintains relationships with a
diversified customer base so funds are accessible. Liquidity requirements can
also be met through short-term borrowings or the disposition of short-term
assets which are generally matched to correspond to the maturity of liabilities.
Alabama Bancorp and its subsidiaries have a formal liquidity policy,
and in the opinion of management, their liquidity levels are considered
adequate. Alabama Bancorp and its subsidiaries are not subject to any specific
regulatory liquidity requirements imposed by regulatory authorities. Alabama
Bancorp and its subsidiaries are subject to general FDIC guidelines. Management
believes its liquidity ratios meet or exceed these guidelines. Management does
not know of any trends or demands which are reasonably likely to result in
liquidity increasing or decreasing in any material manner. The following are
Alabama Bancorp and its subsidiaries' liquidity ratios for the periods
indicated:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Average loans to average deposits................ 84.2% 75.9% 70.5%
</TABLE>
CAPITAL
The Federal Reserve has adopted capital guidelines governing the
activities of bank holding companies. These guidelines require the maintenance
of an amount of capital based on risk-adjusted assets so that categories of
assets with potentially higher credit risk will require more capital backing
than assets with lower risk. In addition, bank and bank holding companies are
required to maintain capital to support, on a risk-adjusted basis, certain
off-balance sheet activities such as loan commitments.
Minimum capital requirements for all banks are Tier I capital of at
least 4% risk-weighted assets, total capital of at least 8% of risk-weighted
assets and a leverage ratio of 3%, plus an additional 100 to 200 basis point
cushion in certain circumstances, of adjusted quarterly average assets.
80
<PAGE> 84
The following table provides information regarding Alabama
Bancorp's, Highland Bank's and First Community Bank's capital ratios:
<TABLE>
<CAPTION>
December 31,
-------------------
1997 1996
--------- --------
<S> <C> <C>
Tier I risk based capital ratio:
Alabama Bancorp............................................ 9.71% 10.07%
Highland Bank.............................................. 9.36 10.57
First Community Bank....................................... 13.96 12.95
Total risk based capital ratio:
Alabama Bancorp............................................ 10.53% 10.97%
Highland Bank.............................................. 10.10 11.27
First Community Bank....................................... 15.16 14.20
Tier I leverage ratio:
Alabama Bancorp............................................ 6.57% 6.57%
Highland Bank.............................................. 6.58 7.19
First Community Bank....................................... 7.67 7.33
</TABLE>
Each of these capital levels at December 31, 1997 and 1996 exceeded the
"well capitalized" levels under the regulatory framework.
INTEREST SENSITIVITY
Alabama Bancorp monitors and manages the repricing and maturity of its
assets and liabilities through an asset/liability management committee formed by
its Board of Directors. In order to diminish the potential adverse impact that
changes in interest rates could have on its net interest income, the
asset/liability management committee uses a traditional gap analysis which
compares the repricings, maturities and payments, as applicable, of Alabama
Bancorp's interest earning assets ("RSA") to interest bearing liabilities
("RSL"). The asset/liability management committee uses a GAP analysis to monitor
changes in net interest income due to changes in market interest rates. Alabama
Bancorp's GAP target is to maintain a GAP-to-assets ratio of +/- 15% for the One
Year category. At December 31, 1997, the ratio was 92 basis points outside of
the target range.
Cumulative GAP Analysis
<TABLE>
<CAPTION>
As of December 31, 1997
--------------------------------------------------------------------
(In thousands)
Three Six One Five Thirty
Months Months Year Years Years
--------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Rate Sensitive Assets (RSA):
Fixed rate securities .......................... $ 1,268 $ 1,789 $ 4,715 $ 39,290 $ 49,820
Floating rate securities and fed funds sold..... 32,889 32,889 33,382 33,382 33,382
Fixed rate loans ............................... 11,631 17,082 29,777 80,150 92,605
Floating rate loans ............................ 46,037 56,925 73,922 83,949 84,240
-------- -------- -------- -------- --------
Total Rate Sensitive Assets .......................... $ 91,825 $108,685 $141,796 $236,771 $260,047
======== ======== ======== ======== ========
Rate Sensitive Liabilities (RSL):
Fixed rate deposits ............................ $ 28,141 $ 37,595 $ 58,565 $ 92,393 $ 95,119
Floating rate deposits and borrowed funds ...... 127,797 127,797 127,797 127,797 127,797
-------- -------- -------- -------- --------
Total Rate Sensitive Liabilities ..................... $155,938 $165,392 $186,362 $220,190 $222,916
======== ======== ======== ======== ========
GAP .................................................. $(64,113) $(56,707) $(44,566) $ 16,581 $ 37,131
GAP/Assets ........................................... (22.90)% (20.26)% (15.92)% 5.92% 13.27%
GAP Target ........................................... +/- 15%
</TABLE>
81
<PAGE> 85
As of December 31, 1997, the cumulative GAP analysis indicated that
Alabama Bancorp was liability sensitive in relation to changes in market
interest rates, meaning that increases in market rates would have a negative
impact, and increases in market interest rates would have a positive impact, on
net interest income.
YEAR 2000
The Year 2000 issue concerns the inability of certain computer and
operational systems to properly perform calculations and process information
containing four-digit date fields. Alabama Bancorp has developed and implemented
an enterprise-wide strategy to address and mitigate potential risks resulting
from the Year 2000 issue, which encompasses the following components:
1. Awareness of the Year 2000 issue and communication/education of key
personnel on the approach to address potential problems;
2. Identification of significant systems, including both system
hardware and software, and interfaces to and from these systems;
3. Inventory and assessment of potentially affected operational
systems;
4. Establishment of a testing plan to test key internal systems and a
remediation plan to address any problems identified;
5. Evaluation, and testing when applicable, of the Year 2000 efforts of
significant vendors and outside service organizations providing
processing for Alabama Bancorp; and
6. Development of contingency plans, where necessary, to address
potential unidentified problems in both significant internal and
external systems.
Alabama Bancorp is currently in the renovation phase of its strategy
and is scheduled to begin testing of changes made in the fourth quarter of 1998.
Alabama Bancorp is also assessing the risk of borrowers being unable to
meet their obligations due to a Year 2000 related problem by contacting
customers to determine their awareness of the Year 2000 issue, gaining an
understanding of the impact of Year 2000 on the customers' operations and
determining whether the customer has a plan and timetable to address the Year
2000 issue. The Year 2000 risk relating to customers is mitigated by the fact
that Alabama Bancorp's loan portfolio is primarily secured by asset-based
collateral where the fair market value of such assets is typically equal to or
greater than the outstanding loan balance.
Alabama Bancorp has estimated its total costs for the Year 2000 project
to be between $250,000 and $350,000, of which $5,000 was incurred in 1997 and
approximately $190,000 has been incurred year-to-date in 1998. Given the nature
and scope of the project, it is not feasible at this stage to estimate the
degree of success of the project. However, management of Alabama Bancorp
believes an adequate plan is in place to address the issue and the final outcome
is not anticipated to have a material adverse effect on its operations.
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<PAGE> 86
INFORMATION ABOUT ALABAMA BANCORP, HIGHLAND BANK
AND FIRST COMMUNITY BANK
GENERAL
Alabama Bancorp was incorporated as Leeds Bancgroup, Inc. in 1981 under
the laws of the State of Delaware to own, operate and support banks in the State
of Alabama. Leeds Bancgroup, Inc. changed its name to Alabama Bancorp., Inc. in
1986. Initially, Alabama Bancorp owned Citizens Bank of Leeds which operated a
single office in the city of Leeds in Jefferson County, Alabama. In 1986,
Alabama Bancorp acquired The Fort Deposit Bank (now named First Community Bank
of The South) which operated two banking offices in Lowndes County, Alabama. In
1988, Highland Bank was incorporated in Jefferson County, Alabama, with Alabama
Bancorp owning a controlling interest.
Highland Bank's primary market focus is providing high quality
financial services to owner-managed businesses and high net worth individuals in
and around the Birmingham, Alabama area. Since its inception, Highland Bank has
grown both internally and through one acquisition and one merger. In 1994,
Highland Bank acquired Steiner Bank in Birmingham from Union Planters
Corporation. In 1996, Citizens Bank of Leeds merged into Highland Bank. Highland
Bank currently operates seven offices in the greater Birmingham, Alabama area.
Six of the offices are located in Jefferson County, Alabama and the seventh is
located in Moody, Alabama in the contiguous St. Clair County. The majority of
Highland Bank's loan portfolio is composed of secured and unsecured commercial
loans, commercial real estate loans and other real estate related loans.
Although commercially focused, Highland Bank offers a wide variety of consumer
products including mortgage lending, equity lines, credit cards, installment
consumer loans and competitive deposit products.
First Community Bank, formerly named The Fort Deposit Bank, was
incorporated in 1904 to serve Lowndes County, Alabama. Lowndes County is located
just south of Montgomery County, in which Montgomery, Alabama, the state
capital, is located. Until recently, First Community Bank operated only two
offices, one in Fort Deposit, Alabama, and the other in Hayneville, Alabama,
which is the Lowndes County seat. In 1991, First Community Bank opened an office
in the city of Burkeville in northern Lowndes County. In 1994, First Community
Bank opened an office in the city of Greenville, Alabama, which is located in
Butler County. The Greenville branch is located in one of the more rapidly
growing markets in the area. First Community Bank provides a wide variety of
both commercial and consumer products in both Lowndes and Butler County. The
majority of the bank's loan portfolio consists of commercial loans in several
counties, including Lowndes, Butler, Montgomery, Elmore and Autauga, Alabama. A
majority of First Community Bank's loans are secured by real estate. Consumer
deposits comprise most of the bank's deposit base, with the volume centered in
Lowndes County, Alabama.
Highland Bank and First Community Bank offer a wide variety of
traditional banking services, including depository services such as checking
accounts, savings accounts, certificates of deposit and individual retirement
accounts, as well as mortgage lending, equity lines and installment loans. Each
of the banks acts as issuing agents for U. S. Savings Bonds and travelers
checks, and offers collection teller services, direct deposit services, wire
transfer facilities, safe deposit boxes, 24 hour voice response and night
depositing facilities. The banks also offer ATM cards (with access to local,
state and nationwide networks), and both personal and corporate VISA credit
cards. Deposits of Highland Bank and First Community Bank are insured by the
FDIC.
83
<PAGE> 87
On June 30, 1998, Alabama Bancorp, Highland Bank and First Community
Bank had the following total assets, total deposits and stockholders' equity:
<TABLE>
<CAPTION>
June 30, 1998
----------------------------------------------------------
Alabama Bancorp Highland Bank First Community Bank
---------------- ------------- --------------------
<S> <C> <C> <C>
Total assets......................................... $279,105,000 $206,289,007 $70,158,000
Total deposits....................................... 242,826,000 193,341,162 59,131,000
Stockholders' equity................................. 18,975,000 15,267,761 5,563,000
</TABLE>
Highland Bank and First Community Bank encounter competition both in
lending funds and attracting deposits. In one or more aspects of their
businesses, the banks compete with other commercial banks, savings and loan
associations, credit unions, finance companies, insurance companies and other
financial institutions in their respective markets. The Birmingham banking
market is currently concentrated, and is dominated by several super-regional
banks such as SouthTrust Bank, AmSouth Bank, Regions Bank and Compass Bank. In
Lowndes County, First Community Bank's primary competition is another locally
owned independent bank as well as other banks from surrounding counties and in
Butler County. The competition generally is based on the level of interest rates
charged on loans or paid on deposits.
EMPLOYEES
As of June 30, 1998, Alabama Bancorp, Highland Bank and First Community
Bank had, collectively, 119 full-time and 12 part-time employees, none of whom
is represented by collective bargaining agreement. Management of these companies
believes that employee relations are excellent.
DESCRIPTION OF PROPERTIES
Highland Bank and First Community Bank own all of the properties where
their offices are located, with the exception of Highland Bank's 3rd Avenue
North office in downtown Birmingham, which is leased. Alabama Bancorp leases
office space from its subsidiary banks at a market rental rate. With the
exception of Highland Bank's downtown office, all of Highland Bank's and First
Community Bank's offices are equipped with private offices, walk-in vaults, safe
deposit boxes, teller stations and covered drive-through banking lanes.
LEGAL PROCEEDINGS
Highland Bank and First Community Bank are involved in routine legal
proceedings occurring in the ordinary course of business that, in the aggregate,
are not believed by management of these companies to be material to the
consolidated financial condition and results of operation of the banks.
SUPERVISION AND REGULATION
Alabama Bancorp. Alabama Bancorp is a bank holding company registered
under the Bank Holding Company Act of 1956, as amended (the "Bank Holding
Company Act"), and it operates two banking subsidiaries, Highland Bank and First
Community Bank. As a registered bank holding company, Alabama Bancorp is subject
to supervision and regulation by the Federal Reserve under the Bank Holding
Company Act. As a bank holding company, Alabama Bancorp is required to furnish
the Federal Reserve an annual report of its operations at the end of each fiscal
year and to
84
<PAGE> 88
furnish such additional information as the Federal Reserve may require pursuant
to the Bank Holding Company Act. The Federal Reserve may also make examinations
of Alabama Bancorp.
The Bank Holding Company Act requires, subject to certain exceptions,
every bank holding company to obtain the prior approval of the Federal Reserve
(1) before it may acquire direct or indirect ownership or control of any voting
shares of any bank if, after such acquisition, such bank holding company will
directly or indirectly own or control more than five percent of the voting
shares of such bank; (2) before it or any of its subsidiaries, other than a
bank, may acquire all or substantially all of the assets of a bank; or (3)
before it may merge or consolidate with any other bank holding company.
In addition, the Bank Holding Company Act prohibits (with specific
exceptions) Alabama Bancorp from engaging in nonbanking activities or from
acquiring or retaining direct or indirect control of any company engaged in
nonbanking activities. The Federal Reserve by regulation or order may make
exceptions for activities determined to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. In determining
whether a particular activity is permissible, the Federal Reserve considers
whether the performance of such an activity can reasonably be expected to
produce benefits to the public, such as greater convenience, increased
competition or gains in efficiency that outweigh possible adverse effects, such
as undue concentration of resources, decreased or unfair competition, conflicts
of interest or unsound banking practices. For example, making, acquiring or
servicing loans, leasing personal property, providing certain investment or
financial advice, performing certain data processing services, acting as agent
or broker in selling credit life insurance and certain other types of insurance
in connection with credit transactions by the bank holding company and certain
limited insurance underwriting activities have all been determined by
regulations of the Federal Reserve to be permissible activities. The Bank
Holding Company Act does not place territorial limitations on permissible
bank-related activities of bank holding companies. However, despite prior
approval, the Federal Reserve has the power to order a holding company or its
subsidiaries to terminate any activity, or terminate its ownership or control of
any subsidiary, when it has reasonable cause to believe that continuation of
such activity or such ownership or control constitutes a serious risk to the
financial safety, soundness or stability of any bank subsidiary of that holding
company.
Highland Bank and First Community Bank. Each of Highland Bank and First
Community Bank is an Alabama state banking corporation. As state banking
corporations, Highland Bank and First Community Bank are subject to supervision
by the Alabama Banking Department and have their deposits insured by the FDIC.
Each of the banks is regulated and subject to periodic examination by these
governmental authorities, each of which imposes regulations related to reserves,
investments, loans, issuance of securities, establishment of branches and other
aspects of operation.
RISK-BASED CAPITAL GUIDELINES
Under the Federal Reserve's and the FDIC's risk-based capital
guidelines applicable to Alabama Bancorp, the minimum ratio of capital to
risk-weighted assets (including certain off-balance sheet items, such as standby
letters of credit) is 8%. To be considered a "well capitalized" bank under the
guidelines, a bank must have a total risk-based capital ratio in excess of 10%.
At December 31, 1997, under these guidelines, each of Highland Bank and First
Community Bank was considered "well capitalized." At least half of the total
capital is to be comprised of common equity, retained earnings and a limited
amount of perpetual preferred stock, after subtracting goodwill, and certain
other adjustment ("Tier 1 capital"). The remainder may consist of perpetual
debt, mandatory convertible debt securities, a limited amount of subordinated
debt, other preferred stock not qualifying for Tier 1 capital and a limited
amount of loan loss reserves ("Tier 2 capital"). In addition, the Federal
Reserve and the FDIC have adopted a minimum leverage ratio (Tier 1 capital to
total assets) of 3%. Generally, banking organizations are expected to operate
well above the minimum required capital level of 3% unless they meet certain
specified criteria, including that they have the
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<PAGE> 89
highest regulatory ratings. Most banking organizations are required to maintain
a leverage ratio of 3% plus an additional cushion of at least 1% to 2%. The
guidelines also provide that banking organizations experiencing internal growth
or making acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels without significant reliance
upon intangible assets. On December 31, 1997, Alabama Bancorp had a Tier 1
capital ratio of 9.71%, a total risk-based capital ratio of 10.53%, and a
leverage ratio of 6.57%.
Under the Financial Institutions Reform, Recovery and Enforcement Act
of 1989, failure to meet the capital guidelines could subject a banking
institution to a variety of enforcement remedies available to federal regulatory
authorities, including the termination of deposit insurance by the FDIC. The
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
substantially revised the depository institution regulatory and funding
provisions of the Federal Deposit Insurance Act as well as several other federal
banking statutes. Among other things, FDICIA requires the federal banking
regulators to take prompt corrective action in respect of depository
institutions that do not meet minimum capital requirements.
SOURCE OF STRENGTH
According to Federal Reserve policy, bank holding companies are
expected to act as a source of financial strength to each subsidiary bank and to
commit resources to support each such subsidiary. This support may be required
at times when a bank holding company may not be able to provide such support. In
the event of a loss suffered or anticipated by the FDIC, either as a result of
default of a banking subsidiary of Alabama Bancorp or related to FDIC assistance
provided to a subsidiary in danger of default, the banking subsidiaries of
Alabama Bancorp may be assessed for the FDIC's loss, subject to certain
exceptions.
Alabama Bancorp is regulated by the Federal Reserve. As state banking
corporations, Highland Bank and First Community Bank are subject to regulation
by the Alabama Banking Department and the FDIC. Periodic examinations of Alabama
Bancorp, Highland Bank and First Community Bank are performed by their
respective regulators to monitor their compliance with applicable rules and
regulations.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Highland Bank's and First Community Bank's directors and officers and
certain business organizations and individuals associated with them have been
customers and have had banking relationships with Highland Bank and First
Community Bank. EBSCO Industries, Inc., which is an affiliate of Alabama Bancorp
and its subsidiary banks through common ownership, has maintained certain
deposit arrangements with certain of its vendors at Highland Bank to facilitate
payment of its trade payables. Highland Bank's and First Community Bank's
directors and officers from time to time have borrowed funds from Highland Bank
and First Community Bank. The extensions of credit made by Highland Bank and
First Community Bank to its directors and officers (1) were made in the ordinary
course of business, (2) were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and (3) did not involve more than a normal risk
of collect ability or present other unfavorable features.
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<PAGE> 90
PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following tables set forth, as of the date of this Prospectus
Supplement/Proxy Statement, (1) certain information regarding those persons
known by Alabama Bancorp, Highland Bank and First Community Bank to be
beneficial owners of more than 5% of the outstanding shares of Alabama Bancorp
Common Stock, Highland Bank Common Stock and First Community Bank Common Stock,
respectively, and (2) the number and percentage of outstanding shares of Alabama
Bancorp Common Stock, Highland Bank Common Stock and First Community Bank Common
Stock beneficially owned by each director and executive officer of Alabama
Bancorp, Highland Bank and First Community Bank, respectively, and their
respective directors, executive officers and 5% shareholders as a group.
ALABAMA BANCORP
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY OF SHARES
BENEFICIAL OWNER POSITION OWNED OUTSTANDING
---------------- -------- ----- -----------
<S> <C> <C> <C>
Richard L. Bozzelli ............. Director (1) 34.50 0.17%
Dell S. Brooke
3204 Fernway Road
Birmingham, AL 36223 ............ Director (1), (2), (3) 3,684.25 17.71
Jane Comer
3152 Pine Ridge Road
Birmingham, AL 35213 ............ Shareholder (4) 2,931.25 14.09
Larry R. Mathews ................ President & Director (1) 34.50 0.17
Elton B. Stephens
3200 Fernway Road
Birmingham, AL 35225 ............ Chairman & Director (1), (2) 3,395.50 16.33
Elton B. Stephens, Jr ...........
3300 Westbury Road
Birmingham, AL 35223 ............ Director (1), (2), (5) 2,894.25 13.92
James T. Stephens
3710 Redmont Road
Birmingham, AL 35213 ............ Vice Chairman & Director (1), (2), (6) 5,772.25 27.76
All Directors, Executive Officers
and 5% Shareholders
as a group (seven persons) ................................................. 18,746.50 90.15
- -------------------
(1) Member of the Board of Directors of Alabama Bancorp.
(2) Elton B. Stephens and Dell S. Brooke are father and daughter. Elton B. Stephens and Jane Comer are father
and daughter. Elton B. Stephens and Elton B. Stephens, Jr. are father and son. Elton B. Stephens and James
T. Stephens are father and son.
(3) The amount shown includes 1,045 shares owned by Dell S. Brooke individually; 46 shares held in trust for the
benefit of Alyson Carter Brooke over which Dell S. Brooke is the trustee and has the power to vote; 83 shares
held in trust under an Indenture of Trust for the benefit of Alyson Carter Brooke over which Dell S. Brooke is
the custodian and trustee and has the power to vote; 46 shares held in trust for the benefit of Nelson O'Hara Brooke
over which Dell S. Brooke is the trustee and has the power to vote; 83 shares held in trust under an Indenture of
Trust for the benefit of Nelson O'Hara Brooke over which Dell S. Brooke is the custodian and trustee and has the power
to vote; 1,905 shares of 7,620 shares
</TABLE>
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<PAGE> 91
<TABLE>
<S> <C>
held by the Elton B. Stephens Charitable Lead Annuity Trust over which Dell S. Brooke is a trustee and has the power
to vote; and 476.25 shares held in the Elton B. Stephens, GST Trust for the benefit of Dell S. Brooke over which
Dell S. Brooke is the trustee and has the power to vote.
(4) The amount shown includes 550 shares owned by Jane Comer individually; 1,905 shares of 7,620 shares held by the Elton B.
Stephens Charitable Lead Annuity Trust over which Jane Comer is a trustee and has the power to vote; and 476.25 shares
held in the Elton B. Stephens, GST Trust for the benefit of Jane Comer over which Jane Comer is the trustee and has the
power to vote.
(5) The amount shown includes 430 shares owned by Elton B. Stephens, Jr. individually; 1,905 shares of 7,620 shares held
by the Elton B. Stephens Charitable Lead Annuity Trust over which Elton B. Stephens, Jr. is a trustee and has the power
to vote; 83 shares held in the Elton B. Stephens, GST Trust for the benefit of Dell S. Brooke over which
Elton B. Stephens, Jr. is trustee and has the power to vote; and 476.25 shares held in the Elton B. Stephens, GST Trust for
the benefit of Elton B. Stephens, Jr. over which Elton B. Stephens, Jr. is the trustee and has the power to vote.
(6) The amount shown includes 3,094 shares owned by James T. Stephens individually; 1,905 shares of 7,620 shares held by the
Elton B. Stephens Charitable Lead Annuity Trust over which James T. Stephens is a trustee and has the power to vote; 476.25
shares held in the Elton B. Stephens, GST Trust for the benefit of James T. Stephens over which James T. Stephens is the
trustee and has the power to vote; 214 shares held in trust for the benefit of Alys F. Stephens of which James T. Stephens is
trustee and has the power to vote; and 83 shares held in trust under an Indenture of Trust for the benefit of Alys Fay
Stephens over which James T. Stephens is custodian and trustee and has the power to vote.
</TABLE>
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<PAGE> 92
HIGHLAND BANK
<TABLE>
<CAPTION>
SHARES OF SHARES OF
PREFERRED STOCK COMMON STOCK PERCENTAGE OF
BENEFICIAL BENEFICIALLY BENEFICIALLY SHARES
OWNER POSITION OWNED(1) OWNED OUTSTANDING(2)
----- -------- ----- ----- -----------
<S> <C> <C> <C> <C>
Alabama Bancorp., Inc.
2211 Highland Avenue
Birmingham, AL 35205.................................. Shareholder (5) -- 1,870,455 87.69%
Virginia B. Austin.................................... Director (3) 2 484 0.02
Dell S. Brooke........................................ Director (3), (4), (5), (8) 2 3,934 0.18
David E. Dixon
2830 Cahaba Rd.
Birmingham, AL 35223.................................. Shareholder (3), (7) 2 4,000 0.18
William M. Foshee..................................... C.F.O. (6) -- 3,555 0.17
Thomas F. Hinton...................................... Director (3), (9) 2 1,000 0.05
Charles O. Huffstutler................................ Director (3) 2 605 0.03
C. Stuart Johnson..................................... Director (3) 2 3,750 0.18
L. Paul Kassouf....................................... Director (3), (10) 2 61,598 2.89
Larry R. Mathews...................................... President, C.E.O. & Director (3) 2 33,632 1.58
David R. Pittman...................................... Director (3), (11) 2 22,975 1.10
Wilmer S. Poynor...................................... Director (3) 2 4,573 0.21
Don H. Pruett......................................... E.V.P./Senior Lender (6) -- 10,418 0.49
Randy J. Smith........................................ Director (3) 2 484 0.02
Elton B. Stephens..................................... Chairman & Director (3), (4), (5) 2 8,010 0.38
Elton B. Stephens, Jr................................. Director (2), (4), (5), (12) 2 7,591 0.35
James T. Stephens..................................... Director (3), (4), (5), (13) 2 3,920 0.18
All Directors, Executive Officers
and 5% Shareholders as a Group
(17 Persons)..................................................................... 28 2,030,661 95.21
</TABLE>
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<PAGE> 93
- --------------------
(1) All shares of Highland Bank Preferred Stock will be redeemed by Highland
Bank prior to the Mergers.
(2) Based upon aggregate of outstanding shares of Highland Bank Common Stock
and Highland Bank Preferred Stock.
(3) Each director has purchased two shares of Highland Bank's Class A
Preferred Stock, par value $100 per share, which stock is non-voting and
not entitled to dividends. This stock is "director's stock," which is
purchased by directors to ensure compliance with Section 5-6A-1, Code of
Alabama (1975).
(4) Elton B. Stephens and Dell S. Brooke are father and daughter. Elton B.
Stephens and Elton B. Stephens, Jr. are father and son. Elton B. Stephens
and James T. Stephens are father and son.
(5) Elton B. Stephens, Dell S. Brooke, Elton B. Stephens, Jr., James T.
Stephens, their family members and affiliates collectively own or control
approximately 100% of the capital stock of Alabama Bancorp. Alabama
Bancorp also owns 87.69% of the Highland Bank Common Stock. Accordingly,
and pursuant to the provisions of the Depository Institution Management
Interlocks Act, set forth in 12 U.S.C.ss.3201 et seq., Alabama Bancorp,
its subsidiary banks and Highland Bank are "affiliates" for purposes of
determining management interlock and other issues established under such
Act.
(6) William M. Foshee has received options from Highland Bank to purchase
3,555 shares of Highland Bank Common Stock. Don H. Pruett has received
options from Highland Bank to purchase 6,768 shares of Highland Bank
Common Stock. The respective number and percentage of shares of Highland
Bank Common Stock reflected in the table as beneficially owned by Mr.
Foshee and Mr. Pruett include the shares of Highland Bank Common Stock
subject to these options.
(7) David E. Dixon submitted his resignation as a member of Highland Bank's
Board of Directors in January 1998.
(8) The number shown includes 1,320 shares owned by Dell S. Brooke
individually; 1,000 shares held in trust for the benefit of Alyson Carter
Brooke over which Dell S. Brooke is the trustee and has the power to vote;
1,000 shares held in trust for the benefit of Nelson O'Hara Brooke over
which Dell S. Brooke is the trustee and has the power to vote; 307 shares
held in trust under an Indenture of Trust for the benefit of Alyson Carter
Brooke over which F. Dixon Brooke, Jr., spouse of Dell S. Brooke, is
trustee and has the power to vote; 307 shares held in trust under an
Indenture of Trust for the benefit of Nelson O'Hara Brooke over which F.
Dixon Brooke, Jr., spouse of Dell S. Brooke, is trustee and has the power
to vote.
(9) The number shown includes 1,000 shares owned by Patricia G. Hinton, spouse
of Thomas F. Hinton, individually.
(10) The number shown includes 20,598 shares owned by L. Paul Kassouf
individually; 41,000 shares owned by Naomi H. Kassouf, spouse of L. Paul
Kassouf.
(11) The number shown includes 8,000 shares owned by Pittman & Associates,
Inc.; 2,452 shares owned by David R. Pittman, CLU, Inc.; 6,533 shares
owned by David R. Pittman, CLU, Inc., Pension Trust; 798 shares held in
trust for the benefit of Carlin Mallory Gray over which David R. Pittman
is the trustee and has the power to vote; 798 shares held in trust for the
benefit of Caroline Ivy Pittman over which David R. Pittman is the trustee
and has the power to vote; 798 shares held in trust for the benefit of
Lacey Denise Gray over which David R. Pittman is the trustee and has the
power to vote; 798 shares held in trust for the benefit of Leslie Meredith
Pittman over which David R. Pittman is the trustee and has the power to
vote; 798 shares held in trust for the benefit of Rand Pittman Mitchell
over which David R. Pittman is the trustee and has the power to vote;
1,000 shares held in trust for the benefit of Caroline Ivy Pittman over
which Dede H. Pittman, spouse of David R. Pittman, is trustee and has the
power to vote; 1,000 shares held in trust for the benefit of Leslie
Meredith Pittman over which Dede H. Pittman, spouse of David R. Pittman,
is trustee and has the power to vote.
(12) The number shown includes 2,484 shares owned by Elton B. Stephens, Jr.,
individually; 3,607 shares held in trust for the benefit of Elton B.
Stephens Educators Trust over which Elton B. Stephens, Jr. is trustee and
has the power to vote; 1,500 shares held in trust for the benefit of
Forrest Walter Stephens over which Elton B. Stephens, Jr. is trustee and
has the power to vote.
(13) The number includes 2,613 shares owned by James T. Stephens individually;
1,307 shares held in trust for the benefit of Alys Fay Stephens over which
James T. Stephens is trustee and has the power to vote.
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<PAGE> 94
FIRST COMMUNITY BANK
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY SHARES
BENEFICIAL OWNER POSITION OWNED OUTSTANDING
---------------- -------- ----- -----------
<S> <C> <C> <C>
Alabama Bancorp., Inc.
2211 Highland Avenue
Birmingham, AL 35205...................................... Stockholder 68,313 96.0000%
Danny Flowers............................................. President & Director (1) 718 0.0100
Beebe R. Frederick, Jr.................................... Director 40 0.0006
WM Henry Holson........................................... Director 40 0.0006
C. B. Haigler, Jr......................................... Director 40 0.0006
Larry R. Mathews.......................................... Director (1) 40 0.0006
Daisy G. Norman........................................... Director 50 0.0007
Elton B. Stephens......................................... Chairman & Director (1) 40 0.0006
J. W. Wimble.............................................. Director 54 0.0007
All Directors, Executive Officers and 5% Shareholders
as a group (nine persons)............................................................... 69,335 96.0100
</TABLE>
- --------------------
(1) Executive Officer and Director.
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COMPARISON OF RIGHTS OF SHAREHOLDERS
Alabama Bancorp Shareholders, whose rights are governed by the Alabama
Bancorp Articles, Alabama Bancorp Bylaws and the DGCL, will become BancorpSouth
Shareholders upon consummation of the Mergers. As such, the rights of the former
Alabama Bancorp Shareholders will be governed by the BancorpSouth Articles, the
BancorpSouth Bylaws and the MBCA.
Highland Bank Shareholders, whose rights are governed by the Highland
Bank Articles, Highland Bank Bylaws, ABCA and the ABC, and First Community Bank
Shareholders, whose rights are governed by the First Community Bank Articles,
First Community Bank Bylaws, ABCA and ABC, will become BancorpSouth Shareholders
upon consummation of the Mergers. As such, the rights of the former Highland
Bank Shareholders and First Community Bank Shareholders will be governed by the
BancorpSouth Articles, the BancorpSouth Bylaws and the MBCA.
While it is impractical to summarize all such differences, set forth
below are the material differences between the rights of Alabama Bancorp
Shareholders, Highland Bank Shareholders and First Community Bank Shareholders
under their governing documents and governing law and the rights of BancorpSouth
Shareholders under the BancorpSouth Articles, BancorpSouth Bylaws and the MBCA.
CHANGE OF CONTROL
Alabama Bancorp, Highland Bank and First Community Bank. The governing
documents of each of Alabama Bancorp, Highland Bank and First Community Bank do
not contain provisions relating to a change in control.
BancorpSouth. The BancorpSouth Articles contain several provisions
which make a change of control of BancorpSouth more difficult to accomplish
without the approval of the Board of Directors of BancorpSouth, including the
following:
1. The BancorpSouth Board is divided into three classes so that
approximately one-third of the directors will be subject to
reelection at each annual meeting of the shareholders of
BancorpSouth;
2. The BancorpSouth Bylaws provide that a vote of at least 80% of the
outstanding shares of BancorpSouth Common Stock is required to
increase the maximum number of members of the BancorpSouth Board
unless the BancorpSouth Board recommends such an increase;
3. The BancorpSouth Articles provide that the affirmative vote of the
holders of not less than 80% of the outstanding shares of voting
stock of BancorpSouth is required in the event that the BancorpSouth
Board does not recommend to BancorpSouth Shareholders a vote in
favor of a merger or consolidation of BancorpSouth with, or a sale
or lease of all or substantially all of the assets of BancorpSouth
to, any person or entity;
4. The affirmative vote of the holders of not less than 80% of the
outstanding shares of voting stock of BancorpSouth, as well as at
least 67% of the outstanding shares of voting stock of BancorpSouth
not held by a person owning or controlling 20% or more of
BancorpSouth's voting stock ("Controlling Person"), shall be
required for the approval of a merger, consolidation, or sale or
lease of all or substantially all of BancorpSouth's assets with or
to a Controlling Person, except in certain instances; and
5. BancorpSouth has implemented a shareholders' rights plan under which
a common stock purchase right ("BancorpSouth Right") attaches to and
trades with each share of BancorpSouth Common Stock. Upon the
occurrence of certain events, including the
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<PAGE> 96
acquisition of or tender for 20% or more of the outstanding shares
of BancorpSouth Common Stock by any person, then the holders of each
such purchase right (except those held by the acquiring person) will
be entitled to purchase a share of BancorpSouth Common Stock at 50%
of the then current market price.
BOARD OF DIRECTORS
Alabama Bancorp. The Alabama Bancorp Articles provide that the Alabama
Bancorp Board is to consist of three members. Any vacancy on the Alabama Bancorp
Board may be filled by a majority vote of the remaining directors. Directors of
Alabama Bancorp are not required to be Alabama Bancorp Shareholders.
Highland Bank. The Highland Bank Articles provide that the Highland
Bank Board is to consist of five to 11 members, as determined from time to time
by the Highland Bank Board. On the date of this Prospectus Supplement/Proxy
Statement, the Highland Bank Board consisted of ____ members.
First Community Bank. The First Community Bank Board is to consist of
five to eight members, each of whom is to own at least $200 of par value of
unencumbered shares of First Community Bank Common Stock. On the date of this
Prospectus Supplement/Proxy Statement the First Community Bank Board consisted
of seven members. Any vacancy arising from any cause is to be filled by a
majority vote of the remaining directors.
BancorpSouth. The BancorpSouth Board is to consist of nine to 24
members, as determined from time to time by the BancorpSouth Board, and on the
date of this Prospectus Supplement/Proxy Statement consisted of 11 members. The
vote of at least 80% of the outstanding shares of BancorpSouth Common Stock is
required to increase the maximum number of members of the BancorpSouth Board
unless the BancorpSouth Board recommends such an increase. Any vacancy arising
from a director's early retirement from the BancorpSouth Board or an increase in
the number of members of the BancorpSouth Board is to be filled by vote of the
shareholders of BancorpSouth. The members of the BancorpSouth Board are divided
into three classes, with the classes elected for staggered three-year terms.
Each director of BancorpSouth must own at least $200 of par value of
unencumbered shares of BancorpSouth Common Stock.
REMOVAL OF DIRECTORS
Alabama Bancorp. The Alabama Bancorp Bylaws provide that a director of
Alabama Bancorp may be removed by the affirmative vote of a majority of the
quorum present or represented by proxy at a special meeting called for the
purpose of such removal.
Highland Bank. The Highland Bank Bylaws provide that a director of
Highland Bank may be removed by the Highland Bank Shareholders with or without
cause.
First Community Bank. The First Community Bank Articles and First
Community Bank Bylaws do not address the removal of directors from the First
Community Bank Board.
BancorpSouth. The BancorpSouth Articles provide that a director of
BancorpSouth may be removed for cause by the affirmative vote of a majority of
the entire BancorpSouth Board, and may be removed by the BancorpSouth
Shareholders only for cause.
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<PAGE> 97
AUTHORIZED CAPITAL STOCK
<TABLE>
<CAPTION>
Par Value per
Authorized Shares Share
-------------------- -----------------
<S> <C> <C>
Alabama Bancorp ........................ 40,000 $ 0.25
Highland Bank:
Common Stock ................... 3,000,000 0.06
Preferred Stock ................ 50 100.00
First Community Bank ................... 80,000 5.00
BancorpSouth ........................... 500,000,000 2.50
</TABLE>
RIGHTS OF SHAREHOLDERS TO CALL SPECIAL MEETINGS
Alabama Bancorp. The Alabama Bancorp Bylaws provide that a special
meeting of the Alabama Bancorp Shareholders may be called, for any purpose, by
the President of Alabama Bancorp, and shall be called by the Chairman of the
Alabama Bancorp Board, the President or Secretary of Alabama Bancorp upon the
written request, stating the purpose for such special meeting, of a majority of
directors on the Alabama Bancorp Board or at the request of the holders of not
less than a majority of the total amount of Alabama Bancorp Common Stock issued,
outstanding and entitled to vote at such special meeting.
Highland Bank. The Highland Bank Bylaws provide that special meetings
of the Highland Bank Shareholders may be called by the Chairman of the Highland
Bank Board, the President of Highland Bank, the Highland Bank Board or by the
holders of not less than 10% of the outstanding shares of Highland Bank Common
Stock entitled to vote at such meeting.
First Community Bank. The First Community Bank Bylaws provide that
special meetings of the First Community Bank Shareholders may be called by the
President of First Community Bank, by direction of the First Community Bank
Board, at any time the First Community Bank Board deems that such meeting is in
the best interests of First Community Bank.
BancorpSouth. The BancorpSouth Articles provide that a special meeting
of the BancorpSouth Shareholders may be called by the Chief Executive Officer or
Secretary of BancorpSouth, or by the holders of not less than a majority of the
shares of BancorpSouth Common Stock entitled to vote at such meeting.
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<PAGE> 98
WHERE YOU CAN FIND MORE INFORMATION
BancorpSouth has filed with the SEC under the Securities Act a
Registration Statement on Form S-4 and a Post-Effective Amendment No. 2 thereto
that registers the distribution to Alabama Bancorp Shareholders, Highland Bank
Shareholders and First Community Bank Shareholders of the shares of BancorpSouth
Common Stock to be issued in connection with the Mergers (collectively, the
"Registration Statement"). The Registration Statement, including the attached
exhibits and schedules, contain additional relevant information about
BancorpSouth, Alabama Bancorp, Highland Bank, First Community Bank and the
BancorpSouth Common Stock. The rules and regulations of the SEC allow the
companies to omit certain information included in the Registration Statement
from this Prospectus Supplement/Proxy Statement.
In addition, BancorpSouth files reports, proxy statements and other
information with the SEC under the Exchange Act. You may read and copy this
information at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. You may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, like
BancorpSouth, who file electronically with the SEC. The address of that site is
http://www.sec.gov.
You can also inspect reports, proxy statements and other information
about BancorpSouth at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
The SEC allows BancorpSouth to "incorporate by reference" information
into this Prospectus Supplement/Proxy Statement from documents that BancorpSouth
has previously filed with the SEC. This means that the companies can disclose
important information to you by referring you to another document filed
separately with the SEC. These documents contain important information about the
company and its financial condition. The information incorporated by reference
is considered to be a part of this Prospectus Supplement/Proxy Statement, except
for any information that is superseded by other information that is set forth
directly in this document.
This Prospectus Supplement/Proxy Statement incorporates by reference
the following documents with respect to BancorpSouth:
1. BancorpSouth's Annual Report on Form 10-K for the year ended
December 31, 1997;
2. BancorpSouth's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998;
3. BancorpSouth's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998;
4. BancorpSouth's Current Report on Form 8-K dated May 18, 1998;
5. BancorpSouth's Current Report on Form 8-K dated July 10, 1998;
6. BancorpSouth's Current Report on Form 8-K dated September 3, 1998;
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<PAGE> 99
7. The description of BancorpSouth Common Stock contained in
BancorpSouth's Registration Statement on Form 8-A dated May 14,
1997; and
8. The description of BancorpSouth Rights contained in BancorpSouth's
Registration Statement on Form 8-A dated May 14, 1997.
BancorpSouth incorporates by reference additional documents that
BancorpSouth may file with the SEC between the date of this Prospectus
Supplement/Proxy Statement and the date of the Alabama Bancorp Special Meeting,
Highland Bank Special Meeting and First Community Bank Special Meeting. These
documents include periodic reports, such as Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy
statements.
BancorpSouth has supplied all information contained or incorporated by
reference in this Prospectus Supplement/Proxy Statement relating to
BancorpSouth, as well as all pro forma financial information.
You can obtain copies of the documents incorporated by reference in
this Prospectus Supplement/Proxy Statement with respect to BancorpSouth without
charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference as an exhibit in this Prospectus
Supplement/Proxy Statement, by requesting them in writing or by telephone from
BancorpSouth at the following:
BancorpSouth, Inc.
One Mississippi Plaza
Tupelo, Mississippi 38801
(601) 680-2000
Attention: Secretary
You should rely only on the information contained in or incorporated by
reference in this Prospectus Supplement/Proxy Statement in considering how to
vote your shares at the Alabama Bancorp Special Meeting, Highland Bank Special
Meeting and First Community Bank Special Meeting. Neither BancorpSouth nor
Alabama Bancorp, Highland Bank or First Community Bank has authorized anyone to
provide you with information that is different from the information in this
document. This Prospectus Supplement/Proxy Statement is dated _______________,
1998. You should not assume that the information contained in this document is
accurate as of any date other than that date. Neither the mailing of this
Prospectus Supplement/Proxy Statement nor the issuance of BancorpSouth Common
Stock in the Mergers shall create any implication to the contrary.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This Prospectus Supplement/Proxy Statement contains certain
forward-looking statements about the financial condition, results of operations
and business of BancorpSouth, Alabama Bancorp, Highland Bank and First Community
Bank and about the combined companies following the Mergers. These statements
concern the cost savings, revenue enhancements and other advantages the
companies expect to obtain from the Mergers, the anticipated impact of the
Mergers on BancorpSouth's financial performance and earnings estimates for the
combined company. These statements appear in several sections of this Prospectus
Supplement/Proxy Statement, including "SUMMARY," "THE MERGERS -- Reasons for the
Mergers" and "THE MERGERS -- Fairness Opinion." Also, the forward-looking
statements generally include any of the words "believes," "expects,"
"anticipates," "intends," "estimates," "plans" or similar expressions.
Forward-looking statements are not guarantees of future performance.
They involve risks, uncertainties and assumptions. The future results and
shareholder values of BancorpSouth, Alabama Bancorp, Highland Bank and First
Community Bank, and of the combined companies, may differ materially from those
expressed in these forward-looking statements. Many of the factors that could
influence or determine actual results are unpredictable and not within the
control of
96
<PAGE> 100
BancorpSouth, Alabama Bancorp, Highland Bank or First Community Bank. In
addition, neither BancorpSouth nor Alabama Bancorp, Highland Bank nor First
Community Bank intend to, nor are they obligated to, update these
forward-looking statements after this Prospectus Supplement/Proxy Statement is
distributed, even if new information, future events or other circumstances have
made them incorrect or misleading as of any future date. For all of these
statements, BancorpSouth claims the protection of the safe harbor for
forward-looking statements provided in the Private Securities Litigation Reform
Act of 1995.
Factors that may cause actual results to differ materially from those
contemplated by these forward-looking statements include, among others, the
following possibilities:
1. Cost savings the companies expect from the Mergers might not be
fully realized or realized within the time frame the companies
anticipate;
2. Revenues following the Mergers may be lower than expected;
3. Loss of deposits, customers or revenues following the Mergers may be
greater than anticipated;
4. Competitive pressure among financial services providers in the
mid-south region of the United States or in the financial services
industry generally may increase significantly;
5. Costs or difficulties related to regulatory requirements involved in
combining the companies, including the subsidiary banks, may be
greater than expected;
6. Interest rates may change in such a way as to reduce the companies'
margins;
7. General economic or monetary conditions, either nationally or
regionally, may be less favorable than expected, resulting in a
deterioration in credit quality or a diminished demand for the
companies' services and products;
8. Changes in laws or government rules, or the way in which courts
interpret these laws or rules, may adversely affect the companies'
businesses; and
9. Business conditions, inflation or securities markets may undergo
significant change.
LEGAL MATTERS
The validity of the shares of BancorpSouth Common Stock to be issued in
the Mergers will be passed upon by Waller Lansden Dortch & Davis, A Professional
Limited Liability Company, Nashville, Tennessee, special counsel to
BancorpSouth. Certain matters concerning the Mergers will be passed upon on
behalf of BancorpSouth by Riley, Ford, Caldwell & Cork, P.A., Tupelo,
Mississippi. Certain legal matters concerning the Mergers will be passed upon on
behalf of Alabama Bancorp, Highland Bank and First Community Bank by Bradley
Arant Rose & White LLP, Birmingham, Alabama, special counsel to such companies.
EXPERTS
The Consolidated Financial Statements of BancorpSouth as of December
31, 1997 and 1996, and for each of the years in the three-year period ended
December 31, 1997, have been incorporated by reference in this Prospectus
Supplement/Proxy Statement and in the Registration Statement in reliance upon
the report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of such firm as experts
in accounting and auditing.
The Consolidated Financial Statements of Alabama Bancorp at December
31, 1997 and 1996 and for each of the two years in the period ended December 31,
1997, included in this Prospectus Supplement/Proxy Statement and Registration
Statement, have been audited by Ernst & Young
97
<PAGE> 101
LLP, independent auditors, as set forth in their report appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
The Consolidated Statements of Income, Stockholders' Equity and Cash
Flows of Alabama Bancorp and subsidiaries for the year ended December 31, 1995
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said report.
98
<PAGE> 102
ALABAMA BANCORP., INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
Contents
<TABLE>
<S> <C>
Report of Independent Auditors.......................................F-2
Report of Independent Auditors.......................................F-3
Audited Financial Statements
Consolidated Statements of Condition.................................F-4
Consolidated Statements of Income....................................F-6
Consolidated Statements of Stockholders' Equity......................F-7
Consolidated Statements of Cash Flows ...............................F-8
Notes to Consolidated Financial Statements...........................F-10
Other Financial Information
Schedule 1: First Community Bank of The South
Statements of Condition...........................................F-27
Statements of Income..............................................F-28
Schedule 2: Highland Bank
Statements of Condition...........................................F-30
Statements of Income..............................................F-32
</TABLE>
F-1
<PAGE> 103
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Alabama Bancorp., Inc. and Subsidiaries
We have audited the accompanying consolidated statements of condition of Alabama
Bancorp., Inc. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Alabama Bancorp.,
Inc. and subsidiaries at December 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the
consolidated financial statements taken as a whole. The information contained in
Schedules 1 and 2 is presented for purposes of additional analysis and is not a
required part of the consolidated financial statements. Such information has
been subjected to the auditing procedures applied in our audit of the
consolidated financial statements and, in our opinion, is fairly stated in all
material respects in relation to the consolidated financial statements taken as
a whole.
/s/ Ernst & Young LLP
Birmingham, Alabama
March 25, 1998
F-2
<PAGE> 104
Report of Independent Public Accountants
To Alabama Bancorp., Inc. and Subsidiaries:
We have audited the accompanying consolidated statements of income,
stockholders' equity, and cash flows of Alabama Bancorp., Inc. and Subsidiaries
for the year ended December 31, 1995. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the 1995 financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Alabama
Bancorp., Inc. and subsidiaries for the year ended December 31, 1995 in
conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the
consolidated statements of income, stockholders' equity, and cash flows taken
as a whole. The information contained in Schedules 1 and 2 is presented for
purposes of additional analysis and is not a required part of the consolidated
financial statements. Such information has been subjected to the auditing
procedures applied in our audit of the consolidated financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
consolidated statements of income, stockholders' equity, and cash flows taken
as a whole.
/s/ ARTHUR ANDERSEN LLP
Birmingham, Alabama
March 14, 1996
F-3
<PAGE> 105
ALABAMA BANCORP., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1996
------------------------------
ASSETS
<S> <C> <C>
Cash and due from banks ........................................ $ 11,550,000 $ 10,398,000
Federal funds sold ............................................. 10,718,000 1,420,000
Interest bearing deposits with other banks ..................... -- 20,000
Available-for-sale securities .................................. 36,127,000 40,916,000
Investment securities (fair value of $36,525,000 and
$27,130,000, respectively) ................................... 36,912,000 27,770,000
Loans .......................................................... 176,864,000 158,032,000
Less:
Unearned income ....................................... 19,000 68,000
Allowance for loan losses ............................. 1,519,000 1,549,000
------------ ------------
Net loans ...................................................... 175,326,000 156,415,000
------------ ------------
FHLB stock ..................................................... 916,000 756,000
Premises and equipment, net .................................... 6,383,000 6,633,000
Excess of cost over net assets of subsidiaries
acquired.................................................... 1,238,000 1,311,000
Accrued interest receivable .................................... 2,068,000 1,908,000
Other assets ................................................... 412,000 406,000
Other real estate .............................................. 559,000 154,000
------------ ------------
Total assets ................................................... $282,209,000 $248,107,000
============ ============
</TABLE>
F-4
<PAGE> 106
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1996
------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand:
Noninterest bearing ................................... $ 37,931,000 $ 31,806,000
Interest bearing ...................................... 81,269,000 71,522,000
Savings deposits ............................................... 12,568,000 12,565,000
Certificates of deposit $100,000 and over ...................... 26,403,000 18,575,000
Other time deposits ............................................ 89,879,000 89,694,000
------------ ------------
Total deposits ................................................. 248,050,000 224,162,000
Federal funds purchased ........................................ -- 178,000
FHLB Advance ................................................... 9,000,000 --
Other borrowed funds ........................................... 1,614,000 1,308,000
Notes payable .................................................. 2,183,000 2,425,000
Accrued expenses and other liabilities ......................... 1,597,000 2,135,000
------------ ------------
Total liabilities .............................................. 262,444,000 230,208,000
------------ ------------
Minority interest in subsidiary banks .......................... 2,115,000 1,890,000
------------ ------------
Stockholders' equity:
Common stock, $.25 par value, 40,000 shares
authorized, 20,799 issued and outstanding ................... 5,000 5,000
Surplus ........................................................ 6,927,000 6,927,000
Retained earnings .............................................. 10,190,000 8,885,000
Unrealized gain on available-for-sale securities ............... 528,000 192,000
------------ ------------
Total stockholders' equity ..................................... 17,650,000 16,009,000
------------ ------------
Total liabilities and stockholders' equity ..................... $282,209,000 $248,107,000
============ ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 107
ALABAMA BANCORP., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1997 1996 1995
---------------------------------------------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans ........................ $14,339,000 $13,043,000 $11,928,000
Interest on securities:
Taxable interest income .................. 3,838,000 4,110,000 4,214,000
Tax exempt interest income ............... 333,000 442,000 617,000
Interest on federal funds sold and other interest
earning assets .................................. 291,000 375,000 665,000
----------- ----------- -----------
Total interest income ............................. 18,801,000 17,970,000 17,424,000
----------- ----------- -----------
Interest expense:
Interest on deposits .............................. 9,343,000 9,306,000 9,449,000
Interest on borrowed funds ........................ 470,000 205,000 206,000
----------- ----------- -----------
Total interest expense ............................ 9,813,000 9,511,000 9,655,000
----------- ----------- -----------
Net interest income ............................... 8,988,000 8,459,000 7,769,000
Provision for loan losses ......................... 179,000 401,000 72,000
----------- ----------- -----------
Net interest income after provision for loan losses 8,809,000 8,058,000 7,697,000
----------- ----------- -----------
Noninterest income:
Service charges on deposits ....................... 1,265,000 1,291,000 1,108,000
Net securities gains .............................. 13,000 17,000 79,000
Other ............................................. 668,000 544,000 548,000
----------- ----------- -----------
Total noninterest income .......................... 1,946,000 1,852,000 1,735,000
----------- ----------- -----------
Noninterest expense:
Salaries and employee benefits .................... 4,063,000 3,465,000 3,140,000
Net occupancy expense ............................. 1,212,000 1,138,000 946,000
FDIC insurance expense ............................ 22,000 5,000 233,000
Minority interest in net income of consolidated
subsidiaries .................................... 225,000 278,000 256,000
Other ............................................. 2,341,000 2,178,000 2,307,000
----------- ----------- -----------
Total noninterest expense ......................... 7,863,000 7,064,000 6,882,000
----------- ----------- -----------
Income before income taxes ........................ 2,892,000 2,846,000 2,550,000
Applicable income taxes ........................... 1,042,000 1,020,000 622,000
=========== =========== ===========
Net income ........................................ $ 1,850,000 $ 1,826,000 $ 1,928,000
=========== =========== ===========
Net income per share .............................. $ 88.95 $ 87.79 $ 92.70
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 108
ALABAMA BANCORP., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the Years Ended December 31,
1997, 1996 and 1995
--------------------------------
Unrealized
Gain (Loss)
on
Available-
Common for-sale Retained Stockholders'
Stock Surplus Securities Earnings Equity
----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 ........ $ 5,000 $ 6,927,000 $(1,000,000) $ 6,223,000 $ 12,155,000
Unrealized gain on
securities due to
reclassification from
investment to
available-for-sale, net
of income tax effect of
$177,000 ...................... 271,000 271,000
Change in unrealized loss on
available-for-sale
securities, net of
income tax effect of
$641,000 ...................... 1,245,000 1,245,000
Net income ........................ 1,928,000 1,928,000
Dividends declared and paid........ (546,000) (546,000)
----------- ----------- ----------- ------------- ------------
Balance, December 31, 1995........ $ 5,000 $ 6,927,000 $ 516,000 $ 7,605,000 $ 15,053,000
Change in unrealized loss on
available-for-sale
securities, net of
income tax effect of
$(167,000) .................... (324,000) (324,000)
Net income ........................ 1,826,000 1,826,000
Dividends declared and paid ....... (546,000) (546,000)
Balance, December 31, 1996.........
----------- ----------- ----------- ------------- ------------
5,000 $ 6,927,000 192,000 8,885,000 16,009,000
Change in unrealized gain
on available for-sale
securities, net of
income tax effect of
$204,000 ...................... 336,000 336,000
Net income ........................ 1,850,000 1,850,000
Dividends declared and paid........ (545,000) (545,000)
----------- ----------- ----------- ------------ ------------
Balance, December 31,
1997 ........................... $ 5,000 $ 6,927,000 $ 528,000 $ 10,190,000 $ 17,650,000
=========== =========== =========== ============ ============
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 109
ALABAMA BANCORP., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1997 1996 1995
--------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ....................................... $ 1,850,000 $ 1,826,000 $ 1,928,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ................................. 672,000 616,000 485,000
Provisions for loan losses ................... 179,000 401,000 72,000
Net amortization on securities ............... 171,000 38,000 48,000
Realized securities gains .................... (13,000) (17,000) (79,000)
Provision for deferred income taxes .......... (14,000) -- 12,000
Loss on sale of premises and equipment, net... 10,000 9,000 --
Loss on sale of other real estate ............ 27,000 --
Amortization of intangibles .................. 73,000 74,000 73,000
Minority interest in net income of
consolidated subsidiaries ................. 225,000 278,000 256,000
(Increase) decrease in other assets .......... (6,000) (455,000) 296,000
Increase in accrued interest receivable ...... (160,000) (31,000) (374,000)
Decrease in accrued expenses and other
liabilities ............................... (729,000) (554,000) (103,000)
------------ ------------ ------------
Net cash provided by operating activities ........ 2,285,000 2,185,000 2,614,000
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of available for sale
securities ................................... 7,206,000 38,255,000 32,129,000
Proceeds from maturities of investment securities. 2,446,000 825,000 --
Proceeds from maturity of available for sale
securities ................................... 4,930,000 5,596,000 10,177,000
Purchase of available for sale securities ........ (7,055,000) (28,444,000) (49,518,000)
Purchase of investment securities ................ (11,657,000) -- (5,152,000)
Net loan originations ............................ (19,661,000) (14,703,000) (18,666,000)
Decrease (increase) in interest-bearing deposits
with other banks ............................. 20,000 172,000 (192,000)
Capital expenditures ............................. (451,000) (1,226,000) (609,000)
Proceeds from sale of premises and equipment...... 19,000 224,000 --
Proceeds from sale of other real estate .......... 139,000 -- 10,000
------------ ------------ ------------
Net cash (used) provided by investing activities .
(24,064,000) 699,000 (31,821,000)
------------ ------------ ------------
</TABLE>
F-8
<PAGE> 110
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1997 1996 1995
--------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand and savings deposits ...... $ 15,875,000 $ 2,590,000 $ 18,871,000
Net increase (decrease) in certificates of deposit
$100,000 and over ............................ 7,828,000 (5,075,000) (2,363,000)
Net increase (decrease) in other time deposits ... 185,000 (1,916,000) 9,597,000
Net repayment of federal funds ................... (178,000) (332,000) (340,000)
Net increase in FHLB advance ..................... 9,000,000 --
Net increase in other borrowed funds ............. 306,000 1,308,000 --
Proceeds from long-term debt ..................... -- 265,000 --
Repayment of long-term debt ...................... (242,000) (507,000) --
Cash dividends ................................... (545,000) (546,000) (546,000)
------------ ------------ ------------
Net cash provided (used) by financing activities . 32,229,000 (4,213,000) 25,219,000
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents................................... 10,450,000 (1,329,000) (3,988,000)
Cash and cash equivalents at beginning of year ... 11,818,000 13,147,000 17,135,000
------------ ------------ ------------
Cash and cash equivalents at end of year ......... $ 22,268,000 $ 11,818,000 $ 13,147,000
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE> 111
ALABAMA BANCORP., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Alabama Bancorp and its subsidiaries
(the "Company") conform with generally accepted accounting principles and with
general financial services industry practices. The Company provides a full range
of banking and bank related services to individual and corporate customers
through its subsidiaries located in Alabama. The Company is subject to the
regulations of certain government agencies and undergoes periodic examinations
by those regulatory authorities.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Alabama Bancorp
and its subsidiary banks: First Community Bank of The South, Fort Deposit,
Alabama; and Highland Bank, Birmingham, Alabama. Significant intercompany
balances and transactions have been eliminated in consolidation.
At December 31, 1997, Alabama Bancorp's ownership percentages are as follows:
<TABLE>
<S> <C>
First Community Bank of The South.................. 95.70%
Highland Bank...................................... 87.69%
</TABLE>
During the year ended December 31, 1996, The Citizens Bank of Leeds, a majority
owned subsidiary of the Parent, was merged with and into Highland Bank, another
majority owned subsidiary of the Parent. The merger was accounted for in a
manner similar to a pooling of interests as the entities were under common
control, and as such the assets and liabilities of the former subsidiary were
transferred at book value. The results of operations reflect the activities of
the former subsidiaries as if they had always been merged.
Certain amounts in the prior year financial statements have been reclassified to
conform to the current year presentation.
USE OF ESTIMATES IN FINANCIAL STATEMENTS
In preparing financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of the
statement of condition dates and revenues and expenses for the periods shown.
Actual results could differ from the estimates and assumptions used in the
consolidated financial statements.
SECURITIES
The Company adopted the provisions of the Statement of Financial Accounting
Standards ("SFAS") No. 115, Accounting for Certain Investments in Debt and
Equity Securities, effective January 1, 1994. Accordingly, the Company's
policies for investments in debt and equity securities are as follows:
Securities classified as trading are intended to be sold in the near term.
Trading securities are carried at fair value and unrealized gains and losses are
included in earnings. The Company had no securities classified as trading at
December 31, 1997 or December 31, 1996. Securities classified as investment are
carried at amortized cost, as the Company has the ability and positive intent to
hold
F-10
<PAGE> 112
these securities to maturity. All securities not considered investment or part
of the trading portfolio have been designated as available-for-sale and are
carried at fair value. The unrealized difference between amortized cost and fair
value on available-for-sale securities is excluded from earnings and is reported
net of deferred taxes as a component of stockholders' equity. This caption
includes securities that management intends to use as part of its
asset/liability management strategy; or alternatively may be sold in response to
changes in interest rates, changes in prepayment risk, liquidity needs or for
other purposes (see Note 4).
Amortization of premium and accretion of discount are computed using a method
that approximates the interest method. The adjusted cost of the specific
security sold is used to compute gain or loss on the sale of securities.
LOANS
Loans are stated at the amount of unpaid principal, reduced by unearned income
and an allowance for loan losses. Interest income with respect to loans is
accrued on the principal amount outstanding, except for interest on certain
consumer loans which is recognized over the terms of the loan using a method
which approximates the level yield method. Accrual of interest is discontinued
on a loan when management believes, after considering economic and business
conditions and collection efforts, that the borrower's financial condition is
such that collection is doubtful. The net amount of nonrefundable loan fees and
direct costs of loan originations are deferred and amortized to interest income
over the lives of the loans using a method that approximates the level-yield
method.
During 1995, management adopted the provisions of SFAS No. 114, Accounting by
Creditors for Impairment of a Loan, and SFAS No. 118, Accounting by Creditors
for Impairment of a Loan--Income Recognition and Disclosures. These standards
require that impaired loans be valued based on the present value of the loans'
estimated cash flows at each loan's effective interest rate, the fair value of
the loan itself, or the fair value of the underlying collateral (see Note 5).
Initial adoption of SFAS Nos. 114 and 118 had no material impact on financial
condition or results of operations.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained through provisions for loan losses
charged to expense at levels that management estimates will be adequate to
absorb losses inherent in the existing loan portfolio. These estimates take into
consideration such factors as changes in the nature and volume of the loan
portfolio, overall portfolio quality, review of specific loan problems and
current economic conditions that may affect the borrower's ability to pay. Loans
deemed uncollectible are charged to the allowance, while provisions for loan
losses and recoveries on loans previously charged off are added to the
allowance. Ultimate losses may vary from those estimates; adjustments, as
necessary, are made through the provision for loan losses in the period they
become known.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation and amortization are computed utilizing both the straight-line and
accelerated methods for financial statement and tax purposes. The estimated
useful lives in computing the depreciation and amortization are as follows:
<TABLE>
<S> <C>
Premises........................................... 5-40 years
Equipment.......................................... 3-20 years
</TABLE>
F-11
<PAGE> 113
Expenditures for maintenance and repairs are charged to operations as incurred;
expenditures for renewals and improvements are capitalized and written off
through depreciation and amortization charges. Premises and equipment retired or
sold are removed from the asset and related accumulated depreciation accounts
and any resulting profit or loss is reflected in the consolidated statements of
income.
In 1996, the Company adopted SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. The
accounting for long-lived assets that are expected to be disposed of is also
addressed by Statement 121. The initial adoption of Statement 121 had no
material impact on the Company's financial condition or results of operations.
EXCESS OF COST OVER NET ASSETS OF SUBSIDIARIES ACQUIRED
The excess of cost over net assets of subsidiaries acquired includes both
goodwill and core deposit premium. Goodwill is being amortized over a 40-year
period using the straight-line method for acquisitions prior to January 1, 1994
and over a 15-year period using the straight-line method for more recent
acquisitions. Core deposit premium is being amortized over a 15-year period. The
accumulated amortization at December 31, 1997 and 1996 was approximately
$681,000 and 608,000, respectively.
OTHER REAL ESTATE
Other real estate includes foreclosed properties, acquired through partial or
total satisfaction of loans. Such properties are carried at the lower of the
recorded investment in the loan or fair value of the foreclosed properties less
estimated selling costs. The recorded investment is the sum of the outstanding
principal loan balance plus any accrued interest which has not been received,
and acquisition costs associated with the property. Any excess of the recorded
investment over the fair value of the property received at the time of
foreclosure is charged to the allowance for loan losses. Subsequent declines in
values are provided for through charges against other noninterest expense.
Revenues and expenses associated with operating or disposing of foreclosed
properties are recorded during the period in which they are incurred.
INCOME TAXES
The consolidated financial statements are prepared on the accrual basis.
Temporary differences occur when income and expenses are recognized in different
periods for financial reporting purposes and for purposes of computing income
taxes currently payable. Deferred taxes are provided as a result of such
temporary differences.
STATEMENT OF CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents include cash and
due from banks and federal funds sold. Generally, federal funds are purchased
and sold for one-day periods.
Cash payments for interest during 1997, 1996 and 1995 were $9,687,000,
$9,705,000 and $9,408,000, respectively. Gross cash payments for income taxes
were $1,196,000, $892,000 and $838,000 in 1997, 1996 and 1995, respectively.
Non-cash transactions included refinancings of other real estate of $221,000
during 1995.
F-12
<PAGE> 114
2. RESTRICTIONS ON CASH AND DUE FROM BANKS
Alabama Bancorp's subsidiary banks are required to maintain reserve balances
with the Federal Reserve Bank. The average amount of the reserve balances
maintained for the years ended December 31, 1997 and 1996 were approximately
$1,262,000 and $442,000, respectively.
3. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's estimates of fair values of financial instruments and valuation
methods and assumptions are provided in accordance with the requirements of SFAS
No. 107, Disclosures About Fair Value of Financial Instruments. In cases where
quoted market prices are not available, fair values have been estimated using
present values of future cash flows. This method is highly sensitive to the
assumptions used, such as those concerning appropriate discount rates and
estimates of future cash flows. In that regard, estimates presented herein are
not necessarily indicative of the amounts the Company could realize in a current
settlement of the underlying financial instruments, and they are not intended to
represent a measure of the underlying value of the Company.
CASH AND DUE FROM BANKS, FEDERAL FUNDS SOLD AND INTEREST BEARING DEPOSITS WITH
OTHER BANKS
The carrying amounts are considered to be reasonable estimates of fair values as
of December 31, 1997 and 1996.
SECURITIES
Fair value is determined based on quoted market prices where available. If not
available, fair values are based on market prices of comparable instruments. As
of December 31, 1997 and 1996, the carrying amounts of securities exceeded the
fair values by approximately $387,000 and $640,000, respectively. The carrying
amounts of accrued interest on securities approximate fair values as of December
31, 1997 and 1996.
LOANS
For loans with rates that are repriced in coordination with movements in market
interest rates and which have undergone no significant change in credit risk,
fair value is considered to approximate carrying value. The fair value of other
loans by loan category (real estate, commercial, installment, etc.) is estimated
by discounting the future cash flows using current interest rates at which loans
with similar terms would be made to borrowers with similar credit ratings. As of
December 31, 1997 and 1996, the fair values of loans exceeded the carrying
amounts by approximately $1,122,000 and $137,000, respectively. The carrying
amounts of accrued interest on loans approximate fair values as of December 31,
1997 and 1996.
DEPOSITS
The fair value of deposit liabilities with no stated maturity is considered to
be the amount payable on demand (i.e., carrying value) as of December 31, 1997
and 1996. The fair value of fixed maturity deposits (i.e., certificates of
deposit) is estimated by discounting the future cash flows at the current rate
and the accompanying maturity term currently chosen by the majority of these
deposit customers. The fair values of these deposits exceeded the carrying
amounts by approximately
F-13
<PAGE> 115
$266,000 and $491,000 as of December 31, 1997 and 1996, respectively. The
carrying amounts of accrued interest payable on deposits approximate fair values
as of December 31, 1997 and 1996.
The economic value attributable to the long-term relationship with depositors
who provide low-cost funds to the Company is considered to be a separate,
intangible asset and is excluded from both the presentation above and the
consolidated statements of condition.
FEDERAL FUNDS PURCHASED AND OTHER BORROWED FUNDS
The carrying amounts are considered to be reasonable estimates of fair values as
of December 31, 1997 and 1996.
NOTES PAYABLE
Notes payable have rates that are priced in coordination with movements in
market rates. As such, the carrying amounts of notes payable are considered to
be reasonable estimates of fair values as of December 31, 1997 and 1996. The
carrying amounts of accrued interest payable on notes payable approximate fair
values as of December 31, 1997 and 1996.
OFF-BALANCE-SHEET INSTRUMENTS
Off-balance-sheet financial instruments include commitments to extend credit and
standby letters of credit. The fair value of such instruments is estimated based
on fees currently charged for similar arrangements in the market place, adjusted
for changes in terms and credit risk as appropriate. As a result of management's
evaluation of terms and credit risk, the fair value of these financial
instruments was not considered to be significant as of December 31, 1997 and
1996.
4. SECURITIES
The amortized cost and fair value of available-for-sale securities and gross
unrealized gains and gross unrealized losses are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
-------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Mortgage-backed securities......... $ 3,574,000 $ 58,000 $ -- $ 3,632,000
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies...... 28,028,000 191,000 (61,000) 28,158,000
Obligations of states and
political subdivisions......... 3,424,000 54,000 -- 3,478,000
Equity securities.................. 250,000 609,000 -- 859,000
-------------- ---------- -------- ------------
Totals............................. $ 35,276,000 $ 912,000 $(61,000) $ 36,127,000
</TABLE>
F-14
<PAGE> 116
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
----------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Mortgage-backed securities ........ $ 5,290,000 $ 36,000 $ (20,000) $ 5,306,000
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies...... 33,283,000 96,000 (225,000) 33,154,000
Obligations of states and political
subdivisions .................. 1,789,000 35,000 (1,000) 1,823,000
Equity securities ................. 244,000 389,000 -- 633,000
----------- --------- ------------ -----------
Totals ............................ $40,606,000 $ 556,000 $ (246,000) $40,916,000
=========== ========= ============ ===========
</TABLE>
The amortized cost and fair value of available-for-sale securities (excluding
equity securities) at December 31, 1997 and 1996, by contractual maturity are
shown below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or repay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
---------------------------- ----------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Due in one year or less ........ $ 802,000 $ 804,000 $ 523,000 $ 524,000
Due after one year through five
years ...................... 21,684,000 21,779,000 23,409,000 23,391,000
Due after five years through ten
years ...................... 5,116,000 5,158,000 6,110,000 6,071,000
Due after ten years ............ 7,424,000 7,527,000 10,320,000 10,297,000
----------- ----------- ----------- -----------
Totals ......................... $35,026,000 $35,268,000 $40,362,000 $40,283,000
=========== =========== =========== ===========
</TABLE>
Proceeds from sales of available-for-sale securities were $7,206,000 and
$38,255,000 during 1997 and 1996, respectively. Gross gains of $37,000 and
$304,000 and gross losses of $24,000 and $287,000 were realized on the sale of
available-for-sale securities during 1997 and 1996, respectively.
F-15
<PAGE> 117
The amortized cost and fair value of investment securities and gross unrealized
gains and gross unrealized losses are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Mortgage-backed securities ....... $25,775,000 $ 21,000 $ (549,000) $25,247,000
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies..... 3,409,000 30,000 (15,000) 3,424,000
Obligations of states and
political subdivisions ....... 7,728,000 137,000 (11,000) 7,854,000
----------- --------- ----------- -----------
Totals ........................... $36,912,000 $ 188,000 $ (575,000) $36,525,000
=========== ========= =========== ===========
<CAPTION>
DECEMBER 31, 1996
--------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Mortgage-backed securities ....... $20,707,000 $ 24,000 $ (642,000) $20,089,000
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies..... 998,000 -- (28,000) 970,000
Obligations of states and political
subdivisions ................. 6,065,000 70,000 (64,000) 6,071,000
----------- --------- ----------- -----------
Totals ........................... $27,770,000 $ 94,000 $ (734,000) $27,130,000
=========== ========= =========== ===========
</TABLE>
At December 31, 1997 and 1996, investment securities with book values of
$37,225,000 and $33,873,000, respectively, were pledged to secure United States
Government deposits and other public funds and for other purposes as permitted
by law.
F-16
<PAGE> 118
The amortized cost and fair value of investment securities at December 31, 1997
and 1996, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or repay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------------------------------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Due in one year or less .......... $ -- $ -- $ -- $ --
----------- ---------- ----------- -----------
Due after one year through five
years ........................ 1,704,000 1,719,000 -- --
Due after five years through ten
years ........................ 10,742,000 10,854,000 8,062,000 8,030,000
Due after ten years .............. 24,466,000 23,952,000 19,708,000 19,100,000
----------- ----------- ----------- -----------
Totals ........................... $36,912,000 $36,525,000 $27,770,000 $27,130,000
=========== =========== =========== ===========
</TABLE>
5. LOANS
The subsidiary banks grant the majority of their loans to customers in
Jefferson, Shelby and St. Clair counties and within a 50-mile radius of Fort
Deposit, Alabama. Composition of the loan portfolios at December 31, 1997 and
1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Commercial, agricultural and industrial loans .. $ 94,293,000 $ 80,851,000
Real estate loans .............................. 70,003,000 63,054,000
Consumer loans ................................. 12,384,000 13,904,000
Other loans .................................... 184,000 223,000
------------ ------------
Gross loans .................................... 176,864,000 158,032,000
Less:
Unearned income ................................ 19,000 68,000
Allowance for loan losses ...................... 1,519,000 1,549,000
------------ ------------
Net loans ...................................... $175,326,000 $156,415,000
============ ============
</TABLE>
At December 31, 1997 and 1996, nonaccrual loans totaled approximately $775,000
and $1,187,000, respectively. The amount of interest income that would have been
recorded during 1997 and 1996 if the above amounts had been current in
accordance with their original terms was approximately $70,000 and $98,000,
respectively.
At December 31, 1997 and 1996, the recorded investment in loans that are
considered to be impaired under SFAS No. 114 was $1,163,000 and $2,106,000,
respectively, of which $775,000 and $1,187,000 were on a non-accrual basis. The
allowance for loan losses related to impaired loans at December 31, 1997 and
1996 was $174,000 and $316,000, respectively. The average recorded investment in
impaired loans was approximately $1,001,000 and $1,359,000 during the years
ended December 31, 1997 and 1996, respectively. For the years ended December 31,
1997 and 1996, the Company recognized interest income on these impaired loans of
$21,000 and $47,000, respectively.
F-17
<PAGE> 119
In the normal course of business, loans are made to directors and executive
officers of the Company and other related parties. The loans are made on
substantially the same terms, including interest rates and collateral, as those
prevailing for comparable transactions with others. Such loans do not involve
more than a normal risk of collectibility, nor do they present other unfavorable
features. Loan balances outstanding from such related parties were $3,239,000
and $4,871,000 at December 31, 1997 and 1996, respectively. Loan activity during
1997 consisted of $264,000 in new loans and $1,896,000 in repayments.
6. ALLOWANCE FOR LOAN LOSSES
The following is an analysis of changes in the allowance for loan losses for the
years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of year ................... $ 1,549,000 $ 1,429,000 $ 1,593,000
Loans charged off .............................. (521,000) (516,000) (422,000)
Recoveries of loans previously charged off ..... 312,000 235,000 186,000
----------- ----------- -----------
Net charge-offs ................................ (209,000) (281,000) (236,000)
Provision charged to operations ................ 179,000 401,000 72,000
----------- ----------- -----------
Balance at end of year ......................... $ 1,519,000 $ 1,549,000 $ 1,429,000
=========== =========== ===========
</TABLE>
7. PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31 is as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Land and improvements .......................... $ 1,279,000 $ 1,278,000
Buildings and improvements ..................... 5,417,000 4,893,000
Furniture and equipment ........................ 3,559,000 3,347,000
Construction in process ........................ -- 320,000
----------- -----------
10,255,000 9,838,000
Less accumulated depreciation .................. 3,872,000 3,205,000
----------- -----------
Net carrying amounts ........................... $ 6,383,000 $ 6,633,000
=========== ===========
</TABLE>
8. DEPOSITS
In the normal course of business, related parties deposit funds with the
Company. Deposits with related parties were $4,292,000 and $3,273,000 at
December 31, 1997 and 1996, respectively.
At December 31, 1997, remaining maturities of certificates of deposit $100,000
and greater and other time deposits $100,000 and greater are as follows:
<TABLE>
<S> <C>
Three months or less ........................ $34,106,000
Over three through six months ............... 2,259,000
Over six through 12 months .................. 5,238,000
Over 12 months .............................. 5,686,000
-----------
Totals ...................................... $47,289,000
===========
</TABLE>
F-18
<PAGE> 120
Maturities of time deposits for each of the five years following December 31,
1997 are as follows:
<TABLE>
<S> <C>
1998 ........................................ $85,493,000
1999 ........................................ $21,019,000
2000 ........................................ $ 4,715,000
2001 ........................................ $ 3,599,000
2002 ........................................ $ 1,287,000
</TABLE>
9. BORROWINGS
Notes payable at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Note payable to stockholder, unsecured; interest payable at prime minus
one percent, 7.50% and 7.25% at December 31, 1997 and 1996,
respectively; due on demand .................................................... $ 200,000 $ 200,000
Note payable to affiliated entity, unsecured; interest at prime, 8.50% and 8.25%
at December 31, 1997 and 1996, respectively; due in annual installments of
$100,000 through March 2002 .................................................... 600,000 700,000
Note payable to an unaffiliated commercial bank; interest at one month LIBOR
plus one percent, 6.94% at December 31, 1997 and 1996, principal and
interest due monthly through January 2000 ...................................... 1,383,000 1,525,000
---------- ----------
Totals ............................................................................. $2,183,000 $2,425,000
========== ==========
</TABLE>
Debt maturities for each of the five years following December 31, 1997 are as
follows:
<TABLE>
<S> <C>
1998 ............................................................... $ 242,000
1999 ............................................................... $ 242,000
2000 ............................................................... $5,200,000
2001 ............................................................... $ 100,000
2002 ............................................................... $5,100,000
</TABLE>
Alabama Bancorp has an unsecured short-term credit agreement with an
unaffiliated bank that provides for maximum borrowings of $500,000. No
borrowings were outstanding under this agreement at December 31, 1997 or
December 31, 1996. No compensating balances or commitment fees are required by
this agreement.
Federal Home Loan Bank notes represent borrowings from the Federal Home Loan
Bank of Atlanta. Interest on $5 million of these borrowings is at a fixed rate
of 5.66% with a maturity of five years and $4 million at a variable rate of
three month LIBOR minus 16 basis points (5.72% at December 31, 1997) with a
maturity of three years. These borrowings are secured by Federal Home Loan Bank
stock (carried at cost of $916,000) and by first mortgage loans on one-to-four
family dwellings held by banking subsidiaries (approximately $28 million at
December 31, 1997).
F-19
<PAGE> 121
10. EMPLOYEE BENEFIT PLANS
The Company has a contributory profit sharing plan covering employees who
qualify as to age and length of service. The Company's subsidiaries make annual
contributions to the plan at amounts determined by the Board of Directors of the
subsidiaries, not to exceed 14% of the total eligible compensation paid to
participants in the plan. The Company and its subsidiaries expect to continue
the plan indefinitely; however, the rights to modify, amend or terminate the
plan have been reserved.
Profit sharing expenses (included in salaries and employee benefits) were
$294,000, $184,000 and $294,000 for the years ended December 31, 1997, 1996 and
1995, respectively.
11. INCOME TAXES
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- --------
<S> <C> <C> <C>
Currently payable:
Federal ........................................... $ 967,000 $ 925,000 $550,000
State ............................................. 89,000 95,000 60,000
----------- ---------- --------
Tax currently payable ................................. 1,056,000 1,020,000 610,000
Tax effect of temporary differences, primarily
regarding loan loss recognition and change from
cash to accrual method ............................ (14,000) -- 12,000
----------- ---------- --------
Income tax expense .................................... $ 1,042,000 $1,020,000 $622,000
=========== ========== ========
</TABLE>
The effective tax rates for the years ended December 31, 1997, 1996 and 1995
differ from the expected tax using federal statutory rates. A reconciliation
between the expected tax and the actual income tax expense follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- --------
<S> <C> <C> <C>
Expected tax at federal statutory rates ............... $ 983,000 $ 968,000 $867,000
Increase (decrease) resulting from:
Tax-exempt interest ............................... (113,000) (157,000) (179,000)
State excise taxes, less federal tax benefit ...... 47,000 61,000 8,000
Minority interest in income of consolidated
subsidiaries ..................................... 77,000 95,000 87,000
Other, net ........................................ 48,000 53,000 (161,000)
----------- ---------- --------
Income tax expense .................................... $ 1,042,000 $1,020,000 $622,000
=========== ========== ========
</TABLE>
The Company was in a net deferred tax asset position of $55,000 and $245,000 at
December 31, 1997 and 1996, respectively. The deferred taxes primarily relate to
differences in the treatment of loan losses and deferred loan costs for
financial reporting and income tax reporting purposes and the tax effect on the
unrealized gain (loss) on available-for-sale securities.
12. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the subsidiary banks have entered into
off-balance-sheet financial instruments consisting of commitments to extend
credit and standby letters of credit. Such financial instruments are recorded in
the balance sheet when they become payable. A summary of commitments and
contingent liabilities at December 31, 1997 and 1996 is as follows:
F-20
<PAGE> 122
<TABLE>
<CAPTION>
1997 1996
-------------- ---------------
<S> <C> <C>
Commitments to extend credit............................. $ 18,628,000 $ 12,388,000
Standby letters of credit................................ 334,000 344,000
</TABLE>
Commitments to extend credit and standby letters of credit include exposure to
some credit loss in the event of nonperformance of the customer. The subsidiary
banks' credit policies and procedures for credit commitments and financial
guarantees are the same as those for extensions of credit that are recorded on
the consolidated statements of condition.
Because these instruments have fixed maturity dates, and because many of them
expire without being drawn upon, they do not necessarily represent liquidity
requirements of the subsidiary banks.
The Company and its bank subsidiaries are defendants in various legal
proceedings arising in the normal course of business. Based upon consultation
with legal counsel, management believes the ultimate resolution of these
proceedings will not have a material effect on the Company's financial
statements.
The primary source of funds available to the company is payment of dividends
from the Company's subsidiaries. Banking laws and other regulations limit the
amount of dividends a bank subsidiary may pay without prior regulatory approval.
The amount of net assets of subsidiaries available for payment without prior
regulatory approval was approximately $2,993,000 and $3,456,000 at December 31,
1997 and 1996, respectively.
13. REGULATORY CAPITAL REQUIREMENTS
Alabama Bancorp and its subsidiaries are subject to regulatory capital
requirements administered by federal banking agencies. These regulatory capital
requirements involve quantitative measures of the Company's assets, liabilities
and certain off-balance sheet items, and also qualitative judgments by the
regulators. Failure to meet minimum capital requirements can subject the Company
to a series of increasingly restrictive regulatory actions. As of December 31,
1997 and 1996, the most recent notification from federal banking agencies
categorized Alabama Bancorp and its subsidiaries as "well capitalized" under the
regulatory framework. There are no conditions or events since that notification
that management believes have changed the institution's category.
Minimum capital requirements for all banks are Tier 1 Capital of at least 4%
risk-weighted assets, Total Capital of at least 8% of risk-weighted assets and a
Leverage ratio of 3%, plus an additional 100 to 200 basis point cushion in
certain circumstances, of adjusted quarterly average assets. Tier 1 Capital
consists principally of stockholders' equity, excluding unrealized gains and
losses on securities available for sale, less excess purchase price and certain
other intangibles. Total Capital consists of Tier 1 Capital plus certain debt
instruments and the allowance for loan losses, subject to limitation.
F-21
<PAGE> 123
Alabama Bancorp's and its subsidiaries' capital levels at December 31, 1997 and
1996, exceeded the "well capitalized" levels as shown below:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------
ACTUAL
----------------------------- TO BE WELL
AMOUNT RATIO CAPITALIZED
------------ ------ -----------
<S> <C> <C> <C>
Tier 1 Capital:
Alabama Bancorp ....................................... $17,776,000 9.71% 6.00%
Highland Bank ......................................... 13,393,000 9.36 6.00
First Community Bank .................................. 5,184,000 13.96 6.00
Total Capital:
Alabama Bancorp ....................................... $19,251,000 10.53% 10.00%
Highland Bank ......................................... 14,452,000 10.10 10.00
First Community Bank .................................. 5,630,000 15.16 10.00
Leverage:
Alabama Bancorp ....................................... $17,776,000 6.57% 5.00%
Highland Bank ......................................... 13,393,000 6.58 5.00
First Community Bank .................................. 5,184,000 7.67 5.00
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------
ACTUAL
----------------------------- TO BE WELL
AMOUNT RATIO CAPITALIZED
------------ ------ -----------
<S> <C> <C> <C>
Tier 1 Capital:
Alabama Bancorp ....................................... $16,100,000 10.07% 6.00%
Highland Bank ......................................... 12,879,000 10.57 6.00
First Community Bank .................................. 4,875,000 12.95 6.00
Total Capital:
Alabama Bancorp ....................................... $17,541,000 10.97% 10.00%
Highland Bank ......................................... 13,738,000 11.27 10.00
First Community Bank .................................. 5,346,000 14.20 10.00
Leverage:
Alabama Bancorp ....................................... $16,100,000 6.57% 5.00%
Highland Bank ......................................... 12,879,000 7.19 5.00
First Community Bank .................................. 4,875,000 7.33 5.00
</TABLE>
F-22
<PAGE> 124
14. PARENT CORPORATION
The financial information for Alabama Bancorp (parent company only) is presented
as follows:
ALABAMA BANCORP., INC. (PARENT COMPANY ONLY)
STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
----------- -----------
<S> <C> <C>
Assets:
Cash ................................................... $ 801,000 $ 654,000
Investment in subsidiaries ............................. 19,293,000 18,182,000
Available-for-sale securities .......................... 859,000 633,000
Premises and equipment, net ............................ 332,000 473,000
Excess of cost over net assets of subsidiaries
acquired.............................................. 705,000 733,000
Other assets ........................................... 57,000 58,000
----------- -----------
Total assets ........................................... $22,047,000 $20,733,000
=========== ===========
Liabilities:
Notes payable .......................................... $ 2,183,000 $ 2,425,000
Income taxes payable ................................... -- 203,000
Accrued expenses and other liabilities ................. 99,000 206,000
----------- -----------
Total liabilities ...................................... 2,282,000 2,834,000
----------- -----------
Minority interest in subsidiary banks .................. 2,115,000 1,890,000
----------- -----------
Stockholders' equity:
Common stock, $.25 par value, 40,000 shares authorized,
20,799 issued and outstanding ...................... 5,000 5,000
Capital surplus ........................................ 6,927,000 6,927,000
Unrealized gain on available-for-sale securities ....... 528,000 192,000
Retained earnings ...................................... 10,190,000 8,885,000
----------- -----------
Total stockholders' equity ............................. 17,650,000 16,009,000
----------- -----------
Total liabilities and stockholders' equity ............. $22,047,000 $20,733,000
=========== ===========
</TABLE>
F-23
<PAGE> 125
ALABAMA BANCORP., INC. (PARENT COMPANY ONLY)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------------------------
1997 1996 1995
----------- ---------- ------------
<S> <C> <C> <C>
Income:
Dividend income from subsidiaries .......................... $ 1,263,000 $ 1,329,000 $ 1,266,000
Other income ............................................... 1,559,000 1,359,000 1,269,000
----------- ----------- -----------
Total income ............................................... 2,822,000 2,688,000 2,535,000
----------- ----------- -----------
Expenses:
Salaries and employee benefits ............................. 1,014,000 935,000 881,000
Interest ................................................... 170,000 178,000 205,000
Minority interest in net income of consolidated
subsidiaries.............................................. 225,000 278,000 256,000
Other expenses ............................................. 538,000 507,000 398,000
----------- ----------- -----------
Total expense .............................................. 1,947,000 1,898,000 1,740,000
----------- ----------- -----------
Income before income tax expense ........................... 875,000 790,000 795,000
Income tax (benefit) expense ............................... (64,000) 247,000 207,000
----------- ----------- -----------
Income before equity in earnings of subsidiaries ........... 939,000 543,000 588,000
----------- ----------- -----------
Equity in earnings of subsidiaries ......................... 2,174,000 2,612,000 2,606,000
Less dividends received .................................... (1,263,000) (1,329,000) (1,266,000)
----------- ----------- -----------
911,000 1,283,000 1,340,000
----------- ----------- -----------
Net income ................................................. $ 1,850,000 $ 1,826,000 $ 1,928,000
=========== =========== ===========
</TABLE>
F-24
<PAGE> 126
ALABAMA BANCORP., INC. (PARENT COMPANY ONLY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ............................................. $ 1,850,000 $ 1,826,000 $ 1,928,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in subsidiary earnings over dividends received (911,000) (1,283,000) (1,340,000)
Depreciation and amortization .......................... 208,000 192,000 117,000
Minority interest in net income of consolidated
subsidiaries ....................................... 225,000 278,000 256,000
Decrease (increase) in other assets .................... 1,000 (1,000) 17,000
Decrease in income taxes payable ....................... (203,000) (8,000) 151,000
Decrease in accrued expenses and other liabilities (197,000) (108,000) (364,000)
----------- ----------- -----------
Net cash provided by operations ........................ 973,000 896,000 765,000
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ................................... (39,000) (96,000) (140,000)
Proceeds from sale of subsidiary stock ................. -- 128,000 --
Investment in subsidiary bank .......................... -- (58,000) --
Purchase of securities ................................. -- -- (9,000)
----------- ----------- -----------
Net cash used in financing activities .................. (39,000) (26,000) (149,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt ........................... -- 265,000 --
Payments on long-term debt ............................. (242,000) (507,000) --
Dividends paid ......................................... (545,000) (546,000) (546,000)
----------- ----------- -----------
Net cash used in financing activities .................. (787,000) (788,000) (546,000)
----------- ----------- -----------
Net increase in cash and cash equivalents .............. 147,000 82,000 70,000
Cash and cash equivalents at beginning of year ......... 654,000 572,000 502,000
----------- ----------- -----------
Cash and cash equivalents at end of year ............... $ 801,000 $ 654,000 $ 572,000
=========== =========== ===========
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash paid during the period for:
Interest ............................................... $ 174,000 $ 254,000 $ 160,000
=========== =========== ===========
Income taxes ........................................... $ 1,196,000 $ 892,000 $ 838,000
=========== =========== ===========
</TABLE>
F-25
<PAGE> 127
15. OTHER MATTERS (UNAUDITED)
The Company estimates that the cost related to adapting its computer systems to
reflect the Year 2000 will not have a material adverse effect on results of
operations. The Company presently believes that with modifications to existing
software and conversions to new software, the Year 2000 Issue will not pose
significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the Company.
The Company's third-party vendors have indicated that they will be Year 2000
compliant, and the Company is continuing to monitor their progress in that
regard.
F-26
<PAGE> 128
Schedule 1
FIRST COMMUNITY BANK OF THE SOUTH
STATEMENTS OF CONDITION
Assets
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Assets:
Cash and due from banks ............................ $ 1,524,000 $ 2,042,000
Federal funds sold ................................. 1,422,000 --
Available-for-sale securities ...................... 14,491,000 13,566,000
Investment securities (fair value of $8,718,000
and $7,640,000, respectively) .................. 8,785,000 7,787,000
Loans .............................................. 38,847,000 40,810,000
Less:
Unearned income ................................ 13,000 51,000
Allowance for loan losses ...................... 445,000 612,000
----------- -----------
Net loans .......................................... 38,389,000 40,147,000
----------- -----------
FHLB stock ......................................... 375,000 209,000
Premises and equipment, net ........................ 1,690,000 1,553,000
Accrued interest receivable ........................ 695,000 661,000
Other assets ....................................... 101,000 83,000
Other real estate .................................. 475,000 --
----------- -----------
Total assets ....................................... $67,947,000 $66,048,000
=========== ===========
</TABLE>
F-27
<PAGE> 129
Schedule 1
FIRST COMMUNITY BANK OF THE SOUTH
STATEMENTS OF CONDITION (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Liabilities:
Deposits:
Demand:
Noninterest bearing ............................... $ 6,751,000 $ 5,459,000
Interest bearing .................................. 9,081,000 9,906,000
Savings deposits ...................................... 4,689,000 4,572,000
Certificates of deposit $100,000 and over ............. 7,512,000 6,487,000
Other time deposits ................................... 30,123,000 34,023,000
----------- -----------
Total deposits ........................................ 58,156,000 60,447,000
Federal funds purchased ............................... -- 178,000
FHLB Advance .......................................... 4,000,000 --
Accrued expenses and other liabilities ................ 511,000 533,000
----------- -----------
Total liabilities ..................................... 62,667,000 61,158,000
----------- -----------
Stockholders' equity:
Common stock, $5 par value, 80,000 shares authorized,
71,385 issued and outstanding ..................... 357,000 357,000
Capital surplus ....................................... 201,000 201,000
Retained earnings ..................................... 4,626,000 4,317,000
Unrealized gain on available-for-sale securities ...... 96,000 15,000
----------- -----------
Total stockholders' equity ............................ 5,280,000 4,890,000
----------- -----------
Total liabilities and stockholders' equity ............ $67,947,000 $66,048,000
=========== ===========
</TABLE>
This schedule is presented for additional analysis of the consolidated
statements of condition and should be read in conjunction with the consolidated
financial statements and notes thereto.
F-28
<PAGE> 130
Schedule 1
FIRST COMMUNITY BANK OF THE SOUTH
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans ................................. $ 3,517,000 $ 3,648,000 $ 3,580,000
Interest on securities ..................................... 1,300,000 1,307,000 1,325,000
Interest on federal funds sold and other interest earning
assets ................................................. 107,000 113,000 166,000
------------ ------------ ------------
Total interest income ...................................... 4,924,000 5,068,000 5,071,000
------------ ------------ ------------
Interest expense:
Interest on deposits ....................................... 2,494,000 2,670,000 2,779,000
Interest on borrowed funds ................................. 161,000 3,000 --
------------ ------------ ------------
Total interest expense ..................................... 2,655,000 2,673,000 2,779,000
------------ ------------ ------------
Net interest income ........................................ 2,269,000 2,395,000 2,292,000
Loan loss provision ........................................ -- 135,000 --
------------ ------------ ------------
Net interest income after provision for loan loss .......... 2,269,000 2,260,000 2,292,000
Noninterest income:
Service charges on deposits ................................ 447,000 414,000 320,000
Net securities (loss) gain ................................. (2,000) 14,000 30,000
Other ...................................................... 72,000 49,000 52,000
------------ ------------ ------------
Total noninterest income ................................... 517,000 477,000 402,000
------------ ------------ ------------
Noninterest expense:
Salaries and employee benefits ............................. 939,000 798,000 742,000
Net occupancy expense ...................................... 272,000 252,000 235,000
FDIC insurance expense ..................................... 7,000 2,000 65,000
Other ...................................................... 927,000 791,000 817,000
------------ ------------ ------------
Total noninterest expense .................................. 2,145,000 1,843,000 1,859,000
------------ ------------ ------------
Income before income tax expense ........................... 641,000 894,000 835,000
Income tax expense ......................................... 107,000 282,000 126,000
------------ ------------ ------------
Net income ................................................. $ 534,000 $ 612,000 $ 709,000
============ ============ ============
</TABLE>
F-29
<PAGE> 131
Schedule 2
HIGHLAND BANK
STATEMENTS OF CONDITION
Assets
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Assets:
Cash and cash due from banks ................................... $ 10,026,000 $ 8,356,000
Federal funds sold ............................................. 9,296,000 1,420,000
Interest bearing deposits with other banks ..................... -- 20,000
Available-for-sale securities .................................. 20,777,000 26,717,000
Investment securities (fair value of $27,807,000 and
$19,490,000, respectively) ................................. 28,127,000 19,983,000
Loans .......................................................... 138,016,000 117,222,000
Less:
Unearned income ................................................ 6,000 17,000
Allowance for loan losses ...................................... 1,073,000 1,238,000
------------ ------------
Net loans ...................................................... 136,937,000 115,967,000
------------ ------------
FHLB stock ..................................................... 542,000 547,000
Premises and equipment, net .................................... 4,361,000 4,607,000
Accrued interest receivable .................................... 1,373,000 1,247,000
Excess cost over net assets acquired ........................... 703,000 763,000
Other assets ................................................... 297,000 522,000
------------ ------------
Total assets ................................................... $212,439,000 $180,149,000
============ ============
</TABLE>
F-30
<PAGE> 132
Schedule 2
HIGHLAND BANK
STATEMENTS OF CONDITION (CONTINUED)
Liabilities and Stockholders' Equity
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Liabilities:
Demand:
Noninterest bearing ........................................ $ 31,980,000 $ 27,000,000
Interest bearing ........................................... 72,188,000 61,617,000
Savings deposits ............................................... 7,878,000 7,993,000
Certificates of deposit $100,000 and over ...................... 18,892,000 12,088,000
Other time deposits ............................................ 59,756,000 55,671,000
------------ ------------
Total deposits ................................................. 190,694,000 164,369,000
Accrued expenses and other liabilities ......................... 987,000 893,000
Other borrowed funds ........................................... 6,615,000 1,308,000
------------ ------------
Total liabilities .............................................. 198,296,000 166,570,000
------------ ------------
Stockholders' equity:
Preferred stock, Class A, nonvoting, par value $100;
50 shares authorized, 28 shares issued and outstanding ...... 3,000 3,000
Common stock, par value $.06; 3,000,000 shares authorized,
2,132,942 issued and outstanding ........................... 128,000 128,000
Capital surplus ................................................ 13,794,000 13,794,000
Retained earnings (deficit) .................................... 163,000 (282,000)
Unrealized gain (loss) on available-for-sale securities ........
55,000 (64,000)
------------ ------------
Total stockholders' equity ..................................... 14,143,000 13,579,000
------------ ------------
Total liabilities and stockholders' equity ..................... $212,439,000 $180,149,000
============ ============
</TABLE>
This schedule is presented for additional analysis of the consolidated
statements of condition and should be read in conjunction with the consolidated
financial statements and notes thereto.
F-31
<PAGE> 133
Schedule 2
HIGHLAND BANK
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------------------------
1997 1996 1995
------------ ----------- ----------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans .............................. $10,822,000 $ 9,395,000 $8,348,000
Interest on securities .................................. 2,859,000 3,242,000 3,496,000
Interest on federal funds sold and other interest earning
assets .............................................. 184,000 262,000 497,000
----------- ----------- ----------
Total interest income ................................... 13,865,000 12,899,000 12,341,000
----------- ----------- ----------
Interest expense:
Interest on deposits .................................... 6,848,000 6,636,000 6,670,000
Interest on borrowed funds .............................. 139,000 24,000 1,000
----------- ----------- ----------
Total interest expense .................................. 6,987,000 6,660,000 6,671,000
----------- ----------- ----------
Net interest income ..................................... 6,878,000 6,239,000 5,670,000
Provision for loan losses ............................... 179,000 266,000 (72,000)
----------- ----------- ----------
Net interest income after provision for
loan losses ......................................... 6,699,000 5,973,000 5,598,000
Noninterest income:
Service charges on deposits ............................. 818,000 877,000 788,000
Net securities gains .................................... 15,000 27,000 49,000
Other ................................................... 648,000 521,000 548,000
----------- ----------- ----------
Total noninterest income ................................ 1,481,000 1,425,000 1,385,000
----------- ----------- ----------
Noninterest expense:
Salaries and employee benefits .......................... 2,110,000 1,732,000 1,515,000
Net occupancy expense ................................... 677,000 641,000 548,000
FDIC insurance expense .................................. 15,000 3,000 168,000
Other ................................................... 2,739,000 2,531,000 2,566,000
----------- ----------- ----------
Total noninterest expense ............................... 5,541,000 4,907,000 4,797,000
----------- ----------- ----------
Income before income tax expense ........................ 2,639,000 2,491,000 2,186,000
Income tax expense ...................................... 999,000 491,000 289,000
----------- ----------- ----------
Net income .............................................. $ 1,640,000 $ 2,000,000 $1,897,000
=========== =========== ==========
</TABLE>
F-32
<PAGE> 134
PROSPECTUS
15,000,000 SHARES
BANCORPSOUTH
COMMON STOCK
BancorpSouth, Inc. may from time to time offer shares of its common
stock in an aggregate amount of up to 15,000,000 shares, on terms and at prices
to be determined at the time of such offerings and set forth in one or more
supplements to this Prospectus. BancorpSouth is a Mississippi corporation and a
bank holding company registered under the Bank Holding Company Act of 1956, as
amended.
Shares of BancorpSouth common stock are to be offered directly by
BancorpSouth in connection with the acquisition of, or business combination
with, certain banking or savings institutions. The specific terms under which
shares of BancorpSouth common stock are being offered in connection with the
delivery of this Prospectus will be set forth in the applicable supplement and
will include the specific number of shares of BancorpSouth common stock and the
issuance price per share. BancorpSouth common stock may not be sold through this
Prospectus without delivery of the applicable supplement.
BancorpSouth common stock is listed on the New York Stock Exchange
under the symbol "BXS."
---------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSIONER HAS APPROVED OR DISAPPROVED OF THE SHARES OF BANCORPSOUTH COMMON
STOCK TO BE ISSUED UNDER THIS PROSPECTUS OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
SHARES OF BANCORPSOUTH COMMON STOCK ARE NOT SAVINGS OR DEPOSIT ACCOUNTS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
---------------
The date of this Prospectus is __________, 1998
P-1
<PAGE> 135
THE COMPANY
BancorpSouth, Inc. ("BancorpSouth") is a bank holding company with
financial services operations in Mississippi and Tennessee. BancorpSouth Bank, a
wholly-owned subsidiary of BancorpSouth, conducts a commercial banking and trust
business through offices located in communities throughout Mississippi and West
Tennessee. In addition, BancorpSouth Bank operates consumer finance, credit life
insurance and insurance agency subsidiaries. BancorpSouth Bank operates under
the trade names "Bank of Mississippi" in Mississippi and "Volunteer Bank" in
Tennessee.
BancorpSouth, through its subsidiaries, provides a range of financial
services to individuals and small-to-medium size businesses. Various types of
checking accounts, both interest bearing and non-interest bearing, are
available. Savings accounts and certificates of deposit with a range of
maturities and interest rates are available to meet the needs of customers.
Other services include safe deposit and night depository facilities. Limited
24-hour banking with automated teller machines is provided in most of its
principal markets. BancorpSouth Bank is an issuing bank for MasterCard, and
overdraft protection is available to approved MasterCard holders maintaining
checking accounts with BancorpSouth Bank.
BancorpSouth offers a variety of services through the trust department
of BancorpSouth Bank, including personal trust and estate services, certain
employee benefit accounts and plans, including individual retirement accounts,
and limited corporate trust functions.
BancorpSouth's lending activities include both commercial and consumer
loans. Loan originations are derived from a number of sources including real
estate broker referrals, mortgage loan companies, direct solicitation by
BancorpSouth's loan officers, present savers and borrowers, builders, attorneys,
walk-in customers and, in some instances, other lenders. BancorpSouth has
established disciplined and systematic procedures for approving and monitoring
loans that vary depending on the size and nature of the loan.
BancorpSouth's principal office is located at One Mississippi Plaza,
Tupelo, Mississippi, 38801 and its telephone number is (601) 680-2000.
AVAILABLE INFORMATION
BancorpSouth has filed a Registration Statement on Form S-4, including
amendments thereto, if any, with respect to BancorpSouth common stock (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC"). This Prospectus and any accompanying supplement do not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents of
any contract or other document referred to are not necessarily complete and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or as previously filed with
the SEC and incorporated herein by reference. For further information with
respect to BancorpSouth and BancorpSouth common stock, reference is made to such
Registration Statement, exhibits and schedules.
BancorpSouth is subject to the information requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the SEC.
The Registration Statement, as well as such reports, proxy statements and other
information, may be inspected and copied at prescribed rates at the public
reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices
located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
Seven World Trade Center, Suite 1300, New York, New York 10048. You can obtain
information about the operation of the SEC's Public Reference Room by calling
the SEC at 1-800-SEC-0330. In addition, the SEC maintains a web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the
P-2
<PAGE> 136
SEC at http://www.sec.gov. BancorpSouth common stock is listed on The New York
Stock Exchange, Inc., and such reports, proxy statements and other information
may be inspected at the offices of the New York Stock Exchange at 20 Broad
Street, New York, New York 10005.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents or portions of documents filed by BancorpSouth
with the SEC are incorporated herein by reference:
1. BancorpSouth's Annual Report on Form 10-K for the year ended
December 31, 1997;
2. BancorpSouth's Quarterly Report on Form 10-Q for the three months
ended March 31, 1998;
3. BancorpSouth's Quarterly Report on Form 10-Q for the three months
ended June 30, 1998;
4. BancorpSouth's Current Report on Form 8-K dated May 18, 1998;
5. BancorpSouth's Current Report on Form 8-K dated July 10, 1998;
6. BancorpSouth's Current Report on Form 8-K dated September 3, 1998;
7. The description of BancorpSouth common stock contained in
BancorpSouth's Registration Statement on Form 8-A, dated May 14,
1997; and
8. The description of BancorpSouth common stock purchase rights
contained in BancorpSouth's Registration Statement on Form 8-A,
dated May 14, 1997.
All documents filed by BancorpSouth pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus shall
be deemed to be incorporated by reference into this Prospectus. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein, modifies or supersede such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which are not
presented herein or delivered herewith. A copy of these documents is available
upon written or oral request, at no charge, from Cathy S. Freeman, Vice
President and Corporate Secretary, BancorpSouth, Inc., One Mississippi Plaza,
Tupelo, Mississippi 38801, (601) 680-2000.
LEGAL MATTERS
The validity of the shares of BancorpSouth common stock to be offered
hereunder will be passed upon by Waller Lansden Dortch & Davis, A Professional
Limited Liability Company, Nashville, Tennessee, special counsel to
BancorpSouth. Certain matters concerning this offering will be passed upon on
behalf of BancorpSouth by Riley, Ford, Caldwell & Cork, P.A., Tupelo,
Mississippi.
EXPERTS
The Consolidated Financial Statements of BancorpSouth, as of December
31, 1997 and 1996, and for each of the years in the three-year period ended
December 31, 1997, have been incorporated by reference in this Prospectus and in
the Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of such firm as experts in accounting and auditing.
P-3
<PAGE> 137
ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
BANCORPSOUTH, INC.
AND
ALABAMA BANCORP., INC.
HIGHLAND BANK
AND
FIRST COMMUNITY BANK OF THE SOUTH
DATED AS OF JUNE 19, 1998
A-1
<PAGE> 138
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 19, 1998
("Agreement"), among BANCORPSOUTH, INC., a Mississippi corporation
("BancorpSouth"), and ALABAMA BANCORP., INC., a Delaware corporation (the
"Company"), HIGHLAND BANK, an Alabama banking corporation ("Highland Bank"),
and FIRST COMMUNITY BANK OF THE SOUTH, an Alabama banking corporation ("First
Community Bank").
RECITALS:
WHEREAS, BancorpSouth is the sole shareholder of BancorpSouth Bank, a
Mississippi banking corporation ("BancorpSouth Bank");
WHEREAS, the Company is the majority shareholder of Highland Bank and
First Community Bank;
WHEREAS, the Boards of Directors of each of the parties hereto have
determined that it is in the best interests of their respective companies and
their shareholders to consummate the business combination transactions provided
for herein in which (i) the Company will merge with and into BancorpSouth (the
"Holding Company Merger"), (ii) Highland Bank will merge with and into
BancorpSouth Bank (the "Highland Merger"), and (iii) First Community Bank will
merge with and into BancorpSouth Bank (the "First Community 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") and the Delaware
General Corporation Law (the "DGCL"), at the Effective Time (as defined in
Section 1.2 hereof), the Company shall merge with and into BancorpSouth.
BancorpSouth shall be the surviving corporation (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.
(b) Subject to the terms and conditions of this Agreement, in accordance
with the Mississippi Banking Act (the "MBA"), the Alabama Business Corporation
Act (the "ABCA") and the Alabama Banking Code (the "ABC"), at the Effective
Time, Highland Bank shall merge with and into BancorpSouth Bank. BancorpSouth
Bank shall be the surviving banking corporation (the "Surviving Bank") in the
Highland 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 Highland Merger, the separate
corporate existence of Highland Bank shall terminate.
(c) Subject to the terms and conditions of this Agreement, in accordance
with the MBA, the ABCA and the ABC, at the Effective Time, First Community Bank
shall merge with and into
A-2
<PAGE> 139
BancorpSouth Bank. BancorpSouth Bank shall be the Surviving Bank in the First
Community 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 First Community Merger, the
separate corporate existence of First Community Bank shall terminate.
1.2. Effective Time.
(a) The Holding Company Merger shall become effective as set forth in the
articles of merger (the "Company Articles of Merger") which shall be filed on
the Closing Date (as defined in Section 10.1) with the Secretary of State of
the State of Mississippi (the "Mississippi Secretary") and the Secretary of
State of the State of Delaware (the "Delaware Secretary") with respect to the
Holding Company Merger.
(b) The Highland Merger shall become effective as set forth in the
articles of merger (the "Highland Articles of Merger") which shall be filed on
the Closing Date with the Mississippi Department of Banking and Consumer
Finance (the "Mississippi Department"), the Secretary of State of the State of
Alabama (the "Alabama Secretary") and the Alabama Banking Department (the
"Alabama Department") with respect to the Highland Merger.
(c) The First Community Merger shall become effective as set forth in the
articles of merger (the "First Community Articles of Merger", and together with
the Company Articles of Merger and the Highland Articles of Merger, the
"Articles of Merger") which shall be filed on the Closing Date with the
Mississippi Department, the Alabama Secretary and the Alabama Department with
respect to the First Community Merger.
(d) 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.
(a) At and after the Effective Time, the Holding Company Merger shall have
the effects set forth in Section 252 of the DGCL.
(b) At and after the Effective Time, the Highland Merger shall have the
effects set forth in Sections 10-2B-11.01 et seq. of the ABCA, Sections 5-7A-1
et seq. of the ABC and Sections 5-13B-20 et seq. of the ABC.
(c) At and after the Effective Time, the First Community Merger shall have
the effects set forth in Sections 10-2B-11.01 et seq. of the ABCA, Sections
5-7A-1 et seq. of the ABC and Sections 5-13B-20 et seq. of the ABC.
1.4. Conversion of Company Common Stock.
(a) At the Effective Time, subject to Section 2.2(e) hereof, each share of
the common stock, par value $0.25 per share, of the Company (the "Company
Common Stock") issued and outstanding immediately prior to the Effective Time
(other than Company Dissenting Shares (as defined herein) and other than shares
of Company Common Stock held directly or indirectly by BancorpSouth 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(c) hereof) shall, by virtue of this Agreement and without any action on the
part of the holder thereof, be converted into and exchangeable for that number
of shares of common stock, par value $2.50 per share, of BancorpSouth
("BancorpSouth Common Stock"), together with the number of BancorpSouth Rights
(as defined in Section 5.2 hereof) associated therewith, equal to the Company
Exchange Ratio (as defined below); provided, however, that (except as provided
in the two following paragraphs) the Company Exchange Ratio shall not be less
than 130.2642 nor greater than 176.2398 (such limitation, the "Company Collar
Provision").
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In the event that, without giving effect to the limitations set forth in
the Company Collar Provision, the computation of the Company Exchange Ratio,
computed in accordance with the definition below, shall result in a number
greater than 176.2398, then the Company may, at its option and without penalty,
terminate this Agreement by giving prior written notice thereof to BancorpSouth
on the Determination Date (as defined below), unless, within 24 hours following
the giving of such notice, BancorpSouth agrees with the Company to adjust the
Company Exchange Ratio for purposes of this subsection (a) to an amount
proposed by the Company that is (i) not greater than the Company Exchange Ratio
as so computed in accordance with this paragraph and (ii) not less than
176.2398.
In the event that, without giving effect to the limitations set forth in
the Company Collar Provision, the computation of the Company Exchange Ratio,
computed in accordance with the definition below, shall result in a number less
than 130.2642, then BancorpSouth may, at its option and without penalty,
terminate this Agreement by giving prior written notice thereof to the Company
on the Determination Date, unless, within 24 hours following the giving of such
notice, the Company agrees with BancorpSouth to adjust the Company Exchange
Ratio for purposes of this subsection (a) to an amount proposed by BancorpSouth
that is (i) not less than the Company Exchange Ratio as so computed in
accordance with this paragraph and (ii) not greater than 130.2642.
For purposes of this Agreement:
(i) the "Company Exchange Ratio" means the quotient, rounded to the
nearest 1/10,000, equal to (x) $3,304.50, divided by (y) the Average
Closing Price (as defined below);
(ii) the "Average Closing Price" means the average of the daily last
sale prices of BancorpSouth Common Stock as reported on the New York
Stock Exchange ("NYSE") Composite Transactions tape (as reported in the
Wall Street Journal or, if not reported therein, in another mutually
agreed upon authoritative source) for the 10 consecutive full trading
days in which shares of BancorpSouth Common Stock are traded on the NYSE
ending at the close of trading on the Determination Date; and
(iii) the "Determination Date" means the third business day prior to
the meeting of the Company's shareholders held for the purpose of voting
upon the approval and adoption of this Agreement (as contemplated in
Section 7.3).
(b) All of the shares of Company Common Stock converted into BancorpSouth
Common Stock pursuant to this Article I shall no longer be outstanding and
shall automatically be canceled and shall cease to exist, and each certificate
(each a "Company 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 BancorpSouth Common Stock and (ii) the cash in
lieu of fractional shares into which the shares of Company Common Stock
represented by such Company Certificate have been converted pursuant to this
Section 1.4 and Section 2.2(e) hereof. Company Certificates previously
representing shares of Company Common Stock shall be exchanged for certificates
representing whole shares of BancorpSouth Common Stock and cash in lieu of
fractional shares issued in consideration therefor upon the surrender of such
Company 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 BancorpSouth Common Stock shall be changed into a different
number or class of shares by reason of any reclassification, recapitalization,
split-up, combination, exchange of shares or readjustment, or a stock dividend
thereon shall be declared with a record date within said period, the Company
Exchange Ratio shall be adjusted accordingly.
(c) At the Effective Time, all shares of Company Common Stock that are
owned directly or indirectly by BancorpSouth or the Company or any of their
respective Subsidiaries (other than shares of Company Common Stock that are (i)
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 ("Trust
Account Shares") or (ii) held by BancorpSouth or the Company or any of their
respective Subsidiaries
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in respect of a debt previously contracted ("DPC Shares")) shall be canceled
and shall cease to exist and no stock of BancorpSouth or other consideration
shall be delivered in exchange therefor. All shares of BancorpSouth 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
BancorpSouth.
(d) 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 Section 262 of the DGCL ("Company Dissenting
Shares") shall not be converted into the right to receive, or be exchangeable
for, BancorpSouth 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 Company Dissenting Shares in accordance with the provisions of
Section 262 of the DGCL; provided, however, that (i) if any holder of Company
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 Section 262 of the DGCL, such
holder or holders (as the case may be) shall forfeit the right to appraisal of
such shares of Company Common Stock and each of such shares shall thereupon be
deemed to have been converted into the right to receive, and to have become
exchangeable for, as of the Effective Time, BancorpSouth Common Stock and/or
cash in lieu of fractional shares, without any interest thereon, as provided in
Section 1.4(a) and Article II hereof.
1.5. Conversion of Highland Common Stock.
(a) At the Effective Time, subject to Section 2.2(e) hereof, each share of
the common stock, par value $0.06 per share, of Highland Bank (the "Highland
Common Stock") issued and outstanding immediately prior to the Effective Time
(other than Highland Dissenting Shares (as defined herein) and other than
shares of Highland Common Stock held directly or indirectly by BancorpSouth,
the Company or Highland Bank or any of their respective Subsidiaries, except
for Trust Account Shares and DPC Shares) shall, by virtue of this Agreement and
without any action on the part of the holder thereof, be converted into and
exchangeable for that number of shares of BancorpSouth Common Stock, together
with the number of BancorpSouth Rights associated therewith, equal to the
Highland Exchange Ratio (as defined below); provided, however, that (except as
provided in the two following paragraphs) the Highland Exchange Ratio shall not
be less than 1.1445 nor greater than 1.5485 (such limitation, the "Highland
Collar Provision").
In the event that, without giving effect to the limitations set forth in
the Highland Collar Provision, the computation of the Highland Exchange Ratio,
computed in accordance with the definition below, shall result in a number
greater than 1.5485 then the Company may, at its option and without penalty,
terminate this Agreement by giving prior written notice thereof to BancorpSouth
on the Determination Date, unless, within 24 hours following the giving of such
notice, BancorpSouth agrees with the Company to adjust the Highland Exchange
Ratio for purposes of this subsection (a) to an amount proposed by the Company
that is (i) not greater than the Highland Exchange Ratio as so computed in
accordance with this paragraph and (ii) not less than 1.5485.
In the event that, without giving effect to the limitations set forth in
the Highland Collar Provision, the computation of the Highland Exchange Ratio,
computed in accordance with the definition below, shall result in a number less
than 1.1445, then BancorpSouth may, at its option and without penalty,
terminate this Agreement by giving prior written notice thereof to the Company
on the Determination Date, unless, within 24 hours following the giving of such
notice, the Company and Highland Bank agrees with BancorpSouth to adjust the
Highland Exchange Ratio for purposes of this subsection (a) to an amount
proposed by BancorpSouth that is (i) not less than the Highland Exchange Ratio
as so computed in accordance with this paragraph and (ii) not greater than
1.1445.
For purposes of this Agreement, the "Highland Exchange Ratio" means the
quotient, rounded to the nearest 1/10,000, equal to (x) $29.0347, divided by
(y) the Average Closing Price.
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(b) All of the shares of Highland Common Stock converted into BancorpSouth
Common Stock pursuant to this Article I shall no longer be outstanding and
shall automatically be canceled and shall cease to exist, and each certificate
(each a "Highland Certificate") previously representing any such shares of
Highland Common Stock shall thereafter only represent the right to receive (i)
the number of whole shares of BancorpSouth Common Stock and (ii) the cash in
lieu of fractional shares into which the shares of Highland Common Stock
represented by such Highland Certificate have been converted pursuant to this
Section 1.5 and Section 2.2(e) hereof. Highland Certificates previously
representing shares of Highland Common Stock shall be exchanged for
certificates representing whole shares of BancorpSouth Common Stock and cash in
lieu of fractional shares issued in consideration therefor upon the surrender
of such Highland 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 BancorpSouth Common Stock shall be changed into a different
number or class of shares by reason of any reclassification, recapitalization,
split-up, combination, exchange of shares or readjustment, or a stock dividend
thereon shall be declared with a record date within said period, the Highland
Exchange Ratio shall be adjusted accordingly.
(c) At the Effective Time, all shares of Highland Common Stock that are
owned directly or indirectly by BancorpSouth, the Company or Highland Bank or
any of their respective Subsidiaries (other than shares of Highland Common
Stock that are Trust Account Shares or DPC Shares) shall be canceled and shall
cease to exist and no stock of BancorpSouth or other consideration shall be
delivered in exchange therefor. All shares of BancorpSouth Common Stock that
are owned by Highland Bank or any of its Subsidiaries (other than Trust Account
Shares and DPC Shares) shall become treasury stock of BancorpSouth.
(d) Notwithstanding anything in this Agreement to the contrary, shares of
Highland 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 ABCA ("Highland Dissenting
Shares") shall not be converted into the right to receive, or be exchangeable
for, BancorpSouth 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 Highland Dissenting Shares in accordance with the provisions of
Article 13 of the ABCA; provided, however, that (i) if any holder of Highland
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 ABCA, such
holder or holders (as the case may be) shall forfeit the right to appraisal of
such shares of Highland Common Stock and each of such shares shall thereupon be
deemed to have been converted into the right to receive, and to have become
exchangeable for, as of the Effective Time, BancorpSouth Common Stock and/or
cash in lieu of fractional shares, without any interest thereon, as provided in
Section 1.5(a) and Article II hereof.
1.6. Conversion of First Community Common Stock.
(a) At the Effective Time, subject to Section 2.2(e) hereof, each share of
the common stock, par value $5.00 per share, of First Community Bank (the
"First Community Common Stock") issued and outstanding immediately prior to the
Effective Time (other than First Community Dissenting Shares (as defined
herein) and other than shares of First Community Common Stock held directly or
indirectly by BancorpSouth, the Company or First Community or any of their
respective Subsidiaries, except for Trust Account Shares and DPC Shares) shall,
by virtue of this Agreement and without any action on the part of the holder
thereof, be converted into and exchangeable for that number of shares of
BancorpSouth Common Stock, together with the number of BancorpSouth Rights
associated therewith, equal to the First Community Exchange Ratio (as defined
below); provided, however, that (except as provided in the two following
paragraphs) the First Community Exchange Ratio shall not be less than 8.3224
nor greater than 11.2597 (such limitation, the "First Community Collar
Provision").
In the event that, without giving effect to the limitations set forth in
the First Community Collar Provision, the computation of the First Community
Exchange Ratio, computed in accordance
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with the definition below, shall result in a number greater than 11.2597, then
the Company may, at its option and without penalty, terminate this Agreement by
giving prior written notice thereof to BancorpSouth on the Determination Date
(as defined below), unless, within 24 hours following the giving of such
notice, BancorpSouth agrees with the Company to adjust the First Community
Exchange Ratio for purposes of this subsection (a) to an amount proposed by the
Company that is (i) not greater than the First Community Exchange Ratio as so
computed in accordance with this paragraph and (ii) not less than 11.2597.
In the event that, without giving effect to the limitations set forth in
the First Community Collar Provision, the computation of the First Community
Exchange Ratio, computed in accordance with the definition below, shall result
in a number less than 8.3224, then BancorpSouth may, at its option and without
penalty, terminate this Agreement by giving prior written notice thereof to the
Company on the Determination Date, unless, within 24 hours following the giving
of such notice, the Company and First Community Bank agrees with BancorpSouth
to adjust the First Community Exchange Ratio for purposes of this subsection
(a) to an amount proposed by the Company that is (i) not less than the First
Community Exchange Ratio as so computed in accordance with this paragraph and
(ii) not greater than 8.3224.
For purposes of this Agreement, the "First Community Exchange Ratio" means
the quotient, rounded to the nearest 1/10,000, equal to (x) $211.1193, divided
by (y) the Average Closing Price.
(b) All of the shares of First Community Common Stock converted into
BancorpSouth Common Stock pursuant to this Article I shall no longer be
outstanding and shall automatically be canceled and shall cease to exist, and
each certificate (each a "First Community Certificate") previously representing
any such shares of First Community Common Stock shall thereafter only represent
the right to receive (i) the number of whole shares of BancorpSouth Common
Stock and (ii) the cash in lieu of fractional shares into which the shares of
First Community Common Stock represented by such First Community Certificate
have been converted pursuant to this Section 1.6 and Section 2.2(e) hereof.
First Community Certificates previously representing shares of First Community
Common Stock shall be exchanged for certificates representing whole shares of
BancorpSouth Common Stock and cash in lieu of fractional shares issued in
consideration therefor upon the surrender of such First Community 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
BancorpSouth Common Stock shall be changed into a different number or class of
shares by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or a stock dividend thereon
shall be declared with a record date within said period, the First Community
Exchange Ratio shall be adjusted accordingly.
(c) At the Effective Time, all shares of First Community Common Stock that
are owned directly or indirectly by BancorpSouth, the Company or First
Community Bank or any of their respective Subsidiaries (other than shares of
First Community Common Stock that are Trust Account Shares or DPC Shares) shall
be canceled and shall cease to exist and no stock of BancorpSouth or other
consideration shall be delivered in exchange therefor. All shares of
BancorpSouth Common Stock that are owned by First Community Bank or any of its
Subsidiaries (other than Trust Account Shares and DPC Shares) shall become
treasury stock of BancorpSouth.
(d) Notwithstanding anything in this Agreement to the contrary, shares of
First Community 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 ABCA ("First Community
Dissenting Shares") shall not be converted into the right to receive, or be
exchangeable for, BancorpSouth 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 First Community Dissenting Shares in accordance with
the provisions of Article 13 of the ABCA; provided, however, that (i) if any
holder of First Community 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 ABCA, such holder or holders (as the
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case may be) shall forfeit the right to appraisal of such shares of First
Community Common Stock and each of such shares shall thereupon be deemed to
have been converted into the right to receive, and to have become exchangeable
for, as of the Effective Time, BancorpSouth Common Stock and/or cash in lieu of
fractional shares, without any interest thereon, as provided in Section 1.6(a)
and Article II hereof.
1.7. Stock Options. At the Effective Time, each outstanding Highland Option
(as defined in Section 4.2) which is vested under the terms of such option and
not exercised immediately prior to the Effective Time shall cease to represent
a right to acquire shares of Highland Common Stock and shall be replaced by an
option issued under the appropriate stock option plan of BancorpSouth, as
follows:
(i) the number of shares of BancorpSouth Common Stock to be subject
to the new option shall be equal to the product of (x) the number of
shares of Highland Common Stock subject to the original option, times (y)
the Highland Exchange Ratio, provided that any fractional shares of
BancorpSouth Common Stock resulting from such multiplication shall be
rounded down to the nearest whole share; and
(ii) the exercise price per share of BancorpSouth Common Stock under
the new option shall be equal to the result of (x) the exercise price per
share of Highland Common Stock under the original option, divided by (y)
the Highland 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
Highland Bank shall be deemed to be references to BancorpSouth.
All other Highland Options shall be terminated and canceled as of the Effective
Time. Prior to the Effective Time, BancorpSouth shall reserve for issuance the
number of shares of BancorpSouth Common Stock necessary to satisfy
BancorpSouth's obligations under this Section 1.7.
1.8. BancorpSouth Common Stock. Except for shares of BancorpSouth 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
BancorpSouth as contemplated by Sections 1.4, 1.5 and 1.6 hereof, the shares of
BancorpSouth 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.
1.9. Articles. At the Effective Time, the Amended and Restated Articles of
Incorporation of BancorpSouth (the "BancorpSouth Articles"), 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.
1.10. Bylaws. At the Effective Time, the Bylaws of BancorpSouth, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended in accordance with applicable law and the
BancorpSouth Articles.
1.11. Directors and Officers. The directors and officers of BancorpSouth
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 Bylaws 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
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Association and Bylaws of the Surviving Bank until their respective successors
are duly elected or appointed and qualified.
1.12. 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). BancorpSouth 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.
ARTICLE II
EXCHANGE OF SHARES
2.1. BancorpSouth to Make Shares Available. At or prior to the Effective Time,
BancorpSouth shall deposit, or shall cause to be deposited, with a bank or trust
company (the "Exchange Agent") selected by BancorpSouth and reasonably
satisfactory to the Company, for the benefit of the holders of Company
Certificates, Highland Certificates and First Community Certificates
(collectively, "Certificates"), for exchange in accordance with this Article II,
certificates representing the shares of BancorpSouth Common Stock and the cash
in lieu of fractional shares (such cash and certificates for shares of
BancorpSouth Common Stock, together with any dividends or distributions with
respect thereto, being hereinafter referred to as the "Exchange Fund") to be
issued pursuant to Sections 1.4, 1.5 and 1.6 and paid pursuant to Section 2.2(a)
in exchange for outstanding shares of Company Common Stock, Highland Common
Stock and First Community Common Stock (collectively, "Acquiree Common Stock"),
as applicable.
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
BancorpSouth Common Stock and the cash in lieu of fractional shares into which
the shares of Acquiree 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
(i) a certificate representing that number of whole shares of BancorpSouth
Common Stock to which such holder of Acquiree Common Stock shall have become
entitled pursuant to the provisions of Article I hereof and (ii) 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 canceled. 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 BancorpSouth 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 BancorpSouth Common Stock represented by such
Certificate.
(c) If any certificate representing shares of BancorpSouth Common Stock is
to be issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance
thereof that the Certificate so surrendered shall be properly endorsed
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(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 BancorpSouth
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 (i) the Company of the shares of Company Common Stock which
were issued and outstanding immediately prior to the Effective Time, (ii)
Highland Bank of the shares of Highland Common Stock which were issued and
outstanding immediately prior to the Effective Time, or (ii) First Community
Bank of the shares of First Community 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 canceled and exchanged for certificates
representing shares of BancorpSouth Common Stock as provided in this Article
II.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of BancorpSouth Common
Stock shall be issued upon the surrender for exchange of Certificates, no
dividend or distribution with respect to BancorpSouth 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 BancorpSouth. In lieu of the issuance of any such fractional
share, BancorpSouth shall pay to each former stockholder of the Company,
Highland Bank or First Community Bank, as applicable, who otherwise would be
entitled to receive a fractional share of BancorpSouth Common Stock an amount
in cash equal to the product of (x) $21.5625, times (y) the fraction of a share
of BancorpSouth Common Stock which such holder would otherwise be entitled to
receive pursuant to Article I hereof.
(f) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of the Company, Highland Bank or First Community Bank, as
applicable, for 12 months after the Effective Time shall be paid to
BancorpSouth. Any shareholders of the Company, Highland Bank or First Community
Bank, as applicable, who have not theretofore complied with this Article II
shall thereafter look only to BancorpSouth for payment of their shares of
BancorpSouth Common Stock, cash in lieu of fractional shares and unpaid
dividends and distributions on BancorpSouth Common Stock deliverable in respect
of each share of Acquiree Common Stock such stockholder holds as determined
pursuant to this Agreement, in each case, without any interest thereon.
Notwithstanding the foregoing, none of BancorpSouth, the Company, Highland
Bank, First Community Bank, the Exchange Agent or any other person shall be
liable to any former holder of shares of Acquiree Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(g) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by
BancorpSouth, the posting by such person of a bond in such reasonable amount as
BancorpSouth 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 BancorpSouth
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 BancorpSouth has
delivered those portions of the BancorpSouth Disclosure Schedule (together 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
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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 BancorpSouth, respectively.
3.2. Standards.
(a) No representation or warranty of the Company contained in Article IV
or of BancorpSouth 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
BancorpSouth, has had or could be reasonably expected to have a Material
Adverse Effect with respect to (i) the Company or (ii) BancorpSouth,
respectively.
(b) As used in this Agreement, the term "Material Adverse Effect" means,
with respect to (i) BancorpSouth or (ii) the Company, as the case may be, a
material adverse effect on (i) the business, results of operations or financial
condition of such party or parties and their Subsidiaries taken as a whole,
other than any such effect attributable to or resulting from (A) any change in
banking or similar laws, rules or regulations of general applicability or
interpretations thereof by courts or governmental authorities, (B) any change
in GAAP or regulatory accounting principles applicable to banks or their
holding companies generally, (C) any action or omission of the Company or
BancorpSouth or any Subsidiary of either of them taken with the express prior
written consent of the other party hereto, or (D) 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. 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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to Article III, the Company hereby represents and warrants to
BancorpSouth 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 Delaware. 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 Certificate of
Incorporation and Bylaws of the Company, copies of which have previously been
made available to BancorpSouth, are true and correct copies of such documents
as in effect as of the date of this Agreement.
(b) Highland Bank is an Alabama state bank duly organized, validly
existing and in good standing under the laws of the State of Alabama. First
Community Bank is an Alabama state bank duly organized, validly existing and in
good standing under the laws of the State of Alabama. The deposit accounts of
Highland Bank and of First Community Bank are insured by the Federal Deposit
Insurance Corporation (the "FDIC") through the Bank Insurance Fund to the
fullest extent
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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.
Highland Bank, First Community Bank and each of the Company's other
Subsidiaries has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or the location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary. The articles of incorporation, bylaws and similar
governing documents of Highland Bank, First Community Bank and each other
Subsidiary of the Company, copies of which have previously been made available
to BancorpSouth, 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, Highland Bank, First Community Bank
and each of their Subsidiaries contain true and correct records of all meetings
and other corporate actions held or taken since December 31, 1994 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 40,000 shares
of Company Common Stock. As of the date hereof, there are 20,799 shares of
Company Common Stock outstanding and no shares of Company Common Stock held by
the Company as treasury stock. There are no shares of Company Common Stock
reserved for issuance upon exercise of outstanding stock options or otherwise
except for 4,139 shares of Company Common Stock reserved for issuance upon
exercise of the option (the "Option") to be issued to BancorpSouth pursuant to
the Stock Option Agreement, to be entered into on the date hereof, between
BancorpSouth 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 the Option,
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.
(b) The authorized capital stock of Highland Bank consists of 3,000,000
shares of Highland Common Stock and 50 shares of preferred stock, $100 par
value per share (the "Highland Preferred Stock"). As of the date hereof, there
are 2,132,942 shares of Highland Common Stock outstanding, 28 shares of
Highland Preferred Stock outstanding and no shares of Highland Common Stock or
Highland Preferred Stock held by Highland Bank as treasury stock. There are no
shares of Highland Common Stock reserved for issuance upon exercise of
outstanding stock options or otherwise except for 90,000 shares of Highland
Common Stock reserved for issuance pursuant to Highland Bank's stock option
plans ("Highland Option Plan") under which options to acquire 24,000 shares of
Highland Common Stock are outstanding as of the date hereof (the "Highland
Options"). All of the issued and outstanding shares of Highland Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable, were not issued in violation of any preemptive rights, and have
no personal liability attaching to the ownership thereof. Except for Highland
Options outstanding under the Highland Option Plan, Highland Bank 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 Highland Common Stock or any other equity security of Highland
Bank or any securities representing the right to purchase or otherwise receive
any shares of Highland Common Stock or any other equity security of Highland
Bank. Of the Highland Options, 21,500 are vested and exercisable and 2500 are
not vested and not exercisable under the terms of such option, as of the date
hereof. The names of the optionees, the date of each option to purchase
Highland 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
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exercised under the Highland Option Plan, if any, shall be set forth in Section
4.2(b) of the Company Disclosure Schedule.
(c) The authorized capital stock of First Community Bank consists of
80,000 shares of First Community Common Stock. As of the date hereof, there are
71,385 shares of First Community Common Stock outstanding and no shares of
First Community Common Stock held by First Community Bank as treasury stock.
There are no shares of First Community Common Stock reserved for issuance upon
exercise of outstanding stock options or otherwise. All of the issued and
outstanding shares of First Community Common Stock have been duly authorized
and validly issued and are fully paid and nonassessable, were not issued in
violation of any preemptive rights, and have no personal liability attaching to
the ownership thereof. First Community Bank 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 First Community Common Stock or any other equity security of First Community
Bank or any securities representing the right to purchase or otherwise receive
any shares of First Community Common Stock or any other equity security of
First Community Bank.
(d) Section 4.2(d) of the Company Disclosure Schedule sets forth a true
and correct list of all of the Subsidiaries of the Company, Highland Bank and
First Community Bank, respectively. Except for such Subsidiaries, the Company,
Highland Bank and First Community Bank do 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) Each of the Company, Highland Bank and First Community Bank has full
corporate power and authority to execute and deliver this Agreement and, with
respect to the Company, the Stock Option Agreement and, upon the receipt of
shareholder approval of this Agreement, to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and, with respect to the Company, the Stock Option Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly approved by the respective Boards of Directors of the Company,
Highland Bank and First Community Bank. The respective Boards of Directors of
the Company, Highland Bank and First Community Bank has directed that this
Agreement and the transactions contemplated hereby be submitted to the
respective shareholders of the Company, Highland Bank and First Community Bank
for approval at a meeting of such shareholders and, except for the adoption of
this Agreement by the requisite vote of the Company's, Highland Bank's and First
Community Bank's shareholders, no other corporate proceedings on the part of the
Company, Highland Bank and First Community Bank 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, with respect to
the Company, the Stock Option Agreement has been duly and validly executed and
delivered by each of the Company, Highland Bank and First Community Bank and
(assuming due authorization, execution and delivery by BancorpSouth) each of
this Agreement and, with respect to the Company, the Stock Option Agreement
constitutes a valid and binding obligation of each of the Company, Highland Bank
and First Community Bank, enforceable against each of them 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, with respect
to the Company, the Stock Option Agreement by any of the Company, Highland Bank
or First Community Bank, nor the consummation by any of the Company, Highland
Bank or First Community Bank, of the transactions contemplated hereby or
thereby, nor compliance by any of the Company, Highland Bank or First Community
Bank with any of the terms or provisions hereof or thereof, will (i) violate
any provision of the Certificate of Incorporation or Bylaws of the Company,
Highland Bank or First Community Bank or the articles of incorporation, bylaws
or similar governing documents of any of
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their Subsidiaries, or (ii) assuming that the consents and approvals referred
to in Section 4.4 hereof are duly obtained, (A) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to the Company, Highland Bank, First Community Bank or any of their
Subsidiaries, or any of their respective properties or assets, or (B) 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, Highland Bank, First Community Bank or any of their Subsidiaries
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which the Company, Highland Bank, First Community Bank or any of
their 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 or statements in definitive form relating to
the meetings of the Company's, Highland Bank's and First Community Bank's
shareholders to be held in connection with this Agreement and the transactions
contemplated hereby (such proxy statement or statements, the "Proxy Statement")
and the filing and declaration of effectiveness of a post-effective amendment
to BancorpSouth Registration Statement on Form S-4 (such 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 each of
the Company, Highland Bank or First Community Bank, (e) the filing of the
Articles of Merger with the Mississippi Secretary, the Delaware Secretary, the
Alabama Secretary, the Mississippi Department and the Alabama Department, as
applicable, and (f) approval for listing of the BancorpSouth Common Stock to be
issued in the Merger on the NYSE, no consents or approvals of or filings or
registrations with any court, administrative agency or commission or other
governmental authority or instrumentality (each a "Governmental Entity") or
with any third party are necessary in connection with (1) the execution and
delivery by the Company, Highland Bank and First Community Bank of this
Agreement and, with respect to the Company, the Stock Option Agreement and (2)
the consummation by the Company, Highland Bank and First Community Bank of the
Merger and the other transactions contemplated hereby and thereby.
4.5. Reports. The Company, Highland Bank, First Community Bank and each of
their 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,
Highland Bank, First Community Bank and their Subsidiaries, no Regulatory
Agency has initiated any proceeding or, to the knowledge of the Company,
investigation into the business or operations of the Company, Highland Bank,
First Community Bank or any of their 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,
Highland Bank, First Community Bank or any of their Subsidiaries.
4.6. Financial Statements. The Company has previously made available to
BancorpSouth copies of the consolidated statements of condition of the Company
and its Subsidiaries as of December 31 for
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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, in each case accompanied by the audit report of
Ernst & Young LLP, 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 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 with applicable accounting
requirements; and each of such statements (including the related notes, where
applicable) has been prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied during the periods involved, except as
indicated in the notes thereto. 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. Except for Alex Sheshunoff & Co. Investment Banking,
neither the Company, Highland Bank, First Community Bank nor any Subsidiary
thereof 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, Highland Bank or First
Community Bank and (ii) the Company, Highland Bank, First Community Bank and
their Subsidiaries have carried on their respective businesses in the ordinary
course consistent with their past practices.
(b) Neither the Company, Highland Bank, First Community Bank nor any of
their 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 BancorpSouth), 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) Except as set forth in Section 4.9(a) of the Company Disclosure
Schedule, neither the Company, Highland Bank, First Community Bank nor any of
their 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, Highland Bank, First Community Bank or any of
their Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement or the Stock Option Agreement.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon the Company, Highland Bank, First Community Bank or
any of their Subsidiaries or the assets of the Company, Highland Bank, First
Community Bank or any of their Subsidiaries.
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4.10. Taxes.
(a) Each of the Company, Highland Bank, First Community Bank and their
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, Highland Bank, First Community Bank nor any of their
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,
Highland Bank, First Community Bank and their Subsidiaries, the federal and
state income Tax Returns of the Company, Highland Bank, First Community Bank
and their 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, Highland Bank, First Community
Bank or any of their Subsidiaries or by any trade or business, whether or not
incorporated, 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 ("ERISA Affiliates"), for the benefit of any employee or former
employee of the Company, Highland Bank, First Community Bank, any Subsidiary
thereof or any ERISA Affiliate.
(b) The Company has heretofore made available to BancorpSouth 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, if any, for
such Plan for each of the last two years, (iii) the most recent determination
letter from the Internal Revenue Service for such Plan and (iv) the most recent
summary plan description and related summaries of material modifications.
(c) Except as set forth in Section 4.11(c) of the Company Disclosure
Schedule, each of the Plans is in compliance with the applicable provisions of
the Code and ERISA; each of the Plans intended to be "qualified" within the
meaning of section 401(a) of the Code has received a favorable determination
letter from the IRS and to the knowledge of the Company, nothing has occurred
which could reasonably be expected to result in the revocation of such letter;
no Plan has an accumulated or waived funding deficiency within the meaning of
section 412 of the Code; neither the Company, Highland Bank nor First Community
Bank 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
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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,
Highland Bank or First Community Bank of incurring a liability to or on account
of a Plan pursuant to Title IV of ERISA; no Plan is a multiemployer plan
(within the meaning of section 4001(a)(3) of ERISA) and no Plan is a multiple
employer plan as defined in Section 413 of the Code; and there are no pending,
or to the knowledge of the Company, threatened or anticipated claims (other
than routine claims for benefits) by, on behalf of or against any of the Plans
or any trusts related thereto.
(d) Except as set forth in Section 4.11(d) of the Company Disclosure
Schedule or as otherwise contemplated by this Agreement or any other agreements
entered into by any party hereto in connection with the execution hereof,
neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will (either alone or in conjunction with
any other event) (i) result in any payment (including, without limitation,
severance, unemployment compensation, "excess parachute payment" within the
meaning of Section 280G of the Code, forgiveness of indebtedness or otherwise)
becoming due to any officer, director or employee of the Company, Highland
Bank, First Community Bank or any of their 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. Company Information. The information relating to the Company, Highland
Bank, First Community Bank and their Subsidiaries which is provided to
BancorpSouth by the Company, Highland Bank and/or First Community Bank 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 BancorpSouth or any of
its Subsidiaries) will comply with the provisions of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder.
4.13. Compliance with Applicable Law. Except as set forth in Section 4.13 of
the Company Disclosure Schedule, the Company, Highland Bank, First Community
Bank and each of their 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, Highland Bank, First Community Bank or any of
their Subsidiaries, and neither the Company, Highland Bank, First Community
Bank nor any of their Subsidiaries has received notice, and the Company does
not know, of any violations of any of the above.
4.14. Certain Contracts.
(a) Except as set forth in Section 4.14 of the Company Disclosure
Schedule, neither the Company, Highland Bank, First Community Bank nor any of
their 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 BancorpSouth, the Company, Highland Bank, First
Community Bank, the Surviving Corporation, the Surviving Bank 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
Securities and Exchange Commission ("SEC")) to be performed after the date of
this Agreement, (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, Highland Bank, First Community Bank or any of their Subsidiaries. Each
contract, arrangement, commitment or understanding of the type described in
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this Section 4.14(a) is referred to herein as a "Company Contract". The Company
has previously delivered or made available to BancorpSouth true and correct
copies of each Company Contract.
(b) (i) Each Company Contract described in clause (iii) of Section
4.14(a) is valid and binding and in full force and effect, (ii) the Company,
Highland Bank, First Community Bank and each of their Subsidiaries has
performed all obligations required to be performed by it to date under each
Company Contract described in clause (iii) of Section 4.14(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, Highland Bank,
First Community Bank or any of their Subsidiaries under any Company Contract
described in clause (iii) of Section 4.14(a), and (iv) no other party to any
Company Contract described in clause (iii) of Section 4.14(a) is, to the
knowledge of the Company, in default in any respect thereunder.
4.15. Agreements with Regulatory Agencies. Except as set forth in Section 4.15
of the Company Disclosure Schedule, neither the Company, Highland Bank, First
Community Bank nor any of their 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, Highland Bank,
First Community Bank or any of their Subsidiaries been advised by any
Regulatory Agency or other Governmental Entity that it is considering issuing
or requesting any Regulatory Agreement.
4.16. Business Combination Provision; Takeover Laws. Each of the Company,
Highland Bank and First Community Bank 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 Alabama and the State of Delaware.
4.17. Administration of Fiduciary Accounts. The Company, Highland Bank, First
Community Bank and each of their 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, Highland Bank, First Community
Bank nor any of their 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.
4.18. Environmental Matters.
(a) Except as set forth in Section 4.18 of the Company Disclosure
Schedule, each of the Company, Highland Bank, First Community Bank and their
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, Highland Bank, First Community Bank, any of their
Subsidiaries, any Participation Facility or any Loan Property, has been or,
with respect to threatened proceedings, may be, named as a defendant
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(i) for alleged noncompliance (including by any predecessor) with any
Environmental Laws, or (ii) 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, Highland Bank, First Community Bank
or any of their Subsidiaries, any Participation Facility or any Loan Property;
(c) Except as set forth in Section 4.18 of the Company Disclosure
Schedule, to the knowledge of the Company, during the period of (i) the
Company's, Highland Bank's, First Community Bank's or any of their
Subsidiaries' ownership or operation of any of their respective current or
former properties, (ii) the Company's, Highland Bank's, First Community Bank's
or any of their Subsidiaries' participation in the management of any
Participation Facility, or (iii) the Company's, Highland Bank's, First
Community Bank's or any of their 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 (i) the
Company's, Highland Bank's, First Community Bank's or any of their
Subsidiaries' ownership or operation of any of their respective current or
former properties, (ii) the Company's, Highland Bank's, First Community Bank's
or any of their Subsidiaries' participation in the management of any
Participation Facility, or (iii) the Company's, Highland Bank's, First
Community Bank's or any of their 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 4.18: (i)
"Hazardous Materials" means any chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum or other regulated substances or materials, (ii)
"Loan Property" means any property in which the Company, Highland Bank, First
Community Bank or any of their Subsidiaries holds a security interest, and,
where required by the context, said term means the owner or operator of such
property; and (iii) "Participation Facility" means any facility in which the
Company, Highland Bank, First Community Bank or any of their Subsidiaries
participates in the management and, where required by the context, said term
means the owner or operator of such property.
4.19. 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.
4.20. Loan Portfolio.
(a) Except as set forth in Section 4.20 of the Company Disclosure
Schedule, neither the Company, Highland Bank, First Community Bank or any of
their 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 May
31, 1998, over 90 days delinquent in payment of principal or interest or in
default of any other provision. Section 4.20 of the Company Disclosure
Schedule sets forth all of the Loans in original principal amount in excess of
$100,000 of the Company, Highland Bank, First Community Bank or any of their
Subsidiaries that as of May 31, 1998, were 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.
4.21. Property. Each of the Company, Highland Bank, First Community Bank and
their 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,
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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, Highland Bank, First Community Bank or
any of their Subsidiaries, as lessee, leases real or personal property are
valid and enforceable in accordance with their respective terms and neither the
Company, Highland Bank, First Community Bank nor any of their Subsidiaries nor,
to the knowledge of the Company, any other party thereto, is in default
thereunder.
4.22. Accounting for the Merger; Reorganization. As of the date of this
Agreement, the Company has no reason to believe that the Merger will fail to
qualify (i) for pooling-of-interests treatment under GAAP or (ii) as a
reorganization under Section 368(a) of the Code.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BANCORPSOUTH
Subject to Article III, BancorpSouth hereby represents and warrants to the
Company as follows:
5.1. Corporate Organization.
(a) BancorpSouth is a corporation duly organized, validly existing and in
good standing under the laws of the State of Mississippi. BancorpSouth 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.
BancorpSouth is duly registered as a bank holding company under the BHC Act.
The BancorpSouth Articles and Bylaws of BancorpSouth, 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 BancorpSouth's other
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Each Subsidiary of BancorpSouth
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, bylaws 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 BancorpSouth 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).
5.2. Capitalization.
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(a) The authorized capital stock of BancorpSouth consists of 500,000,000
shares of BancorpSouth Common Stock. As of June 18, 1998, there were
44,792,042 shares of BancorpSouth Common Stock issued and outstanding, and
105,052 shares of BancorpSouth Common Stock were held in BancorpSouth's
treasury. As of the date of this Agreement, no shares of BancorpSouth Common
Stock were reserved for issuance, except with respect to employee benefit
plans, stock option plans, BancorpSouth's rights plan and that certain
Agreement and Plan of Merger, dated as of May 2, 1998, between BancorpSouth and
Merchants Capital Corporation and the transactions contemplated therein. All
of the issued and outstanding shares of BancorpSouth 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 BancorpSouth's dividend reinvestment plan, BancorpSouth 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 BancorpSouth Common Stock or any other equity securities of
BancorpSouth or any securities representing the right to purchase or otherwise
receive any shares of BancorpSouth Common Stock. The shares of BancorpSouth
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) Schedule 22 to BancorpSouth's Annual Report on Form 10-K for the year
ended December 31, 1997 sets forth a true and correct list of all of the
BancorpSouth Subsidiaries as of the date of this Agreement. BancorpSouth owns,
directly or indirectly, all of the issued and outstanding shares of capital
stock of each of the Subsidiaries of BancorpSouth, 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
BancorpSouth 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 BancorpSouth 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) BancorpSouth has full corporate power and authority to execute and
deliver this Agreement and the Stock Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the Stock Option Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
approved by the Board of Directors of BancorpSouth, and no other corporate
proceedings on the part of BancorpSouth 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 BancorpSouth and (assuming due
authorization, execution and delivery by the Company, Highland Bank and First
Community Bank) each of this Agreement and the Stock Option Agreement
constitutes a valid and binding obligation of BancorpSouth, enforceable against
BancorpSouth 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 BancorpSouth, nor the consummation by BancorpSouth of the
transactions contemplated hereby or thereby, nor compliance by BancorpSouth
with any of the terms or provisions hereof or thereof, will (i) violate any
provision of the BancorpSouth Articles or Bylaws of BancorpSouth, or the
articles of incorporation or bylaws 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, (A) violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable to
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BancorpSouth or any of its Subsidiaries or any of their respective properties
or assets, or (B) 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 BancorpSouth 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 BancorpSouth 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, the Delaware
Secretary, the Alabama Secretary, the Mississippi Department and the Alabama
Department, as applicable, (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 BancorpSouth Common Stock
pursuant to this Agreement and (f) approval for listing of the BancorpSouth
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
BancorpSouth of this Agreement and (2) the consummation by BancorpSouth of the
Merger and the other transactions contemplated hereby.
5.5. Reports. BancorpSouth 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 BancorpSouth
and its Subsidiaries, no Regulatory Agency has initiated any proceeding or, to
the knowledge of BancorpSouth, investigation into the business or operations of
BancorpSouth 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 BancorpSouth
or any of its Subsidiaries.
5.6. Financial Statements. BancorpSouth has previously made available to the
Company copies of (i) the consolidated balance sheets of BancorpSouth 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
BancorpSouth's Annual Report on Form 10-K for the fiscal year ended December
31, 1997, 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 BancorpSouth, and (ii) the unaudited consolidated balance sheet
of BancorpSouth and its Subsidiaries as of March 31, 1998 and the related
unaudited consolidated statements of income, changes in shareholders' equity
and cash flows for the three months ended March 31, 1998, as reported in
BancorpSouth's Quarterly Report on Form 10-Q for the quarter ended March 31,
1998, filed with the SEC under the Exchange Act. The December 31, 1997
consolidated balance sheet of BancorpSouth (including the related notes, where
applicable) fairly presents the consolidated financial position of BancorpSouth
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 BancorpSouth 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
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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 BancorpSouth and its Subsidiaries have been, and
are being, maintained in accordance with GAAP and any other applicable legal
and accounting requirements.
5.7. Broker's Fees. Neither BancorpSouth nor any Subsidiary of BancorpSouth,
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
BancorpSouth 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 BancorpSouth.
5.9. Legal Proceedings.
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(a) Except as set forth in BancorpSouth's Annual Report on Form 10-K for
the year ended December 31, 1997 or as disclosed pursuant to Section 5.16
hereto, neither BancorpSouth nor any of its Subsidiaries is a party to any and
there are no pending or, to BancorpSouth's knowledge, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or governmental
or regulatory investigations of any nature against BancorpSouth or any of its
Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement or the Stock Option Agreement .
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon BancorpSouth, any of its Subsidiaries or the assets of
BancorpSouth or any of its Subsidiaries.
5.10. Taxes. Except as set forth in Section 5.10 of the BancorpSouth
Disclosure Schedule, each of BancorpSouth 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 BancorpSouth (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 BancorpSouth Disclosure Schedule, as of the date hereof, neither
BancorpSouth 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 BancorpSouth and its Subsidiaries, the federal and state
income Tax Returns of BancorpSouth and its Subsidiaries have been audited by
the Internal Revenue Service or appropriate state tax authorities or the time
for assessing and collecting income Tax with respect to such taxable period has
closed and such taxable period is not subject to review.
5.11. Employees.
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(a) Section 5.11(a) of the BancorpSouth 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 "BancorpSouth Plans") by BancorpSouth, any of
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its Subsidiaries or by any trade or business, whether or not incorporated (a
"BancorpSouth ERISA Affiliate"), all of which together with BancorpSouth would
be deemed a "single employer" within the meaning of Section 4001 of ERISA, for
the benefit of any employee or former employee of BancorpSouth, any Subsidiary
or any BancorpSouth ERISA Affiliate.
(b) Each of the BancorpSouth Plans is in compliance with the applicable
provisions of the Code and ERISA; each of the BancorpSouth 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
BancorpSouth, nothing has occurred which could reasonably be expected to result
in the revocation of such letter; no BancorpSouth Plan has an accumulated or
waived funding deficiency within the meaning of Section 412 of the Code;
neither BancorpSouth nor any BancorpSouth ERISA Affiliate has incurred,
directly or indirectly, any liability to or on account of a BancorpSouth Plan
pursuant to Title IV of ERISA (other than PBGC premiums); to the knowledge of
BancorpSouth no proceedings have been instituted to terminate any BancorpSouth
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
BancorpSouth 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 BancorpSouth of incurring a liability to or on account of a
BancorpSouth Plan pursuant to Title IV of ERISA; no BancorpSouth Plan is a
multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) and no
BancorpSouth Plan is a multiple employer plan as defined in Section 413 of the
Code; and there are no pending, or, to the knowledge of BancorpSouth,
threatened or anticipated claims (other than routine claims for benefits) by,
on behalf of or against any of the BancorpSouth Plans or any trusts related
thereto.
5.12. SEC Reports. BancorpSouth 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 BancorpSouth with the SEC pursuant to the Securities Act of 1933 (the
"Securities Act") or the Exchange Act (the "BancorpSouth Reports") and (b)
communication mailed by BancorpSouth 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 as of a later date
shall be deemed to modify information as of an earlier date. BancorpSouth has
timely filed all BancorpSouth 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 BancorpSouth Reports complied with the published rules
and regulations of the SEC with respect thereto.
5.13. BancorpSouth Information. The information relating to BancorpSouth 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, Highland
Bank, First Community Bank or any of their 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. BancorpSouth 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 BancorpSouth or any of its Subsidiaries, and
neither BancorpSouth nor any of its Subsidiaries has received notice, and
BancorpSouth does not know, of any violations of any of the above.
5.15. Ownership of Company Common Stock; Affiliates and Associates. As of the
date hereof, neither BancorpSouth nor any of its affiliates or associates (as
such terms are defined under the
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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,
Highland Bank or First Community Bank (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 BancorpSouth 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
"BancorpSouth 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 BancorpSouth or any of its Subsidiaries been advised by
any Regulatory Agency or other Governmental Entity that it is considering
issuing or requesting any BancorpSouth Regulatory Agreement.
5.17. Environmental Matters.
(a) Each of BancorpSouth and its Subsidiaries and, to the knowledge of
BancorpSouth, 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 BancorpSouth, threatened, before any Governmental Entity or other
forum in which BancorpSouth, 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 (i) for alleged noncompliance
(including by any predecessor) with any Environmental Laws, or (ii) 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 BancorpSouth or
any of its Subsidiaries, any Participation Facility or any Loan Property;
(c) To the knowledge of BancorpSouth during the period of (i)
BancorpSouth's or any of its Subsidiaries' ownership or operation of any of
their respective current or former properties, (ii) BancorpSouth's or any of
its Subsidiaries' participation in the management of any Participation
Facility, or (iii) BancorpSouth'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 BancorpSouth, prior to the
period of (i) BancorpSouth's or any of its Subsidiaries' ownership or operation
of any of their respective current or former properties, (ii) BancorpSouth's or
any of its Subsidiaries' participation in the management of any Participation
Facility, or (iii) BancorpSouth'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: (i)
"Loan Property" means any property in which BancorpSouth 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 (ii) "Participation
Facility" means any facility in which BancorpSouth or any of its Subsidiaries
participates in the management and, where required by the context, said term
means the owner or operator of such property.
5.18. Approvals. As of the date of this Agreement, BancorpSouth 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 BancorpSouth Disclosure
Schedule, neither BancorpSouth nor any of its Subsidiaries is a party to any
written or oral Loan, other than Loans the
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unpaid principal balance of which does not exceed $100,000, under the terms of
which the obligor was, as of May 31, 1998, over 90 days delinquent in payment
of principal or interest or in default of any other provision. Section 5.19 of
the BancorpSouth Disclosure Schedule sets forth all Loans in original principal
amounts in excess of $100,000 of BancorpSouth or any of its Subsidiaries that
were as of May 31, 1998, classified as "Doubtful" or "Loss", or words of
similar import.
(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 BancorpSouth 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 BancorpSouth 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 BancorpSouth or any Subsidiary of
BancorpSouth, as lessee, leases real or personal property are valid and
enforceable in accordance with their respective terms and neither BancorpSouth
nor any of its Subsidiaries nor, to the knowledge of BancorpSouth, any other
party thereto is in default thereunder.
5.21. Accounting for the Merger; Reorganization. As of the date of this
Agreement, BancorpSouth 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, Highland Bank and First Community Bank. During
the period from the date of this Agreement and continuing until the Effective
Time, except as expressly contemplated or permitted by this Agreement and the
Stock Option Agreement or with the prior written consent of BancorpSouth, the
Company, Highland Bank, First Community Bank and their 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 and the Stock Option Agreement or as consented to
in writing by BancorpSouth, the Company, Highland Bank or First Community Bank
shall not, and shall not permit any of their Subsidiaries to:
(a) declare or pay any dividends on, or make other distributions in
respect of any of its capital stock during any period, at a rate that is
inconsistent with its past practice or in excess of the rate of its most recent
dividend or distribution prior to the date hereof;
(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,
Highland Bank, First Community Bank or any of their Subsidiaries, or any
securities convertible into or exercisable for any shares of the capital stock
of the Company, Highland Bank, First Community Bank or any of their
Subsidiaries, (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
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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, Highland Common Stock or First Community
Common Stock upon the exercise or fulfillment of rights or options issued or
existing pursuant to (A) 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 (B) the Stock Option Agreement;
(c) amend its Articles of Incorporation, Bylaws 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, Highland Bank
and First Community Bank may communicate information about any such takeover
proposal to its respective shareholders if, in the judgment of the Company's,
Highland Bank's or First Community Bank's respective Boards of Directors, based
upon the advice of outside counsel, such communication is required under
applicable law, provided further, however, that the Company, Highland Bank and
First Community Bank 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 respective
Boards of Directors of the Company, Highland Bank or First Community Bank 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,
Highland Bank and First Community Bank will immediately cease and cause to be
terminated any existing activities, discussions or negotiations previously
conducted with any parties other than BancorpSouth with respect to any of the
foregoing. The Company, Highland Bank and First Community Bank 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, Highland Bank and First Community Bank
will notify BancorpSouth 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, Highland Bank or First Community Bank, as applicable, and the Company,
Highland Bank and First Community Bank will promptly (within 24 hours) inform
BancorpSouth 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, Highland Bank and First Community Bank will keep
BancorpSouth 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, Highland Bank, First Community Bank or any of their Subsidiaries
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, Highland Bank,
First Community Bank or any of their Subsidiaries, other than the transactions
contemplated or permitted by this Agreement or 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 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
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the Company, Highland Bank or First Community Bank, 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,
Highland Bank, First Community Bank or any of their Subsidiaries 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;
(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, Highland Bank, First
Community Bank or any of their Subsidiaries is a party or by which the Company,
Highland Bank, First Community Bank or any of their 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, Highland Bank, First Community Bank or any of their
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));
(q) enter into any Loans in an original principal amount in excess of
$2,000,000; or
(r) agree or commit to do any of the foregoing.
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6.2. Covenants of BancorpSouth. Except as otherwise contemplated by this
Agreement or consented to in writing by the Company, BancorpSouth 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;
(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 BancorpSouth'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 BancorpSouth'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, BancorpSouth 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) BancorpSouth and the Company, Highland Bank and First Community Bank
shall promptly prepare and file with the SEC the Proxy Statement, and
BancorpSouth 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, Highland
Bank, First Community Bank and BancorpSouth shall use its reasonable best
efforts to have the S-4 declared effective under the Securities Act as promptly
as practicable after such filing, and each of the Company, Highland Bank and
First Community Bank shall thereafter mail the Proxy Statement to its respective
shareholders. BancorpSouth 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
BancorpSouth 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 BancorpSouth, as the case may be, and any of their respective
Subsidiaries, which appears in any filing made with, or written materials
submitted to, any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto shall act reasonably and as promptly as practicable.
The parties hereto agree that they will consult with each other with respect to
the obtaining of all permits, consents, approvals and authorizations of all
third parties and Governmental Entities necessary or advisable to consummate
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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) BancorpSouth and the Company, Highland Bank and First Community Bank
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 BancorpSouth, the Company, Highland Bank,
First Community Bank or any of their respective Subsidiaries to any
Governmental Entity in connection with the Merger and the other transactions
contemplated by this Agreement.
(d) BancorpSouth and the Company, Highland Bank and First Community Bank
shall promptly furnish each other with copies of written communications
received by BancorpSouth or the Company, Highland Bank or First Community
Bank, 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 (each, a "Representative") 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. In addition, the Company, Highland
Bank and First Community Bank shall permit a Representative of BancorpSouth to
have access to the premises and observe the operations of the Company, Highland
Bank and First Community Bank during normal business hours and to attend each
meeting of their respective Boards of Directors and committees thereof (other
than during discussions regarding this Agreement, the Stock Option Agreement
and the transactions contemplated hereby and thereby). 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 appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply.
(b) All information furnished to BancorpSouth pursuant to Section 7.2(a)
shall be subject to, and BancorpSouth shall hold all such information in
confidence in accordance with, the provisions of the confidentiality agreement
dated June 11, 1998 (the "Confidentiality Agreement"), between BancorpSouth and
the Company. Each of the Company, Highland Bank and First Community Bank shall
have the same obligations to BancorpSouth 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 Meetings. Each of the Company, Highland Bank and First
Community Bank 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. Each
of the Company,
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Highland Bank and First Community Bank will, through its respective Board of
Directors, recommend to its respective 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 BancorpSouth and the Company, Highland
Bank and First Community Bank shall, and shall cause their 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, Highland
Bank, First Community Bank or BancorpSouth 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 BancorpSouth and the Company, Highland Bank and First
Community Bank shall use its reasonable best efforts to cause each director,
executive officer and other person who is an "affiliate" (for purposes of Rule
145 under the Securities Act and for purposes of qualifying the Merger for
"pooling-of-interests" accounting treatment) of such party to deliver to the
other party hereto, as soon as practicable after the date of this Agreement, a
written agreement, in the form of Exhibit 7.5(a) hereto (in the case of
affiliates of BancorpSouth) or Exhibit 7.5(b) hereto (in the case of
affiliates of the Company, Highland Bank and First Community Bank).
7.6. Stock Exchange Listing. BancorpSouth shall use its reasonable best efforts
to cause the shares of BancorpSouth 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; Stay Pay Program.
(a) As of the Effective Time, the employees of the Company and its
Subsidiaries (the "Company Employees") shall be eligible to participate in
BancorpSouth's employee benefit plans in which similarly situated employees of
BancorpSouth or BancorpSouth Bank participate, to the same extent as similarly
situated employees of BancorpSouth or BancorpSouth Bank (it being understood
that inclusion of Company Employees in BancorpSouth's employee benefit plans
may occur at different times with respect to different plans).
(b) With respect to each BancorpSouth 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 BancorpSouth; 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 BancorpSouth
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 BancorpSouth Plan.
(c) As of the Effective Time, BancorpSouth shall assume and honor and
shall cause the appropriate Subsidiaries of BancorpSouth 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
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director, officer or employee thereof and which have been disclosed in the
Company Disclosure Schedule.
(d) BancorpSouth and the Company, Highland Bank and First Community Bank
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 BancorpSouth
after the Merger is completed, so that such plan merger satisfies the
requirements of Section 414(l) of the Code; provided, however, that
BancorpSouth 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 BancorpSouth Plan.
(e) BancorpSouth and the Company, Highland Bank and First Community Bank
shall cooperate in establishing a "stay pay" program for certain employees of
the Company, Highland Bank and First Community Bank, whereby such employees
would be paid up to three months of compensation as an incentive to remain in
the employ of the Company, Highland Bank and First Community Bank, as
applicable, during the period between the date hereof and the Closing. The
parties hereto shall negotiate the specific terms and conditions of such "stay
pay" program in good faith.
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, Highland Bank, First Community
Bank or any of their 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 the fact that (i) 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,
BancorpSouth 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 BancorpSouth; provided, however, that (1) BancorpSouth shall have the
right to assume the defense thereof and upon such assumption BancorpSouth 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 BancorpSouth elects not to
assume such defense or counsel for the Indemnified Parties reasonably advises
that there are issues which raise conflicts of interest between BancorpSouth
and the Indemnified Parties, the Indemnified Parties may retain counsel
reasonably satisfactory to them after consultation with BancorpSouth, and
BancorpSouth shall pay the reasonable fees and expenses of such counsel for the
Indemnified Parties, (2) BancorpSouth shall in all cases be obligated pursuant
to this paragraph to pay for only one firm of counsel for all Indemnified
Parties, (3) BancorpSouth shall not be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld) and (4) BancorpSouth 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
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under this Section 7.8, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify BancorpSouth thereof,
provided that the failure to so notify shall not affect the obligations of
BancorpSouth under this Section 7.8 except to the extent such failure to notify
materially prejudices BancorpSouth. BancorpSouth's obligations under this
Section 7.8 shall continue in full force and effect without time limit from and
after the Effective Time.
(b) BancorpSouth shall cause the persons serving as officers and directors
of the Company, Highland Bank, First Community Bank and their Subsidiaries
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, Highland Bank, First Community Bank
and their Subsidiaries, as applicable (provided that BancorpSouth 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 BancorpSouth 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 BancorpSouth is unable to maintain or obtain the insurance
called for by this Section 7.8(b), BancorpSouth shall use all reasonable
efforts to obtain as much comparable insurance as is available for the
Insurance Amount.
(c) In the event BancorpSouth 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
BancorpSouth assume the obligations set forth in this section.
(d) The provisions of this Section 7.8 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs
and representatives.
7.9. Additional Agreements. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement and their respective Subsidiaries shall take all such necessary
action as may be reasonably requested by BancorpSouth.
7.10. Coordination of Dividends. After the date of this Agreement each of
BancorpSouth 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 period with respect to
their shares of Company Common Stock and any shares of BancorpSouth Common
Stock any holder of Company Common Stock receives in exchange therefor in the
Merger.
7.11 Stock Option Agreement. Contemporaneously with the execution and delivery
of this Agreement, the Company and BancorpSouth shall execute and deliver the
Stock Option Agreement.
7.12 Highland Options. Each Highland Option that is outstanding but is not
vested in accordance with its terms and has not been exercised immediately
prior to the Effective Time shall terminate and be canceled as of the Effective
Time.
ARTICLE VIII
CONDITIONS PRECEDENT
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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 respective shareholders of the Company,
Highland Bank and First Community Bank under applicable law.
(b) Listing of Shares. The shares of BancorpSouth Common Stock which
shall be issued to the shareholders of the Company, Highland Bank and First
Community Bank upon consummation of the 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.
(f) Employment Agreement. Larry R. Mathews shall have entered into a
written employment agreement with BancorpSouth Bank containing non-competition
provisions satisfactory to BancorpSouth in its reasonable discretion, or the
Employment Agreement, dated as of January 1, 1998, between the Company and
Larry R. Mathews, shall have been duly amended by the parties thereto to delete
the last sentence of Section 6(a) thereof.
8.2. Conditions to Obligations of BancorpSouth. The obligation of BancorpSouth
to effect the Merger is also subject to the satisfaction or waiver by
BancorpSouth 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. BancorpSouth 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. Each of the Company,
Highland Bank and First Community Bank 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 BancorpSouth 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.
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(c) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
(d) Tax Opinion. BancorpSouth shall have received an opinion from Waller
Lansden Dortch & Davis, PLLC, counsel to BancorpSouth ("BancorpSouth's
Counsel"), in form and substance reasonably satisfactory to BancorpSouth, 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 BancorpSouth, the Company,
Highland Bank or First Community Bank as a result of the Merger;
(ii) No gain or loss will be recognized by the shareholders of the
Company, Highland Bank and First Community Bank who exchange all of their
Acquiree Common Stock solely for BancorpSouth Common Stock pursuant to
the Merger (except with respect to cash received in lieu of a fractional
share interest in BancorpSouth Common Stock); and
(iii) The aggregate tax basis of the BancorpSouth Common Stock
received by shareholders who exchange all of their Acquiree Common Stock
solely for BancorpSouth Common Stock pursuant to the Merger will be the
same as the aggregate tax basis of the Acquiree 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, BancorpSouth's Counsel may require and rely
upon representations and covenants, including those contained in certificates
of officers of BancorpSouth, the Company and others, reasonably satisfactory in
form and substance to such counsel.
(e) Legal Opinion. BancorpSouth shall have received an opinion from the
Company's Counsel (as defined below), in form and substance reasonably
satisfactory to BancorpSouth, dated the Effective Time, relating to the
enforceability of this Agreement and such other matters as BancorpSouth may
reasonably request; provided, however, that as to matters of Mississippi law,
the Company's Counsel may rely upon an opinion of Mississippi counsel addressed
to it or may cause such opinion to be issued directly to BancorpSouth.
(f) Pooling Treatment. KPMG Peat Marwick LLP, certified public
accountants for BancorpSouth, and Ernst & Young LLP, certified public
accountants for the Company, shall have each delivered a letter dated the
Closing Date and addressed to BancorpSouth, to the effect that the Merger will
qualify for pooling of interests accounting treatment under applicable
accounting standards if consummated in accordance with this Agreement.
(g) Shareholder Approval of Employment Agreement. Prior to the Effective
Time, the shareholders of the Company shall have duly approved the Employment
Agreement, dated as of January 1, 1998, between the Company and Larry R.
Mathews, such that the provisions of the Employment Agreement do not result in
any "excess parachute payments," within the meaning of Section 280G of the
Code, in accordance with Section 280G(b)(5) of the Code.
(h) Transfer of Certain Shares. Prior to the Effective Time, the Company
shall have conveyed for fair value all of its holdings of shares of capital
stock of EBSCO Industries, Inc. and of Shrewsbury Bank to a person or entity
that is not a Subsidiary of the Company.
(i) Highland Preferred Stock. Highland Bank shall have redeemed all of
the outstanding shares of Highland Preferred Stock at a redemption price per
share not greater than the par value per share thereof.
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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 BancorpSouth 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
BancorpSouth 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 BancorpSouth by the Chief Executive
Officer and the principal financial officer of BancorpSouth to the foregoing
effect.
(b) Performance of Obligations of BancorpSouth. BancorpSouth 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 BancorpSouth by the Chief
Executive Officer and the principal financial officer of BancorpSouth to such
effect.
(c) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
(d) Tax Opinion. The Company shall have received an opinion from Bradley
Arant Rose & White LLP (the "Company's Counsel"), in form and substance
reasonably satisfactory to the Company, dated the Effective Time, substantially
to the effect that, on the basis of facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts existing at
the Effective Time, the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code and that, accordingly, for federal income
tax purposes:
(i) No gain or loss will be recognized by BancorpSouth, the Company,
Highland Bank or First Community Bank as a result of the Merger;
(ii) No gain or loss will be recognized by the shareholders of the
Company, Highland Bank and First Community Bank who exchange all of their
Acquiree Common Stock solely for BancorpSouth Common Stock pursuant to
the Merger (except with respect to cash received in lieu of a fractional
share interest in BancorpSouth Common Stock); and
(iii) The aggregate tax basis of the BancorpSouth Common Stock
received by shareholders who exchange all of their Acquiree Common Stock
solely for BancorpSouth Common Stock pursuant to the Merger will be the
same as the aggregate tax basis of the Acquiree 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 BancorpSouth, the Company and others, reasonably satisfactory in
form and substance to such counsel.
(e) Fairness Opinion. Prior to the mailing of the Proxy Statement, the
Company shall have received an opinion from Alex Sheshunoff & Co. Investment
Banking 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.
(f) Legal Opinion. The Company shall have received an opinion from
BancorpSouth's Counsel, in form and substance reasonably satisfactory to the
Company, dated the Effective Time,
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relating to the enforceability of this Agreement, the validity of the shares of
BancorpSouth Common Stock to be issued in the Merger and such other matters as
the Company may reasonably request; provided, however, that as to matters of
Mississippi law, BancorpSouth's Counsel may rely upon an opinion of Mississippi
counsel addressed to it or may cause such opinion to be issued directly to the
Company.
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 the parties hereto:
(a) by mutual consent of the Company and BancorpSouth 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 BancorpSouth or the Company upon written notice to the other
party (i) 60 days after the date on which any request or application for a
Requisite Regulatory Approval shall have been denied or withdrawn at the
request or recommendation of the Governmental Entity which must grant such
Requisite Regulatory Approval, unless within the 60-day period following such
denial or withdrawal a petition for rehearing or an amended application has
been filed with the applicable Governmental Entity, provided, however, that no
party shall have the right to terminate this Agreement pursuant to this Section
9.1(b)(i) if such denial or request or recommendation for withdrawal shall be
due to the failure of the party seeking to terminate this Agreement to perform
or observe the covenants and agreements of such party set forth herein or (ii)
if any Governmental Entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the Merger;
(c) by either BancorpSouth or the Company if the Merger shall not have
been consummated on or before January 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 BancorpSouth 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 BancorpSouth 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 BancorpSouth);
(f) by either BancorpSouth 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;
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(g) by the Board of Directors of BancorpSouth, if the Board of Directors
of the Company, Highland Bank and First Community Bank shall have failed to
recommend in the Proxy Statement that the Company's, Highland Bank's and First
Community Bank's shareholders, as applicable, approve and adopt this Agreement,
or shall have withdrawn, modified or changed in a manner adverse to
BancorpSouth its approval or recommendation of this Agreement and the
transactions contemplated hereby;
(h) by either BancorpSouth or the Company as provided in Sections 1.4(a),
1.5(a) and 1.6(a) hereof.
9.2. Effect of Termination. In the event of termination of this Agreement by
either BancorpSouth 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, Highland Bank and First Community Bank; provided, however, that after
any approval of the transactions contemplated by this Agreement by the
Company's, Highland Bank's and First Community Bank'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's, Highland Bank's and First Community Bank's
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.
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.
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10.3. Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
10.4. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt
requested) or delivered by an express courier (with confirmation) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to BancorpSouth, 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, Highland Bank or
First Community Bank, to:
Alabama Bancorp., Inc.
2211 Highland Avenue
Birmingham, Alabama 35255
Attention: Larry R. Mathews
with a copy (which shall not constitute notice) to:
Bradley Arant Rose & White LLP
2001 Park Place, Suite 1400
Birmingham, Alabama 35203
Attention: Paul S. Ware, 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 June 19, 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
Confidentiality Agreement and the Stock Option Agreement.
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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.
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 BancorpSouth nor the Company,
Highland Bank or First Community Bank 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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IN WITNESS WHEREOF, each of the parties hereto 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: Chairman and Chief Executive Officer
ALABAMA BANCORP., INC.
By: /s/ LARRY R. MATHEWS
------------------------
Name: Larry R. Mathews
Title: President
HIGHLAND BANK
By: /s/ LARRY R. MATHEWS
------------------------
Name: Larry R. Mathews
Title: President and Chief Executive Officer
FIRST COMMUNITY BANK OF THE SOUTH
By: /s/ LARRY R. MATHEWS
------------------------
Name: Larry R. Mathews
Title: Director
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ANNEX B
DELAWARE GENERAL CORPORATION LAW
SECTION 262 - APPRAISAL RIGHTS
Section 262. Appraisal Rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section
228 of this title shall be entitled to an appraisal by the Court of Chancery of
the fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share"
mean and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251, 252, 254, 257, 258, 263 or 264 of this
title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock which,
at the record date fixed to determine the stockholders entitled to
receive notice of and to vote at the meeting of stockholders to act upon
the agreement of merger or consolidation, were either (i) listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000
stockholders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation
surviving a merger if the merger did not require for its approval the
vote of the stockholders of the surviving corporation as provided in
subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class
or series of stock of a constituent corporation if the holders thereof
are required by the terms of an agreement of merger or consolidation
pursuant to Sections 251, 252, 254, 257, 258, 263 and 264 of this title
to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation;
b. Shares of stock of any other corporation which at the
effective date of the merger or consolidation will be either listed
on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or held of record
by more than 2,000 stockholders;
c. Cash in lieu of fractional shares of the corporations
described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock and cash in lieu of
fractional shares described in the foregoing subparagraphs a., b.
and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Section 253 of this title
is not owned by the parent corporation
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immediately prior to the merger, appraisal rights shall be available for
the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (3) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares.
Such demand will be sufficient if it reasonably informs the corporation
of the identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of his shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting corporation
shall notify each stockholder of each constituent corporation who has
complied with this subsection and has not voted in favor of or consented
to the merger or consolidation of the date that the merger or
consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or 253 of this title, the surviving or resulting corporation, either
before the effective date of the merger or consolidation or within 10
days thereafter, shall notify each of the stockholders entitled to
appraisal rights of the effective date of the merger or consolidation and
that appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail,
return receipt requested, addressed to the stockholder at his address as
it appears on the records of the corporation. Any stockholder entitled
to appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise entitled
to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the
merger or consolidation, any stockholder who has complied with the requirements
of subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after his written request for such a statement is received by the
surviving
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or resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to subsection
(f) of this section and who has submitted his certificates of stock to the
Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote
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such stock for any purpose or to receive payment of dividends or other
distributions on the stock (except dividends or other distributions payable to
stockholders of record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition for an
appraisal shall be filed within the time provided in subsection (e) of this
section, or if such stockholder shall deliver to the surviving or resulting
corporation a written withdrawal of his demand for an appraisal and an
acceptance of the merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the corporation, then
the right of such stockholder to an appraisal shall cease. Notwithstanding the
foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed
as to any stockholder without the approval of the Court, and such approval may
be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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ANNEX C
CODE OF ALABAMA
ARTICLE 13. DISSENTERS' RIGHTS
Section 10-2B-13.01. Definitions
(1) "Corporate action" means the filing of articles of merger or share
exchange by the probate judge or Secretary of State, or other action giving
legal effect to a transaction that is the subject of dissenters' rights.
(2) "Corporation" means the issuer of shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 10-2B-13.02 and who exercises that right when
and in the manner required by Sections 10-2B-13.20 through 10-2B-13.28.
(4) "Fair Value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans, or, if none, at a rate that is fair
and equitable under all circumstances.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(7) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
Section 10-2B-13.02. Right to dissent
(a) A shareholder is entitled to dissent from, and obtain payment of the
fair value of his or her shares in the event of, any of the following corporate
actions:
(1) Consummation of a plan of merger to which the corporation is a
party (i) if shareholder approval is required for the merger by Section
10-2B-11.03 or the articles of incorporation and the shareholder is
entitled to vote on the merger or (ii) if the corporation is a subsidiary
that is merged with its parent under Section 10-2B-11.04;
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired,
if the shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange by all, or substantially all,
of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which
all or
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substantially all of the net proceeds of the sale will be distributed to
the shareholders within one year after the date of sale;
(4) To the extent that the articles of incorporation of the
corporation so provide, an amendment of the articles of incorporation
that materially and adversely affects rights in respect to a dissenter's
shares because it:
(i) Alters or abolishes a preferential right of the shares;
(ii) Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the
redemption or repurchase of the shares;
(iii) Alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities;
(iv) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights; or
(v) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under Section 10-2B-6.04; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the
board of directors provides that voting or nonvoting shareholders are
entitled to dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for shares under
this chapter may not challenge the corporate action creating his or her
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
Section 10-2B-13.03. Dissent as to fewer than all shares held -- Beneficial
owners
(a) A record shareholder may assert dissenters' rights as to fewer than
all of the shares registered in his or her name only if he or she dissents with
respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
he or she asserts dissenters' rights. The rights of a partial dissenter under
this subsection are determined as if the shares to which he or she dissents and
his or her other shares were registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his or her behalf only if:
(1) He or she submits to the corporation the record shareholder's
written consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights; and
(2) He or she does so with respect to all shares of which he or she
is the beneficial shareholder or over which he or she has power to direct
the vote.
Section 10-2B-13.20. Notice of rights
(a) If proposed corporate action creating dissenters' rights under Section
10-2B-13.02 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are
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or may be entitled to assert dissenters' rights under this article and be
accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Section
10-2B-13.02 is taken without a vote of shareholders, the corporation shall (1)
notify in writing all shareholders entitled to assert dissenters' rights that
the action was taken; and (2) send them the dissenters' notice described in
Section 10-2B-13.22.
Section 10-2B-13.21. Requirements for exercise of rights
(a) If proposed corporate action creating dissenters' rights under Section
10-2B-13.02 is submitted to a vote at a shareholder's meeting, a shareholder
who wishes to assert dissenters' rights (1) must deliver to the corporation
before the vote is taken written notice of his or her intent to demand payment
or his or her shares if the proposed action is effectuated; and (2) must not
vote his or her shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his or her shares under this article.
Section 10-2B-13.22. Dissenters' notice
(a) If proposed corporate action creating dissenters' rights under Section
10-2B-13.02 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Section 10-2B-13.21.
(b) The dissenters' notice must be sent no later than 10 days after the
corporate action was taken, and must:
(1) State where the payment demand must be sent;
(2) Inform holders of shares to what extent transfer of the shares
will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after
the date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this article.
Section 10-2B-13.23. Duty to demand payment
(a) A shareholder sent a dissenters' notice described in Section
10-2B-13.22 must demand payment in accordance with the terms of the dissenters'
notice.
(b) The shareholder who demands payment retains all other rights of a
shareholder until those rights are canceled or modified by the taking of the
proposed corporate action.
(c) A shareholder who does not demand payment by the date set in the
dissenters' notice is not entitled to payment for his or her shares under this
article.
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(d) A shareholder who demands payment under subsection (a) may not
thereafter withdraw that demand and accept the terms offered under the proposed
corporate action unless the corporation shall consent thereto.
Section 10-2B-13.24. Share restrictions
(a) Within 20 days after making a formal payment demand, each shareholder
demanding payment shall submit the certificate or certificates representing his
or her shares to the corporation for (1) notation thereon by the corporation
that such demand has been made and (2) return to the shareholder by the
corporation.
(b) The failure to submit his or her shares for notation shall, at the
option of the corporation, terminate the shareholders' rights under this
article unless a court of competent jurisdiction, for good and sufficient
cause, shall otherwise direct.
(c) If shares represented by a certificate on which notation has been made
shall be transferred, each new certificate issued therefor shall bear similar
notation, together with the name of the original dissenting holder of such
shares.
(d) A transferee of such shares shall acquire by such transfer no rights
in the corporation other than those which the original dissenting shareholder
had after making demand for payment of the fair value thereof.
Section 10-2B-13.25. Offer of payment
(a) As soon as the proposed corporate action is taken, or upon receipt of
a payment demand, the corporation shall offer to pay each dissenter who
complied with Section 10-2B-13.23 the amount the corporation estimates to be
the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of the offer, an income
statement for that year, and the latest available interim financial
statements, if any;
(2) A statement of the corporation's estimate of the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under
Section 10-2B-13.28; and
(5) A copy of this article.
(c) Each dissenter who agrees to accept the corporation's offer of payment
infull satisfaction of his or her demand must surrender to the corporation the
certificate or certificates representing his or her shares in accordance with
terms of the dissenters' notice. Upon receiving the certificate or
certificates, the corporation shall pay each dissenter the fair value of his or
her shares, plus accrued interest, as provided in subsection (a). Upon
receiving payment, a dissenting shareholder ceases to have any interest in the
shares.
Section 10-2B-13.26. Failure to take action
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(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment, the corporation shall release the
transfer restrictions imposed on shares.
(b) If, after releasing transfer restrictions, the corporation takes the
proposed action, it must send a new dissenters' notice under Section
10-2B-13.22and repeat the payment demand procedure.
Section 10-2B-13.27. Reserved.
Section 10-2B-13.28. Procedure if shareholder dissatisfied with
corporation's offer or failure to perform
(a) A dissenter may notify the corporation in writing of his or her own
estimate of the fair value of his or her shares and amount of interest due, and
demand payment of his or her estimate, or reject the corporation's offer under
Section 10-2B-13.25 and demand payment of the fair value of his or her shares
and interest due, if:
(1) The dissenter believes that the amount offered under Section
10-2B-13.25 is less than the fair value of his or her shares or that the
interest due is incorrectly calculated;
(2) The corporation fails to make an offer under Section 10-2B-13.25
within 60 days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does
not release the transfer restrictions imposed on shares within 60 days
after the date set for demanding payment.
(b) A dissenter waives his or her right to demand payment under this
section unless he or she notifies the corporation of his or her demand in
writing under subsection (a) within 30 days after the corporation offered
payment for his or her shares.
Section 10-2B-13.30. Commencement of proceedings
(a) If a demand for payment under Section 10-2B-13.28 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding
within the 60 day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the circuit court of
the county where the corporation's principal office (or, if none in this state,
its registered office) is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic
corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled parties to the proceeding as in an
action against their shares, and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided under the Alabama Rules of Civil Procedure.
(d) After service is completed, the corporation shall deposit with the
clerk of the court an amount sufficient to pay unsettled claims of all
dissenters party to the action in an amount per share equal to its prior
estimate of fair value, plus accrued interest, under Section 10-2B-13.25.
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(e) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one or
more persons as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
(f) Each dissenter made a party to the proceeding is entitled to judgment
for the amount the court finds to be the fair value of his or her shares, plus
accrued interest. If the court's determination as to the fair value of a
dissenter's shares, plus accrued interest, is higher than the amount estimated
by the corporation and deposited with the clerk of the court pursuant to
subsection (d), the corporation shall pay the excess to the dissenting
shareholder. If the court's determination as to fair value, plus accrued
interest, of a dissenter's shares is less than the amount estimated by the
corporation and deposited with the clerk of the court pursuant to subsection
(d), then the clerk shall return the balance of funds deposited, less any costs
under Section 10-2B-13.31, to the corporation.
(g) Upon payment of the judgment, and surrender to the corporation of the
certificate or certificates representing the appraised shares, a dissenting
shareholder ceases to have any interest in the shares.
Section 10-2B-13.31. Court costs and counsel fees
(a) The court in an appraisal proceeding commenced under Section
10-2B-13.30 shall determine all costs of the proceeding, including compensation
and expenses of appraisers appointed by the court. The court shall assess the
costs against the corporation, except that the court may assess costs against
all or some of the dissenters, in amounts the court finds equitable, to the
extent the court finds the dissenters acted arbitrarily, vexatiously, or not in
good faith in demanding payment under Section 10-2B-13.28.
(b) The court may also assess the reasonable fees and expenses of counsel
and experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Sections 10-2B-13.20 through 10-2B-13.28; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
Section 10-2B-13.32. Powers of corporation as to shares acquired pursuant to
payment
Shares acquired by a corporation pursuant to payment of the agreed value
therefor or to payment of the judgment entered therefor, as in this chapter
provided, may be held and disposed of by such corporation as in the case of
other treasury shares, except that, in the case of a merger or share exchange,
they may be held and disposed of as the plan of merger or share exchange may
otherwise provide.
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ANNEX D
[Letterhead of Alex Sheshunoff & Co. Investment Banking]
June 19, 1998
Board of Directors
Alabama Bancorp
3401 Colonnade Parkway
Birmingham, Alabama 35243
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding shares of common stock of First
Community Bank of the South, Fort Deposit, Alabama ("First Community"), and to
the holders of the outstanding shares of common stock of Highland Bank,
Birmingham, Alabama ("Highland") of the allocation of the value of the shares
to be received by the holders of the stock of First Community and the holders
of the stock of Highland in the proposed merger between Alabama Bancorp
("Alabama") and BancorpSouth, Inc., Tupelo, Mississippi, ("Bancorp"). The
shares will be exchanged pursuant to an Agreement and Plan of Merger dated June
19, 1998 (the "Merger Agreement"). Pursuant to the Merger Agreement, Bancorp
shall cause Alabama to be merged with and into Bancorp. In consideration of
the merger, Bancorp has offered to exchange $77,000,000 in shares of its common
stock for the outstanding shares of Alabama common stock.
<TABLE>
<S> <C>
The allocation of value between First Community and Highland is as follows:
Highland Bank $61,929,250
First Community Bank of the South $15,070,750
Total Consideration to be received $77,000,000
</TABLE>
Alex Sheshunoff & Co. Investment Banking ("Sheshunoff") is regularly engaged in
the valuation of securities in connection with mergers and acquisitions,
private placements, and valuations for estate, corporate and other purposes.
Sheshunoff was not engaged and did not participate in the negotiations leading
to the merger.
In connection with our opinion, we have, among other things:
1. Evaluated the relative contributions of First Community and
Highland to Alabama's consolidated results based upon a review of
the annual
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earnings for each bank for the four-year period ending December 31,
1997;
2. Reviewed Call Report information as of December 1997 for
Alabama, First Community and Highland;
3. Conducted conversations with executive management regarding
recent and projected financial performance of Alabama, First
Community and Highland;
4. Compared First Community's and Highland's recent operating
results with those of certain other banks in the Southeast region of
the United States which have recently been acquired;
5. Compared First Community's and Highland's recent operating
results with those of certain other banks in Alabama which have
recently been acquired;
6. Compared the pricing multiples for the respective values
allocated to First Community and to Highland in the Merger to those
of certain other banks in Alabama which have recently been acquired;
7. Compared the pricing multiples for the respective values
allocated to First Community and to Highland in the Merger to those
of certain other banks in the Southeast region of the United States
which have recently been acquired;
8. Performed an affordability analysis based on the projections
of earnings for combined entity subsequent to the Merger;
9. Reviewed the historical stock price and trading volume of
Bancorp common stock and the lack of any active market for the
common stock of First Community, Highland and Alabama; and
10. Performed such other analyses as we deemed appropriate.
We have assumed and relied upon, without independent verification, the accuracy
and completeness of the information provided to us by Alabama on behalf of
First Community and Highland for the purposes of this opinion. In addition,
where appropriate, we have relied upon publicly available information that we
believe to be reliable, accurate and complete; however, we cannot guarantee the
reliability, accuracy or completeness of any such publicly available
information We have not made an independent evaluation of the assets or
liabilities of Alabama, First Community, Highland or Bancorp, nor have we been
furnished with any such appraisals.
We are not experts in the evaluation of loan portfolios for the purposes of
assessing the adequacy of the allowance for losses and have assumed that such
allowances for each of the companies are in the aggregate, adequate to cover
such losses. We have
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assumed that both Alabama and Bancorp have received all required regulatory
approvals necessary to consummate the Merger without conditions that will
materially impact the Merger.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
Events occurring after the date hereof could materially affect the assumptions
used in preparing this opinion.
Our opinion is limited to the fairness, from a financial point of view, to the
holders of First Community's common stock and the holders of Highland's common
stock, of the allocation of the purchase price between the holders of the
common stock of each of the two banks. Moreover, this letter, and the opinion
expressed herein, do not constitute a recommendation to any shareholder as to
any approval of the Merger or the Merger Agreement. It is understood that this
letter is for the information of the Board of Directors of Alabama and may not
be used for any other purpose without our prior written consent.
Based on the foregoing and such other matters we have deemed relevant, it is
our opinion, as of the date hereof, that the allocation of stock to be received
by the holders of common stock of First Community and of Highland is fair, from
a financial point of view, to the holders of First Community common stock and
to the holders of Highland common stock.
Very truly yours,
ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
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ANNEX E
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
THIS STOCK OPTION AGREEMENT ("AGREEMENT"), dated as of June 19, 1998,
between ALABAMA BANCORP., INC., a Delaware 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 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 5167 fully paid
and nonassessable shares of Issuer's Common Stock, $0.25 par value per share
("Common Stock"), at a price of $2400.00 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.
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
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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 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
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bank regulatory authority, which application or notice has been accepted
for processing, for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 25% or
more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (y) shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event of which it has
notice (together, a "Triggering Event"), it being understood that the giving of
such notice by Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares it will purchase pursuant to such exercise and (ii) a place and date not
earlier than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (the "Closing Date"); provided
that if prior notification to or approval of the Federal Reserve Board or any
other regulatory agency is required in connection with such purchase, the
Holder shall promptly file the required notice or application for approval and
shall expeditiously process the same and the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which
any required notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or periods shall
have passed. Any exercise of the Option shall be deemed to occur on the Notice
Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable hereunder, and the
Holder shall deliver to Issuer this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file
at the principal office of Issuer and will be provided to the holder
hereof without charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act"), in the
above legend shall be removed by delivery of substitute certificate(s) without
such reference if the Holder shall have delivered to Issuer a copy of a letter
from the staff of the SEC, or an opinion of counsel, in form and substance
reasonably
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satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions to this
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii)
the legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from preemptive
rights, sufficient authorized but unissued shares of Common Stock so that the
Option may be exercised without additional authorization of Common Stock after
giving effect to all other options, warrants, convertible securities and other
rights to purchase Common Stock; (ii) that it will not, by charter amendment or
through reorganization, consolidation, merger, dissolution or sale of assets,
or by any other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be observed
or performed hereunder by Issuer; (iii) promptly to take all action as may from
time to time be required (including (x) complying with all premerger
notification, reporting and waiting period requirements specified in 15 U.S.C.
Section Section 18a and regulations promulgated thereunder and (y) in the
event, under the Bank Holding Company Act of 1956, as amended (the "BHCA"), or
the Change in Bank Control Act of 1978, as amended, or any state banking law,
prior approval of or notice to the Federal Reserve Board or to any state
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board or such state
regulatory authority as they may require) in order to permit the Holder to
exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock that
are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise
of the Option and the Option Price shall be subject to adjustment from time to
time as provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions, conversions,
exchanges of shares, distributions on or in respect of the Common Stock that
would be prohibited under the terms of the Merger Agreement, or
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the like, the type and number of shares of Common Stock purchasable upon
exercise hereof and the Option Price shall be appropriately adjusted in such
manner as shall fully preserve the economic benefits provided hereunder and
proper provision shall be made in any agreement governing any such transaction
to provide for such proper adjustment and the full satisfaction of the Issuer's
obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to an
Exercise Termination Event, Issuer shall, at the request of Grantee delivered
within 90 days of such Subsequent Triggering Event (whether on its own behalf
or on behalf of any subsequent holder of this Option (or part thereof) or any
of the shares of Common Stock issued pursuant hereto), promptly prepare, file
and keep current a shelf registration statement under the 1933 Act covering
this Option and any shares issued and issuable pursuant to this Option and
shall use its reasonable best efforts to cause such registration statement to
become effective and remain current in order to permit the sale or other
disposition of this Option and any shares of Common Stock issued upon total or
partial exercise of this Option ("Option Shares") in accordance with any plan
of disposition requested by Grantee. Issuer will use its reasonable best
efforts to cause such registration statement first to become effective and then
to remain effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. Grantee shall
have the right to demand two such registrations. The foregoing notwithstanding,
if, at the time of any request by Grantee for registration of the Option or
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good
faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the inclusion of
the Holder's Option or Option Shares would interfere with the successful
marketing of the shares of Common Stock offered by Issuer, the number of Option
Shares otherwise to be covered in the registration statement contemplated
hereby may be reduced; provided, however, that after any such required
reduction the number of Option Shares to be included in such offering for the
account of the Holder shall constitute at least 25% of the total number of
shares to be sold by the Holder and Issuer in the aggregate; and provided
further, however, that if such reduction occurs, then the Issuer shall file a
registration statement for the balance as promptly as practicable and no
reduction shall thereafter occur. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by any such Holder in connection
with such registration, Issuer shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties, indemnities and
other agreements customarily included in secondary offering underwriting
agreements for the Issuer. Upon receiving any request under this Section 6 from
any Holder, Issuer agrees to send a copy thereof to any other person known to
Issuer to be entitled to registration rights under this Section 6, in each case
by promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies. Notwithstanding anything to the
contrary contained herein, in no event shall Issuer be obligated to effect more
than two registrations pursuant to this Section 6 by reason of the fact that
there shall be more than one Grantee as a result of any assignment or division
of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event (as defined
below), (i) following a request of the Holder, delivered prior to an Exercise
Termination Event, Issuer (or any successor thereto) shall repurchase the
Option from the Holder at a price (the "Option Repurchase Price") equal to the
amount by which (A) the Market/Offer Price (as defined below) exceeds (B) the
Option Price, multiplied by the number of shares for which this Option may then
be exercised and (ii) at the request of the owner of Option Shares from time to
time (the "Owner"), delivered within 90 days of such occurrence (or such later
period as provided in Section 10), Issuer shall repurchase such number of the
Option Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the Market/Offer Price multiplied by
the number of Option Shares so designated. The term "Market/Offer Price" shall
mean the highest of (i) the price per share of Common Stock at which a tender
offer or exchange offer therefor has been made, (ii) the price per share of
Common Stock to be paid by any third party pursuant to an agreement with
Issuer, (iii) the highest closing price for shares of Common Stock within the
six-month period immediately preceding
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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, as reported or quoted on the exchange or market, if any, on which
shares of Common Stock are then listed or included for quotation, or (iv) in
the event of a sale of all or a substantial portion of Issuer's assets, the sum
of the price paid in such sale for such assets and the current market value of
the remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case may
be, and reasonably acceptable to the Issuer, divided by the number of shares of
Common Stock of Issuer outstanding at the time of such sale. In determining the
Market/Offer Price, the value of consideration other than cash shall be
determined by a nationally recognized investment banking firm selected by the
Holder or Owner, as the case may be, and reasonably acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder or the
Owner, as the case may be, elects to require Issuer to repurchase this Option
and/or the Option Shares in accordance with the provisions of this Section 7.
Within the latter to occur of (x) five business days after the surrender of the
Option and/or certificates representing Option Shares and the receipt of such
notice or notices relating thereto and (y) the time that is immediately prior
to the occurrence of a Repurchase Event, Issuer shall deliver or cause to be
delivered to the Holder the Option Repurchase Price and/or to the Owner the
Option Share Repurchase Price therefor or the portion thereof, if any, that
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full,
Issuer shall immediately so notify the Holder and/or the Owner and thereafter
deliver or cause to be delivered, from time to time, to the Holder and/or the
Owner, as appropriate, the portion of the Option Repurchase Price and the
Option Share Repurchase Price, respectively, that it is no longer prohibited
from delivering, within five business days after the date on which Issuer is no
longer so prohibited; provided, however, that if Issuer at any time after
delivery of a notice of repurchase pursuant to paragraph (b) of this Section 7
is prohibited under applicable law or regulation from delivering to the Holder
and/or the Owner, as appropriate, the Option Repurchase Price and the Option
Share Repurchase Price, respectively, in full (and Issuer hereby undertakes to
use its best efforts to obtain all required regulatory and legal approvals and
to file any required notices as promptly as practicable in order to accomplish
such repurchase), the Holder or Owner may revoke its notice of repurchase of
the Option or the Option Shares either in whole or to the extent of the
prohibition, whereupon, in the latter case, Issuer shall promptly (i) deliver
to the Holder and/or the Owner, as appropriate, that portion of the Option
Repurchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Holder, a new Stock Option Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock Option
Agreement was exercisable at the time of delivery of the notice of repurchase
by a fraction, the numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the denominator of
which is the Option Repurchase Price, or (B) to the Owner, a certificate for
the Option Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be deemed to
have occurred (i) upon the consummation of any merger, consolidation or similar
transaction involving Issuer or any purchase, lease or other acquisition of all
or a substantial portion of the assets of Issuer, other than any such
transaction which would not constitute an Acquisition Transaction pursuant to
the provisos to Section 2(b)(i) hereof or (ii) upon the acquisition by any
person of beneficial ownership of 50% or more of the then outstanding shares of
Common Stock, provided that no such event shall constitute a Repurchase Event
unless a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event. The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7 shall not terminate
upon the occurrence of an Exercise
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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:
(i) "Acquiring Corporation" shall mean (A) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (B) Issuer in a merger in which Issuer is the continuing or
surviving person, and (C) the transferee of all or substantially all of
Issuer's assets.
(ii) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute
Option.
(iii) "Assigned Value" shall mean the Market/Offer Price, as defined
in Section 7.
(iv) "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
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more than 19.9% of the shares of Substitute Common Stock outstanding prior to
exercise but for this clause (e), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall make a cash payment to Holder equal to the
excess of (i) the value of the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the Substitute Option
after giving effect to the limitation in this clause (e). This difference in
value shall be determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, and reasonably
acceptable to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the "Substitute
Option Holder"), the Substitute Option Issuer shall repurchase the Substitute
Option from the Substitute Option Holder at a price (the "Substitute Option
Repurchase Price") equal to the amount by which (i) the Highest Closing Price
(as hereinafter defined) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common Stock for which
the Substitute Option may then be exercised and at the request of the owner
(the "Substitute Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to
the Highest Closing Price multiplied by the number of Substitute Shares so
designated. The term "Highest Closing Price" shall mean the highest closing
price for shares of Substitute Common Stock within the six-month period
immediately preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share Owner
gives notice of the required repurchase of the Substitute Shares, as
applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant
to this Section 9 by surrendering for such purpose to the Substitute Option
Issuer, at its principal office, the agreement for such Substitute Option (or,
in the absence of such an agreement, a copy of this Agreement) and certificates
for Substitute Shares accompanied by a written notice or notices stating that
the Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase
Price and/or to the Substitute Share Owner the Substitute Share Repurchase
Price therefor or, in either case, the portion thereof which the Substitute
Option Issuer is not then prohibited under applicable law and regulation from
so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option Issuer following a
request for repurchase pursuant to this Section 9 shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner and thereafter
deliver or cause to be delivered, from time to time, to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the portion of the
Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five business days after the date on which
the Substitute Option Issuer is no longer so prohibited; provided, however,
that if the Substitute Option Issuer is at any time after delivery of a notice
of repurchase pursuant to subsection (b) of this Section 9 prohibited under
applicable law or regulation from delivering to the Substitute Option Holder
and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder or Substitute Share
Owner may revoke its notice of repurchase of the Substitute Option or
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the Substitute Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.
10. The 90-day period for exercise of certain rights under Sections 2, 6, 7 and
13 shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer 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 date 15 days
following the date on which the Federal Reserve Board approves an application
by
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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.
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.
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22. Capitalized terms used in this Agreement and not defined herein shall have
the meanings assigned thereto in the Merger Agreement.
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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.
ALABAMA BANCORP., INC.
By: /s/ LARRY R. MATHEWS
-------------------------------------
Name: Larry R. Mathews
Title: President
BANCORPSOUTH, INC.
By: /s/ AUBREY B. PATTERSON
------------------------------------
Name: Aubrey B. Patterson
Title: Chairman and Chief Executive Officer
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Annex F
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made by and between
ALABAMA BANCORP., INC., an Alabama corporation (the "Company") and LARRY R.
MATHEWS, an individual resident of Alabama (the "Executive") effective as of
January 1, 1998.
RECITALS:
The Company desires to employ the Executive as its President and President
and Chief Executive Officer of Highland Bank, its wholly owned subsidiary,
pursuant to the terms hereof and the Executive is willing to become employed by
the Company on the terms and conditions herein provided.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree that on the effective date hereof:
1. Employment. The Company shall employ the Executive, and the Executive
shall serve the Company, as President of the Company and President and Chief
Executive Officer of Highland Bank, its wholly owned subsidiary, upon the terms
and conditions set forth herein. The Executive shall have such authority and
responsibility consistent with his position and which may be set forth in the
Company's bylaws or assigned by the Company's Board of Directors from time to
time. The Executive shall devote his full business time, attention, skill and
efforts to the performance of his duties hereunder, except during periods of
illness or periods of vacation and leaves of absence consistent with Company
policy. The Executive may devote reasonable periods to serve as a director or
advisor to other organizations, to charitable and community activities, and to
managing his personal investments, provided that such activities do not
materially interfere with the performance of his duties hereunder and are not
in conflict or competitive with, or adverse to, the interests of the Company.
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2. Terms. Unless earlier terminated as provided herein, the Executive's
employment under this Agreement shall be for an initial term of one year from
the date hereof and shall automatically renew (without further action of the
Company or the Executive) for successive one year period unless and until
either party gives notice of non-renewal at least 60 days prior to the
expiration of the initial one (1) year period or any renewal year (for
convenience, the initial year and all renewal years or portions thereof prior
to the Termination Date are referred to as the "Term").
3. Compensation and Benefits.
(a) The Company shall pay the Executive base or minimum annual cash
compensation consisting of two components: (i) a base annual salary of
$180,000.00; and (ii) an annual bonus calculated as provided hereinbelow. The
base salary shall be payable at least monthly at the rate of 1/12th of the
annual base salary (pro-rated for the first and final months during the Term,
if less than a full calendar month). The annual bonus shall be paid within 120
days after the end of each fiscal year. The annual bonus shall be based upon
the net income before tax ("NIBT") for each fiscal year of the Company
calculated in accordance with generally accepted accounting principles
consistently applied. The amount of the annual bonus, shall be calculated by
multiplying the applicable percentage set forth under column A, below, times
the amount of the Company's NIBT for the applicable fiscal year. Examples of
the calculation of the bonus under this paragraph (a) are set forth on Exhibit
A attached hereto.
<TABLE>
<CAPTION>
A. Percentage of NIBT To Be Paid To B. If Applicable Fiscal Year's NIBT Is
Executive The Following Percentage Of The NIBT
For the Highest Of The Three Preceding
Fiscal Years
<S> <C>
1) 2.0% 904% to less than 100%
2) 2.5% 100% to less than 105%
3) 3.0% 105% to less than 110%
4) 3.5% 110% to less than 115%
S) 4.0% 115% to less than 120%
6) 4.5% 120%
</TABLE>
Provided, however, if the NIBT for the applicable fiscal year is less than
90% the NIBT for the highest of the three preceding fiscal years, the amount of
any annual bonus shall be subject to the absolute discretion of the Company.
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(b) In addition to the annual bonus provided for in paragraph (a) above,
Executive shall be entitled to receive two (2) special one-time bonuses if NIBT
reaches or exceeds the amount stated below. If NIBT reaches $3,500,000.00 on or
before fiscal year ending December 31, 1999, Executive shall be paid a bonus of
$75.000.00. If NIBT reaches $4,000,000.00 by fiscal year ending December 31,
2000, Executive shall be paid a bonus of $150,000.00 or if NIBT reaches
$4,000,000.00 by fiscal year ending December 31, 2001, Executive shall be paid
a bonus of $100,000.00.
(c) Upon a Change of Control, the Executive will thereupon earn and be
paid a bonus equal to the greater of $1,000,000.00 or two percent (2%) of the
sales proceeds (or, if the consideration paid to the Company or Highland Bank
or their stockholders is not cash, the fair and reasonable value of the stock
or other consideration paid or transferred to the Company, Highland Bank, or
their shareholders) less the Executive's earnings under the Performance Award
Agreement with the Company. If the Company or Highland Bank is taken public wit
a share offering of one-third (1/3) or more of the total outstanding shares
(after inclusion of any shares offered in the public offering), Executive shall
have the right and option of being issued up to two percent (2%) of the total
outstanding shares to be offset by a reduction in the amount to which the
Executive is entitled to receive under the Performance Award Agreement equal to
the value of the shares issued to the Executive.
(d) The Executive shall participate in all retirement, welfare, deferred
compensation, life and health insurance (including medical, dental and
hospitalization under a Blue Cross Blue Shield group plan at a minimum),
vacation, and other benefit plans or programs of the Company or its
subsidiaries now or hereafter applicable to the Executive or applicable
generally to employees of the Company or its subsidiaries or to a class of
employees that includes senior executives of the Company or its subsidiaries;
provided that during any period during the Term that the Executive is subject
to a Disability, the amount of the Executive's base annual salary provided
under this Section 3 shall be reduced by the sum of the amounts, if any, paid
to the Executive for the same period under any disability benefit plan of the
Company or any of its subsidiaries.
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(e) The Company shall provide to the Executive an automobile owned or
leased by the Company of a make and model appropriate to the Executive's
position.
(f) The Company shall reimburse the Executive's reasonable expenses for
dues and capital assessments for country club and dining club memberships
currently held by the Executive.
(g) The Company, at its expense, shall provide the Executive a life
insurance policy with death benefit of a minimum of $1,000,000.00 through age
60.
(h) The Company, at its expense, shall continue to provide the Executive a
disability insurance policy with minimum monthly benefits equal to the amount
of the Executive's base salary (or the highest percentage of base salary
available from time to time) commencing no later than 180 days after
commencement of Disability.
(i) Executive shall be paid a bonus of $90,000.00 for fiscal year ended
December 31, 1997. Executive and Company each acknowledge that such bonus has
been paid to and received by Executive.
4. Termination: Severance Pay.
(a) The Executive's employment under this Agreement may be terminated only
as follows:
(i) by the Company for Cause by delivery
of a Notice of Termination to the Executive;
(ii) by the Company by delivery of a
notice of non-renewal pursuant to Section 2;
(iii) by the Company by delivery of a
Notice of Termination to the Executive within a one (1)
year period beginning on the day after a Change of
Control;
(iv) by the Executive by delivery of a
Notice of Termination to the Company within a one (1)
year period beginning on the day after a Change in
Control;
(v) by the Executive by delivery of a
notice of non-renewal pursuant to Section 2.
(b) If the Executive's employment with the Company is terminated by the
Company for Cause, the Company shall pay to the Executive within fifteen days
after the Termination Date a lump sum cash payment equal to the Accrued
Compensation.
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(c) If the Executive's employment with the Company is terminated by the
Company other than for Cause (e.g., if the Executive is terminated by the
Company following a Change of Control or if the Company elects not to renew the
Executive's employment under Section 2 by giving notice of non-renewal under
Section 2) or by the Executive following a Change of Control, in addition to
other rights and remedies available in law or equity, it any, the Executive
shall be entitled to receive, and the Company agrees to pay or provide all of
the following:
(i) the Company shall pay the Executive
in cash within fifteen days of the Termination Date an
amount equal to all Accrued Compensation;
(ii) the Company shall pay to the
Executive in cash at the end of each of the 36
consecutive calendar moths following the Termination
Date as amount equal to one-twelfth (1/12th) of the cash
compensation from salary and bonus during the fiscal
year preceding the Termination Date. Provided, however,
that if payments under this clause (ii) are made as a
result of or following a Change of Control, then the
member of months of payment hereunder shall be reduced
by the number of month, the Executive is employed with
the successor organization following the Change of
Control; and
(iii) for the period from the Termination
Date through the date that Executive attains the age of
65 (the "Continuation Period"), the Company shall, at
its expense, continue on behalf of the Executive and his
dependents and beneficiaries the life insurance,
disability, medical, dental and hospitalization benefits
provided to the Executive at any time during the year
prior to the Change in Control. The coverage and
benefits (including deductibles and costs) provided in
this Section 4(c)(iii) during the Continuation Period
shall be no less favorable to the Executive and his
dependents and beneficiaries than the most favorable of
such coverages and benefits during the period referred
to In the preceding sentence. Provided, however, that if
the Executive is provided the foregoing benefits by a
successor employer following a Change of Control, then
the Company shall only be required to provide the
benefits to the extent the successor's benefits are not
equal. Provided further that the life insurance
provided for under Section 2(h) shall only be continued
through age 60.
(d) The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or
otherwise, and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Executive In any subsequent
employment, except as specifically provided in (c) (iii) above.
5. Trade Secrets. The Executive shall not, at any time, either during the
Term of his employment or after the Termination Date, if such Termination is
for Cause, use or disclose any
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Trade Secrets of the Company, except in fulfillment of his duties as the
Executive during his employment, for so long as the pertinent information or
data remain Trade Secrets, whether or not the Trade Secrets are in written or
tangible form.
6. Non-Competition.
(a) In the event that the Executive's employment under this Agreement
shall be terminated and the Company has met, or is current with, its
obligations under Section 4 (c) above, for one year following the Termination
Date, the Executive shall not, directly or indirectly, own, operate, be
employed by, be a director of, act as a consultant for, be associated with, or
be a partner or have proprietary interest in, any enterprise, partnership,
association, corporation, joint venture, or other entity, which is competitive
with the business of Highland Bank, in any county in any state where Highland
Bank has an office or other place of business at the Termination Date. Offices
and other places of business of Successors and Assigns of the Company shall nor
be considered in determining the prohibited geographical area. Notwithstanding
the foregoing, this Section 6 shall not apply at any time after a Change of
Control shall have occurred.
(b) The parties have entered into this Section 6 of this Agreement in good
faith and for the reasons set forth in the recitals hereto and assume that this
Agreement is legally bind. If, for any reason, this Agreement is not binding
because of its geographical scope or because of its term, then the parties
agree that this Agreement shall be deemed effective to the widest geographical
area and/or the longest period of tune (but not in excess of one year) as the
case may be legally enforceable.
(c) The Executive acknowledges that the rights and privileges granted to
the: Company in this Section 6 are of special and unique character, which gives
them a peculiar value, the loss of which may not be reasonably or adequately
compensated for by damages in an action at law, and that a breach thereof by
the Executive of this Agreement will cause the Company great and irreparable
injury and damage. Accordingly, the Executive hereby agrees that the Company
shall be entitled to remedies of injunction, specific performance or other
equitable relief to prevent a breach
F-6
<PAGE> 209
of the Section 6 of this Agreement by the Executive. This provision shall not
be construed as a waiver of any other rights or remedies the Company may have
at law or in equity for damages or otherwise.
7. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other; provided that all notices to the Company shall be directed to the
attention of the Board of Directors with a copy to the Secretary of the
Company. All notices and communications shall be deemed to have been received
on the date of delivery thereof.
8. Modification and Waiver. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and the Company. No waiver by
any party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
9. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Alabama without giving
effect to the conflict of laws principles thereof. Any action brought by any
party to this Agreement shall be brought and maintained in a court of competent
jurisdiction in the State of Alabama.
10. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
11. Entire Agreement. This Agreement constitutes the entire agreement
between the panties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
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<PAGE> 210
12. Headings. The headings of Sections herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
14. Successors: Binding Agreement.
(a) This Agreement shall be binding upon and shall inure to tile benefit
of the Company, its Successors and Assigns and the Company shall require any
Successors and Assigns to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal personal representative.
15. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Accrued Compensation" shall mean an amount which shall include all
amounts earned or accrued through the Termination Date but not paid as of the
Termination Date including, without limitation (i) base salary, (ii)
reimbursement for reasonable and necessary expenses incurred by the Executive
on behalf of the Company during the period ending on the Termination Date, and
(iii) bonuses.
(b) The termination of the Executive's employment shall be for "Cause" if
it is a result of:
(i) any act that constitutes, on the part
of the Executive, fraud or dishonesty, or
(ii) the conviction of the Executive of a
felony; or
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<PAGE> 211
(iii) the suspension or removal of the
Executive by federal or state banking regulatory
authorities acting under lawful authority pursuant to
provisions of federal or state law or regulation which
may be in effect from time to time;
(c) A "Change in Control" shall mean the occurrence during the Term of any
of the following events:
(i) An acquisition after the effective
date hereof of any voting securities of the Company or
Highland Bank (the "Voting Securities") by any "Person"
(as the term person is used for purposes of Sections
13(d) or 14(d) of the Securities Exchange Act of 1934
(the "1934 Act")) immediately after which such Person
has "Beneficial Ownership" (within the meaning of Rule
13d-3 promulgated under the 1934 Act) of 20%; or more of
the combined voting power of the Company's or Highland
Bank's then outstanding Voting Securities;
(ii) The individuals who, as of the date
of this Agreement, are members of the Board of Directors
of the Company or Highland Bank (the "Incumbent Board")
cease for any reason to constitute at least two-thirds
of the Board; provided, however, that if the election,
or nomination for election by the Company's or Highland
Bank's stockholders, of any new director was approved by
a vote of at lest two-thirds of the Incumbent Board,
such new director shall, for purposes of this Agreement,
be considered as a member of the Incumbent Board; or
(iii) Approval by stockholders of the Company of:
(A) A merger, consolidation or reorganization
involving the Company, unless
(1) the stockholders of the Company, immediately
before such merger, consolidation or
reorganization, own, directly or indirectly,
immediately following such merger,
consolidation or reorganization, at least
two-thirds of the combined voting power of
the outstanding voting securities of the
corporation resulting from such merger or
consolidation or reorganization (the
"Surviving Corporation") in substantially
the same proportion as their ownership of
the Voting Securities immediately before
such merger, consolidation or
reorganization, and
(2) the individual who were members of the Incumbent
Board immediately prior to the execution of
the agreement providing for such merger,
consolidation or reorganization constitute
at least two-thirds of the members of the
board of directors of the Surviving
Corporation.
(B) A complete liquidation or
dissolution of the Company; or
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(C) An agreement for the sale or other dispensation
of all or substantially all of the assets of
the Company or Highland Bank to any Person
(other than a transfer to the Company).
(iv) Approval by the stockholder of Highland Bank of (A)
a merger, consolidation or reorganization of
Highland Bank (unless the successor or survivor
continues to be a subsidiary of the Company or the
merger is into the Company) or (B) a sale of all or
substantially all of the operating assets of
Highland Bank.
(d) "Continuation Period" shall have the meaning ascribed to it in Section
4(c) (iii).
(e) "Disability" shall mean a physical or mental infirmity which impairs
the Executive's ability to substantially perform his duties with the Company
for a period of 180 consecutive days, as determined by an independent physician
selected with the approval of both the Company and the Executive (or his
guardian or attorney-in-fact if he is unable to select).
(f) "Notice of Termination" shall mean a written notice of termination of
employment from the Company or the Executive which specifies an effective date
of termination, indicates the specific termination provision in this Agreement
relied upon, and sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
(g) "Performance Award Agreement" means that certain Performance
Award Agreement between the Company and the Employee executed simultaneously
herewith.
(h) "Successors and Assigns" shall mean a corporation or other entity
acquiring all or substantially all the assets and business of the Company or
Highland Bank (including this Agreement), whether by merger, operation of law
or otherwise.
(i) "Termination Date" shall mean the date specified in the Notice of
Termination.
(j) "Trade Secrets" shall mean any information, including but not limited
to technical or non-technical data, a formula, a pattern, a compilation, a
program, a device, a method, a technique, a drawing, a process, financial data,
financial plans, product plans, information on customers, or a list of actual
or potential customers or suppliers, which: (i) derives economic value, actual
or potential, from not being generally known to, and not being readily
ascertainable by proper
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<PAGE> 213
means by, other persons who can obtain economic value from its disclosure or
use, and (ii) Is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
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<PAGE> 214
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and it seal to be affixed hereunto by its officers thereunto duly authorized,
and the Executive has signed and sealed this Agreement, effective as of the
date first above written.
<TABLE>
<S> <C>
"COMPANY"
ATTEST: ALABAMA BANCORP., INC.
BY: /s/ SANDRA BULLOCK By: /s/ J.T. STEPHENS
------------------------- -------------------------------------
ITS: Assistant Secretary J. T. Stephens, Vice Chairman
-------------------------
(CORPORATE SEAL)
"EXECUTIVE:
/s/ LARRY R. MATHEWS (L.S.)
-------------------------
</TABLE> LARRY R. MATHEWS
F-12
<PAGE> 215
EXHIBIT A
EXAMPLES OF BONUS COMPUTATION UNDER Section 3(a)
Assume 12-31-97 NIBT is $3mm, then:
1. If 12-98 NIBT is 108% higher, or $3,240k, then 3% X $3,240k =
$97,200.00 bonus.
2. If 12-98 NIBT is 113% higher, or $3,390k, then 3.5% X $3,390k
= $118,650.00 bonus.
3. If 12-98 NIBT is 121% higher, or $3,630k, then 4.5% X $3,630k
= $163,350.00 bonus.
Assume 12-31-99 NIBT is $4mm and the highest in last 3 years, then:
4. If 12-31-2000 NIBT is 12% higher, or $4,480k, then 3.5% = $156,800.00.
F-13
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Annex G
PERFORMANCE REWARD AGREEMENT
THIS PERFORMANCE REWARD AGREEMENT (the "Agreement") is made and entered
into by and between Alabama Bancorp., Inc. (the "Corporation") and Larry R.
Mathews ("Mathews") as of January l, 1998.
RECITALS:
A. The Corporation desires to grant to Mathews 100 Performance Reward
Units (hereinafter defined) with each PRU granting the right to Mathews to
receive, upon his exercise of a PRU, an amount of cash equal to one percent (1%)
of a percentage of the increase in the Adjusted Net Worth (hereinafter defined)
of the Corporation from December 31, 1997 through the end of the fiscal year
preceding the date of the exercise. The percentage of the increase in the
Adjusted Net Worth to be paid to Mathews will be based upon (i) Mathews' years
of service in the employment of the Corporation and (ii) the Cumulative Average
Yearly Return On Equity (hereinafter defined) from December 31, 1997, all as
more fully explained in this Agreement.
B. Mathews desires to obtain the Performance Reward Units on the terms
set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions contained herein, the Corporation and Mathews agree as
follows:
1. Definitions: As used herein, the following terms shall have the
following meanings:
(a) "Adjusted Net Worth" means the net worth (net worth
meaning total assets minus total liabilities) of the Corporation as
determined by its public auditors in accordance with generally accepted
accounting principles, consistently applied, as of the end of each fiscal year,
adjusted to exclude items beyond management control which increase or decrease
the yearly net worth. For example, some of the items to be included and excluded
are (i) the additional input of capital which, for example, would increase the
net worth through other than management achievement or profitability, (ii) the
redemption by the Corporation of its stock which would lower its net worth
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through other than management impact, (iii) capital gains or losses on
miscellaneous equity investments of the Corporation held as of January l, 1998,
such as Synovus or EBSCO Industries, Inc., and (iv) the payment by the
Corporation of dividends which would lower the net worth through other than
management impact.
(b) "Increase in Net Worth" means the amount by which the
Adjusted Net Worth as of the end of a fiscal year of the Corporation exceeds the
Base Book Value.
(c) "Performance Reward Unit" or "PRU". A Performance Reward
Unit or PRU is the right to receive an amount of cash from the Corporation at
the date of exercise. Each PRU entitles Mathews to receive an amount equal to
one percent (1%) of the Applicable Percentage multiplied times the Increase in
Net Worth.
(d) "Base Book Value" means $17,603,000.00, representing
the Adjusted Net Worth as of December 31, 1997.
(e) "Applicable Percentage" means the percentage to be
multiplied by the Increase in Net Worth in calculating the value of each PRU.
The Applicable Percentage is a function of both Mathews years of employment
after December 31, 1997 and the Cumulative Average Yearly Return on Equity after
December 31, 1997. The Applicable Percentage is determined by using Schedule A
attached hereto. For example, if Mathews were employed nine (9) years and the
Cumulative Average Yearly Return on Equity were 12%, the Applicable Percentage
would be .7%.
(f) "Cumulative Average Yearly Return On Equity" shall mean
the percentage return or increase on a cumulative basis for the Corporation's
equity, using the Base Book Value as beginning equity and using the Adjusted Net
Worth at the end of each year thereafter in calculating the increase in equity
and the percentage return on equity. For convenience, Schedule B sets forth the
Cumulative Average Yearly Return On Equity based upon up to twenty (20) years of
employment and an Increase in Net Worth from the Base Book Value up to
$654,856,771. For example, if Mathews were employed nine (9) years and there
were an Increase in Net Worth to $48,814,505, then the Cumulative Average Yearly
Return On Equity would be twelve percent (12%). The
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Cumulative Average Yearly Return On Equity shall be calculated applying
the methodology reflected in Schedule B.
(g) "Change In Control" shall have the same meaning given
such term in the Employment Agreement between the Corporation and Mathews.
(h) "Successors and Assigns" shall have the same meaning given
such term in the Employment Agreement between the Corporation and Mathews.
2. Grant.
The Corporation hereby grants Mathews 100 PRU's. Mathews may
exercise any one or more of 100 PRU's hereby granted at any time within 180 days
after the end of each fiscal year after determination of the Adjusted Net Worth
for each such fiscal year pursuant to this Agreement. Since years of employment
service with the Corporation is one variable applied in determining the amount
to be paid to Mathews, exercise of one or more of the PRU's terminates any
future opportunity for participation in future adjusted book value growth for
those PRU's exercised.
3. Calculation of Increase in Net Worth.
The Corporation's Increase in Net Worth from December 31, 1997
will be determined annually as of the end of each fiscal year based on the
audited net worth, increased or decreased by adjustments as described in Section
1(a) above, with each years Adjusted Net Worth to be the base from which the
following fiscal year's Adjusted Net Worth is determined. The adjustments to the
audited net worth as described in Section 1(a) above, shall be determined in the
reasonable, good faith judgment of the Chairman of the Board of the Corporation
each year within 120 days after the end of each fiscal year. The Chairman shall
deliver to Mathews a schedule of the calculation (including a description of
each adjustment) within the 120 day period.
4. Payment
Within thirty (30) days after exercise of a PRU, the
Corporation agrees to pay Mathews, for each PRU so exercised, an amount equal to
one percent (1%) of the sum calculated by multiplying the Applicable Percentage
times the Increase in Net Worth. For convenience, Schedule C attached hereto
sets forth the amount which would be payable to Mathews if all 100 PRU's were
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exercised, and if fewer than 100 PRU's were exercised then the value of each PRU
would be one percent (1%) of the amount stated in Schedule C. For example, if
Mathews were employed for nine (9) years and the Cumulative Average Yearly
Return On Equity were twelve percent (12%), the amount to be paid to Mathews if
all 100 PRU's were exercised would be $217,481.
5. Special Condition.
If there is a Change of Control after January 1, 1998, the
value of each PRU will be calculated as if the years of employment were 20.
Thus, a Change In Control causes each PRU to be valued as if Mathews had
completed 20 years of employment service whether or not actually achieved at the
time of the Change In Control, but all other variables in calculating the value
of each PRU shall not be affected by the Change In Control.
6. Modification and Waiver.
No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by Mathews and the Corporation. No waiver by any party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.
7. Governing Law.
This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of Alabama without giving effect to the
conflict of laws principles thereof. Any action brought by any party to this
Agreement shall be brought and maintained in a court of competent jurisdiction
in the State of Alabama.
8. Entire Agreement.
This Agreement constitutes the entire agreement between the
parties hereto and supersedes all prior agreements, if any, understandings and
arrangements, oral or written, between the parties hereto with respect to the
subject matter hereof.
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9. Headings.
The headings of Sections herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
10. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
11. Successors: Binding Agreement.
(a) This Agreement shall be binding upon and shall inure to
the benefit of the Corporation, its Successors and Assigns and the Corporation
shall require any Successors and Assigns to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession or assignment
had taken place.
(b) Neither this Agreement nor any right or interest hereunder
shall be assignable or transferable by Mathews, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by Mathews legal
personal representative.
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IN WITNESS WHEREOF, the parties hereto hereby executed this Agreement
as of the date first written above.
ALABAMA BANCORP., INC.
BY: /s/ J.T. STEPHENS
--------------------
ITS: Vice Chairman
/s/ LARRY R. MATHEWS
--------------------
LARRY R. MATHEWS
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SCHEDULE A
PERCENT OF ADJ. BK. VALUE FROM 12/31/97
PERCENT OF FUTURE BOOK VALUE
<TABLE>
<CAPTION>
YEAR >15% 14.00% 13.00% 12.00% 11.00% 10.00%
<S> <C> <C> <C> <C> <C> <C>
1 1.00% 0.90% 0.80% 0.70% 0.60% 0.50%
2 1.00% 0.90% 0.80% 0.70% 0.60% 0.50%
3 1.00% 0.90% 0.80% 0.70% 0.60% 0.50%
4 1.00% 0.90% 0.80% 0.70% 0.60% 0.50%
5 1.00% 0.90% 0.80% 0.70% 0.60% 0.50%
6 1.00% 0.90% 0.80% 0.70% 0.60% 0.50%
7 1.00% 0.90% 0.80% 0.70% 0.60% 0.50%
8 1.00% 0.90% 0.80% 0.70% 0.60% 0.50%
9 1.00% 0.90% 0.80% 0.70% 0.60% 0.50%
10 1.00% 0.90% 0.80% 0.70% 0.60% 0.50%
11 1.10% 0.90% 0.80% 0.70% 0.60% 0.50%
12 1.20% 1.00% 0.80% 0.70% 0.60% 0.50%
13 1.30% 1.10% 0.90% 0.70% 0.60% 0.50%
14 1.40% 1.20% 1.00% 0.80% 0.60% 0.50%
15 1.50% 1.30% 1.10% 0.90% 0.70% 0.50%
16 1.60% 1.40% 1.20% 1.00% 0.80% 0.60%
17 1.70% 1.50% 1.30% 1.10% 0.90% 0.70%
18 1.80% 1.60% 1.40% 1.20% 1.00% 0.80%
19 1.90% 1.70% 1.50% 1.30% 1.10% 0.90%
20 2.00% 1.80% 1.60% 1.40% 1.20% 1.00%
</TABLE>
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SCHEDULE B
FUTURE VALUE ANALYSIS
BASE BOOK VALUE $17,603,000
<TABLE>
<CAPTION>
YEAR 20.00% 19.00% 18.00% 17.00% 16.00% 15.00%
<S> <C> <C> <C> <C> <C> <C>
1 21,123,600 20,947,570 20,771,540 20,595,510 20,419,480 20,243,345
2 25,348,320 24,927,608 24,510,417 24,096,747 23,686,597 23,279,968
3 30,417,984 29,663,854 28,922,292 28,193,194 27,476,452 26,771,963
4 36,501,581 35,299,986 34,128,305 32,988,037 31,872,685 30,787,767
5 43,601,897 42,006,983 40,271,400 38,693,883 36,972,314 35,406,921
6 52,662,276 49,988,310 47,520,252 45,154,585 42,887,884 40,716,809
7 63,074,732 59,486,089 56,073,897 52,830,865 49,749,946 46,824,330
8 75,689,678 70,788,446 66,167,199 61,812,112 57,709,937 53,847,979
9 90,827,614 84,238,251 78,077,294 72,320,171 66,943,427 61,925,176
10 108,993,136 100,243,519 92,131,207 84,614,600 77,654,492 71,213,953
11 130,791,763 119,289,787 108,714,825 98,999,082 90,079,210 81,896,046
12 156,950,116 141,954,847 128,283,493 115,828,926 104,491,884 94,180,453
13 188,340,139 168,926,268 151,374,522 135,519,844 121,210,585 108,307,520
14 226,008,167 201,022,259 178,621,936 158,558,217 140,604,279 124,553,649
15 271,209,801 239,216,488 210,773,884 185,513,114 163,100,964 143,236,696
16 325,451,761 284,667,621 248,713,183 217,050,343 189,197,118 164,722,200
17 390,542,113 338,754,468 293,481,556 253,948,902 219,468,657 189,430,530
18 468,650,536 403,117,817 346,308,236 297,120,215 254,583,642 217,845,110
19 562,380,643 479,710,203 408,643,719 347,630,651 295,317,025 250,521,876
20 674,856,771 570,855,141 482,199,588 406,727,862 342,567,749 288,100,158
</TABLE>
SCHEDULE B
FUTURE VALUE ANALYSIS
BASE BOOK VALUE $17,603,000
<TABLE>
<CAPTION>
YEAR 14.00% 13.00% 12.00% 11.00% 10.00%
<S> <C> <C> <C> <C> <C>
1 20,067,420 19,891,390 19,715,360 19,539,330 19,363,300
2 22,876,859 22,477,271 22,081,203 21,688,656 21,299,630
3 26,079,619 25,399,318 24,730,948 24,074,408 23,429,593
4 29,730,766 28,701,227 27,698,661 26,722,593 25,772,552
5 33,893,073 32,432,388 31,022,601 29,662,079 28,349,808
6 38,638,103 36,648,597 34,745,201 32,924,907 31,184,788
7 44,047,438 41,412,914 38,914,625 36,546,647 34,303,267
8 50,214,079 46,796,593 43,584,380 40,566,778 37,733,594
9 57,214,079 52,880,150 48,814,505 45,029,124 41,506,953
10 65,258,217 59,754,570 54,672,246 49,982,328 45,657,649
11 74,394,367 67,522,664 61,232,916 55,480,384 50,223,413
12 84,809,579 76,300,610 68,580,865 61,583,226 55,245,755
13 96,682,920 86,219,689 76,810,569 68,357,381 60,770,330
14 110,218,528 97,428,249 86,027,838 75,876,693 66,847,363
15 125,649,122 110,093,921 96,351,178 84,223,129 73,532,100
16 143,239,999 124,406,131 107,913,319 93,487,673 80,885,309
17 163,293,599 140,578,928 120,862,918 103,771,317 88,973,840
18 186,154,703 158,854,189 135,366,468 115,186,162 97,871,224
19 212,216,362 179,505,234 151,610,444 127,856,640 107,658,347
20 241,926,652 202,840,914 169,803,697 141,920,870 118,424,182
</TABLE>
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<PAGE> 224
SCHEDULE C
EXAMPLES OF THE VALUE OF 100 PRV UNITS
COMPENSATION AMOUNT AVAILABLE
<TABLE>
<CAPTION>
YEAR 20.00% 19.00% 18.00% 17.00% 16.00% 15.00%
<S> <C> <C> <C> <C> <C> <C>
1 35,206 33,446 31,685 29,925 28,165 26,405
2 77,453 73,246 69,074 64,937 60,836 56,770
3 128,150 120,609 113,193 105,902 98,735 91,690
4 188,986 176,970 165,253 153,830 142,697 131,848
5 261,989 244,040 226,684 209,907 193,693 178,029
6 349,593 323,853 299,173 275,516 252,849 231,138
7 454,717 418,831 384,709 352,279 321,469 292,213
8 580,867 531,854 485,842 442,091 401,069 362,450
9 732,246 666,353 604,743 547,172 493,405 443,222
10 913,901 826,405 745,282 670,116 600,515 536,110
11 1,245,076 1,118,555 1,002,230 895,357 797,238 707,224
12 1,672,165 1,492,222 1,328,168 1,178,711 1,042,667 918,929
13 2,219,583 1,967,202 1,739,030 1,532,919 1,346,899 1,179,159
14 2,917,672 2,567,870 2,254,265 1,973,373 1,722,018 1,497,309
15 3,804,102 3,324,202 2,897,583 2,518,652 2,182,469 1,884,505
16 4,925,580 4,273,034 3,697,763 3,191,157 2,745,506 2,353,907
17 6,339,965 5,459,575 4,689,935 4,017,880 3,431,716 2,921,068
18 8,118,856 6,939,267 5,916,694 5,031,310 4,265,652 3,604,358
19 10,350,775 8,780,037 7,429,774 6,270,525 5,276,566 4,425,459
20 13,145,075 11,065,043 9,291,932 7,782,497 6,499,295 5,409,943
</TABLE>
SCHEDULE C
EXAMPLES OF THE VALUE OF 100 PRV UNITS
COMPENSATION AMOUNT AVAILABLE
<TABLE>
<CAPTION>
YEAR 14.00% 13.00% 12.00% 11.00% 10.00%
<C> <C> <C> <C> <C> <C>
1 22,180 18,307 14,787 11,618 8,802
2 47,465 38,994 31,347 24,514 18,483
3 76,290 62,371 49,896 38,828 29,133
4 109,150 88,786 70,670 54,718 40,848
5 146,611 118,635 93,937 72,354 53,734
6 189,316 152,365 119,995 91,931 67,909
7 238,000 190,479 149,181 113,662 83,501
8 293,500 233,549 181,870 137,783 100,653
9 356,769 282,217 218,481 164,557 119,520
10 428,897 337,213 259,485 194,276 140,273
11 511,122 399,357 305,409 227,264 163,102
12 672,066 469,581 356,845 263,881 188,214
13 869,879 617,550 414,453 304,526 215,837
14 1,111,386 798,252 547,399 349,642 246,222
15 1,404,600 1,017,400 708,734 466,341 279,645
16 1,758,918 1,281,638 903,103 607,077 379,694
17 2,185,359 1,598,687 1,135,859 775,515 499,596
18 2,696,827 1,977,517 1,413,162 975,832 642,146
19 3,308,427 2,428,534 1,742,097 1,212,790 810,498
20 4,037,826 2,963,807 2,130,810 1,491,814 1,008,212
</TABLE>
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<PAGE> 225
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
A. Restated Articles of Incorporation and Bylaws.
The Registrant's Restated Articles of Incorporation provide that it
will indemnify, and upon request advance expenses to, any person (or his estate)
who was or is a party to any legal proceeding because he is or was a director,
officer or employee of BancorpSouth, or is or was serving at the request of
BancorpSouth as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, or other entity, against any liability
incurred in that proceeding (A) to the full extent permitted by the MBCA, and
(B) despite the fact that such person did not meet the standard of conduct
specified in the MBCA or would be disqualified for indemnification under the
MBCA, if a determination is made that (i) the person seeking indemnity is fairly
and reasonably entitled to indemnification in view of all of the relevant
circumstances, and (ii) his acts or omissions did not constitute gross
negligence or willful misconduct. A request for reimbursement or advancement of
expenses prior to final disposition of the proceeding must be accompanied by an
undertaking to repay the advances if it is ultimately determined that he did not
meet the requisite standard of conduct but it need not be accompanied by an
affirmation that the person seeking indemnity believed he has met the standard
of conduct.
The Registrant's Bylaws provide that it will indemnify officers and
directors who are a party to any legal proceeding because he is or was an
officer or director of BancorpSouth against any expenses or awards in connection
therewith if he acted in good faith and in a manner he reasonably believed to be
in the best interest of BancorpSouth and, with respect to any criminal
proceeding, had no reasonable cause to believe his conduct was unlawful. The
Registrant also will indemnify officers and directors who are a party to any
derivative suit with respect to the Registrant because that person is or was an
officer or director of the Registrant, against expenses incurred in connection
with that action unless he is found to have acted without good faith and without
that degree of care, diligence and skill which ordinarily prudent men would
exercise in similar circumstances and in like positions, unless, despite such
finding of liability, the court determines that he is entitled to indemnity. The
Bylaws also provide that the Registrant may (i) advance to the officer or
director the expenses incurred in defending a proceeding upon receipt of an
undertaking that he will repay amounts advanced unless it ultimately is
determined that he is entitled to be indemnified, and (ii) purchase and maintain
insurance on behalf of an officer or director against any liability arising out
of his acting as such.
B. Mississippi Business Corporation Act.
In addition to the foregoing provisions of the Registrant's Restated
Articles of Incorporation and Bylaws, directors, officers, employees and agents
of the Registrant and its subsidiaries may be indemnified by the Registrant
pursuant to Sections 79-4-8.50 through 79-4-8.58 of the MBCA.
C. Insurance.
The Registrant maintains and pays premiums on an insurance policy on
behalf of its officers and directors against liability asserted against or
incurred by such persons in or arising from their capacity as such.
D. SEC Policy On Indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the
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<PAGE> 226
Registrant has been informed that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is therefore
unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
<S> <C> <C>
2.1 -- Agreement and Plan of Merger, dated as of June 19, 1998, among the Registrant, Alabama
Bancorp., Inc., Highland Bank and First Community Bank of The South
3.1 -- Restated Articles of Incorporation of the Registrant (1)
3.2 -- Amendment to Articles of Incorporation of Registrant, as filed on May 4, 1994 (1)
3.3 -- Bylaws of the Registrant, as amended (2)
5.1 -- Opinion of Waller Lansden Dortch & Davis, A Professional Limited Liability Company
8.1 -- Opinion of Waller Lansden Dortch & Davis, A Professional Limited Liability Company, as to
tax matters
8.2 -- Opinion of Bradley Arant Rose & White LLP, as to tax matters
10.1 -- Stock Option Agreement, dated as of June 19, 1998, between the Registrant and Alabama
Bancorp., Inc.
11.1 -- Statement re computation of earnings per share (3)
21.1 -- List of subsidiaries of the Registrant (3)
23.1 -- Consent of KPMG Peat Marwick LLP
23.2 -- Consent of Ernst & Young LLP
23.3 -- Consent of Arthur Andersen LLP
23.4 -- Consent of Waller Lansden Dortch & Davis, A Professional Limited Liability Company (included
in opinions filed as Exhibits 5.1 and 8.1)
23.5 -- Consent of Alex Sheshunoff & Co. Investment Banking
23.6 -- Consent of Bradley Arant Rose & White LLP (included in opinion filed as Exhibit 8.2)
24.1 -- Power of Attorney (included on page II-5)
</TABLE>
[FN]
------------------
(1) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-4, filed on January 5, 1995.
(2) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form 8-A filed on May 14, 1999.
(3) Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1997.
</FN>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no
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<PAGE> 227
more than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
Registration Statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) For the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The Registrant undertakes that every prospectus: (i) that is filed
pursuant to the paragraph immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first
II-3
<PAGE> 228
class mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the Registration Statement
through the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE> 229
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Tupelo, State of Mississippi, on September 8, 1998.
BANCORPSOUTH, INC.
By: /s/ Aubrey B. Patterson
--------------------------
Aubrey B. Patterson
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Aubrey B. Patterson and L. Nash Allen,
Jr., and each of them, his true and lawful attorney-in-fact, as agent and with
full power of substitution and resubstitution for him and in his name, place and
stead, in any and all capacity, to sign any or all amendments to this
Post-Effective Amendment to the Registration Statement and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents in full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as they might or be in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, and their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
/s/ Aubrey B. Patterson Chairman of the Board, Chief September 8, 1998
- -----------------------------------
Aubrey B. Patterson Executive Officer, Director (principal
executive officer)
s/ L. Nash Allen, Jr. Treasurer and Chief Financial September 8, 1998
- -----------------------------------
L. Nash Allen, Jr. Officer (principal financial and
accounting officer)
/s/ Shed H. Davis Director September 8, 1998
- -----------------------------------
Shed H. Davis
/s/ Hassell H. Franklin Director September 8, 1998
- -----------------------------------
Hassell H. Franklin
/s/ Fletcher H. Goode, M.D. Director September 8, 1998
- -----------------------------------
Fletcher H. Goode, M.D.
/s/ W. G. Holliman, Jr. Director September 8, 1998
- -----------------------------------
W. G. Holliman, Jr.
</TABLE>
II-5
<PAGE> 230
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
/s/ A. Douglas Jumper Director September 8, 1998
- -----------------------------------
A. Douglas Jumper
/s/ Turner O. Lashlee Director September 8, 1998
- -----------------------------------
Turner O. Lashlee
/s/ Alan W. Perry Director September 8, 1998
- -----------------------------------
Alan W. Perry
/s/ Travis E. Staub Director September 8, 1998
- -----------------------------------
Travis E. Staub
/s/ Dr. Andrew R. Townes Director September 8, 1998
- -----------------------------------
Dr. Andrew R. Townes
/s/ Lowery A. Woodall Director September 8, 1998
- -----------------------------------
Lowery A. Woodall
</TABLE>
II-6
<PAGE> 231
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<S> <C> <C>
2.1 -- Agreement and Plan of Merger, dated as of June 19, 1998, among the Registrant, Alabama
Bancorp., Inc., Highland Bank and First Community Bank of The South
3.1 -- Restated Articles of Incorporation of the Registrant (1)
3.2 -- Amendment to Articles of Incorporation of Registrant, as filed on May 4, 1994 (1)
3.3 -- Bylaws of the Registrant, as amended (2)
5.1 -- Opinion of Waller Lansden Dortch & Davis, A Professional Limited Liability Company
8.1 -- Opinion of Waller Lansden Dortch & Davis, A Professional Limited Liability Company, as to
tax matters
8.2 -- Opinion of Bradley Arant Rose & White LLP, as to tax matters
10.1 -- Stock Option Agreement, dated as of June 19, 1998, between the Registrant and Alabama
Bancorp., Inc.
11.1 -- Statement re computation of earnings per share (3)
21.1 -- List of subsidiaries of the Registrant (3)
23.1 -- Consent of KPMG Peat Marwick LLP
23.2 -- Consent of Ernst & Young LLP
23.3 -- Consent of Arthur Andersen LLP
23.4 -- Consent of Waller Lansden Dortch & Davis, A Professional Limited Liability Company (included
in opinions filed as Exhibits 5.1 and 8.1)
23.5 -- Consent of Alex Sheshunoff & Co. Investment Banking
23.6 -- Consent of Bradley Arant Rose & White LLP (included in opinion filed as Exhibit 8.2)
24.1 -- Power of Attorney (included on page II-5)
</TABLE>
(1) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-4, filed on January 5, 1995.
(2) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form 8-A filed on May 14, 1999.
(3) Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1997.
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
BANCORPSOUTH, INC.
AND
ALABAMA BANCORP., INC.
HIGHLAND BANK
AND
FIRST COMMUNITY BANK OF THE SOUTH
Dated as of June 19, 1998
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 19, 1998
("Agreement"), among BANCORPSOUTH, INC., a Mississippi corporation
("BancorpSouth"), and ALABAMA BANCORP., INC., a Delaware corporation (the
"Company"), HIGHLAND BANK, an Alabama banking corporation ("Highland Bank"), and
FIRST COMMUNITY BANK OF THE SOUTH, an Alabama banking corporation ("First
Community Bank").
RECITALS:
WHEREAS, BancorpSouth is the sole shareholder of BancorpSouth Bank,
a Mississippi banking corporation ("BancorpSouth Bank");
WHEREAS, the Company is the majority shareholder of Highland Bank and
First Community Bank;
WHEREAS, the Boards of Directors of each of the parties hereto have
determined that it is in the best interests of their respective companies and
their shareholders to consummate the business combination transactions provided
for herein in which (i) the Company will merge with and into BancorpSouth (the
"Holding Company Merger"), (ii) Highland Bank will merge with and into
BancorpSouth Bank (the "Highland Merger"), and (iii) First Community Bank will
merge with and into BancorpSouth Bank (the "First Community 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") and the
Delaware General Corporation Law (the "DGCL"), at the Effective Time (as defined
in Section 1.2 hereof), the Company shall merge with and into BancorpSouth.
BancorpSouth shall be the surviving corporation (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.
(b) Subject to the terms and conditions of this Agreement, in
accordance with the Mississippi Banking Act (the "MBA"), the Alabama Business
Corporation Act (the "ABCA") and the Alabama Banking Code (the "ABC"), at the
Effective Time, Highland Bank shall merge with and into BancorpSouth Bank.
BancorpSouth Bank shall be the surviving banking corporation (the "Surviving
Bank") in the Highland 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 Highland Merger,
the separate corporate existence of Highland Bank shall terminate.
1
<PAGE> 3
(c) Subject to the terms and conditions of this Agreement, in
accordance with the MBA, the ABCA and the ABC, at the Effective Time, First
Community Bank shall merge with and into BancorpSouth Bank. BancorpSouth Bank
shall be the Surviving Bank in the First Community 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 First Community Merger, the separate corporate existence of First
Community Bank shall terminate.
1.2. Effective Time.
(a) The Holding Company Merger shall become effective as set forth in
the articles of merger (the "Company Articles of Merger") which shall be filed
on the Closing Date (as defined in Section 10.1) with the Secretary of State of
the State of Mississippi (the "Mississippi Secretary") and the Secretary of
State of the State of Delaware (the "Delaware Secretary") with respect to the
Holding Company Merger.
(b) The Highland Merger shall become effective as set forth in the
articles of merger (the "Highland Articles of Merger") which shall be filed on
the Closing Date with the Mississippi Department of Banking and Consumer Finance
(the "Mississippi Department"), the Secretary of State of the State of Alabama
(the "Alabama Secretary") and the Alabama Banking Department (the "Alabama
Department") with respect to the Highland Merger.
(c) The First Community Merger shall become effective as set forth in
the articles of merger (the "First Community Articles of Merger", and together
with the Company Articles of Merger and the Highland Articles of Merger, the
"Articles of Merger") which shall be filed on the Closing Date with the
Mississippi Department, the Alabama Secretary and the Alabama Department with
respect to the First Community Merger.
(d) 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.
(a) At and after the Effective Time, the Holding Company Merger shall
have the effects set forth in Section 252 of the DGCL.
(b) At and after the Effective Time, the Highland Merger shall have the
effects set forth in Sections 10-2B-11.01 et seq. of the ABCA, Sections 5-7A-1
et seq. of the ABC and Sections 5-13B-20 et seq. of the ABC.
(c) At and after the Effective Time, the First Community Merger shall
have the effects set forth in Sections 10-2B-11.01 et seq. of the ABCA,
Sections 5-7A-1 et seq. of the ABC and Sections 5-13B-20 et seq. of the ABC.
1.4. Conversion of Company Common Stock.
(a) At the Effective Time, subject to Section 2.2(e) hereof, each share
of the common stock, par value $0.25 per share, of the Company (the "Company
Common Stock") issued and outstanding immediately prior to the Effective Time
(other than Company Dissenting Shares (as defined herein) and other than shares
of Company Common Stock held directly or indirectly by BancorpSouth 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(c)
hereof) shall, by virtue of this Agreement and without any action on the part of
the holder thereof, be converted into and exchangeable for that number of shares
of common stock, par value $2.50 per share, of BancorpSouth ("BancorpSouth
Common Stock"), together with the number of BancorpSouth Rights (as defined in
Section 5.2 hereof)
2
<PAGE> 4
associated therewith, equal to the Company Exchange Ratio (as defined below);
provided, however, that (except as provided in the two following paragraphs) the
Company Exchange Ratio shall not be less than 130.2642 nor greater than 176.2398
(such limitation, the "Company Collar Provision").
In the event that, without giving effect to the limitations set forth
in the Company Collar Provision, the computation of the Company Exchange Ratio,
computed in accordance with the definition below, shall result in a number
greater than 176.2398, then the Company may, at its option and without penalty,
terminate this Agreement by giving prior written notice thereof to BancorpSouth
on the Determination Date (as defined below), unless, within 24 hours following
the giving of such notice, BancorpSouth agrees with the Company to adjust the
Company Exchange Ratio for purposes of this subsection (a) to an amount proposed
by the Company that is (i) not greater than the Company Exchange Ratio as so
computed in accordance with this paragraph and (ii) not less than 176.2398.
In the event that, without giving effect to the limitations set forth
in the Company Collar Provision, the computation of the Company Exchange Ratio,
computed in accordance with the definition below, shall result in a number less
than 130.2642, then BancorpSouth may, at its option and without penalty,
terminate this Agreement by giving prior written notice thereof to the Company
on the Determination Date, unless, within 24 hours following the giving of such
notice, the Company agrees with BancorpSouth to adjust the Company Exchange
Ratio for purposes of this subsection (a) to an amount proposed by BancorpSouth
that is (i) not less than the Company Exchange Ratio as so computed in
accordance with this paragraph and (ii) not greater than 130.2642.
For purposes of this Agreement:
(i) the "Company Exchange Ratio" means the quotient, rounded
to the nearest 1/10,000, equal to (x) $3,304.50, divided by (y) the
Average Closing Price (as defined below);
(ii) the "Average Closing Price" means the average of the
daily last sale prices of BancorpSouth Common Stock as reported on the
New York Stock Exchange ("NYSE") Composite Transactions tape (as
reported in the Wall Street Journal or, if not reported therein, in
another mutually agreed upon authoritative source) for the 10
consecutive full trading days in which shares of BancorpSouth Common
Stock are traded on the NYSE ending at the close of trading on the
Determination Date; and
(iii) the "Determination Date" means the third business day
prior to the meeting of the Company's shareholders held for the purpose
of voting upon the approval and adoption of this Agreement (as
contemplated in Section 7.3).
(b) All of the shares of Company Common Stock converted into
BancorpSouth Common Stock pursuant to this Article I shall no longer be
outstanding and shall automatically be canceled and shall cease to exist, and
each certificate (each a "Company 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 BancorpSouth Common Stock and (ii) the
cash in lieu of fractional shares into which the shares of Company Common Stock
represented by such Company Certificate have been converted pursuant to this
Section 1.4 and Section 2.2(e) hereof. Company Certificates previously
representing shares of Company Common Stock shall be exchanged for certificates
representing whole shares of BancorpSouth Common Stock and cash in lieu of
fractional shares issued in consideration therefor upon the surrender of such
Company 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 BancorpSouth Common Stock shall be changed into a different number or
class of shares by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or a stock dividend thereon
shall be declared with a record date within said period, the Company Exchange
Ratio shall be adjusted accordingly.
3
<PAGE> 5
(c) At the Effective Time, all shares of Company Common Stock that are
owned directly or indirectly by BancorpSouth or the Company or any of their
respective Subsidiaries (other than shares of Company Common Stock that are (i)
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 ("Trust
Account Shares") or (ii) held by BancorpSouth or the Company or any of their
respective Subsidiaries in respect of a debt previously contracted ("DPC
Shares")) shall be canceled and shall cease to exist and no stock of
BancorpSouth or other consideration shall be delivered in exchange therefor. All
shares of BancorpSouth 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 BancorpSouth.
(d) 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 Section 262 of the DGCL ("Company Dissenting
Shares") shall not be converted into the right to receive, or be exchangeable
for, BancorpSouth 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 Company Dissenting Shares in accordance with the provisions of Section
262 of the DGCL; provided, however, that (i) if any holder of Company 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 Section 262 of the DGCL, such
holder or holders (as the case may be) shall forfeit the right to appraisal of
such shares of Company Common Stock and each of such shares shall thereupon be
deemed to have been converted into the right to receive, and to have become
exchangeable for, as of the Effective Time, BancorpSouth Common Stock and/or
cash in lieu of fractional shares, without any interest thereon, as provided in
Section 1.4(a) and Article II hereof.
1.5. Conversion of Highland Common Stock.
(a) At the Effective Time, subject to Section 2.2(e) hereof, each share
of the common stock, par value $0.06 per share, of Highland Bank (the "Highland
Common Stock") issued and outstanding immediately prior to the Effective Time
(other than Highland Dissenting Shares (as defined herein) and other than shares
of Highland Common Stock held directly or indirectly by BancorpSouth, the
Company or Highland Bank or any of their respective Subsidiaries, except for
Trust Account Shares and DPC Shares) shall, by virtue of this Agreement and
without any action on the part of the holder thereof, be converted into and
exchangeable for that number of shares of BancorpSouth Common Stock, together
with the number of BancorpSouth Rights associated therewith, equal to the
Highland Exchange Ratio (as defined below); provided, however, that (except as
provided in the two following paragraphs) the Highland Exchange Ratio shall not
be less than 1.1445 nor greater than 1.5485 (such limitation, the "Highland
Collar Provision").
In the event that, without giving effect to the limitations set forth
in the Highland Collar Provision, the computation of the Highland Exchange
Ratio, computed in accordance with the definition below, shall result in a
number greater than 1.5485 then the Company may, at its option and without
penalty, terminate this Agreement by giving prior written notice thereof to
BancorpSouth on the Determination Date, unless, within 24 hours following the
giving of such notice, BancorpSouth agrees with the Company to adjust the
Highland Exchange Ratio for purposes of this subsection (a) to an amount
proposed by the Company that is (i) not greater than the Highland Exchange Ratio
as so computed in accordance with this paragraph and (ii) not less than 1.5485.
In the event that, without giving effect to the limitations set forth
in the Highland Collar Provision, the computation of the Highland Exchange
Ratio, computed in accordance with the definition below, shall result in a
number less than 1.1445, then BancorpSouth may, at its option and without
penalty, terminate this Agreement by giving prior written notice thereof to the
Company on the Determination Date, unless, within 24 hours following the giving
of such notice, the Company
4
<PAGE> 6
and Highland Bank agrees with BancorpSouth to adjust the Highland Exchange Ratio
for purposes of this subsection (a) to an amount proposed by BancorpSouth that
is (i) not less than the Highland Exchange Ratio as so computed in accordance
with this paragraph and (ii) not greater than 1.1445.
For purposes of this Agreement, the "Highland Exchange Ratio" means the
quotient, rounded to the nearest 1/10,000, equal to (x) $29.0347, divided by (y)
the Average Closing Price.
(b) All of the shares of Highland Common Stock converted into
BancorpSouth Common Stock pursuant to this Article I shall no longer be
outstanding and shall automatically be canceled and shall cease to exist, and
each certificate (each a "Highland Certificate") previously representing any
such shares of Highland Common Stock shall thereafter only represent the right
to receive (i) the number of whole shares of BancorpSouth Common Stock and (ii)
the cash in lieu of fractional shares into which the shares of Highland Common
Stock represented by such Highland Certificate have been converted pursuant to
this Section 1.5 and Section 2.2(e) hereof. Highland Certificates previously
representing shares of Highland Common Stock shall be exchanged for certificates
representing whole shares of BancorpSouth Common Stock and cash in lieu of
fractional shares issued in consideration therefor upon the surrender of such
Highland 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 BancorpSouth Common Stock shall be changed into a different number
or class of shares by reason of any reclassification, recapitalization,
split-up, combination, exchange of shares or readjustment, or a stock dividend
thereon shall be declared with a record date within said period, the Highland
Exchange Ratio shall be adjusted accordingly.
(c) At the Effective Time, all shares of Highland Common Stock that are
owned directly or indirectly by BancorpSouth, the Company or Highland Bank or
any of their respective Subsidiaries (other than shares of Highland Common Stock
that are Trust Account Shares or DPC Shares) shall be canceled and shall cease
to exist and no stock of BancorpSouth or other consideration shall be delivered
in exchange therefor. All shares of BancorpSouth Common Stock that are owned by
Highland Bank or any of its Subsidiaries (other than Trust Account Shares and
DPC Shares) shall become treasury stock of BancorpSouth.
(d) Notwithstanding anything in this Agreement to the contrary, shares
of Highland 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 ABCA ("Highland
Dissenting Shares") shall not be converted into the right to receive, or be
exchangeable for, BancorpSouth 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 Highland Dissenting Shares in accordance with the provisions of
Article 13 of the ABCA; provided, however, that (i) if any holder of Highland
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 ABCA, such
holder or holders (as the case may be) shall forfeit the right to appraisal of
such shares of Highland Common Stock and each of such shares shall thereupon be
deemed to have been converted into the right to receive, and to have become
exchangeable for, as of the Effective Time, BancorpSouth Common Stock and/or
cash in lieu of fractional shares, without any interest thereon, as provided in
Section 1.5(a) and Article II hereof.
1.6. Conversion of First Community Common Stock.
(a) At the Effective Time, subject to Section 2.2(e) hereof, each share
of the common stock, par value $5.00 per share, of First Community Bank (the
"First Community Common Stock") issued and outstanding immediately prior to the
Effective Time (other than First Community Dissenting Shares (as defined herein)
and other than shares of First Community Common Stock held directly or
indirectly by BancorpSouth, the Company or First Community or any of their
respective Subsidiaries, except for Trust Account Shares and DPC Shares) shall,
by virtue of this Agreement
5
<PAGE> 7
and without any action on the part of the holder thereof, be converted into and
exchangeable for that number of shares of BancorpSouth Common Stock, together
with the number of BancorpSouth Rights associated therewith, equal to the First
Community Exchange Ratio (as defined below); provided, however, that (except as
provided in the two following paragraphs) the First Community Exchange Ratio
shall not be less than 8.3224 nor greater than 11.2597 (such limitation, the
"First Community Collar Provision").
In the event that, without giving effect to the limitations set forth
in the First Community Collar Provision, the computation of the First Community
Exchange Ratio, computed in accordance with the definition below, shall result
in a number greater than 11.2597, then the Company may, at its option and
without penalty, terminate this Agreement by giving prior written notice thereof
to BancorpSouth on the Determination Date (as defined below), unless, within 24
hours following the giving of such notice, BancorpSouth agrees with the Company
to adjust the First Community Exchange Ratio for purposes of this subsection (a)
to an amount proposed by the Company that is (i) not greater than the First
Community Exchange Ratio as so computed in accordance with this paragraph and
(ii) not less than 11.2597.
In the event that, without giving effect to the limitations set forth
in the First Community Collar Provision, the computation of the First Community
Exchange Ratio, computed in accordance with the definition below, shall result
in a number less than 8.3224, then BancorpSouth may, at its option and without
penalty, terminate this Agreement by giving prior written notice thereof to the
Company on the Determination Date, unless, within 24 hours following the giving
of such notice, the Company and First Community Bank agrees with BancorpSouth to
adjust the First Community Exchange Ratio for purposes of this subsection (a) to
an amount proposed by the Company that is (i) not less than the First Community
Exchange Ratio as so computed in accordance with this paragraph and (ii) not
greater than 8.3224.
For purposes of this Agreement, the "First Community Exchange Ratio"
means the quotient, rounded to the nearest 1/10,000, equal to (x) $211.1193,
divided by (y) the Average Closing Price.
(b) All of the shares of First Community Common Stock converted into
BancorpSouth Common Stock pursuant to this Article I shall no longer be
outstanding and shall automatically be canceled and shall cease to exist, and
each certificate (each a "First Community Certificate") previously representing
any such shares of First Community Common Stock shall thereafter only represent
the right to receive (i) the number of whole shares of BancorpSouth Common Stock
and (ii) the cash in lieu of fractional shares into which the shares of First
Community Common Stock represented by such First Community Certificate have been
converted pursuant to this Section 1.6 and Section 2.2(e) hereof. First
Community Certificates previously representing shares of First Community Common
Stock shall be exchanged for certificates representing whole shares of
BancorpSouth Common Stock and cash in lieu of fractional shares issued in
consideration therefor upon the surrender of such First Community 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 BancorpSouth
Common Stock shall be changed into a different number or class of shares by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or a stock dividend thereon shall be
declared with a record date within said period, the First Community Exchange
Ratio shall be adjusted accordingly.
(c) At the Effective Time, all shares of First Community Common Stock
that are owned directly or indirectly by BancorpSouth, the Company or First
Community Bank or any of their respective Subsidiaries (other than shares of
First Community Common Stock that are Trust Account Shares or DPC Shares) shall
be canceled and shall cease to exist and no stock of BancorpSouth or other
consideration shall be delivered in exchange therefor. All shares of
BancorpSouth Common Stock that are owned by First Community Bank or any of its
Subsidiaries (other than Trust Account Shares and DPC Shares) shall become
treasury stock of BancorpSouth.
6
<PAGE> 8
(d) Notwithstanding anything in this Agreement to the contrary, shares
of First Community 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 ABCA ("First Community
Dissenting Shares") shall not be converted into the right to receive, or be
exchangeable for, BancorpSouth 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 First Community Dissenting Shares in accordance with the
provisions of Article 13 of the ABCA; provided, however, that (i) if any holder
of First Community 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 ABCA, such holder or holders (as the case may be) shall forfeit the
right to appraisal of such shares of First Community Common Stock and each of
such shares shall thereupon be deemed to have been converted into the right to
receive, and to have become exchangeable for, as of the Effective Time,
BancorpSouth Common Stock and/or cash in lieu of fractional shares, without any
interest thereon, as provided in Section 1.6(a) and Article II hereof.
1.7. Stock Options. At the Effective Time, each outstanding Highland Option (as
defined in Section 4.2) which is vested under the terms of such option and not
exercised immediately prior to the Effective Time shall cease to represent a
right to acquire shares of Highland Common Stock and shall be replaced by an
option issued under the appropriate stock option plan of BancorpSouth, as
follows:
(i) the number of shares of BancorpSouth Common Stock to be
subject to the new option shall be equal to the product of (x) the
number of shares of Highland Common Stock subject to the original
option, times (y) the Highland Exchange Ratio, provided that any
fractional shares of BancorpSouth Common Stock resulting from such
multiplication shall be rounded down to the nearest whole share; and
(ii) the exercise price per share of BancorpSouth Common Stock
under the new option shall be equal to the result of (x) the exercise
price per share of Highland Common Stock under the original option,
divided by (y) the Highland 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 Highland Bank shall be deemed to be references to
BancorpSouth.
All other Highland Options shall be terminated and canceled as of the Effective
Time. Prior to the Effective Time, BancorpSouth shall reserve for issuance the
number of shares of BancorpSouth Common Stock necessary to satisfy
BancorpSouth's obligations under this Section 1.7.
1.8. BancorpSouth Common Stock. Except for shares of BancorpSouth 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 BancorpSouth as
contemplated by Sections 1.4, 1.5 and 1.6 hereof, the shares of BancorpSouth
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.
1.9. Articles. At the Effective Time, the Amended and Restated Articles of
Incorporation of BancorpSouth (the "BancorpSouth Articles"), 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
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Articles of Association of BancorpSouth Bank, as in effect at the Effective
Time, shall be the articles of association of the Surviving Bank.
1.10. Bylaws. At the Effective Time, the Bylaws of BancorpSouth, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended in accordance with applicable law and the
BancorpSouth Articles.
1.11. Directors and Officers. The directors and officers of BancorpSouth
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 Bylaws 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 Bylaws of the Surviving
Bank until their respective successors are duly elected or appointed and
qualified.
1.12. 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). BancorpSouth 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.
ARTICLE II
EXCHANGE OF SHARES
2.1. BancorpSouth to Make Shares Available. At or prior to the Effective Time,
BancorpSouth shall deposit, or shall cause to be deposited, with a bank or trust
company (the "Exchange Agent") selected by BancorpSouth and reasonably
satisfactory to the Company, for the benefit of the holders of Company
Certificates, Highland Certificates and First Community Certificates
(collectively, "Certificates"), for exchange in accordance with this Article II,
certificates representing the shares of BancorpSouth Common Stock and the cash
in lieu of fractional shares (such cash and certificates for shares of
BancorpSouth Common Stock, together with any dividends or distributions with
respect thereto, being hereinafter referred to as the "Exchange Fund") to be
issued pursuant to Sections 1.4, 1.5 and 1.6 and paid pursuant to Section 2.2(a)
in exchange for outstanding shares of Company Common Stock, Highland Common
Stock and First Community Common Stock (collectively, "Acquiree Common Stock"),
as applicable.
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
BancorpSouth Common Stock and the cash in lieu of fractional shares into which
the shares of Acquiree 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 (i)
a certificate representing that number of whole shares of BancorpSouth Common
Stock to which such holder of Acquiree Common Stock shall have become entitled
pursuant to the provisions of Article I hereof and (ii) a check representing the
amount of cash in lieu of fractional shares, if any, which such holder has the
right to receive in
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respect of the Certificate surrendered pursuant to the provisions of this
Article II, and the Certificate so surrendered shall forthwith be canceled. 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 BancorpSouth 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 BancorpSouth Common
Stock represented by such Certificate.
(c) If any certificate representing shares of BancorpSouth Common Stock
is to be issued in a name other than that in which the Certificate surrendered
in exchange therefor is registered, it shall be a condition of the issuance
thereof that the Certificate so surrendered shall be properly endorsed (or
accompanied by an appropriate instrument of transfer) and otherwise in proper
form for transfer, and that the person requesting such exchange shall pay to the
Exchange Agent in advance any transfer or other taxes required by reason of the
issuance of a certificate representing shares of BancorpSouth 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 (i) the Company of the shares of Company Common Stock which
were issued and outstanding immediately prior to the Effective Time, (ii)
Highland Bank of the shares of Highland Common Stock which were issued and
outstanding immediately prior to the Effective Time, or (ii) First Community
Bank of the shares of First Community 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 canceled and exchanged for certificates
representing shares of BancorpSouth Common Stock as provided in this Article II.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of BancorpSouth Common
Stock shall be issued upon the surrender for exchange of Certificates, no
dividend or distribution with respect to BancorpSouth 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 BancorpSouth. In lieu of the issuance of any such fractional
share, BancorpSouth shall pay to each former stockholder of the Company,
Highland Bank or First Community Bank, as applicable, who otherwise would be
entitled to receive a fractional share of BancorpSouth Common Stock an amount in
cash equal to the product of (x) $21.5625, times (y) the fraction of a share of
BancorpSouth Common Stock which such holder would otherwise be entitled to
receive pursuant to Article I hereof.
(f) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of the Company, Highland Bank or First Community Bank, as
applicable, for 12 months after the Effective Time shall be paid to
BancorpSouth. Any shareholders of the Company, Highland Bank or First Community
Bank, as applicable, who have not theretofore complied with this Article II
shall thereafter look only to BancorpSouth for payment of their shares of
BancorpSouth Common Stock, cash in lieu of fractional shares and unpaid
dividends and distributions on BancorpSouth Common Stock deliverable in respect
of each share of Acquiree Common Stock such stockholder holds as determined
pursuant to this Agreement, in each case, without any interest thereon.
Notwithstanding the foregoing, none of BancorpSouth, the Company, Highland Bank,
First Community Bank, the Exchange Agent or any other person shall be liable to
any former holder of shares of Acquiree 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
BancorpSouth, the posting by such person of a bond in such reasonable amount as
BancorpSouth 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 BancorpSouth 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 BancorpSouth has delivered
those portions of the BancorpSouth Disclosure Schedule (together 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
BancorpSouth, respectively.
3.2. Standards.
(a) No representation or warranty of the Company contained in
Article IV or of BancorpSouth 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 BancorpSouth, has
had or could be reasonably expected to have a Material Adverse Effect with
respect to (i) the Company or (ii) BancorpSouth, respectively.
(b) As used in this Agreement, the term "Material Adverse Effect"
means, with respect to (i) BancorpSouth or (ii) the Company, as the case may be,
a material adverse effect on (i) the business, results of operations or
financial condition of such party or parties and their Subsidiaries taken as a
whole, other than any such effect attributable to or resulting from (A) any
change in banking or similar laws, rules or regulations of general applicability
or interpretations thereof by courts or governmental authorities, (B) any change
in GAAP or regulatory accounting principles applicable to banks or their holding
companies generally, (C) any action or omission of the Company or BancorpSouth
or any Subsidiary of either of them taken with the express prior written consent
of the other party hereto, or (D) 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.
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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to Article III, the Company hereby represents and warrants to
BancorpSouth as follows:
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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 Delaware. 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 Certificate of
Incorporation and Bylaws of the Company, copies of which have previously been
made available to BancorpSouth, are true and correct copies of such documents as
in effect as of the date of this Agreement.
(b) Highland Bank is an Alabama state bank duly organized, validly
existing and in good standing under the laws of the State of Alabama. First
Community Bank is an Alabama state bank duly organized, validly existing and in
good standing under the laws of the State of Alabama. The deposit accounts of
Highland Bank and of First Community Bank are insured by the Federal Deposit
Insurance Corporation (the "FDIC") through the Bank 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.
Highland Bank, First Community Bank and each of the Company's other Subsidiaries
has the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted and is duly
licensed or qualified to do business in each jurisdiction in which the nature of
the business conducted by it or the character or the location of the properties
and assets owned or leased by it makes such licensing or qualification
necessary. The articles of incorporation, bylaws and similar governing documents
of Highland Bank, First Community Bank and each other Subsidiary of the Company,
copies of which have previously been made available to BancorpSouth, 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, Highland Bank, First Community
Bank and each of their Subsidiaries contain true and correct records of all
meetings and other corporate actions held or taken since December 31, 1994 of
their respective shareholders and Boards of Directors (including committees of
their respective Boards of Directors).
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4.2. Capitalization.
(a) The authorized capital stock of the Company consists of 40,000
shares of Company Common Stock. As of the date hereof, there are 20,799 shares
of Company Common Stock outstanding and no shares of Company Common Stock held
by the Company as treasury stock. There are no shares of Company Common Stock
reserved for issuance upon exercise of outstanding stock options or otherwise
except for 4,139 shares of Company Common Stock reserved for issuance upon
exercise of the option (the "Option") to be issued to BancorpSouth pursuant to
the Stock Option Agreement, to be entered into on the date hereof, between
BancorpSouth 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 the Option,
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.
(b) The authorized capital stock of Highland Bank consists of 3,000,000
shares of Highland Common Stock and 50 shares of preferred stock, $100 par value
per share (the "Highland Preferred Stock"). As of the date hereof, there are
2,132,942 shares of Highland Common Stock outstanding, 28 shares of Highland
Preferred Stock outstanding and no shares of Highland Common Stock or Highland
Preferred Stock held by Highland Bank as treasury stock. There are no shares of
Highland Common Stock reserved for issuance upon exercise of outstanding stock
options or otherwise except for 90,000 shares of Highland Common Stock reserved
for issuance pursuant to Highland Bank's stock option plans ("Highland Option
Plan") under which options to acquire 24,000 shares of Highland Common Stock are
outstanding as of the date hereof (the "Highland Options"). All of the issued
and outstanding shares of Highland Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable, were not issued in
violation of any preemptive rights, and have no personal liability attaching to
the ownership thereof. Except for Highland Options outstanding under the
Highland Option Plan, Highland Bank 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 Highland
Common Stock or any other equity security of Highland Bank or any securities
representing the right to purchase or otherwise receive any shares of Highland
Common Stock or any other equity security of Highland Bank. Of the Highland
Options, 21,500 are vested and exercisable and 2500 are not vested and not
exercisable under the terms of such option, as of the date hereof. The names of
the optionees, the date of each option to purchase Highland 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 Highland Option Plan, if any, shall be set forth in Section 4.2(b) of
the Company Disclosure Schedule.
(c) The authorized capital stock of First Community Bank consists of
80,000 shares of First Community Common Stock. As of the date hereof, there are
71,385 shares of First Community Common Stock outstanding and no shares of First
Community Common Stock held by First Community Bank as treasury stock. There are
no shares of First Community Common Stock reserved for issuance upon exercise of
outstanding stock options or otherwise. All of the issued and outstanding shares
of First Community Common Stock have been duly authorized and validly issued and
are fully paid and nonassessable, were not issued in violation of any preemptive
rights, and have no personal liability attaching to the ownership thereof. First
Community Bank 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 First Community Common Stock or any
other equity security of First Community Bank or any securities representing the
right to purchase or otherwise receive any shares of First Community Common
Stock or any other equity security of First Community Bank.
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(d) Section 4.2(d) of the Company Disclosure Schedule sets forth a true
and correct list of all of the Subsidiaries of the Company, Highland Bank and
First Community Bank, respectively. Except for such Subsidiaries, the Company,
Highland Bank and First Community Bank do 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) Each of the Company, Highland Bank and First Community Bank has
full corporate power and authority to execute and deliver this Agreement and,
with respect to the Company, the Stock Option Agreement and, upon the receipt of
shareholder approval of this Agreement, to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and, with respect to the Company, the Stock Option Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly approved by the respective Boards of Directors of the Company,
Highland Bank and First Community Bank. The respective Boards of Directors of
the Company, Highland Bank and First Community Bank has directed that this
Agreement and the transactions contemplated hereby be submitted to the
respective shareholders of the Company, Highland Bank and First Community Bank
for approval at a meeting of such shareholders and, except for the adoption of
this Agreement by the requisite vote of the Company's, Highland Bank's and First
Community Bank's shareholders, no other corporate proceedings on the part of the
Company, Highland Bank and First Community Bank 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, with respect to the
Company, the Stock Option Agreement has been duly and validly executed and
delivered by each of the Company, Highland Bank and First Community Bank and
(assuming due authorization, execution and delivery by BancorpSouth) each of
this Agreement and, with respect to the Company, the Stock Option Agreement
constitutes a valid and binding obligation of each of the Company, Highland Bank
and First Community Bank, enforceable against each of them 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, with
respect to the Company, the Stock Option Agreement by any of the Company,
Highland Bank or First Community Bank, nor the consummation by any of the
Company, Highland Bank or First Community Bank, of the transactions contemplated
hereby or thereby, nor compliance by any of the Company, Highland Bank or First
Community Bank with any of the terms or provisions hereof or thereof, will (i)
violate any provision of the Certificate of Incorporation or Bylaws of the
Company, Highland Bank or First Community Bank or the articles of incorporation,
bylaws or similar governing documents of any of their Subsidiaries, or (ii)
assuming that the consents and approvals referred to in Section 4.4 hereof are
duly obtained, (A) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to the Company, Highland
Bank, First Community Bank or any of their Subsidiaries, or any of their
respective properties or assets, or (B) 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,
Highland Bank, First Community Bank or any of their Subsidiaries under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to which
the Company, Highland Bank, First Community Bank or any of their 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.
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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 or statements in definitive form relating to the meetings of the
Company's, Highland Bank's and First Community Bank's shareholders to be held in
connection with this Agreement and the transactions contemplated hereby (such
proxy statement or statements, the "Proxy Statement") and the filing and
declaration of effectiveness of a post-effective amendment to BancorpSouth
Registration Statement on Form S-4 (such 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 each of the Company,
Highland Bank or First Community Bank, (e) the filing of the Articles of Merger
with the Mississippi Secretary, the Delaware Secretary, the Alabama Secretary,
the Mississippi Department and the Alabama Department, as applicable, and (f)
approval for listing of the BancorpSouth Common Stock to be issued in the Merger
on the NYSE, no consents or approvals of or filings or registrations with any
court, administrative agency or commission or other governmental authority or
instrumentality (each a "Governmental Entity") or with any third party are
necessary in connection with (1) the execution and delivery by the Company,
Highland Bank and First Community Bank of this Agreement and, with respect to
the Company, the Stock Option Agreement and (2) the consummation by the Company,
Highland Bank and First Community Bank of the Merger and the other transactions
contemplated hereby and thereby.
4.5. Reports. The Company, Highland Bank, First Community Bank and each of their
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, Highland
Bank, First Community Bank and their Subsidiaries, no Regulatory Agency has
initiated any proceeding or, to the knowledge of the Company, investigation into
the business or operations of the Company, Highland Bank, First Community Bank
or any of their 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, Highland Bank,
First Community Bank or any of their Subsidiaries.
4.6. Financial Statements. The Company has previously made available to
BancorpSouth copies of 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, in each case
accompanied by the audit report of Ernst & Young LLP, 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 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 with applicable
accounting requirements; and each of such statements (including the related
notes, where applicable) has been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied during the periods involved,
except as indicated in the notes thereto. The books and records of the Company
and
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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. Except for Alex Sheshunoff & Co. Investment Banking, neither
the Company, Highland Bank, First Community Bank nor any Subsidiary thereof 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, Highland Bank or First
Community Bank and (ii) the Company, Highland Bank, First Community Bank and
their Subsidiaries have carried on their respective businesses in the ordinary
course consistent with their past practices.
(b) Neither the Company, Highland Bank, First Community Bank nor any of
their 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 BancorpSouth), 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) Except as set forth in Section 4.9(a) of the Company Disclosure
Schedule, neither the Company, Highland Bank, First Community Bank nor any of
their 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, Highland Bank, First Community Bank or any of their
Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement or the Stock Option Agreement .
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon the Company, Highland Bank, First Community Bank or any
of their Subsidiaries or the assets of the Company, Highland Bank, First
Community Bank or any of their Subsidiaries.
4.10. Taxes.
(a) Each of the Company, Highland Bank, First Community Bank and their
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, Highland Bank, First Community Bank nor any of their 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
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assess any Taxes are pending or outstanding, and as of the date hereof, with
respect to each taxable period of the Company, Highland Bank, First Community
Bank and their Subsidiaries, the federal and state income Tax Returns of the
Company, Highland Bank, First Community Bank and their 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, Highland Bank, First Community Bank
or any of their Subsidiaries or by any trade or business, whether or not
incorporated, 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 ("ERISA Affiliates"), for the benefit of any employee or former
employee of the Company, Highland Bank, First Community Bank, any Subsidiary
thereof or any ERISA Affiliate.
(b) The Company has heretofore made available to BancorpSouth 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, if
any, for such Plan for each of the last two years, (iii) the most recent
determination letter from the Internal Revenue Service for such Plan and (iv)
the most recent summary plan description and related summaries of material
modifications.
(c) Except as set forth in Section 4.11(c) of the Company Disclosure
Schedule, each of the Plans is in compliance with the applicable provisions of
the Code and ERISA; each of the Plans intended to be "qualified" within the
meaning of section 401(a) of the Code has received a favorable determination
letter from the IRS and to the knowledge of the Company, nothing has occurred
which could reasonably be expected to result in the revocation of such letter;
no Plan has an accumulated or waived funding deficiency within the meaning of
section 412 of the Code; neither the Company, Highland Bank nor First Community
Bank 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, Highland Bank or First Community Bank 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.
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(d) Except as set forth in Section 4.11(d) of the Company Disclosure
Schedule or as otherwise contemplated by this Agreement or any other agreements
entered into by any party hereto in connection with the execution hereof,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (either alone or in conjunction with any
other event) (i) result in any payment (including, without limitation,
severance, unemployment compensation, "excess parachute payment" within the
meaning of Section 280G of the Code, forgiveness of indebtedness or otherwise)
becoming due to any officer, director or employee of the Company, Highland Bank,
First Community Bank or any of their 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. Company Information. The information relating to the Company, Highland
Bank, First Community Bank and their Subsidiaries which is provided to
BancorpSouth by the Company, Highland Bank and/or First Community Bank 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 BancorpSouth or any of its
Subsidiaries) will comply with the provisions of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations thereunder.
4.13. Compliance with Applicable Law. Except as set forth in Section 4.13 of the
Company Disclosure Schedule, the Company, Highland Bank, First Community Bank
and each of their 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, Highland Bank, First Community Bank or any of their Subsidiaries, and
neither the Company, Highland Bank, First Community Bank nor any of their
Subsidiaries has received notice, and the Company does not know, of any
violations of any of the above.
4.14. Certain Contracts.
(a) Except as set forth in Section 4.14 of the Company Disclosure
Schedule, neither the Company, Highland Bank, First Community Bank nor any of
their 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 BancorpSouth, the Company, Highland Bank, First Community Bank,
the Surviving Corporation, the Surviving Bank 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 Securities and
Exchange Commission ("SEC")) to be performed after the date of this Agreement,
(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, Highland Bank,
First Community Bank or any of their Subsidiaries. Each contract, arrangement,
commitment or understanding of the type described in this Section 4.14(a) is
referred to herein as a "Company Contract". The Company has previously delivered
or made available to BancorpSouth true and correct copies of each Company
Contract.
(b) (i) Each Company Contract described in clause (iii) of Section
4.14(a) is valid and binding and in full force and effect, (ii) the Company,
Highland Bank, First Community Bank and each of their Subsidiaries has performed
all obligations required to be performed by it to date under each Company
Contract described in clause (iii) of Section 4.14(a), (iii) no event or
condition exists
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which constitutes or, after notice or lapse of time or both, would constitute, a
default on the part of the Company, Highland Bank, First Community Bank or any
of their Subsidiaries under any Company Contract described in clause (iii) of
Section 4.14(a), and (iv) no other party to any Company Contract described in
clause (iii) of Section 4.14(a) is, to the knowledge of the Company, in default
in any respect thereunder.
4.15. Agreements with Regulatory Agencies. Except as set forth in Section 4.15
of the Company Disclosure Schedule, neither the Company, Highland Bank, First
Community Bank nor any of their 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, Highland Bank,
First Community Bank or any of their Subsidiaries been advised by any Regulatory
Agency or other Governmental Entity that it is considering issuing or requesting
any Regulatory Agreement.
4.16. Business Combination Provision; Takeover Laws. Each of the Company,
Highland Bank and First Community Bank 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 Alabama and the State of Delaware.
4.17. Administration of Fiduciary Accounts. The Company, Highland Bank, First
Community Bank and each of their 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, Highland Bank, First Community Bank nor any of
their 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.
4.18. Environmental Matters.
(a) Except as set forth in Section 4.18 of the Company Disclosure
Schedule, each of the Company, Highland Bank, First Community Bank and their
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, Highland Bank, First Community Bank, any of their
Subsidiaries, any Participation Facility or any Loan Property, has been or, with
respect to threatened proceedings, may be, named as a defendant (i) for alleged
noncompliance (including by any predecessor) with any Environmental Laws, or
(ii) 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, Highland Bank, First Community Bank or any of their Subsidiaries,
any Participation Facility or any Loan Property;
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(c) Except as set forth in Section 4.18 of the Company Disclosure
Schedule, to the knowledge of the Company, during the period of (i) the
Company's, Highland Bank's, First Community Bank's or any of their Subsidiaries'
ownership or operation of any of their respective current or former properties,
(ii) the Company's, Highland Bank's, First Community Bank's or any of their
Subsidiaries' participation in the management of any Participation Facility, or
(iii) the Company's, Highland Bank's, First Community Bank's or any of their
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 (i) the Company's, Highland
Bank's, First Community Bank's or any of their Subsidiaries' ownership or
operation of any of their respective current or former properties, (ii) the
Company's, Highland Bank's, First Community Bank's or any of their Subsidiaries'
participation in the management of any Participation Facility, or (iii) the
Company's, Highland Bank's, First Community Bank's or any of their 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 4.18:
(i) "Hazardous Materials" means any chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum or other regulated substances or materials, (ii)
"Loan Property" means any property in which the Company, Highland Bank, First
Community Bank or any of their Subsidiaries holds a security interest, and,
where required by the context, said term means the owner or operator of such
property; and (iii) "Participation Facility" means any facility in which the
Company, Highland Bank, First Community Bank or any of their Subsidiaries
participates in the management and, where required by the context, said term
means the owner or operator of such property.
4.19. 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.
4.20. Loan Portfolio.
(a) Except as set forth in Section 4.20 of the Company Disclosure
Schedule, neither the Company, Highland Bank, First Community Bank or any of
their 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 May
31, 1998, over 90 days delinquent in payment of principal or interest or in
default of any other provision. Section 4.20 of the Company Disclosure Schedule
sets forth all of the Loans in original principal amount in excess of $100,000
of the Company, Highland Bank, First Community Bank or any of their Subsidiaries
that as of May 31, 1998, were 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.
4.21. Property. Each of the Company, Highland Bank, First Community Bank and
their 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
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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, Highland Bank, First Community Bank or any
of their Subsidiaries, as lessee, leases real or personal property are valid and
enforceable in accordance with their respective terms and neither the Company,
Highland Bank, First Community Bank nor any of their Subsidiaries nor, to the
knowledge of the Company, any other party thereto, is in default thereunder.
4.22. Accounting for the Merger; Reorganization. As of the date of this
Agreement, the Company has no reason to believe that the Merger will fail to
qualify (i) for pooling-of-interests treatment under GAAP or (ii) as a
reorganization under Section 368(a) of the Code.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BANCORPSOUTH
Subject to Article III, BancorpSouth hereby represents and warrants to
the Company as follows:
5.1. Corporate Organization.
(a) BancorpSouth is a corporation duly organized, validly existing and
in good standing under the laws of the State of Mississippi. BancorpSouth 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.
BancorpSouth is duly registered as a bank holding company under the BHC Act. The
BancorpSouth Articles and Bylaws of BancorpSouth, 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 BancorpSouth's other
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Each Subsidiary of BancorpSouth
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, bylaws 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 BancorpSouth 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).
5.2. Capitalization.
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(a) The authorized capital stock of BancorpSouth consists of
500,000,000 shares of BancorpSouth Common Stock. As of June 18, 1998, there were
44,792,042 shares of BancorpSouth Common Stock issued and outstanding, and
105,052 shares of BancorpSouth Common Stock were held in BancorpSouth's
treasury. As of the date of this Agreement, no shares of BancorpSouth Common
Stock were reserved for issuance, except with respect to employee benefit plans,
stock option plans, BancorpSouth's rights plan and that certain Agreement and
Plan of Merger, dated as of May 2, 1998, between BancorpSouth and Merchants
Capital Corporation and the transactions contemplated therein. All of the issued
and outstanding shares of BancorpSouth 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 BancorpSouth's
dividend reinvestment plan, BancorpSouth 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
BancorpSouth Common Stock or any other equity securities of BancorpSouth or any
securities representing the right to purchase or otherwise receive any shares of
BancorpSouth Common Stock. The shares of BancorpSouth 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) Schedule 22 to BancorpSouth's Annual Report on Form 10-K for the
year ended December 31, 1997 sets forth a true and correct list of all of the
BancorpSouth Subsidiaries as of the date of this Agreement. BancorpSouth owns,
directly or indirectly, all of the issued and outstanding shares of capital
stock of each of the Subsidiaries of BancorpSouth, 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 BancorpSouth 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 BancorpSouth 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) BancorpSouth has full corporate power and authority to execute and
deliver this Agreement and the Stock Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Stock Option Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and validly approved
by the Board of Directors of BancorpSouth, and no other corporate proceedings on
the part of BancorpSouth 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 BancorpSouth and (assuming due authorization,
execution and delivery by the Company, Highland Bank and First Community Bank)
each of this Agreement and the Stock Option Agreement constitutes a valid and
binding obligation of BancorpSouth, enforceable against BancorpSouth 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 BancorpSouth, nor the consummation by BancorpSouth of the
transactions contemplated hereby or thereby, nor compliance by BancorpSouth with
any of the terms or provisions hereof or thereof, will (i) violate any provision
of the BancorpSouth Articles or Bylaws of BancorpSouth, or the articles of
incorporation or bylaws or similar governing documents of any of its
Subsidiaries or (ii) assuming
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that the consents and approvals referred to in Section 5.4 are duly obtained,
(A) violate any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to BancorpSouth or any of its Subsidiaries
or any of their respective properties or assets, or (B) 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 BancorpSouth 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 BancorpSouth 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, the Delaware Secretary,
the Alabama Secretary, the Mississippi Department and the Alabama Department, as
applicable, (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 BancorpSouth Common Stock pursuant to this
Agreement and (f) approval for listing of the BancorpSouth 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 BancorpSouth of this
Agreement and (2) the consummation by BancorpSouth of the Merger and the other
transactions contemplated hereby.
5.5. Reports. BancorpSouth 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 BancorpSouth and its Subsidiaries, no Regulatory Agency has
initiated any proceeding or, to the knowledge of BancorpSouth, investigation
into the business or operations of BancorpSouth 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 BancorpSouth or any of its Subsidiaries.
5.6. Financial Statements. BancorpSouth has previously made available to the
Company copies of (i) the consolidated balance sheets of BancorpSouth 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
BancorpSouth's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, 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 BancorpSouth, and (ii) the unaudited consolidated balance sheet of
BancorpSouth and its Subsidiaries as of March 31, 1998 and the related unaudited
consolidated statements of income, changes in shareholders' equity and cash
flows for the three months ended March 31, 1998, as reported in BancorpSouth's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, filed with
the SEC under the Exchange Act. The December 31, 1997 consolidated balance sheet
of BancorpSouth (including the related notes, where applicable) fairly presents
the consolidated financial position of BancorpSouth 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
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audit adjustments normal in nature and amount), the results of the consolidated
operations and changes in shareholders' equity and consolidated financial
position of BancorpSouth 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 BancorpSouth and its Subsidiaries have been, and
are being, maintained in accordance with GAAP and any other applicable legal and
accounting requirements.
5.7. Broker's Fees. Neither BancorpSouth nor any Subsidiary of BancorpSouth,
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
BancorpSouth 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 BancorpSouth.
5.9. Legal Proceedings.
(a) Except as set forth in BancorpSouth's Annual Report on Form 10-K
for the year ended December 31, 1997 or as disclosed pursuant to Section 5.16
hereto, neither BancorpSouth nor any of its Subsidiaries is a party to any and
there are no pending or, to BancorpSouth's knowledge, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or governmental
or regulatory investigations of any nature against BancorpSouth or any of its
Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement or the Stock Option Agreement.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon BancorpSouth, any of its Subsidiaries or the assets of
BancorpSouth or any of its Subsidiaries.
5.10. Taxes. Except as set forth in Section 5.10 of the BancorpSouth Disclosure
Schedule, each of BancorpSouth 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 BancorpSouth (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
BancorpSouth Disclosure Schedule, as of the date hereof, neither BancorpSouth
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
BancorpSouth and its Subsidiaries, the federal and state income Tax Returns of
BancorpSouth 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 BancorpSouth 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 "BancorpSouth Plans") by BancorpSouth, any of its Subsidiaries or
by any trade or business, whether or not incorporated (a "BancorpSouth ERISA
Affiliate"), all of which together with BancorpSouth would be deemed a "single
employer" within the meaning of Section 4001 of ERISA, for the benefit of any
employee or former employee of BancorpSouth, any Subsidiary or any BancorpSouth
ERISA Affiliate.
(b) Each of the BancorpSouth Plans is in compliance with the applicable
provisions of the Code and ERISA; each of the BancorpSouth 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
BancorpSouth, nothing has occurred which could reasonably be expected to result
in the revocation of such letter; no BancorpSouth Plan has an accumulated or
waived funding deficiency within the meaning of Section 412 of the Code; neither
BancorpSouth nor any BancorpSouth ERISA Affiliate has incurred, directly or
indirectly, any liability to or on account of a BancorpSouth Plan pursuant to
Title IV of ERISA (other than PBGC premiums); to the knowledge of BancorpSouth
no proceedings have been instituted to terminate any BancorpSouth 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 BancorpSouth 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
BancorpSouth of incurring a liability to or on account of a BancorpSouth Plan
pursuant to Title IV of ERISA; no BancorpSouth Plan is a multiemployer plan
(within the meaning of Section 4001(a)(3) of ERISA) and no BancorpSouth Plan is
a multiple employer plan as defined in Section 413 of the Code; and there are no
pending, or, to the knowledge of BancorpSouth, threatened or anticipated claims
(other than routine claims for benefits) by, on behalf of or against any of the
BancorpSouth Plans or any trusts related thereto.
5.12. SEC Reports. BancorpSouth 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
BancorpSouth with the SEC pursuant to the Securities Act of 1933 (the
"Securities Act") or the Exchange Act (the "BancorpSouth Reports") and (b)
communication mailed by BancorpSouth 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 as of a later date shall
be deemed to modify information as of an earlier date. BancorpSouth has timely
filed all BancorpSouth 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 BancorpSouth Reports complied with the published rules and
regulations of the SEC with respect thereto.
5.13. BancorpSouth Information. The information relating to BancorpSouth 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, Highland
Bank, First Community Bank or any of their 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.
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5.14. Compliance with Applicable Law. BancorpSouth 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 BancorpSouth or any of its Subsidiaries, and
neither BancorpSouth nor any of its Subsidiaries has received notice, and
BancorpSouth does not know, of any violations of any of the above.
5.15. Ownership of Company Common Stock; Affiliates and Associates. As of the
date hereof, neither BancorpSouth 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, Highland Bank or First Community Bank (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 BancorpSouth 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
"BancorpSouth 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 BancorpSouth or any of its Subsidiaries been advised by
any Regulatory Agency or other Governmental Entity that it is considering
issuing or requesting any BancorpSouth Regulatory Agreement.
5.17. Environmental Matters.
(a) Each of BancorpSouth and its Subsidiaries and, to the knowledge of
BancorpSouth, 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 BancorpSouth, threatened, before any Governmental Entity or other
forum in which BancorpSouth, 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 (i) for alleged noncompliance (including by any
predecessor) with any Environmental Laws, or (ii) 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 BancorpSouth or any of
its Subsidiaries, any Participation Facility or any Loan Property;
(c) To the knowledge of BancorpSouth during the period of (i)
BancorpSouth's or any of its Subsidiaries' ownership or operation of any of
their respective current or former properties, (ii) BancorpSouth's or any of its
Subsidiaries' participation in the management of any Participation Facility, or
(iii) BancorpSouth'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 BancorpSouth, prior to the period of (i)
BancorpSouth's or any of its Subsidiaries' ownership or operation of any of
their respective current or former properties, (ii) BancorpSouth's or any of its
Subsidiaries' participation in the management of any Participation Facility, or
(iii) BancorpSouth'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:
(i) "Loan Property" means any property in which BancorpSouth 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 (ii)
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"Participation Facility" means any facility in which BancorpSouth or
any of its Subsidiaries participates in the management and, where required by
the context, said term means the owner or operator of such property.
5.18. Approvals. As of the date of this Agreement, BancorpSouth 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 BancorpSouth Disclosure
Schedule, neither BancorpSouth 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 May
31, 1998, over 90 days delinquent in payment of principal or interest or in
default of any other provision. Section 5.19 of the BancorpSouth Disclosure
Schedule sets forth all Loans in original principal amounts in excess of
$100,000 of BancorpSouth or any of its Subsidiaries that were as of May 31,
1998, classified as "Doubtful" or "Loss", or words of similar import.
(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 BancorpSouth 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 BancorpSouth 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 BancorpSouth or any Subsidiary of BancorpSouth, as
lessee, leases real or personal property are valid and enforceable in accordance
with their respective terms and neither BancorpSouth nor any of its Subsidiaries
nor, to the knowledge of BancorpSouth, any other party thereto is in default
thereunder.
5.21. Accounting for the Merger; Reorganization. As of the date of this
Agreement, BancorpSouth 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, Highland Bank and First Community Bank. During
the period from the date of this Agreement and continuing until the Effective
Time, except as expressly contemplated or permitted by this Agreement and the
Stock Option Agreement or with the prior written consent of BancorpSouth, the
Company, Highland Bank, First Community Bank and their 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 and the Stock Option
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Agreement or as consented to in writing by BancorpSouth, the Company, Highland
Bank or First Community Bank shall not, and shall not permit any of their
Subsidiaries to:
(a) declare or pay any dividends on, or make other distributions in
respect of any of its capital stock during any period, at a rate that is
inconsistent with its past practice or in excess of the rate of its most recent
dividend or distribution prior to the date hereof;
(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, Highland
Bank, First Community Bank or any of their Subsidiaries, or any securities
convertible into or exercisable for any shares of the capital stock of the
Company, Highland Bank, First Community Bank or any of their Subsidiaries, (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, Highland Common Stock
or First Community Common Stock upon the exercise or fulfillment of rights or
options issued or existing pursuant to (A) 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 (B) the Stock Option
Agreement;
(c) amend its Articles of Incorporation, Bylaws 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, Highland Bank and
First Community Bank may communicate information about any such takeover
proposal to its respective shareholders if, in the judgment of the Company's,
Highland Bank's or First Community Bank's respective Boards of Directors, based
upon the advice of outside counsel, such communication is required under
applicable law, provided further, however, that the Company, Highland Bank and
First Community Bank 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 respective
Boards of Directors of the Company, Highland Bank or First Community Bank 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,
Highland Bank and First Community Bank will immediately cease and cause to be
terminated any existing activities, discussions or negotiations previously
conducted with any parties other than BancorpSouth with respect to any of the
foregoing. The Company, Highland Bank and First Community Bank 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, Highland Bank and First Community Bank will notify
BancorpSouth 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, Highland
Bank or First Community Bank, as applicable, and the Company, Highland Bank and
First Community Bank will promptly (within 24 hours) inform BancorpSouth 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,
Highland Bank and First Community Bank will keep BancorpSouth 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
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Company, Highland Bank, First Community Bank or any of their Subsidiaries 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, Highland Bank, First
Community Bank or any of their Subsidiaries, other than the transactions
contemplated or permitted by this Agreement or 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
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, Highland Bank or First Community Bank, 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, Highland Bank, First Community Bank or any of their Subsidiaries 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;
(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;
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(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, Highland Bank, First
Community Bank or any of their Subsidiaries is a party or by which the Company,
Highland Bank, First Community Bank or any of their 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, Highland Bank, First Community Bank or any of their
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));
(q) enter into any Loans in an original principal amount in excess of
$2,000,000; or
(r) agree or commit to do any of the foregoing.
6.2. Covenants of BancorpSouth. Except as otherwise contemplated by this
Agreement or consented to in writing by the Company, BancorpSouth 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;
(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 BancorpSouth'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 BancorpSouth'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, BancorpSouth 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) BancorpSouth and the Company, Highland Bank and First Community
Bank shall promptly prepare and file with the SEC the Proxy Statement, and
BancorpSouth 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, Highland
Bank, First Community Bank and BancorpSouth shall use its reasonable best
efforts to have the S-4 declared effective under the Securities Act as promptly
as practicable after such filing, and each of the Company, Highland Bank and
First Community Bank
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shall thereafter mail the Proxy Statement to its respective shareholders.
BancorpSouth 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
BancorpSouth 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 BancorpSouth, as the case may be, and any of their respective
Subsidiaries, which appears in any filing made with, or written materials
submitted to, any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto shall act reasonably and as promptly as practicable.
The parties hereto agree that they will consult with each other with respect to
the obtaining of all permits, consents, approvals and authorizations of all
third parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
(c) BancorpSouth and the Company, Highland Bank and First Community
Bank 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 BancorpSouth, the Company, Highland Bank, First
Community Bank or any of their respective Subsidiaries to any Governmental
Entity in connection with the Merger and the other transactions contemplated by
this Agreement.
(d) BancorpSouth and the Company, Highland Bank and First Community
Bank shall promptly furnish each other with copies of written communications
received by BancorpSouth or the Company, Highland Bank or First Community Bank,
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 (each, a "Representative") 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. In addition, the Company, Highland Bank and First
Community Bank shall permit a Representative of BancorpSouth to have access to
the premises and observe the operations of the Company, Highland Bank and First
Community Bank during normal business hours and to attend each meeting of their
respective Boards of Directors and committees thereof (other than during
discussions regarding this Agreement, the Stock Option Agreement and the
transactions contemplated hereby and thereby). 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
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and disclosure, and the parties hereto will make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply.
(b) All information furnished to BancorpSouth pursuant to Section
7.2(a) shall be subject to, and BancorpSouth shall hold all such information in
confidence in accordance with, the provisions of the confidentiality agreement
dated June 11, 1998 (the "Confidentiality Agreement"), between BancorpSouth and
the Company. Each of the Company, Highland Bank and First Community Bank shall
have the same obligations to BancorpSouth 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 Meetings. Each of the Company, Highland Bank and First
Community Bank 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. Each of the
Company, Highland Bank and First Community Bank will, through its respective
Board of Directors, recommend to its respective 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 BancorpSouth and the Company,
Highland Bank and First Community Bank shall, and shall cause their 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, Highland Bank,
First Community Bank or BancorpSouth 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 BancorpSouth and the Company, Highland Bank and
First Community Bank shall use its reasonable best efforts to cause each
director, executive officer and other person who is an "affiliate" (for purposes
of Rule 145 under the Securities Act and for purposes of qualifying the Merger
for "pooling-of-interests" accounting treatment) of such party to deliver to the
other party hereto, as soon as practicable after the date of this Agreement, a
written agreement, in the form of Exhibit 7.5(a) hereto (in the case of
affiliates of BancorpSouth) or Exhibit 7.5(b) hereto (in the case of affiliates
of the Company, Highland Bank and First Community Bank).
7.6. Stock Exchange Listing. BancorpSouth shall use its reasonable best
efforts to cause the shares of BancorpSouth 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; Stay Pay Program.
(a) As of the Effective Time, the employees of the Company and its
Subsidiaries (the "Company Employees") shall be eligible to participate in
BancorpSouth's employee benefit plans in which similarly situated employees of
BancorpSouth or BancorpSouth Bank participate, to the same extent as similarly
situated employees of BancorpSouth or BancorpSouth Bank (it being understood
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that inclusion of Company Employees in BancorpSouth's employee benefit plans may
occur at different times with respect to different plans).
(b) With respect to each BancorpSouth 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 BancorpSouth; 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 BancorpSouth 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
BancorpSouth Plan.
(c) As of the Effective Time, BancorpSouth shall assume and honor and
shall cause the appropriate Subsidiaries of BancorpSouth 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.
(d) BancorpSouth and the Company, Highland Bank and First Community
Bank 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 BancorpSouth
after the Merger is completed, so that such plan merger satisfies the
requirements of Section 414(l) of the Code; provided, however, that BancorpSouth
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 BancorpSouth Plan.
(e) BancorpSouth and the Company, Highland Bank and First Community
Bank shall cooperate in establishing a "stay pay" program for certain employees
of the Company, Highland Bank and First Community Bank, whereby such employees
would be paid up to three months of compensation as an incentive to remain in
the employ of the Company, Highland Bank and First Community Bank, as
applicable, during the period between the date hereof and the Closing. The
parties hereto shall negotiate the specific terms and conditions of such "stay
pay" program in good faith.
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, Highland Bank, First Community
Bank or any of their 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 the fact that (i) 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, BancorpSouth shall indemnify and hold
harmless, as and to the extent permitted by law, each
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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 BancorpSouth; provided,
however, that (1) BancorpSouth shall have the right to assume the defense
thereof and upon such assumption BancorpSouth 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 BancorpSouth elects not to assume such defense or
counsel for the Indemnified Parties reasonably advises that there are issues
which raise conflicts of interest between BancorpSouth and the Indemnified
Parties, the Indemnified Parties may retain counsel reasonably satisfactory to
them after consultation with BancorpSouth, and BancorpSouth shall pay the
reasonable fees and expenses of such counsel for the Indemnified Parties, (2)
BancorpSouth shall in all cases be obligated pursuant to this paragraph to pay
for only one firm of counsel for all Indemnified Parties, (3) BancorpSouth shall
not be liable for any settlement effected without its prior written consent
(which consent shall not be unreasonably withheld) and (4) BancorpSouth 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 BancorpSouth thereof, provided that the failure to so notify
shall not affect the obligations of BancorpSouth under this Section 7.8 except
to the extent such failure to notify materially prejudices BancorpSouth.
BancorpSouth's obligations under this Section 7.8 shall continue in full force
and effect without time limit from and after the Effective Time.
(b) BancorpSouth shall cause the persons serving as officers and
directors of the Company, Highland Bank, First Community Bank and their
Subsidiaries 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, Highland Bank, First Community Bank
and their Subsidiaries, as applicable (provided that BancorpSouth 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 BancorpSouth 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
BancorpSouth is unable to maintain or obtain the insurance called for by this
Section 7.8(b), BancorpSouth shall use all reasonable efforts to obtain as much
comparable insurance as is available for the Insurance Amount.
(c) In the event BancorpSouth 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
BancorpSouth assume the obligations set forth in this section.
(d) The provisions of this Section 7.8 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
7.9. Additional Agreements. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving
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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 BancorpSouth.
7.10 Coordination of Dividends. After the date of this Agreement each of
BancorpSouth 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 period with respect to
their shares of Company Common Stock and any shares of BancorpSouth Common Stock
any holder of Company Common Stock receives in exchange therefor in the Merger.
7.11 Stock Option Agreement. Contemporaneously with the execution and
delivery of this Agreement, the Company and BancorpSouth shall execute and
deliver the Stock Option Agreement.
7.12 Highland Options. Each Highland Option that is outstanding but is not
vested in accordance with its terms and has not been exercised immediately prior
to the Effective Time shall terminate and be canceled as of the Effective Time.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1. Conditions to Each Party's Obligation To Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Shareholder Approvals. This Agreement shall have been approved and
adopted by the requisite vote of the respective shareholders of the Company,
Highland Bank and First Community Bank under applicable law.
(b) Listing of Shares. The shares of BancorpSouth Common Stock which
shall be issued to the shareholders of the Company, Highland Bank and First
Community Bank upon consummation of the 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.
(f) Employment Agreement. Larry R. Mathews shall have entered into a
written employment agreement with BancorpSouth Bank containing non-competition
provisions satisfactory to BancorpSouth in its reasonable discretion, or the
Employment Agreement, dated as of January 1,
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1998, between the Company and Larry R. Mathews, shall have been duly amended by
the parties thereto to delete the last sentence of Section 6(a) thereof.
8.2. Conditions to Obligations of BancorpSouth. The obligation of
BancorpSouth to effect the Merger is also subject to the satisfaction or waiver
by BancorpSouth 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. BancorpSouth 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. Each of the Company,
Highland Bank and First Community Bank 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 BancorpSouth 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) Tax Opinion. BancorpSouth shall have received an opinion from
Waller Lansden Dortch & Davis, PLLC, counsel to BancorpSouth ("BancorpSouth's
Counsel"), in form and substance reasonably satisfactory to BancorpSouth, 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 BancorpSouth, the
Company, Highland Bank or First Community Bank as a result of the
Merger;
(ii) No gain or loss will be recognized by the shareholders of
the Company, Highland Bank and First Community Bank who exchange all
of their Acquiree Common Stock solely for BancorpSouth Common Stock
pursuant to the Merger (except with respect to cash received in lieu
of a fractional share interest in BancorpSouth Common Stock); and
(iii) The aggregate tax basis of the BancorpSouth Common Stock
received by shareholders who exchange all of their Acquiree Common
Stock solely for BancorpSouth Common Stock pursuant to the Merger will
be the same as the aggregate tax basis of the Acquiree 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, BancorpSouth's Counsel may require and rely
upon representations and covenants, including those contained in certificates of
officers of BancorpSouth, the Company and others, reasonably satisfactory in
form and substance to such counsel.
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(e) Legal Opinion. BancorpSouth shall have received an opinion from the
Company's Counsel (as defined below), in form and substance reasonably
satisfactory to BancorpSouth, dated the Effective Time, relating to the
enforceability of this Agreement and such other matters as BancorpSouth may
reasonably request; provided, however, that as to matters of Mississippi law,
the Company's Counsel may rely upon an opinion of Mississippi counsel addressed
to it or may cause such opinion to be issued directly to BancorpSouth.
(f) Pooling Treatment. KPMG Peat Marwick LLP, certified public
accountants for BancorpSouth, and Ernst & Young LLP, certified public
accountants for the Company, shall have each delivered a letter dated the
Closing Date and addressed to BancorpSouth, to the effect that the Merger will
qualify for pooling of interests accounting treatment under applicable
accounting standards if consummated in accordance with this Agreement.
(g) Shareholder Approval of Employment Agreement. Prior to the
Effective Time, the shareholders of the Company shall have duly approved the
Employment Agreement, dated as of January 1, 1998, between the Company and Larry
R. Mathews, such that the provisions of the Employment Agreement do not result
in any "excess parachute payments," within the meaning of Section 280G of the
Code, in accordance with Section 280G(b)(5) of the Code.
(h) Transfer of Certain Shares. Prior to the Effective Time, the
Company shall have conveyed for fair value all of its holdings of shares of
capital stock of EBSCO Industries, Inc. and of Shrewsbury Bank to a person or
entity that is not a Subsidiary of the Company.
(i) Highland Preferred Stock. Highland Bank shall have redeemed all of
the outstanding shares of Highland Preferred Stock at a redemption price per
share not greater than the par value per share thereof.
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 BancorpSouth 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
BancorpSouth 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 BancorpSouth by the Chief Executive
Officer and the principal financial officer of BancorpSouth to the foregoing
effect.
(b) Performance of Obligations of BancorpSouth. BancorpSouth 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 BancorpSouth by the Chief
Executive Officer and the principal financial officer of BancorpSouth to such
effect.
(c) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
(d) Tax Opinion. The Company shall have received an opinion from
Bradley Arant Rose & White LLP (the "Company's Counsel"), in form and substance
reasonably satisfactory to the Company, dated the Effective Time, substantially
to the effect that, on the basis of facts,
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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 BancorpSouth, the
Company, Highland Bank or First Community Bank as a result of the
Merger;
(ii) No gain or loss will be recognized by the shareholders of
the Company, Highland Bank and First Community Bank who exchange all
of their Acquiree Common Stock solely for BancorpSouth Common Stock
pursuant to the Merger (except with respect to cash received in lieu
of a fractional share interest in BancorpSouth Common Stock); and
(iii) The aggregate tax basis of the BancorpSouth Common Stock
received by shareholders who exchange all of their Acquiree Common
Stock solely for BancorpSouth Common Stock pursuant to the Merger will
be the same as the aggregate tax basis of the Acquiree 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 BancorpSouth, the Company and others, reasonably satisfactory in
form and substance to such counsel.
(e) Fairness Opinion. Prior to the mailing of the Proxy Statement, the
Company shall have received an opinion from Alex Sheshunoff & Co. Investment
Banking 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.
(f) Legal Opinion. The Company shall have received an opinion from
BancorpSouth's Counsel, in form and substance reasonably satisfactory to the
Company, dated the Effective Time, relating to the enforceability of this
Agreement, the validity of the shares of BancorpSouth Common Stock to be issued
in the Merger and such other matters as the Company may reasonably request;
provided, however, that as to matters of Mississippi law, BancorpSouth's Counsel
may rely upon an opinion of Mississippi counsel addressed to it or may cause
such opinion to be issued directly to the Company.
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 the parties hereto:
(a) by mutual consent of the Company and BancorpSouth 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 BancorpSouth 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
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Entity of competent jurisdiction shall have issued a final nonappealable order
enjoining or otherwise prohibiting the Merger;
(c) by either BancorpSouth or the Company if the Merger shall not have
been consummated on or before January 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 BancorpSouth 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 BancorpSouth 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 BancorpSouth);
(f) by either BancorpSouth or the Company (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have been
a material breach of any of the covenants or agreements set forth in this
Agreement on the part of the other party, which breach shall not have been cured
within thirty days following receipt by the breaching party of written notice of
such breach from the other party hereto, or which breach, by its nature, cannot
be cured prior to the Closing;
(g) by the Board of Directors of BancorpSouth, if the Board of
Directors of the Company, Highland Bank and First Community Bank shall have
failed to recommend in the Proxy Statement that the Company's, Highland Bank's
and First Community Bank's shareholders, as applicable, approve and adopt this
Agreement, or shall have withdrawn, modified or changed in a manner adverse to
BancorpSouth its approval or recommendation of this Agreement and the
transactions contemplated hereby;
(h) by either BancorpSouth or the Company as provided in Sections
1.4(a), 1.5(a) and 1.6(a) hereof.
9.2. Effect of Termination. In the event of termination of this Agreement by
either BancorpSouth 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, Highland Bank and First Community Bank; provided, however, that after
any approval of the transactions contemplated by this Agreement by the
Company's, Highland Bank's
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and First Community Bank'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's, Highland Bank's and First Community Bank's 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.
10.2 Nonsurvival of Representations, Warranties and Agreements. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement (other than pursuant to the
Stock Option Agreement which shall terminate in accordance with its terms) shall
survive the Effective Time, except for those covenants and agreements contained
herein and therein which by their terms apply in whole or in part after the
Effective Time.
10.3 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
10.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to BancorpSouth, to:
BancorpSouth, Inc.
One Mississippi Plaza
Tupelo, Mississippi 38801
Attention: Aubrey B. Patterson
39
<PAGE> 41
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, Highland Bank or First Community Bank, to:
Alabama Bancorp., Inc.
2211 Highland Avenue
Birmingham, Alabama 35255
Attention: Larry R. Mathews
with a copy (which shall not constitute notice) to:
Bradley Arant Rose & White LLP
2001 Park Place, Suite 1400
Birmingham, Alabama 35203
Attention: Paul S. Ware, 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 June 19, 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
Confidentiality Agreement and the Stock Option 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.
40
<PAGE> 42
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 BancorpSouth nor the Company,
Highland Bank or First Community Bank 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.]
41
<PAGE> 43
IN WITNESS WHEREOF, each of the parties hereto 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: Chairman and Chief Executive Officer
ALABAMA BANCORP., INC.
By: /s/ LARRY R. MATHEWS
--------------------------
Name: Larry R. Mathews
Title: President
HIGHLAND BANK
By: /s/; LARRY R. MATHEWS
--------------------------
Name: Larry R. Mathews
Title: President and Chief Executive Officer
FIRST COMMUNITY BANK OF THE SOUTH
By: /s/ LARRY R. MATHEWS
--------------------------
Name: Larry R. Mathews
Title: Director
42
<PAGE> 1
Exhibit 5.1
WALLER LANSDEN DORTCH & DAVIS
A PROFESSIONAL LIMITED LIABILITY COMPANY
NASHVILLE CITY CENTER
511 UNION STREET, SUITE 2100
POST OFFICE BOX 198966
NASHVILLE, TENNESSEE 37219-8966
FACSIMILES (615) 244-6380 809 SOUTH MAIN STREET
(615) 244-6804 P. O. BOX 1035
(615) 244-5686 COLUMBIA, TN 38402-1035
(615) 388-6031
September 9, 1998
Board of Directors
BancorpSouth, Inc.
One Mississippi Plaza
Tupelo, Mississippi 38801
Ladies and Gentlemen:
We are acting as counsel to BancorpSouth, Inc., a Mississippi
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of up to 4,143,827 shares of
common stock (the Shares"), $2.50 par value per share, of the Company, pursuant
to the above-captioned Registration Statement and Post-Effective Amendment No. 1
thereto (the "Registration Statement"). As such counsel and in connection with
the foregoing, we have examined and relied upon such records, documents and
other instruments as in our judgment are necessary or appropriate in order to
express the opinions hereinafter set forth, and have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us as originals,
and the conformity to original documents of all documents submitted to us as
certified or photostatic copies.
Based upon and subject to the foregoing and such other matters as we
have deemed relevant, we are of the opinion that the Shares, when issued and
delivered upon payment therefor in the manner and on the terms described in or
incorporated by reference into the Registration Statement (after the same is
effective), will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and further consent to the reference to us under the
caption "Legal Matters" in the prospectus included in the Registration
Statement.
Very truly yours,
/s/ WALLER LANSDEN DORTCH & DAVIS, PLLC
<PAGE> 1
Exhibit 8.1
WALLER LANSDEN DORTCH & DAVIS
A PROFESSIONAL LIMITED LIABILITY COMPANY
NASHVILLE CITY CENTER
511 UNION STREET, SUITE 2100
POST OFFICE BOX 198966
NASHVILLE, TENNESSEE 37219-8966
FACSIMILES (615) 244-6380 809 SOUTH MAIN STREET
(615) 244-6804 P. O. BOX 1035
(615) 244-5686 COLUMBIA, TN 38402-1035
(615) 388-6031
September 9, 1998
BancorpSouth, Inc.
One Mississippi Plaza
Tupelo, Mississippi 38801
RE: CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGERS OF
(I) ALABAMA BANCORP, INC. WITH AND INTO BANCORPSOUTH,
INC.; (II) HIGHLAND BANK WITH AND INTO BANCORPSOUTH BANK;
AND (III) FIRST COMMUNITY BANK OF THE SOUTH WITH AND INTO
BANCORPSOUTH BANK.
Ladies and Gentlemen:
We have acted as tax counsel to BancorpSouth, Inc., a
Mississippi corporation ("BancorpSouth"), in connection with the proposed
mergers (collectively, the "Mergers") of (i) Alabama Bancorp., Inc., a Delaware
corporation (the "Company"), with and into BancorpSouth; (ii) Highland Bank, an
Alabama banking corporation ("Highland Bank"), with and into BancorpSouth Bank,
a Mississippi banking corporation ("BancorpSouth Bank"); and (iii) First
Community Bank of The South, an Alabama banking corporation ("First Community
Bank"), with and into BancorpSouth Bank pursuant to the Agreement and Plan of
Merger, dated as of June 19, 1998, as amended by that certain amendment dated as
of July 10, 1998, and amended by that certain second amendment dated as of
September 8, 1988 (as so amended, the "Merger Agreement"). At your request, as
an exhibit to the Registration Statement on Form S-4 to be filed with the
Securities and Exchange Commission in connection with the Mergers (the
"Registration Statement"), we are rendering our opinion regarding certain
federal income tax consequences of the Mergers.
INFORMATION RELIED UPON
In rendering the opinion set forth herein, and with your
consent, we have examined and relied upon originals or copies, certified or
otherwise identified
<PAGE> 2
BancorpSouth, Inc.
September 9, 1998
Page 2
to our satisfaction, of the Merger Agreement, the Proxy Statement/Prospectus
included in the Registration Statement and the representations (which we have
neither investigated nor verified) given to us by letter, dated September 9,
1998, by BancorpSouth and BancorpSouth Bank and by letter, dated September 9,
1998, by the Company, Highland Bank and First Community Bank, each as contained
and described in the representations section of such letters (collectively, the
"Certificates"), and have assumed that such Certificates will be complete and
accurate on the date given and as of the Effective Time. In addition, we have
examined such other documents, agreements, and certificates and made such
investigations of law and fact as we have deemed necessary or appropriate as a
basis for the opinion set forth below.
In our examination, we have assumed, with your consent, the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photocopies,
the authenticity of the originals of such copies, and any material unexecuted
documents will be properly executed in the form as currently presented to us. As
to any facts material to this opinion which we did not independently establish
or verify, we have relied upon the completeness and accuracy of (i) the
statements and representations made by BancorpSouth, BancorpSouth Bank, the
Company, Highland Bank and First Community Bank and (ii) the Proxy
Statement/Prospectus, and we have assumed that such will be complete and
accurate through the date hereof and will continue to remain complete and
accurate as of the Effective Time. In addition, we have assumed, with your
consent, that the statements contained in the Certificates are complete and
accurate on the date hereof and will be complete and accurate as of the
Effective Time, and that any representation made in any of the documents
referred to herein "to the best of the knowledge and belief" (or similar
qualification) of any person or party is now and will be as of the Effective
Time complete and accurate without such qualification. We have also assumed that
the transactions contemplated by the Merger Agreement will be consummated in
accordance therewith and as described in the Proxy Statement/Prospectus, and
that immediately following the merger of the Company with and into BancorpSouth,
Highland Bank and First Community Bank will be merged with and into BancorpSouth
Bank and that the each of the Mergers will qualify as a statutory merger under
the applicable laws of the States of Mississippi and Alabama.
Unless specified, capitalized terms used herein shall have the meanings
assigned to them in the Merger Agreement. All references herein to the Code are
to the Internal Revenue Code of 1986, as amended (the "Code").
<PAGE> 3
BancorpSouth, Inc.
September 9, 1998
Page 3
OPINION
On the basis of the foregoing, and subject to the assumptions,
qualifications and limitations stated herein, we are of the opinion that:
(i) Each of the Mergers will constitute a reorganization
within the meaning of Section 368(a) of the Code;
(ii) No gain or loss will be recognized by BancorpSouth,
BancorpSouth Bank, the Company, Highland Bank or First Community Bank
as a result of the Mergers;
(iii) No gain or loss will be recognized by the shareholders
of the Company who exchange all of their Company Common Stock solely
for BancorpSouth Common Stock pursuant to the Merger Agreement (except
with respect to cash received in lieu of a fractional share interest in
BancorpSouth Common Stock);
(iv) No gain or loss will be recognized by the shareholders of
Highland Bank who exchange all of their Highland Common Stock solely
for BancorpSouth Common Stock pursuant to the Merger Agreement (except
with respect to cash received in lieu of a fractional share interest in
BancorpSouth Common Stock);
(v) No gain or loss will be recognized by the shareholders of
First Community Bank who exchange all of their First Community Common
Stock solely for BancorpSouth Common Stock pursuant to the Merger
Agreement (except with respect to cash received in lieu of a fractional
share interest in BancorpSouth Common Stock);
(vi) The aggregate tax basis of the BancorpSouth Common Stock
received by the shareholders of the Company who exchange all of their
Company Common Stock solely for BancorpSouth Common Stock pursuant to
the Merger Agreement 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);
(vii) The aggregate tax basis of the BancorpSouth Common Stock
received by the shareholders of Highland Bank who exchange all of their
Highland Common Stock solely for BancorpSouth Common Stock pursuant to
<PAGE> 4
BancorpSouth, Inc.
September 9, 1998
Page 4
the Merger Agreement will be the same as the aggregate tax basis of the
Highland Common Stock surrendered in exchange therefor (reduced by any
amount allocable to a fractional share interest for which cash is
received); and
(viii) The aggregate tax basis of the BancorpSouth Common
Stock received by the shareholders of First Community Bank who exchange
all of their First Community Common Stock solely for BancorpSouth
Common Stock pursuant to the Merger Agreement will be the same as the
aggregate tax basis of the First Community Common Stock surrendered in
exchange therefor (reduced by any amount allocable to a fractional
share interest for which cash is received).
The opinion expressed herein is based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinion is based solely on the documents
that we have examined, the additional information that we have obtained, and the
facts set out in the Certificates that we have assumed, with your consent, to be
true and correct. Our opinion cannot be relied upon if any of the facts
contained in such documents or in any such additional information is, or later
becomes, inaccurate, or if any of the facts set out in the Certificates is, or
later becomes, inaccurate.
<PAGE> 5
BancorpSouth, Inc.
September 9, 1998
Page 5
Our opinion is limited to the United States federal income tax
matters specifically covered thereby, and we have not been asked to address, nor
have we addressed, any other tax consequences that may result from the Mergers
or any other transaction (including any transaction undertaken in connection
with the Mergers). We express no opinion regarding the tax consequences of the
Mergers to shareholders of the Company, Highland Bank or First Community Bank
that are subject to special tax rules.
In rendering this opinion, we have assumed that Bradley Arant
Rose & White LLP has delivered, and has not withdrawn, their opinion regarding
certain of the federal income tax consequences of the Mergers.
We hereby consent to the filing of this letter as an exhibit
to the Registration Statement and to the reference to our firm under the
headings "Legal Matters" and "The Mergers -- Certain Federal Income Tax
Consequences" in the Prospectus Supplement/Proxy Statement forming a part of the
Registration Statement. In giving such consent, we do not thereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
Very truly yours,
/s/ WALLER LANSDEN DORTCH & DAVIS, PLLC
<PAGE> 1
Exhibit 8.2
[Letterhead of Bradley Arant Rose & White LLP]
September 9, 1998
Alabama Bancorp., Inc.
2211 Highland Avenue
Birmingham, Alabama 35255
Re: Certain Federal Income Tax Consequences of the Mergers of (i)
Alabama Bancorp., Inc. with and into BancorpSouth, Inc.; (ii)
Highland Bank with and into BancorpSouth Bank; and (iii) First
Community Bank of The South with and into BancorpSouth Bank
Ladies and Gentlemen:
We have acted as tax counsel to Alabama Bancorp., Inc., a
Delaware corporation (the "Company"), in connection with the proposed mergers
(collectively, the "Mergers") of (i) the Company with and into BancorpSouth,
Inc., a Mississippi corporation ("BancorpSouth"); (ii) Highland Bank, an Alabama
banking corporation ("Highland Bank") with and into BancorpSouth Bank, a
Mississippi banking corporation ("BancorpSouth Bank"); and (iii) First Community
Bank of The South, an Alabama banking corporation ("First Community Bank") with
and into BancorpSouth Bank pursuant to the Agreement and Plan of Merger dated as
of June 19, 1998, as amended by that certain first amendment dated as of July
10, 1998 (as amended, the "Merger Agreement"). At your request, as an exhibit to
the Registration Statement on Form S-4 to be filed with the Securities and
Exchange Commission in connection with the Mergers (the "Registration
Statement"), we are rendering our opinion regarding certain federal income tax
consequences of the Mergers.
Information Relied Upon
In rendering the opinion set forth herein, and with your
consent, we have examined and relied upon originals or copies, certified or
otherwise identified to our satisfaction, of the Merger Agreement, the Proxy
Statement/Prospectus included in the Registration Statement and the
representations (which we have neither investigated or verified) given to us by
letter, dated September 9, 1998, by BancorpSouth and BancorpSouth Bank and by
letter, dated September 9, 1998, by the Company, Highland Bank and First
Community Bank, each as contained and described in the representations section
of such letters (collectively, the "Certificates"). In addition, we have
<PAGE> 2
Alabama Bancorp., Inc.
September 9, 1998
Page 2
examined such other documents, agreements, and certificates and made such
investigations of law and fact as we have deemed necessary or appropriate as a
basis for the opinion set forth below.
In our examination, we have assumed, with your consent, the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photocopies,
the authenticity of the originals of such copies, and any material unexecuted
documents will be properly executed in the form as currently presented to us. As
to any facts material to this opinion which we did not independently establish
or verify, we have relied upon the completeness and accuracy of (i) the
statements and representations made by BancorpSouth, BancorpSouth Bank, the
Company, Highland Bank and First Community Bank and (ii) the Proxy
Statement/Prospectus, and we have assumed that such will be complete and
accurate through the date hereof and will continue to remain complete and
accurate as of the Effective Time. In addition, we have assumed, with your
consent, that the statements contained in the Certificates are complete and
accurate on the date hereof and will be complete and accurate as of the
Effective Time, and that any representation made in any of the documents
referred to herein "to the best of the knowledge and belief" (or similar
qualification) of any person or party is now and will be as of the Effective
Time complete and accurate without such qualification. We have also assumed that
the transactions contemplated by the Merger Agreement will be consummated in
accordance therewith and as described in the Proxy Statement/Prospectus, and
that immediately following the merger of the Company with and into BancorpSouth,
Highland Bank and First Community Bank will be merged with and into BancorpSouth
Bank and that each of the Mergers will qualify as a statutory merger under the
applicable laws of the State of Mississippi and Alabama. Unless specified,
capitalized terms used herein shall have the meanings assigned to them in the
Merger Agreement.
Opinion
On the basis of the foregoing, and subject to the assumptions,
qualifications and limitations stated herein, we are of the opinion that:
(i) Each of the Mergers will be treated as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code");
(ii) No gain or loss will be recognized by BancorpSouth,
BancorpSouth Bank, the Company, Highland Bank or First Community Bank
as a result of the Mergers;
(iii) No gain or loss will be recognized by the shareholders
of the Company who exchange all of their Company Common Stock solely
for BancorpSouth Common Stock pursuant to the Merger Agreement (except
with respect to cash received in lieu of a fractional share interest in
BancorpSouth Common Stock);
(iv) No gain or loss will be recognized by the shareholders of
Highland Bank who exchange all of their Highland Common Stock solely
for BancorpSouth Common Stock pursuant to the Merger Agreement (except
with respect to cash received in lieu of a fractional share interest in
BancorpSouth Common Stock);
<PAGE> 3
Alabama Bancorp., Inc.
September 9, 1998
Page 3
(v) No gain or loss will be recognized by the shareholders of
First Community Bank who exchange all of their First Community Common
Stock solely for BancorpSouth Common Stock pursuant to the Merger
Agreement (except with respect to cash received in lieu of a fractional
share interest in BancorpSouth Common Stock);
(vi) The aggregate tax basis of the BancorpSouth Common Stock
received by the shareholders of the Company who exchange all of their
Company Common Stock solely for BancorpSouth Common Stock pursuant to
the Merger Agreement 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);
(vii) The aggregate tax basis of the BancorpSouth Common Stock
received by the shareholders of Highland Bank who exchange all of their
Highland Common Stock solely for BancorpSouth Common Stock pursuant to
the Merger Agreement will be the same as the aggregate tax basis of the
Highland Common Stock surrendered in exchange therefor (reduced by any
amount allocable to a fractional share interest for which cash is
received); and
(viii) The aggregate tax basis of the BancorpSouth Common
Stock received by the shareholders of First Community Bank who exchange
all of their First Community Common Stock solely for BancorpSouth
Common Stock pursuant to the Merger Agreement will be the same as the
aggregate tax basis of the First Community Common Stock surrendered in
exchange therefor (reduced by any amount allocable to a fractional
share interest for which cash is received).
<PAGE> 4
Alabama Bancorp., Inc.
September 9, 1998
Page 4
The opinion expressed herein is based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinion is based solely on the documents
that we have examined, the additional information that we have obtained, and the
facts set out in the Certificates that we have assumed, with your consent, to be
true and correct. Our opinion cannot be relied upon if any of the facts
contained in such documents or in any such additional information is, or later
becomes, inaccurate, or if any of the facts set out in the Certificates is, or
later becomes, inaccurate.
Our opinion is limited to the United States federal income tax
matters specifically covered thereby, and we have not been asked to address, nor
have we addressed, any other tax consequences that may result from the Mergers
or any other transaction (including any transaction undertaken in connection
with the Mergers). We express no opinion regarding the tax consequences of the
Mergers to shareholders of the Company, Highland Bank or First Community Bank
that are subject to special tax rules.
In rendering this opinion, we have assumed that Waller Lansden
Dortch & Davis, PLLC has delivered, and has not withdrawn, their opinion
regarding certain of the federal income tax consequences of the Mergers.
We hereby consent to the filing of this letter as an exhibit
to the Registration Statement and to the reference to our firm under the heading
"Certain Federal Income Tax Consequences" in the Proxy Statement/Prospectus
forming a part of the Registration Statement. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Bradley Arant Rose & White LLP
<PAGE> 1
EXHIBIT 10.1
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO CERTAIN PROVISIONS CONTAINED HEREIN
AND TO RESALE RESTRICTIONS UNDER THE SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("AGREEMENT"), dated as of June 19, 1998,
between ALABAMA BANCORP., INC., a Delaware 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 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 5167 fully paid and
nonassessable shares of Issuer's Common Stock, $0.25 par value per share
("Common Stock"), at a price of $2400.00 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.
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
1
<PAGE> 2
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 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
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(vi) Any person other than Grantee or any Grantee Subsidiary,
other than in connection with a transaction to which Grantee has given
its prior written consent, shall have filed an application or notice
with the Federal Reserve Board, or other federal or state bank
regulatory authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of
25% or more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described
in paragraph (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (y) shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Initial Triggering Event or Subsequent Triggering Event of which it has
notice (together, a "Triggering Event"), it being understood that the giving of
such notice by Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided that if prior
notification to or approval of the Federal Reserve Board or any other regulatory
agency is required in connection with such purchase, the Holder shall promptly
file the required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer this Agreement and a letter agreeing that the Holder
will not offer to sell or otherwise dispose of such shares in violation of
applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file
at the principal office of Issuer and will be provided to the holder
hereof without charge upon receipt by Issuer of a written request
therefor."
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It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act"), in the
above legend shall be removed by delivery of substitute certificate(s) without
such reference if the Holder shall have delivered to Issuer a copy of a letter
from the staff of the SEC, or an opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend is not
required for purposes of the 1933 Act; (ii) the reference to the provisions to
this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from preemptive
rights, sufficient authorized but unissued shares of Common Stock so that the
Option may be exercised without additional authorization of Common Stock after
giving effect to all other options, warrants, convertible securities and other
rights to purchase Common Stock; (ii) that it will not, by charter amendment or
through reorganization, consolidation, merger, dissolution or sale of assets, or
by any other voluntary act, avoid or seek to avoid the observance or performance
of any of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to time
be required (including (x) complying with all premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. ss. 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act
of 1978, as amended, or any state banking law, prior approval of or notice to
the Federal Reserve Board or to any state regulatory authority is necessary
before the Option may be exercised, cooperating fully with the Holder in
preparing such applications or notices and providing such information to the
Federal Reserve Board or such state regulatory authority as they may require) in
order to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly
to take all action provided herein to protect the rights of the Holder against
dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
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<PAGE> 5
5. In addition to the adjustment in the number of shares of Common Stock that
are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5. In the event of any change in, or distributions
in respect of, the Common Stock by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations, subdivisions, conversions, exchanges
of shares, distributions on or in respect of the Common Stock that would be
prohibited under the terms of the Merger Agreement, or the like, the type and
number of shares of Common Stock purchasable upon exercise hereof and the Option
Price shall be appropriately adjusted in such manner as shall fully preserve the
economic benefits provided hereunder and proper provision shall be made in any
agreement governing any such transaction to provide for such proper adjustment
and the full satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to an
Exercise Termination Event, Issuer shall, at the request of Grantee delivered
within 90 days of such Subsequent Triggering Event (whether on its own behalf or
on behalf of any subsequent holder of this Option (or part thereof) or any of
the shares of Common Stock issued pursuant hereto), promptly prepare, file and
keep current a shelf registration statement under the 1933 Act covering this
Option and any shares issued and issuable pursuant to this Option and shall use
its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
this Option and any shares of Common Stock issued upon total or partial exercise
of this Option ("Option Shares") in accordance with any plan of disposition
requested by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand two such registrations. The foregoing notwithstanding, if, at
the time of any request by Grantee for registration of the Option or Option
Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practicable and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in secondary
offering underwriting agreements for the Issuer. Upon receiving any request
under this Section 6 from any Holder, Issuer agrees to send a copy thereof to
any other person known to Issuer to be entitled to registration rights under
this Section 6, in each case by promptly mailing the same, postage prepaid, to
the address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no event shall
Issuer be obligated to effect more than two registrations pursuant to this
Section 6 by reason of the fact that there shall be more than one Grantee as a
result of any assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event (as defined
below), (i) following a request of the Holder, delivered prior to an Exercise
Termination Event, Issuer (or any successor thereto) shall repurchase the Option
from the Holder at a price (the "Option Repurchase Price") equal to the amount
by which (A) the Market/Offer Price (as defined below) exceeds (B) the
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<PAGE> 6
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, as reported or quoted on the exchange or
market, if any, on which shares of Common Stock are then listed or included for
quotation, or (iv) in the event of a sale of all or a substantial portion of
Issuer's assets, the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Issuer as determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the Issuer, divided by
the number of shares of Common Stock of Issuer outstanding at the time of such
sale. In determining the Market/Offer Price, the value of consideration other
than cash shall be determined by a nationally recognized investment banking firm
selected by the Holder or Owner, as the case may be, and reasonably acceptable
to the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to Issuer, at its principal
office, this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder or the Owner,
as the case may be, elects to require Issuer to repurchase this Option and/or
the Option Shares in accordance with the provisions of this Section 7. Within
the latter to occur of (x) five business days after the surrender of the Option
and/or certificates representing Option Shares and the receipt of such notice or
notices relating thereto and (y) the time that is immediately prior to the
occurrence of a Repurchase Event, Issuer shall deliver or cause to be delivered
to the Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price therefor or the portion thereof, if any, that Issuer is not
then prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify the Holder and/or the Owner and thereafter deliver
or cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable law or regulation from delivering to the Holder and/or the
Owner, as appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its
best efforts to obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to accomplish such
repurchase), the Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder
and/or the Owner, as appropriate, that portion of the Option Repurchase Price or
the Option Share Repurchase Price that Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to the Holder, a new Stock Option
Agreement evidencing the right of the Holder to purchase that number of shares
of Common Stock obtained by multiplying the number of shares of Common Stock for
which the surrendered Stock Option Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereof theretofore delivered to
the Holder and the
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<PAGE> 7
denominator of which is the Option Repurchase Price, or (B) to the Owner, a
certificate for the Option Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be deemed
to have occurred (i) upon the consummation of any merger, consolidation or
similar transaction involving Issuer or any purchase, lease or other acquisition
of all or a substantial portion of the assets of Issuer, other than any such
transaction which would not constitute an Acquisition Transaction pursuant to
the provisos to Section 2(b)(i) hereof or (ii) upon the acquisition by any
person of beneficial ownership of 50% or more of the then outstanding shares of
Common Stock, provided that no such event shall constitute a Repurchase Event
unless a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event. The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7 shall not terminate
upon the occurrence of an Exercise Termination Event unless no Subsequent
Triggering Event shall have occurred prior to the occurrence of an Exercise
Termination Event.
8. (a) In the event that prior to an Exercise Termination Event, Issuer shall
enter into an agreement (i) to consolidate with or merge into any person, other
than Grantee or one of its Subsidiaries, and shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding voting shares and voting share
equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (B) Issuer in a merger in which Issuer is the
continuing or surviving person, and (C) the transferee of all or
substantially all of Issuer's assets.
(ii) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the Market/Offer Price, as
defined in Section 7.
(iv) "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
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<PAGE> 8
Substitute Option in substantially the same form as this Agreement, which shall
be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the Acquiring
Corporation.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the "Substitute
Option Holder"), the Substitute Option Issuer shall repurchase the Substitute
Option from the Substitute Option Holder at a price (the "Substitute Option
Repurchase Price") equal to the amount by which (i) the Highest Closing Price
(as hereinafter defined) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common Stock for which
the Substitute Option may then be exercised and at the request of the owner (the
"Substitute Share Owner") of shares of Substitute Common Stock (the "Substitute
Shares"), the Substitute Option Issuer shall repurchase the Substitute Shares at
a price (the "Substitute Share Repurchase Price") equal to the Highest Closing
Price multiplied by the number of Substitute Shares so designated. The term
"Highest Closing Price" shall mean the highest closing price for shares of
Substitute Common Stock within the six-month period immediately preceding the
date the Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or, in either case, the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.
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<PAGE> 9
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option Issuer following a
request for repurchase pursuant to this Section 9 shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner and thereafter
deliver or cause to be delivered, from time to time, to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the portion of the
Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five business days after the date on which
the Substitute Option Issuer is no longer so prohibited; provided, however, that
if the Substitute Option Issuer is at any time after delivery of a notice of
repurchase pursuant to subsection (b) of this Section 9 prohibited under
applicable law or regulation from delivering to the Substitute Option Holder
and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder or Substitute Share
Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.
10. The 90-day period for exercise of certain rights under Sections 2, 6, 7 and
13 shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer 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:
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(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the 1933 Act.
13. Neither of the parties hereto may assign any of its rights or obligations
under this Option Agreement or the Option created hereunder to any other person,
without the express written consent of the other party, except that in the event
a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder within 90 days
following such Subsequent Triggering Event (or such later period as provided in
Section 10); provided, however, that until the date 15 days following the date
on which the Federal Reserve Board approves an application by Grantee under the
BHCA to acquire the shares of Common Stock subject to the Option, Grantee may
not assign its rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party acquires the right
to purchase in excess of 2% of the voting shares of Issuer, (iii) an assignment
to a single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on Grantee's behalf, or (iv)
any other manner approved by the Federal Reserve Board.
14. Each of Grantee and Issuer will use its best efforts to make all filings
with, and to obtain consents of, all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement, including without limitation making application to authorize for
quotation the shares of Common Stock issuable hereunder on 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.
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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.
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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.
ALABAMA BANCORP., INC.
By: /s/ LARRY R. MATHEWS
------------------------------
Name: Larry R. Mathews
Title: President
BANCORPSOUTH, INC.
By: /s/ AUBREY B. PATTERSON
------------------------------
Name: Aubrey B. Patterson
Title: Chairman and Chief Executive Officer
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EXHIBIT 23.1
ACCOUNTANTS' CONSENT
The Board of Directors
BancorpSouth, Inc.:
We consent to incorporation by reference in the Registration Statement
on Form S-4 of BancorpSouth, Inc. of our report dated January 20, 1998 relating
to the consolidated balance sheets of BancorpSouth, Inc. and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1997, which report is included in the 1997 Annual
Report Form 10-K of BancorpSouth, Inc. and to the reference to our firm under
the heading "Experts" in the Prospectus.
/s/ KPMG Peat Marwick LLP
Memphis, Tennessee
September 9, 1998
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EXHIBIT 23.2
ACCOUNTANTS' CONSENT
We consent to the reference to our firm under the caption "Experts" and
to the use of our reported dated March 25, 1998, included in the Proxy Statement
of Alabama Bancorp., Inc. that is made a part of the Registration Statement
(Post-Effective Amendment No. 1 to Form S-4 No. 333-28081) and Prospectus of
BancorpSouth, Inc.
/s/ Ernst & Young LLP
Birmingham, Alabama
September 4, 1998
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EXHIBIT 23.3
ACCOUNTANTS' CONSENT
As independent public accountants, we hereby consent to the use in this
registration statement of our report dated March 14, 1996 included herein and to
all references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
Birmingham, Alabama
September 4, 1998
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EXHIBIT 23.5
CONSENT OF ALEX SHESHUNOFF & CO. INVESTMENT BANKING
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of BancorpSouth, Inc. of our opinion, dated June 19, 1998,
with respect to the merger of BancorpSouth, Inc. and Alabama Bancorp., Inc. and
to our firm, respectively, included in the Registration Statement No. 333-28081
of BancorpSouth, Inc. (the "Initial Registration Statement") and to the
inclusion of such opinion as an annex to the Initial Registration Statement. By
giving such consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933
or the rules and regulations of the Securities and Exchange Commission
thereunder.
/s/ ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
AUSTIN, TX
September 3, 1998
