As filed with the Securities and Exchange Commission on May 6, 1997
Registration Number: 33-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
HANCOCK HOLDING COMPANY
(Exact name of Registrant as specified in its charter)
MISSISSIPPI 6022
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
64-0693170
(I.R.S. Employer Identification Number)
ONE HANCOCK PLAZA, 2510 14TH STREET
` (601) 868-4000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
CHARLES A. WEBB, JR.
ONE HANCOCK PLAZA, 2510 14TH STREET
GULFPORT, MISSISSIPPI 39501
(601) 868-4000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
CARL J. CHANEY, ESQ.
WATKINS LUDLAM & STENNIS, P.A.
POST OFFICE BOX 427
633 NORTH STATE STREET
JACKSON, MISSISSIPPI 39202
(601) 949-4900
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED OFFERING: As soon as
practicable after the effective date of this Registration Statement.
If securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ _ ]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
Title of each class Amount Proposed maximum Proposed maximum Amount of
of securities to to be offering price per aggregate offering registration
be registered registered unit price ** fee
- ------------------------------------------------------------------------------
Common Stock,
$3.33 par value. . . . 85,571 shares * $918,418.49 $278.31
- -----------------------------------------------------------------------------
*Not applicable.
**Estimated solely for purposes of determining the amount of the registration
fee in accordance with Rule 457(f)(2) under the Securities Act of 1933.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
[COMMERCE CORPORATION LETTERHEAD]
________, 19____
Dear Shareholders:
You are cordially invited to attend a Special Meeting of Shareholders of
Commerce Corporation, a Louisiana corporation ("Commerce Corporation"), holding
company of Bank of Commerce & Trust Co., a Louisiana state bank (the "Bank") to
be held at the Bank, 12320 Jackson Road, St. Francisville, Louisiana, on
Wednesday, June 18, 1997, at 1:00 p.m., local time.
At this meeting, you will be asked to consider and vote upon a proposal to
approve and adopt an Agreement and Plan of Merger, and related Company Merger
Agreement and Bank Merger Agreement (collectively, the "Merger Agreement")
pursuant to which (a) Commerce Corporation will be merged with and into Hancock
Holding Company, a Mississippi corporation ("HHC") (the "Company Merger"); (b)
Bank will be merged with and into Hancock Bank of Louisiana (the "Bank Merger"
and, together with the Company Merger, the "Mergers"); (c) each outstanding
share of Commerce Corporation common stock will be converted into the right to
receive cash and between .116 to .159 shares of HHC common stock, depending on
the number of outstanding shares of Commerce Corporation Common Stock and the
Average Market Price of the HHC Common Stock as defined by the Merger Agreement.
Based on the closing sales price of HHC Common Stock on NASDAQ on ____________,
1997 of $__________ the value of .1 share of HHC Common Stock is $5.57. Unless
you dissent from the Mergers, your Commerce Corporation common stock will be
converted into HHC common stock on a tax-free basis, except to the extent you
receive cash.
Details of the proposed transaction are set forth in the accompanying
Prospectus/Proxy Statement, which you should read carefully. Only those
shareholders of record at the close of business on May 1, 1997, will be entitled
to notice of and to vote at the Special Meeting.
Your Board of Directors unanimously recommends your approval of the Mergers.
Among the factors considered by your Board in recommending the Mergers were the
financial terms of the Merger Agreement, the liquidity it will afford Commerce
Corporation's shareholders, and the likelihood and potential adverse impact of
increased competition for Commerce Corporation and Bank in their market area if
Commerce Corporation and Bank remain independent. For these reasons, your Board
of Directors believes that the proposed Mergers are in the best interests of
Commerce Corporation and its shareholders, and urges that you vote "FOR" the
proposed Mergers by signing, dating and returning the enclosed form of proxy
promptly, whether or not you plan to attend the Special Meeting. The prompt
return of your signed proxy, regardless of the number of shares you hold, will
assist Commerce Corporation and Bank in reducing the expense of additional proxy
solicitation. Your proxy may be revoked at any time prior to the vote at the
Special Meeting by notice to the Secretary of Commerce Corporation or by
execution and delivery of a later dated proxy. If you attend the Special Meeting
you may, if you wish, revoke your proxy and vote in person on all matters
brought before the Special Meeting.
Very truly yours,
Jimmy H. Whittington
President & CEO
<PAGE>
COMMERCE CORPORATION
12320 Jackson Road
St. Francisville, Louisiana 70775-0520
(504) 635-3022
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Notice is hereby given that a Special Meeting of Shareholders of Commerce
Corporation, a Louisiana corporation ("Commerce Corporation") and Bank of
Commerce & Trust Co., a Louisiana state bank (the "Bank") will be held at the
Bank, 12320 Jackson Road, St. Francisville, Louisiana, on Wednesday, June 18,
1997, at 1:00 p.m., local time:
1. To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger, and related Company Merger Agreement and Bank Merger
Agreement (collectively, the "Merger Agreement") pursuant to which (a) Commerce
Corporation will be merged with and into Hancock Holding Company, a Mississippi
corporation ("HHC") (the "Company Merger"); (b) Bank will be merged with and
into Hancock Bank of Louisiana (the "Bank Merger" and, together with the Company
Merger, the "Mergers"); (c) each outstanding share of Commerce Corporation
common stock will be converted into the right to receive shares of HHC common
stock and cash in accordance with the terms of the Merger Agreement.
2. To transact such other business as may properly come before the
meeting and any adjournment thereof.
Only those shareholders of record at the close of business on May 1, 1997
will be entitled to notice of and to vote at the special meeting.
Dissenting shareholders of Commerce Corporation who comply with the
procedural requirements of the Business Corporation Law of Louisiana will be
entitled to receive payment of the fair cash value of their shares of Commerce
Corporation common stock if the Company Merger is effected upon approval by less
than 80 percent of the total voting power of Commerce Corporation.
BY ORDER OF THE BOARD OF DIRECTORS
Julie Jacob, Secretary
St. Francisville, Louisiana
______________, 1997
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN. EVEN IF
YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE DATE AND SIGN THE ENCLOSED PROXY
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE.
YOUR PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE VOTE AT THE SPECIAL MEETING
BY NOTICE TO THE SECRETARY OF COMMERCE CORPORATION OR BANK OR BY EXECUTION AND
DELIVERY OF A LATER DATED PROXY. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY
WITHDRAW YOUR PROXY AND VOTE IN PERSON.
<PAGE>
PROXY STATEMENT OF COMMERCE CORPORATION
Special Meeting of Shareholders
to be held on Wednesday, June 18, 1997
----------------------------------------
PROSPECTUS OF HANCOCK HOLDING COMPANY
85,571 Shares of Common Stock
($3.33 Par Value)
Hancock Holding Company, a Mississippi corporation ("HHC"), has filed a
Registration Statement on Form S-4 to register 85,571 shares of HHC's common
stock, $3.33 par value ("HHC Common Stock"), under the Securities Act of 1933 to
be issued in connection with a proposed merger of Commerce Corporation, a
Louisiana corporation ("Commerce Corporation") with and into HHC (the "Company
Merger") and a proposed merger of Bank of Commerce & Trust Co., a Louisiana
state chartered bank (the "Bank") with and into Hancock Bank of Louisiana, a
Louisiana state chartered bank ("Hancock Bank") (the "Bank Merger" and, together
with the Company Merger, the "Mergers").
This document constitutes a Proxy Statement of Commerce Corporation in
connection with the transactions described herein and a Prospectus of HHC with
respect to the shares of HHC Common Stock to be issued if the Mergers are
consummated.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT IN CONNECTION
WITH THE OFFERING DESCRIBED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HHC,
COMMERCE CORPORATION OR BANK. THIS PROSPECTUS/PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO PURCHASE NOR SHALL
THERE BE ANY SALE OF THE SECURITIES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT
IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT WOULD BE UNLAWFUL
TO MAKE SUCH OFFER, SOLICITATION, OR SALE. NEITHER THE DELIVERY OF THIS
PROSPECTUS/PROXY STATEMENT NOR ANY OFFER OR SALE MADE HEREUNDER NOR ANY
DISTRIBUTION OF THE SECURITIES TO WHICH THIS PROSPECTUS/PROXY STATEMENT
RELATES SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF HHC,COMMERCE CORPORATION OR BANK SINCE THE DATE HEREOF.
----------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION ("SEC") OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------------------------------------
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
The date of this Prospectus/Proxy Statement is ______________ __, 1997.
<PAGE>
AVAILABLE INFORMATION
HHC is subject to the reporting requirements of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the SEC.
Copies of such reports, proxy statements and other information can be obtained,
at prescribed rates, from the SEC by addressing written requests for such copies
to the Public Reference Section of the SEC at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549. In addition, such reports, proxy
statements and other information can be inspected at the public reference
facilities referred to above and at the regional offices of the SEC at 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 300 West
Madison Street, Suite 1400, Chicago, Illinois 60661. The SEC also maintains a
Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically, including
HHC, with the Commission at http://www.sec.gov.
This Prospectus/Proxy Statement constitutes part of the Registration
Statement on Form S-4 of HHC (including any exhibits and amendments thereto, the
"Registration Statement") filed with the SEC under the Securities Act of 1933 as
amended (the "Securities Act"), relating to the shares of HHC common stock
offered hereby. This Prospectus/Proxy Statement does not include all of the
information and undertakings in the Registration Statement and exhibits thereto.
For further information about HHC and the shares of common stock offered hereby,
reference is made to the Registration Statement and exhibits thereto. Statements
contained in this Prospectus/Proxy Statement as to the contents of any contract
or other document referred to are not necessarily complete, and in each instance
reference is made to a copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. The Registration Statement may be inspected and
copied, at prescribed rates, at the SEC's public reference facilities at the
addresses set forth above.
Except for the historical information contained herein, the matters
discussed in this Prospectus/Proxy Statement are forward-looking statements
which involve risks and uncertainties, including but not limited to economic,
competitive, regulatory and technological factors affecting HHC's operations,
markets, services, products and prices, and other factors discussed in HHC's
filings with the SEC.
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE
DOCUMENTS ARE AVAILABLE UPON REQUEST, WITHOUT CHARGE FROM CHARLES
A. WEBB, JR., CORPORATE SECRETARY, HANCOCK HOLDING COMPANY, ONE
HANCOCK PLAZA, GULFPORT, MISSISSIPPI 39501 (601) 868-4000. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
__________ ___, 1997. SEE "DOCUMENTS INCORPORATED BY REFERENCE."
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the SEC by HHC pursuant to
the Exchange Act are hereby incorporated by reference:
1. HHC's Annual Report on Form 10-K for the fiscal year ended December
31, 1996;
2. The Proxy Statement of HHC for its Annual Meeting of Shareholders
held on February 20, 1997;
3. The description of the rights set forth in Item 1 of HHC's
Registration Statement on Form 8-A (Commission File No. 000-13089 ),
dated February 27, 1997 and any amendment or report filed for the
purpose of updating such description.
4 ll other reports filed by HHC pursuant to Section 13(a) or 15(d)
of the Exchange Act,since December 31, 1996.
All documents filed by HHC pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this Prospectus/Proxy Statement and prior
to final adjournment of the Special Meeting, shall be deemed to be incorporated
by reference into this Prospectus/Proxy Statement and to be a part hereof from
the date of filing of such documents. Any statement contained in any document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus/Proxy Statement 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
supersedes such statement. Any statement so modified or superseded shall not be
deemed to constitute a part of this Prospectus/Proxy Statement, except as so
modified or superseded. The audited financial statements of HHC incorporated
herein by reference should only be read in conjunction with the discussion of
consummated and pending acquisitions set forth under the caption "CERTAIN
INFORMATION CONCERNING HHC."
<PAGE>
SUMMARY
The following is a brief summary of certain information contained
elsewhere in this Prospectus/Proxy Statement. The summary is necessarily
incomplete and is qualified in its entirety by reference to detailed information
contained elsewhere herein, the appendices hereto and the documents incorporated
herein by reference. Shareholders are urged to read carefully all such material.
The Companies
Hancock Holding Company. HHC is a bank holding company chartered,
organized and existing under and pursuant to the laws of the State of
Mississippi with its principal executive office located at One Hancock Plaza,
Gulfport, Mississippi 39501. The telephone number of HHC's principal executive
office is (601) 868-4000. HHC owns all of the issued and outstanding common
stock of Hancock Bank of Louisiana ("Hancock Bank"), a state bank chartered,
organized and existing under and pursuant to the laws of the State of Louisiana
and maintaining its principal place of business in Baton Rouge, Louisiana. HHC
also owns all of the issued and outstanding common stock of Hancock Bank
("Hancock Bank MS"), a state bank chartered, organized and existing under and
pursuant to the laws of the State of Mississippi and maintaining its principal
place of business in Gulfport, Mississippi. HHC was organized on April 6, 1984,
for the purpose of becoming a bank holding company under the Bank Holding
Company Act of 1956, as amended, and acquiring all the stock of Hancock Bank MS.
At December 31, 1996, HHC had total consolidated assets of approximately $2.3
billion and shareholders' equity of approximately $261.9 million. Of HHC's $2.3
billion in assets as of December 31, 1996, approximately $0.9 billion were in
Louisiana and approximately $1.4 billion were in Mississippi. See "CERTAIN
INFORMATION CONCERNING HHC."
Commerce Corporation. Commerce Corporation is a Louisiana corporation
organized in February 7, 1985 for the purpose of becoming a bank holding
company under the Bank Holding Company Act of 1956, as amended, and acquiring
the stock of Bank of Commerce & Trust Co. ("Bank"). At December 31, 1996,
Commerce Corporation had total consolidated assets of approximately $28.8
million and shareholders' equity of approximately $827,000. Commerce
Corporation is domiciled in St. Francisville, Louisiana and its principal
executive office is located at 12320 Jackson Road, St. Francisville,
Louisiana, and its telephone numberis (504) 635-3022. See "CERTAIN
INFORMATION CONCERNING COMMERCE CORPORATION AND BANK."
The Banks
Hancock Bank of Louisiana. Hancock Bank, a Louisiana state chartered
bank organizedin August 1990, is a wholly-owned subsidiary of HHC. Hancock
Bank is community oriented and focuses primarily on offering commercial,
consumer and mortgage loans and deposit services to individuals and small to
middle market businesses in its market area. Hancock
1
<PAGE>
Bank's operating strategy is to provide its customers with the financial
sophistication and breadth of products of a regional bank while successfully
retaining the local appeal and level of service of a community bank. At December
31, 1996, Hancock Bank's services were delivered through a network of 40
full-service locations, including a main office in Baton Rouge and 39 branches
located throughout East Baton Rouge, Livingston, Tangipahoa and Washington
Parishes. At December 31, 1996, Hancock Bank had total assets of approximately
$868 million and total deposits of approximately $708 million. Hancock Bank's
principal executive offices are located at One American Place, 301 Main Street,
Baton Rouge, Louisiana, and its telephone number is (504) 292-0336. See "CERTAIN
INFORMATION CONCERNING HHC."
Bank of Commerce & Trust Co. Bank, a Louisiana state chartered bank
organized in St. Francisville in 1915, is a wholly-owned subsidiary of Commerce
Corporation. Bank provides traditional consumer and commercial deposit and loan
services to the individuals, families and businesses in West Feliciana Parish,
Louisiana. Bank's services are delivered through a main office in St.
Francisville. In addition to traditional bank services, Bank offers mortgage
loans and VISA services. At December 31, 1996, Bank had total assets of
approximately $28.8 million and total deposits of approximately $26.3 million.
Bank is domiciled in St. Francisville, Louisiana and its principal executive
office is located at 12320 Jackson Road, St. Francisville, Louisiana, and its
telephone number is (504) 635-3022. See "CERTAIN INFORMATION CONCERNING COMMERCE
CORPORATION AND BANK."
The Special Meeting
A special meeting of the shareholders of Commerce Corporation will be held
at the offices of Bank, 12320 Jackson Road, St. Francisville, Louisiana, on
Wednesday, June 18, 1997 at 1:00 p.m., local time (the "Special Meeting"). Only
record holders of common stock, $.50 par value, of Commerce Corporation
("Commerce Corporation Common Stock") on May 1, 1997 (the "Record Date") are
entitled to notice of and to vote at the Special Meeting. On the Record Date,
there were 537,680 shares of Commerce Corporation Common Stock outstanding.
Purpose of the Special Meeting
The purpose of the Special Meeting is to consider and vote upon a proposal
to approve and adopt an Agreement and Plan of Merger, and related Company Merger
Agreement and Bank Merger Agreement (collectively, the "Merger Agreement"), a
copy of which is attached hereto as Appendix A. See "GENERAL INFORMATION --
Purpose of the Special Meeting."
Vote Required
Approval of the Company Merger Agreement will require the affirmative vote
of the holders of at least a majority of the outstanding shares of Commerce
Corporation Common Stock actually cast, in person or by proxy, at the Special
Meeting. Each shareholder of Commerce Corporation Common Stock is entitled to
one vote for each share owned by him. As of the
2
<PAGE>
Record Date, directors and executive officers of Commerce Corporation and their
affiliates were the beneficial owners of approximately 97.90 percent of the
outstanding Commerce Corporation Common Stock entitled to vote at the Special
Meeting. As a condition to consummation of the Mergers, two shareholders of
Commerce Corporation have executed agreements ("Joinder Agreements") with HHC,
which, among other things, obligates each such shareholder to vote
his shares of Commerce Corporation Common Stock in favor of the approval and
adoption of the Merger Agreement. As of the Record Date, the two persons who
have executed Joinder Agreements beneficially owned an aggregate of 83.15
percent of the outstanding Commerce Corporation Common Stock. Under
Mississippi law, shareholders of HHC are not required to approve the
Merger Agreement. See "GENERAL INFORMATION -- Shares Entitled to Vote;
Quorum; Vote Required." Commerce Corporation as sole shareholder of Bank
has approved the Bank Merger Agreement.
Recommendation of Board of Directors
The Board of Directors of Commerce Corporation believes that the Merger
Agreement is in the best interests of the shareholders and recommends that the
shareholders vote "FOR" the approval and adoption of the Merger Agreement.
Commerce Corporation's Board of Directors believes that the terms of the Merger
Agreement will provide significant value to all Commerce Corporation
shareholders and will enable them to participate in opportunities for growth
that Commerce Corporation's Board of Directors believes the Mergers make
possible. In recommending the Merger Agreement to the shareholders, Commerce
Corporation's Board of Directors considered, among other factors, the financial
terms of the Merger Agreement, the liquidity it will afford Commerce
Corporation's shareholders, and the likelihood and potential adverse impact of
increased competition for Commerce Corporation and Bank in their market area if
Commerce Corporation and Bank remain independent. See "THE MERGERS -Background
of and Reasons for the Mergers."
Basis for the Terms of the Merger
A number of factors in addition to those stated above were considered by
the Board of Directors of Commerce Corporation and Bank in approving the terms
of the Merger Agreement, including, without limitation, information concerning
the business, financial condition, results of operations and prospects of
Commerce Corporation, HHC, Bank and Hancock Bank; the ability of the combined
entity to compete in the relevant banking markets; the proposed treatment of the
Commerce Corporation Common Stock in the Company Merger and Bank Common Stock in
the Bank Merger; the market price of HHC Common Stock; the absence of an active
trading market for Commerce Corporation Common Stock; the federal tax
consequences of the Merger Agreement to Commerce Corporation's shareholders, to
the extent HHC Common Stock is received, for federal income tax purposes; the
financial terms of other business combinations in the banking industry; and
certain non-monetary factors. See "THE MERGERS -- Background of and Reasons for
the Mergers."
3
<PAGE>
Conversion of Commerce Corporation and Bank Stock
On the Effective Date, as defined in "SUMMARY - Regulatory Approvals and
Other Conditions to the Mergers," each share of HHC Common Stock issued and
outstanding immediately prior to the Effective Date will remain outstanding and
will continue to represent one share of HHC Common Stock, $3.33 par value. Each
share of $0.50 par value Commerce Corporation Common Stock, issued and
outstanding immediately prior to the Effective Date, other than shares of
Commerce Corporation Common Stock owned by stockholders who, pursuant to the
LCL, perfect dissenters' rights, shall, by virtue of the Company Merger and
without any action on the part of the holder thereof, be converted into the
right to receive (i) that number of shares of HHC Common Stock that is equal to
the quotient obtained by dividing the Deliverable Stock Amount (as hereinafter
defined) by the total number of issued and outstanding shares (not including
Treasury shares) of Commerce Corporation Common Stock on the Effective Date; and
(ii) that amount of cash that is equal to the quotient obtained by dividing
$330,000 by the total number of issued and outstanding shares (not including
treasury shares) of Commerce Corporation Common Stock (collectively, the
"Exchange Ratio").
The term "Deliverable Stock Amount" means the quotient obtained by
dividing $2,995,000 by the Average Market Price (as hereinafter defined). The
term "Average Market Price" shall be the average of the closing per share
trading prices of a share of HHC Common Stock on the NASDAQ stock market for the
twenty (20) trading days preceding the 5th trading day immediately prior to the
Effective Date.
The Merger Agreement provides that the Average Market Price cannot be
greater than $48.00 or less than $35.00. Based upon this range and assuming that
there will be 587,680 shares of Commerce Corporation outstanding on the
Effective Date, each outstanding share of Commerce Corporation Common Stock will
be converted into the right to receive from .116 to .159 of a share of HHC
Common Stock or $5.66 in cash.
Due to fluctuations in the trading prices of HHC Common Stock, the actual number
of shares to be received by Commerce Corporation shareholders cannot currently
be determined.
As a result of the Mergers, all shares of Commerce Corporation Common
Stock will be canceled and each holder of a certificate (a "Certificate")
representing any share(s) of Commerce Corporation Common Stock will thereafter
cease to have any rights with respect to such shares, except the right to
receive, without interest, the HHC Common Stock and/or the cash as described
above, and cash for fractional shares of HHC Common Stock upon the surrender of
such Certificate. No fractional shares of HHC Common Stock will be issued in
connection with the Mergers. In lieu of the issuance of any fractional share of
HHC Common Stock, cash adjustments will be paid to holders in respect of any
fractional share of HHC Common Stock that would otherwise be issuable, and the
amount of such cash adjustment will be equal to such fractional proportion of
the Average Market Price.
4
<PAGE>
Exchange of Certificates
HHC will deposit with Hancock Bank MS Trust Department, as exchange agent
(the "Exchange Agent"), certificates representing the shares of HHC Common Stock
and cash to be issued and paid, respectively, pursuant to the Merger Agreement
in exchange for outstanding shares of Commerce Corporation Common Stock. HHC
will cause the Exchange Agent to mail to each holder, other than Commerce
Corporation, of Commerce Corporation Common Stock a letter of transmittal which
will specify terms of the delivery of the Commerce Corporation Certificates to
the Exchange Agent along with instructions for effecting the surrender of the
Certificates in exchange for Certificates representing shares of HHC Common
Stock and/or cash, and cash in lieu of fractional shares.
No dividends on HHC Common Stock will be paid with respect to any shares
of Commerce Corporation Common Stock represented by a Certificate until such
Certificate is surrendered for exchange.
On or after the Effective Date, there will be no transfers on the stock
transfer books of Commerce Corporation of the shares of Commerce Corporation
Common Stock which were outstanding immediately prior to the Effective Date.
Regulatory Approvals and Other Conditions to the Mergers
The Company Merger is subject to approval by the Board of Governors of the
Federal Reserve System ("FRB"). The Bank Merger is subject to approval by the
Federal Deposit Insurance Corporation ("FDIC") and the Office of Financial
Institutions, State of Louisiana ("OFI"). There can be no assurance whether such
approvals will be given, or will be given without unacceptable conditions and,
if given, the timing of such approvals. After approval by the Commerce
Corporation shareholders, consummation of the Mergers is also subject to a
number of conditions included in the Merger Agreement. See "THE MERGERS --
Regulatory Approvals and Other Conditions to the Mergers."
The Mergers will become effective on the date the Secretary of State of
the State of Louisiana issues a Certificate of Merger and following the
satisfaction or waiver of all conditions set forth in the Merger Agreement (the
"Effective Date").
Termination
Among other reasons, the Merger Agreement may be terminated at any time on
or prior to the Effective Date, by (i) the mutual consent of the parties; (ii)
by either party if the Mergers have not become effective on or before December
31, 1997; (iii) by Commerce Corporation, Bank, HHC or Hancock Bank if the
Company Merger is not approved by the required vote of Commerce Corporation's
shareholders; (iv) by HHC if holders of ten percent or more of the outstanding
Commerce Corporation Common Stock exercise statutory rights of dissent and
appraisal pursuant to the Louisiana Business Corporation Law ("LBCL"); (vii) by
Commerce Corporation or Bank if the Average Market Price of HHC Common Stock
exceeds $48.00; or (viii) by HHC or Hancock Bank if the Average Market Price of
HHC Common Stock is less
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<PAGE>
than $35.00. However, in the event the Average Market Price is greater than
$48.00 or less than $35.00, the parties have agreed first to attempt to
renegotiate the Exchange Ratio in good faith prior to terminating the Merger
Agreement.
Interests of Certain Persons in the Mergers
Certain members of Commerce Corporation's management and Board of
Directors have interests in the mergers in addition to their interests as
shareholders of Commerce Corporation generally. Those interests relate to the
assumption by HHC of $1.25 million in Commerce Corporation's debt payable to two
of the directors, the appointment of certain directors to the Board of Hancock
Bank of Louisiana, the continued indemnification of officers and directors of
Commerce Corporation, the assumption of an employment contract of one of the
officer/directors and employee benefits that will be provided by Hancock Bank of
Louisiana. See "THE MERGERS -- Interests of Certain Persons in the Mergers" and
"-- Employee Benefits."
Material Federal Income Tax Consequences
The Mergers are structured to qualify as tax-free reorganizations under
the Internal Revenue Code of 1986, as amended (the "Code"), so that (a) each
Commerce Corporation shareholder who receives HHC Common Stock in the Company
Merger will not recognize gain or loss, except with respect to the receipt of
cash (i) as part of the Exchange Ratio, (ii) in lieu of fractional shares of HHC
Common Stock, or (iii) pursuant to the exercise of dissenters' rights, and (b)
no gain or loss will be recognized by HHC, Commerce Corporation, Hancock Bank,
or Bank in connection with the Mergers. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGERS."
Dissenters' Rights
By complying with the specific procedures required by statute and
described herein, unless the Company Merger Agreement is approved by the holders
of at least 80 percent of the total voting power of Commerce Corporation,
dissenting shareholders of Commerce Corporation may be entitled to be paid the
fair value of their shares, if the Company Merger is consummated, in lieu of the
consideration to be received in the Company Merger by the non-dissenting
shareholders of Commerce Corporation. See "DISSENTERS' RIGHTS."
6
<PAGE>
Selected Financial Data for Commerce Corporation and HHC
The following selected consolidated financial information of Commerce
Corporation and HHC should be read in conjunction with the consolidated
financial statements of Commerce Corporation and HHC and the notes thereto,
included elsewhere, or incorporated by reference herein.
The following selected unaudited pro forma financial information is
presented assuming the proposed merger of Commerce Corporation and HHC will
be accounted for using the purchase method of accounting. The unaudited pro
forma financial information assumes the merger was consummated on
December 31, 1996 with respect to the Balance Sheet Data and on January 1,
1996 as to the Income Statement Data, and subject to the purchase
adjustments reflects the combination of the historical consolidated financial
statements of the respective companies commencing as of each such date.
The unaudited pro forma information does not purport to represent what
HHC's and Commerce Corporation's combined results of operations would have
been if the merger had occurred as of the dates indicated or will be for any
future period.
<TABLE>
Years Ended December 31,
------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(Dollars in Thousands except Per Share Amounts)
<S> <C> <C> <C> <C> <C>
COMMERCE CORPORATION
(HISTORICAL)
Income Statement Data:
Net interest income $1,199 $1,212 $1,164 $1,142 $1,150
Provision for loan losses (25) 64 75 65 64
Net income 257 241 150 (133) 158
Balance Sheet Data:
Total assets (period end) 28,764 28,169 27,212 27,558 29,254
Net Loans 17,645 17,179 17,757 17,419 16,478
Deposits 26,266 25,624 24,688 25,196 26,726
Stockholders' equity 827 555 284 182 315
period end
Per Share Data:
Earnings Per Share $0.48 $0.45 $0.28 ($0.25) $0.29
Dividends Declared 0.00 0.00 0.00 0.00 0.00
Dividends Paid 0.00 0.00 0.00 0.00 0.00
Average Shares 537,680 537,680 537,680 537,680 537,680
Outstanding
Selected Ratios:
Return on Average Assets 0.90% 0.87% 0.55% -0.47% 0.54%
Return on Average Equity 37.19% 57.45% 64.38% -53.52% 50.16%
Equity to Assets 2.88% 1.97% 1.04% 0.66% 1.08%
Dividend Payout 0.00% 0.00% 0.00% 0.00% 0.00%
HANCOCK HOLDING COMPANY
(HISTORICAL)
Income Statement Data:
Net interest incom $106,719 $100,367 $86,282 $85,319 $81,819
Provision for loan losses 6,154 4,425 1,998 4,632 7,978
Net income 31,603 27,017 23,130 24,862 21,410
Balance Sheet Data:
Total assets 2,289,582 2,234,286 2,026,929 1,988,125 1,899,709
period end
Net Loans 1,173,967 1,034,977 925,665 921,925 839,613
Deposits 1,926,576 1,927,681 1,775,664 1,759,189 1,693,255
Stockholders' equity 261,938 224,179 182,277 166,712 148,822
period end
7
<PAGE>
Per Share Data:
Earnings Per Share $3.08 $2.65 $2.48 $2.67 $2.30
Dividends Declared 0.88 0.84 0.80 0.78 0.59
Dividends Paid 0.88 0.84 0.80 0.78 0.59
Average Shares Outstanding 10,277 10,181 9,314 9,307 9,307
Selected Ratios:
Return on Average Assets 1.38% 1.22% 1.13% 1.27% 1.17%
Return on Average Equity 13.74% 12.50% 13.22% 15.61% 15.18%
Equity to Assets 11.11% 10.03% 8.99% 8.39% 7.83%
Dividend Payout 28.90% 32.06% 31.90% 28.03% 24.82%
HANCOCK HOLDING COMPANY
(PRO FORMA)
(Unaudited)
Income Statement Data:
Net interest income $107,918
Provision for loan losses 6,129
Net income 31,675
Balance Sheet Data:
Total assets (period end) 2,320,514
Net Loans 1,191,612
Deposits 1,952,842
Stockholders' equity 264,933
(period end)
Per Share Data:
Earnings Per Share $3.06
Dividends Declared 0.88
Dividends Paid 0.88
Average Shares Outstanding 10,348
Selected Ratios:
Return on Average Assets 1.37%
Return on Average Equity 13.72%
Equity to Assets 11.41%
Dividend Payout 28.75%
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Comparative Per Share Data (Unaudited)
PRO FORMA COMMERCE
HISTORICAL with PRO FORMA
HHC COMMERCE COMMERCE EQUIVALENT
PER COMMON SHARE:
<S> <C> <C> <C> <C>
NET INCOME
For the year ended
December 31, 1996 $3.08 $0.48 $3.06 $0.41
CASH DIVIDENDS PAID
For the years ended
December 31, 1996 $0.88 $0.00 $0.88 $0.12
December 31, 1995 0.84 0.00 0.84 $0.11
December 31, 1994 0.80 0.00 0.80 $0.11
December 31, 1993 0.78 0.00 0.78 $0.10
December 31, 1992 0.59 0.00 0.59 $0.08
BOOK VALUE
December 31, 1996 $24.42 $1.54 $24.26 $3.24
</TABLE>
9
<PAGE>
Recent Stock Prices
There is no established public trading market for the Commerce Corporation
or Bank Common Stock. The Commerce Corporation Common Stock is not traded on any
exchange quoted on an automated system of a registered securities association.
No cash dividends have been paid for the past ten years. See "CERTAIN
INFORMATION CONCERNING COMMERCE CORPORATION -- Stock Prices and Dividends."
HHC Common Stock is traded in the over-the-counter market and quoted on
the NASDAQ National Market System under the symbol "HBHC." The following table
sets forth the per share high and low sale prices of HHC Common Stock as
reported on the NASDAQ National Market System for the periods indicated. These
prices do not reflect retail mark-ups, mark-downs or commissions. The following
table also gives the amount of cash dividends paid on HHC Common Stock for the
time periods indicated.
<TABLE>
Cash
Dividends Actual Cash
High Low Paid Dividends
Sale Sale Restated Paid
1996
<S> <C> <C> <C> <C>
1st Quarter $32.83 $31.09 $0.22 $0.25
2nd Quarter $35.22 $31.09 $0.22 $0.25
3rd Quarter $35.00 $31.52 $0.22 $0.25
4th Quarter $42.50 $32.61 $0.22 $0.25
1995
1st Quarter $26.30 $25.00 $0.20 $0.23
2nd Quarter $27.50 $25.44 $0.20 $0.23
3rd Quarter $31.52 $26.74 $0.22 $0.25
4th Quarter $32.62 $30.88 $0.22 $0.25
* The figures presented have been restated to reflect the retroactive effect of
a 15% stock dividend paid in December 1996.
</TABLE>
The parties entered into the Merger Agreement as of February 28, 1997. On
February 27, 1997, the reported closing sales price of HHC Common Stock was
$41.50. On , 1997, [latest date prior to printing proxy materials] the reported
closing sales price was $______. On December 31, 1996, HHC's outstanding shares
of common stock were owned by 4,718 shareholders of record.
As a bank holding company, HHC depends on dividend payments from its
subsidiary banks, Hancock Bank and Hancock Bank MS, in order to meet its
obligations and to pay dividends. The payment of dividends from the banks to HHC
is regulated and restricted by the
10
<PAGE>
bank's primary regulators. Information about restrictions on the ability of HHC
to pay dividends is contained in Item 1 of HHC's 1996 Annual Report on Form 10-K
under the caption "Federal Regulation," which information is incorporated herein
by reference.
Accounting Treatment
HHC and Commerce Corporation intend to account for the Mergers as a
purchase transaction under generally accepted accounting principles.
Accordingly, the earnings of Commerce Corporation will be combined with the
earnings of HHC from and after the Effective Date of the Mergers and any
goodwill or other intangibles recorded in the transaction will be amortized
through charges to income in future periods. See "THE MERGERS -- Accounting
Treatment."
11
<PAGE>
GENERAL INFORMATION
Introduction
This Prospectus/Proxy Statement is being furnished on or about
_______________, 1997 to the shareholders of Commerce Corporation in
connection with the solicitation of proxies on behalf of the Board of Directors
of Commerce Corporation for use at a Special Meeting of the
Shareholders of Commerce Corporation, to be held at the offices of
Bank, 12320 Jackson Road, St. Francisville, Louisiana, on Wednesday, June 18,
1997, at 1:00 p.m., local time, and at any adjournment thereof. A Notice of
Special Meeting for Commerce Corporation is attached hereto and a proxy card
relating to the Special Meeting accompanies this Prospectus/Proxy Statement.
Purpose of the Special Meeting
The purpose of the Special Meeting is to consider and vote upon a proposal
to approve and adopt an Agreement and Plan of Merger, and related
Company Merger Agreement and Bank Merger Agreement (collectively, the "Merger
Agreement"), pursuant to which (a) Commerce Corporation will be merged with and
into HHC (the "Company Merger"); (b) Bank will be merged with and into Hancock
Bank (the "Bank Merger" and, together with the Company Merger, the "Mergers");
(c) each outstanding share of Commerce Corporation Common Stock will be
converted into the right to receive an amount in cash and between .116 to .159
shares of HHC common stock, $3.33 par value ("HHC Common Stock") as more fully
described in the Merger Agreement.
Solicitation, Voting and Revocation of Proxies
When a proxy in the form accompanying this Prospectus/Proxy Statement is
properly executed and returned, the shares voted thereby will be voted in
accordance with the instructions marked thereon. ALL EXECUTED BUT UNMARKED
PROXIES THAT ARE RETURNED WILL BE VOTED "FOR" THE PROPOSALS TO APPROVE THE
MERGER AGREEMENT AND THE COMPANY MERGER.
No matters are expected to be considered at the Special Meeting other than
the proposal to approve the Merger Agreement, but if any other matters should
properly come before the Special Meeting, it is intended that proxies in the
form accompanying this Prospectus/Proxy Statement will be voted on all such
matters in accordance with the judgment of the person(s) voting such proxies.
Any proxy may be revoked at any time before it is voted. A shareholder may
revoke a proxy: (i) by submitting a subsequently dated proxy; (ii) by giving
written notice of such revocation to the Secretary of Commerce Corporation,
provided that such notice is received by such Secretary at the
principal offices of Bank prior to the date of the Special Meeting, or (iii)
upon request, if such shareholder is present at the Special Meeting and advises
12
<PAGE>
the inspector(s) of election that he is revoking a proxy. Mere attendance at the
Special Meeting will not of itself revoke a previously submitted proxy.
Revocation of a proxy will not affect a vote on any matter taken prior to
receipt of such revocation.
The cost of soliciting these proxies, including any and all professional
fees paid to attorneys and accountants in connection with the preparation and
filing with the SEC of this Prospectus/Proxy Statement and other proxy
materials, and the cost of printing and mailing these proxy materials, will be
borne by Commerce Corporation. In addition to the use of the mails, proxies may
be solicited personally, by telephone, telecopier, or telegram by directors,
officers and employees of Commerce Corporation or Bank. Such officers, directors
and employees will continue to receive any compensation from Commerce
Corporation or Bank to which they are entitled by virtue of their employment or
status as an officer or director, but will not receive any additional fee,
compensation, or other remuneration for soliciting proxies in connection with
the Special Meeting.
Shares Entitled to Vote; Quorum; Vote Required
The Board of Directors of Commerce Corporation has fixed the close of
business on May 1, 1997, as the record date for the determination of Commerce
Corporation shareholders entitled to notice of and to vote at the Special
Meeting. As of the Record Date, there were 537,680 shares of Commerce
Corporation Common Stock outstanding. Each share of Commerce Corporation Common
Stock is entitled to one vote on all matters to come before the Special Meeting.
With respect to all matters to come before the Special Meeting, the
presence at the Special Meeting, in person or by proxy, of the holders of a
majority of the outstanding shares of Commerce Corporation Common Stock is
necessary to constitute a quorum.
Vote Required
Approval of the Company Merger Agreement will require the affirmative vote
of the holders of at least a majority of the outstanding shares of Commerce
Corporation Common Sock actually cast, in person or by proxy, at the Special
Meeting. Each shareholder of Commerce Corporation Common Stock is entitled to
one vote for each share owned by him. As of the Record Date, directors and
executive officers of Commerce Corporation and their affiliates were the
beneficial owners of approximately 97.90 percent of the outstanding Commerce
Corporation Common Stock entitled to vote at the Special Meeting. As a condition
to consummation of the Mergers, two shareholders of Commerce Corporation
have executed agreements ("Joinder Agreements") with HHC, which, among other
things, obligates each such shareholder to vote his shares of Commerce
Corporation Common Stock in favor of the approval and adoption of the Merger
Agreement. As of the Record Date, the two persons who have executed Joinder
Agreements beneficially owned an aggregate of 83.15 percent of the outstanding
Commerce Corporation Common Stock. Under Mississippi law, shareholders of HHC
are not required to approve the Merger Agreement. Commerce Corporation as sole
shareholder of Bank has approved the Bank Merger Agreement. See "GENERAL
INFORMATION -- Shares Entitled to Vote; Quorum; Vote Required."
13
<PAGE>
THE MERGERS
General
The transactions contemplated by the Merger Agreement are to be effected in
accordance with the terms and conditions of the Merger Agreement, a copy of
which is attached hereto as Appendix A. The following description does not
purport to be complete and is qualified in its entirety by reference to the
Merger Agreement.
The ultimate result of the transactions contemplated by the Merger
Agreement will be that the business and properties of Commerce Corporation will
become the business and properties of HHC, the shareholders of Commerce
Corporation will become shareholders of HHC (except for dissenting shareholders
who will receive cash in exchange for their shares of Commerce Corporation
Common Stock) and the business and properties of Bank will become the business
and properties of Hancock Bank with all the banking facilities of Bank becoming
branches of Hancock Bank.
Background of and Reasons for the Mergers
Background. During the last several years there have been significant
developments in the banking industry. These developments have included the
increased emphasis and dependence on automation, specialization of products and
services, increased competition from other financial institutions, and a trend
toward consolidation and geographic expansion. Commerce Corporation and Bank and
their respective Boards of Directors concluded that they could best serve their
shareholders, employees, customers and communities by combining with a regional
banking organization, provided that Commerce Corporation and Bank could obtain a
fair price for its shareholders. Accordingly, in early 1997, representatives of
Commerce Corporation and HHC entered into extensive negotiations which
ultimately led to the execution of the Merger Agreement dated as of February 28,
1997.
Reasons for the Merger. In deciding to enter into the Merger Agreement, the
Boards of Directors of Commerce Corporation and Bank, after considering various
alternatives, concluded that the Merger Agreement was in the best interest of
Commerce Corporation and Bank and their shareholders because it would permit
shareholders to exchange on favorable terms their ownership interests in
Commerce Corporation and Bank for participation in the ownership of a regional
banking organization operating on a multi-state basis.
The Board of Directors also concluded that the shareholders of Commerce
Corporation and Bank would benefit additionally from the Mergers in that they
would attain greater liquidity in their investment by obtaining shares of stock
of a corporation whose securities are more widely held and significantly more
actively traded.
14
<PAGE>
Commerce Corporation's and Bank's Board of Directors consulted with their
financial and other advisors, as well as with Commerce Corporation's management
and considered a number of factors, including, but not limited to, the
following: (i) the parties' respective earnings and dividend records, financial
conditions, historical stock prices and managements; (ii) the market for Bank's
services and the competitive pressures existing in Bank's market area; (iii) the
outlook for Commerce Corporation and Bank in the financial institutions
industry; (iv) the amount and type of consideration to be received by Commerce
Corporation's shareholders pursuant to the Merger Agreement; (v) the fact that
HHC Common Stock to be received pursuant to the Merger Agreement will be listed
for trading on the NASDAQ National Market and should provide Commerce
Corporation's shareholders with liquidity that is currently unavailable to them;
(vi) recent changes in the regulatory environment will result in Commerce
Corporation and Bank facing additional competitive pressures in its market area
from other financial institutions with greater financial resources capable of
offering a broad array of financial services; and (vii) the Mergers are expected
to qualify as tax-free reorganizations so that neither Commerce Corporation,
Bank nor Commerce Corporation's shareholders (except to the extent that cash is
received in respect of their shares) will recognize any gain in the transaction.
See "MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGERS."
Commerce Corporation's Board of Directors did not assign any specific or
relative weight to the foregoing factors in its considerations. Commerce
Corporation's Board of Directors believes that the Merger Agreement will provide
significant value to all Commerce Corporation shareholders and will enable them
to participate in opportunities for growth that Commerce Corporation's Board of
Directors believes the Mergers make possible.
Based on the foregoing, the Board of Directors of Commerce Corporation has
approved the Merger Agreement and Mergers, believes that the Mergers are in
the best interest of Commerce Corporation's shareholders, and recommends
that all shareholders of Commerce Corporation vote "FOR" the approval of
the Merger Agreement.
Conversion of Commerce Corporation and Bank Common Stock
The Merger Agreement between HHC, Hancock Bank, Commerce Corporation and
Bank provides as follows:
a. On the Effective Date, each share of Common Stock, $3.33 par value,
of HHC issued and outstanding immediately prior to the Effective
Date will remain outstanding and will continue to represent one
share of Common Stock, $3.33 par value, of HHC.
b. On the Effective Date, each share of Common Stock, $.50 par value of
Commerce Corporation issued and outstanding immediately prior to the
Effective Date will, by virtue of the Company Merger and without any
action on the part
15
<PAGE>
of the holder thereof, be converted into the right to receive (i)
that number of shares of HHC Common Stock that is equal to the
quotient obtained by dividing the Deliverable Stock Amount (as
hereinafter defined) by the total number of issued and outstanding
shares (not including Treasury shares) of Commerce Corporation
Common Stock on the Effective Date; and (ii) that amount of cash
that is equal to the quotient obtained by dividing $330,000 by the
total number of issued and outstanding shares (not including
treasury shares) of Commerce Corporation Common Stock (collectively,
the "Exchange Ratio"). The term "Deliverable Stock Amount" means the
quotient obtained by dividing $2,995,000 by the Average Market Price
(as hereinafter defined). The term "Average Market Price" shall be
the average of the closing per share trading prices of a share of
HHC Common Stock on the NASDAQ stock market for the twenty (20)
trading days preceding the 5th trading day immediately prior to the
Effective Date. The Merger Agreement can be terminated if the
Average Market Price of HHC stock is greater than $48 or less than
$35; however, if this occurs, the parties have agreed to attempt to
renegotiate the Exchange Ratio prior to terminating the Merger
Agreement.
c. On the Effective Date, each share of Common Stock, $5.00 par value
of Bank issued and outstanding immediately prior to the Effective
Date shall be canceled.
d. As a result of the Mergers and without any action on the part of
the holder thereof, all shares of Commerce Corporation and Bank Common Stock
will cease to be outstanding and will be canceled and retired and will cease
to exist, and each holder, other than Commerce Corporation, of a Certificate
representing any shares of Commerce Corporation Common Stock will thereafter
cease to have any rights with respect to such shares of Commerce Corporation
Common Stock, except the right to receive, without interest, the HHC Common
Stock and cash in accordance with the Merger Agreement and cash for fractional
shares of HHCCommon Stock in accordance with the Merger Agreement upon the
surrender of such Certificate.
No fractional shares of HHC Common Stock will be issued pursuant to the
Merger Agreement. In lieu of the issuance of any fractional share of HHC Common
Stock, cash adjustments will be paid to holders in respect of any fractional
share of HHC Common Stock that would otherwise be issuable, and the amount of
such cash adjustment will be equal to such fractional proportion of the Average
Market Price.
Effective Date
The closing (the "Closing") of the transactions contemplated by the Merger
Agreement will take place on a date that is mutually agreed to by HHC and
Commerce Corporation ("Closing Date") that is within thirty (30) days following
the later of the date of receipt of all
16
<PAGE>
applicable regulatory approvals relating to the transactions contemplated
herein, the expiration of all applicable statutory and regulatory waiting
periods relative thereto, or the date the Registration Statement filed with the
SEC is declared effective, or such later date as may be agreed to by Commerce
Corporation and HHC.
Immediately upon consummation of the Closing, or on such other later date
as the parties may agree, the Company Merger Agreement will be certified,
executed, acknowledged and delivered to the Secretary of State of the State of
Louisiana for filing pursuant to and in accordance with the provisions of
Section 12:112 of the LBCL. The Company Merger will become effective as of the
date and time of issuance by the Secretary of State of the State of Louisiana of
a certificate of merger relating to the Company Merger.
Immediately upon consummation of the Closing, or on such other later date
as the parties may agree, the Bank Merger Agreement will be certified, executed,
acknowledged and delivered to the OFI for filing pursuant to and in accordance
with the provisions of Section 6:352 of the Louisiana Banking Laws. The Bank
Merger shall become effective as of the date and time specified or permitted by
the OFI in a Certificate of Merger or other written record issued by the OFI.
Exchange of Certificates
As of the Effective Date, HHC will deposit or cause to be deposited with
the Exchange Agent for the benefit of the holders of shares of Commerce
Corporation and Bank Common Stock, pursuant to the Merger Agreement,
certificates representing the shares of HHC Common Stock and cash (such
certificates for shares of HHC Common Stock and cash being hereinafter referred
to as the "Exchange Fund") to be issued and paid, respectively, pursuant to the
Merger Agreement in exchange for outstanding shares of Commerce Corporation and
Bank Common Stock.
Promptly after the Effective Date, HHC will cause the Exchange Agent to
mail to each holder of record, other than Commerce Corporation, of a
Certificate(s) of Commerce Corporation Common Stock (other than those
representing shares with respect to which the holder thereof has perfected
appraisal rights under the LBCL and has not subsequently lost, withdrawn or
forfeited such rights):
(i) A letter of transmittal which will specify that delivery shall be
effected, and the risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent
and will be in such form and have such other provisions as HHC may
reasonably specify; and
(ii) Instructions for use in effecting the surrender of the Certificates
in exchange for Certificates representing shares of HHC Common
Stock, and cash in lieu of fractional shares.
17
<PAGE>
Upon surrender of a Certificate for cancellation to the Exchange Agent
together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, the holder of such Certificate will be
entitled to receive in exchange therefor (i) a certificate representing that
number of whole shares of HHC Common Stock; 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 Certificates surrendered, after giving effect
to any required withholding tax, and the Certificate so surrendered shall then
be canceled. No interest will be paid or accrued on the value of any HHC Common
Stock or cash payable to holders of Certificates. In the event of a transfer of
ownership of Commerce Corporation Common Stock which is not registered in the
transfer records of Commerce Corporation, a certificate representing the proper
number of shares of HHC Common Stock together with a check for the cash
component of the Exchange Ratio and cash to be paid in lieu of fractional
shares, if any, may be issued to such a transferee if the Certificate
representing such Commerce Corporation Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer taxes have been
paid.
No dividends on HHC Common Stock will be paid with respect to any shares
of Commerce Corporation Common Stock represented by a certificate until such
certificate is surrendered for exchange as described above. Subject to the
effect of applicable laws, following surrender of any such Certificate, there
will be paid to the holder of the certificates representing whole shares of HHC
Common Stock issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of dividends or other distributions with a record
date after the Effective Date theretofore payable with respect to such whole
shares of HHC Common Stock and not paid, less the amount of any withholding
taxes which may be required thereon, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Date but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole shares of HHC Common Stock, less the amount
of any withholding taxes which may be required thereon.
On or after the Effective Date, there will be no transfers on the stock
transfer books of Commerce Corporation of the shares of Commerce Corporation
Common Stock which were outstanding immediately prior to the Effective Date. If,
after the Effective Date, Certificates are presented to HHC, they will be
canceled and exchanged for certificates for shares of HHC Common Stock and/or
cash, as appropriate, and cash in lieu of fractional shares, if any, deliverable
in respect thereof pursuant to the Merger Agreement. Certificates surrendered
for exchange by any person constituting an "affiliate" of Commerce Corporation
for purposes of Rule 145(c) under the Securities Act will not be exchanged until
HHC has received a written agreement from such person as provided in the Merger
Agreement.
No fractional shares of HHC Common Stock will be issued pursuant to the
Merger Agreement. In lieu of the issuance of any fractional share of HHC Common
Stock, cash payments will be paid to holders in respect of any fractional share
of HHC Common Stock that
18
<PAGE>
would otherwise be issuable, and the amount of such cash adjustment will be
equal to such fractional proportion of the Average Market Price.
In the event that any Certificate has 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 HHC, the posting by such
person of a bond in such reasonable amount as HHC 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 HHC Common Stock and cash in lieu of fractional
shares, if any, and unpaid dividends and distributions on shares of HHC Common
Stock as provided in the Merger Agreement, deliverable in respect thereof
pursuant to the Merger Agreement.
In the event that, subsequent to the date of the Merger Agreement but
prior to the Effective Date, Commerce Corporation, Bank, or HHC changes the
number of shares of Commerce Corporation or Bank Common Stock or HHC Common
Stock, respectively, issued and outstanding as a result of a stock split,
reverse stock split, stock dividend, recapitalization or other similar
transaction, the Exchange Ratio will be appropriately adjusted.
Regulatory Approvals and Other Conditions to the Mergers
The Company Merger is subject to approval by the FRB. On or about
April 30, 1997, HHC filed with the FRB a request seeking approval to
waive the FRB merger application. As of the date of this Prospectus/Proxy
Statement, the FRB had not acted on this request.
The Bank Merger is subject to approval by the FDIC and the OFI. On or
about April 30, 1997 Hancock Bank filed with the FDIC and the OFI an
application seeking approval to merge Bank into Hancock Bank. As of the
date of this Prospectus/Proxy Statement, neither the FDIC nor the OFI have
acted on the merger application. The Bank Merger cannot be consummated
for fifteen days after approval thereof by the FDIC, and during such period,
the Justice Department may challenge the merger of Bank into Hancock Bank
on antitrust grounds.
There can be no assurance that any applicable regulatory authority will
approve or take other required action with respect to the Mergers or as to the
date of such regulatory approval or other action. HHC and Commerce Corporation
are not aware of any governmental approvals or actions that are required in
order to consummate the Mergers except as described herein. Should such other
approval or action be required, it is contemplated that HHC and Commerce
Corporation would seek such approval or action. There can be no assurance as to
whether or when any such other approval or action, if required, could be
obtained.
19
<PAGE>
In addition to the receipt of all necessary regulatory approvals, the
expiration of all required notice and waiting periods following the granting of
such approvals, and the approval of the Merger Agreement by the vote of the
shareholders of Commerce Corporation, consummation of the Mergers is subject to
the satisfaction of certain other conditions on or before the Effective Date of
the Mergers. Generally, such additional conditions include, among others, the
following: (i) the Prospectus/Proxy Statement must have been filed with the SEC
and must have been cleared thereby or otherwise authorized for mailing, and the
Registration Statement must have been filed with and declared effective by the
SEC and shall not be the subject of any stop order or proceedings seeking a stop
order; (ii) no action or proceeding shall have been threatened or instituted
before a court or other governmental body to restrain or prohibit the
transactions contemplated by the Merger Agreement and (iii) Commerce Corporation
has received from Watkins Ludlam & Stennis, P.A., an opinion of counsel as to
certain tax aspects of the transactions contemplated by the Merger Agreement.
The obligations of Commerce Corporation and HHC to effect the Mergers are
subject to conditions as set forth in Article 8 of the Merger Agreement, to the
effect, among others, as follows: (i) Each of the representations and warranties
of the other parties set forth in the Merger Agreement is true and correct in
all material respects on and as of the Closing; (ii) that the other parties set
forth have in all material respects performed all obligations required by the
Merger Agreement to be performed prior to the Closing; (iii) that there has not
been a material adverse change in the financial condition, results of operations
or business of the other parties; and (iv) the receipt of customary legal
opinion of the others' counsel.
Conduct of Business Prior to the Effective Date
Pending consummation of the Mergers, Commerce Corporation and Bank have
agreed to conduct their business in the ordinary course consistent with prudent
business practices and in compliance with all applicable laws; and without the
prior consent of HHC, will not, among other matters, amend its Articles of
Incorporation or Bylaws, sell, dispose of or encumber any assets, issue or
reacquire any stock, pay dividends, except for intercompany dividends between
the Bank and Commerce Corporation necessary to service the Commerce Corporation
Debt, authorize any capital expenditure exceeding $20,000, extend any new or
renew any existing loan which individually exceeds $75,000, adopt any type of
compensation benefit or plan for Commerce Corporation or Bank officers or
employees, enter into, amend, or terminate any employment agreement,
relationship or responsibilities with any director, officer or key employee or
representative of Commerce Corporation or Bank, or enter into, amend, or
terminate any employment agreement with any other person otherwise than in the
ordinary course of business, or take any action with respect to the grant or
payment of any severance or termination pay except as expressly consented to in
writing by HHC except that prior to the Effective Date, Commerce Corporation and
Bank shall terminate any and all employment contracts with Jimmy H. Whittington,
or grant any increase in compensation to any director, officer, employee or
representative of Commerce Corporation or Bank except in the ordinary course of
business consistent with past practice.
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Waiver, Amendment and Termination
Commerce Corporation and HHC may waive their respective rights, powers or
privileges under the Merger Agreement provided, however, that any such waiver is
in writing. The Merger Agreement may be amended or modified only upon written
agreement of both Commerce Corporation and HHC.
The Merger Agreement may be terminated at any time on or prior to the
Effective Date (a) by the mutual consent of the parties; (b) by either party to
the Merger Agreement (i) if the Mergers have not become effective on or before
December 31, 1997, (ii) in the event of a breach by the other party of any
covenant, representation or warranty of the other party that reflects a material
adverse change in the financial condition of the other party, (iii) regulatory
approvals are not obtained, (iv) the Merger is not approved by the required vote
of Commerce Corporation's shareholders; (c) by Commerce Corporation if the
Average Market Price of HHC stock exceeds $48.00; and (d) by HHC in the event
there are dissenting shareholders who hold more than 10% of the shares of
Commerce Corporation or if the Average Market Price of HHC stock is less than
$35.00. If the Average Market Price of the HHC Common Stock is greater than
$48.00 or less than $35.00, the parties have agreed to first attempt to
renegotiate the Exchange Ratio prior to terminating the Merger Agreement.
Except under certain circumstances specified in the Merger Agreement, upon
termination of the Merger Agreement, no liability will result on the part of
either party or their respective directors, officers, employees, agents, or
shareholders unless there has been an intentional breach of the Merger Agreement
prior to the date of termination.
Interests of Certain Persons in the Mergers
From and after the Effective Date of the Mergers, HHC agrees to indemnify
and hold harmless each person who is an officer or director of Commerce
Corporation or Bank from and against all losses, claims, damages, liabilities
and judgments based upon or arising from his capacity as an officer or director
of Commerce Corporation or Bank, as the case may be, to the same extent he would
have been indemnified under the Articles of Incorporation and Bylaws of HHC as
such documents were in effect on the date of the Merger Agreement as if he were
an officer or director of HHC at all relevant times.
HHC's Board of Directors shall take all action necessary to appoint
Jimmy H. Whittington, Dr. J. R. Haskin and Karen M. Haskin to the Board of
Directors of Hancock Bank upon the Effective Date for such persons to serve
for a period of not less than one year.
On the Effective Date, HHC shall assume all of the obligations under that
certain Promissory Note dated July 15, 1989 which matures on June 30, 1998 with
a current principal balance of $1,251,000 which is currently payable to three
individuals (which include two directors of Commerce Corporation) in the
proportionate share as indicated: Jimmy H.
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Whittington (46.875%); Dr. J. R. Haskin (46.875%); and Hunter O. Wagner, Jr.
(6.25%). The interest rate of the note is 9% with original repayment terms
as follows:
o interest only through 1996, payable each June 30,
o principal of $100,000 plus interest due June 30, 1997, and
o principal of $1,654,00 plus interest due June 30, 1998.
Stuart Cagle, Vice President of the Bank and director of Commerce
Corporation, is currently employed by the Bank under the terms of a written
employment contract. The term of the contract is from April 13, 1995 and shall
terminate on April 3, 1998, and is automatically renewable for another 12 month
term unless canceled by either party within 30 days before the end of that term.
The contract will be binding on Hancock Bank and Hancock Bank agrees to honor
the contract which provides for guaranteed salary amounts and other customary
terms.
Employee Benefits
Commerce Corporation's and Bank's Group Health and Life Benefit Plan will
be continued through the Effective Date of the Mergers. Thereafter, HHC shall
have the option of either: (1) continuing such plan on and after the Effective
Date of the Mergers; or (2) discontinuing such plan upon the Effective Date and
thereafter, all retained employees will be eligible to participate in Hancock
Bank's group health and life benefit plan based on the provisions in the plan.
The ninety-day employment period will be waived for eligible retained employees
in accordance with Hancock Bank's Plan. Hancock Bank will waive pre-existing
medical conditions for health insurance purposes as to all retained personnel.
With respect to non-employee directors of Commerce Corporation or Bank who
continue to serve on the Board of Directors of Hancock Bank for the one (1) year
period subsequent to the Effective Date, HHC shall continue Commerce
Corporation's and Bank's group health and life benefit plan as it currently
exists for a period of one (1) year after the Effective Date of the Mergers.
Commerce Corporation's and Bank's Profit Sharing Plan and Trust will
remain operative and in effect through the Effective Date of the Mergers. The
Plan will be terminated as of the Effective Date of the Mergers and distributed
to vested employees of Commerce Corporation and Bank in accordance with the
terms of the Plan after the normal and customary contributions have been made
consistent with past practices. All termination costs will be paid from the
Plan's assets. All retained employees will be eligible to enter the Hancock Bank
Profit Sharing Plan, Hancock Bank 401K Plan, and Hancock Bank Pension Plan based
on the provisions set forth in the respective plans. All retained employees will
be granted full credit for all prior service for vesting, eligibility and
benefit purposes for the Hancock Bank Profit Sharing Plan, for eligibility
purposes for the Hancock Bank 401K Plan, and for vesting and eligibility
purposes for the Hancock Bank Pension Plan. All other Commerce Corporation and
Bank benefit plans will continue through the Effective Date of the Mergers.
Thereafter, all retained employees will be eligible to participate in all
Hancock Bank employment benefit plans not set forth above based on the
provisions set forth in the plans with full credit for all prior service.
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<PAGE>
Expenses
HHC and Commerce Corporation have each agreed to pay their respective
costs, fees and expenses incurred in connection with or incidental to the Merger
Agreement, including attorney and accountant's fees. HHC is responsible for
preparing the applications, regulatory filings and Registration Statement
necessary to obtain approval of the Mergers and the issuance of the HHC Common
Stock. Commerce Corporation is responsible for the cost of its accountants and
legal counsel and will bear all costs related to conducting its shareholders'
meeting and obtaining shareholder approval of the Merger Agreement and the
Mergers.
Status Under Federal Securities Laws; Certain Restrictions on Resales of
Securities
The shares of HHC Common Stock to be issued pursuant to the Merger
Agreement have been registered under the Securities Act of 1933, as amended,
("Securities Act") thereby allowing such shares to be sold without restriction
by shareholders of Commerce Corporation or Bank who are not deemed to be
"affiliates" (as that term is defined in the rules under the Securities Act) of
Commerce Corporation and Bank and who do not become affiliates of HHC. The
shares of HHC Common Stock to be issued to affiliates of Commerce Corporation or
Bank may be resold only pursuant to an effective registration statement,
pursuant to Rule 145 under the Securities Act (which, among other things,
permits the resale of securities subject to certain volume limitations) or in
transactions otherwise exempt from registration under the Securities Act. HHC
will not be obligated and does not intend to register its shares under the
Securities Act for resale by shareholders who are affiliates.
Prior to the Effective Date of the Mergers, each such person deemed an
affiliate of Commerce Corporation or Bank will deliver to HHC a letter agreement
pertaining to the limitations on the transferability of such affiliate's shares
of HHC Common Stock acquired in the Company Merger or Bank Merger, respectively,
and whereby such affiliate shall represent and warrant, among other things, that
he or she will not sell, pledge, transfer, or otherwise dispose of such shares
of HHC Common Stock in violation of the Securities Act or the rule and
regulations thereunder.
Accounting Treatment
HHC and Commerce Corporation intend to account for the Mergers as
purchase transactions under generally accepted accounting principles.
Accordingly, the earnings of Commerce Corporation will be combined with the
earnings of HHC from and after the Effective Date of the Mergers and any
goodwill or other intangibles recorded in the transaction will be amortized
through charges to income in future periods.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGERS
Set forth below is a discussion of material federal income tax
consequences of the Mergers. The discussion is intended only as a summary and
does not purport to be a complete analysis of all potential tax effects relevant
to a decision whether to vote for the approval of the Merger Agreement and
related Mergers. The discussion is based on current provisions of the Code,
regulations thereunder, and applicable judicial and administrative
interpretations on the date hereof, any of which is subject to change at any
time.
HHC and Commerce Corporation expect the Mergers to be tax-free
reorganizations for federal income tax purposes, with the result that no gain or
loss will be recognized by Commerce Corporation's or Bank's shareholders, except
with respect to the cash consideration received by Commerce Corporation
shareholders in exchange for Commerce Corporation Common Stock, fractional
shares, or payments received by such shareholders upon exercise of their
statutory dissenters' rights.
Consummation of the Mergers is conditioned upon receipt by Commerce
Corporation of an opinion from Watkins Ludlam & Stennis, P.A., substantially to
the following effects, among others:
(i) The Mergers will constitute reorganizations under Section 368 of
the Code.
(ii) No gain or loss will be recognized by HHC, Hancock Bank, Commerce
Corporation, or Bank as a result of the Mergers.
(iii) No gain or loss will be recognized by a Commerce Corporation
shareholder with respect to the HHC Common Stock received solely in
exchange for such shareholder's Commerce Corporation Common Stock.
However, because both HHC Common Stock and other consideration
(i.e., cash) will be transferred in exchange for shares of Commerce
Corporation Common Stock in the Company Merger, in general, Commerce
Corporation shareholders will be required to recognize gain on such
exchange. The amount of gain recognized will not exceed the amount
of cash received in the exchange. The character of any such gain
(i.e., as a dividend or as capital gain), will depend upon whether
the exchange has the effect of a dividend. Such determination must
be made on a shareholder-by-shareholder basis in accordance with the
principles of applicable case law.
(iv) Cash received in the Company Merger by a shareholder of Commerce
Corporation in lieu of a fractional share interest in HHC Common
Stock will be treated under Section 302 of the Code as having been
received by shareholder in exchange for such fractional share, and
the shareholder generally will recognize gain or loss on such
exchange equal to the difference between the cash received and the
shareholder's basis allocable to the fractional share. If a
fractional share
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of HHC Common Stock would constitute a capital asset in the hands of
the shareholder, any resulting gain or loss will be characterized as
capital gain or loss in accordance with the applicable provisions
and limitations of the Code.
(v) A shareholder of Commerce Corporation who perfects his statutory
dissenters' rights and who receives solely cash in exchange for his Commerce
Corporation Common Stock will be treated as having received such cash payment
as a distribution in redemption of his shares of Commerce Corporation Common
Stock, subject to the provisions and limitations of Section 302 of the Code.
After such distribution, if the former shareholder does not actually or
constructively own any Commerce Corporation Common Stock, the redemption wil
constitute a complete termination of interest and be treated as a distribution
in full payment in exchange for the Commerce Corporation Common Stock so
redeemed.
(vi) The basis of the HHC Common Stock to be received by the Commerce
Corporation shareholders (including any fractional share interests
to which they may be entitled) will be, in each instance, the same
as the basis of the Commerce Corporation Common Stock surrendered in
exchange therefor, decreased by the amount of cash received, and
increased by (a) the amount that is treated as a dividend, and (b)
any gain recognized on the exchange (not including any portion of
the gain that is treated as a dividend).
(vii) The holding period of the HHC Common Stock to be received by the
Commerce Corporation shareholders (including any fractional share
interests to which they may be entitled) will include, in each case,
the period during which the Commerce Corporation Common Stock
surrendered in exchange therefor was held, provided that the
Commerce Corporation Common Stock is held as a capital asset in the
hands of the Commerce Corporation shareholder on the Effective Date
of the Company Merger.
In connection with the foregoing opinion, counsel will make such factual
assumptions as are customary in similar tax opinions, and such factual
assumptions may be confirmed by certificates signed by appropriate officers of
HHC, Hancock Bank, Commerce Corporation and Bank. The foregoing opinion cannot
be relied upon if any such factual assumptions is, or later becomes, inaccurate.
No ruling from the Internal Revenue Service concerning the tax consequences of
the Mergers has been requested, and the opinion will not be binding upon the
Internal Revenue Service or the courts. If the Mergers are consummated, and it
is later determined that the Mergers did not qualify as tax-free reorganizations
under the Code, shareholders of Commerce Corporation and Bank will, in general,
recognize taxable gain or loss on the Mergers equal to the difference between
the fair market value of the consideration received in the Mergers and their
basis in their Commerce Corporation Common Stock or Bank Common Stock, as the
case may be.
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THE FOREGOING ANALYSIS OF FEDERAL INCOME TAX CONSEQUENCES IS INCLUDED
HEREIN FOR GENERAL INFORMATION ONLY AND IS NOT INTENDED AS A SUBSTITUTE FOR
CAREFUL TAX PLANNING. SHAREHOLDERS OF COMMERCE CORPORATION AND BANK ARE URGED TO
CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE
MERGERS AND OF OWNERSHIP OF HHC COMMON STOCK, INCLUDING THE APPLICATION AND
EFFECT OF STATE AND LOCAL INCOME AND OTHER TAX LAWS.
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DISSENTERS' RIGHTS
IF A SHAREHOLDER OF COMMERCE CORPORATION COMMON STOCK WHO OBJECTS TO THE
COMPANY MERGER AND DESIRES TO PERFECT DISSENTERS' RIGHTS IS NOT TIMELY IN TAKING
ANY OF THE FOLLOWING STEPS, THE SHAREHOLDER WILL LOSE THE RIGHT TO DISSENT FROM
THE COMPANY MERGER AND THE SHARES OWNED BY SUCH SHAREHOLDER WILL BE CONVERTED AS
OF THE EFFECTIVE TIME OF THE COMPANY MERGER INTO THE RIGHT TO RECEIVE HHC COMMON
STOCK AND/OR CASH IN ACCORDANCE WITH THE TERMS OF THE COMPANY MERGER AGREEMENT.
Unless the Company Merger is approved by the holders of at least 80
percent of the total voting power of Commerce Corporation, Section 131 of the
LBCL allows a shareholder of Commerce Corporation Common Stock who objects to
the Company Merger and who complies with the provisions of that section to
dissent from the Company Merger and to be paid the fair cash value of his shares
of Commerce Corporation Common Stock, as of the day before the Special Meeting,
as determined by agreement between the shareholder and HHC, or by the state
district court for the Parish of Tangipahoa if the shareholder and HHC are
unable to agree upon the fair cash value of such shares.
To exercise the right of dissent, a shareholder must (i) file with
Commerce Corporation a written objection to the Company Merger prior to or at
the Special Meeting, and (ii) vote his shares against the Company Merger at the
Special Meeting. Neither a vote against the Company Merger nor a specification
in a proxy to vote against the Company Merger will constitute the necessary
written objection to the Company Merger. Moreover, by voting in favor of the
Company Merger, by abstaining from voting on the Company Merger, or by returning
the enclosed proxy without instructing the proxy holders to vote against the
Company Merger, a shareholder waives his rights under Section 131 of the LBCL.
If the Company Merger is approved by less than 80 percent of the total
voting power of Commerce Corporation, then promptly after the Effective Date of
the Company Merger, written notice of consummation of the Company Merger will be
given by registered mail to each shareholder who filed a written objection and
voted against the Company Merger. Within twenty days of the mailing of such
notice, the shareholder must file with HHC a written demand for payment of the
fair cash value of his shares as of the day before the Special Meeting and must
state the amount demanded and a post office address to which HHC may reply. The
shareholder also must deposit the certificate(s) formerly representing his
shares of Commerce Corporation Common Stock in escrow with a bank or trust
company located in West Feliciana Parish, Louisiana. With the above-mentioned
demand, the shareholder must also deliver to HHC the written acknowledgment of
such bank or trust company that it holds the certificate(s), duly endorsed and
transferred to HHC, on the sole condition that the certificate(s) will be
delivered to HHC upon payment of the value of the shares in accordance with
Section 131.
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Unless the shareholder objects to and votes against the Company Merger,
demands payment, deposits his certificate(s) and delivers the required
acknowledgment in accordance with the above mentioned procedures and within the
time periods set forth above, the shareholder will conclusively be presumed to
have acquiesced to the Company Merger and will forfeit any right to seek payment
pursuant to Section 131.
If HHC does not agree with the fair value demanded by the shareholder, or
does not agree that payment is due, it will notify the shareholder within twenty
days after receipt of the shareholder's demand and acknowledgment, and state in
such notice the value it is willing to pay for the shares or its belief that no
payment is due. If the shareholder does not agree to accept the amount offered
by HHC, he must, within 60 days after receipt of such notice, file suit against
HHC in the state district court for the Parish of West Feliciana for a judicial
determination of the fair cash value of the shares. Any shareholder entitled to
file such suit, within such 60-day period but not thereafter, may intervene as a
plaintiff in any suit filed against HHC by any other former Commerce Corporation
shareholder for a judicial determination of the fair cash value of such other
shareholder's shares. If a shareholder fails to bring or to intervene in such a
suit within the applicable 60-day period, he will be deemed to have consented to
accept HHC's statement that no payment is due or, if HHC does not contend that
no payment is due, to accept the amount specified by HHC in its notice of
disagreement.
If, upon filing of any such suit or intervention, HHC deposits with the
court the amount, if any, that it specified in its notice of disagreement, and
if in that notice HHC offered to pay such amount to the shareholder on demand,
then the costs (not including legal fees) of the suit or intervention will be
taxed against the shareholder if the amount finally awarded to him, exclusive of
interest or costs, is equal to or less than the amount so deposited; otherwise,
the costs (not including legal fees) will be taxed against HHC.
Upon filing a demand for the value of his shares, a shareholder ceases to
have any rights as a shareholder except the rights created by Section 131. The
shareholder's demand may be withdrawn voluntarily at any time before HHC gives
its notice of disagreement. Withdrawal of a demand thereafter requires the
written consent of HHC. If withdrawn, or if the shareholder otherwise loses his
dissenters' rights under Section 131, he will be restored to his rights as a
shareholder as of the time of filing his demand for fair cash value.
The foregoing summary of dissenters' rights under the LBCL is necessarily
incomplete and is qualified in its entirety by reference to Section 131 of the
LBCL, which is set forth in its entirety in this Prospectus/Proxy Statement as
Appendix B.
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CERTAIN INFORMATION CONCERNING COMMERCE CORPORATION
AND BANK
Principal Business
Commerce Corporation. Commerce Corporation was organized on February 11,
1985, as a business corporation under the laws of the State of Louisiana to
acquire Bank and to engage in activities related to the operation of a bank
holding company. On December 10, 1986 Commerce Corporation acquired
approximately 100% of the capital stock of Bank and became a one-bank holding
company subject to regulation under the BHCA. At December 31, 1996, Commerce
Corporation had total consolidated assets of approximately $28.8 million and
shareholders' equity of approximately $827,000. Commerce Corporation is
domiciled in St. Francisville, Louisiana and its principal executive offices
are located at 12320 Jackson Road, St. Francisville, Louisiana 70775
and its telephone number is (504) 635-3022.
Bank of Commerce & Trust Co. Bank, organized on October 7, 1915, provides
traditional consumer and commercial deposit and loan services to individuals,
families and businesses in West Feliciana Parish, Louisiana. Bank also provides
traditional consumer and commercial deposit and loan services to individuals,
families and businesses in the neighboring parishes of East Baton Rouge and the
municipality of Jackson in East Feliciana Parish. The Bank's services are
delivered through a full service main office in St. Francisville, Louisiana. In
addition to traditional bank services, Bank offers mortgage loans,
VISA/Mastercard, and limited trust services. Bank's deposits are insured by the
FDIC. At December 31, 1996, Bank had total assets of approximately $28.8 million
and total deposit liabilities of approximately $26.3 million. Bank is domiciled
in St. Francisville, Louisiana and its principal executive office is located at
12320 Jackson Road, St. Francisville, Louisiana 70775 and its telephone number
is (504) 635-3022.
Competition
Bank's primary market area, West Feliciana Parish, has a current
population of approximately 13,102. Its secondary market area, East Baton Rouge
Parish, has a current population of approximately 399,991.
Competition among banks for loan customers is generally governed by such
factors as loan terms, including interest charges, restrictions on borrowers and
compensating balances, and other services offered by such banks. Bank competes
with numerous other commercial banks, savings and loan associations and credit
unions for customer deposits, as well as with a broad range of financial
institutions in consumer and commercial lending activities. In addition to
thrift institutions, other businesses in the financial services industry compete
with Bank for retail and commercial deposit funds and for retail and commercial
loan business. Competition for loans and deposits is intense among the financial
institutions in Bank's primary market area, including those located in the
surrounding parishes.
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Currently, all state banks organized under the law of the State of
Louisiana are permitted to establish branches on a statewide basis. Louisiana's
banking laws also permit bank holding companies domiciled in any other state to
acquire Louisiana banks and bank holding companies. Unless state legislatures
elect otherwise, under recent federal banking legislation, banks will be allowed
to establish interstate branches beginning June 1, 1997.
Seasonality of Business and Customers
Bank deposits represent a cross-section of the area's economy and there is
no material concentration of deposits from any single customer or group of
customers. No significant portion of Bank's loans is concentrated within a
single industry or group of related industries. Historically, the business of
Bank has not been seasonal in nature and management of Bank does not anticipate
any seasonal trends in the future. Bank does not rely on foreign sources of
funds or income.
Employees
As of the date of this Prospectus/Proxy Statement, Commerce Corporation
and Bank have, in the aggregate, approximately 22 full-time employees. None of
such employees are represented by labor unions. Management of Commerce
Corporation considers its relationship with its employees to be good.
Property
Commerce Corporation and Bank have one office located in West Feliciana
Parish, Louisiana, which houses the executive offices of Commerce Corporation
and Bank, at 12320 Jackson Road, St. Francisville, Louisiana 70775. All of the
offices and the premises on which they are located are owned by Bank and are not
subject to any mortgages or encumbrances.
Legal Proceedings
Commerce Corporation and Bank normally are parties to and have pending
routine litigation arising from their regular business activities of furnishing
financial services, including providing credit and collecting secured and
unsecured indebtedness. In some instances, such litigation involves claims or
counterclaims against Commerce Corporation and Bank, or either of them.
As of the date of this Prospectus/Proxy Statement, the Bank has filed suit
seeking a deficiency judgment against loan customers whose loan originated
several years ago as a result of purchasing certain foreclosed real estate from
the Bank. In 1989, the Bank repossessed the foreclosed real estate. The Bank's
suit has been dismissed and the former loan customers have filed a
reconventional demand against the Bank seeking recision of the sales contract
and collection of all moneys paid to the Bank on the various notes that were
executed, as well as
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moneys paid on a second mortgage to another bank by the customers, which
aggregate approximately $350,000. Management believes an adverse outcome to the
Bank is unlikely, however the ultimate outcome cannot be predicted.
Stock Prices and Dividends
Market Prices. There is no established public trading market for the
Commerce Corporation or Bank Common Stock. These securities are not traded on
any exchange and are not quoted on an automated system of a registered
securities association. The most recent trades were 2,000 shares in June of 1995
at $.75 a share and 62,208 shares at $.35 a share in November, 1995.
At the Record Date, there were 18 shareholders of record of Commerce
Corporation Common Stock and 537,680 shares of Commerce Corporation Common Stock
issued and outstanding.
Commerce Corporation Cash Dividends. No cash dividends have been paid
for the past ten years.
Bank Cash Dividends. In 1995, the Bank paid a cash dividend of $12.2786
per share on its Common Stock representing a total cash dividend payment of
$436,100. In 1996, Bank paid a cash dividend of $9.2913 per share on its Common
Stock for a total cash dividend payment of $330,000, and year-to-date 1997, the
Bank has paid a cash dividend of $.8165 per share for a total cash dividend
payment of $29,000.
Federal bank regulatory authorities have the power under the Financial
Institutions Supervisory Act to prohibit a bank from engaging in an unsafe or
unsound practice. The payment of a dividend by a bank could, depending on the
financial condition of the bank and other factors, be deemed an unsafe or
unsound practice. The ability of Commerce Corporation to pay dividends to its
shareholders in the future is dependent upon the ability of Bank to pay
dividends to it.
Under the Merger Agreement, Commerce Corporation and Bank are prohibited
from declaring or paying any dividends on Commerce Corporation Common Stock and
Bank Common Stock, respectively, unless the Merger Agreement is terminated;
provided however, Bank may, to the extent lawfully permitted, declare and pay
dividends for the purpose of allowing Commerce Corporation to service its
outstanding debt.
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Security Ownership of Principal Shareholders and Management
The following table sets forth, as of the Record Date, certain information
with respect to the beneficial ownership (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), direct or indirect, of Commerce Corporation
Common Stock Common Stock for (i) each person who is the beneficial owner of
more than five percent of any class of the outstanding voting securities of
Commerce Corporation; (ii) each director of Commerce Corporation, and each
executive officer of Commerce Corporation; and (iii) all directors and executive
officers of Commerce Corporation as a group. Unless otherwise indicated, all
shares indicated as beneficially owned are held with sole voting and investment
power.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
of Commerce
Corporation Common
Stock
- ------------------------------ ---------------------------------
Jerry R. Haskin 223,538 41.57%
130 Quail Run Court
New Orleans, LA 70128
Karen M. Haskin 2,000 .37%
130 Quail Run Court
New Orleans, LA 70128
Jimmy H. Whittington 223,537 41.57%
P. O. Box 4
St. Francisville, LA 70775
Betty P. Whittington 2,000 .37
P.O. Box 4
St. Francisville, LA 70775
William A. Murhammer, Jr. 13,117 2.44%
14 St. Thomas Drive
Kenner, LA 70065
A. Stuart Cagle, Jr. 62,208* 11.57%
668 Silvery Lane
Port Allen, LA 70767 ________ _______
All Directors and Executive 526,400 97.90%
========= ======
Officers as a Group (6 persons)
- ------------------------------
* Includes 31,104 shares in a self directed IRA over which Mr. Cagle has
voting control.
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COMMERCE CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion provides certain information concerning the
financial condition and results of operations of Commerce Corporation for the
periods ending December 31, 1996 and 1995. The results of operations and
financial condition of Commerce Corporation were due primarily to its banking
subsidiary, Bank of Commerce and Trust Company. Management's discussion should
be read in conjunction with the audited financial statements and accompanying
notes for the years ended December 31, 1996 and 1995 included elsewhere herein.
Overview
Net income totaled $257 thousand compared to $241 thousand for 1995.
Return on average assets was 0.90% and return on average equity was 37.19% for
1996 compared to 0.87% and 57.45% respectively, for 1995.
Assets grew $595 thousand or 2.11% in 1996. This increase in assets was
funded by an increase in customer deposits of $642 thousand or 2.51%.
Loan balances increased $466 thousand or 2.71% as a result of improved
area loan demand. Loans totaled $17.645 million at December 31, 1996 and
represented 67.18% of deposit balances and 66.93% of earning asset balances.
Investment securities totaled $5.325 million at December 31, 1996 an
increase of 12.44% over 1995 balances. Securities available for sale were $5.105
million or 96% of portfolio balances at December 31, 1996. Federal Funds Sold
balances remained level at $2.325 million.
Results of Operations
Net Interest Income. Net interest income decreased slightly from 1995 to
1996. The net interest margin, the percentage of net interest income to net
earning assets, decreased slightly in 1996 as a result of increased rates on
deposits. Earning assets comprised 90.69% and 88.63% of total assets in 1996 and
1995 respectively.
Provision for Loan Losses. The provision for loan losses charged to
operating expense is the result of management's evaluation of the loan loss
reserve adequacy based on the Bank's past loan loss experience, known and
inherent portfolio risks, adverse situations that may affect the borrower's
ability to repay, the estimated value of any underlying collateral, and current
economic conditions. In 1996 the loan loss provision was ($25) thousand compared
to $64 thousand in 1995. Charged off loans net of recoveries amounted to $41
thousand in 1996 and $61 thousand in 1995.
33
<PAGE>
COMMERCE CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS AND OPERATIONS AND FINANCIAL CONDITION
Other Operating Income. Other operating income in 1996 totaled $294
thousand compared to $283 thousand in 1995. Customer service charges remained
level at $239 thousand with the increase attributed to a non recurring other
income item.
Other Operating Expenses. Other operating expenses increased $57 thousand
or 5.30% in 1996 over 1995 levels. This increase is attributed to an increase in
salaries and benefits of $42 thousand or 7.92%.
Income Taxes. Income tax expense increased $14 thousand in 1996. The
effective tax rate was 33.0% and 32.1% in 1996 and 1995 respectively.
Financial Condition
Capital Resources. The bank subsidiary maintains adequate capital for
regulatory purposes and has sufficient capital to absorb inherent business
risks. Risk based capital requirements have been established that weight
different assets according to the level of risk associated with that type of
asset. At December 31, 1996, the bank was rated well capitalized according to
regulatory standards. Increases in capital balances have primarily come from
earnings.
Allowance for Loan Losses. Commerce Corporation maintains an allowance for
loan losses which management deems adequate to absorb reasonably foreseeable
losses in the loan portfolio. The loan loss allowance was 1.74% of loans at
December 31, 1996 and 2.17% of loan balances for the same period in 1995. The
loan loss reserve declined $66 thousand in 1996 as a result of a negative
provision and charged off loans net of recoveries.
Interest Rate Sensitivity. Management monitors the volume of interest
sensitive assets compared with interest sensitive liabilities over specific time
intervals. Commerce Corporation's policy is designed to produce a stable net
interest margin in periods of interest rate fluctuations. Interest sensitive
assets and liabilities are those assets and liabilities subject to repricing
within a given time period. Interest rate risk is monitored, quantified and
managed to produce tolerable impacts on short-term earnings.
The difference between total interest sensitive assets and liabilities in
a given time period is known as the interest sensitivity gap. At December 31,
1996, Commerce Corporation's cumulative interest sensitivity gap in the one
year interval was 13.25% of assets compared
to 23.97% for the same period in 1995. The percentage reflects a higher level
of interest sensitive liabilities than assets repricing within one year.
Generally, when rate sensitive liabilities exceed rate sensitive assets, the net
interest margin is higher during periods of decreasing interest rates and lower
during periods of increasing rates.
34
<PAGE>
Non Performing Assets. Non-accrual loans and foreclosed assets are
included in non-performing assets. Non-performing assets were $327 thousand at
December 31, 1996 representing a $72 thousand increase over the 1995 balance of
$255. The other real estate balance increased $14 thousand and non-accrual loan
balances increased $58 thousand.
Non-accrual loans are loans on which the accrual of interest income has
been discontinued due to a deterioration in the borrower's financial condition
to the extent the collection of principal and interest is doubtful. While in a
non-accrual status, all interest collections are recorded on the cash basis.
Interest income that would have been recorded on non-accrual loans had they been
on an accrual status at contractual terms throughout 1996 was approximately $16
thousand.
Liquidity. Liquidity represents the ability of the Commerce Corporation to
provide funds to satisfy demands from depositors, borrowers and other
commitments by either converting assets to cash or accessing new or existing
funding sources. The principal source of funds are customer deposits, loan
payments, maturities and sales of investment securities, earnings and other
borrowing. At December 31, 1996, cash and due from banks, securities
available-for-sale, and federal funds sold represented in excess of 35% of
deposit balances.
Bank Premise and Equipment. Commerce Corporation owns one banking facility
and a storage facility. The book value of premises and equipment at December 31,
1996 was $484 thousand compared to $478 thousand at December 31, 1995.
CERTAIN STATISTICAL INFORMATION
The following tables and other materials present certain statistical
information regarding Commerce Corporation. This information is not audited and
should be read in conjunction with the December 31, 1996 and 1995 audited
consolidated financial statements and accompanying notes elsewhere herein.
35
<PAGE>
COMMERCE CORPORATION
The following table show interest income on interest-earning assets and
related average yields earned and interest expense on interest-bearing
liabilities and related average rates paid for the period indicated.
<TABLE>
<CAPTION>
Comparative Average Balances - Yields and Costs
Year Ended December 31, Year Ended December 31
1996 1995
---- ----
Average Amount Average Amount
Average Yield or Paid or Average Yield or Paid or
Amount Rate Earned Amount Rate Earned
ASSETS:
Earning assets:
Investment Securities:
<S> <C> <C> <C> <C> <C> <C>
Taxable 5,265 5.58% 294 4,247 6.12% 260
Non-taxable securities(1) 26 7.69% 2 304 4.93% 15
Federal Funds Sold & 2,272 5.37% 122 2,558 5.67% 145
Repos
Interest bearing deposits 938 5.54% 52 324 5.25% 17
Net loans 17,416 9.19% 1,600 16,982 9.47% 1,608
------ ----- ----- ------ ----- -----
Total earning
assets/interest 25,917 7.99% 2.070 24,415 8.38% 2,045
income
Less: reserve for loan (360) 0.00% (371) 0.00%
losses
Nonearning assets:
Cash and due from banks$ 2,175 0.00% 1,505 0.00%
Fixed assets 528 0.00% 488 0.00%
Other assets 508 0.00% 751 0.00%
--- ----- -------- --- -----
Total Assets $28,768 7.20% $ 2,070 26,788 7.63% $ 2,045
======= ===== ======= ====== ===== =======
LIABILITIES & STOCKHOLDERS'
EQUITY
Deposits:
Savings, NOW, & money
market 11,410 2.21% 252 9,791 2.44% 239
Time 9,464 5.08% 481 9,192 4.69% 431
Capital Notes & 1,602 8.55% 137 1,907 8.29% 158
Other Borrowings
---------- ----- ----- ----- ----- ---
Total interest bearing
liabilities/ 22,476 3.87% 870 20,890 3.96% 828
interest expense
Noninterest bearing
liabilities:
Demand $ 5,451 0.00% 5,259 0.00%
Other Liabilities 341 0.00% 390 0.00%
Stockholders' Equity 500 0.00% 249 0.00%
--- ----- -------- --- ----- --------
Total liab. & $28,768 3.02% $ 870 26,788 3.09% $ 828
& stockholers' equity
======= ===== ======= ======= ===== ========
Interest Earning Assets $25,917 $24,415
Interest Bearing 22,476 $20,890
Liabilities
Interest Income $2,070 $2,045
Interest Expense 870 828
------- -------
Int. Income/Int. Earning Assets 7.99% 8.38%
Int. Expense/Int. Bearing 3.87% 3.96%
Liabilities
Interest Spread 4.12% 4.41%
Interest Differential (1) $1,200 $1,217
======= =======
Interest Margin 4.63% 4.98%
- -----------------------------------
<FN>
(1)Includes tax equivalent adjustments to interest income of $0.5 and
$5.0 thousand in 1996 and 1995, respectively, using an effective tax rate
of 35%.
</FN>
</TABLE>
36
<PAGE>
COMMERCE CORPORATION
The following table sets forth, for the period indicated, a summary of the
changes in interest income on interest-earning assets and interest expenses on
interest-bearing liabilities relating to rate and volume variances. Nonaccrual
loans are included in average amounts of loans and do not bear interest for
purposes of the presentation. Changes that are not solely due to volume or rate
are allocated to volume.
<TABLE>
<CAPTION>
Analysis of Changes in Net Interest Income
1996
Volume Rate Total
INTEREST INCOME Investment Securities:
<S> <C> <C> <C>
Taxable $ 62 $(28) $34
Non-taxable securities (14) 1 (13)
Federal Funds Sold & Repos. (16) (7) (23)
Interest bearing deposits 32 3 35
Net loans 41 (49) (8)
--- ---- ---
Total 106 (81) 25
-------- -------- ------
INTEREST EXPENSE:
Deposits:
Savings, NOW, & money market 40 (27) 13
Time 13 37 50
Capital Notes & Other Borrowings (25) 4 (21)
Total 27 15 42
------- ------- ------
Net Interest Income Change $ 79 $(96) $(17)
======= ======= ======
</TABLE>
37
<PAGE>
COMMERCE CORPORATION
The following tables set forth the Commerce Corporation's interest rate
sensitivity gap at December 31, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
Analysis of Interest Sensitivity at December 31, 1996
After Three
Within Through One After Five
Three Twelve Through Years and
Months Months Five Years Insensitive Total
-------------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Net loans 1,633 10,603 2,257 3,152 17,645
Securities and time 1,037 1,653 3,483 147 6,320
deposits
Federal funds 2,400 0 0 0 2,400
-------------------- ---------- ---------- --------------
Total earning assets 5,070 12,256 5,740 3,299 26,365
==================== ========== ========== ==============
19.23% 46.49% 21.77% 12.51% 100.00%
==================== ========== ========== ==============
Interest bearing deposits,
excluding CD's > $100,000 8,325 3,840 6,961 0 19,126
CD's > $100,000 684 983 200 0 1,867
Short-term borrowings 0 0 0 0 0
Other borrowings 0 0 0 0 0
-------------------- ---------- ---------- --------------
Total interest-bearing funds 9,009 4,823 7,161 0 20,993
Interest-free funds 0 0 0 5,372 5,273
-------------------- ---------- ---------- --------------
Funds supporting earning 9,009 4,823 7,161 5,372 26,365
assets
==================== ========== ========== ==============
34.17% 18.29% 27.16% 20.38% 100.00%
==================== ========== ========== ==============
Interest sensitivity gap (3,939) 7,433 (1,421) (2,073) 0
Cumulative gap (3,939) 3,494 2,073 0 0
Percent of total earning (14.94)% 13.25% 7.86% 0.00% 0.00%
assets
========== ======== ======== ========== ==========
</TABLE>
38
<PAGE>
COMMERCE CORPORATION
<TABLE>
<CAPTION>
Analysis of Interest Sensitivity at December 31, 1995
========== ========== ========== ==
After Three
Within Through One After Five
Three Twelve Through Years and
Months Months Five Years Insensitive Total
---------------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
Net loans 1,815 9,370 2,867 3,127 17,179
Securities and time deposits 2,194 1,658 1,681 260 5,793
Federal funds 2,325 0 0 0 2,325
-------------------- ---------- ---------- --------------
Total earning assets 6,334 11,028 4,548 3,387 25,297
==================== ========== ========== ==============
25.04% 43.59% 17.98% 13.39% 100.00%
==================== ========== ========== ==============
Interest bearing deposits,
excluding CD's > $100,000 7,174 2,866 7,919 0 17,960
CD's > $100,000 512 747 500 0 1,759
Short-term borrowings 0 0 0 0 0
Other borrowings 0 0 0 0 0
-------------------- ---------- ---------- --------------
Total interest-bearing funds 7,686 3,613 8,419 0 19,718
Interest-free funds 0 0 0 5,579 5,579
-------------------- ---------- ---------- --------------
Funds supporting earning 7,686 3,613 8,419 5,579 25,297
assets
==================== ========== ========== ==============
30.38% 14.28% 33.28% 22.06% 100.00%
==================== ========== ========== ==============
Interest sensitivity gap (1,352) 7,415 (3,871) (2,192) 0
Cumulative gap (1,352) 6,063 2,192 0 0
Percent of total earning 5.34% 23.97% 8.66% 84.43% 0.00%
assets
==================== ========== ========== ==============
</TABLE>
39
<PAGE>
COMMERCE CORPORATION
The following table sets for the distribution of the average deposit
accounts for the periods indicated and the weighted average interest rates on
each category of deposits:
<TABLE>
1996 1995
----------------------------------------------------
Percent Percent
of of
Amount Deposits Rate (%) Amount Deposits Rate (%)
<S> <C> <C> <C> <C> <C>
Non-interest bearing $ 5,451 20.71 $ 5,260 21.69 1.83
accounts
NOW accounts 5,175 19.66 1.91 3,993 16.47 1.83
Money market and other
savings accounts 6,235 23.68 2.45 5,798 23.92 2.86
Time deposits 9.464 35.95 5.08 9,192 37.92 4.69
------- ----- ---- ----- ----- ------
$26,325 100.00 $24,243 100.00
======= ====== ======= ======
</TABLE>
40
<PAGE>
CERTAIN INFORMATION CONCERNING HHC
General
HHC is a multi-bank holding company headquartered in Gulfport, Mississippi
with total consolidated assets of approximately $2.3 billion at December 31,
1996. HHC operates a total of 70 banking offices and 102 automated teller
machines in the States of Mississippi and Louisiana through two wholly owned
bank subsidiaries, Hancock Bank, Gulfport, Mississippi, organized in 1899
("Hancock Bank MS") and Hancock Bank of Louisiana, Baton Rouge, Louisiana,
organized in August 1990 ("Hancock Bank").
As of March 31, 1997, the authorized capital stock of HHC consists of
75,000,000 shares of HHC Common Stock of which 11,007,401 shares are issued and
outstanding and no shares are held in its treasury. Assuming consummation of the
Mergers without any Commerce Corporation's shareholders exercising their
dissenters rights, HHC will have 11,092,972 shares of Common Stock issued
and outstanding after the Closing.
Both Hancock Bank MS and Hancock Bank are community oriented and focus
primarily on offering commercial, consumer and mortgage loans and deposit
services to individuals and small to middle market businesses in their
respective market areas. Hancock Bank MS and Hancock Bank's operating strategy
is to provide their customers with the financial sophistication and breath of
products of a regional bank while successfully retaining the local appeal and
level of service of a community bank.
Merger and Acquisition History
HHC has expanded its market area through a series of mergers and branch
and deposit acquisitions. Beginning with the 1985 acquisition of the
Pascagoula-Moss Point Bank in Pascagoula, Mississippi ("PMP"), HHC has assumed
approximately $799.8 million in deposit liabilities and acquired approximately
$891.7 million in assets through acquisitions or purchase and assumption
transactions involving six (6) commercial banks, one (1) savings association and
one (1) savings association branch. At the time of the PMP acquisition, PMP had
total assets of approximately $132 million and total deposit liabilities of
approximately $114 million.
The majority of HHC's acquisition activity occurred in 1990 and 1991 and
then again in 1994 and 1995. In June of 1990, Metropolitan National Bank ("MNB")
was merged into Hancock Bank MS. At the time of its acquisition, MNB had total
assets of approximately $98.8 million and total deposit liabilities of
approximately $95.1 million. Also in June of 1990, pursuant to a Purchase and
Assumption Agreement, Hancock Bank MS acquired the Poplarville, Mississippi
branch of Unifirst Bank for Savings from the Resolution Trust Corporation
("RTC"). The acquisition increased HHC's total assets by approximately $7.8
million and its total deposit liabilities by approximately $7.4 million. In
August 1990, HHC formed Hancock Bank for the purpose of assuming the deposit
liabilities and acquiring the consumer loan portfolio, corporate credit card
portfolio and non-adversely classified securities portfolio of AmBank, Baton
Rouge, from the FDIC. As a result of the transaction, Hancock Bank acquired
fifteen (15) branch locations in the greater Baton Rouge area, approximately
$337.5 million in assets and approximately $300.9 million in deposit
liabilities. In August 1991, Hancock Bank MS acquired certain assets and deposit
liabilities of Peoples Federal Savings Association, Bay Saint Louis,
41
<PAGE>
Mississippi, from the RTC. As a result of the transaction, HHC acquired assets
of approximately $39.0 million and deposit liabilities of approximately $38.5
million.
In April 1994, HHC acquired First State Bank and Trust Company of East
Baton Rouge Parish, Baker, Louisiana ("First State Bank"). First State Bank was
merged with Hancock Bank under the pooling-of-interests accounting method. The
acquisition of First State Bank expanded HHC's market share in East Baton Rouge
Parish by increasing HHC's total assets by approximately $82 million and total
deposit liabilities by approximately $70 million. Additionally, effective
January 31, 1995, Washington Bancorp, Inc. and its subsidiary bank, Washington
Bank & Trust Company, Franklinton, Louisiana ("Washington") merged with and into
HHC and Hancock Bank, respectively, with all six (6) facilities of Washington
becoming branches of Hancock Bank. At the time of the acquisition, Washington
had total assets of approximately $90 million and total deposits of
approximately $77 million. On January 13, 1995, HHC also merged with First
Denham Bancshares, Inc., Denham Springs, Louisiana. Its wholly owned subsidiary,
First National Bank of Denham Springs ("FNB Denham") remained a separate
subsidiary of HHC. At the time of acquisition, FNB Denham had total assets of
approximately $108 million and total deposits of approximately $96.5 million.
Effective August 15, 1996, HHC merged FNB Denham with and into Hancock Bank and
the six (6) offices of FNB Denham became branches of Hancock Bank.
In November 1996, the HHC acquired Community Bancshares, Inc. which owed
100% of the Stock of Community State Bank ("Community"). This acquisition
expanded HHC's market to the Hammond, Louisiana area, where many of the people
who are employed in East Baton Rouge Parish reside.
On January 17, 1997, HHC acquired Southeast National Bank, Hammond,
Louisiana ("Southeast"). The acquisition was in return for approximately
$4,700,000 cash and 105,000 shares of HHC Common Stock. The acquisition was
accounted for using the purchase method. Southeast had total assets of
approximately $40,000,000 and stockholders' equity of approximately $4,000,000
as of December 31, 1996 and net earnings of approximately $500,000 for the year
then ended.
HHC's regulatory capital at December 31, 1996, both on a historical basis
and after giving pro forma effect to the Mergers, as of that date, substantially
exceeds all current minimum regulatory requirements.
Changes in Control
Certain provisions of the HHC Articles of Incorporation and Bylaws may
have the effect of preventing, discouraging or delaying any change in control of
HHC. The classification of the HHC Board of Directors would delay any attempt by
dissatisfied shareholders or anyone who obtains a controlling interest in the
HHC Common Stock to elect a new board of directors. The classes of directors
serve staggered three year terms so that one-third of the directors are elected
each year. These staggered terms of service may make it more difficult for HHC
shareholders to effect a change in the majority of the HHC directors because
replacement of a majority of the directors will normally require two annual
meetings of shareholders. Accordingly, this provision may have the effect of
discouraging hostile attempts to gain control of HHC.
42
<PAGE>
The HHC Articles of Incorporation contain in Article Fifth provisions
regarding the vote required to approve certain business combinations or other
significant corporate transactions involving HHC and a substantial shareholder.
Mississippi law generally requires the affirmative vote of the holders of a
majority of the shares entitled to vote at the meeting to approve a merger,
consolidation or dissolution of HHC or a disposition of all or substantially all
of HHC's assets. Article Fifth raises the required affirmative vote to 80
percent of the total number of votes entitled to be cast to approve these and
other significant corporate transactions ("business combinations") if a
"Substantial Shareholder" (as defined) is a party to the transaction or its
percentage equity interest in HHC will be increased by the transaction.
Two-thirds of the whole Board of Directors may, in all such cases, determine not
to require such 80 percent affirmative vote, but only if a majority of the
directors making such determination are "Continuing Directors" (as defined).
Such determination may only be made prior to the time the Substantial
Shareholder in question achieves such status.
A "Substantial Shareholder" generally is defined under Article Fifth as
the "beneficial owner" of more than 10 percent of the outstanding shares of
stock of HHC entitled to vote in the election of directors ("voting shares").
"Beneficial ownership" generally is defined in accordance with the definition of
beneficial ownership in Rule 13d-3 under the Securities Exchange Act of 1934 and
includes all shares as to which the Substantial Shareholder in question has sole
or shared voting or investment power. However, for purposes of Article Fifth, a
Substantial Shareholder is also deemed to own beneficially shares owned,
directly or indirectly, by an "affiliate" or "associate" of the Substantial
Shareholder, as well as (i) shares which it or any such "affiliate" or
"associate" has a right to acquire, (ii) shares issuable upon the exercise of
options or rights, or upon conversion of convertible securities, held by the
Substantial Shareholder and (iii) shares beneficially owned by any other person
with whom the Substantial Shareholder or any of his "affiliates" or "associates"
acts as a partnership, syndicate or other group pursuant to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of shares of capital stock of HHC.
A "business combination" subject to Article Fifth includes, but is not
limited to, the following: a merger or consolidation involving HHC or any of its
subsidiaries and a Substantial Shareholder; a sale, lease or other disposition
of a "substantial part" of the assets of HHC or any of its subsidiaries (i.e.,
assets constituting in excess of 10 percent of the book value of the total
consolidated assets of HHC) to a Substantial Shareholder; an issuance of equity
securities of HHC or any of its subsidiaries to a Substantial Shareholder for
consideration aggregating $5 million or more; a liquidation or dissolution of
HHC; and a reclassification or recapitalization of securities of HHC or any of
its subsidiaries or a reorganization, in any case having the effect, directly or
indirectly, of increasing the percentage interest of a Substantial Shareholder
in any class of equity securities of HHC or such subsidiary.
Article Fifth may not be amended or repealed without the affirmative vote
of 80 percent or more of the votes entitled to be cast by all holders of voting
shares (which 80 percent vote must also include the affirmative vote of a
majority of the votes entitled to be cast by all holders of voting shares not
beneficially owned by any Substantial Stockholder).
The supermajority voting provisions embodied in Article Fifth may have the
effect of discouraging any takeover or change in control of HHC. If the holders
of a majority of HHC's outstanding common stock desire a takeover or change in
control, and if such takeover or change
43
<PAGE>
in control is opposed by HHC management, the existing Articles of Incorporation
of HHC possibly could be used to thwart the desires of such majority.
Article Fourth of the Articles provides that the number of directors which
shall constitute the whole Board of Directors shall be fixed from time to time
by Bylaw adopted by a majority of the Board of Directors (but in no event less
than nine). This provision enables the Board of Directors to increase the size
of the Board during the period between annual meetings of stockholders to
accommodate the inclusion of persons it concludes would be valuable additions to
the Board. It also enables the Board to decrease the number of directorships in
order to respond to circumstances under which the Board deems a lower number of
directors to be desirable, such as when a director unexpectedly dies or resigns
and a qualified candidate to replace the departing director is not immediately
available. It should be noted that, under the Mississippi BCA, the Board may
only increase or decrease by 80 percent or less the number of directors last
approved by the stockholders; the stockholders must approve any proposal by the
Board to increase or decrease by more than 30 percent the number of directors
last approved by the stockholders.
Article Fourth may not be amended or repealed without the approval of the
holders of 2/3 of the outstanding Common Stock.
On February 21, 1997 the HHC board of directors declared a dividend of one
common stock purchase right (a "Right") for each outstanding share of HHC's
Common Stock held of record. Each Right entitles the registered holder, subject
to the terms of the Rights Agreement, to purchase from HHC one share of Common
Stock. See "DESCRIPTION OF HHC CAPITAL STOCK -- Common Stock Purchase Right."
Initially the Rights will not be exercisable, but will become exercisable
at an exercise price of 50% of the current market price of the HHC Stock upon
the public announcement that a person or group of persons has acquired 10% or
more of HHC's outstanding Common Stock (the "Stock Acquisition Date"), or upon
the announcement or commencement of a tender or exchange offer, without the
prior approval of HHC's Board of Directors. In the event that, at any time
following the Stock Acquisition Date, (i) the HHC is acquired in a merger of
other business combination transaction and HHC is not the surviving corporation
(other than a subsidiary merger covered in the preceding paragraph), (ii) any
person or group effects a share exchange or merger with HHC and all or part of
HHC's Common Stock is converted or exchanged for securities, cash, or property
of any other person or group, (iii) 50% or more of HHC's assets or earning power
is sold or transferred (any of such events also being a "Triggering Event"),
then, in each such case, each holder of a Right shall have the right to receive,
upon exercise, that number of shares of Common Stock of the Acquiring Person
purchasable for the Purchase Price at a price of 50% of the current market value
of such shares. The Rights are generally designed to deter coercive takeover
tactics and to encourage all persons interested in potentially acquiring control
of HHC to treat each stockholder on a fair and equal basis.
The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person or group that attempts to acquire HHC on terms
not approved by HHC's Board of Directors. The Rights should not interfere with
any merger of other business combination approved by the Board of Directors
prior to the time that a person or group has acquired, or obtained the right to
acquire, beneficial ownership of 10% or more of the Common Stock, or
44
<PAGE>
has been determined to be an Adverse Person, because until such time the Rights
may be redeemed by HHC at $.01 per Right.
These provisions may have the effect of making it more difficult for
stockholders to replace or add directors, or to otherwise influence actions
taken by directors, which may discourage attempts to acquire control of HHC
which may (or may not) be in the best interest of the majority of the
stockholders.
Additional Information
Additional information concerning HHC's business, and information
concerning the principal holders of HHC Common Stock, the directors and
executive officers of HHC, executive compensation, and certain relationships and
related transactions is contained in the Annual Report on Form 10-K of HHC for
the year ended December 31, 1996 (the "HHC 10- K"), in the Proxy Statement for
the February 20, 1997 Annual Meeting of Shareholders of HHC (incorporated into
the HHC 10-K by reference). All of such information is hereby incorporated into
this Prospectus/Proxy Statement by reference. See "DOCUMENTS INCORPORATED BY
REFERENCE."
45
<PAGE>
DESCRIPTION OF HHC CAPITAL STOCK
Authorized and Outstanding Stock
The Articles of Incorporation as amended (the "Articles") of HHC authorize
the issuance of 75,000,000 shares of Common Stock having a par value of $3.33
per share. As of the date of this Prospectus/Proxy Statement, there were
[11,007,401] shares of common stock outstanding.
Voting Rights
The Holders of HHC Common Stock are each entitled to one vote per share on
all matters brought before shareholders.
Dividend Rights
The holders of Common Stock are entitled to receive such dividends as may
be declared, from time to time, by the Board of Directors out of funds legally
available therefor. Substantially all of the funds available to HHC for payment
of dividends on the Common Stock are derived from dividends paid by its
subsidiaries. The payment of dividends by HHC is subject to the restrictions of
Mississippi law applicable to the declaration of dividends by a business
corporation. Under such provisions, no distribution may be made if, after giving
it effect (1) HHC would not be able to pay its debts as they become due in the
usual course of business; or (2) HHC's total assets would be less than the sum
of its total liabilities plus the amount that would be needed, if HHC were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of stockholders whose preferential rights are superior to those
receiving the distributions.
Additionally, the Federal Reserve, in its Policy Statement on Cash
Dividends Not Fully Covered by Earnings, has stated that bank holding companies
should not pay dividends except out of current earnings and unless the
prospective rate of earnings retention by the holding company appears consistent
with its capital needs, asset quality and overall financial condition.
Preemptive Rights
The holders of HHC Common Stock do not have any preemptive or preferential
right to purchase or to subscribe for any additional shares of Common Stock that
may be issued.
Fully Paid and Nonassessable
The shares of HHC Common Stock presently outstanding are , and those
shares of HHC Common Stock to be issued in connection with the Mergers will be
when issued, fully paid and nonassessable. Such shares do not have any
redemption provisions.
46
<PAGE>
Liquidation Rights
In the event of liquidation, dissolution or winding-up of HHC, whether
voluntary or involuntary, the holders of HHC Common Stock will be entitled to
share ratably in any of the net assets or funds which are available for
distribution to stockholders after the satisfaction of all liabilities or after
adequate provision is made therefor and after payment of any preferences on
liquidation of preferred stock, if any.
Limitation of Liability of Directors
The HHC Articles provide that a director shall not be liable to HHC or its
shareholders for money damages for any action taken, or any failure to take any
action, as a director, except liability for: (i) the amount of financial benefit
received by a director to which he is not entitled; (ii) an international
infliction of harm on HHC or its shareholders; (iii) a violation of Mississippi
Code Annotated Section 79-4-8.33 (1972), as amended; or (iv) an intentional
violation of criminal law.
Indemnification of Directors, Officers and Employees
HHC's Articles provide for indemnification of officers, directors and
employees in connection with a proceeding including reasonable expenses
(attorney's fees) to the fullest extent permitted by the MBCA in effect from
time to time and also provide for indemnification against liability to HHC,
liability for improperly receiving a personal benefit and/or liability for any
other reason, provided that such person's conduct did not constitute gross
negligence or wilful misconduct as determined by a board of directors or
committee designated by the board, by special legal counsel, by the shareholders
or by a court.
The HHC Articles also provide for advances to persons for reasonable
expenses if the person furnishes a written undertaking to repay the advance if
these actions are adjudged to be grossly negligent or wilful misconduct and a
determination is made that the facts known would not preclude indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling HHC
pursuant to the foregoing provisions, HHC has been informed that in the opinion
of the Commission such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
Transfer Agent
The registered transfer agent and registrar for HHC Common Stock is
Hancock Bank MS, Gulfport, Mississippi.
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Changes in Control
See "CERTAIN INFORMATION CONCERNING HHC -- Changes in Control."
Common Stock Purchase Right
Attached to each share of HHC Stock held by a registered holder is a
Common Stock Purchase Right. Each Right entitles the registered holder, subject
to the terms of the rights agreement, to purchase from HHC one share of Common
Stock in the event of a change in control. See "CERTAIN INFORMATION CONCERNING
HHC -- Changes in Control."
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COMPARISON RIGHTS OF SHAREHOLDERS
If the shareholders of Commerce Corporation approve the Merger Agreement
and the Merger is subsequently consummated, all shareholders of Commerce
Corporation other than those exercising dissenter's rights, will become
shareholders of HHC. The rights of shareholders of Commerce Corporation who
receive HHC Common Stock in connection with the Mergers will each be governed by
the Articles of Incorporation, as amended, and Bylaws, as amended, of HHC,
rather than the Articles of Incorporation and Bylaws of Bank and Commerce
Corporation, respectively. The rights of HHC's shareholders are governed by the
Articles of Incorporation of HHC, the Bylaws of HHC and the laws of the State of
Mississippi. The rights of Commerce Corporation's shareholders are governed by
the Articles of Incorporation of Commerce Corporation, the Bylaws of Commerce
Corporation and the laws of the State of Louisiana, including the Louisiana
Business Corporation Law. The following is a brief summary of the principal
differences between the rights of shareholders of HHC and the shareholders of
Commerce Corporation. This summary is qualified in its entirety by reference to
the Articles of Incorporation and Bylaws of HHC; and the Articles of
Incorporation of Commerce Corporation and Bylaws of Commerce Corporation, the
Louisiana Business Corporation Law and the Mississippi Business Corporation Act.
Authorized Capital
Commerce Corporation has 2,000,000 shares of authorized Common Stock
having a par value of $.50 per share.
HHC has 75,000,000 shares of authorized Common Stock having a par value of
$3.33 per share.
Board of Directors
The Board of Directors of Commerce Corporation may be composed of such
number of persons determined by resolution of the Commerce Corporation Board of
Directors or by the shareholders but can never be less than one. No director
need be a shareholder, a resident of the State of Louisiana, or a citizen of the
United States. Commerce Corporation's Board of Directors currently consists of
twelve members. The directors of Commerce Corporation are elected for one year
terms of office each year or until their successors are chosen and qualified.
The Board of Directors of HHC may consist of not less than nine persons,
as set from time to time by the Board of Directors, and currently consists of
nine members. The HHC Board of Directors is divided into three classes, as
nearly equal in number as possible, with members of each class to serve for
three years and with one class being elected each year.
At all meetings of the Board of Directors of Commerce Corporation, a
majority of the directors constitutes a quorum for the transaction of business.
By resolution of the Commerce Corporation Board of Directors, those persons
serving as directors may be compensated a fixed sum and expenses of attendance,
if any, for attending board meetings or they may receive a stated salary.
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Except as provided otherwise in the Articles of Incorporation of HHC, a
majority of the number of directors that constitutes the whole Board of
Directors constitutes a quorum for the transaction of business at any meeting of
the Board of Directors. If a quorum is present when a vote is taken, the
affirmative vote of a majority of directors present shall be the act of the
Board of Directors. The Bylaws of HHC provide that the Board of Directors may
fix the compensation of directors, including for serving on committees.
Removal of Directors
The Bylaws of Commerce Corporation provide that at any meeting of
shareholders called expressly for that purpose, any director or the entire Board
of Directors of Commerce Corporation may be removed, with or without cause, by a
vote of the holders a majority of the shares then entitled to vote in the
election of directors. A director of HHC may be removed from office only for
cause, by the affirmative vote of a majority of directors present.
Vacancies in the Board of Directors
The Bylaws of Commerce Corporation provide that any vacancy occurring on
the Board of Directors (by death, resignation, removal, increase in the
authorized number of directors, or otherwise) may be filled by the affirmative
vote of a majority of the remaining directors, though less than a quorum of the
Board of Directors. A director elected to fill a vacancy serves the unexpired
term of his predecessor in office. The shareholders of Commerce Corporation may
fill any such vacancy prior to the action of the Board of Directors at any
special meeting called for such purpose.
The Bylaws of HHC provide that vacancies occurring on the Board of
Directors for any reason must be filled only by vote of a majority of the
remaining members of the Board of Directors, although less than a quorum. The
person filling the vacancy must serve out the remainder of the term of the
vacated directorship or, in case the vacancy results from an increase in the
number of directors, the term designated for the class of directors of which the
directorship is a part.
Amendment of the Articles of Incorporation
Pursuant to Louisiana Business Corporation Law, the Articles of
Incorporation of Commerce Corporation may be amended by two-thirds (2/3) of the
voting power present. Louisiana Banking Laws require that prior to the adoption
of the amendment, the proposed amendment shall be submitted to the Commissioner
of Financial Institutions (the "Commissioner") for his approval. No proposed
amendments or restatement is valid unless a letter of approval has been issued
by the Commissioner.
The affirmative vote of the holders of a majority of votes entitled to be
cast at a shareholders meeting is required to amend any provision of the HHC
Articles of Incorporation unless the amendment would amend the Articles relating
to certain changes in control, in which case eighty percent (80%) or more of the
votes entitled to be cast is required or unless the amendment would amend the
Articles relating to size, composition and removal of the HHC Board of
Directors, in which case the approval of the holders of not less than two-thirds
(2/3) of the outstanding shares of common stock is required.
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Amendment of Bylaws
The Bylaws of Commerce Corporation provide that the power and authority to
alter, amend or repeal the Bylaws or to adopt new Bylaws are concurrently vested
in the Board of Directors and the shareholders, subject to the right of the
shareholders to repeal the authority of the Board of Directors to alter, amend,
or repeal the Bylaws or to adopt new Bylaws.
Although certain provisions of HHC's Bylaws relating to changes in control
and the size, composition and removal of the HHC Board of Directors require a
vote of eighty percent (80%) of the total voting power and a vote of two-thirds
(2/3) of the outstanding common stock, respectively, the remaining provisions of
HHC's Bylaws may be amended or repealed by the Board of Directors, if a quorum
is present, by the affirmative vote of majority of directors present or by the
shareholders if a quorum exists and the votes cast favoring the action exceed
the votes cast opposing the action.
Special Meetings of Shareholders
Under Commerce Corporation's Bylaws, a special meeting of the shareholders
may be called at any time by the President, the Board of Directors, or the
holders of not less than twenty percent of all shares entitled to vote at such
meeting. Only the business stated or indicated in the notice of the special
meeting can be transacted at a special meeting of the shareholders.
Under HHC's Bylaws, a special meeting of the shareholders may be called,
for any purpose or purposes, unless otherwise prescribed by statute, by the
President or by the Board of Directors, and shall be called by the President at
the request of the holders of not less than one-tenth of all the votes entitled
to be cast on any issue proposed to be considered at the meeting. A request for
a special meeting must be signed and dated by the shareholder(s) requesting the
special meeting and must state the purpose of the meeting, and be delivered to
the Corporation's Secretary. Business transacted at a special meeting of the
shareholders is confined to the purpose(s) stated in the notice.
Telephone and Similar Meetings; Action Without Meeting
Commerce Corporation shareholders, directors, or committee members may
participate in and hold a meeting by means of a conference telephone or similar
communications equipment by means of which persons participating in the meeting
can hear each other. Participation in such a meeting shall constitute presence
in person at such meeting, except where a person participates in the meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
The Commerce Corporation Bylaws provide that any action which may be
taken, or is required by law, the articles of incorporation, or the bylaws to be
taken, at a meeting of shareholders may be taken without a meeting if a consent
in writing, setting forth the action so taken, shall be signed by shareholders
who, in the aggregate, are entitled to vote the percentage of shares required
for approval of the subject matter by law or the articles of incorporation,
whichever is greater.
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HHC's Bylaws provide that any action required to be taken at a meeting of
the stockholders of the corporation, or any action which may be taken at a
meeting of the stockholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
stockholders entitled to vote with respect to the subject matter thereof.
Preemptive Rights
Neither the holders of Commerce Corporation Common Stock nor the holders
of HHC Common Stock have any preemptive or preferential right to purchase or to
subscribe for any additional shares of Commerce Corporation Common Stock or HHC
Common Stock, respectively, that may be issued.
Reports to Shareholders
The HHC Common Stock is registered under the Exchange Act, and, therefore,
HHC is required to provide annual reports containing audited financial
statements to shareholders and to file such other reports with the SEC and
solicit proxies in accordance with the rules of the SEC. HHC also provides
reports to its shareholders on an interim basis containing unaudited financial
information. The Commerce Corporation Common Stock is not registered under the
Exchange Act. Commerce Corporation does not provide its shareholders with annual
reports containing audited financial statements of Commerce Corporation.
Dividends
The sources of funds for payments of dividends by Commerce Corporation and
HHC are their subsidiaries. Because the primary subsidiaries of Commerce
Corporation and HHC are financial institutions, payments made by such
subsidiaries of Commerce Corporation and HHC to their shareholders are limited
by law and regulations of the bank regulatory authorities.
The Louisiana Business Corporation Law provides that a board of directors
may declare dividends in cash, property or shares out of surplus (except earned
surplus reserved by the board) except: (1) when the corporation is insolvent or
would thereby become insolvent, or (2) when such would be contrary to
restrictions in the corporation's Articles of incorporation. If no surplus is
available, dividends may be paid out of net profits for current or preceding
fiscal years, under certain restrictions. No dividend may be paid in shares
other than with treasury shares without transfer to stated capital from surplus
of (1) an amount not less than the aggregate par value of shares issued, and (2)
an amount determined by directors in respect to no par shares issued. The
Mississippi Business Corporation Act provides that no distribution, including
dividend distributions, may be made if, after giving it effect the corporation
would not be able to pay its debts as they become due in the usual course of
business, or the corporation's total assets would be less than the sum of its
total liabilities plus the amount that would be needed, if the corporation were
to be dissolved at the time of the distribution, to satisfy the preferential
rights upon dissolution of shareholders who have superior preferential rights
upon dissolution.
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Voting Rights
The holders of shares of Commerce Corporation Common Stock and the holders
of HHC Common Stock are each entitled to one vote per share on all matters
brought before the shareholders.
Redemption and Retirement
A Louisiana Corporation cannot purchase or redeem its shares when it is
insolvent, or at a price, in the case of shares subject to redemption, exceeding
the redemption price thereof, or when its net assets are less than, or such
purchase would reduce its net assets below, the aggregate amount payable on
liquidation upon any issued shares having a preferential right to participate in
the assets in the event of liquidation which remain after the purchase or
redemption and cancellation of any shares in connection with the purchase or
redemption.
Without submitting such purchase to a vote of the shareholders of the
Corporation, the Corporation is authorized to purchase, directly or indirectly,
its own shares to the extent of the aggregate of the unrestricted surplus
available therefor, and to the extent of stated capital as will not reduce
stated capital below the aggregate allocated value of the issued shares
remaining after the purchase of its shares.
Under Mississippi law, a corporation is permitted to purchase or redeem
shares of its own stock except where upon doing so, the corporation would not be
able to pay its debts as they become due in the usual course of business. This
prohibition also applies to where the corporation's total assets would be less
than the sum of the corporation's total liabilities, plus, unless the articles
of incorporation permit otherwise, the amount that would be needed to satisfy
the preferential rights upon dissolution of stockholders whose preferential
rights are superior to those whose shares are purchased or redeemed, if the
corporation were to be dissolved at the time of such purchase or redemption.
Mississippi law permits a Board of Directors to base its determination as to
whether such purchase or redemption is prohibited either on financial statements
prepared on the basis of accounting practices and principles that are reasonable
in the circumstances or on a fair valuation or other method that is reasonable
under the circumstances.
Reversion of Unclaimed Dividends
Commerce Corporation articles provide that any and all cash, property or
share dividends, shares issuable to shareholders in connection with a
reclassification of stock, and the redemption price of redeemed shares, which
are not claimed by the shareholders entitled thereto within a reasonable time
(not less than one year in any event) after the dividend or redemption price
became payable or the shares became issuable, despite reasonable efforts by the
Corporation to pay the dividend or redemption price or deliver the certificates
for the shares to such shareholders within such time, shall, at the expiration
of such time, revert in full ownership to the Corporation, and the Corporation's
obligation to pay such dividend or redemption price or issue such shares, as the
case may be, shall thereupon cease; provided that the Board of Directors may, at
any time, for any reason satisfactory to it, but need not, authorize (a) payment
of the amount of any cash or property dividend or redemption price or (b)
issuance of any shares, ownership of which has reverted to the Corporation
pursuant to the provision of this
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Article, to the entity who or which would be entitled thereto had such reversion
not occurred. The HHC articles and Bylaws have no provisions regarding
reversion.
Stockholders' Inspection Rights
Under the Louisiana Business Corporation Law, upon at least five days'
written notice, any shareholder, except a business competitor, who is and has
been the holder of record of at least five percent of the outstanding shares of
any class of a corporation for at least six months has the right to examine, in
person or by agent or attorney, at any reasonable time, for any proper and
reasonable purpose, any and all of the records and accounts of the corporation
and to make extracts therefrom. Louisiana law allows two or more shareholders,
each of whom has been a holder of record for six months, whose aggregate
holdings equal five percent to inspect the records.
Under the Mississippi Business Corporation Act, any shareholder may
inspect the shareholders' list if the demand is made in good faith and for a
proper purpose. Such shareholder must describe his purpose and establish that
the list is directly connected to his purpose. Moreover, the stockholders' list
must be available for inspection by any shareholder beginning two days after
notice of a shareholder's meeting is given and continuing until the meeting
takes place.
Limitation of Liability of Directors
Commerce Corporation's Articles and Bylaws have no provisions limiting the
liability of its directors.
The HHC Articles provide that a director shall not be liable to HHC or its
shareholders for money damages for any action taken, or any failure to take any
action, as a director, except liability for: (i) the amount of financial benefit
received by a director to which he is not entitled; (ii) an international
infliction of harm on HHC or its shareholders; (iii) a violation of Mississippi
Code Annotated Section 79-4-8.33 (1972), as amended; or (iv) an intentional
violation of criminal law.
Indemnification
Commerce Corporation's articles provide that the Corporation shall
indemnify directors, officers, employees, and agents of the Corporation and may
maintain liability insurance for such persons as, and to the extent, permitted
by the Louisiana Business Corporation Law. The Louisiana Business Corporation
Law permits Commerce Corporation to indemnify any person who is or was a party
or is threatened to be made a party to any action, suit, proceeding, whether
civil, criminal, administrative, or investigative. This includes any action by
or in the right of the corporation (a "derivative action"), by reason of fact
that he is or was a director, officer, employee, or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee, or agent, against expenses (including attorney's fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred in
connection with such action, suit, or proceeding if the director acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the corporation. With respect to any criminal action or
proceeding, the director must show that he or she had no reasonable cause to
believe his or her conduct was unlawful.
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In the case of derivative actions, Louisiana Business Corporation Law
limits the indemnity to expenses (including attorney's fees) and amounts paid in
settlement not exceeding, in the judgment of the Board of Directors, the
estimated expense of litigating the action to conclusion, actually and
reasonably incurred in connection with the defense or settlement of such action.
The Mississippi Business Corporation Act (the "MBCA") provides that a
director, officer or agent of a corporation may be indemnified for such service
if he conducted himself in good faith, and he reasonably believed in the case of
conduct in his official capacity with the corporation, that his conduct was in
the corporation's best interests; and in all other cases that his conduct was at
least not opposed to the corporation's best interests. In the case of a criminal
proceeding, a director must show that he had no reasonable cause to believe his
conduct was unlawful. Indemnification permitted under this section in connection
with a derivative action is limited to reasonable expenses incurred in
connection with the proceeding.
The MBCA further authorizes a corporation to make further indemnity for
certain actions that do not constitute gross negligence or wilful misconduct if
authorized by the corporation's Articles of Incorporation. The HHC Articles
provide for indemnification to the fullest extent permitted by the MBCA and
specifically provide for the further indemnity authorized by the MBCA.
The HHC Articles provide that HHC shall indemnify any person who was or is
a party to, or is threatened to be made a party to, any threatened pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise, formal or informal (a "Proceeding"), by reason of
the fact that such person is or was a director, officer, employee or agent of
HHC against any obligation to pay a judgment, settlement, penalty, fine or
reasonable expenses (including legal fees) incurred with respect to the
Proceeding: (A) to the fullest extent permitted by the Mississippi Business
Corporation Act in effect from time to time (the "Act") and (B) despite the fact
that such person has failed to meet the standard of conduct set forth in the
Act, or would be disqualified for indemnification under the Act for any reason,
if a determination is made by (i) the board of directors a committee duly
designated by the board of directors, consisting of two or more directors not at
the time parties to the Proceeding, (ii) by special legal counsel, (iii) by the
shareholders or (iv) by a court, that the acts or omissions of the director,
officer, employee or agent did not constitute gross negligence or willful
misconduct. However, HHC shall not indemnify a person for: (i) an intentional
infliction of harm on the Corporation or its shareholders; (ii) a violation of
Mississippi Code Annotated Section 79-4-8.33 (1972), as amended; or for (iii) an
intentional violation of criminal law, and HHC shall not indemnify a person for
receipt of a financial benefit to which he is not entitled unless ordered by a
court under Mississippi Code Annotated, Section 79-4-8.54(9)(3). The HHC
Articles further provide that HHC shall indemnify a person in connection with a
proceeding by or in the right of HHC for reasonable expenses incurred in
connection with the Proceeding if such acts or omissions do not constitute gross
negligence or willful misconduct, and shall make further indemnification in
connection with the Proceeding if so ordered by a court under Mississippi Code
Annotated, Section 79-4-8.54(9)(3). HHC, upon request, shall pay or reimburse
such person for his reasonable expenses (including legal fees) in advance of
final disposition of the Proceeding as long as: (i) such person furnishes HHC a
written undertaking, executed personally or on his behalf, to repay the advance
if he is not entitled to mandatory indemnification under Mississippi Code
Annotated, Section 79-4-8.52 and it is ultimately determined by a judgment or
other final adjudication that his acts or omissions did constitute
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gross negligence or willful misconduct, which undertaking must be an unlimited
general obligation of such person, and which shall be accepted by HHC without
reference to the financial ability of the person to make repayment or to
collateral; (ii) such person furnishes a written affirmation of his good faith
that his acts or omissions did not constitute gross negligence or willful
misconduct; and (iii) a determination is made by any of the determining bodies
that the facts then known to those making the determination would not preclude
indemnification under the HHC Articles.
Under Louisiana Business Corporation Law, the corporation may pay, prior
to final disposition, the expenses (including attorneys' fees) incurred by a
director or officer in defending a proceeding. Under Louisiana law, expenses
incurred by an officer or director in defending any action may be advanced prior
to final disposition upon receipt of an undertaking by the director or officer
of the corporation to repay such advances if it is ultimately determined that he
is not entitled to indemnification. Louisiana law does not require the
undertaking to be secured and the undertaking may be accepted without reference
to financial ability to make the repayment.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling HHC
pursuant to the foregoing provisions, HHC has been informed that in the opinion
of the Commission such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
Supermajority Voting Requirements; Business Combinations
Commerce Corporation's Articles and Bylaws do not have supermajority
voting requirements for business combinations or other matters.
HHC's Articles contain provisions regarding the vote required to approve
certain business combinations or other significant corporate transactions
involving HHC and a substantial stockholder. Mississippi law generally requires
the affirmative vote of the holders of a majority of shares entitled to vote at
a meeting to approve a merger, consolidation or dissolution of HHC or a
disposition of all or substantially all of HHC's assets. The Articles require
the affirmative vote of 80 percent of the total number of votes entitled to be
cast to approve these and other significant corporate transactions ("business
combinations") if a "Substantial Stockholder" (as defined) is a party to the
transaction or its percentage equity interest in HHC will be increased by the
transaction. A majority of the "Continuing Directors" (as defined) of the Board
of Directors may, in all such cases, determine not to require such 80 percent
affirmative vote. The required 80 percent approval of any such business
combination includes all votes entitled to be cast with respect to voting shares
not beneficially owned by any Substantial Stockholder. In addition, such 80
percent affirmative vote will not be required if certain price criteria and
procedural requirements are satisfied. See "CERTAIN INFORMATION CONCERNING HHC
- -- Changes in Control" and "DESCRIPTION OF HHC CAPITAL STOCK -- Changes in
Control" for a more complete discussion of this provision and for definitions of
such terms.
Appraisal Rights
The LBCL provides appraisal rights to shareholders in connection with
mergers and consolidations and the sale, lease or exchange of all of the
corporation's assets, if such are approved by less than eighty percent (80%) of
a corporation's total voting power. Appraisal rights are not available under the
LBCL in the case of: (1) a sale pursuant to a court order; (2)
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a sale for cash requiring distribution of all or substantially all of the net
proceeds to shareholders in accordance with their respective interests within
one (1) year of the date of the sale; and (3) shareholders holding shares of any
class of stock which, at the record date fixed to determine shareholders
entitled to receive notice of and to vote at the meeting of shareholders at
which a merger or consolidation was acted on, were listed on a national
securities exchange unless the shares of such shareholders were not converted by
the merger or consolidation solely into shares of the surviving or new
corporation.
The MBCA provides appraisal rights to shareholders in any of the following
corporate actions: (1) a merger if shareholder approval is required or if the
corporation is a subsidiary that merges with its parent; (2) a plan of share
exchange if the corporation is being acquired and the shareholder is entitled to
vote; and (3) a sale or exchange of all or substantially all of the property of
the corporation that is not in the usual and regular course of business, but not
including a court ordered sale or sale pursuant to a plan where the shareholders
will receive the proceeds within one (1) year after the date of sale.
Shareholders Rights Plan
Attached to each share of HHC Stock held by a registered holder is a
Common Stock Purchase Right which may deter certain takeover proposals. Each
Right entitles the registered holder, subject to the terms of the rights
agreement, to purchase from HHC one share of Common Stock in the event of a
change in control. See "CERTAIN INFORMATION CONCERNING HHC --Changes in
Control." Commerce Corporation does not have a shareholder rights plan.
LEGAL MATTERS
Certain legal matters in connection with the HHC Common Stock being
offered hereby will be passed upon by Watkins Ludlam & Stennis, P.A., 633 North
State Street, Jackson, Mississippi, counsel for HHC.
EXPERTS
The consolidated financial statements of Commerce Corporation as of and
for the years ended December 31, 1996 and 1995 contained in this
Prospectus/Proxy Statement have been audited by Basil M. Lee & Company,
independent auditors, as set forth in their report with respect thereon
appearing elsewhere herein, and have been included in reliance upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of HHC incorporated in this
Prospectus/Proxy Statement by reference from the HHC Annual Report on Form 10-K
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
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OTHER MATTERS
At the time of the preparation of this Prospectus/Proxy Statement, neither
Commerce Corporation nor Bank had been informed of any matters to be presented
by or on behalf of Commerce Corporation, Bank or their management for action at
the Special Meeting other than those listed in the Notice of Special Meeting of
Shareholders and referred to herein. If any other matters come before the
meeting or any adjournment thereof, the persons named in the enclosed proxy will
vote on such matters according to their best judgment.
Shareholders are urged to sign the enclosed proxy, which is solicited on
behalf of the Board of Directors of Commerce Corporation and return it at once
in the enclosed envelope.
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INDEX TO COMMERCE CORPORATION FINANCIAL STATEMENTS
Audited Consolidated Financial Statements - Years Ended December 31, 1996 and
1995
Report of Independent Auditors.......................................F-2
Consolidated Statements of Financial Condition.......................F-3
Consolidated Statements of Income....................................F-4
Consolidated Statements of Shareholders' Equity......................F-5
Consolidated Statements of Cash Flows................................F-6
Notes to Consolidated Financial Statements...........................F-7
F-1
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Basil M. Lee and Company
Certified Public Accountants
Alvin J. Ourso, Jr., CPA Basil M. Lee, CPA - Ret.
Leonard M. Blanchard, CPA Consultant
Roy P. Chenevert, Jr., CPA
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of Commerce Corporation
We have audited the accompanying consolidated statements of financial condition
of Commerce Corporation and its subsidiary as of December 31, 1996 and 1995, and
the related consolidated statements of income, shareholders' equity, and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Commerce Corporation and its subsidiary as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
As discussed in note 16 to the consolidated financial statements, the subsidiary
Bank is involved in a lawsuit in which demand for recision of a contract
involving the sale of foreclosed real estate is sought. The Bank has responded
to the demand and denies any and all liability to the other parties. The
ultimate outcome of the litigation cannot presently be determined. Accordingly,
no provision for any liability that may result in adjudication has been made in
the accompanying consolidated financial statements.
/s/ Basil M. Lee and Company
Basil M. Lee and Company
Baton Rouge, Louisiana
February 6, 1997
(except for Note 17, as to which
the date is February 28, 1997)
2820 Continental Drive-Baton Rouge, LA 70808-3211
Tel. 504/928-1100 - Fax 504/928-1154
F-2
<PAGE>
<TABLE>
<CAPTION>
COMMERCE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1996 AND 1995
(In thousands of dollars)
1996 1995
Assets
<S> <C> <C>
Cash and due from banks (Note 2) $ 1,736 $ 2,181
Federal funds sold 2,400 2,325
--------- --------
Cash and cash equivalents 4,136 4,506
Interest-bearing deposits with banks 995 1,057
Securities available for sale, at fair values (Note 3) 5,105 4,115
Securities held to maturity, fair values of $230 in 1996
and $639 in 1995 (Note 3) 220 621
Loans receivable, net of allowance for loan losses of $307 in 1996
and $373 in 1995 (Note 4) 17,338 16,806
Accrued interest receivable 224 195
Premises and equipment (Note 5) 484 478
Foreclosed real estate, net of allowance of $25 in 1996 162 148
and $115 in 1995 (Note 6)
Deferred tax asset (Note 9) 14 147
Other assets 86 96
--------- --------
Total assets $28,764 $28,169
========= ========
Liabilities and Shareholders' Equity
Liabilities
Demand deposits $ 5,273 $ 5,905
Savings, NOW, and money-market deposits 11,353 10,581
Time deposits $100,000 and more (Note 7) 1,867 1,759
Other time deposits (Note 7) 7,773 7,379
--------- --------
Total deposits 26,266 25,624
Accrued interest payable 191 199
Note payable to shareholders (Note 11) 1,449 1,754
Accrued expenses and other liabilities 31 37
--------- --------
Total liabilities 27,937 27,614
--------- --------
Shareholders' equity (Note 12)
Common stock, $0.50 par value, 2,000,000 shares authorized,
537,680 shares issued and outstanding 269 269
Additional paid-in capital 740 740
Retained earnings (deficit) (Note 2) (179) (436)
Net unrealized (depreciation) on securities available for sale,
net of tax of $2 in 1996 and $9 in 1995 (3) (18)
--------- --------
Total shareholders' equity 827 555
--------- --------
Total liabilities and shareholders' equity $28,764 $28,169
========= ========
</TABLE>
<TABLE>
<CAPTION>
COMMERCE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996 AND 1995
(In thousands of dollars, except per share amounts)
1996 1995
Interest income
<S> <C> <C>
Loans receivable $1,600 $1,608
Taxable securities 294 260
Tax-exempt securities 1 10
Federal funds sold 122 145
Deposits with banks 52 17
--------- --------
Total interest income 2,069 2,040
--------- --------
Interest expense
Deposits
Savings, NOW, and money-market deposits 252 239
Time deposits $100,000 and more 101 85
Other time deposits 380 346
Note payable to shareholders 137 158
--------- --------
Total interest expense 870 828
--------- --------
Net interest income 1,199 1,212
Provision (credit) for loan losses (Note 4) (25) 64
--------- --------
Net interest income after provision for loan losses 1,224 1,148
--------- --------
Noninterest income
Service charges 239 239
Insurance commissions 9 8
Other income 46 36
-- --
Total noninterest income 294 283
---- ----
Noninterest expense
Salaries and employee benefits 572 530
Occupancy and equipment expense 214 190
Net cost of operation of foreclosed real estate 33 25
Other expense 314 331
--- ---
Total noninterest expense 1,133 1,076
--------- --------
Income before income taxes 385 355
Income tax expense (Note 9) 128 114
--------- --------
Net income $ 257 $ 241
========= ========
Net income per share of common stock $ 0.48 $ 0.45
========= ========
Average shares outstanding 537,680 537,680
========= ========
</TABLE>
<TABLE>
<CAPTION>
COMMERCE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995
(In thousands of dollars)
Net Unrealized
Additional Retained (Depreciation) Total
Common Paid-in Earnings on Available for Shareholders'
Stock Capital (Deficit) Sale Securities Equity
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $269 $740 $(677) $(48) $284
Net income for 1995 - - 241 - 241
Net change in unrealized depreciation of
securities available for sale, net of - - - 30 30
$17
--------- --------- --------- -------------- ------------
Balance at December 31, 1995 269 740 (436) (18) 555
Net income for 1996 - - 257 - 257
Net change in unrealized depreciation of
securities available for sale, net of - - - 15 15
$7
--------- --------- --------- -------------- ------------
Balance at December 31, 1996 $269 $740 $(179) $(3) $827
========= ========= ========= ============== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
COMMERCE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
(In thousands of dollars)
1996 1995
Cash flows from operating activities
<S> <C> <C>
Net income $ 257 $ 241
Adjustments to reconcile net income to net
cash provided by operating
activities:
Deferred income tax expense 126 114
Depreciation and amortization 84 63
Provision (credit) for loan losses (25) 64
(Gain) on sales of foreclosed real estate - (10)
Net (accretion) of securities (53) (88)
Provision for foreclosed real estate losses 26 28
(Increase) in accrued interest receivable (29) (19)
(Increase) in other assets (2) (3)
(Decrease) in accrued interest payable (8) (242)
(Decrease) in accrued expenses and other liabilities (6) (8)
--------- --------
Net cash provided by operating activities 370 140
--------- --------
Cash flows from investing activities
Net (increase) decrease in interest-bearing deposits with banks 62 (1,057)
Purchases of securities available for sale (5,819) (3,489)
Maturities of securities available for sale 4,905 3,358
Maturities of securities held to maturity 400 68
Net (increase) decrease in loans (547) 506
Sales of foreclosed real estate - 389
Purchases of premises and equipment (78) (90)
--------- --------
Net cash (used) by investing activities (1,077) (315)
--------- --------
Cash flows from financing activities
Net increase in deposits 642 935
Reduction of note payable to shareholders (305) -
--------- --------
Net cash provided by financing activities 337 935
--------- --------
Net increase (decrease) in cash and cash equivalents (370) 760
Cash and cash equivalents at beginning of year 4,506 3,746
--------- --------
Cash and cash equivalents at end of year $ 4,136 $ 4,506
========= ========
========= ========
Interest paid $ 878 $ 1,071
========= ========
Income taxes paid $ - $ -
========= ========
Foreclosed real estate acquired in satisfaction of loans $ 40 $ 12
========= ========
</TABLE>
(1) Summary of Significant Accounting Policies
The accounting and reporting policies of Commerce Corporation (the "Company")
and its subsidiary are based on generally accepted accounting principles and
conform to predominant banking industry practices. Bank of Commerce and Trust
Company (the "Bank") is wholly owned by the Company.
a. Principles of consolidation - The consolidated financial statements of the
Company include the accounts of the Company and its subsidiary. All material
intercompany transactions and accounts have been eliminated.
b. Nature of operations - The Bank provides a variety of financial services
to individual and business customers through its office in West Feliciana
Parish, Louisiana, which is primarily a rural, residential area. The Bank's
primary deposit products are checking and savings accounts and certificates
of deposit. Its primary lending products are commercial, real estate and
consumer loans.
c. Use of estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Material estimates that are particularly susceptible to
significant change relate to the determination of the allowance for losses on
loans and the valuation of real estate acquired in connection with
foreclosures or in satisfaction of loans. In connection with the
determination of the allowances for losses on loans and foreclosed real
estate, management obtains independent appraisals for significant properties.
While management uses available information to recognize losses on loans and
foreclosed real estate, future additions to the allowances may be necessary
based on changes in local economic conditions, which depends heavily on the
real estate market. In addition, regulatory agencies, as an integral part of
their examination process, periodically review the Bank's allowances for
losses on loans and foreclosed real estate. Such agencies may require the
Bank to recognize additions to the allowances based on their judgments about
information available to them at the time of their examination. Because of
these factors, it is reasonably possible that the allowances for losses on
loans and foreclosed real estate may change materially in the near term.
d. Cash equivalents - For the purpose of presentation in the consolidated
statements of cash flows, the Company considers due from bank accounts and
federal funds sold to be cash equivalents.
e. Securities held to maturity - Bonds and notes for which the Bank has the
positive intent and ability to hold to maturity are reported at cost,
adjusted for premiums and discounts that are recognized in interest income
using the interest method over the period to maturity. Declines in the fair
value of individual securities below their cost that are other than temporary
result in write-downs of the individual securities to their fair value. The
related write-downs are included in earnings as realized losses.
f. Securities available for sale - Securities available for sale consist of
bonds and notes not classified as held to maturity. Unrealized holding gains
and losses, net of tax, on these securities are reported as a net amount in a
separate component of shareholders' equity until realized. Gains and losses
on the sale of securities available for sale are determined using the
specific-identification method. Premiums and discounts are recognized in
interest income using the interest method over the period to maturity.
Declines in the fair value of individual securities below their cost that are
other than temporary result in write-downs of the individual securities to
their fair value.
The related write-downs are included in earnings as realized losses.
g. Loans receivable and allowance for loan losses - Loans receivable that
management has the intent and ability to hold for the foreseeable future or
until maturity or pay-off are reported at their outstanding principal
adjusted for any charge-offs and the allowance for loan losses. Interest on
loans is calculated by using the simple interest method on daily balances of
the principal amount outstanding. The accrual of interest on impaired loans
is discontinued when, in management's opinion, the borrower may be unable to
meet payments as they become due.
F-4
<PAGE>
COMMERCE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
Interest income generally is not recognized on these loans unless the
likelihood of further loss is remote. Interest payments received on such
loans are applied as a reduction of the loan principal balance. The allowance
for loan losses is increased by charges to income and decreased by
charge-offs (net of recoveries). Management's periodic evaluation of the
adequacy of the allowance is based on the Bank's past loan loss experience,
known and inherent risks in the portfolio, adverse situations that may affect
the borrower's ability to repay, the estimated value of any underlying
collateral, and current economic conditions.
h. Premises and equipment - Land is carried at cost. Bank premises, furniture
and equipment are carried at cost, less accumulated depreciation and
amortization computed principally by the straight-line method.
i. Foreclosed real estate - Real estate properties acquired through, or in
lieu of, loan foreclosure are to be sold and are initially recorded at fair
value at the date of foreclosure establishing a new cost basis. After
foreclosure, valuations are periodically performed by management and the real
estate is carried at the lower of carrying amount or fair value less cost to
sell. Revenue and expenses from operations and changes in the valuation
allowance are included in operations.
j. Income taxes - Deferred tax assets and liabilities are reflected at
currently enacted income tax rates applicable to the period in which the
deferred tax assets or liabilities are expected to be realized or settled. As
changes in tax laws or rates are enacted, deferred tax assets and liabilities
are adjusted through the provision for income taxes.
k. Net income per share - Net income per share of common stock has been
computed on the basis of the weighted-average number of shares of common
stock outstanding.
l. Reclassifications - Certain reclassifications have been made to the prior
year's financial statements, which have no effect on net income as previously
reported, to conform to current year reporting.
(2) Restrictions
The Bank is required to maintain average reserve balances by the Federal Reserve
Bank. The average amounts of these reserves for the years ended December 31,
1996 and 1995 were $149,000 and $127,000, respectively.
In addition, prior approval of the Commissioner of the Louisiana Office of
Financial Institutions is required for the Bank to pay dividends if the total of
all dividends declared and paid during any one year would exceed the total of
net profits of that year combined with the net profits from the immediately
preceding year.
(3) Investment Securities
F-5
<PAGE>
COMMERCE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
<TABLE>
The amortized costs and approximate fair values of investments in debt
securities at December 31 follow (in thousands of dollars):
December 31, 1996
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Securities available for sale Cost Gains Losses Value
- -----------------------------
<S> <C> <C> <C> <C>
U. S. Treasury securities $1,548 $ 6 $ 1 $1,553
U. S. Government agencies and 3,041 5 16 3,030
and corporations
Mortgage-backed securities 381 4 3 382
---------- --------- --------- ----------
$4,970 $15 $20 $4,965
========== ========= ========= ==========
Securities held to maturity
- ---------------------------
Mortgage-backed securities $220 $10 $ - $230
========== ========= ========= ==========
Securities pledged to secure
public deposits
and for other purposes $5,135 $5,146
========== ==========
</TABLE>
<TABLE>
Securities available for sale December 31, 1995
- -----------------------------
----------------------------------------------
<S> <C> <C> <C> <C>
U. S. Treasury securities $1,775 $2 $ 1 $1,776
U. S. Government agencies and 1,802 1 30 1,773
corporations
Mortgage-backed securities 437 4 3 438
---------- --------- --------- ----------
$4,014 $7 $34 $3,987
========== ========= ========= ==========
Securities held to maturity
- ---------------------------
States and political subdivisions $ 309 $ - $ - $ 309
Mortgage-backed securities 312 18 - 330
---------- --------- --------- ----------
$ 621 $18 $ - $ 639
========== ========= ========= ==========
Securities pledged to secure public
deposits and for other purposes $4,558 $4,555
========== ==========
</TABLE>
F-6
<PAGE>
COMMERCE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
The scheduled maturities of securities available for sale and held to maturity
at December 31, 1996 were as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Available for sale Held to maturity
Amortized Fair Amortized Fair
Contractual maturities Cost Value Cost Value
<S> <C> <C> <C> <C>
One year or less $1,875 $1,876 $ - $ -
After one year through five years 2,714 2,707 - -
Mortgage-backed securities 381 382 220 230
---------- --------- --------- ----------
$4,970 $4,965 $220 $230
========== ========= ========= ==========
</TABLE>
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties. No debt securities were sold during 1996 and 1995.
The Bank owns stock in the Federal Home Loan Bank totaling $140,000 and $128,000
at December 31, 1996 and 1995, respectively. Quarterly stock dividends are paid
and the Federal Home Loan Bank will repurchase the stock at par if no advances
are outstanding. The Bank may take advances from the Federal Home Loan Bank in
the future for the purpose of providing long-term, fixed rate mortgage loans to
its customers. Such advances would be secured by the stock and the mortgage
loans.
(4) Loans Receivable
The components of loans in the consolidated statements of financial condition at
December 31 were as follows (in thousands of dollars):
<TABLE>
1996 1995
----
<S> <C> <C>
Real estate mortgage $15,233 $14,978
Commercial 205 235
Consumer 2,045 1,788
Other 162 178
---------- ----------
17,645 17,179
Allowance for loan losses (307) (373)
---------- ----------
$17,338 $16,806
========== ==========
</TABLE>
An analysis of the change in the allowance for loan losses follows (in thousands
of dollars):
<TABLE>
1996 1995
----
<S> <C> <C>
Balance at January 1 $373 $370
Loans charged off (79) (89)
Recoveries 38 28
---------- ----------
Net loans charged off (41) (61)
Provision (credit) for loan losses (25) 64
---------- ----------
Balance at December 31 $307 $373
========== ==========
</TABLE>
F-7
<PAGE>
COMMERCE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
At December 31, 1996 and 1995, loans totaling $666,000 and $823,000 were
classified as impaired. Of the total impaired loans at December 31, 1996 and
1995, $150,000 and $445,000 had a related allowance for loan losses of $46,000
and $71,000, respectively. The average balances of these loans in 1996 and 1995
were approximately $791,000 and $836,000. In 1996 and 1995, interest income
recognized on impaired loans was approximately $52,000 and $62,000,
respectively. No commitments to loan additional funds to borrowers of impaired
loans were outstanding at December 31, 1996.
Federally guaranteed loans of $370,000 and $367,000 at December 31, 1996 and
1995 were pledged to secure public funds and for other purposes.
(5) Premises and Equipment
Components of premises and equipment included in the consolidated statements of
financial condition at December 31 were as follows (in thousands of dollars):
<TABLE>
1996 1995
---- ----
Cost:
<S> <C> <C>
Land $ 124 $ 124
Buildings 626 593
Furniture and equipment 504 461
Construction in progress - 10
1,254 1,188
Accumulated depreciation (756) (681)
Unamortized excess of book value over
cost in acquisition of subsidiary (14) (29)
---------- ----------
$ 484 $ 478
========== ==========
</TABLE>
(6) Foreclosed Real Estate
Activity in the allowance for losses on foreclosed real estate is as follows (in
thousands of dollars):
<TABLE>
1996 1995
---- ----
<S> <C> <C>
Balance at January 1 $ 115 $ 128
Provision charged to income 26 28
Charge-offs, net of recoveries (116) (41)
---------- ----------
Balance at December 31 $ 25 $ 115
========== ==========
</TABLE>
Foreclosed real estate under a sales contract was accounted for by the deposit
method as of December 31, 1996. The sales price in the contract was $150,000 for
property with a book value of $97,000.
F-8
<PAGE>
COMMERCE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(7) Deposits
At December 31, 1996, the scheduled maturities of time deposits are as follows
(in thousands of dollars):
<TABLE>
$100,000 Other time
Year maturing and more deposits
<S> <C> <C>
1997 $1,667 $6,547
1998 200 938
1999 - 277
2000 - 11
---------- ----------
$1,867 $7,773
========== ==========
</TABLE>
(8) Financial Instruments
The Bank is a party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and standby letters
of credit which involve credit risk in excess of the amounts recognized in the
statement of financial condition. The Bank's exposure to credit loss in the
event of nonperformance by the other party to these financial instruments is
represented by the contractual amounts of the instruments. The Bank uses the
same credit policies in making commitments and conditional obligations as it
does for on-balance sheet instruments, including collateral or other security to
support the financial instruments.
At December 31, 1996 and 1995, commitments to extend credit totaled $125,000 and
$689,000, respectively. These commitments are agreements to lend to a customer
as long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments may expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.
At December 31, 1996 and 1995, commitments under standby letters of credit
totaled $1,000 and $0, respectively. Standby letters of credit are conditional
commitments issued by the Bank to guarantee the performance of a customer to a
third party. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loans to customers.
(9) Income Taxes
The consolidated provision for income taxes consisted of the following for the
years ended December 31 (in thousands of dollars):
<TABLE>
1996 1995
Current expense $ 2 $ -
Deferred expense 126 114
--------- --------
<S> <C> <C>
Income tax expense $128 $114
========= ========
</TABLE>
F-9
<PAGE>
COMMERCE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
The effective tax rates differed from the statutory federal income tax rates as
follows:
<TABLE>
1996 1995
<S> <C> <C>
Statutory federal income tax rate 34.0% 34.0%
Nontaxable income (1.4%) (2.4%)
Nondeductible expenses 0.4% 0.5%
--------- --------
Effective tax rate 33.0% 32.1%
========= ========
</TABLE>
Deferred tax assets and (liabilities) at December 31 consist of the following
(in thousands of dollars):
<TABLE>
1996 1995
<S> <C> <C>
Net depreciation of securities available for sale $ 2 $ 9
Allowance for loan losses 43 66
Allowance for foreclosed real estate losses 9 39
Accumulated depreciation (21) (27)
Tax net operating loss carryforward - 88
FASB 66 real estate gains deferred 17 -
Accredited discount on investments (2) (17)
Cash basis income and expenses (31) (11)
Other (3) -
--------- --------
Deferred tax asset $ 14 $147
========= ========
</TABLE>
No valuation allowance was recorded to reduce the deferred tax asset at December
31, 1996 and 1995.
(10) Related Parties
The Bank has entered into transactions with its directors, executive officers,
significant shareholders, and their affiliates. The aggregate amount of loans to
such related parties at December 31, 1996 and 1995 was $457,000 and $293,000,
respectively. During 1996, new loans to such related parties amounted to
$214,000 and repayments amounted to $50,000. Deposits held by the Bank at
December 31, 1996 and 1995 for related parties were $309,000 and $325,000,
respectively.
(11) Note Payable to Shareholders
In December, 1986 the Company borrowed $2,000,000 from an unrelated bank,
secured by all of the stock of Bank of Commerce and Trust Company. On July 26,
1990 the note was purchased at a discount by the then four controlling
shareholders of the Company from the unrelated bank. The present holders of the
note consist of the two controlling shareholders who own 93.75% of the note and
a former shareholder who owns 6.25% of the note. The interest rate of the note
is 9% with repayment terms as follows:
o interest only through 1996, payable each June 30, o principal of
$100,000 plus interest due June 30, 1997, and o principal of $1,654,000
plus interest due June 30, 1998.
F-10
<PAGE>
COMMERCE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
The Company has made payments on the note ahead of the required terms. At
December 31, 1996, principal and accrued interest payable were $1,449,000 and
$32,000, respectively.
(12) Regulatory Matters
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly discretionary, actions by regulators
that, if undertaken, could have a direct material effect on the Bank's financial
statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Bank must meet specific capital guidelines that
involve quantitative measures of the Bank's assets, liabilities, and certain
off-balance sheet items as calculated under regulatory accounting practices. The
Bank's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of total and Tier 1
capital, as defined in the regulations, to risk-weighted assets, as defined, and
of Tier 1 capital to average assets, as defined. Management believes, as of
December 31, 1996, that the Bank meets all capital adequacy requirements to
which it is subject.
As of December 31, 1996, the most recent notification from the Federal Deposit
Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain a total risk-based capital ratio of 10% or
higher, Tier 1 risk-based capital ratio of 6% or higher, and Tier 1 leverage
capital ratio of 5% or higher. No conditions or events have occurred since that
notification that management believes have changed the Bank's category. The
following table presents the Bank's actual capital amounts and ratios as of
December 31, 1996 (dollars in thousands):
Amount Ratio
Total Capital (to Risk Weighted Assets) $2,251 17.1%
Tier 1 Capital (to Risk Weighted Assets) $2,083 15.8%
Tier 1 Capital (to Average Assets) $2,083 7.2%
(13) Parent Company Statements
The financial statements of Commerce Corporation (parent company only) at
December 31 and for the years then ended follow (in thousands of dollars):
Statements of Financial Condition 1996 1995
--------------------------------- ----
Assets
Investment in Bank of Commerce $2,066 $2,034
Cash and equivalents 1 57
Deferred tax asset 11 104
Intercompany receivables 230 160
--------- --------
Total assets $2,308 $2,355
========= ========
F-11
<PAGE>
COMMERCE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
========= ========
1996 1995
Liabilities and Shareholders' Equity
Note payable to shareholders $1,449 $1,754
Accrued interest payable 32 46
--------- --------
Total liabilities 1,481 1,800
--------- --------
Common stock 269 269
Additional paid-in capital 740 740
Retained earnings (179) (436)
Net unrealized (depreciation) on
securities available for sale (3) (18)
--------- --------
Total shareholders' equity 827 555
--------- --------
Total liabilities and shareholders' equity $2,308 $2,355
========= ========
Statements of Income
Income
Equity in undistributed net income of Bank of Commerce $17 $(90)
Dividends received from Bank of Commerce 330 436
--------- --------
Total income 347 346
--------- --------
Expenses
Interest 137 158
Other expenses - 2
Income tax (benefit) (47) (55)
--------- --------
Total expenses 90 105
--------- --------
Net income $257 $241
========= ========
Statements of Cash Flows
Cash flows from operating activities
Net income $ 257 $ 241
Adjustments to reconcile net income to net cash provided
by operating activities:
Deferred income tax expense 93 106
Equity in undistributed net income of Bank of Com(17)e 90
(Increase) in intercompany receivables (70) (160)
(Decrease) in accrued interest payable (14) (305)
--------- --------
Net cash provided (used) by operating activities 249 (28)
--------- --------
F-12
<PAGE>
COMMERCE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
--------- --------
1996 1995
Cash flows from investing activities - -
--------- --------
Cash flows from financing activities
Reduction of note payable to shareholders (305) -
--------- --------
Net (decrease) in cash and equivalents (56) (28)
Cash and equivalents at beginning of year 57 85
--------- --------
Cash and equivalents at end of year $ 1 $ 57
========= ========
(14) Bank Subsidiary Statements
The statements of financial condition and income of Bank of Commerce and Trust
Company (bank only) at December 31 and for the years then ended follow (in
thousands of dollars):
Statements of Financial Condition 1996 1995
--------------------------------- ----
Assets
------
Cash and due from banks $ 1,736 $ 2,181
Federal funds sold 2,400 2,325
Interest-bearing deposits with banks 995 1,057
Investment securities 5,308 4,736
Loans receivable 17,378 16,806
Accrued interest receivable 241 195
Premises and equipment 498 507
Foreclosed real estate 122 148
Deferred tax asset 3 43
Other assets 86 96
--------- --------
Total assets $28,767 $28,094
========= ========
Liabilities and Shareholders' Equity
Deposits $26,268 $25,680
Accrued interest payable 158 154
Accrued expenses and other liabilities 261 198
Common stock 355 355
Additional paid-in capital 1,825 1,825
Retained earnings (deficit) (97) (100)
Net unrealized (depreciation) on
securities available for sale (3) (18)
--------- --------
Total liabilities and shareholders' equity $28,767 $28,094
========= ========
F-13
<PAGE>
COMMERCE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
========= ========
Statements of Income 1996 1995
-------------------- ---- ----
Interest income
Loans $1,600 $1,608
Investment securities 295 270
Federal funds sold 122 145
Deposits with banks 52 17
2,069 2,040
Interest expense on deposits 733 670
--------- --------
Net interest income 1,336 1,370
Provision (credit) for loan losses (25) 64
--------- --------
Net interest income after provision for loan losses 1,361 1,306
Noninterest income 294 282
Noninterest expense 1,148 1,088
Income tax expense 174 168
Net income $ 333 $ 332
========= ========
(15) Profit-Sharing Plan
The Bank has a profit-sharing plan which provides benefits upon normal
retirement and upon total and permanent disability. The plan covers all
employees of the Bank who have been continuously employed as full-time employees
for one year and have reached the age of twenty-one. Contributions are made each
December and are charged to operations in the year made. $10,000 was contributed
in each of the years 1996 and 1995.
(16) Litigation
The Bank had filed suit seeking a deficiency judgment against loan customers
whose loan originated several years ago as a result of purchasing certain
foreclosed real estate from the Bank. In 1989, the Bank repossessed the
foreclosed real estate. The Bank's suit has been dismissed and the former loan
customers have filed a reconventional demand against the Bank seeking recision
of the sales contract and collection of all moneys paid to the Bank on the
various notes that were executed, as well as moneys paid on a second mortgage to
another bank by the customers, which aggregate approximately $350,000.
Management believes an adverse outcome to the Bank is unlikely, however the
ultimate outcome cannot be predicted.
(17) Subsequent Events
On February 28, 1997, the Company's Board of Directors voted to merge the
Company with Hancock Holding Company (the "Acquiror") of Mississippi. The Bank
will become a branch of a subsidiary (Hancock Bank of Louisiana) owned by the
Acquiror, for a purchase price of $3,325,000 payable in Hancock Holding Company
common stock and cash, plus the assumption of approximately $1,251,000 of debt
of the Company. The merger is subject to the approval of the Company's
shareholders and appropriate regulatory authorities. Such approval is expected
by July, 1997.
F-14
<PAGE>
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
HANCOCK HOLDING COMPANY
and
HANCOCK BANK OF LOUISIANA
AND
COMMERCE CORPORATION
and
BANK OF COMMERCE & TRUST CO.
<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
ARTICLE 1....................................................................1
DEFINITIONS..................................................................1
1.1 "Agreement"................................................1
1.2 "Bank".....................................................1
1.3 "Business Day".............................................1
1.4 "Commerce Corporation".....................................1
1.5 "Closing"..................................................2
1.6 "Effective Date"...........................................2
1.7 "FDIC".....................................................2
1.8 "FRB"......................................................2
1.9 "HHC"......................................................2
1.10 "Hancock Bank".............................................3
1.11 "OFI"......................................................3
1.12 "Party"....................................................3
1.13 "Person"...................................................3
1.14 "SEC"......................................................3
ARTICLE 2....................................................................3
THE MERGERS AND RELATED MATTERS..............................................3
2.1 Mergers....................................................3
2.2 Effect of Company Merger...................................3
2.3 Effect of Bank Merger......................................4
ARTICLE 3....................................................................4
CONVERSION OF STOCK..........................................................4
3.1 Conversion of Commerce Corporation Stock and Bank
Stock..................................................................4
3.2 Exchange of Certificates Representing Commerce
Corporation Common Stock and Bank Common Stock.............6
3.3 Adjustment of Exchange Ratio...............................8
ARTICLE 4....................................................................8
ACCOUNTING AND TAX MATTERS...................................................8
4.1 Affiliates.................................................8
4.2 Accounting Treatment.......................................8
4.3 Tax Consequences...........................................8
4.4 Accounting and Tax Representations.........................9
ARTICLE 5....................................................................9
COMMERCE CORPORATION'S COVENANTS AND AGREEMENTS..............................9
5.1 Operation of Business......................................9
5.2 Preservation of Business..................................11
5.3 Insurance.................................................11
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5.4 Stockholders' Meeting.....................................11
5.5 Property Transfers........................................11
5.6 Commerce Corporation and Bank Financial and Other
Reports...............................................................11
5.7 Due Diligence.............................................12
5.8 No Solicitation...........................................12
ARTICLE 6...................................................................12
COMMERCE CORPORATION'S REPRESENTATIONS AND WARRANTIES.......................12
6.1 Organization and Authority................................12
6.2 Authorization.............................................13
6.3 Capital Structure of Commerce Corporation.................13
6.4 Ownership of Other Banks..................................14
6.5 Commerce Corporation Financial and Other Reports..........14
6.6 No Material Adverse Change................................14
6.7 Tax Liability.............................................14
6.8 Tax Returns: Payment of Taxes.............................14
6.9 Litigation and Proceedings................................15
6.10 Brokers' or Finders' Fees.................................15
6.11 Contingent Liabilities....................................15
6.12 Title to Assets; Adequate Insurance Coverage..............15
6.13 Liabilities...............................................16
6.14 Loans.....................................................16
6.15 Allowance for Loan Losses.................................17
6.16 Investments...............................................17
6.17 Registration and Proxy Statements.........................17
6.18 Commitments and Contracts.................................18
6.19 Employee Plans............................................18
6.20 Plan Liability............................................18
6.21 Vote Required.............................................19
6.22 Continuity of Interest....................................19
6.23 Continuity of Business Enterprise.........................19
6.24 Environmental Matters.....................................19
6.25 Accuracy of Information...................................20
6.26 Compliance with Laws and Contracts........................20
ARTICLE 7...................................................................20
HHC'S REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS....................................................20
7.1 Organization and Authority................................20
7.2 Shares Fully Paid and Non Assessable......................20
7.3 Authorization.............................................20
7.4 No Material Adverse Change................................21
7.5 Loans.....................................................21
7.6 Litigation................................................21
7.7 Contingent Liabilities....................................21
7.8 Allowances for Possible Loan Losses.......................21
7.9 Benefit Plans.............................................22
7.10 Conduct of Business.......................................22
7.11 Due Diligence.............................................22
7.12 Registration Statement....................................23
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7.13 Application to Regulatory Authorities.....................23
7.14 Indemnification of Directors and Officers of
Commerce Corporation and Bank.............................23
7.15 Continuity of Business Enterprise.........................24
7.16 Governance................................................24
7.17 Assumption of Debt........................................24
ARTICLE 8...................................................................25
CONDITIONS TO CLOSING.......................................................25
8.1 Conditions to Each Party's Obligations to Effect
the Mergers...........................................................25
8.2 Conditions to Obligations of Commerce Corporation
to Effect the Mergers.....................................26
8.3 Conditions to Obligations of HHC to Effect the
Mergers...............................................................27
ARTICLE 9...................................................................29
CLOSING.....................................................................29
9.1 Closing...................................................29
9.2 Deliveries at Closing.....................................29
9.3 Documents.................................................29
ARTICLE 10..................................................................29
EMPLOYMENT MATTERS..........................................................29
10.1 Employees.................................................29
10.2 Retirement Plan...........................................30
10.3 Other Benefit Plans.......................................30
10.4 Notices...................................................30
ARTICLE 11..................................................................31
REMEDIES....................................................................31
11.1 Parties' Joint Remedies...................................31
11.2 Commerce Corporation's Remedies...........................31
11.3 HHC's Remedies............................................31
11.4 Attorney Fees.............................................31
ARTICLE 12..................................................................32
TERMINATION.................................................................32
12.1 Termination...............................................32
ARTICLE 13..................................................................33
APPRAISAL RIGHTS............................................................33
13.1 Appraisal Rights of Commerce Corporation..................33
ARTICLE 14..................................................................33
MISCELLANEOUS...............................................................33
14.1 Entire Agreement..........................................33
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14.2 Survival of Representations, Warranties and
Agreements............................................................33
14.3 Headings..................................................33
14.4 Duplicate Originals.......................................33
14.5 Governing Law.............................................33
14.6 Successors: No Third Party Beneficiaries..................33
14.7 Modification; Assignment..................................34
14.8 Notice....................................................34
14.9 Waiver....................................................34
14.10 Costs, Fees and Expenses................35
14.11 Press Releases..........................35
14.12 Severability............................35
14.13 Mutual Covenant of Best Efforts and
Good Faith............................................................35
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<PAGE>
EXHIBITS
Exhibit A Company Merger Agreement
Exhibit B Bank Merger Agreement
Exhibit C Form of Affiliate Agreement
Exhibit D Tax Certificate
Exhibit E Cashier's Certificate
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<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of the 28th
day of February, 1997, is made between COMMERCE CORPORATION, St. Francisville,
Louisiana, a Louisiana corporation ("Commerce Corporation"), HANCOCK HOLDING
COMPANY, Gulfport, Mississippi, a Mississippi corporation ("HHC"), Bank of
Commerce & Trust Co., St. Francisville, Louisiana, a Louisiana state bank
("Bank"), and Hancock Bank of Louisiana, Baton Rouge, Louisiana, a Louisiana
state bank ("Hancock Bank").
The Boards of Directors of Commerce Corporation, HHC, Bank and Hancock
Bank have duly approved this Agreement and have authorized the execution hereof
by their respective President. Commerce Corporation and Bank have directed that
this Agreement be submitted to a vote of their shareholders, in accordance with
Part XI of the Louisiana Business Corporation Law ("LCL"), and Section 6:352 of
the Louisiana Banking Laws ("LBL"), respectively, and the terms of this
Agreement.
In consideration of their mutual promises and obligations, the parties
hereto adopt and make this Agreement for the merger of Commerce Corporation with
and into HHC and the merger of Bank with and into Hancock Bank and prescribe the
terms and conditions of such mergers and the mode of carrying them into effect,
which shall be as follows:
ARTICLE 1
DEFINITIONS
Certain Defined Terms. As used in this Agreement, the following terms
shall have the following meanings (such meaning to be equally applicable to both
the singular and plural forms of the terms defined):
1.1 "Agreement" shall mean this Agreement and Plan of Reorganization by
and between Commerce Corporation, HHC, Bank, and Hancock Bank and any amendments
thereto. References to Articles, Sections, Schedules and the like refer to the
Articles, Sections, Schedules and the like of this Agreement unless otherwise
indicated.
1.2 "Bank" means Bank of Commerce & Trust Co., a Louisiana banking
corporation duly chartered on October 7, 1915, organized and existing under and
pursuant to the laws of the State of Louisiana and maintaining its principal
place of business and registered address at 12320 Jackson Road, in St.
Francisville, West Feliciana Parish, Louisiana 70775.
1.3 "Business Day" shall mean a day on which Hancock Bank is open for
business and which is not a Saturday, Sunday or legal bank holiday.
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<PAGE>
1.4 "Commerce Corporation" means Commerce Corporation, a corporation duly
chartered on February 11, 1985, organized, and existing under and pursuant to
the laws of the State of Louisiana; maintaining its principal place of business
at 12320 Jackson Road, in St. Francisville, West Feliciana Parish, Louisiana;
and is a bank holding company within the meaning of the Bank Holding Company Act
of 1956, as amended.
1.5 "Closing" The closing (the "Closing") of the transactions contemplated
herein will take place at a place and on a date that is mutually agreed to by
the parties ("Closing Date") that is within thirty (30) days following the later
of the date of receipt of all applicable regulatory approvals relating to the
transactions contemplated herein, the expiration of all applicable statutory and
regulatory waiting periods relative thereto, or the date the Registration
Statement (the "Registration Statement") filed with the SEC is declared
effective, or such later date as may be agreed to by the parties. At the Closing
the parties shall each deliver to the other such evidence of the satisfaction of
the conditions to the Mergers (as defined in Section 2.1 hereof) as may
reasonably be required (including material required to be delivered under this
Agreement).
1.6 "Effective Date" Immediately upon consummation of the Closing, or on
such other later date as the parties hereto may agree, the Company Merger
Agreement (as defined in Section 2.1 hereof) shall be certified, executed,
acknowledged and delivered to the Secretary of State of the State of Louisiana
(the "Secretary") for filing pursuant to and in accordance with the provisions
of Section 12:112 of the LCL. The Company Merger shall become effective as of
the date and time of issuance by the Secretary of a Certificate of Merger
relating to the Company Merger.
Immediately upon consummation of the Closing, or on such other later date
as the parties hereto may agree, the Bank Merger Agreement (as defined in
Section 2.1 hereof) shall be certified, executed, acknowledged and delivered to
the Louisiana Office of Financial Institutions (the "OFI") for filing pursuant
to and in accordance with the provisions of Section 6:352 of the LBL. The Bank
Merger shall become effective as of the date and time specified or permitted by
the OFI in a Certificate of Merger or other written record issued by the OFI.
1.7 "FDIC" means that agency of the United States of America known as the
Federal Deposit Insurance Corporation, or any successor United States
governmental agency which insures deposits of commercial banks.
1.8 "FRB" means that agency of the United States of America which acts in
the capacity of a governmental central bank known as the Federal Reserve System
represented by actions of its Board of Governors, having regulatory authority
over bank holding companies,
A-2
<PAGE>
or any successor United States governmental agency performing the function of
exercising such regulatory authority.
1.9 "HHC" means Hancock Holding Company, a corporation duly chartered,
organized and existing under and pursuant to the laws of the State of
Mississippi; maintaining its principal place of business at One Hancock Plaza,
in Gulfport, Harrison County, Mississippi; and is a bank holding company within
the meaning of the Bank Holding Company Act of 1956, as amended.
1.10 "Hancock Bank" means Hancock Bank of Louisiana, a Louisiana banking
corporation, duly chartered, organized and existing under and pursuant to the
laws of the State of Louisiana and maintaining its principal place of business
at One American Place in Baton Rouge, East Baton Rouge Parish, Louisiana.
1.11 "OFI" means the Office of Financial Institutions of the State of
Louisiana having regulatory authority over Hancock Bank and Bank or any
successor Louisiana governmental agency exercising such regulatory authority.
1.12 "Party" shall mean HHC, Hancock Bank, Commerce Corporation, or Bank
and "Parties" shall mean HHC, Hancock Bank, Commerce Corporation and Bank.
1.13 "Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
1.14 "SEC" means that agency of the United States of America known as the
Securities and Exchange Commission.
ARTICLE 2
THE MERGERS AND RELATED MATTERS
2.1 Mergers. On the Effective Date, Commerce Corporation shall be merged
with and into HHC under the Articles of Incorporation of HHC, pursuant to the
provisions of this Agreement, the provisions of and with the effect provided in,
Part XI of the LCL (the "Company Merger") and the Company Merger Agreement in
substantially the form of Exhibit A hereto (the "Company Merger Agreement"). On
the Effective Date and immediately after the Company Merger, Bank shall be
merged with and into Hancock Bank under the Articles of Incorporation of Hancock
Bank, pursuant to the provisions of this Agreement, the provisions of and with
the effect provided in Section 6:355 of the LBL (the "Bank Merger" and together
with the Company Merger, the "Mergers") and the Bank Merger Agreement in
substantially the form of Exhibit B hereto (the "Bank Merger Agreement" and,
together with the Company Merger Agreement, the "Merger Agreements"). For
federal income tax
A-3
<PAGE>
purposes, it is intended that the Company Merger shall qualify as a non-taxable
reorganization under and in accordance with Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended, and the applicable IRS regulations. In
addition, for federal income tax purposes, it is intended that the Bank Merger
shall also qualify as a non-taxable reorganization under and in accordance with
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended, and the
applicable IRS regulations. The Parties expect that the Mergers will further
certain of their business objectives, including, and without limitation, the
expansion of operations as a financial institution.
2.2 Effect of Company Merger. Upon consummation of the Company Merger, the
separate corporate existence of Commerce Corporation shall cease and HHC shall
continue as the surviving corporation. The name of HHC, as the surviving
corporation, shall by virtue of the Company Merger remain unchanged. On the
Effective Date, as hereinabove provided, all of the assets and property of every
kind and character, real, personal and mixed, tangible and intangible, choses in
action, rights, and credits then owned by Commerce Corporation, or which would
inure to it, shall immediately by operation of law and without any conveyance or
transfer or without any further action or deed, be vested in and become the
property of HHC, which shall have, hold, and enjoy the same in its own right as
fully and to the same extent as the same were possessed, held, and enjoyed by
Commerce Corporation prior to such merger, and HHC shall be deemed to be and
shall be a continuation of the original entities and all of the rights and
obligations of Commerce Corporation shall remain unimpaired, and HHC, on the
Effective Date of the Company Merger shall succeed to all such rights,
obligations, duties and liabilities connected therewith.
2.3 Effect of Bank Merger. Upon consummation of the Bank Merger, the
separate corporate existence of Bank shall cease and Hancock Bank shall continue
as the surviving corporation. The name of Hancock Bank, as the surviving
corporation, shall by virtue of the Bank Merger remain unchanged. On the
Effective Date, as hereinabove provided, all of the assets and property of every
kind and character, real, personal and mixed, tangible and intangible, choses in
action, rights, and credits then owned by Bank, or which would inure to it,
shall immediately by operation of law and without any conveyance or transfer or
without any further action or deed, be vested in and become the property of
Hancock Bank, which shall have, hold, and enjoy the same in its own right as
fully and to the same extent as the same were possessed, held, and enjoyed by
Bank prior to such merger; and Hancock Bank shall be deemed to be and shall be a
continuation of the original entities and all of the rights and obligations of
Bank shall remain unimpaired, and Hancock Bank, on the Effective Date of the
Bank Merger shall succeed to all such rights, obligations, duties and
liabilities connected therewith.
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<PAGE>
ARTICLE 3
CONVERSION OF STOCK
3.1 Conversion of Commerce Corporation Stock and Bank Stock.
a. On the Effective Date, each share of the Common Stock, $3.33 par
value, of HHC ("HHC Common Stock") issued and outstanding immediately
prior to the Effective Date shall remain outstanding and shall represent
one share of Common Stock, $3.33 par value, of HHC.
b. On the Effective Date, each share of Common Stock, $0.50 par
value, of Commerce Corporation ("Commerce Corporation Common Stock")
issued and outstanding immediately prior to the Effective Date, other than
shares of Commerce Corporation Common Stock owned by stockholders who,
pursuant to the LCL, perfect dissenters' rights, shall, by virtue of the
Company Merger and without any action on the part of the holder thereof,
be converted into the right to receive:
(i) that number of shares of HHC Common Stock that is equal to the
quotient obtained by dividing the Deliverable Stock Amount (as
hereinafter defined) by the total number of issued and
outstanding shares (not including Treasury shares) of Commerce
Corporation Common Stock on the Effective Date; and
(ii) that amount of cash that is equal to the quotient obtained by
dividing $330,000 by the total number of issued and
outstanding shares (not including treasury shares) of Commerce
Corporation Common Stock (collectively, the "Commerce
Corporation Exchange Ratio").
For purposes of this Article 3, the term "Deliverable Stock Amount" means the
quotient obtained by dividing $2,995,000 by the Average Market Price (as
hereinafter defined). The term "Average Market Price" shall be the average of
the closing per share trading prices of a share of HHC Common Stock on the
NASDAQ stock market for the twenty (20) trading days preceding the 5th trading
day immediately prior to the Effective Date.
c. On the Effective Date, each share of Common Stock, $10.00 par
value, of Bank ("Bank Common Stock") issued and outstanding immediately
prior to the Effective Date, shall be canceled.
d. As a result of the Mergers and without any action on the part of
the holder thereof, all shares of Commerce Corporation Common Stock shall
cease to be outstanding and shall be canceled and retired and shall cease
to exist, and each holder of a certificate (a "Certificate") representing
A-5
<PAGE>
any shares of Commerce Corporation Common Stock shall thereafter cease to
have any rights with respect to such shares of Commerce Corporation Common
Stock, except the right to receive, without interest, the HHC Common Stock
and cash in accordance with Section 3.1(b), and cash for fractional shares
of HHC Common Stock in accordance with Section 3.2(e) upon the surrender
of such Certificate.
e. Each share of Commerce Corporation Common Stock and Bank Common
Stock issued and held in Commerce Corporation's and Bank's treasury,
respectively, at the Effective Date shall, by virtue of the Merger, cease
to be outstanding and shall be canceled and retired without payment of any
consideration therefor.
3.2 Exchange of Certificates Representing Commerce
Corporation Common Stock and Bank Common Stock.
a. As of the Effective Date, HHC shall deposit, or shall cause to be
deposited, with Hancock Bank Trust Department, as exchange agent (the
"Exchange Agent"), for the benefit of the holders of shares of Commerce
Corporation Common Stock, for exchange in accordance with this Article 3,
certificates representing the shares of HHC Common Stock and cash (such
certificates for shares of HHC Common Stock and cash being hereinafter
referred to as the "Exchange Fund") to be issued pursuant to Section 3.1
and paid pursuant to this Section 3.2 in exchange for outstanding shares
of Commerce Corporation Common Stock.
b. Promptly after the Effective Date, HHC shall cause the Exchange
Agent to mail to each holder of record of a Certificate or Certificates
(other than those representing Bank Common Stock held by Commerce
Corporation or other than those representing shares with respect to which
the holder thereof has perfected appraisal rights under the LCL and has
not subsequently lost, withdrawn or forfeited such rights) (i) a 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 shall be in such form and have
such other provisions as HHC may reasonably specify and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for
certificates representing shares of HHC Common Stock and cash, and cash in
lieu of fractional shares. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of
transmittal, duly executed and completed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor (x) a certificate representing that number of
whole shares of HHC Common Stock and (y) a check representing the amount
of cash and cash in lieu of fractional shares, if any, which such holder
has the
A-6
<PAGE>
right to receive in respect of the Certificate surrendered pursuant to
Section 3.1(b), after giving effect to any required withholding tax, and
the Certificate so surrendered shall forthwith be canceled. No interest
will be paid or accrued on the value of any HHC Common Stock or cash
payable to holders of Certificates. In the event of a transfer of
ownership of Commerce Corporation Common Stock which is not registered in
the transfer records of Commerce Corporation, a certificate representing
the proper number of shares of HHC Common Stock, together with a check for
the cash component of the Commerce Corporation Exchange Ratio and/or cash
to be paid in lieu of fractional shares, may be issued to such a
transferee if the Certificate representing such Commerce Corporation
Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid.
c. Notwithstanding any other provisions of this Agreement, no
dividends on HHC Common Stock shall be paid with respect to any shares of
Commerce Corporation Common Stock represented by a Certificate until such
Certificate is surrendered for exchange as provided herein. Subject to the
effect of applicable laws, following surrender of any such Certificate,
there shall be paid to the holder of the certificates representing whole
shares of HHC Common Stock issued in exchange therefor, without interest,
(i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Date theretofore
payable with respect to such whole shares of HHC Common Stock and not
paid, less the amount of any withholding taxes which may be required
thereon, and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Date but
prior to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of HHC Common Stock, less the amount of any
withholding taxes which may be required thereon.
d. On or after the Effective Date, there shall be no transfers on
the stock transfer books of Commerce Corporation of the shares of Commerce
Corporation Common Stock which were outstanding immediately prior to the
Effective Date. If, after the Effective Date, Certificates are presented
to HHC, they shall be canceled and exchanged for certificates for shares
of HHC Common Stock and cash, as appropriate, and cash in lieu of
fractional shares, if any, deliverable in respect thereof pursuant to this
Agreement in accordance with the procedures set forth in this Article 3.
Certificates surrendered for exchange by any person constituting an
"affiliate" of Commerce Corporation or Bank for purposes of Rule 145(c)
under the Securities Act of 1933 (the "Securities
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<PAGE>
Act") shall not be exchanged until HHC has received a written agreement
from such person as provided in Section 4.1.
e. No fractional shares of HHC Common Stock shall be issued pursuant
hereto. In lieu of the issuance of any fractional share of HHC Common
Stock pursuant to Section 3.1(b), cash adjustments will be paid to holders
in respect of any fractional share of HHC Common Stock that would
otherwise be issuable, and the amount of such cash adjustment shall be
equal to such fractional proportion of the Average Market Price.
f. Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any shares of HHC Common Stock) that remains
unclaimed by the former stockholders of Commerce Corporation one year
after the Effective Date shall be delivered to HHC. Any former
stockholders of Commerce Corporation who have not theretofore complied
with this Article 3 shall thereafter look only to HHC for payment in
respect of their shares, in any event without any interest thereon. In the
event that any such holder fails to surrender either such Certificate or
the documents and information contemplated by the letter of transmittal
and instructions on or before the fifth (5th) anniversary of the Effective
Date, HHC shall not have any obligation to deliver the amount to which any
such holder would have been entitled in-accordance with the provisions of
this Agreement and any such holder shall not be entitled to receive from
HHC any amount in substitution and exchange for each share canceled and
extinguished in accordance with this Agreement.
g. None of HHC, Commerce Corporation, Hancock Bank, Bank, the
Exchange Agent or any other person shall be liable to any former holder of
shares of Commerce Corporation Common Stock for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
h. 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 HHC, the posting by such person of a bond in such reasonable amount as
HHC 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 HHC
Common Stock and cash, as appropriate, and cash in lieu of fractional
shares, and unpaid dividends and distributions on shares of HHC Common
Stock as provided in Section 3.2(c), deliverable in respect thereof
pursuant to this Agreement.
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<PAGE>
3.3 Adjustment of Exchange Ratio. In the event that, subsequent to the
date of this Agreement but prior to the Effective Date, Commerce Corporation,
Bank, or HHC changes the number of shares of Commerce Corporation Common Stock,
Bank Common Stock or HHC Common Stock, respectively, issued and outstanding as a
result of a stock split, reverse stock split, stock dividend, recapitalization
or other similar transaction, the Commerce Corporation Exchange Ratio shall be
appropriately adjusted.
ARTICLE 4
ACCOUNTING AND TAX MATTERS
4.1 Affiliates. Commerce Corporation, Bank and HHC shall cooperate and use
their best efforts to identify those persons who may be deemed to be
"affiliates" of Commerce Corporation or Bank within the meaning of Rule 145(c)
or Rule 144 (as applicable) under the Securities Act. Commerce Corporation and
Bank shall use its best efforts to cause each person so identified to deliver to
HHC, not later than twenty (20) days after execution of this Agreement, a
written agreement in substantially the form set forth in Exhibit C attached
hereto. HHC shall be entitled to place appropriate legends on the certificates
evidencing shares of HHC Common Stock to be received pursuant to this Agreement
by such affiliates and to issue appropriate stop transfer instructions to the
transfer agent for HHC Common Stock.
4.2 Accounting Treatment. It is intended by the Parties
hereto, that the Mergers will qualify for pooling of interest
accounting treatment under generally accepted accounting
principles.
4.3 Tax Consequences. It is the intention of the Parties hereto, that the
Mergers shall constitute reorganizations within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), and that this
Agreement shall constitute a "plan of reorganization" for purposes of Section
368 of the Code.
4.4 Accounting and Tax Representations. Each Party hereto represents and
warrants that the statements made with respect to it in the Statement of
Representations attached hereto on Schedule 4.4 and made a part hereof, are true
and correct as of the date hereof and will be true and correct on the Effective
Date.
ARTICLE 5
COMMERCE CORPORATION'S COVENANTS AND AGREEMENTS
5.1 Operation of Business. Between the date hereof and the Effective Date,
or until the termination of this Agreement, Commerce Corporation covenants and
agrees that it will operate its business solely in the ordinary course
consistent with prudent business practices and in compliance with all applicable
laws, regulations and rules; and, Commerce Corporation will cause the
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Bank to operate its business solely in the ordinary course consistent with
prudent business practices and in compliance with all applicable laws,
regulations and rules; and without prior written consent of HHC, Commerce
Corporation will not, and Commerce Corporation will cause Bank not to:
a. Amend or otherwise change its respective articles of
incorporation or bylaws, as each such document is in effect on
the date hereof;
b. Issue or sell, or authorize for issuance or sale,
the shares of Commerce Corporation or Bank or any additional
shares of any class of capital stock of Commerce Corporation
or Bank;
c. Issue, grant, or enter into any subscription,
option, warrant, right, convertible security, or other
agreement or commitment of any character obligating Commerce
Corporation or Bank to issue securities;
d. Except for intercompany dividends between Bank and Commerce
Corporation necessary to service the Commerce Corporation Debt (as
hereinafter defined), declare, set aside, make, or pay any dividend or
other distribution with respect to its capital stock;
e. Redeem, purchase, or otherwise acquire, directly or
indirectly, any of its capital stock respectively;
f. Authorize any capital expenditure(s) which,
individually or in the aggregate, exceed $20,000;
g. Extend any new, or renew any existing, loan, credit,
lease, or other type of financing which individually exceeds
$75,000;
h. Except in the ordinary course of business, sell, pledge, dispose
of, or encumber, or agree to sell, pledge, dispose of, or encumber, any
assets of Commerce Corporation or Bank, provided, however, in no event
shall Commerce Corporation or Bank sell, pledge, transfer, dispose of, or
encumber, or agree to sell, pledge, transfer, dispose of, or encumber, any
art works, antiques, furniture, paintings or the like without the prior
written consent of HHC;
i. Excluding normal and customary banking transactions, incur any
indebtedness for borrowed money, issue any debt securities, or enter into
or modify any contract, agreement, commitment, or arrangement with respect
thereto;
j. Amend its or the Bank's Articles of Incorporation or
Bylaws (except to the extent required in order to effect the
Mergers as contemplated herein); impose, or suffer the
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imposition, on any share of stock held by Commerce Corporation in the
Bank, of any material lien, charge, or encumbrance, or permit any such
lien to exist; establish or add any automated teller machines or branch or
other banking offices; take any action that would materially and adversely
affect the ability of any Party hereto to obtain the approvals necessary
for consummation of the transactions contemplated hereby or that would
materially and adversely affect Commerce Corporation's ability to perform
its covenants and agreements hereunder;
k. Acquire (by merger, consolidation, lease or other acquisition of
stock, ownership interests or assets) any corporation, partnership, or
other business organization or division thereof, or enter into any
contract, agreement, commitment, or arrangement with respect to any of the
foregoing;
l. Enter into, extend, or renew any lease for office or
other space;
m. Except as required by law, enter into, adopt or amend any bonus,
profit sharing, compensation, stock option, pension, retirement, deferred
compensation, employment, or other employee benefit plan, agreement,
trust, fund, or arrangement for the benefit or welfare of any officer,
employee or representative of Commerce Corporation or Bank;
n. Grant any increase in compensation to any director,
officer, or employee or representative of Commerce Corporation
or Bank except in the ordinary course of business consistent
with past practice; or
o. Enter into, amend, or terminate any employment agreement,
relationship or responsibilities with any director, officer, or key
employee or representative of Commerce Corporation or Bank, or enter into,
amend, or terminate any employment agreement with any other person
otherwise than in the ordinary course of business, or take any action with
respect to the grant or payment of any severance or termination pay except
as expressly consented to in writing by HHC, provided, however, prior to
the Effective Date, Commerce Corporation and Bank shall terminate any and
all employment contracts with Jimmy H. Whittington with no liability
therefor on the part of Commerce Corporation or Bank;
p. Take any action or omit to take any action which would cause any
of Commerce Corporation's or Bank's representations or warranties to be
untrue or misleading in any material respect or any covenant of Commerce
Corporation or Bank under this Agreement incapable of being performed; or
q. Agree in writing or otherwise to do any of the
foregoing.
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5.2 Preservation of Business. Between the date hereof and the Effective
Date, Commerce Corporation will, and will cause Bank to, use its best efforts to
preserve its existing business and to keep its business organization intact,
including its present relationships with its employees and customers and others
having business relations with it.
5.3 Insurance. Pending the Closing, Commerce Corporation shall cause the
real property owned by Commerce Corporation and Bank to be insured reasonably
against all insurable risks under policies with reasonable deductibles and in
full compliance with any co-insurance provision.
5.4 Stockholders' Meeting. Commerce Corporation and Bank will promptly
give proper notice of a stockholders' meeting, respectively, for the purpose of
approving this Agreement. Said notice shall include notice of dissenter's
rights, if any, and shall solicit stockholders' proxies in favor of this
Agreement, and all notices shall be given in accordance with all applicable
laws, regulations, and rules. Commerce Corporation, Bank and their respective
directors and principal stockholders will support and vote in favor of a
stockholder resolution approving this Agreement.
5.5 Property Transfers. From time to time, as and when requested by HHC
and to the extent permitted by Louisiana law, the officers and directors of
Commerce Corporation and Bank last in office shall be authorized to execute and
deliver such deeds and other instruments and shall take or cause to be taken
such further or other actions as shall be necessary in order to vest or perfect
in or to confirm of record or otherwise to HHC title to, and possession of, all
the property, interests, assets, rights, privileges, immunities, powers,
franchises, and authorities of Commerce Corporation and Bank, and otherwise to
carry out the purposes of this Agreement.
5.6 Commerce Corporation and Bank Financial and Other Reports. Commerce
Corporation shall (and shall cause Bank to) make available to HHC and Hancock
Bank the following statements and other reports and documents:
a. Commerce Corporation's Consolidated Balance Sheets as of December
31, 1996, 1995 and 1994 (audited); Consolidated Statements of Income and
Changes in Stockholders' Equity and Consolidated Statements of Cash Flows
for the years ended December 31, 1996, 1995 and 1994 (audited) ("Commerce
Corporation Financial Statements");
b. All correspondence with the OFI, the FDIC, the FRB and the
Internal Revenue Service from January 1, 1996 through the date of Closing
(for inspection, but copying may be restricted by legal limitations); and
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c. Such additional financial or other information as may be required
for the regulatory applications and Registration Statement in connection
with the consummation of the Mergers (subject to any legal limitations).
5.7 Due Diligence. In order to afford HHC access to such information as it
may reasonably deem necessary to perform any due diligence review with respect
to the assets of Commerce Corporation and Bank to be acquired as a result of the
Mergers, Commerce Corporation shall (and shall cause the Bank to), upon
reasonable notice, afford HHC and its officers, employees, counsel, accountants,
and other authorized representatives access, during normal business hours
throughout the period prior to the Effective Date, to all of its and the Bank's
properties; books, contracts, commitments, loan files, litigation files and
records (including, but not limited to, the minutes of the Boards of Directors
of Commerce Corporation and the Bank and all committees thereof), and it shall
(and shall cause the Bank to), upon reasonable notice and to the extent
consistent with applicable law, furnish promptly to HHC such information as HHC
may reasonably request to perform such review.
5.8 No Solicitation. Prior to the Effective Date, neither Commerce
Corporation nor Bank shall authorize or knowingly permit any of their officers,
directors, employees, representatives, agents or other persons controlled by
Commerce Corporation or Bank to directly or indirectly, encourage or solicit or,
hold any discussions or negotiations with, or provide any information to, any
persons, entity or group concerning any merger, consolidation, sale of
substantial assets, sale of shares of capital stock or similar transactions
involving, directly or indirectly, Commerce Corporation or Bank except as
contemplated by this Agreement. Commerce Corporation and Bank shall promptly
communicate to HHC the identity and terms of any proposal which they may receive
with respect to any such transaction.
ARTICLE 6
COMMERCE CORPORATION'S REPRESENTATIONS AND WARRANTIES
Commerce Corporation represents and warrants to HHC and Hancock Bank as
follows: for purposes of this Agreement, except in Section 6.1 and where the
context requires otherwise, any reference to Commerce Corporation in this
Article 6 shall be deemed to include Commerce Corporation and Bank.
6.1 Organization and Authority. Each of Commerce Corporation and Bank is a
corporation or bank duly organized, validly existing and in good standing under
the laws of the State of Louisiana and each of Commerce Corporation and Bank has
the corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as it is now being conducted.
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6.2 Authorization. The execution, delivery and performance of this
Agreement by Commerce Corporation and Bank and the consummation of the
transactions contemplated hereby have been duly authorized by the Boards of
Directors of Commerce Corporation and Bank, subject to regulatory approval. No
other corporate proceedings on the part of Commerce Corporation or Bank are
necessary to authorize consummation of this Agreement, except for the approval
of the transaction by Commerce Corporation's and Bank's stockholders, and the
performance by Commerce Corporation and Bank of the terms hereof. This Agreement
is a valid and binding obligation of Commerce Corporation and Bank enforceable
against Commerce Corporation and Bank in accordance with its terms except as may
be limited by applicable bankruptcy, insolvency, reorganization or moratorium or
other similar laws affecting creditors' rights generally and except that the
availability of equitable remedies is within the discretion of the appropriate
court and except that it is subject to approval by its stockholders and
applicable regulatory agencies.
Neither the execution, delivery or performance of this Agreement by
Commerce Corporation, nor the consummation of the transactions contemplated
hereby, nor compliance by Commerce Corporation with any of the provisions
hereof, will (a) in any material respect violate, conflict with, or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration, or the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Commerce
Corporation or Bank under any terms, conditions or provisions of (i) Commerce
Corporation's or Bank's Charter or Bylaws or other charter documents of Commerce
Corporation or Bank or (ii) any material note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to which
Commerce Corporation or Bank is a party or by which Commerce Corporation or Bank
may be bound, or to which Commerce Corporation or Bank or the properties or
assets of it may be subject, or (b) violate in any material respect any
judgment, ruling, order, writ, injunction, decree, statute, rule or regulation
applicable to Commerce Corporation or Bank or any of its properties or assets.
6.3 Capital Structure of Commerce Corporation. As of the date hereof, the
authorized capital of Commerce Corporation consists solely of 2,000,000 shares
of common stock of the par value of $0.50 each and no preferred stock. As of the
date hereof 537,680 shares of such authorized common stock were issued and
outstanding. The outstanding shares of capital stock of Commerce Corporation are
validly issued and outstanding, fully paid and nonassessable. There are no
outstanding options, conversion rights, warrants, calls, rights, commitments or
agreements to issue any form of stock or other security of Commerce Corporation.
There are no outstanding obligations or commitments to purchase, redeem
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or otherwise acquire any outstanding shares of common stock of
Commerce Corporation.
6.4 Ownership of Other Banks. Commerce Corporation does not own, directly
or indirectly, five percent (5%) or more of the outstanding capital stock or
other voting securities of any corporation, bank, or other organization except
the Bank. The presently authorized capital of the Bank consists solely of 40,000
shares of common stock of the par value of $10.00 each and no preferred stock.
As of the date hereof, 35,517 shares of common stock were issued and
outstanding. The outstanding shares of capital stock of the Bank are validly
issued and outstanding, fully paid and, nonassessable and, all of such shares
are owned by Commerce Corporation, free and clear of all liens, claims and
encumbrances.
6.5 Commerce Corporation Financial and Other Reports. Commerce
Corporation's Financial Statements (i) will have been prepared in accordance
with generally accepted accounting principles, consistently applied, (ii) will
present fairly the consolidated results of operations and financial position of
Commerce Corporation for the periods and at the times indicated, and (iii) will
be true and correct in all material respects for the periods and at the times
indicated.
6.6 No Material Adverse Change. Since December 31, 1996, there has been no
event or condition of any character (whether actual, or to the knowledge of
Commerce Corporation or the Bank, threatened or contemplated) that has had or
can reasonably be anticipated to have, or that, if concluded or sustained
adversely to Commerce Corporation would reasonably be anticipated to have, a
material adverse effect on the financial condition, results of operations,
business or prospects of Commerce Corporation or the Bank, excluding changes in
laws or regulations that affect banking institutions generally.
6.7 Tax Liability. The amounts set up as liabilities for taxes in the
Commerce Corporation Financial Statements are sufficient for the payment of all
respective taxes (including, without limitation, federal, state, local, and
foreign excise, franchise, property, payroll, income, capital stock, and sales
and use taxes) accrued in accordance with GAAP and unpaid at the respective
dates thereof.
6.8 Tax Returns: Payment of Taxes. All federal, state, local, and foreign
tax returns (including, without limitation, estimated tax returns, withholding
tax returns with respect to employees, and FICA and FUTA returns) required to be
filed by or on behalf of Commerce Corporation or the Bank have been timely filed
or requests for extensions have been timely filed and granted and have not
expired for periods ending on or before December 31, 1996, and all returns filed
are complete and accurate to the best information and belief of their respective
managements and all
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taxes shown on filed returns have been paid. As of the date hereof, there is no
audit, examination, deficiency or refund litigation or matter in controversy
with respect to any taxes that might result in a determination materially
adverse to Commerce Corporation or the Bank except as reserved against in the
Commerce Corporation Financial Statements. All taxes, interest, additions and
penalties due with respect to completed and settled examinations or concluded
litigation have been paid, and Commerce Corporation's reserves for bad debts at
December 31, 1996, as filed with the Internal Revenue Service were not greater
than the maximum amounts permitted under the provisions of Section 585 of the
Code.
6.9 Litigation and Proceedings. Except as set forth on Schedule 6.9
hereto, no litigation, proceeding or controversy before any court or
governmental agency is pending against Commerce Corporation that in the opinion
of its management is likely to have a material and adverse effect on the
business, results of operations or financial condition of Commerce Corporation
and the Bank taken as a whole, and, to the best of its knowledge, no such
litigation, proceeding or controversy has been threatened or is contemplated.
6.10 Brokers' or Finders' Fees. No agent, broker, investment banker,
investment or financial advisor or other person acting on behalf of Commerce
Corporation or the Bank or under their authority is entitled to any commission,
broker's or finder's fee from any of the Parties hereto in connection with any
of the transactions contemplated by this Agreement.
6.11 Contingent Liabilities. Except as disclosed on Schedule 6.11 hereto
or as reflected in the Commerce Corporation Financial Statements and except in
the case of the Bank for unfunded loan commitments made in the ordinary course
of business consistent with past practices, as of December 31, 1996, neither
Commerce Corporation nor the Bank has any obligation or liability (contingent or
otherwise) that was material, or that when combined with all similar obligations
or liabilities would have been material, to Commerce Corporation and the Bank
taken as a whole and there does not exist a set of circumstances resulting from
transactions effected or events occurring prior to, on, or after December 31,
1996, or from any action omitted to be taken during such period that, to the
knowledge of Commerce Corporation, could reasonably be expected to result in any
such material obligation or liability.
6.12 Title to Assets; Adequate Insurance Coverage.
Except as described on Schedule 6.12:
a. As of December 31, 1996, Commerce Corporation and the Bank had,
and except with respect to assets disposed of for adequate consideration
in the ordinary course of business since such date, now have, good and
merchantable title to all
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real property and good and merchantable title to all other material
properties and assets reflected in the Commerce Corporation Financial
Statements, free and clear of all mortgages, liens, pledges, restrictions,
security interests, charges and encumbrances of any nature except for (i)
mortgages and encumbrances which secure indebtedness which is properly
reflected in the Commerce Corporation Financial Statements or which secure
deposits of public funds as required by law; (ii) liens for taxes accrued
by not yet payable; (iii) liens arising as a matter of law in the ordinary
course of business with respect to obligations incurred after December 31,
1996, provided that the obligations secured by such liens are not
delinquent or are being contested in good faith; (iv) such imperfections
of title and encumbrances, if any, as do not materially detract from the
value or materially interfere with the present use of any of such
properties or assets or the potential sale of any such owned properties or
assets; and (v) capital leases and leases, if any, to third parties for
fair and adequate consideration. Commerce Corporation and the Bank own, or
have valid leasehold interests in, all material properties and assets,
tangible or intangible, used in the conduct of its business. Any real
property and other material assets held under lease by Commerce
Corporation or the Bank are held under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with
the use made or proposed to be made by HHC in such lease of such property.
b. With respect to each lease of any real property or a material
amount of personal property to which Commerce Corporation or the Bank is a
party, except for financing leases in which Commerce Corporation or the
Bank is lessor, (i) such lease is in full force and effect in accordance
with its terms; (ii) all rents and other monetary amounts that have been
due and payable thereunder have been paid; (iii) there exists no default
or event, occurrence, condition or act which with the giving of notice,
the lapse of time or the happening of any further event, occurrence,
condition or act would become a default under such lease; and (iv) the
Mergers will not constitute a default or a cause for termination or
modification of such lease.
c. Neither Commerce Corporation nor the Bank has any legal
obligation, absolute or contingent, to any other person to sell or
otherwise dispose of any substantial part of its assets or to sell or
dispose of any of its assets except in the ordinary course of business
consistent with past practices.
d. To the knowledge and belief of its management, the
policies of fire, theft, liability and other insurance
maintained with respect to the assets or businesses of
Commerce Corporation and the Bank provide adequate coverage
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against loss and the fidelity bonds in effect as to which Commerce
Corporation or the Bank is named insured meet the applicable standards of
the American Bankers Association.
6.13 Liabilities. To the best knowledge and belief of its management, all
liabilities of Commerce Corporation and Bank were, and will be created, for
good, valuable and adequate consideration in accordance with prudent business
standards and in substantial compliance with all laws, regulations and rules and
the accounts or evidence of ownership of accounts are and will be genuine, true,
valid and enforceable in accordance with their written terms. Neither Commerce
Corporation nor Bank has agreed to any modification or extension of accounts or
account terms or otherwise made any agreements regarding such accounts except as
disclosed in writing on the books and records of Commerce Corporation or Bank;
and Commerce Corporation and Bank have no knowledge of any claim of ownership to
any account other than as shown on the written ownership records of Commerce
Corporation and Bank for each account, and Commerce Corporation and Bank have no
knowledge of any alleged improper or wrongful withdrawal or payment of any such
account.
6.14 Loans. To the best knowledge and belief of its management, each loan
reflected as an asset of Commerce Corporation in the Commerce Corporation
Financial Statements, as of December 31, 1996, or acquired since that date, is
the legal, valid, and binding obligation of the obligor named therein,
enforceable in accordance with its terms, and no loan is subject to any asserted
defense, offset or counterclaim known to Commerce Corporation, except as
disclosed in writing to HHC on or prior to the date hereof.
6.15 Allowance for Loan Losses. The allowances for possible loan losses
shown on the consolidated balance sheets of Commerce Corporation as of December
31, 1996 are adequate in all material respects under the requirements of GAAP to
provide for possible losses, net of recoveries, relating to loans previously
charged off, on loans outstanding (including accrued interest receivable) as of
December 31, 1996, and each such allowance has been established in accordance
with GAAP.
6.16 Investments. Except for investments classified as held-to-maturity as
prescribed under the Financial Accounting Standards Board Statement Number 115,
and pledges to secure public or trust deposits, none of the investments
reflected in the Commerce Corporation Financial Statements under the heading
"Investment Securities", and none of the investments made by Commerce
Corporation or the Bank since December 31, 1996, and none of the assets
reflected in the Commerce Corporation Financial Statements under the heading
"Cash and Due From Banks," is subject to any restriction, whether contractual or
statutory, that materially impairs the ability of Commerce Corporation or the
Bank freely to dispose of such investment at any time. With respect to
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all repurchase agreements to which Commerce Corporation or the Bank is a party,
Commerce Corporation or the Bank, as the case may be, has a valid, perfected
first lien or security interest in the government securities or other collateral
securing each such repurchase agreement which equals or exceeds the amount of
debt secured by such collateral under such agreement.
6.17 Registration and Proxy Statements. None of the information supplied
or to be supplied by Commerce Corporation for inclusion in (a) the Registration
Statement to be filed by HHC with the SEC (b) the Notice of Meeting and Proxy
Statement to be mailed by Commerce Corporation to its stockholders in connection
with the meeting referred to in Section 5.4 hereof (the "Proxy Statement"), and
(c) any other documents to be filed with the SEC or any regulatory agency in
connection with the transactions contemplated hereby will, as amended or
supplemented at the time the Registration Statement is filed with the SEC or at
the time it becomes effective, at the time the Proxy Statement is mailed to
holders of Commerce Corporation's stock, as may be amended at the time of
Commerce Corporation Stockholders' Meeting, and at the time of filing of such
other documents, respectively, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. All documents, financial statements, or other information
or materials which Commerce Corporation and Bank shall provide for filing with
the SEC and any regulatory agency in connection with the Mergers will comply
with generally accepted accounting principles.
6.18 Commitments and Contracts. Neither Commerce Corporation nor Bank is a
party or subject to any of the following (whether written or oral, express or
implied):
a. Except as listed on Schedule 6.18a attached hereto and with a
complete copy provided to HHC, any employment contract (including any
obligations with respect to severance or termination pay liabilities or
fringe benefits) with any present or former officer, director, employee or
consultant (other than those which are terminable at will by Commerce
Corporation or Bank);
b. Except as listed on Schedule 6.18b attached hereto and with a
complete copy provided to HHC, any plan or contract providing for any
bonus, pension, option, deferred compensation, retirement payment, profit
sharing or similar arrangement with respect to any present or former
officer, director, employee or consultant; or
c. Any contract not made in the ordinary course of business
containing covenants which limit the ability of Commerce Corporation or
Bank to compete in any line of business or with any person or which
involves any restriction
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of the geographical area in which, or method by which, Commerce
Corporation or Bank may carry on its respective business (other than as
may be required by law or applicable regulatory authorities).
6.19 Employee Plans. To the best of Commerce Corporation's knowledge and
belief, it, the Bank, and all "employee benefit plans", as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), that cover one or more employees employed by Commerce Corporation or
the Bank:
i. is in compliance with all laws, regulations, reporting and
licensing requirements and orders applicable to its business or to such plan or
any of its employees (because of such employee's activities on behalf of it),
the breach or violation of which could have a material and adverse effect on
such business; and
ii. has received no notification from any agency or department of
federal, state or local government or the staff thereof asserting that any such
entity is not in compliance with any of the statutes, regulations or ordinances
that such governmental authority enforces, or threatening to revoke any license,
franchise, permit or governmental authorization, and is subject to no agreement
with any such governmental authority with respect to its assets or business.
6.20 Plan Liability. Except for liabilities to the Pension Benefit
Guaranty Corporation pursuant to Section 4007 of ERISA, all of which have been
fully paid, and except for liabilities to the Internal Revenue Service under
Section 4971 of the Code, all of which have been fully paid, neither Commerce
Corporation nor the Bank has any liability to the Pension Benefit Guaranty
Corporation or to the Internal Revenue Service with respect to any pension plan
qualified under Section 401 of the Code.
6.21 Vote Required. The affirmative vote of the holders of at least a
majority of the outstanding shares of Commerce Corporation common stock actually
cast, is the only vote of the stockholders of Commerce Corporation necessary to
approve the Company Merger and related transactions contemplated hereby. The
affirmative vote of the holders of at least two-thirds of the voting power
present is the only vote of the stockholders of Bank necessary to approve the
Bank Merger and related transactions contemplated hereby.
6.22 Continuity of Interest. To the best knowledge of Commerce Corporation
and Bank, there is no plan or intention by the Commerce Corporation or Bank
shareholders who own 1% or more of the Commerce Corporation Common Stock or Bank
Common Stock, and to the best of the knowledge of management of Commerce
Corporation and Bank, there is no plan or intention on the part of the remaining
Commerce Corporation or Bank shareholders to sell, exchange or otherwise dispose
of a number of shares of HHC Common Stock, to be
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received in the Mergers that would reduce Commerce Corporation or Bank
stockholders' ownership of the HHC Common Stock to a number of shares having a
value, as of the date of the Mergers, of less than 50% of the value of all of
the formerly outstanding Commerce Corporation or Bank Common Stock as of the
same date. For purposes of this representation, shares of Commerce Corporation
or Bank Common Stock surrendered by dissenters or exchanged for cash in lieu of
fractional shares of Commerce Corporation or Bank Common Stock will be treated
as outstanding Commerce Corporation or Bank Common Stock on the date of the
Mergers. Furthermore, shares of Commerce Corporation or Bank Common Stock and
shares of HHC Common Stock held by Commerce Corporation or Bank stockholders and
otherwise sold, redeemed, or disposed of prior to or subsequent to the Mergers
are considered in this assumption. See Exhibit D for additional representations
regarding continuity of shareholder interest under Section 368(a)(1)(A) and
Section 368(a)(2)(D) of the Code of 1986, as amended.
6.23 Continuity of Business Enterprise. Commerce Corporation operates at
least one significant historic business line, namely, financial services, and
owns at least a significant portion of its historic business assets within the
meaning of Treasury Regulation Section 1.368-1(d).
6.24 Environmental Matters. Except as set forth on Schedule 6.24; neither
Commerce Corporation nor the Bank nor, to the best knowledge of its management,
any previous owner or operator of any properties at any time owned (including
any properties owned or subsequently resold) leased, or occupied by Commerce
Corporation or the Bank or used by Commerce Corporation or the Bank in their
respective business ("Commerce Corporation Properties") used, generated,
treated, stored, or disposed of any hazardous waste, toxic substance, or similar
materials on, under, or about Commerce Corporation Properties except in
compliance with all applicable federal, state, and local laws, rules and
regulations pertaining to air and water quality, hazardous waste, waste
disposal, air omissions, and other environmental matters ("Environmental Laws").
Neither Commerce Corporation nor the Bank has received any notice of
noncompliance with Environmental Laws, applicable laws, orders, or regulations
of any governmental authorities relating to waste generated by any such party or
otherwise or notice that any such party is liable or responsible for the
remediation, removal, or clean-up of any site relating to Commerce Corporation
Properties.
6.25 Accuracy of Information. To the best of Commerce Corporation's and
its officers' and directors' knowledge, all information furnished by Commerce
Corporation or Bank to HHC and Hancock Bank relating to the assets, liabilities,
and this Agreement is accurate, and Commerce Corporation has not omitted to
disclose any information which is or would be material to this Agreement.
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6.26 Compliance with Laws and Contracts. To the best of Commerce
Corporation's and its officers' and directors' knowledge, neither Commerce
Corporation nor the Bank is in violation of any laws, regulations, or agreements
to which it is a party and have failed to file any material reports required by
any governmental or other regulatory body.
ARTICLE 7
HHC'S REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS
HHC represents and warrants to Commerce Corporation as follows: for
purposes of this Agreement, except in Section 7.1 and where the context requires
otherwise, any reference to HHC in this Article 7 shall be deemed to include HHC
and Hancock Bank and any reference to "material", material adverse effect or a
similar standard shall refer to the financial condition, operations or other
aspects of HHC and its subsidiaries including Hancock Bank taken as a whole.
7.1 Organization and Authority. Each of HHC and Hancock Bank is a
corporation or bank duly incorporated, validly existing and in good standing
under the laws of the State of Mississippi and Louisiana, respectively, and has
the corporate power and authority to own its properties and assets and to carry
on its business as it is now being conducted.
7.2 Shares Fully Paid and Non Assessable. The outstanding shares of
capital stock of HHC are validly issued and outstanding, fully paid and
nonassessable and all of such shares of Hancock Bank are owned directly or
indirectly by HHC free and clear of all liens, claims, and encumbrances. The
shares of HHC common stock to be issued in connection with the Mergers pursuant
to this Agreement have been duly authorized and, when issued in accordance with
the terms of this Agreement, will be validly issued, fully paid, and
nonassessable.
7.3 Authorization. The execution, delivery and performance of this
Agreement by HHC and the consummation of the transactions contemplated hereby
have been duly authorized by the Board of Directors of HHC and Hancock Bank,
subject to regulatory approval. No other corporate proceedings on the part of
HHC are necessary to authorize the execution and delivery of this Agreement and
the performance by HHC of the terms hereof. This Agreement is a valid and
binding obligation of HHC enforceable against HHC in accordance with its terms
except as may be limited by applicable bankruptcy, insolvency, reorganization or
moratorium or other similar laws affecting creditors' rights generally and
except that the availability of equitable remedies is within the discretion of
the appropriate court and except that it is subject to approval of applicable
regulatory agencies.
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7.4 No Material Adverse Change. Since December 31, 1996, there has been no
event or condition of any character (whether actual, or to the knowledge of HHC
or Hancock Bank, threatened or contemplated) that has had or can reasonably be
anticipated to have, or that, if concluded or sustained adversely to HHC would
reasonably be anticipated to have, a material adverse effect on the financial
condition, results of operations, business or prospects of HHC or Hancock Bank
excluding changes in laws or regulations that affect banking institutions
generally.
7.5 Loans. To the best knowledge and belief of its management, and
management of Hancock Bank, each loan reflected as an asset of HHC in the
unaudited consolidated balance sheet contained in HHC's quarterly report to
shareholders for the period ended December 31, 1996, or acquired since that
date, is the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, and no loan is subject to any asserted
defense, offset, or counterclaim known to HHC, except as disclosed on Schedule
7.5 hereto.
7.6 Litigation. Except as disclosed on Schedule 7.6 hereto, no litigation,
proceeding or controversy before any court or governmental agency is pending
that in the opinion of its management is likely to have a material and adverse
effect on the business, results of operations or financial condition of HHC and
its subsidiaries taken as a whole, and, to the best of its knowledge, no such
litigation, proceeding or controversy has been threatened or is contemplated.
7.7 Contingent Liabilities. Except as disclosed on Schedule 7.7 hereto or
reflected in the HHC reports filed with the SEC and except in the case of HHC's
subsidiaries for unfunded loan commitments made in the ordinary course of
business consistent with past practices, as of December 31, 1996, neither HHC
nor any of its subsidiaries had any obligation or liability (contingent or
otherwise) that was material, or that when combined with all similar obligations
or liabilities would have been material, to HHC and its subsidiaries taken as a
whole.
7.8 Allowances for Possible Loan Losses. The allowances for possible loan
losses shown on the balance sheet of HHC contained in the HHC reports filed with
the SEC as of December 31, 1996, were or will be, as the case may be, adequate
in all material respects under the requirements of GAAP to provide for possible
loan losses, net of recoveries relating to loans previously charged off, on
loans outstanding (including accrued interest receivable) as of the respective
date of such balance sheet and such allowance has been or will have been
established in accordance with GAAP. To the knowledge of HHC's and Hancock
Bank's management, HHC is not likely to be required to materially increase the
provision for loan losses between the date hereof and the Effective Date.
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7.9 Benefit Plans. To the knowledge and belief of HHC's senior management,
HHC, each of its subsidiaries and all "employee benefit plans," as defined in
Section 3(3) of ERISA, that cover one or more employees employed by HHC or any
of its subsidiaries:
i. is in compliance with all laws, regulations, reporting and
licensing requirements and orders applicable to its business or to such plan or
any of its employees (because such employee's activities on behalf of it), the
breach or violation of which could have a material and adverse effect on such
business; and
ii. has received no notification from any agency or department of
federal, state or local government or the staff thereof asserting that any such
entity is not in compliance with any of the statutes; regulations or ordinances
that such governmental authority enforces, or threatening to revoke any license,
franchise or permit or governmental authorization, and is subject to no
agreement or written understanding with any such governmental authorities with
respect to its assets or business.
HHC covenants and agrees as follows:
7.10 Conduct of Business. HHC agrees to operate its business solely in the
ordinary course consistent with prudent business practices and in compliance
with all applicable laws, regulations, and rules; but nothing herein shall be
construed as limiting or restricting HHC in its assets, liability, or capital
structure or limiting any action of HHC or its affiliates, nor shall anything in
this Agreement be construed as limiting the future number and amount of
outstanding shares of HHC stock pending settlement of this transaction.
7.11 Due Diligence. In order to afford Commerce Corporation access to such
information as it may reasonably deem necessary to perform its due diligence
review with respect to HHC and its assets in connection with the Mergers, HHC
shall (and shall cause Hancock Bank to), (a) upon reasonable notice, afford
Commerce Corporation and its officers, employees, counsel, accountants and other
authorized representatives, during normal business hours throughout the period
prior to the Effective Date and to the extent consistent with applicable law,
access to its premises, properties, books and records, and to furnish Commerce
Corporation and such representatives with such financial and operating data and
other information of any kind respecting its business and properties as Commerce
Corporation shall from time to time reasonably request to perform such review,
(b) furnish Commerce Corporation with copies of all reports filed by HHC with
the Securities and Exchange Commission ("SEC") throughout the period after the
date hereof prior to the Effective Date promptly after such reports are so
filed, and (c) promptly advise Commerce Corporation of the occurrence before the
Effective Date of any event or condition of any character (whether actual or to
the knowledge of HHC,
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threatened or contemplated) that has had or can reasonably be anticipated to
have, or that, if concluded or sustained adversely to HHC, would reasonable be
anticipated to have, a material adverse effect on the financial condition,
results of operations, business or prospects of its consolidated group as a
whole.
7.12 Registration Statement. (a) HHC will promptly prepare and file on
Form S-4 a registration statement under the Securities Act (which will include
the Proxy Statement) complying with all the requirements of the Securities Act
applicable thereto, for the purpose, among other things, of registering the HHC
Common Stock which will be issued to the holders of Commerce Corporation Common
Stock pursuant to the Mergers. HHC shall use its best efforts to cause the
Registration Statement to become effective as soon as practicable, to qualify
the HHC Common Stock under the securities or blue sky laws of such jurisdictions
as may be required and to keep the Registration Statement and such
qualifications current and in effect for so long as is necessary to consummate
the transactions contemplated hereby.
(b) HHC will indemnify and hold harmless each member of Commerce
Corporation's consolidated group and each of their respective directors,
officers, agents and other persons, if any, who control Commerce Corporation
within the meaning of the Securities Act from and against any losses, claims,
damages, liabilities or judgments, joint or several, to which they or any of
them may become subject under the Securities Act or any state securities or blue
sky laws or otherwise, insofar as such losses, claims, damages, liabilities, or
judgements (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, or in any amendment or supplement thereto, or in any
state application for qualification, permit, exemption or registration as a
broker/dealer, or in any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each such person for any legal or other expenses
reasonably incurred by such person in connection with investigating or defending
any such action or claim; provided, however, that HHC shall not be liable, in
any such case, to the extent that any such loss, claim, damage, liability, or
judgment (or action in respect thereof) arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement, or any such amendment or supplement thereto,
or in any such state application, or in any amendment or supplement thereto, in
reliance upon and in conformity with information furnished in writing to HHC by
Commerce Corporation.
7.13 Application to Regulatory Authorities. HHC shall
prepare, as promptly as practicable, all regulatory applications
and filings which are required to be made with respect to the
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Mergers and provide copies thereof to Commerce Corporation and its counsel.
7.14 Indemnification of Directors and Officers of Commerce Corporation and
Bank. (a) From and after the Effective Date of the Mergers, HHC agrees to
indemnify and hold harmless each person who is an officer or director of
Commerce Corporation or Bank on the day of this agreement or hereafter from and
against all losses, claims, damages, liabilities and judgments (and related
expenses including, but not limited to, attorney's fees and amounts paid in
investigating or defending any action in respect thereof or in settlement of any
such action) based upon or arising from his capacity as an officer or director
of Commerce Corporation or Bank, as the case may be, to the same extent he would
have been indemnified under the Articles of Incorporation and By-laws of HHC as
such documents were in effect on the date of this Agreement as if he were an
officer or director of HHC at all relevant times. Any indemnification to which
subparagraph (b) of Section 7.12 applies shall be paid pursuant thereto and
shall not be payable under this Section 7.14. The persons entitled to
indemnification hereunder and their respective heirs, executors, estates and
assigns are hereinafter referred to as "Indemnified Persons."
(b) The rights granted to the Indemnified Persons hereby shall be
contractual rights inuring to the benefit of all Indemnified Persons and shall
survive the Mergers, and any merger, consolidation or reorganization of HHC.
(c) An Indemnified Person shall give HHC prompt notice of any matter
as to which indemnification is provided, shall employ counsel that is reasonably
acceptable to HHC (and no more than one counsel for all Indemnified Persons
shall be employed in any one matter or series of related matters except to the
extent that actual conflicts of interest require otherwise) and shall not settle
any such matter unless HHC shall first consent thereto.
(d) The total aggregate indemnification to be provided by HHC
pursuant to Section 7.14 hereof will not exceed, as to all of the Indemnified
Persons described herein as a group, the sum of Five Hundred Thousand Dollars
($500,000).
7.15 Continuity of Business Enterprise. It is the present intention of HHC
to continue at least one significant historic business line of Commerce
Corporation, namely, financial services, and to use at least a significant
portion of Commerce Corporation's historic business assets in a business within
the meaning of Treasury Regulation Section 1.368-1(d).
7.16 Governance. HHC's Board of Directors shall take all
action necessary to appoint Jimmy H. Whittington, Dr. J. R. Haskin
and Karen M. Haskin to the Board of Directors of Hancock Bank upon
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the Effective Date for such persons to serve for a period of not
less than one year.
7.17 Assumption of Debt. On the Effective Date, HHC shall
assume all of the obligations under that certain Promissory Note
dated July 15, 1989 which matures on June 30, 1998 with a
current principal balance of $1,251,000 which is currently payable
to the following three individuals in the proportionate share as
indicated: Jimmy H. Whittington (46.875%); Dr. J. R. Haskin
(46.875%); and Hunter O. Wagner, Jr. (6.25%) (the "Commerce
Corporation Debt").
ARTICLE 8
CONDITIONS TO CLOSING
The obligations of Commerce Corporation, Bank, HHC and Hancock Bank under
this Agreement, except as otherwise provided herein, shall be subject to the
satisfaction or waiver of the following conditions on or prior to the Closing:
8.1 Conditions to Each Party's Obligations to Effect the
Mergers. The respective obligation of each party to effect the
Mergers shall be subject to the following conditions:
a. Stockholder Approval. The Company Merger shall have
been approved by the requisite vote of the holders of the
outstanding shares of Commerce Corporation Common Stock at
Commerce Corporation's Stockholders' Meeting.
b. Regulatory Approvals. The transactions contemplated by this
Agreement shall have been approved by all governing regulatory
authorities, without any condition or requirement that either HHC or
Commerce Corporation deem burdensome, or which otherwise would have a
material adverse effect on the business, operations, properties, assets or
financial condition of HHC, Hancock Bank, Commerce Corporation or Bank
after the Effective Date, all conditions required to be satisfied shall
have been satisfied, and all waiting periods relating to such approvals
shall have expired.
c. Registration Statement. The Registration Statement shall have
been declared effective and shall not be subject to a stop order or any
threatened stop order, and all state securities and blue sky permits or
approvals required to consummate the transactions contemplated by this
Agreement shall have been received.
d. No Restraining Action. No action or proceeding
shall have been threatened or instituted before a court or
other governmental body to restrain or prohibit the
transactions contemplated by the Merger Agreements or this
Agreement or to obtain damages or other relief in connection
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with the execution of such agreements or the consummation of the
transactions contemplated hereby or thereby; and no governmental agency
shall have given notice to any party hereto to the effect that
consummation of the transactions contemplated by the Merger Agreements or
this Agreement would constitute a violation of any law or that it intends
to commence proceedings to restrain consummation of the Mergers.
8.2 Conditions to Obligations of Commerce Corporation to
Effect the Mergers. The obligations of Commerce Corporation to
effect the Mergers shall be subject to the following additional
conditions:
a. Representations and Warranties. The representations and
warranties of HHC set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the
Closing as though made at and as of the Closing, except as otherwise
contemplated by this Agreement or consented to in writing by Commerce
Corporation.
b. Performance of Obligations. HHC and Hancock Bank shall have
performed in all material respects all obligations and complied with all
covenants required by it under this Agreement prior to the Closing and HHC
shall deliver at Closing appropriate certificates setting forth such.
c. No Material Adverse Change. There shall not have
occurred any material adverse change from the date of this
Agreement to the Closing Date in the financial condition,
results of operations or business of HHC and its subsidiaries
taken as a whole.
d. Legal Opinion. An opinion of Watkins Ludlam & Stennis, P.A.,
special counsel to HHC, shall be delivered to Commerce Corporation dated
the Closing Date and in form and substance reasonably satisfactory to
Commerce Corporation and its counsel to the effect that:
i. HHC is a corporation duly incorporated, validly
existing and in good standing under the laws of the State
of Mississippi, and has corporate authority to own and
operate its businesses and properties and to carry on its
business as presently conducted by it;
ii. Hancock Bank is a Louisiana banking corporation, duly
organized and validly existing and in good standing under the laws
of the State of Louisiana, and has corporate authority to own and
operate its businesses and properties and to carry on its business
as presently conducted by it;
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iii. HHC had and has corporate authority to make, execute and
deliver this Agreement, it has been duly authorized and approved by
all necessary corporate action of HHC and has been duly executed and
delivered and is as of the Closing Date its valid and binding
obligation subject, however, to bankruptcy, insolvency and similar
laws affecting the enforcement of creditors' rights generally and to
the availability of equitable remedies in general;
iv. All required regulatory approvals have been
obtained;
v. To such counsel's knowledge after inquiry, there is no
litigation or proceeding pending or threatened against HHC relating
to the participation in or consummation of this Agreement by HHC and
consummation will not violate any other contract, agreement, charter
or bylaw of HHC; and
vi. All shares of HHC Common Stock to be issued pursuant to
the Mergers have been duly authorized and, when issued pursuant to
the Merger Agreements, will be validly and legally issued, fully
paid and non-assessable and will be, at the time of their delivery,
free and clear of all liens, charges, security interests, mortgages,
pledges and other encumbrances and any preemptive or similar rights.
e. Tax Opinion. Commerce Corporation shall have
received from Watkins Ludlam & Stennis, P.A. an opinion of
counsel as to certain tax aspects of the transactions
contemplated by this Agreement and the Merger Agreements.
8.3 Conditions to Obligations of HHC to Effect the Mergers. The
obligations of HHC to effect the Mergers shall be subject to the following
additional conditions:
a. Representations and Warranties. The representations and
warranties of Commerce Corporation and Bank set forth in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing as though made at and as of the Closing,
except as otherwise contemplated by this Agreement or consented to in
writing by HHC.
b. Performance of Obligations. Commerce Corporation
and Bank shall have performed in all material respects all
obligations and complied with all covenants required by it
under this Agreement prior to the Closing and Commerce
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Corporation shall deliver at Closing appropriate certificates setting
forth such.
c. No Material Adverse Change. There shall not have
occurred any material adverse change from the date of this
Agreement to the Closing Date in the financial condition,
results of operations or business of Commerce Corporation and
its subsidiaries taken as a whole.
d. Termination of Employment Contract. Immediately
prior to the Effective Date, Commerce Corporation and Bank
shall have terminated any and all employment contracts with
Jimmy H. Whittington with no further obligation whatsoever
owed by any of the Parties hereto.
e. Affiliate Agreement. An Affiliate Agreement substantially in the
form specified on Exhibit C hereto (as contemplated by Section 4.1 hereof)
shall have been executed by each person who serves as an executive officer
or director of Commerce Corporation or Bank or who beneficially owns 5% or
more of the Commerce Corporation Common Stock outstanding; and HHC shall
have received from each such person a written confirmation dated not
earlier than five days prior to the Closing Date to the effect that each
representation made in such person's Affiliate Agreement is true and
correct as of the date of such confirmation and that such person has
complied with all of his or her covenants therein through the date of such
confirmation.
f. Legal Opinion. An Opinion of Mike Hughes, Esquire,
counsel to Commerce Corporation, shall be delivered to HHC
dated the Closing Date, and in form and substance reasonably
satisfactory to HHC to the effect that:
i. Commerce Corporation is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Louisiana, and has corporate authority to own and operate its
businesses and properties and to carry on its business as presently
conducted by it;
ii. Bank is a Louisiana banking corporation, duly organized
and validly existing and in good standing under the laws of the
State of Louisiana, and has corporate authority to own and operate
its businesses and properties and to carry on its business as
presently conducted by it;
iii. Commerce Corporation and Bank had and have corporate
authority to make, execute and deliver this Agreement, it has been
duly authorized and approved by all necessary corporate action of
Commerce Corporation and Bank and has been duly executed and
delivered and is
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as of the Closing Date its valid and binding obligation subject,
however, to bankruptcy, insolvency and similar laws affecting the
enforcement of creditors' rights generally and to the availability
of equitable remedies in general;
iv. To such counsel's knowledge after inquiry, there is no
litigation or proceeding pending or threatened against Commerce
Corporation or Bank relating to the participation in or consummation
of this Agreement by Commerce Corporation or Bank and consummation
will not violate any other contract, agreement, charter or bylaw of
Commerce Corporation or Bank; and
v. Commerce Corporation and Bank have complied with all laws
and regulations relating to dissenters' rights and all stock in
Commerce Corporation and Bank will be acquired by HHC pursuant to
the terms of this Agreement and that the title and/or ownership
interest in the shares of Commerce Corporation and Bank stock are as
represented in Commerce Corporation's and Bank's certificate at
Closing and that no known dispute exists as to the title and/or
ownership of any such shares.
ARTICLE 9
CLOSING
9.1 Closing. The Closing shall be held at the offices of Hancock Bank or
such other place as HHC and Commerce Corporation shall mutually designate.
9.2 Deliveries at Closing. At the Closing, all documents and instruments
shall be duly and validly executed and delivered by all the Parties hereto, and
possession of all liabilities and assets shall be transferred and delivered
accordingly.
9.3 Documents. The Parties shall execute any and all documents reasonably
requested by them or their legal counsel for the purpose of effecting the
transaction contemplated, including but not limited to the following:
a. endorsement, negotiation, and/or assignment of all
original notes and Security Agreements relating to all loans;
b. warranty deeds for the real property;
c. commitments for owners title insurance for the real
property;
d. such other endorsements, assignments or other
conveyances as may be appropriate or necessary to effect the
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transfer to HHC of the assets, duties, responsibilities and
obligations as referred to herein; and
e. listing of dissenting stockholders, if any,
including name, address, and number of shares owned.
ARTICLE 10
EMPLOYMENT MATTERS
10.1 Employees. Neither HHC nor Hancock Bank shall be obligated to retain
in any capacity any of Commerce Corporation's or Bank's officers, directors, or
employees or to pay any stipulated compensation to any employees. HHC will make
reasonable efforts to maintain compensation levels for any retained personnel
commensurate with the employees' experience and qualifications, and in
accordance with HHC and Hancock Bank's salary administration program. With
regard to any retained employee, HHC and Hancock Bank shall be free of any
obligation to honor any past agreement of Commerce Corporation or Bank to such
person.
With respect to Commerce Corporation's and Bank's group health and life
benefit plan as it relates to employees, HHC shall have the option of either:
(1) continuing such plan on and after the Effective Date of the Mergers; or (2)
discontinuing such plan upon the Effective Date and thereafter, all retained
employees will be eligible to participate in Hancock Bank's group health and
life benefit plan based on the provisions in the plan. The ninety (90) day
employment period will be waived for eligible retained employees in accordance
with Hancock Bank's plan. Hancock Bank will waive pre-existing medical
conditions for health insurance purposes as to all retained personnel. With
respect to non-employee directors of Commerce Corporation or Bank who continue
to serve on the Board of Directors of Hancock Bank for the one(1) year period
subsequent to the Effective Date, HHC shall continue Commerce Corporation's and
Bank's group health and life benefit plan as it currently exists for a period of
one (1) year after the Effective Date of the Mergers.
10.2 Retirement Plan. Commerce Corporation and Bank currently maintain the
Bank of Commerce & Trust Co. Profit Sharing Plan and Trust which will remain
operative and in effect through the Effective Date of the Mergers (the "Plan").
The Plan will be terminated as of the Effective Date of the Mergers and
distributed to vested employees of Commerce Corporation and Bank in accordance
with the terms of the Plans after the normal and customary contributions have
been made consistent with past practices. The trustees for the Plan will be
responsible for the termination, allocation and distribution of plan assets and
related notices and other reporting responsibilities to the IRS, Department of
Labor and other government agencies. All such termination costs will be paid
from the Plan's assets.
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Upon the Effective Date of the Mergers, all retained employees will be
eligible to enter the Hancock Bank Profit Sharing Plan, Hancock Bank 401-K Plan,
and Hancock Bank Pension Plan based on the provisions set forth in the
respective plans. All retained employees will be granted full credit for all
prior service for vesting, eligibility and benefit purposes for the Hancock Bank
Profit Sharing Plan, for eligibility purposes for the Hancock Bank 401-K Plan,
and for vesting and eligibility purposes for the Hancock Bank Pension Plan.
10.3 Other Benefit Plans. Other Commerce Corporation and Bank benefit
plans will continue through the Effective Date of the Mergers. Thereafter, all
retained employees will be eligible to participate in all Hancock Bank
employment benefit plans not set forth in Sections 10.1 and 10.2 hereof, based
on the provisions set forth in the plans with full credit for all prior service.
10.4 Notices. Commerce Corporation shall be (and shall cause Bank to be)
responsible for notifying its employees of the terms of this Agreement as it
affects and/or relates to them and for complying with any applicable laws
regarding such notices.
ARTICLE 11
REMEDIES
For purposes of this Agreement, any reference to HHC in this Article 11
shall be deemed to include HHC and Hancock Bank and any reference to Commerce
Corporation in this Article 11 shall be deemed to include Commerce Corporation
and Bank.
11.1 Parties' Joint Remedies. In the event regulatory authorities impose
requirements which do not materially alter this Agreement and which are not
otherwise burdensome or objectionable to the Parties, then the Parties agree to
amend this Agreement to conform to such regulatory requirements, and specific
performance shall be available as a remedy for this purpose.
11.2 Commerce Corporation's Remedies. In the event HHC breaches this
Agreement, then Commerce Corporation shall give HHC notice of the breach, and
HHC shall have a reasonable amount of time to cure the breach, and HHC shall be
liable for such economic damages that are the direct result of any uncured
breach, but HHC shall not be liable for consequential or punitive damages. If
HHC breaches a warranty, representation, covenant or agreement that does not
materially affect the entire transaction, then the amount of the damages shall
be mutually agreed upon by the Parties, and if they cannot agree as to the
damage, then by an arbitrator mutually agreeable to them, and the damage
determined shall be conclusively binding on both Parties and shall be treated as
an adjustment to the Conversion Amount.
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11.3 HHC's Remedies. In the event Commerce Corporation breaches this
Agreement, then HHC shall give Commerce Corporation notice of the breach, and
Commerce Corporation shall have a reasonable amount of time to cure the breach,
and Commerce Corporation shall be liable for such economic damages that are the
direct result of any uncured breach, but Commerce Corporation shall not be
liable for consequential or punitive damages. If Commerce Corporation breaches a
warranty, representation, covenant or agreement that does not materially affect
the entire transaction, then the amount of the damages shall be mutually agreed
upon by the Parties, and if they cannot agree as to the damage, then by an
arbitrator mutually agreeable to them, and the damage determined shall be
conclusively binding on both Parties and shall be treated as an adjustment to
the Commerce Corporation Exchange Ratio.
11.4 Attorney Fees. Each Party shall bear its own attorney fees except
attorney fees may be awarded by the presiding judge if the trier of fact finds
that the other Party has committed fraud against the other Party.
ARTICLE 12
TERMINATION
12.1 Termination. This Agreement may be terminated, either before or after
approval by the stockholders of Commerce Corporation and Bank as follows:
a. Mutual Consent. At any time on or prior to the
Effective Date, by the mutual consent in writing of a majority
of the members of each of the Board of Directors of the
Parties hereto;
b. Expiration of Time. By the Board of Directors of HHC in writing
or by the Board of Directors of Commerce Corporation in writing, if the
Mergers shall have not become effective on or before December 31, 1997,
unless the absence of such occurrence shall be due to the failure of the
Party seeking to terminate this Agreement to perform each of its
obligations under this Agreement required to be performed by it on or
prior to the Effective Date;
c. Breach of Representation, Warranty or Covenant. By either Party
hereto, in the event of a breach by the other Party (a) of any covenant or
agreement contained herein or (b) of any representation or warranty
herein, if (i) the facts constituting such breach reflect a material and
adverse change in the financial condition, results of operations,
business, or prospects taken as a whole, of the breaching Party, which in
either case cannot be or is not cured within 60 days after written notice
of such breach is given to the Party committing such breach, or (ii) in
the event of a breach of a warranty or covenant, such breach results in a
material increase in the
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cost of the non-breaching Party's performance of this
Agreement.
d. Regulatory Approval. By either Party hereto, at any
time after the FRB, FDIC, or OFI has denied any application
for any approval or clearance required to be obtained as a
condition to the consummation of the Mergers and the
time-period for all appeals or requests for reconsideration
thereof has run.
e. Shareholder Approval. By either Party hereto, if
the Company Merger is not approved by the required vote of
shareholders of Commerce Corporation.
f. Dissenters. By HHC, if holders of ten percent (10%)
or more of the outstanding Commerce Corporation Common Stock
exercise statutory rights of dissent and appraisal pursuant to
Part XIII of the LCL.
g. Price of HHC Common Stock. By Commerce Corporation or Bank if the
Average Market Price (as defined herein) of HHC Common Stock exceeds
$48.00; or by HHC or Hancock Bank if the Average Market Price (as defined
herein) of HHC Common Stock is less than $35.00, provided however, should
either of the two aforementioned events occur, the Parties hereto agree
first to attempt to renegotiate the Commerce Corporation Exchange Ratio in
good faith prior to terminating this Agreement.
ARTICLE 13
APPRAISAL RIGHTS
13.1 Appraisal Rights of Commerce Corporation. Notwithstanding any other
provision of this Agreement to the contrary, dissenting stockholders of Commerce
Corporation who comply with the procedural requirements of the LCL Section
12:131 will be entitled to receive payment of the fair cash value of their
shares if the Company Merger is effected upon approval by less than eighty
percent of Commerce Corporation's total voting power.
ARTICLE 14
MISCELLANEOUS
14.1 Entire Agreement. This Agreement embodies the entire understanding of
the Parties in relation to the subject matter herein and supersede all prior
understandings or agreements, oral or written, between the Parties hereto.
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14.2 Survival of Representations, Warranties and Agreements.
The representations, warranties and agreements made herein shall
survive the Closing.
14.3 Headings. The headings and subheadings in this Agreement, except the
terms identified for definition in Article 1 and elsewhere in this Agreement,
are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provision hereof.
14.4 Duplicate Originals. This Agreement may be executed in any number of
duplicate originals, any one of which when fully executed by all Parties shall
be deemed to be an original without having to account for the other originals.
14.5 Governing Law. This Agreement and the rights and
obligations hereunder shall be governed and construed by the laws
of the State of Louisiana.
14.6 Successors: No Third Party Beneficiaries. All terms and conditions of
this Agreement shall be binding on the successors and assigns of Commerce
Corporation and HHC. Except as otherwise specifically provided in this
Agreement, nothing expressed or referred to in this Agreement is intended or
shall be construed to give any person other than Commerce Corporation and HHC
any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provisions contained herein, it being the intention of the
Parties hereto that this Agreement, the obligations and statements of
responsibilities hereunder, and all other conditions and provisions hereof are
for the sole and exclusive benefit of Commerce Corporation and HHC and for the
benefit of no other person.
14.7 Modification; Assignment. No amendment or other modification of any
part of this Agreement shall be effective except pursuant to a written agreement
subscribed by the duly authorized representatives of all of the Parties hereto.
This Agreement may not be assigned without the express written consent of both
Parties.
14.8 Notice. Any notice, request, demand, consent, approval or other
communication to any Party hereof shall be effective when received and shall be
given in writing, and delivered in person against receipt thereof, or sent by
certified mail, postage prepaid or courier service at its address set forth
below or at such other address as it shall hereafter furnish in writing to the
others. All such notices and other communications shall be deemed given on the
date received by the addressee or its agent.
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Commerce Corporation
Commerce Corporation
12320 Jackson Road
St. Francisville, Louisiana 70775-0520
Attn: Mr. Jimmy H. Whittington, President & CEO
Copy to: Mike Hughes, Esq.
4782 Prosperity Street
St. Francisville, Louisiana 70775
HHC
Hancock Holding Company
Post Office Box 4019
Gulfport, MS 39502
Attn: Mr. George A. Schloegel, Vice Chairman
Copy to: Carl J. Chaney, Esquire
Watkins Ludlam & Stennis, P.A.
P. O. Box 427
Jackson, MS 39205-0427
or
633 North State Street
Jackson, Mississippi 39202
14.9 Waiver. Commerce Corporation and HHC may waive their respective
rights, powers or privileges under this Agreement; provided that such waiver
shall be in writing; and further provided that no failure or delay on the part
of Commerce Corporation or HHC to exercise any right, power or privilege under
this Agreement will operate as a waiver thereof, nor will any single or partial
exercise of any right, power or privilege under this Agreement preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege by Commerce Corporation or HHC under the terms of this Agreement, nor
will any such waiver operate or be construed as a future waiver of such right,
power or privilege under this Agreement.
14.10 Costs, Fees and Expenses. Each Party hereto agrees to pay all costs,
fees and expenses which it has incurred in connection with or incidental to the
matters contained in this Agreement, including without limitation any fees and
disbursements to its accountants and counsel. HHC will be responsible for
preparing the applications, regulatory filings and registration statement
necessary to obtain approval of the Mergers and the issuance of the HHC common
stock. Commerce Corporation will be responsible for the cost of its (and Bank's)
accountants and legal counsel and will bear all costs related to conducting its
stockholders' meetings and obtaining stockholders' approval of the Mergers.
14.11 Press Releases. Commerce Corporation and HHC shall
consult with each other as to the form and substance of any press
release related to this Agreement or the transactions contemplated
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hereby, and shall consult each other as to the form and substance of other
public disclosures related thereto, provided, however, that nothing contained
herein shall prohibit HHC, following notification to Commerce Corporation, from
making any disclosures which its counsel deems necessary to conform with
requirements of law or the rules of the National Association of Securities
Dealers Automated Quotation System.
14.12 Severability. If any provision of this Agreement is invalid or
unenforceable then, to the extent possible, all of the remaining provisions of
this Agreement shall remain in full force and effect and shall be binding upon
the Parties hereto.
14.13 Mutual Covenant of Best Efforts and Good Faith. The Parties mutually
covenant and agree with each other that they will use their best efforts to
consummate the transactions herein contemplated and that they will act and deal
with each other in good faith as to this Agreement and all matters arising from
or related to it.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
[SIGNATURES]
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EXHIBIT A
COMPANY MERGER AGREEMENT
This Company Merger Agreement is made and entered into as of the 28th day
of February, 1997, between Hancock Holding Company, Gulfport, Mississippi, a
Mississippi corporation ("HHC") and Commerce Corporation, St. Francisville
Louisiana, a Louisiana corporation ("Commerce Corporation") (the "Company Merger
Agreement").
W I T N E S S E T H:
WHEREAS, HHC and Commerce Corporation (collectively, the "Constituent
Corporations") and their respective Boards of Directors deem it advisable that
Commerce Corporaiton be merged into HHC (the "Company Merger") pursuant to the
provisions of the Louisiana Business Corporation Law and upon the terms and
conditions hereinafter set forth and in the Plan (as hereinafter defined); and
WHEREAS, the Constituent Corporations have entered into an Agreement and
Plan of Merger dated as of the date hereof (the "Plan") (the defined terms in
which are used herein as defined therein) setting forth certain representations,
warranties, covenants and conditions relating to the Company Merger;
NOW THEREFORE, the Constituent Corporations hereby make, adopt and approve
this Company Merger Agreement and prescribe the terms and conditions of the
Company Merger and the mode of carrying the Company Merger into effect as
follows:
ARTICLE ONE
The Company Merger
Upon the terms and subject to the conditions hereinafter set forth, on the
Effective Date (as defined in Article Two hereof) Commerce Corporation shall be
merged into HHC and the separate existence of Commerce Corporation shall cease.
ARTICLE TWO
Effective Date and Time
The Company Merger shall be effective as of the date and time when this
Company Merger Agreement, having been certified, signed and acknowledged in the
manner required by law, is filed in the office of the Secretary of State of
Louisiana (such time and date being herein referred to as the "Effective Time"
and the "Effective Date", respectively).
188343.1/07816.98250
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ARTICLE THREE
Conversion and Cancellation of Shares
On the Effective Date, each share of Common Stock, $0.50 par value, of
Commerce Corporation ("Commerce Corporation Common Stock") issued and
outstanding immediately prior to the Effective Date, other than shares of
Commerce Corporation Common Stock owned by stockholders who, pursuant to the
LCL, perfect dissenters' rights, shall, by virtue of the Company Merger and
without any action on the part of the holder thereof, be converted into the
right to receive:
(a) that number of shares of HHC Common Stock that is equal to the
quotient obtained by dividing the Deliverable Stock Amount (as
hereinafter defined) by the total number of issued and outstanding
shares (not including treasury shares) of Commerce Corporation
Common Stock on the Effective Date; and
(b) that amount of cash that is equal to the quotient obtained by
dividing $330,000 by the total number of issued and outstanding
shares (not including treasury shares) of Commerce Corporation
Common Stock (collectively, the "Commerce Corporation Exchange
Ratio").
For purposes of this Article 3, the term "Deliverable Stock Amount" means
the quotient obtained by dividing $2,995,000 by the Average Market Price (as
hereinafter defined). The term "Average Market Price" shall be the average of
the closing per share trading prices of a share of HHC Common Stock on the
NASDAQ stock market for the twenty (20) trading days preceding the 5th trading
day immediately prior to the Effective Date.
The exchange of certificates representing HHC Common Stock for
certificates formerly representing Commerce Corporation Common Stock shall be
effected as provided in the Plan. No fractional shares of HHC Common Stock
representing such fractional shares will be issued to the holders of Commerce
Corporation Common Stock. Instead, a shareholder otherwise entitled to receive
such fractional shares shall be entitled to a cash payment (without interest) as
provided in the Plan.
ARTICLE FOUR
Effects of Company Merger
The Company Merger shall have the effects set forth in Section 12:115 of
the Louisiana Business Corporation Law.
188343.1/07816.98250
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<PAGE>
ARTICLE FIVE
Filing of Company Merger Agreement
If this Company Merger Agreement is approved by the shareholders of
Commerce Corporation, then the fact of such approval shall be certified hereon
by the Secretary or Assistant Secretary of Commerce Corporation, and this
Company Merger Agreement, as approved and certified, shall be signed and
acknowledged by the President or Vice President of each of the Constituent
Corporations. Thereafter, a multiple original of this Company Merger Agreement,
so certified, signed and acknowledged, shall be delivered to the Secretary of
State of Louisiana for filing and recordation in the manner required by law; and
thereafter, as soon as practicable (but not later than the time required by
law), a copy of the Certificate of Merger issued by the Secretary of State of
Louisiana shall be filed for record in the office of the recorder of mortgages
for the parishes of West Feliciana and East Baton Rouge and shall also be
recorded in the conveyance records for the parishes of West Feliciana and East
Baton Rouge and any other parish in which any of the Constituent Corporations
owns real property on the Effective Date of the Company Merger.
ARTICLE SIX
Miscellaneous
The obligations of the Constituent Corporations to effect the Company
Merger shall be subject to all of the terms and conditions of the Plan. At any
time prior to the Effective Date, this Company Merger Agreement may be
terminated (a) by the mutual agreement of the Boards of Directors of the
Constituent Corporations or (b) pursuant to the terms and provisions of the
Plan.
IN WITNESS WHEREOF, this Company Merger Agreement is signed by a majority
of the Directors of each of the Constituent Corporations as of the day first
above written.
[SIGNATURES]
188343.1/07816.98250
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<PAGE>
EXHIBIT B
BANK MERGER AGREEMENT
This Bank Merger Agreement is made and entered into as of the 28th day of
February, 1997, between Hancock Bank of Louisiana, Baton Rouge, Louisiana, a
Louisiana banking corporation ("Hancock Bank") and Bank of Commerce & Trust Co.,
St. Francisville, Louisiana, a Louisiana banking corporation ("Bank") (the "Bank
Merger Agreement").
WITNESSETH:
WHEREAS, Hancock Bank and Bank (collectively, the "Constituent Banks") and
their respective Boards of Directors deem it advisable that Bank be merged into
Hancock Bank (the "Bank Merger") pursuant to the provisions of the Louisiana
Banking Laws and upon the terms and conditions hereinafter set forth and in the
Plan (as hereinafter defined); and;
WHEREAS, the Constituent Corporations have entered into an Agreement and
Plan of Merger dated as of the date hereof (the "Plan") (the defined terms in
which are used herein as defined therein) setting forth certain representations,
warranties, covenants and conditions relating to the Bank Merger;
NOW THEREFORE, the Constituent Banks hereby make, adopt and approve this
Bank Merger Agreement and prescribe the terms and conditions of the Bank Merger
and the mode of carrying the Bank Merger into effect as follows:
ARTICLE ONE
The Bank Merger
Upon the terms and subject to the conditions hereinafter set forth, on the
Effective Date (as defined in Article Two hereof) Bank shall be merged into
Hancock Bank and the separate existence of Bank shall cease.
ARTICLE TWO
Effective Date and Time
The Bank Merger shall be effective no earlier than the latter of: (a) the
date and time specified or permitted by the Louisiana Office of Financial
Institutions ("OFI") in a Certificate of Merger or other written record issued
by the OFI; or (b) fifteen (15) days after the time specified in the certificate
to be issued by the Federal Deposit Insurance Corporation under its seal
approving the Bank Merger, such date to be determined by resolution of the Board
of Directors of Hancock Bank (such time and date being herein
188350.1/07816.98250
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<PAGE>
referred to as the "Effective Time" and the "Effective Date",
respectively).
ARTICLE THREE
Conversion and Cancellation of Shares
Except for shares as to which dissenters' rights have been perfected and
not withdrawn or otherwise forfeited under Section 6:376 of the Louisiana
Banking Laws, on the Effective Date each issued and outstanding share of Bank
Common Stock, par value $10.00 shall be cancelled.
ARTICLE FOUR
Effects of Bank Merger
The Bank Merger shall have the effects set forth in Section 6:355 of the
Louisiana Banking Laws. Upon the Effective Date, each branch office maintained
by Bank as a branch office immediately before the Bank Merger becomes effective,
shall become a branch office of Hancock Bank.
ARTICLE FIVE
Filing of Merger Agreement
If this Bank Merger Agreement is approved by the shareholders of Bank and
Hancock Bank, then the fact of such approval shall be certified hereon by the
Secretary or Assistant Secretary of the Constituent Banks, and this Bank Merger
Agreement, as approved and certified, shall be signed and acknowledged by the
President or Vice President of each of the Constituent Banks. Thereafter, a
multiple original of this Bank Merger Agreement, so certified, signed and
acknowledged, shall be delivered to the OFI for filing and recordation in the
manner required by law; and thereafter, as soon as practicable (but not later
than the time required by law), a copy of the Certificate of Merger issued by
the OFI shall be filed for record in the office of the recorder of mortgages for
the parishes of West Feliciana and East Baton Rouge and shall also be recorded
in the conveyance records for the parishes of West Feliciana and East Baton
Rouge and any other parish in which any of the Constituent Banks owns real
property on the Effective Date of the Bank Merger.
ARTICLE SIX
Miscellaneous
The obligations of the Constituent Banks to effect the Bank Merger shall
be subject to all of the terms and conditions of the Plan. At any time prior to
the Effective Date, this Bank Merger Agreement may be terminated (a) by the
mutual agreement of the
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<PAGE>
Boards of Directors of the Constituent Banks or (b) pursuant to the terms and
provisions of the Plan.
IN WITNESS WHEREOF, this Bank Merger Agreement is signed by a majority of
the Directors of each of the Constituent Banks as of the day first above
written.
[SIGNATURES]
188350.1/07816.98250
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APPENDIX B
PROVISIONS OF THE LOUISIANA BUSINESS CORPORATION LAW
RELATING TO RIGHTS OF DISSENTING SHAREHOLDERS
(Extract from Louisiana Revised Statutes,
Title 12, Section 131)
A. Except as provided in subsection B of this section, if a corporation
has, by vote of its shareholders, authorized a sale, lease or exchange of all of
its assets, or has, by vote of its shareholders, become a party to a merger or
consolidation, then, unless such authorization or action shall have been given
or approved by at least eighty percent of the total voting power, a shareholder
who voted against such corporate action shall have the right to dissent. If a
corporation has become a party to a merger pursuant to R.S. 12:112(H), the
shareholders of any subsidiaries party to the merger shall have the right to
dissent without regard to the proportion of the voting power which approved the
merger and despite the fact that the merger was not approved by vote of the
shareholders of any of the corporations involved.
B. The right to dissent provided by this Section shall not exist in
the case of:
(1) A sale pursuant to an order of a court having jurisdiction in
the premises.
(2) A sale for cash on terms requiring distribution of all or
substantially all of net proceeds to the shareholders in accordance with their
respective interests within one year after the date of the sale.
(3) Shareholders holding shares of any class of stock which, at the
record date fixed to determine shareholders entitled to receive notice of and to
vote at the meeting of shareholders at which a merger or consolidation was acted
on, were listed on a national securities exchange, unless the articles of the
corporation issuing such stock provide otherwise or the shares of such
shareholders were not converted by the merger or consolidation solely into
shares of the surviving or new corporation.
C. Except as provided in the last sentence of this subsection, any
shareholder electing to exercise such right of dissent shall file with the
corporation, prior to or at the meeting of shareholders at which such proposed
corporate action is submitted to a vote, a written objection to such proposed
corporate action, and shall vote his shares against such action. If such
proposed corporate action be taken by the required vote, but by less than eighty
percent of the total voting power, and the merger, consolidation or sale, lease
or exchange of assets authorized thereby be effected, the corporation shall
promptly thereafter give written notice thereof, by registered mail, to each
shareholder who filed such written objection to, and voted his shares against,
such action, at such shareholder's last address on the corporation's records.
Each such shareholder may, within twenty days after the mailing of such notice
to him, but not thereafter, file with the corporation a demand in writing for
the fair cash value of his shares as of the day before such vote was taken;
provided that he state in such demand the value demanded, and a post office
address to which the reply of the corporation may be sent, and at the same time
deposit in escrow in a chartered bank or trust company located in the parish of
the registered office of the corporation, the certificates representing his
shares, duly endorsed and transferred to the corporation upon the sole condition
that said certificates shall be delivered to the corporation upon payment of the
value of the shares determined in accordance with the provisions of this
section. With his demand the shareholder shall deliver to the corporation, the
written acknowledgment of such bank or trust company that it so holds his
certificates of stock. Unless the objection, demand and acknowledgment aforesaid
be made and delivered by the shareholder within the period above limited, he
shall conclusively be presumed to have acquiesced in the corporate action
proposed or taken. In the case of a merger pursuant to R.S. 12:112(H), the
dissenting shareholder need not file an objection with the corporation nor vote
against the merger, but need only file with the corporation, within twenty days
after a copy of the merger certificate was mailed to him, a demand in writing
for the cash value of his shares as of the day before the certificate was filed
with the secretary of state, state in such demand the value demanded and a post
office address to which the corporation's reply may be sent, deposit the
certificates representing his shares in escrow as hereinabove provided, and
deliver to the corporation with his demand the acknowledgment of the escrow bank
or trust company as herein-above prescribed.
D. If the corporation does not agree to the value so stated and demanded,
or does not agree that a payment is due, it shall, within twenty days after
receipt of such demand and acknowledgment, notify in writing the shareholder, at
the designated post office address, of its disagreement, and shall state in such
notice the value it will agree to pay if any payment should be held to be due;
otherwise it shall be liable for, and shall pay to the dissatisfied shareholder,
the value demanded by him for his shares.
E. In case of disagreement as to such fair cash value, or as to whether
any payment is due, after compliance by the parties with the provisions of
subsections C and D of this section, the dissatisfied shareholder, within sixty
days after receipt of notice in writing of the corporation's disagreement, but
not thereafter, may file suit against the corporation, or the merged or
consolidated corporation, as the may be, in the district court of the parish in
which the corporation or the merged or consolidated corporation, as the case may
be, has its registered office, praying the court to fix and decree the fair cash
value of the dissatisfied shareholder's shares as of the day before such
corporate action complained of was taken, and the court shall, on such evidence
as may be adduced in relation thereto, determine
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summarily whether any payment is due, and, if so, such cash value, and render
judgment accordingly. Any shareholder entitled to file such suit may, within
such sixty-day period but not thereafter, intervene as a plaintiff in such suit
filed by another shareholder, and recover therein judgment against the
corporation for the fair cash value of his shares. No order or decree shall be
made by the court staying the proposed corporate action, and any such corporate
action may be carried to completion notwithstanding any such suit. Failure of
the shareholder to bring suit, or to intervene in such a suit, within sixty days
after receipt of notice of disagreement by the corporation shall conclusively
bind the shareholder (1) by the corporation's statement that no payment is due,
or (2) if the corporation does not contend that no payment is due to accept the
value of his shares as fixed by the corporation in its notice of disagreement.
F. When the fair value of the shares has been agreed upon between the
shareholder and the corporation, or when the corporation has become liable for
the value demanded by the shareholder because of failure to give notice of
disagreement and of the value it will pay, or when the shareholder has become
bound to accept the value the corporation agrees is due because of his failure
to bring suit within sixty days after receipt of notice of the corporation's
disagreement, the action of the shareholder to recover such value must be
brought within five years from the date the value was agreed upon, or the
liability of the corporation became fixed.
G. If the corporation or the merged or consolidated corporation, as the
case may be, shall, in its notice of disagreement, have offered to pay to the
dissatisfied shareholder on demand an amount in cash deemed by it to be the fair
cash value of his shares, and if, on the institution of a suit by the
dissatisfied shareholder claiming an amount in excess of the amount so offered,
the corporation, or the merged or consolidated corporation, as the case may be,
shall deposit in the registry of the court, there to remain until the final
determination of the cause, the amount so offered, then, if the amount finally
awarded such shareholder, exclusive of interest and costs, be more than the
amount offered and deposited as aforesaid, the costs of the proceeding shall be
taxed against the corporation, or the merged or consolidated corporation, as the
case may be; otherwise the costs of the proceeding shall be taxed against the
corporation, or the merged or consolidated corporation, as the case may be;
otherwise the costs of the proceeding shall be taxed against such shareholder.
H. Upon filing a demand for the value of his shares, the shareholder shall
cease to have any of the rights of a shareholder except the rights accorded by
this section. Such a demand may be withdrawn by the shareholder at any time
before the corporation gives notice of disagreement, as provided in subsection D
of this section. After such notice of disagreement is given, withdrawal of a
notice of election shall require the written consent of the corporation. If a
notice of election is withdrawn, or the proposed corporate action is abandoned
or rescinded, or a court shall determine that the shareholder is not entitled to
receive payment for his shares, or the shareholder shall otherwise lose his
dissenter's rights, he shall not have the right to receive payment for his
shares, his share certificates shall be returned to him (and, on his request,
new certificates shall be issued to him in exchange for the old ones endorsed to
the corporation), and he shall be reinstated to all his rights as a shareholder
as of the filing of his demand for value, including any intervening preemptive
rights, and the right to payment of any intervening dividend or other
distribution, or, if any such rights have expired or any such dividend or
distribution other than in cash has been completed, in lieu thereof, at the
election of the corporation, the fair value thereof in cash as determined by the
board as of the time of such expiration or completion, but without prejudice
otherwise to any corporate proceedings that may have been taken in the interim.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS/JOINT PROXY STATEMENT
Item 20. Indemnification of Directors and Officers.
The Registrant's Articles of Incorporation provide for indemnification
to the fullest extent allowed by law. The Articles of the Registrant provide in
Article Sixth certain provisions regarding the extent to which the Registrant
will provide indemnification and advancement of expenses to its directors,
officers, employees and agents as well as persons serving at the request of the
Registrant as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
(collectively referred as "Eligible Persons").
The Mississippi Business Corporation Act (the "MBCA") provides that a
director, officer or agent of a corporation may be indemnified for such service
if he conducted himself in good faith, and he reasonably believed in the case of
conduct in his official capacity with the corporation, that his conduct was in
the corporation's best interests; and in all other cases that his conduct was at
least not opposed to the corporation's best interests. In the case of a criminal
proceeding, a director must show that he had no reasonable cause to believe his
conduct was unlawful. Indemnification permitted under this section in connection
with a derivative action is limited to reasonable expenses incurred in
connection with the proceeding.
The MBCA further authorizes a corporation to make further indemnity for
certain actions that do not constitute gross negligence or wilful misconduct if
authorized by the corporation's Articles of Incorporation. The HHC Articles
provide for indemnification to the fullest extent permitted by the MBCA and
specifically provide for the further indemnity authorized by the MBCA.
The HHC Articles provide that HHC shall indemnify any person who was or
is a party to, or is threatened to be made a party to, any threatened pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise, formal or informal (a "Proceeding"), by reason of
the fact that such person is or was a director, officer, employee or agent of
HHC against any obligation to pay a judgment, settlement, penalty, fine or
reasonable expenses (including legal fees) incurred with respect to the
Proceeding: (A) to the fullest extent permitted by the Mississippi Business
Corporation Act in effect from time to time (the "Act") and (B) despite the fact
that such person has failed to meet the standard of conduct set forth in the
Act, or would be disqualified for indemnification under the Act for any reason,
if a determination is made by (i) the board of directors a committee duly
designated by the board of directors,
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<PAGE>
consisting of two or more directors not at the time parties to the Proceeding,
(ii) by special legal counsel, (iii) by the shareholders or (iv) by a court,
that the acts or omissions of the director, officer, employee or agent did not
constitute gross negligence or willful misconduct. However, HHC shall not
indemnify a person for: (i) an intentional infliction of harm on the Corporation
or its shareholders; (ii) a violation of Mississippi Code Annotated Section
79-4-8.33 (1972), as amended; or for (iii) an intentional violation of criminal
law, and HHC shall not indemnify a person for receipt of a financial benefit to
which he is not entitled unless ordered by a court under Mississippi Code
Annotated, Section 79-4-8.54(9)(3). The HHC Articles further provide that HHC
shall indemnify a person in connection with a proceeding by or in the right of
HHC for reasonable expenses incurred in connection with the Proceeding if such
acts or omissions do not constitute gross negligence or willful misconduct, and
shall make further indemnification in connection with the Proceeding if so
ordered by a court under Mississippi Code Annotated, Section 79-4-8.54(9)(3).
HHC, upon request, shall pay or reimburse such person for his reasonable
expenses (including legal fees) in advance of final disposition of the
Proceeding as long as: (i) such person furnishes HHC a written undertaking,
executed personally or on his behalf, to repay the advance if he is not entitled
to mandatory indemnification under Mississippi Code Annotated, Section 79-4-8.52
and it is ultimately determined by a judgment or other final adjudication that
his acts or omissions did constitute gross negligence or willful misconduct,
which undertaking must be an unlimited general obligation of such person, and
which shall be accepted by HHC without reference to the financial ability of the
person to make repayment or to collateral; (ii) such person furnishes a written
affirmation of his good faith that his acts or omissions did not constitute
gross negligence or willful misconduct; and (iii) a determination is made by any
of the determining bodies that the facts then known to those making the
determination would not preclude indemnification under the HHC Articles.
Article Sixth of the Articles further provides that no amendment or
repeal of its provisions may be applied retroactively with respect to any event
that occurred prior to such amendment or appeal. The effect of such provision is
that the protection of Article Sixth may not be taken away or diminished by an
amendment in the event of a change in control of the Registrant.
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 such action, suit or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
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<PAGE>
Item 21. Exhibits
2 Agreement and Plan of Merger dated February 27, 1997 among
Hancock Holding Company, Commerce Corporation, Hancock Bank of
Louisiana, and Commerce Bank & Trust Co. (included as
Appendix A to the Prospectus/Proxy Statement).
3.1 Amended and Restated Articles of Incorporation dated November 8, 1990
(filed as Exhibit 3.1 to the Registrant's Registration Statement on Form
S-8 (No. 333-11831), and incorporated herein by reference).
3.2 Bylaws of Hancock Holding Company restated through November 8, 1990
(filed as Exhibit 3.2 to the Registrant's Registration Statement on Form
S-8 (No. 333-11831), and incorporated herein by reference).
3.3 Articles of Amendment to the Articles of Incorporation of Hancock
Holding Company, dated October 16, 1991 (filed as Exhibit 4.1 to the
Registrant's Form 10-Q for the quarter ended September 30, 1991, and
incorporated herein by reference).
3.4 Articles of Correction, filed with Mississippi Secretary of State on
November 15, 1991 (filed as Exhibit 4.2 to the Registrant's Form 10-Q
for the quarter ended September 30, 1991, and incorporated herein by
reference).
3.5 Articles of Amendment to the Articles of Incorporation of Hancock
Holding Company, adopted February 13, 1992 (filed as Exhibit 3.5 to the
Registrant's Form 10-K for the year ended December 31, 1992, and
incorporated herein by reference).
3.6 Articles of Correction, filed with the Mississippi Secretary of State on
March 2, 1992 (filed as Exhibit 3.6 to the Registrant's Form 10-K for
the year ended December 31, 1992, and incorporated herein by reference).
3.7 Articles of Amendment to the Articles of Incorporation adopted
February 20, 1997.
4.1 Specimen stock certificate (reflecting change in par value from $10.00
to $3.33, effective March 6, 1989)(filed as Exhibit 4.1 to the
Registrant's Registration Statement on Form S-8 (No. 333-11831), and
incorporated herein by reference).
4.2 Description of common Stock Purchase Rights (set forth in Item
1 of the Registrants Registration Statement on Form 8-A
(Commission file No. 000-13089 ) ) and incorporated herein by
reference.
5* Opinion of Watkins Ludlam & Stennis, P.A. as to the legality
of the shares being registered.
8* Opinion of Watkins Ludlam & Stennis, P.A. regarding certain
tax matters.
13 Form 10-K and Annual Report for year ending December 31, 1996 (furnished
for the information of the Commission only and not deemed "filed" except
for those portions which are specifically incorporated herein by
reference).
23.1 Consent of Deloitte & Touche LLP.
II-3
<PAGE>
23.2 Consent of Basil M. Lee and Company.
23.3 Consent of Watkins Ludlam & Stennis, P.A. (included in
Exhibits 5 and 8).
24 Power of Attorney (included on the signature page of the
Registration Statement).
99 Form of Proxy for Commerce Corporation.
* To be filed by Amendment.
II-4
<PAGE>
Item 22. Undertakings.
(a) 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 of 1993;
(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;
(iii) To include any material information with respect to the
plan or distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof;
(3) To remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) 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 15(d) of the Securities
Exchange Act of 1934 (and, when applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) (1) 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
II-5
<PAGE>
a part of this Registration Statement, by any person or party who
is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration
form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the
other items of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that
is filed pursuant to paragraph (1) immediately preceding,
or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement
and will not be used until such amendment is effective,
and that, for purposes of determining any liability under
the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and
the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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 Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
II-6
<PAGE>
(f) The undersigned Registrant hereby undertakes to supply by means of
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-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Gulfport,
State of Mississippi, this day of May 6, 1997.
HANCOCK HOLDING COMPANY
(Registrant)
By:
Leo W. Seal, Jr.,
President and Chief Executive
Officer
By:
C. Stanley Bailey
Executive Vice President and
Chief Financial Officer
Know all men by these presents, that each individual whose signature
appears below constitutes and appoints Leo W. Seal, Jr. and George A. Schloegel,
and each or either one of them, his true and lawful attorney-in-fact and agent,
with power of substitution and resubstitution, for him and in his name, place
and stead in any and all capacities, to sign this Registration Statement on Form
S-4 and relating to the registration of shares of Hancock Holding Company common
stock, $3.33 par value per share, and any and all amendments (including
post-effective amendments) to such 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 attorneys-in-fact and
agents, and each of them, 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 to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, their, or his 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
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
By: Chairman of the May 6, 1997
Joseph F. Boardman, Jr. Board and Directors
II-8
<PAGE>
By: Director May 6, 1997
Thomas W. Milner, Jr.
By: Director May 6, 1997
Dr. Homer C. Moody, Jr.
By: Director May 6, 1997
James B. Estabrook, Jr.
By: Director May 6, 1997
Victor Mavar
By: Director May 6, 1997
Charles H. Johnson
By: Director May 6, 1997
L. A. Koenenn, Jr.
By: President, Chief Executive May 6, 1997
Leo W. Seal, Jr. Officer and Director
By: Vice Chairman of the May 6, 1997
George A. Schloegel Board and Director
II-9
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
2 Agreement and Plan of Merger dated February 27, 1997 among Hancock
Holding Company, Commerce Corporation, Hancock Bank of Louisiana,
and Commerce Bank & Trust Co. (included as Appendix A to the
Prospectus/Proxy Statement).
3.1 Amended and Restated Articles of Incorporation dated November 8, 1990
(filed as Exhibit 3.1 to the Registrant's Registration Statement on Form
S-8 (No. 333-11831), and incorporated herein by reference).
3.2 Bylaws of Hancock Holding Company restated through November 8, 1990
(filed as Exhibit 3.2 to the Registrant's Registration Statement on Form
S-8 (No. 333-11831), and incorporated herein by reference).
3.3 Articles of Amendment to the Articles of Incorporation of Hancock
Holding Company, dated October 16, 1991 (filed as Exhibit 4.1 to the
Registrant's Form 10-Q for the quarter ended September 30, 1991, and
incorporated herein by reference).
3.4 Articles of Correction, filed with Mississippi Secretary of State on
November 15, 1991 (filed as Exhibit 4.2 to the Registrant's Form 10-Q
for the quarter ended September 30, 1991, and incorporated herein by
reference).
3.5 Articles of Amendment to the Articles of Incorporation of Hancock
Holding Company, adopted February 13, 1992 (filed as Exhibit 3.5 to the
Registrant's Form 10-K for the year ended December 31, 1992, and
incorporated herein by reference).
3.6 Articles of Correction, filed with the Mississippi Secretary of State on
March 2, 1992 (filed as Exhibit 3.6 to the Registrant's Form 10-K for
the year ended December 31, 1992, and incorporated herein by reference).
3.7 Articles of Amendment to the Articles of Incorporation adopted
February 20, 1997.
4.1 Specimen stock certificate (reflecting change in par value from $10.00
to $3.33, effective March 6, 1989)(filed as Exhibit 4.1 to the
Registrant's Registration Statement on Form S-8 (No. 333-11831), and
incorporated herein by reference).
4.2 Description of common Stock Purchase Rights (set forth in Item 1 of
the Registrants Registration Statement on Form 8-A (No. 000-13089)
and incorporated herein by reference.
5* Opinion of Watkins Ludlam & Stennis, P.A. as to the legality of the
shares being registered.
8* Opinion of Watkins Ludlam & Stennis, P.A. regarding certain tax matters.
13 Form 10-K and Annual Report for year ending December 31, 1996
(furnished for the information of the Commission only and not deemed
"filed" except for those portions which are specifically incorporated
herein by reference).
23.1* Consent of Deloitte & Touche LLP.
23.2 Consent of Basil M. Lee and Company.
23.3 Consent of Watkins Ludlam & Stennis, P.A. (included in Exhibits
5 and 8).
24 Power of Attorney (included on the signature page of the Registration
Statement).
99 Form of Proxy for Commerce Corporation.
* To be filed by Amendment.
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended DECEMBER 31, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________ to ____________ .
Commission file number 0-13089
HANCOCK HOLDING COMPANY
(Exact name of registrant as specified in its charter)
MISSISSIPPI 64-0693170
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
Number)
ONE HANCOCK PLAZA, GULFPORT, MISSISSIPPI 39501
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (601) 868-4715
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $3.33 PAR VALUE
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes X No
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of January 2, 1997, was approximately $367,105,000. For purposes
of this calculation only, shares held by non-affiliates are deemed to consist of
(a) shares held by all shareholders other than directors and executive officers
of the registrant plus (b) shares held by directors and officers as to which
beneficial ownership has been disclaimed.
On December 31, 1996, the registrant had outstanding 10,725,102 shares of
common stock for financial statement purposes.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the year
ended December 31, 1996 are incorporated by reference into Part II of this
report.
Portions of the definitive Proxy Statement used in connection with the
Registrant's Annual Meeting of Shareholders held on February 20, 1997, filed by
the Registrant on January 21, 1997, are incorporated by reference into Part III
of this report.
<PAGE>
CONTENTS
PART I
Item 1. Business 4
Item 2. Properties 38
Item 3. Legal Proceedings 39
Item 4. Submission of Matters to a Vote of Security
Holders 39
PART II
Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matters 40
Item 6. Selected Financial Data 40
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 40
Item 8. Financial Statements and Supplementary Data 40
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 41
PART III
Item 10. Directors and Executive Officers of the
Registrant 41
Item 11. Executive Compensation 41
Item 12. Security Ownership of Certain Beneficial
Owners and Management 41
Item 13. Certain Relationships and Related
Transactions 41
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 42
PART I
ITEM 1 - BUSINESS
BACKGROUND AND CURRENT OPERATIONS
BACKGROUND
GENERAL:
Hancock Holding Company (the "Company"), organized in 1984 as a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended, is headquartered in Gulfport, Mississippi. The Company operates 80
banking offices and over 100 automated teller machines ("ATM's") in the states
of Mississippi and Louisiana through two wholly-owned bank subsidiaries, Hancock
Bank, Gulfport, Mississippi ("Hancock Bank MS") and Hancock Bank of Louisiana,
Baton Rouge, Louisiana ("Hancock Bank LA"). Hancock Bank MS and Hancock Bank LA
are referred to collectively as the "Banks."
The Banks are community oriented and focus primarily on offering
commercial, consumer and mortgage loans and deposit services to individuals and
small to middle market businesses in their respective market areas. The
Company's operating strategy is to provide its customers with the financial
sophistication and breadth of products of a regional bank, while successfully
retaining the local appeal and level of service of a community bank. At December
31, 1996, the Company had total assets of $2.3 billion and employed on a
full-time basis 845 persons in Mississippi and 436 persons in Louisiana.
Hancock Bank MS was originally chartered as Hancock County Bank in 1899.
Since its organization, the strategy of Hancock Bank MS has been to achieve a
dominant market share on the Mississippi Gulf Coast. Prior to a series of
acquisitions begun in 1985, growth was primarily internal and was accomplished
by concentrating branch expansions in areas of population growth where no
dominant financial institution previously served the market area. Economic
expansion on the Mississippi Gulf Coast has resulted primarily from growth of
military and governmentrelated facilities, tourism, port facility activities,
industrial complexes and the gaming industry. Hancock Bank MS currently has the
largest market share in each of the four counties in which it operates:
Harrison, Hancock, Jackson and Pearl River. With assets of $1.4 billion at
December 31, 1996, Hancock Bank MS currently ranks as the fourth largest bank in
Mississippi.
In August 1990, the Company formed Hancock Bank LA to assume the deposit
liabilities and acquire the consumer loan portfolio, corporate credit card
portfolio and non-adversely classified securities portfolio of American Bank and
Trust, Baton Rouge, Louisiana, ("AmBank"), from the Federal Deposit Insurance
Corporation ("FDIC"). Economic expansion in East Baton Rouge Parish has resulted
from growth in state government and related service industries, educational and
medical complexes, petrochemical industries, port facility activities and
transportation and related industries. With assets of $868 million at December
31, 1996, Hancock Bank LA is the largest bank in East Baton Rouge Parish.
In November 1996, the Company acquired Community Bancshares, Inc.,
Independence, Louisiana which owned 100% of the stock of Community State Bank
(Community). This acquisition expanded the Baton Rouge market area into the
Hammond area where many of the people who work in Baton Rouge live.
Beginning with the 1985 acquisition of the Pascagoula-Moss Point Bank
("PMP") in Pascagoula, Mississippi, the Company has acquired approximately
$976.2 million in assets and approximately $876.5 million in deposit liabilities
through selected acquisitions or purchase and assumption transactions.
RECENT ACQUISITION ACTIVITY:
In August 1991, Hancock Bank MS acquired certain assets and deposit
liabilities of Peoples Federal Savings Association, Bay St. Louis, Mississippi,
from the RTC. As a result of this transaction, the Bank acquired assets of
approximately $39.0 million and deposit liabilities of approximately $38.5
million.
The Company borrowed $18,750,000 from Whitney National Bank, New Orleans,
Louisiana ("Whitney"), to partially fund the acquisition of Metropolitan
National Bank and AmBank in 1990. On November 28, 1991, the Company sold
1,552,500 shares of its common stock at $17 per share. This followed a
two-for-one stock split in the form of a 100% stock dividend on October 15,
1991, and an increase in authorized shares to 20,000,000. The net proceeds of
this sale, after underwriting discount and expenses, of approximately
$24,700,000, were used to pay the principal and interest on $18,500,000 of
principal debt on the Whitney loans and increase Hancock Bank LA's capital by
$5,000,000.
In April 1994, the Company merged Hancock Bank LA with First State Bank and
Trust Company of East Baton Rouge Parish, Baker, Louisiana ("Baker"). The merger
was consummated by the exchange of all outstanding common stock of Baker in
return for 527,235 shares of common stock of the Company. The merger was
accounted for using the pooling-of-interests method; therefore, all prior years'
financial information has been restated.
On January 13, 1995, the Company acquired First Denham Bancshares, Inc.
("Bancshares") which owned 100% of the stock of First National Bank of Denham
Springs ("Denham"), Denham Springs, Louisiana. The acquisition was in return for
approximately $4,000,000 cash and 774,098 shares of common stock of the Company.
The acquisition was accounted for using the purchase method. Bancshares had
total assets of approximately $111,000,000 and stockholders' equity of
approximately $11,300,000 as of December 31, 1994 and net earnings of
approximately $2,600,000 for the year then ended. On August 15, 1996, Denham was
merged into Hancock Bank LA.
On February 1, 1995, the Company merged Hancock Bank LA with Washington Bank
& Trust Company, Franklinton, Louisiana ("Washington"). The merger was
consummated by the exchange of all outstanding common stock of Washington in
return for 542,650 shares of common stock of the Company. The merger was
accounted for using the pooling-of-interests method; therefore, all prior years'
financial information has been restated. Washington had total assets of
approximately $86,100,000 and stockholders' equity of approximately $12,400,000
as of December 31, 1994, and net earnings of approximately $1,300,000 for the
year then ended.
In November 1996, the Company acquired Community Bancshares, Inc., which
owned 100% of the stock of Community State Bank ("Community"). This acquisition
expanded the Company's market to the Hammond, Louisiana area, where many of the
people who are employed in East Baton Rouge Parish reside.
On January 17, 1997, the Company acquired Southeast National Bank, Hammond,
Louisiana (Southeast). The acquisition was in return for approximately
$3,700,000 cash and 105,000 shares of common stock of the Company. The
acquisition was accounted for using the purchase method. Southeast had total
assets of approximately $40,000,000 and stockholders' equity of approximately
$4,000,000 as of December 31, 1996 and net earnings of approximately $500,000
for the year then ended.
CURRENT OPERATIONS
LOAN PRODUCTION AND CREDIT REVIEW:
The Banks' primary lending focus is to provide commercial, consumer, leasing
and real estate loans to consumers and to small and middle market businesses in
their respective market areas. The Banks have no concentrations of loans to
particular borrowers or loans to any foreign entities. Each loan officer has
Board approved loan limits on the principal amount of secured and unsecured
loans he or she can approve for a single borrower without prior approval of a
loan committee. All loans, however, must meet the credit underwriting standards
and loan policies of the Banks.
For Hancock Bank MS, all loans over an individual loan officer's Board
approved lending authority and below a regional approved limit must be approved
by his or her region's loan committee or by another loan officer with greater
lending authority. Both the regional loan committee and the Bank's senior loan
committee must review and approve any loan for a borrower whose total
indebtedness exceeds the region's approved limit. Each loan file is reviewed by
the Bank's loan operations quality assurance function, a component of its loan
review system, to ensure proper documentation and asset quality.
For Hancock Bank LA, all loans over an individual loan officer's Board
approved lending authority must be approved by the Bank's, his or h region's
loan committee or by another loan officer with greater lending authority. Both
the regional loan committee and the Bank's senior loan committee must review and
approve any loan for a borrower whose total indebtedness exceeds $500,000. Each
loan file is reviewed by the Bank's loan operations quality assurance function,
a component of its loan review system, to ensure proper documentation and asset
quality.
LOAN REVIEW AND ASSET QUALITY:
Each Bank's portfolio of loan relationships aggregating $250,000 or more is
annually reviewed by the respective Bank to identify any deficiencies and to
take corrective actions as necessary. Periodically, selected loan relationships
aggregating less than $250,000 are reviewed. As a result of such reviews, each
Bank places on its Watchlist loans requiring close or frequent review. All loans
classified by a regulator are also placed on the Watchlist. All Watchlist and
past due loans are reviewed monthly by the Banks' senior lending officers and by
the Banks' Board of Directors.
In addition, all loans to a particular borrower are reviewed, regardless of
classification, each time such borrower requests a renewal or extension of any
loan or requests a new loan. All lines of credit are reviewed annually before
renewal. The Banks currently have mechanisms in place that allow for at least an
annual review of the financial statements and the financial condition of all
borrowers, except borrowers with secured installment and residential mortgage
loans.
Consumer loans which become 60 days delinquent are reviewed regularly by
management. Generally, a consumer loan which is delinquent 120 days is in
process of collection through repossession and liquidation of collateral or has
been deemed currently uncollectible. Loans deemed currently uncollectible are
charged-off against the reserve account. As a matter of policy, loans are placed
on a nonaccrual status when the loan is 1) maintained on a cash basis due to the
deterioration in the financial condition of the borrower, 2) payments, in full,
of principal or interest are not expected or 3) the principal or interest has
bee in default for a period of 90 days, unless the loan is well secured AND in
the process of collection.
The Banks follow the standard FDIC loan classification system. This system
provides management with (1) a general view of the quality of the overall loan
portfolio (each branch's loan portfolio and each commercial loan officer's loan
portfolio) and (2) information on specific loans that may need individual
attention.
The Banks hold nonperforming assets, consisting of real property, vehicles
and other items held for resale, which were acquired generally through the
process of foreclosure. At December 31, 1996, the book value of nonperforming
assets held for resale was approximately $1.9 million.
SECURITIES PORTFOLIO:
The Banks maintain portfolios of securities consisting primarily of U.S.
Treasury securities, U.S. government agency issues, mortgage-backed securities,
CMOs and tax-exempt obligations of states and political subdivisions. The
portfolios are designed to enhance liquidity while providing acceptable rates of
return. Therefore, the Banks invest only in high grade investment quality
securities with acceptable yields and generally with durations of less than 7
years.
The Banks' policies limit investments to securities having a rating of no
less than "Baa" by Moody's Investors' Service, Inc., except for certain
obligations of Mississippi or Louisiana counties and municipalities.
DEPOSITS:
The Banks have several programs designed to attract depository accounts
offered to consumers and to small and middle market businesses at interest rates
generally consistent with market conditions. Additionally, the Banks offer over
100 ATMs: over 65 ATMs at the 80 banking offices and over 40 free-standing ATMs
at other locations. As members of regional and international ATM networks such
as "PULSE", "PLUS" and "CIRRUS," the Banks offer customers access to their
depository accounts from regional, national and international ATM facilities.
Deposit flows are controlled by the Banks primarily through pricing, and to a
certain extent, through promotional activities. Management believes that the
rates it offers, which are posted weekly on deposit accounts, are generally
competitive with or, in some cases, slightly below other financial institutions
in the Banks' respective market areas.
TRUST SERVICES:
The Banks', through their respective Trust Departments, offer a full range
of trust services on a fee basis. The Banks act as executor, administrator or
guardian in administering estates. Also provided are investment custodial
services for individuals, businesses and charitable and religious organizations.
In their trust capacities, the Banks provide investment management services on
an agency basis and act as trustee for pension plans, profit sharing plans,
corporate and municipal bond issues, living trusts, life insurance trusts and
various other types of trusts created by or for individuals, businesses and
charitable and religious organizations. As of December 31, 1996, the Trust
Departments of the Banks had approximately $1.6 billion of assets under
management, of which $1.0 billion were corporate accounts and $0.6 billion were
personal, employee benefit, estate and other trust accounts.
OPERATING EFFICIENCY STRATEGY:
The primary focus of the Company's operating strategy is to increase
operating income and to reduce operating expense. Beginning in January of 1988,
management has taken steps to improve operating efficiencies. As a result,
employees at Hancock Bank MS have been reduced from .78 per $1 million in assets
in February 1988 to .59 as of December 31, 1996. Since its acquisition in August
1990, Hancock Bank LA employees have been reduced from .97 per $1 million of
assets to .50 as of December 31, 1996. Management annually establishes an
employee to asset goal for each Bank. The Banks also have set an internal long
range goal of at least covering total salary and benefit costs by fee income.
The ratio of fee income to total salary and benefit costs is $.56 to $1.00 at
Hancock Bank MS. Hancock Bank LA has a higher level of fee income and through
December 31, 1996, has achieved a ratio of $.86 to $1.00.
OTHER ACTIVITIES:
Hancock Bank MS has seven subsidiaries through which it engages in the
following activities: providing consumer financing services; mortgage lending;
owning, managing and maintaining certain real property; providing general
insurance agency services; holding investment securities; marketing credit life
insurance; and providing discount investment brokerage services. The income of
these subsidiaries generally accounts for less than 10% of the Company's total
annual income.
During 1994, the Company began offering alternative investments through a
third party vendor. The Investment Center is now located in several branch
locations in Mississippi and Louisiana to accommodate the investment needs of
customers whose needs fall outside the traditional commercial bank product line.
Hancock Bank MS also owns approximately 3,700 acres of timberland in
Hancock County, Mississippi, most of which was acquired through foreclosure in
the 1930's. Timber sales and oil and gas leases on this acreage generate less
than 1% of the Company's annual income.
COMPETITION:
The deregulation of the financial services industry, the elimination of
many previous distinctions between commercial banks and other financial
institutions and legislation enacted in Mississippi, Louisiana and other states
allowing state-wide branching, multi-bank holding companies and regional
interstate banking has created a highly competitive environment for commercial
banking in the Company's market area. The principal competitive factors in the
markets for deposits and loans are interest rates paid and charged. The Company
also competes through the efficiency, quality, range of services and products it
provides, convenience of office and ATM locations and office hours.
In attracting deposits and in its lending activities, the Company competes
generally with other commercial banks, savings associations, credit unions,
mortgage banking firms, consumer finance companies, securities brokerage firms,
mutual funds, insurance companies and other financial institutions. Many of
these institutions have greater available resources than the Company.
SUPERVISION AND REGULATION
BANK HOLDING COMPANY REGULATION
GENERAL:
The Company is subject to extensive regulation by the Board of Governors of
the Federal Reserve System (the "Federal Reserve") pursuant to the Bank Holding
Company Act of 1956, as amended (the "Bank Holding Company Act"). The Company
also is required to file certain reports with, and otherwise comply with the
rules and regulations of, the Securities and Exchange Commission (the
"Commission") under federal securities laws.
FEDERAL REGULATION:
The Bank Holding Company Act generally prohibits the Company from engaging
in activities other than banking, managing or controlling banks or other
permissible subsidiaries. Acquiring or obtaining control of any company engaged
in activities other than those activities determined by the Federal Reserve to
be so closely related to banking, managing or controlling banks as to be proper
incident thereto is also prohibited. In determining whether a particular
activity is permissible, the Federal Reserve considers whether the performance
of the activity can reasonably be expected to produce benefits to the public
that outweigh possible adverse effects. 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 performing certain 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. Despite prior approval, however, the Federal Reserve has the
power to order a holding company or its subsidiaries to terminate any activity
or its control of any subsidiary when it has reasonable cause to believe that
continuation of such activity or control of such subsidiary constitutes a
serious risk to the financial safety, soundness or stability of any bank
subsidiary of that holding company.
The Bank Holding Company Act requires every bank holding company to obtain
the prior approval of the Federal Reserve: (1) before it may acquire ownership
or control of any voting shares of any bank if, after such acquisition, such
bank holding company will own or control more than 5% of the voting shares of
such bank, (2) before it or any of its subsidiaries other than a bank may
acquire all of the assets of a bank, or (3) before it may merge with any other
bank holding company. In reviewing a proposed acquisition, the Federal Reserve
considers financial, managerial and competitive aspects. The future prospects of
the companies and banks concerned and the convenience and needs of the community
to be served must also be considered. The Federal Reserve also reviews the
indebtedness to be incurred by a bank holding company in connection with the
proposed acquisition to ensure that the holding company can service such
indebtedness without adversely affecting the capital requirements of the holding
company or its subsidiaries. The Bank Holding Company Act further requires that
consummation of approved acquisitions or mergers must be delayed at least 30
days following the date of approval. During such 30-day period, complaining
parties may obtain a review of the Federal Reserve's order granting its approval
by filing a petition in the appropriate United States Court of Appeals
petitioning that the order be set aside.
The Federal Reserve has adopted capital adequacy guidelines for use in its
examination and regulation of bank holding companies. The regulatory capital of
a bank holding company under applicable federal capital adequacy guidelines is
particularly important in the Federal Reserve's evaluation of a bank holding
company and any applications by the bank holding company to the Federal Reserve.
If regulatory capital falls below minimum guideline levels, a bank holding
company or bank may be denied approval to acquire or establish additional banks
or non-bank businesses or to open additional facilities. In addition, a
financial institution's failure to meet minimum regulatory capital standards can
lead to other penalties, including termination of deposit insurance or
appointment of a conservator or receiver for the financial institution. There
are two measures of regulatory capital presently applicable to bank holding
companies, (1) risk-based capital and (2) leverage capital ratios.
The Federal Reserve rates bank holding companies by a component and
composite 1-5 rating system. This system is designed to help identify
institutions which require special attention. Financial institutions are
assigned ratings based on evaluation and rating of their financial condition and
operations. Components reviewed include capital adequacy, asset quality,
management capability, the quality and level of earnings, and the adequacy of
liquidity. Effective January 1, 1997, a sixth component was added to the rating
system Sensitivity to market risk. This component addresses primarily the issue
of a bank's sensitivity to interest rate fluctuations.
The leverage ratios adopted by the Federal Reserve require all but the most
highly rated bank holding companies to maintain Tier 1 Capital at 4% to 5% of
total assets. Certain bank holding companies having a composite 1 rating and not
experiencing or anticipating significant growth may satisfy the Federal Reserve
guidelines by maintaining Tier 1 Capital of at least 3% of total assets. Tier 1
Capital for bank holding companies includes: stockholders' equity, minority
interest in equity accounts of consolidated subsidiaries and qualifying
perpetual preferred stock. In addition, Tier 1 Capital excludes goodwill and
other disallowed intangibles. The Company's leverage capital ratio at December
31, 1996, was 10.37%.
The risk-based capital guidelines are designed to make regulatory capital
requirements more sensitive to differences in risk profiles among banks and bank
holding companies, to account for off-balance sheet exposure and to minimize
disincentives for holding liquid assets. Under the risk-based capital
guidelines, assets are assigned to one of four risk categories; 0%, 20% 50% and
100%. As an example, U.S. Treasury securities are assigned to the 0% risk
category while most categories of loans are assigned to the 100% risk category.
A two-step process determines the risk weight of off-balance sheet items such as
standby letters of credit. First, the amount of the off-balance sheet item is
multiplied by a credit conversion factor of either 0%, 20%, 50% or 100%. The
result is then assigned to one of the four risk categories. At December 31,
1996, the Company's off-balance sheet items aggregated $253.2 million; however,
after the credit conversion these items represented $19.1 million of balance
sheet equivalents.
The primary component of risk-based capital is Tier 1 Capital, which is
essentially equal to common stockholders' equity, plus a certain portion of
perpetual preferred stock. Tier 2 Capital, which consists primarily of the
excess of any perpetual preferred stock, mandatory convertible securities,
subordinated debt and general reserves for loan losses, is a secondary component
of risk-based capital. The risk-weighted asset base is equal to the sum of the
aggregate dollar values of assets and off-balance sheet items in each risk
category, multiplied by the weight assigned to that category. A ratio of Tier 1
Capital to risk-weighted assets of at least 4% and a ratio of Total Capital
(Tier 1 and Tier 2) to risk-weighted assets of at least 8% must be maintained by
bank holding companies. At December 31, 1996, the Company's Tier 1 and Total
Capital ratios were 18.03% and 19.02%, respectively.
The prior approval of the Federal Reserve must be obtained before the
Company may acquire substantially all the assets of any bank, or ownership or
control of any voting shares of any bank, if, after such acquisition, it would
own or control, directly or indirectly, more than 5% of the voting shares of
such bank. In no case, however, may the Federal Reserve approve an acquisition
of any bank located outside Mississippi unless such acquisition is specifically
authorized by the laws of the state in which the bank to be acquired is located.
The banking laws of Mississippi presently permit out-of-state banking
organizations to acquire Mississippi banking organizations, provided the
out-of-state banking organization's home state grants similar privileges to
banking organizations in Mississippi. This reciprocity privilege is restricted
to banking organizations in specified geographic regions that encompass the
states of Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi,
Missouri, North Carolina, South Carolina, Tennessee, Texas, Virginia and West
Virginia. In addition, Mississippi banking organizations are permitted to
acquire certain out-of-state financial institutions. A bank holding company is
additionally prohibited from engaging in non-banking activities, or acquiring
direct or indirect control of more than 5% of the voting shares of any company
engaged in non-banking activities.
With the passage of The Interstate Banking and Branching Efficiency Act of
1994, adequately capitalized and managed bank holding companies are permitted to
acquire control of banks in any state, subject to federal regulatory approval,
without regard to whether such a transaction is prohibited by the laws of any
state. Beginning June 1, 1997, federal banking regulators may approve merger
transactions involving banks located in different states, without regard to laws
of any state prohibiting such transactions; except that, mergers may not be
approved with respect to banks located in states that, before June 1, 1997,
enacted legislation prohibiting mergers by banks located in such state with
out-of-state institutions. Federal banking regulators may permit an out-of-state
bank to open new branches in another state if such state has enacted legislation
permitting interstate branching. The legislation further provides that a bank
holding company may not, following an interstate acquisition, control more than
10% of nationwide insured deposits or 30% of deposits in the relevant state.
States have the right to adopt legislation to lower the 30% limit. Additional
provisions require that interstate activities conform to the Community
Reinvestment Act.
The Company is required to give the Federal Reserve prior written notice of
any purchase or redemption of its outstanding equity securities if the gross
consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, is equal to 10% or more of the Company's consolidated net worth. The
Federal Reserve may disapprove such a transaction if it determines that the
proposal constitutes an unsafe or unsound practice, would violate any law,
regulation, Federal Reserve order or directive or any condition imposed by, or
written agreement with, the Federal Reserve.
In November 1985, the Federal Reserve adopted its Policy Statement on Cash
Dividends Not Fully Covered by Earnings (the "Policy Statement"). The Policy
Statement sets forth various guidelines that the Federal Reserve believes that a
bank holding company should follow in establishing its dividend policy. In
general, the Federal Reserve stated that bank holding companies should pay
dividends only out of current earnings. It also stated that dividends should not
be paid unless the prospective rate of earnings retention by the holding company
appears consistent with its capital needs, asset quality and overall financial
condition.
The activities of the Company are also restricted by the provisions of the
Glass-Steagall Act of 1933 (the "Act"). The Act prohibits the Company from
owning subsidiaries engaged principally in the issue, floatation, underwriting,
public sale or distribution of securities. Regulators and legislators are
currently reviewing the interpretation, scope and application of the provisions
of the Act. The outcome of the current examination and the effect of the outcome
on the ability of bank holding companies to engage in securities related
activities cannot be predicted.
The Company is a legal entity separate and distinct from the Banks. There
are various restrictions that limit the ability of the Banks to finance, pay
dividends or otherwise supply funds to the Company or other affiliates. In
addition, subsidiary banks of holding companies are subject to certain
restrictions on any extension of credit to the bank holding company or any of
its subsidiaries, on investments in the stock or other securities thereof and on
the taking of such stock or securities as collateral for loans to any borrower.
Further, a bank holding company and its subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with extensions of credit,
or leases or sales of property or furnishing of services.
BANK REGULATION:
The operations of the Banks are subject to state and federal statutes
applicable to state banks and national banks, respectively, and the regulations
of the Federal Reserve, the FDIC and the Office of the Comptroller of the
Currency ("OCC"). Such statutes and regulations relate to, among other things,
required reserves, investments, loans, mergers and consolidations, issuance of
securities, payment of dividends, establishment of branches and other aspects of
the Banks' operations.
Hancock Bank MS is subject to regulation and periodic examinations by the
FDIC and the State of Mississippi Department of Banking and Consumer Finance.
Hancock Bank LA is subject to regulation and periodic examinations by the FDIC
and the Office of Financial Institutions, State of Louisiana. These regulatory
authorities examine such areas as reserves, loan and investment quality,
management policies, procedures and practices and other aspects of operations.
These examinations are designed for the protection of the Banks' depositors,
rather than their stockholders. In addition to these regular examinations, the
Company and the Banks must furnish periodic reports to their respective
regulatory authorities containing a full and accurate statement of their
affairs.
As a result of the enactment of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989 ("FIRREA"), a financial institution insured by the
FDIC can be held liable for any losses incurred by, or reasonably expected to be
incurred by, the FDIC in connection with (1) the default of a commonly
controlled FDIC-insured financial institution or (2) any assistance provided by
the FDIC to a commonly controlled financial institution in danger of default.
The Banks are members of the FDIC, and their deposits are insured as
provided by law by the Bank Insurance Fund ("BIF"). On December 19, 1991, the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") was
enacted. The Federal Deposit Insurance Act, as amended by Section 302 of FDICIA,
calls for risk-related deposit insurance assessment rates. The risk
classification of an institution will determine its deposit insurance premium.
Assignment to one of three capital groups, coupled with assignment to one of
three supervisory sub-groups, determines which of the nine risk classifications
is appropriate for an institution.
Effective in the first quarter of 1996, the FDIC lowered banks' deposit
insurance premiums from 4 to 31 cents per hundred dollars in insured deposits to
a rate of 0 to 27 cents. The Banks have received a risk classification of 1A for
assessment purposes. Total assessments paid to the FDIC amounted to $285
thousand. The Banks paid BIF premiums of 0 cents per hundred dollars of insured
deposits during 1996. The decrease in the 1996 rates resulted in $1.9 million
FDIC premium reductions over the 1995 level of $2.2 million. Premiums for the
first and second quarters of 1997 have remained 0 cents per hundred dollars of
insured deposits. Premiums on OAKAR deposits from the 1991 acquisition of
Peoples Federal Savings Association totalled $86 thousand. In addition to the
normal premiums paid on OAKAR deposits, a one-time assessment of $191 thousand
was paid.
In general, FDICIA subjects banks and bank holding companies to
significantly increased regulation and supervision. FDICIA increased the
borrowing authority of the FDIC in order to recapitalize the Bank Insurance
Fund, and the future borrowings are to be repaid by increased assessments on
FDIC member banks. Other significant provisions of FDICIA require a new
regulatory emphasis linking supervision to bank capital levels. Also, federal
banking regulators are required to take prompt regulatory action with respect to
depository institutions that fall below specified capital levels and to draft
non-capital regulatory measures to assure bank safety.
FDICIA contains a "prompt corrective action" section intended to resolve
problem institutions at the least possible long-term cost to the deposit
insurance funds. Pursuant to this section, the federal banking agencies are
required to prescribe a leverage limit and a risk-based capital requirement
indicating levels at which institutions will be deemed to be "well capitalized,"
"adequately capitalized," "undercapitalized," "significantly undercapitalized"
and "critically undercapitalized." In the case of a depository institution that
is "critically undercapitalized" (a term defined to include institutions which
still have positive net worth), the federal banking regulators are generally
required to appoint a conservator or receiver.
FDICIA further requires regulators to perform annual on-site bank
examinations, places limits on real estate lending and tightens audit
requirements. The new legislation eliminated the "too big to fail" doctrine,
which protects uninsured deposits of large banks, and restricts the ability of
undercapitalized banks to obtain extended loans from the Federal Reserve Board
discount window. FDICIA also imposes new disclosure requirements relating to
fees charged and interest paid on checking and deposit accounts. Most of the
significant changes brought about by FDICIA required new regulations.
In addition to regulating capital, the FDIC and the OCC have broad authority
to prevent the development or continuance of unsafe or unsound banking
practices. Pursuant to this authority, the FDIC and OCC have adopted regulations
that restrict preferential loans and loan amounts to "affiliates" and "insiders"
of banks, require banks to keep information on loans to major stockholders and
executive officers and bar certain director and officer interlocks between
financial institutions. The FDIC is also authorized to approve mergers,
consolidations and assumption of deposit liability transactions between insured
banks and between insured banks and uninsured banks or institutions to prevent
capital or surplus diminution in such transactions where the resulting,
continuing or assumed bank is an insured nonmember state bank, like Hancock Bank
MS and Hancock Bank LA.
Although the Hancock Bank MS and Hancock Bank LA are not members of the
Federal Reserve System, they are subject to Federal Reserve regulations that
require the Banks to maintain reserves against transaction accounts (primarily
checking accounts), money market deposit accounts and nonpersonal time deposits.
Because reserves generally must be maintained in cash or in noninterest-bearing
accounts, the effect of the reserve requirements is to increase the cost of
funds for the Banks. The Federal Reserve regulations currently require that
reserves be maintained against net transaction accounts in the amount of 3% of
the aggregate of such accounts up to $47,700 million, or, if the aggregate of
such accounts exceeds $47,700 million, $1.302 million plus 10% of the total in
excess of $47,700 million. This regulation is subject to an exemption from
reserve requirements on a limited amount of an institution's transaction
accounts.
The foregoing is a brief summary of certain statutes, rules and regulations
affecting the Company and the Banks. It is not intended to be an exhaustive
discussion of all the statutes and regulations having an impact on the
operations of such entities.
EFFECT OF GOVERNMENTAL POLICIES:
The difference between the interest rate paid on deposits and other
borrowings and the interest rate received on loans and securities will comprise
most of a bank's earnings. Due to recent deregulation of the industry, however,
the banking business is becoming increasingly dependent on the generation of fee
and service charge revenue.
The earnings and growth of a bank will be affected by both general economic
conditions and the monetary and fiscal policy of the United States Government
and its agencies, particularly the Federal Reserve. The Federal Reserve sets
national monetary policy such as seeking to curb inflation and combat recession.
This is accomplished by its open-market operations in United States Government
securities, adjustments in the amount of reserves that financial institutions
are required to maintain and adjustments to the discount rates on borrowings and
target rates for federal funds transactions. The actions of the Federal Reserve
in these areas influence the growth of bank loans, investments and deposits and
also affect interest rates on loans and deposits. The nature and timing of any
future changes in monetary policies and their potential impact on the Company
cannot be predicted.
STATISTICAL INFORMATION
The following tables and other material present certain statistical
information regarding the Company. This information is not audited and should be
read in conjunction with the Company's consolidated financial statements and the
accompanying notes.
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDER'S EQUITY
AND INTEREST RATES AND DIFFERENTIALS
Net interest income, the difference between interest income and interest
expense, is the most significant component of the Banks earnings. For internal
analytical purposes, management adjusts net interest income to a "taxable
equivalent" basis using a 35% federal tax rate on tax exempt items (primarily
interest on municipal securities and loans).
Another significant statistic in the analysis of net interest income is the
effective interest differential, which is the difference between the average
rate of interest earned on earning assets and the effective rate paid for all
funds, noninterest-bearing as well as interest-bearing. Since a portion of the
Bank's deposits do not bear interest, such as demand deposits, the rate paid for
all funds is lower than the rate on interest-bearing liabilities alone. The rate
differential for the years 1996 and 1995 was 5.10%.
Recognizing the importance of interest differential to total earnings,
management places great emphasis on managing interest rate spreads. Although
interest differential is affected by national, regional, and area economic
conditions, including the level of loan demand and interest rates, there are
significant opportunities to influence interest differential through appropriate
loan and investment policies. These policies are designed to maximize interest
differential while maintaining sufficient liquidity and availability of funds
for purposes of meeting existing commitments and for investment in loans and
other investment opportunities that may arise.
The following table shows interest income on interest-earning assets and
related average yields earned and interest expense on interest-bearing
liabilities and related average rates paid for the periods indicated:
<PAGE>
<TABLE>
<CAPTION>
COMPARATIVE AVERAGE BALANCES - YIELDS AND RATES
-----------------------------------------------
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------
1996 1995 1994
--------------------------------- ------------------------------ --------------------------------
Interest Average Interest Average Interest Average
Average Income or Yield or Average Income or Yield Average Income or Yield
Balance Expense Rate Balance Expense or Rate Balance Expense or Rate
(%) (%) (%)
- -------------------------------------------------------------------------------------------------------------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning
assets:
Investment
securities:
U.S. Treasury $221,120 $13,567 6.14% $257,228 $14,568 5.66% $316,232 $17,168 5.43%
U.S. government
obligations 449,687 34,886 7.76% 493,315 33,726 6.84% 423,555 24,772 5.85%
Municipal
obligations 60,690 5,451 8.98% 57,001 5,426 9.52% 48,194 4,912 10.19%
Other
securities 171,889 6,780 3.94% 87,606 6,231 7.11% 75,956 4,713 6.20%
Federal funds
sold &
securities
purchased
Under agreements
to resell 106,316 5,580 5.25% 99,559 5,820 5.85% 89,341 3,832 4.29%
Interest-bearing
time deposits
with other
banks 1,543 87 5.64% 500 31 6.20% 725 38 5.24%
Net loans
(2)(3) 1,083,165 107,079 9.89% 1,000,907 98,029 9.79% 906,342 82,967 9.15%
Total
interest- --------------------------------------------------------------------------------------------------
earning
assets/
interest
income (1) 2,094,410 173,430 8.28% 1,996,116 163,831 8.21% 1,860,345 138,402 7.44%
Less: Reserve
for loan
losses (17,670) --- (16,532) --- (15,251) ---
Noninterest-
earning assets:
Cash and due
from banks 121,157 --- 104,854 --- 112,931 ---
Property and
equipment 37,185 --- 37,786 --- 34,815 ---
Other assets 50,795 --- 93,302 --- 50,435 ---
- ------------------------------------------------------------------------------------------------------
Total assets $2,285,877 $173,430 7.58% $2,215,526 $163,831 7.39% $2,043,275 $138,402 6.77%
=====================================================================================================
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Interest-bearing
liabilities:
Deposits:
Savings, NOW
and money
market $ 694,017 19,001 2.74% $ 739,091 $ 20,515 2.78% $ 755,888 $ 20,703 2.74%
Time 778,602 41,624 5.35% 717,064 37,097 5.17% 657,587 27,490 4.18%
Federal funds
purchased 11,425 549 4.80% 15,284 863 5.65% 18,622 754 4.05%
Securities sold
under
agreements to
repurchase 79,411 3,465 4.36% 53,924 2,219 4.12% 24,710 718 2.91%
Long-term bonds 1,795 158 8.80% 2,799 203 7.25% 3,656 256 7.00%
Capital notes 7 --- --- 265 0.00% 1,571 76 4.84%
-----------------------------------------------------------------------------------------------------
Total interest-
bearing
liabilities/
interest
expense 1,565,250 64,804 4.14% 1,528,162 61,162 4.00% 1,462,034 49,997 3.42%
Noninterest-
bearing
liabilities:
Demand deposits 472,909 --- --- 439,495 --- --- 393,120 --- ---
Other
liabilities 17,667 --- --- 32,135 --- --- 13,183 --- ---
Stockholders'
equity 230,051 --- --- 215,734 --- --- 174,938 --- ---
-----------------------------------------------------------------------------------------------------
Total
liabilities &
stockholders'
equity $2,285,877 $ 64,804 2.83% $2,215,526 $ 61,162 2.76% $2,043,275 $ 49,997 2.45%
======================================================================================================
Interest-earning
assets $2,094,410 $1,996,116 $1,860,345
Interest-bearing
liabilities 1,565,250 1,528,162 1,462,034
Interest income $173,430 $163,831 $138,402
Interest expense 64,804 61,162 49,997
-------- -------- --------
Interest income/
interest-
earning assets 8.28% 8.21% 7.44%
Interest
expense/interest-
bearing liabilities 4.14% 4.00% 3.42%
Interest spread 4.14% 4.21% 4.02%
Net interest income $108,626 $102,669 $ 88,405
======== ======== ========
Net interest margin 5.19% 5.13% 4.75%
- ----------
</TABLE>
(1) Includes tax equivalent adjustments to interest income of $1.9 million,
$2.3 million, and $2.1 million in 1996, 1995 and 1994, respectively, using
an effective tax rate of 35%.
(2) Interest income includes fees on loans of $4.5 million in 1996, $4.1
million in 1995 and $3.2 million in 1994.
(3) Includes nonaccrual loans. See "Nonperforming Assets."
The following table sets forth, for the periods indicated, a summary of the
changes in interest income on interest-earning assets and interest expense on
interest-bearing liabilities relating to rate and volume variances. Nonaccrual
loans are included in average amounts of loans and do not bear interest for
purposes of the presentation. Changes that are not solely due to volume or rate
are allocated to volume.
<TABLE>
<CAPTION>
ANALYSIS OF CHANGES IN NET INTEREST INCOME
------------------------------------------
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1996 1995 1994
--------------------------- ------------------------------ ------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL VOLUME RATE TOTAL
--------------------------- ------------------------------ ------------------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME Investment securities:
U.S. Treasury $(2,044) $ 1,043 $(1,001) $( 3,327) $ 727 $( 2,600) $ 1,301 $( 994)$ 307
U.S. government obligations (2,984) 4,144 1,160 4,761 4,193 8,954 1,528 (1,630) ( 102)
Municipal obligations (1) 351 ( 326) 25 837 ( 323) 514 463 ( 751) ( 288)
Other securities 5,992 (5,443) 549 827 691 1,518 ( 602) 540 ( 62)
Federal funds sold & securities
purchased under agreements
to resell 395 ( 635) ( 240) 594 1,394 1,988 (1,536) 1,765 229
Interest bearing time deposits
with other banks 65 ( 9) 56 ( 14) 7 ( 7) ( 19) 12 ( 7)
Net Loans 8,053 997 9,050 9,261 5,801 15,062 5,459 (3,136) 2,323
-----------------------------------------------------------------------------------------
Total 9,828 ( 229) 9,599 12,939 12,490 25,429 6,594 (4,194) 2,400
-----------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits:
Savings, NOW and money
market (1,253) ( 261) (1,514) ( 490) 302 ( 188) 978 359 1,337
Time 3,181 1,346 4,527 3,097 6,510 9,607 ( 212) 133 ( 79)
Federal funds purchased ( 218) ( 96) ( 314) ( 189) 298 109 24 193 217
Securities sold under
agreements to repurchase 1,050 196 1,246 1,202 299 1,501 63 171 234
Long-term bonds ( 73) 28 ( 45) ( 62) 9 ( 53) ( 69)( 25) ( 94)
Capital notes ( 258) --- ( 258) 265 ( 76) 189 12 ( 26) ( 14)
-----------------------------------------------------------------------------------------------
Total 2,429 1,213 3,642 3,823 7,342 11,165 796 805 1,601
---------------------------------------------------------------------------------------------
Increase (decrease) in
net interest income $ 7,399 $(1,442) $ 5,957 $ 9,116 $ 5,148 $ 14,264 $ 5,798 $(4,999) $ 799
=============================================================================================
- ----------
</TABLE>
(1) Yields on tax-exempt investments have been adjusted to a tax equivalent
basis utilizing a 35% effective tax rate.
(2) Interest earned includes fees on loans of $4.5 million in 1996, $4.1
million in 1995 and $3.2 million in 1994.
RATE SENSITIVITY:
To control interest rate risk, management regularly monitors the volume of
interest sensitive assets compared with interest sensitive liabilities over
specific time intervals. The Company's interest rate management policy is
designed to produce a stable net interest margin in periods of interest rate
fluctuations. Interest sensitive assets and liabilities are those that are
subject to maturity or repricing within a given time period. Interest rate risk
is monitored, quantified and managed to produce a 5% or less impact on
short-term earnings.
The interest sensitivity gap is the difference between total interest
sensitive assets and liabilities in a given time period. At December 31, 1996,
the Company's cumulative interest sensitivity gap in the one year interval was
(21.75%) as compared to a cumulative interest sensitivity gap in the one year
interval of (18.44%) at December 31, 1995. The percentage reflects a higher
level of interest sensitive liabilities than assets repricing within one year.
Generally, when rate sensitive liabilities exceed rate sensitive assets, the net
interest margin is expected to be positively affected during periods of
decreasing interest rates and negatively affected during periods of increasing
rates.
The following tables set forth the Company's interest rate sensitivity gap
at December 31, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
ANALYSIS OF INTEREST SENSITIVITY AT DECEMBER 31, 1996
-----------------------------------------------------
AFTER THREE
WITHIN THROUGH ONE AFTER FIVE
THREE TWELVE THROUGH YEARS AND
MONTHS MONTHS FIVE YEARS INSENSITIVE TOTAL
--------------------------------------------------------------------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Net loans $ 302,553 $ 107,128 $ 531,015 $ 233,271 $1,173,967
Securities and time deposits 119,629 94,242 225,752 464,914 904,537
Federal funds 12,000 -- -- -- 12,000
--------------------------------------------------------------------------
Total earning assets $ 434,182 $ 201,370 $ 756,767 $ 698,185 $2,090,504
===========================================================================
20.77% 9.64% 36.20% 33.39% 100.00%
Interest bearing deposits, excluding
CDs greater than $100,000 $ 542,277 $ 285,565 $ 440,733 $ 3,339 $1,271,914
CDs greater than $100,000 97,686 75,521 48,491 -- 221,698
Short-term borrowings 87,609 -- -- -- 87,609
Other borrowings 500 1,050 -- -- 1,550
--------------------------------------------------------------------------
Total interest-bearing funds 728,072 362,136 489,224 3,339 1,582,771
Interest-free funds -- -- -- 507,733 507,733
--------------------------------------------------------------------------
Funds supporting earning assets $ 728,072 $ 362,136 $ 489,224 $ 511,072 $2,090,504
==========================================================================
34.82% 17.33% 23.40% 24.45% 100.00%
Interest sensitivity gap $(293,890) $(160,766) $ 267,543 $ 187,113 --
Cumulative gap $(293,890) $(454,656) $(187,113) -- --
Percent of total earning assets (14.06%) (21.75%) (8.95%) -- --
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF INTEREST SENSITIVITY AT DECEMBER 31, 1995
-----------------------------------------------------
AFTER THREE
WITHIN THROUGH ONE AFTER FIVE
THREE TWELVE THROUGH YEARS AND
MONTHS MONTHS FIVE YEARS INSENSITIVE TOTAL
-------------------------------------------------------------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Net loans $ 281,636 $ 103,346 $ 429,298 $ 220,697 $1,034,977
Securities and time deposits 181,199 137,057 219,763 311,837 849,856
Federal funds 153,725 -- -- -- 153,725
-------------------------------------------------------------------
Total earning assets $ 616,560 $ 240,403 $ 649,061 $ 532,534 $2,038,558
===================================================================
30.25% 11.79% 31.84% 26.12% 100.00%
Interest bearing deposits, excluding
CDs greater than $100,000 $ 566,967 $ 443,939 $ 234,772 $ 15 $1,245,693
CDs greater than $100,000 73,320 79,031 61,191 -- 213,542
Short-term borrowings 66,585 -- -- -- 66,585
Other borrowings 1,045 1,970 2,100 -- 5,115
Total interest-bearing funds 707,917 524,940 298,063 15 1,530,935
-------------------------------------------------------------------
Interest-free funds -- -- -- 507,623 507,623
-------------------------------------------------------------------
Funds supporting earning assets $ 707,917 $ 524,940 $ 298,063 $ 507,638 $2,038,558
===================================================================
34.73% 25.75% 14.62% 24.90% 100.00%
Interest sensitivity gap $ (91,357) $(284,537) $ 350,998 $ 24,896 --
Cumulative gap $ (91,357) $(375,894) $ (24,896) -- --
Percent of total earning assets (4.48%) (18.44%) (1.22%) -- --
</TABLE>
INCOME TAXES:
The Company had income tax expense of $15.2 million and $13.1 million for the
years ended December 31, 1996 and 1995, respectively. This represents effective
tax rates of 32.4% and 32.6% for December 31, 1996 and 1995, respectively.
PERFORMANCE AND EQUITY RATIOS:
The following table sets forth, for the periods indicated, the percentage of
net income to average assets and average stockholders' equity, the percentage of
common stock dividends to net income and the percentage of average stockholders'
equity to average assets.
YEARS ENDED DECEMBER 31,
--------------------------
1996 1995 1994
-------------------------
Return on average assets (%) 1.38 1.22 1.13
Return on average stockholders'
equity (%) 13.74 12.50 13.22
Dividend payout ratio (%) 28.90 31.45 32.21
Average stockholders' equity to
average assets (%) 10.06 9.74 8.56
SECURITIES PORTFOLIO:
The Company generally purchases securities to be held to maturity, with a
maturity schedule that provides ample liquidity. Securities classified as
held-to-maturity are carried at amortized cost. Certain securities have been
classified as available-for-sale based on management's internal assessment of
the portfolio considering future liquidity, earning requirements and capital
position. The Company increased its available-for-sale portfolio during 1995.
Generally, securities with a market risk have been placed in this category. The
December 31, 1996 book value of the held-to-maturity portfolio was $804 million
and the market value was $807 million. The available-for-sale portfolio balance
was $98 million at December 31, 1996.
The book values of securities classified as available-for-sale as of December
31, 1996, 1995 and 1994, were as follows (in thousands):
DECEMBER 31
-------------------------------
1996 1995 1994
-------------------------------
U.S. Treasury securities $ 499 $ 1,493 $ 2
Other U.S. gov. obligations 53,802 61,470 659
Municipal obligations 923 962 997
Other securities --- 544 ---
Mortgage-backed securities 5,373 5,140 ---
CMOs 33,038 34,695 19,385
Equity securities 4,932 4,993 ---
--------------------------------
$ 98,567 $109,297 $ 20,382
================================
The book value, book yield and market value of the debt securities
classified as available-for-sale as of December 31, 1996, by estimated maturity,
were as follows (in thousands):
BOOK VALUE YIELD (%) MARKET VALUE
-------------------------------------
Due in one year or less $ 4,029 6.40 $ 3,939
Due after one year through
five years 17,403 6.56 17,149
Due after five years through
ten years 15,908 6.60 15,753
Due after ten years 56,295 6.57 55,822
-------------------------------------
$ 93,635 6.57 $92,663
=====================================
The book value and market values of securities classified as
held-to-maturity as of December 31, 1996, 1995 and 1994 were as follows (in
thousands):
DECEMBER 31
--------------------------------
1996 1995 1994
--------------------------------
U.S. Treasury securities $175,171 $239,892 $280,578
Other U.S. gov. obligations 338,796 317,140 275,209
Municipal obligations 66,367 56,961 58,224
Other securities --- 11,027 15,747
Mortgage-backed securities 87,991 50,427 129,028
CMOs 135,673 63,082 88,807
--------------------------------
$809,998 $738,529 $847,593
================================
The book value, book yield and market value of the securities classified as
held-to-maturity as of December 31, 1996, by contractual maturity, were as
follows (in thousands):
BOOK VALUE YIELD (%) MARKET VALUE
-----------------------------------
Due in one year or less $ 99,189 6.60 $ 99,328
Due after one year through
five years 227,023 6.64 227,834
Due after five years through
ten years 249,010 6.70 248,796
Due after ten years 228,776 6.64 230,752
----------------------------------
$803,998 6.65 $806,710
==================================
LOAN PORTFOLIO:
The Banks' primary lending focus is to provide commercial, consumer and real
estate loans to consumers and to small and middle market businesses in their
respective market areas. Diversification in the loan portfolio is a means of
reducing the risks associated with economic fluctuations. The Banks have no
concentrations of loans to particular borrowers or loans to any foreign
entities.
Loan underwriting standards and loan loss reserve maintenance further reduce
the impact of credit risk to the Company. Loans are underwritten on the basis of
cash flow capacity and collateral market value. Generally, real estate mortgage
loans are made when the borrower produces sufficient cash flow capacity and
equity in the property to offset historical market devaluations. The loan loss
reserve adequacy is tested monthly based on historical losses through different
economic cycles and projected future losses specifically identified.
The following table sets forth, for the periods indicated, the composition
of the loan portfolio of the Company:
<TABLE>
<CAPTION>
LOAN PORTFOLIO
DECEMBER 31,
----------------------------------------------------------------------
1996 1995 1994 1993 1992
----------------------------------------------------------------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Real estate:
Residential mortgages
1-4 family $ 333,581 $ 224,646 $ 214,247 $ 213,216 $ 211,931
Residential mortgages
multifamily 12,769 9,674 7,302 7,124 7,804
Home equity lines 13,000 11,825 11,740 13,147 12,873
Construction and development 71,057 41,602 35,719 24,234 18,454
Nonresidential 168,203 127,027 112,957 119,094 111,504
Commercial, industrial and
other 169,814 176,942 119,997 160,385 157,797
Consumer 372,951 409,608 397,879 366,401 297,401
Lease financing and depository
institutions 16,095 13,811 10,074 6,673 6,079
Political subdivisions 12,142 14,394 12,806 11,668 12,791
Credit card 29,158 32,104 30,794 27,466 26,482
---------------------------------------------------------------
1,198,770 1,061,633 953,515 949,408 863,116
Less, unearned income 24,806 26,656 27,850 26,396 22,393
---------------------------------------------------------------
Net loans $1,173,967 $1,034,977 $ 925,665 $ 923,012 $ 840,723
===============================================================
</TABLE>
Prior to July 1991, a correspondent bank of Hancock Bank MS issued credit
cards under the Bank's name to customers of Hancock Bank MS and retained the
outstanding receivables. In July 1991, Hancock Bank MS purchased, at par, from
its correspondent bank, certain credit cards with outstanding balances of
approximately $7.8 million and simultaneously transferred, at par, the cards and
balances to Hancock Bank LA. The resulting combined consumer and corporate
credit card portfolio aggregated approximately $11.5 million with approximately
17,700 cards outstanding. At December 31, 1996, the portfolio balance had
increased to approximately $20.8 million with approximately 37,000 cards
outstanding.
The following table sets forth, for the periods indicated, the approximate
maturity by type of the loan portfolio of the Company:
<TABLE>
<CAPTION>
LOAN MATURITY SCHEDULE
DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------------------------- ------------------------------------------
MATURITY RANGE MATURITY RANGE
---------------------------------------- ------------------------------------------
AFTER ONE AFTER ONE
WITHIN THROUGH AFTER FIVE WITHIN THROUGH AFTER FIVE
ONE YEAR FIVE YEARS YEARS TOTAL ONE YEAR FIVE YEARS YEARS TOTAL
--------------------------------------------------------------------------------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, industrial and
other $ 68,436 $ 77,960 $ 23,418 $ 169,814 $ 70,958 $ 77,897 $ 28,087 $ 176,942
Real estate - construction 44,714 18,994 7,349 71,057 20,227 14,685 6,690 41,602
All other loans 148,232 557,936 251,731 957,899 154,587 454,385 234,117 843,089
---------------------------------------------------------------------------------------
Total loans $261,382 $654,891 $282,498 $1,198,770 $245,772 $546,967 $268,894 $1,061,633
=======================================================================================
</TABLE>
The sensitivity to interest rate changes of that portion of the Company's
loan portfolio that matures after one year is shown below:
<TABLE>
<CAPTION>
LOAN SENSITIVITY TO CHANGES IN INTEREST RATES
DECEMBER 31, DECEMBER 31,
1996 1995
-------------------------
(Amounts in thousands)
<S> <C> <C>
Commercial, industrial, and real estate construction maturing after one year:
Fixed rate $188,476 $150,111
Floating rate 80,793 80,298
Other loans maturing after one year:
Fixed rate 594,593 559,592
Floating rate 18,781 25,860
----------------------
Total $882,643 $815,861
=====================
</TABLE>
NONPERFORMING ASSETS:
The following table sets forth nonperforming assets by type for the periods
indicated, consisting of nonaccrual loans, restructured loans, real estate owned
and loans past due 90 days or more and still accruing:
<TABLE>
DECEMBER 31,
- -----------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans:
Real estate $ 753 $ 2,406 $ 1,914 $ 1,888 $ 4,050
Commercial, industrial
and other 169 1,144 525 1,424 399
Consumer 1,298 1,176 1,287 1,322 1,735
Lease financing --- --- --- --- 22
Depository institutions --- --- --- --- ---
Political subdivisions --- --- --- --- ---
Restructured loans 685 611 614 482 194
-------------------------------------------------------------------------------------------
Total nonperforming
loans 2,905 5,337 4,340 5,116 6,400
Acquired real estate
owned 147 140 --- --- ---
Real estate owned 1,728 946 1,001 1,029 1,673
-------------------------------------------------------------------------------------------
Total nonperforming
assets $ 4,780 $ 6,423 $ 5,341 $ 6,145 $ 8,073
===========================================================================================
Loans 90+ days past
due and still
accruing $8,361 $ 4,089 $ 2,692 $ 4,338 $ 7,356
===========================================================================================
Ratios (%):
Nonperforming loans
to net loans 0.71 0.52 0.47 0.55 0.76
Nonperforming assets
to net loans and
real estate owned 0.41 0.62 0.58 0.67 0.96
Nonperforming loans
to average net loans 0.77 0.53 0.48 0.60 0.80
Reserve for loan
losses to
nonperforming loans 681.58 325.86 354.19 299.18 229.41
</TABLE>
The following table sets forth, for the periods indicated, the amount of
interest that would have been recorded on nonaccrual loans had the loans not
been classified as "nonaccrual" as well as the interest that would have been
recorded under the original terms of restructured loans:
<TABLE>
DECEMBER 31,
------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------------------------------------------------------------------------------------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual $ 220 $ 463 $ 340 $ 441 $ 603
Restructured 68 60 56 45 17
------------------------------------------------------------------------------------------------
Total $ 288 $ 523 $ 396 $ 486 $ 620
===========================================================================================
</TABLE>
Interest actually received on nonaccrual and restructured loans was
insignificant.
LOAN LOSS, CHARGE-OFF AND RECOVERY EXPENSES:
The following table sets forth, for the periods indicated, average net loans
outstanding, reserve for loan losses, amounts charged-off and recoveries of
loans previously charged-off:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------------------------------------------------------------------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Net loans outstanding at end of period $1,173,967 $1,034,978 $ 925,665 $ 923,012 $ 840,723
================================================================================
Average net loans outstanding $1,083,165 $1,000,907 $ 904,342 $ 847,526 $ 796,018
================================================================================
Balance of reserve for loan losses
at beginning of period $ 17,391 $ 15,372 $ 15,306 $ 14,682 $ 12,805
Loans charged-off:
Real estate 73 210 106 318 766
Commercial 975 636 637 2,218 2,516
Consumer 5,417 4,524 2,706 3,087 3,981
Lease financing 1 13 --- 53 2
Depository institutions --- --- --- --- ---
Political subdivisions --- --- --- --- ---
--------------------------------------------------------------------------------
Total charge-offs 6,466 5,383 3,449 5,676 7,265
--------------------------------------------------------------------------------
Recoveries of loans previously charged-off:
Real estate 186 15 53 102 85
Commercial 937 971 570 695 430
Consumer 945 839 886 869 648
Lease financing 0 5 8 2 1
Depository institutions --- --- --- --- ---
Political subdivisions --- --- --- --- ---
------------------------------------------------------------------------
Total recoveries 2,068 1,830 1,517 1,668 1,164
------------------------------------------------------------------------
Net charge-offs 4,398 3,553 1,932 4,008 6,101
Provision for loan losses 6,153 4,425 1,998 4,632 7,978
Balance acquired through acquisition 654 1,147 --- --- ---
------------------------------------------------------------------------
Balance of reserve for loan losses
at end of period $ 19,800 $ 17,391 $ 15,372 $ 15,306 $ 14,682
========================================================================
</TABLE>
The following table sets forth, for the periods indicated, certain ratios
related to the Company's charge-offs, reserve for loan losses and outstanding
loans:
<TABLE>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
-------------------------------------------------
Ratios (%):
Net charge-offs to average net loans 0.41 0.35 0.21 0.47 0.77
Net charge-offs to period-end net loans 0.37 0.34 0.21 0.43 0.73
Reserve for loan losses to average net loans 1.83 1.74 1.70 1.81 1.84
Reserve for loan losses to period-end net loans 1.69 1.68 1.66 1.66 1.75
Net charge-offs to loan loss reserve 22.21 20.43 12.57 26.19 41.55
Net charge-offs to loan loss provision 71.47 80.29 96.70 86.53 76.47
</TABLE>
An allocation of the loan loss reserve by major loan category is set forth
in the following table. The allocation is not necessarily indicative of the
category of future losses, and the full reserve at December 31, 1996, is
available to absorb losses occurring in any category of loans.
<TABLE>
DECEMBER 31,
---------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---------------------------------------------------------------------------------------------------
RESERVE % OF RESERVE % OF RESERVE % OF RESERVE % OF RESERVE % OF
FOR LOANS FOR LOANS FOR LOANS FOR LOANS FOR LOANS
LOAN TO TOTAL LOAN TO TOTAL LOAN TO TOTAL LOAN TO TOTAL LOAN TO TOTAL
LOSSES LOANS LOSSES LOANS LOSSES LOANS LOSSES LOANS LOSSES LOANS
---------------------------------------------------------------------------------------------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate $3,000 49.94 $ 2,000 39.08 $1,250 46.06 $1,250 36.69 1,250 42.00
Commercial,
industrial
and other 5,750 16.52 5,250 19.32 5,000 14.98 5,000 18.82 4,750 20.47
Consumer 8,250 31.11 7,500 38.58 6,500 41.73 6,500 38.60 6,250 34.46
Credit card 800 2.43 500 3.02 500 3.23 500 2.89 500 3.07
Unallocated 2,000 --- 2,141 --- 2,122 --- 2,056 --- 1,932 ---
------------------------------------------------------------------------------------------------------
$19,800 100.00 17,391 100.00 $15,372 100.00 $15,306 100.00 $14,682 100.00
======================================================================================================
</TABLE>
DEPOSITS AND OTHER DEBT INSTRUMENTS:
The following table sets forth the distribution of the average deposit
accounts for the periods indicated and the weighted average interest rates on
each category of deposits:
<TABLE>
1996 1995 1994
------------------------------- ------------------------------- -------------------------
PERCENT PERCENT PERCENT
OF OF OF RATE
AMOUNT DEPOSITS RATE (%) AMOUNT DEPOSITS RATE (%) AMOUNT DEPOSITS (%)
------------------------------- ------------------------------- -------------------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest bearing
accounts $ 472,909 24.30 --- $ 439,495 23.18 --- $393,120 21.76 ---
NOW accounts 268,391 13.8 2.68 288,947 15.24 2.64 293,347 16.24 2.58
Money market and other
savings accounts 425,626 21.88 2.78 450,144 23.75 2.86 462,541 25.60 2.84
Time deposits 778,602 40.02 5.34 717,064 37.83 5.17 657,587 36.40 4.18
---------------------------------------------------------------------------------------------------
$1,945,528 100.00 $1,895,650 100.00 $1,806,595 100.00
===================================================================================================
</TABLE>
The Banks traditionally price their deposits to position
themselves in the middle of the local market. The Banks' policy
is not to accept brokered deposits.
Time certificates of deposit of $100,000 and over at December 31, 1996 had
maturities as follows:
DECEMBER 31, 1996
-------------------
(Amounts in thousands)
Three months or less $ 97,686
Over three through six months 29,453
Over six through twelve months 46,068
Over twelve months 48,491
---------
Total $221,698
=========
SHORT-TERM BORROWINGS:
The following table sets forth certain information concerning the Company's
short-term borrowings, which consist of federal funds purchased and securities
sold under agreements to repurchase.
YEARS ENDED DECEMBER 31,
--------------------------
1996 1995 1994
--------------------------
(Amounts in thousands)
Federal funds purchased:
Amount outstanding at
period-end $ 0 $11,300 $29,150
Weighted average interest at
period-end 0.00% 3.12% 2.75%
Maximum amount at any month-end
during period $ 19,725 $16,325 $37,000
Average amount outstanding
during period $ 11,425 $15,284 $18,622
Weighted average interest rate
during period 5.33% 5.65% 4.05%
Securities sold under agreements to repurchase:
Amount outstanding at
period-end $ 87,609 $55,285 $25,146
Weighted average interest at
period-end 4.25% 2.50% 2.50%
Maximum amount at any month
end during-period $156,595 $88,070 $43,096
Average amount outstanding
during period $ 79,411 $53,924 $24,710
Weighted average interest
rate during period 4.26% 4.12% 2.91%
LIQUIDITY:
Liquidity represents an institution's ability to provide funds to satisfy
demands from depositors, borrowers and other commitments by either converting
assets into cash or accessing new or existing sources of incremental funds. The
principal sources of funds that provide liquidity are customer deposits,
payments of interest and principal on loans, maturities in and sales of
investment securities, earnings and borrowings. At December 31, 1996, cash and
due from banks, securities available-for-sale, federal funds sold and repurchase
agreements were in excess of 10% of total deposits at December 31, 1996.
The Company depends upon the dividends paid to it from the Banks as a
principal source of funds for its debt service and dividend requirements. As of
December 31, 1996, there was approximately $85 million available to be
dividended to the Company from the Banks.
CAPITAL RESOURCES:
Risk-based and leverage capital ratios for the Company and the Banks for the
periods indicated are shown in the following table:
<TABLE>
RISK-BASED CAPITAL RATIOS TIER 1 LEVERAGE
---------------------------------------------------------------------------------------
TOTAL TIER 1 RATIO
---------------------------------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Hancock Bank
MS 18.62% 17.98% 17.79% 17.18% 10.10% 9.26%
Hancock Bank
LA 19.63 22.35 18.38 21.10 10.54 9.61
Company 19.02 18.64 18.03 17.69 10.37 9.28
</TABLE>
Risk-based capital requirements are intended to make regulatory capital more
sensitive to risk elements of the Company. Currently, the Company is required to
maintain a minimum risk-based capital ratio of 8.0%, with not less than 4.0% in
Tier 1 capital. In addition, the Company must maintain a minimum Tier 1 leverage
ratio (Tier 1 capital to total assets) of at least 3.0% based upon the
regulator's latest composite rating of the institution.
NEW ACCOUNTING STANDARDS:
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 125 "Accounting for Transfers and servicing of
Financial Assets and Extinguishments of Liabilities" which provides revised
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities. The Company does not anticipate that
the adoption of this statement in 1997 will have a significant effect of its
financial condition or results of operations.
IMPACT OF INFLATION:
Unlike most industrial companies, the assets and liabilities of financial
institutions such as the Banks are primarily monetary in nature. Interest rates,
therefore, have a more significant effect on the Banks' performance than the
effect of general levels of inflation on the price of goods and services.
Interest rates earned and paid by the Banks are affected to a degree by the rate
of inflation, and noninterest income and expenses can be affected by increasing
rates of inflation; however, the Company believes that the effects of inflation
are generally manageable through asset/liability management.
ITEM 2 - PROPERTIES
The Company's main offices are located at One Hancock Plaza, Gulfport,
Mississippi. The building has fourteen stories, of which seven are utilized by
the Company. The remaining seven stories are presently leased to outside
parties.
The building is leased from the City of Gulfport in connection with a urban
development revenue bond issue with a present balance of $1,050,000. The lease
payments by Hancock Bank MS, which are equivalent in amount to the payments of
principal and interest on the bonds, are used by the City to make payments on
the bonds. Hancock Bank MS, however, effectively has ownership of the building
since title will revert when all outstanding bonds have been paid. For this
reason, the Company carries the building as an asset and the bonds as a long
term payable on its balance sheet. The bonds mature at various dates through
1997.
The following banking offices in Mississippi and Louisiana are held in fee
(number of locations shown in parenthesis):
Albany, LA (1) Hammond, LA (1)
Angie, LA (1) Independence, LA (1)
Baker, LA (1) Long Beach, MS (2)
Baton Rouge, LA (13) Loranger, LA (1)
Bay St. Louis, MS (2) Lyman, MS (1)
Biloxi, MS (3) Moss Point, MS (3)
Bogalusa, LA (1) Mt. Hermon, LA (1)
Denham Springs, LA (4) Ocean Springs, MS (2)
D'Iberville, MS (1) Pascagoula, MS (4)
Escatawpa, MS (1) Pass Christian, MS (1)
Franklinton, LA (1) Picayune, MS (2)
French Settlement, LA (1) Poplarville, MS (1)
Gautier, MS (1) Walker, LA (1)
Gulfport, MS (7) Waveland, MS (1)
The following banking offices in Mississippi and Louisiana are leased under
agreements with unexpired terms of from one to thirty-four years including
renewal options (number of locations shown in parenthesis):
Baton Rouge, LA (5) Hammond, LA (1)
Bay St. Louis, MS (2) Pascagoula, MS (1)
Biloxi, MS (1) Picayune, MS (2)
Diamondhead, MS (1) Springfield, LA (1)
Gulfport, MS (5) Vancleave, MS (1)
In addition to the above, Hancock Bank MS owns land and other properties
acquired through foreclosures of loans. The major item is approximately 3,700
acres of timber land in Hancock County, Mississippi, which Hancock Bank MS
acquired by foreclosure in the 1930's.
ITEM 3 - LEGAL PROCEEDINGS
The Company is party to various legal proceedings arising in the ordinary
course of business. In the opinion of management, after consultation with
outside legal counsel, all such matters are adequately covered by insurance or,
if not so covered, are not expected to have a material adverse effect on the
financial condition of the Company.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no
matters submitted to a vote of security
holders during the quarter ended December 31, 1996.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
The information under the caption "Market Information" on page 6 of the
Company's 1996 Annual Report to Stockholders is incorporated herein by
reference.
ITEM 6 - SELECTED FINANCIAL DATA
The information under the caption "Consolidated Summary of Selected
Financial Information" on Page 7 of the Company's 1996 Annual Report to
Stockholders is incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on Pages 34 and 35 of the
Company's 1996 Annual Report to Stockholders is incorporated herein by
reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Company and
subsidiaries, and the independent auditors' report, appearing on Pages 18
through 33 of the Company's 1996 Annual Report to Stockholders is incorporated
herein by reference:
Consolidated Balance Sheets on Page 18 Consolidated Statements of Earnings
on Page 19 Consolidated Statements of Stockholders' Equity on Page 20
Consolidated Statements of Cash Flows on Page 21 Notes to Consolidated
Financial Statements on Pages 22 through 32 Independent Auditors' Report on
Page 33
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements with the Company's independent accountants
and auditors on any matter of accounting principles or practices or financial
statement disclosure.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information concerning this item, see "Election of Directors" (Pages
3-7) and "Executive Compensation" (Pages 12-18) in the Proxy Statement for the
Annual Meeting of Shareholders held February 20, 1997, which was filed by the
Registrant in definitive form with the Commission on January 21, 1997 and is
incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
For information concerning this item see "Executive Compensation" (Pages
12-18) in the Proxy Statement for the Annual Meeting of Shareholders held
February 20, 1997, which was filed by the Registrant in definitive form with the
Commission on January 21, 1997 and is incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
For information concerning this item see "Principal Shareholders" (Page 10)
and "Election of Directors" (Pages 3-7) in the Proxy Statement for the Annual
Meeting of Shareholders held February 20, 1997, which was filed by the
Registrant in definitive form with the Commission on January 21, 1997 and is
incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information concerning this item see "Certain Transactions and
Relationships" (Page 18) in the Proxy Statement for the Annual Meeting of
Shareholders held February 20, 1997, which was filed by the Registrant in
definitive form with the Commission on January 21, 1997 and is incorporated
herein by
reference.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
HANCOCK HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
(a) 1. AND 2. CONSOLIDATED FINANCIAL STATEMENTS:
The following have been incorporated herein from the Company's 1996 Annual
Report to Stockholders and are incorporated herein by reference:
- Independent Auditors' Report
- Consolidated Balance Sheets as of December 31, 1996 and
1995
- Consolidated Statements of Earnings for the three years
ended December 31, 1996
- Consolidated Statements of Stockholders' Equity for the
three years ended December 31, 1996
- Consolidated Statements of Cash Flows for the three
years ended December 31, 1996
- Notes to Consolidated Financial Statements for the three
years ended December 31, 1996
All other financial statements and schedules are omitted as the required
information is inapplicable or the required information is presented in the
consolidated financial statements or related notes.
(a) 3. EXHIBITS:
(2.1) Agreement and Plan of Merger dated May 30, 1985 among Hancock Holding
Company, Hancock Bank and Pascagoula-Moss Point Bank (filed as Exhibit 2
to the Registrant's Form 8-K dated June 6, 1985 and incorporated herein
by reference).
(2.2) Amendment dated July 9, 1985 to Agreement and Plan of Merger dated May
30, 1985 among Hancock Holding Company, Hancock Bank and Pascagoula-Moss
Point Bank (filed as Exhibit 19 to Registrant's Form 10-Q for the
quarter ended June 30, 1985 and incorporated herein by reference).
(2.3) Stock Purchase Agreement dated February 12, 1990 among Hancock Holding
Company, Metropolitan Corporation and Metropolitan National Bank (filed
as Exhibit 2.3 to Registrant's Form 10-K for the year ended December 31,
1989 and incorporated herein by reference).
(2.4) Modified Purchase and Assumption Agreement dated August
2, 1990, among Hancock Bank of Louisiana and the Federal
Deposit Insurance Corporation, receiver of American Bank
and Trust Company of Baton Rouge, Louisiana (filed as
Exhibit 2.1 to the Registrant's Form 10-Q for the
quarter ended June 30, 1990 and incorporated herein by
reference).
(2.5) Agreement and Plan of Reorganization dated November 30, 1993 among
Hancock Holding Company, Hancock Bank of Louisiana and First State Bank
and Trust Company of East Baton Rouge Parish, Baker, Louisiana (filed as
Exhibit 2.5 to the Registrant's Form 10-K dated December 31, 1993).
(2.6) Agreement and Plan of Reorganization dated July 6, 1994 among Hancock
Holding Company and Washington Bancorp, Franklinton, Louisiana (filed as
Exhibit 2 to the Registrant's Form S-4, Registration Number 33-56505,
dated November 16, 1994).
(2.7) Agreement and Plan of Reorganization dated August 20, 1994 among Hancock
Holding Company and First Denham Bancshares, Inc., Denham Springs,
Louisiana (filed as Exhibit 2 to the Registrant's Form S-4, Registration
Number 33-56285, dated November 2, 1994).
(2.8) Agreement and Plan of Reorganization dated November 15, 1996 among
Hancock Holding Company, Hancock Bank of Louisiana, Community
Bancshares, Inc. and Community State Bank, Hammond Louisiana (filed as
Exhibit 2 to the Registrant's Form S-4, Registration Number 333-11873,
dated September 12, 1996).
(2.9) Agreement and Plan of Reorganization dated January 17, 1997 among
Hancock Holding Company, Hancock Bank of Louisiana and Southeast
National Bank, Hammond, Louisiana (filed as Exhibit 2 to the
Registrant's Form S-4, Registration Number 333-14223, dated October 16,
1996).
(3.1) Amended and Restated Articles of Incorporation dated November 8, 1990
(filed as Exhibit 3.1 to the Registrant's Form 10-K for the year ended
December 31, 1990 and incorporated herein by reference).
(3.2) Amended and Restated Bylaws dated November 8, 1990 (filed as Exhibit 3.2
to the Registrant's Form 10-K for the year ended December 31, 1990 and
incorporated herein by reference).
(3.3) Articles of Amendment to the Articles of Incorporation of Hancock
Holding Company, dated October 16, 1991 (filed as Exhibit 4.1 to the
Registrant's Form 10-Q for the quarter ended September 30, 1991).
(3.4) Articles of Correction, filed with Mississippi Secretary of State on
November 15, 1991 (filed as Exhibit 4.2 to the Registrant's Form 10-Q
for the quarter ended September 30, 1991).
(3.5) Articles of Amendment to the Articles of Incorporation of Hancock
Holding Company, adopted February 13, 1992 (filed as Exhibit 3.5 to the
Registrant's Form 10-K for the year ended December 31, 1992 and
incorporated herein by reference).
(3.6) Articles of Correction, filed with Mississippi Secretary of State on
March 2, 1992 (filed as Exhibit 3.6 to the Registrant's Form 10-K for
the year ended December 31, 1992 and incorporated herein by reference).
(3.7) Articles of Amendment to the Articles of Incorporation adopted February
20, 1997 (filed herewith).
(4.1) Specimen stock certificate (reflecting change in par value from $10.00
to $3.33, effective March 6, 1989) (filed as Exhibit 4.1 to the
Registrant's Form 10-Q for the quarter ended March 31, 1989 and
incorporated herein by reference).
(4.2) By executing this Form 10-K, the Registrant hereby
agrees to deliver to the Commission upon request copies
of instruments defining the rights of holders of
long-term debt of the Registrant or its consolidated
subsidiaries or its unconsolidated subsidiaries for
which financial statements are required to be filed,
where the total amount of such securities authorized
thereunder does not exceed 10 percent of the total
assets of the Registrant and its subsidiaries on a
consolidated basis.
(10.1) 1996 Long Term Incentive Plan (filed as Exhibit 10.1 to the Registrant's
Form 10-K for the year ended December 31, 1995, and incorporated herein
by reference).
(10.2) Description of Hancock Bank Executive Supplemental Reimbursement Plan,
as amended (provided on page 17 of the Registrant's definitive proxy
statement for its annual shareholders' meeting on February 20, 1997
filed with the Registrant's definitive proxy materials on January 21,
1997 and incorporated herein by reference).
(10.3) Description of Hancock Bank Automobile Plan (provided on page 17 of the
Registrant's definitive proxy statement for its annual shareholders'
meeting on February 20, 1997 filed with the Registrant's definitive
proxy materials on January 21, 1997 and incorporated herein by
reference).
(10.4) Description of Deferred Compensation Arrangement for Directors (provided
on pages 12-18 of the Registrant's definitive proxy statement for its
annual shareholders' meeting on February 20, 1997 filed with the
Registrant's definitive proxy materials on January 21, 1997 and
incorporated herein by reference).
(10.5) Site Lease Agreement between Hancock Bank and City of Gulfport,
Mississippi dated as of March 1, 1989 (filed as Exhibit 10.4 to the
Registrant's Form 10-K for the year ended December 31, 1989 and
incorporated herein by reference).
(10.6) Project Lease Agreement between Hancock Bank and City of Gulfport,
Mississippi dated as of March 1, 1989 (filed as Exhibit 10.5 to the
Registrant's Form 10-K for the year ended December 31, 1989 and
incorporated herein by reference).
(10.7) Deed of Trust dated as of March 1, 1989 from Hancock Bank to Deposit
Guaranty National Bank as trustee (filed as Exhibit 10.6 to the
Registrant's Form 10-K for the year ended December 31, 1989 and
incorporated herein by reference).
(10.8) Trust Indenture between City of Gulfport, Mississippi and Deposit
Guaranty National Bank dated as of March 1, 1989 (filed as Exhibit 10.7
to the Registrant's Form 10-K for the year ended December 31, 1989 and
incorporated herein by reference).
(10.9) Guaranty Agreement dated as of March 1, 1989 from Hancock Bank to
Deposit Guaranty National Bank as trustee (filed as Exhibit 10.8 to the
Registrant's Form 10-K for the year ended December 31, 1989 and
incorporated herein by reference).
(10.10) Bond Purchase Agreement dated as of February 23, 1989
among Hancock Bank, J. C. Bradford & Co. and City of
Gulfport, Mississippi (filed as Exhibit 10.9 to the
Registrant's Form 10-K for the year ended December 31,
1989 and incorporated herein by reference).
(13) Annual Report to Stockholders for year ending December 31, 1996
(furnished for the information of the Commission only and not deemed
"filed" except for those portions which are specifically incorporated
herein by reference).
(21) Proxy Statement for the Registrant's Annual Meeting of Shareholders on
February 20, 1997 (deemed "filed" for the purposes of this Form 10-K
only for those portions which are specifically incorporated herein by
reference).
(22) Subsidiaries of the Registrant.
(27) Selected Financial Data
JURISDICTION HOLDER OF
NAME OF INCORPORATION OUTSTANDING STOCK (1)
- -----------------------------------------------------------------
Hancock Bank Mississippi Hancock Holding Company
Hancock Bank of
Louisiana Louisiana Hancock Holding Company
Hancock Bank
Securities Mississippi Hancock Bank
Corporation
Hancock Insurance
Agency Mississippi Hancock Bank
Hancock Investment
Services, Inc. Mississippi Hancock Bank
Town Properties,
Inc. Mississippi Hancock Bank
The Gulfport
Building, Inc. Mississippi Hancock Bank
of Mississippi
Harrison Financial
Services, Inc. Mississippi Hancock Bank
Hancock Mortgage
Corporation Mississippi Hancock Bank and
Hancock Securities Corp.
Harrison Life
Insurance Company Mississippi 79% owned by Hancock Bank
(1) All are 100% owned except as indicated.
(23) Consent of Independent Accountants.
(b) Reports on Form 8-K: No reports on Form 8-k were filed during the last
quarter of the period covered by this report.
(c) The response to this portion of Item 14 is submitted as a separate section
of this report.
(d) Not applicable.
(27) Selected Financial Data
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HANCOCK HOLDING COMPANY
DATE MARCH 25, 1997 /S/ LEO W. SEAL, JR.
By Leo W. Seal, Jr., President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/S/ LEO W. SEAL, JR. President and Director March 25, 1997
Leo W. Seal, Jr. (Chief Executive Officer)
/S/ JOSEPH F. BOARDMAN, JR. Director, March 25, 1997
Joseph F. Boardman, Jr. Chairman of the Board
/S/ THOMAS W. MILNER, JR. Director March 25, 1997
Thomas W. Milner, Jr.
/S/ GEORGE A. SCHLOEGEL Director, March 25, 1997
George A. Schloegel Vice-Chairman of the Board
/S/ DR. HOMER C. MOODY, JR. Director March 25, 1997
Dr. Homer C. Moody, Jr.
/S/ JAMES B. ESTABROOK, JR. Director March 25, 1997
James B. Estabrook, Jr.
/S/ CHARLES H. JOHNSON Director March 25, 1997
Charles H. Johnson
/S/ L. A. KOENENN, JR. Director March 25, 1997
L. A. Koenenn, Jr.
/S/ VICTOR MAVAR Director March 25, 1997
Victor Mavar
/S/ C. STANLEY BAILEY Chief Financial March 25, 1997
C. Stanley Bailey Officer
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this Registration Statement of
Hancock Holding Company on Form S-8 of our report dated January 15, 1997,
incorporated by reference in the Annual Report on Form 10-K of Hancock Holding
Company for the year ended December 31, 1996 and to the reference to us under
the heading "Experts" in the Prospectus/Proxy Statement, which is a part of this
Registration Statement.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
May 5, 1997
EXHIBIT 23.2
Basil M. Lee and Company
Certified Public Accountants
Alvin J. Ourso, Jr., CPA Basil M. Lee, CPA - Ret.
Leonard M. Blanchard, CPA Consultant
Roy P. Chenevert, Jr., CPA
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 6, 1997 (which expresses an unqualified opinion
and includes an explanatory paragraph relating to litigation against the
subsidiary) with respect to the consolidated financial statements of Commerce
Corporation And Subsidiary included in this Registration Statement (Form S-4)
and related Prospectus of Hancock Holding Company for the registration of its
common stock.
/s/ Basil M. Lee and Company
Basil M. Lee and Company
April 25, 1997
2820 Continental Drive-Baton Rouge, LA 70808-3211
Tel. 504/928-1100 - Fax 504/928-1154
EXHIBIT 99
COMMERCE CORPORATION
12320 Jackson Road
St. Francisville, Louisiana 70775
PROXY
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned hereby appoints and
, or any of them (with full power to act alone and to appoint
a substitute), as Proxies, and hereby authorizes them to represent and to vote
all the shares of common stock of Commerce Corporation ("Commerce Corporation")
held of record by the undersigned on May 1, 1997, at the special meeting
of shareholders (the "Special Meeting") to be held on Wednesday, June 18, 1997
at 1:00 p.m., local time, and at any and all adjournments thereof as follows:
1. The proposal to approve and adopt the Agreement and Plan of Merger
and related Company Merger Agreement by and among Hancock Holding
Company and Commerce Corporation whereby Commerce Corporation will
be merged with and into Hancock Holding Company and Bank of Commerce
& Trust Co. will be merged with and into Hancock Bank of Louisiana.
FOR ________ AGAINST _________ ABSTAIN ________
2. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the Special Meeting or
any adjournment thereof.
The Board of Directors recommends a vote "FOR" Proposal 1.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR PROPOSAL 1. IF ANY OTHER BUSINESS IS PRESENTED AT SUCH
MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR
DISCRETION.
Please sign exactly as your name appears on certificate(s) representing
shares to be voted by this proxy. When signing as attorney, executor,
administrator, trustee, or guardian, please give your full title. If a
corporation, please sign in full corporate name by the president or other
authorized officer. If a partnership, please sign in full partnership name by an
authorized person. If shares are held as joint tenants, each holder should sign.
Dated ___________________, 1997
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE
