AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 18, 2002
REGISTRATION NO. 333-28081
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 6
TO
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
-----------------
BANCORPSOUTH, INC.
(Exact name of Registrant as specified in its charter)
MISSISSIPPI 6712 64-0659571
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
ONE MISSISSIPPI PLAZA AUBREY B. PATTERSON
TUPELO, MISSISSIPPI 38804 BANCORPSOUTH, INC.
(662) 680-2000 ONE MISSISSIPPI PLAZA
(Address, including zip code, and telephone number, TUPELO, MISSISSIPPI 38804
including area code, of registrant's principal executive (662) 680-2000
offices) (Name, address, including zip code, and telephone
number, including area code, of agent for service)
-----------------
With a copy to:
HOWARD W. HERNDON, ESQ. JEFFREY J. GEARHART, ESQ.
L. BETH EVANS, ESQ. HOLLY L. LARKIN, ESQ.
WALLER LANSDEN DORTCH & DAVIS, PLLC KUTAK ROCK LLP
511 UNION STREET, SUITE 2100 425 WEST CAPITOL AVENUE, SUITE 1100
NASHVILLE, TENNESSEE 37219 LITTLE ROCK, ARKANSAS 72201
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this post-effective amendment becomes
effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
________________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________________________________
[PINNACLE LOGO]
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
BancorpSouth, Inc. and Pinnacle Bancshares, Inc. have entered into an
agreement and plan of merger which provides that, subject to shareholder and
regulatory approval and other conditions, Pinnacle will merge into BancorpSouth.
In connection with that transaction, Pinnacle's subsidiary bank, Pinnacle Bank,
will merge into BancorpSouth Bank, a subsidiary of BancorpSouth. The combined
company will have banking operations in Mississippi, Tennessee, Alabama,
Arkansas, Louisiana and Texas, and, based upon the companies' most recent
balance sheets, total assets of about $9.5 billion, deposits of about $7.9
billion and shareholders' equity of about $805.3 million.
If the merger is completed, each shareholder of Pinnacle will be able
to elect to receive cash, shares of BancorpSouth common stock or a combination
of both for his or her shares of Pinnacle common stock, subject to the election
proceedings described in this Prospectus Supplement/Proxy Statement and the
related election form. However, you will not receive any fractional shares of
BancorpSouth common stock. Instead, you will receive cash for any fraction of a
share of BancorpSouth common stock.
The merger cannot be completed without the approval of Pinnacle's
shareholders. Pinnacle has scheduled a special meeting of its shareholders to
vote on the agreement and plan of merger. In order for the agreement and plan of
merger to be approved, at least a majority of the outstanding shares of Pinnacle
common stock must be voted in favor of the agreement and plan of merger. The
date, time and place of Pinnacle's special meeting is as follows:
February 28, 2002
10:00 a.m. (Central Time)
425 West Capitol Avenue, Suite 1100
Little Rock, Arkansas 72201
Pinnacle's Board of Directors recommends that Pinnacle shareholders
vote "FOR" approval of the agreement and plan of merger.
The attached Prospectus Supplement/Proxy Statement provides you with
detailed information about the proposed merger and the companies involved. We
encourage you to read it carefully. You can also obtain information about
BancorpSouth from documents it has filed with the Securities and Exchange
Commission.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the
special meeting of shareholders, please take the time to vote your proxy by
completing and mailing the enclosed proxy card to us. If your proxy is properly
given and not revoked without indicating how you want to vote, your proxy will
be counted as a vote in favor of the agreement and plan of merger. If you do not
vote your proxy, the effect will be a vote against the agreement and plan of
merger. If you attend the shareholders meeting, you may vote in person if you
wish, even though you previously voted your proxy.
Very truly yours,
/s/ Robert M. Althoff
Robert M. Althoff
President and Chief Executive Officer
Pinnacle Bancshares, Inc.
[PINNACLE LOGO]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 28, 2002
TO THE SHAREHOLDERS OF PINNACLE BANCSHARES, INC.:
This serves as notice to you that a special meeting of shareholders of
Pinnacle Bancshares, Inc. will be held on February 28, 2002 at 10:00 a.m.,
Central Time, at 425 West Capitol Avenue, Suite 1100, Little Rock, Arkansas
72201, for the purpose of considering and voting upon the following:
- Approval of the Agreement and Plan of Merger, dated as of
November 14, 2001, between Pinnacle Bancshares, Inc. and
BancorpSouth, Inc., which provides for the merger of Pinnacle
Bancshares, Inc. with and into BancorpSouth, Inc.
Only holders of record of Pinnacle common stock at the close of
business on January 28, 2002 are entitled to notice of and to vote at the
special meeting or any adjournments or postponements of the special meeting. In
order for the agreement and plan of merger to be approved, at least a majority
of the outstanding shares of Pinnacle common stock must be voted in favor of the
agreement and plan of merger.
If the agreement is approved and the merger is completed, each share of
Pinnacle common stock, other than shares held by Pinnacle shareholders who
properly exercise their rights to dissent from the merger, will be converted
into the right to receive, at the election of the holder, $1,134.10 in cash, a
number of shares of BancorpSouth common stock as determined by the exchange
ratio (together with the related rights of BancorpSouth shareholders that are
exercisable under certain circumstances) or a combination of cash and shares of
BancorpSouth common stock, with cash to be paid in lieu of any remaining
fractional share interest of BancorpSouth common stock. The exchange ratio will
fluctuate, depending on the market price of BancorpSouth common stock. The
exchange ratio will be 85.8516 shares of BancorpSouth common stock for each
share of Pinnacle common stock if the average closing price per share of
BancorpSouth common stock for the 10 consecutive trading days ending on the
fifth trading day immediately preceding the merger is less than or equal to
$13.209. The exchange ratio will be 63.4639 shares of BancorpSouth common stock
for each share of Pinnacle common stock if the average closing price per share
of BancorpSouth common stock for this time period is greater than or equal to
$17.871. If the average closing price per share of BancorpSouth common stock for
this time period is between $13.209 and $17.871, the number of shares of
BancorpSouth common stock exchangeable for each share of Pinnacle common stock
will be determined by dividing $1,134.10 by the average closing price per share
of BancorpSouth common stock.
Pinnacle and BancorpSouth have agreed that 49% of the total merger
consideration to be received by Pinnacle shareholders will be cash and 51% of
the total merger consideration to be received by Pinnacle shareholders will be
shares of BancorpSouth common stock. The percentage of shares of Pinnacle common
stock that will be convertible into the right to receive cash is therefore fixed
at 49%, and the percentage of shares of Pinnacle common stock that will be
convertible into the right to receive BancorpSouth common stock is fixed at 51%.
In the event that more than 49% of the outstanding shares of Pinnacle common
stock elect or otherwise are to receive cash consideration, the amount of cash
that you will have the right to receive upon exchange of your shares of Pinnacle
common stock will be adjusted on a pro rata basis so that, in the aggregate, 49%
of the shares of Pinnacle common stock will be converted into the right to
receive cash and the remaining 51% of the shares of Pinnacle common stock will
be converted into the right to receive BancorpSouth common
stock. In the event that more than 51% of the outstanding shares of Pinnacle
common stock elect to receive stock consideration, the amount of BancorpSouth
common stock that you will have the right to receive upon exchange of your
shares of Pinnacle common stock will be adjusted on a pro rata basis so that, in
the aggregate, 51% of the shares of Pinnacle common stock will be converted into
the right to receive shares of BancorpSouth common stock and the remaining 49%
of the shares of Pinnacle common stock will be converted into the right to
receive cash. As a result, you may receive a different combination of
consideration than you elected, based on the choices made by other Pinnacle
shareholders or other circumstances. The federal income tax consequences of the
merger to Pinnacle shareholders will depend on whether they receive cash,
BancorpSouth common stock or a combination of cash and BancorpSouth common
stock.
PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AND THE
ENCLOSED ELECTION FORM TO SUNTRUST BANK, ATLANTA, N.A. IN THE ENCLOSED ENVELOPE
ON OR BEFORE 5:00 P.M., CENTRAL STANDARD TIME, ON FEBRUARY 26, 2002 AT THE
ADDRESS LISTED ON THE ELECTION FORM AND LETTER OF TRANSMITTAL, WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING. ALSO, PLEASE SIGN, DATE AND RETURN THE
ENCLOSED LETTER OF TRANSMITTAL, ALONG WITH ALL OF YOUR PINNACLE STOCK
CERTIFICATES, IN THE SAME ENVELOPE, TO SUNTRUST BANK, ATLANTA, N.A. IF YOUR
ELECTION FORM IS NOT RECEIVED BY SUNTRUST BANK, ATLANTA, N.A. BY 5:00 P.M.,
CENTRAL STANDARD TIME, ON FEBRUARY 26, 2002, YOU WILL BE DEEMED TO HAVE MADE NO
ELECTION AND YOU WILL RECEIVE CONSIDERATION CONSISTING OF 51% BANCORPSOUTH
COMMON STOCK AND 49% CASH IN EXCHANGE FOR YOUR SHARES. All Pinnacle shareholders
are cordially invited to attend the special meeting. To ensure your
representation at the special meeting, please complete and promptly mail the
enclosed proxy card in the enclosed return envelope. This will not prevent you
from voting in person, but will help to secure a quorum and avoid added
solicitation costs. You may revoke your proxy at any time before it is voted.
Please review the Prospectus Supplement/Proxy Statement attached to this notice
for more complete information regarding the proposed merger and the special
meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Robert M. Althoff
Robert M. Althoff
President and Chief Executive Officer
January ___, 2002
THE BOARD OF DIRECTORS OF PINNACLE UNANIMOUSLY RECOMMENDS THAT PINNACLE
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT AND PLAN OF MERGER.
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY ___, 2002)
AND PROXY STATEMENT
[BANCORPSOUTH LOGO]
COMMON STOCK
This Prospectus Supplement/Proxy Statement provides you with detailed
information about a proposed merger between BancorpSouth, Inc. and Pinnacle
Bancshares, Inc. This document also contains information about BancorpSouth and
Pinnacle. If the merger is completed, Pinnacle will merge into BancorpSouth and
Pinnacle shareholders, other than Pinnacle shareholders who properly exercise
their rights to dissent from the merger, will receive, at the holder's election,
in exchange for each share of Pinnacle common stock, $1,134.10 in cash, a number
of shares of BancorpSouth common stock as determined by the exchange ratio, or a
combination of cash and shares of BancorpSouth common stock, with cash to be
paid in lieu of any remaining fractional share interest of BancorpSouth common
stock. The merger consideration to be received by Pinnacle shareholders is
subject to adjustment under certain circumstances described in this Prospectus
Supplement/Proxy Statement.
The exchange ratio will fluctuate, depending on the market price of
BancorpSouth common stock. The exchange ratio will be 85.8516 shares of
BancorpSouth common stock for each share of Pinnacle common stock if the average
closing price per share of BancorpSouth common stock for the 10 consecutive
trading days ending on the fifth trading day immediately preceding the merger is
less than or equal to $13.209. The exchange ratio will be 63.4639 shares of
BancorpSouth common stock for each share of Pinnacle common stock if the average
closing price per share of BancorpSouth common stock for this time period is
greater than or equal to $17.871. If the average closing price per share of
BancorpSouth common stock for this time period is between $13.209 and $17.871,
the number of shares of BancorpSouth common stock exchangeable for each share of
Pinnacle common stock will be determined by dividing $1,134.10 by the average
BancorpSouth common stock price. In connection with this transaction, Pinnacle
Bank, a wholly-owned subsidiary of Pinnacle, will merge into BancorpSouth Bank,
a subsidiary of BancorpSouth. We encourage you to carefully read and consider
this Prospectus Supplement/Proxy Statement in its entirety.
You can obtain additional information about BancorpSouth from documents
that it has filed with the Securities and Exchange Commission. For information
on how to obtain copies of these documents, you should refer to the section of
this document entitled "WHERE YOU CAN FIND MORE INFORMATION," which begins on
page 76.
BancorpSouth common stock is listed on the New York Stock Exchange
under the symbol "BXS." On January ___, 2002, the closing price per share of
BancorpSouth common stock reported on the New York Stock Exchange was $________.
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS DESCRIBED IN ITEM 7 OF
BANCORPSOUTH'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000.
---------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSIONER HAS APPROVED OR DISAPPROVED OF THE SHARES OF BANCORPSOUTH COMMON
STOCK TO BE ISSUED UNDER THIS PROSPECTUS SUPPLEMENT/PROXY STATEMENT OR
DETERMINED IF THIS PROSPECTUS SUPPLEMENT/PROXY STATEMENT IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
SHARES OF BANCORPSOUTH COMMON STOCK ARE NOT SAVINGS OR DEPOSIT ACCOUNTS
OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION, AND ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
The date of this Prospectus Supplement/Proxy Statement is
January __, 2002.
TABLE OF CONTENTS
PAGE
----
QUESTIONS AND ANSWERS ABOUT THE MERGER........................................................................... 1
SUMMARY.......................................................................................................... 5
SELECTED FINANCIAL DATA......................................................................................... 14
THE SPECIAL MEETING............................................................................................. 17
General................................................................................................ 17
Proxies................................................................................................ 17
Solicitation of Proxies................................................................................ 18
Record Date and Voting Rights.......................................................................... 18
Recommendation of the Board of Directors............................................................... 19
Dissenters' Rights..................................................................................... 19
THE MERGER...................................................................................................... 24
Description of the Merger.............................................................................. 24
Background of the Merger............................................................................... 26
Pinnacle's Reasons for the Merger; Recommendation of the Board of Directors............................ 27
Analysis of Pinnacle's Financial Advisor............................................................... 29
BancorpSouth's Reasons For The Merger.................................................................. 32
Regulatory Approval.................................................................................... 33
Certain U.S. Federal Income Tax Consequences........................................................... 33
Interests of Certain Persons in the Merger............................................................. 37
Comparison of Rights of Shareholders................................................................... 39
Restrictions on Resales by Affiliates.................................................................. 39
THE AGREEMENT AND PLAN OF MERGER................................................................................ 40
Exchange of Certificates; Cash Election................................................................ 40
Conditions to the Merger............................................................................... 42
Termination of the Agreement and Plan of Merger........................................................ 42
Conduct of Business Prior to the Merger and Other Covenants............................................ 43
Indemnification........................................................................................ 45
Amendment of the Agreement and Plan of Merger.......................................................... 45
Waiver................................................................................................. 46
Expenses............................................................................................... 46
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER.................................................................. 46
PRICE RANGE OF COMMON STOCK AND DIVIDENDS....................................................................... 47
PINNACLE MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................. 48
General................................................................................................ 48
Analysis of Results of Operations...................................................................... 49
Analysis of Financial Condition........................................................................ 53
Interest Rate Sensitivity.............................................................................. 60
Liquidity and Capital Resources........................................................................ 61
Effects Of Inflation And Changing Prices............................................................... 63
i
INFORMATION ABOUT BANCORPSOUTH.................................................................................. 64
INFORMATION ABOUT PINNACLE...................................................................................... 65
General................................................................................................ 65
Supervision And Regulation............................................................................. 66
Employees.............................................................................................. 70
Certain Relationships and Related Transactions......................................................... 70
Legal Proceedings...................................................................................... 70
Principal Shareholders and Management.................................................................. 71
COMPARISON OF RIGHTS OF SHAREHOLDERS............................................................................ 73
Change of Control...................................................................................... 73
Shareholder Nominations and Proposals.................................................................. 74
Board of Directors..................................................................................... 74
Removal of Directors................................................................................... 75
Authorized Capital Stock............................................................................... 75
Rights of Shareholders to Call Special Meetings........................................................ 75
WHERE YOU CAN FIND MORE INFORMATION............................................................................. 76
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION..................................................... 78
LEGAL MATTERS................................................................................................... 79
EXPERTS......................................................................................................... 79
UNAUDITED FINANCIAL STATEMENTS OF PINNACLE BANCSHARES, INC. ................................................... F-1
PROSPECTUS DATED JANUARY ____, 2002 ........................................................................... P-1
ANNEX A - AGREEMENT AND PLAN OF MERGER ........................................................................ A-1
ANNEX B - PROVISIONS OF SUBCHAPTER 13 OF THE ARKANSAS BUSINESS
CORPORATION ACT OF 1987, RELATING TO DISSENTERS' RIGHTS.............................................. B-1
THIS PROSPECTUS SUPPLEMENT/PROXY STATEMENT INCORPORATES IMPORTANT
BUSINESS AND FINANCIAL INFORMATION THAT IS NOT INCLUDED IN OR DELIVERED WITH
THIS PROSPECTUS SUPPLEMENT/PROXY STATEMENT. THIS INFORMATION IS AVAILABLE
WITHOUT CHARGE TO SECURITY HOLDERS UPON ORAL OR WRITTEN REQUEST TO CATHY S.
FREEMAN, VICE PRESIDENT AND CORPORATE SECRETARY OF BANCORPSOUTH, INC., ONE
MISSISSIPPI PLAZA, TUPELO, MISSISSIPPI, 38804, (662) 680-2000. TO ENSURE TIMELY
DELIVERY OF THE REQUESTED INFORMATION, YOU SHOULD MAKE YOUR REQUEST BY FEBRUARY
21, 2002 WHICH IS FIVE BUSINESS DAYS BEFORE THE DATE UPON WHICH YOU MUST MAKE
THE INVESTMENT DECISION.
----------------------------------------
THIS PROSPECTUS SUPPLEMENT/PROXY STATEMENT IS NOT AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO PURCHASE ANY SECURITIES OTHER THAN SHARES OF
BANCORPSOUTH COMMON STOCK TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING SUCH OFFER IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH AN OFFER.
ii
QUESTIONS AND ANSWERS
ABOUT THE MERGER
Q: WHAT DO I NEED TO DO NOW?
A: Whether or not you plan to attend the special meeting of Pinnacle
shareholders, please vote your proxy promptly by indicating on the
enclosed proxy card how you want to vote, and fill out your election
form and letter of transmittal according to their instructions. Please
sign and mail the proxy card, the election form and the letter of
transmittal, along with all of your Pinnacle stock certificates, in the
enclosed return envelope which is addressed to SunTrust Bank, Atlanta,
N.A. as soon as possible so that your shares may be represented at the
special meeting of shareholders and so that we may know the amount of
each type of consideration you wish to receive. If your proxy is
properly given and not revoked without indicating how you want to vote,
your proxy will be counted as a vote in favor of the agreement and plan
of merger between Pinnacle and BancorpSouth. If you do not vote on the
agreement and plan of merger or if you abstain, the effect will be a
vote against the agreement and plan of merger.
You are invited to the special meeting of shareholders to vote your
shares in person. If you do vote your proxy, you can take back your
proxy at any time until shareholders vote at the special meeting of
shareholders and either change your vote or attend the special meeting
and vote in person.
You may change your vote in any of the following ways:
- by sending written notice to SunTrust Bank, Atlanta,
N.A. prior to 5:00 p.m., Central Standard Time, on
February 26, 2002 stating that you would like to
revoke your proxy;
- by completing, signing and dating another proxy card
and returning it by mail to SunTrust Bank, Atlanta,
N.A. prior to 5:00 p.m., Central Standard Time, on
February 26, 2002;
- by delivering at the special meeting a duly executed
proxy; or
- by attending the special meeting and voting in
person.
Regardless of whether you plan to attend the special meeting in person,
we encourage you to vote your proxy promptly. This will help to ensure
that a quorum is present at the special meeting and will help reduce
the costs associated with the solicitation of proxies.
THE BOARD OF DIRECTORS OF PINNACLE UNANIMOUSLY RECOMMENDS THAT ITS
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT AND PLAN OF MERGER.
Q: WHAT IS THE PURPOSE OF THIS PROSPECTUS SUPPLEMENT/PROXY STATEMENT?
A: This document serves as Pinnacle's proxy statement and as
BancorpSouth's prospectus. As a proxy statement, this document is being
provided to Pinnacle shareholders because Pinnacle's Board of Directors
is soliciting their proxy to vote to approve the agreement and plan of
merger. As a prospectus, this document is being provided to Pinnacle
shareholders by BancorpSouth because BancorpSouth is offering them
shares of BancorpSouth common stock, in addition to cash, in exchange
for their shares of Pinnacle common stock if the merger is completed,
as possible consideration for the merger.
Q: IS THERE OTHER INFORMATION I SHOULD CONSIDER?
A: Yes. Much of the business and financial information about BancorpSouth
that may be
important to you is not included directly in this document. Instead,
this information is incorporated into this document by reference to
documents separately filed by BancorpSouth with the Securities and
Exchange Commission. This means that BancorpSouth may satisfy its
disclosure obligations to you by referring you to one or more documents
separately filed by them with the SEC. See "WHERE YOU CAN FIND MORE
INFORMATION" beginning on page 76 for a list of documents that
BancorpSouth has incorporated by reference into this Prospectus
Supplement/Proxy Statement and for instructions on how to obtain copies
of these documents. The documents are available to you without charge.
Q: WHAT IF I CHOOSE NOT TO READ THE DOCUMENTS INCORPORATED BY REFERENCE?
A: Information contained in a document that is incorporated into this
Prospectus Supplement/Proxy Statement by reference is part of this
Prospectus Supplement/Proxy Statement, unless it is superseded by
information contained directly in this Prospectus Supplement/Proxy
Statement or in documents filed by BancorpSouth with the SEC after the
date of this Prospectus Supplement/Proxy Statement. Information that is
incorporated from another document is considered to have been disclosed
to you whether or not you choose to read the document.
Q: WHAT WILL I RECEIVE IN CONNECTION WITH THE MERGER?
A: You may elect to receive cash, shares of BancorpSouth common stock or a
combination of cash and shares of BancorpSouth common stock by
indicating your preference on the enclosed election form. The
Prospectus Supplement/Proxy Statement explains in more detail what
amount of cash and/or BancorpSouth common stock each shareholder of
Pinnacle is entitled to receive. The percentage of shares of Pinnacle
common stock that will be convertible into the right to receive cash is
fixed at 49%. In the event that more than 49% of the outstanding shares
of Pinnacle common stock elect or otherwise receive cash consideration,
the amount of cash that you will have the right to receive upon
exchange of your shares of Pinnacle common stock will be adjusted on a
pro rata basis so that, in the aggregate, 49% of the shares of Pinnacle
common stock will be converted into the right to receive cash and the
remaining 51% of the shares of Pinnacle common stock will be converted
into the right to receive BancorpSouth common stock. The percentage of
shares of Pinnacle common stock that will be convertible into the right
to receive BancorpSouth common stock is fixed at 51%. In the event that
more than 51% of the outstanding shares of Pinnacle common stock elect
to receive stock consideration, the amount of BancorpSouth common stock
that you will have the right to receive upon exchange of your shares of
Pinnacle common stock will be adjusted on a pro rata basis so that, in
the aggregate, 51% of the shares of Pinnacle common stock will be
converted into the right to receive shares of BancorpSouth common stock
and the remaining 49% of the shares of Pinnacle common stock will be
converted into the right to receive cash. As a result, you may receive
a different combination of consideration than you elected, based on the
choices made by other Pinnacle shareholders or other circumstances.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: If you exchange your shares of Pinnacle common stock solely for
BancorpSouth common stock, you should not recognize any gain or loss
(except with respect to the cash you receive instead of a fractional
share) for U.S. federal income tax purposes. If you exchange your
shares of Pinnacle common stock solely for cash, you should recognize
gain or loss on the exchange. If you exchange your shares of Pinnacle
common stock for a combination of BancorpSouth common stock and cash,
you should recognize gain, but not loss, on the exchange to the extent
of the lesser of cash received or gain realized in the exchange.
2
THIS TAX TREATMENT MAY NOT APPLY TO ALL PINNACLE SHAREHOLDERS. YOU
SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF THE
MERGER'S TAX CONSEQUENCES THAT ARE PARTICULAR TO YOU.
Q: WHY HAVE I BEEN SENT AN ELECTION FORM?
A: If the agreement is approved and the merger is completed, unless you
exercise your right to dissent from the merger, each share of Pinnacle
common stock held by you will be converted into the right to receive,
at your election, $1,134.10 in cash, a number of shares of BancorpSouth
common stock as determined by the exchange ratio or a combination of
cash and shares of BancorpSouth common stock, with cash to be paid in
lieu of any remaining fractional share interest. The election form is
the document provided to you to select the amount of each type of
consideration you wish to receive. The form is divided into four
sections. There are corresponding instructions for completing each of
these sections.
Q: WHAT HAPPENS IF I DO NOT SEND IN MY ELECTION FORM?
A: If you do not respond, you will receive consideration of 51%
BancorpSouth common stock and 49% cash in exchange for your shares of
Pinnacle common stock.
Q: WHAT HAPPENS IF I MISS THE ELECTION DEADLINE?
A: Missing the election deadline is the same as not responding - you will
receive consideration of 51% BancorpSouth common stock and 49% cash in
exchange for your shares of Pinnacle common stock. The election
deadline is 5:00 p.m., Central Standard Time, on February 26, 2002.
Q: WHAT HAPPENS IF I MISS THE PROXY DEADLINE?
A: Missing the proxy deadline will invalidate the proxy granted by the
enclosed proxy card and is therefore the same as not voting on the
agreement and plan of merger unless you do one of the following:
- vote by proxy at the special meeting; or
- attend the special meeting and vote in person.
Q: AM I GUARANTEED TO RECEIVE WHAT I ASK FOR ON THE ELECTION FORM?
A: No. If more than 49% of the outstanding shares of Pinnacle common stock
elect or otherwise receive cash consideration, the amount of cash that
you will have the right to receive upon exchange of your shares of
Pinnacle common stock will be adjusted on a pro rata basis so that, in
the aggregate, 49% of the shares of Pinnacle common stock will be
converted into the right to receive cash and the remaining 51% of the
shares of Pinnacle common stock will be converted into the right to
receive BancorpSouth common stock. If more than 51% of the outstanding
shares of Pinnacle common stock elect to receive stock consideration,
the amount of BancorpSouth common stock that you will have the right to
receive upon exchange of your shares of Pinnacle common stock will be
adjusted on a pro rata basis so that, in the aggregate, 51% of the
shares of Pinnacle common stock will be converted into the right to
receive shares of BancorpSouth common stock and the remaining 49% of
the shares of Pinnacle common stock will be converted into the right to
receive cash. As a result, you may not receive the combination of cash
and/or shares you elected, based on the choices made by other Pinnacle
shareholders or other circumstances.
Q: SHOULD I SEND IN MY PINNACLE STOCK CERTIFICATES NOW?
A: Yes. Enclosed is an election form and letter of transmittal with
instructions on how to exchange your shares of Pinnacle common stock
for cash, shares of BancorpSouth common stock or some combination of
cash and BancorpSouth common stock. You should follow the written
instructions included with the election form and letter of transmittal
and return it, along with all of your Pinnacle stock certificates, to
SunTrust Bank, Atlanta, N.A. at the address listed in the instructions.
3
Q. WHOM DO I CONTACT IF I HAVE QUESTIONS ABOUT THE MERGER?
A: If you have more questions about the merger, you should contact:
Pinnacle Bancshares, Inc.
2610 Cantrell Road
Little Rock, Arkansas 72202
Attention: Robert M. Althoff, President
and Chief Executive Officer
Phone Number: (501) 614-5000
Q. ARE BANCORPSOUTH SHAREHOLDERS REQUIRED TO APPROVE THE MERGER?
A: No, BancorpSouth shareholders are not required to approve the merger.
Q. DO I HAVE DISSENTERS' RIGHTS?
A: Yes, if you so choose, you are entitled to exercise dissenters' rights
in connection with the merger.
Q. WHEN WILL THE MERGER BE COMPLETED?
A: We expect to complete the merger in the first quarter of 2002, promptly
after the Pinnacle shareholders approve the agreement and plan of
merger, provided that all of the other conditions to the merger have
been satisfied at such time.
4
SUMMARY
This summary highlights selected information from this document. It
does not contain all of the information that is important to you. You should
carefully read this entire document and the documents to which it refers you in
order to understand fully the merger and to obtain a more complete description
of the companies and the legal terms of the merger. For information on how to
obtain copies of documents referred to in this document, you should read the
section of this document entitled "WHERE YOU CAN FIND MORE INFORMATION." Each
item in this summary includes a page reference that directs you to a more
complete description in this document of the topic discussed.
THE COMPANIES (PAGES 64 AND 65)
BANCORPSOUTH, INC.
One Mississippi Plaza
Tupelo, Mississippi 38804
(662) 680-2000
BancorpSouth is a Mississippi corporation and a bank holding company
with commercial banking and financial services operations in Mississippi,
Tennessee, Alabama, Arkansas, Texas and Louisiana. Its principal subsidiary is
BancorpSouth Bank. At September 30, 2001, BancorpSouth had total assets of about
$9.4 billion, deposits of about $7.8 billion, and shareholders' equity of about
$796.4 million. For a more detailed description of BancorpSouth's business,
please see the attached Prospectus, on page P-1, dated as of January ___, 2002.
PINNACLE BANCSHARES, INC.
2610 Cantrell Road
Little Rock, Arkansas 72202
(501) 614-5000
Pinnacle is incorporated in Arkansas and a bank holding company. It is
based in Little Rock, Arkansas and conducts its operations through its
subsidiary bank, Pinnacle Bank. Pinnacle Bank has two subsidiaries, Pinnacle
Bank Home Loan Company and Pinnacle Capital Resources, Inc. Pinnacle's
subsidiaries conduct commercial banking operations through a total of three
offices in Little Rock, Pulaski County, Arkansas. As of December 31, 2001,
Pinnacle had total assets of about $135.2 million, deposits of about $101.8
million and shareholders' equity of about $8.9 million.
THE MERGER (PAGE 24)
BancorpSouth and Pinnacle have entered into an agreement and plan of
merger whereby Pinnacle will merge into BancorpSouth, subject to the approval of
Pinnacle's shareholders, regulatory approval and other conditions. The agreement
and plan of merger is attached to this Prospectus Supplement/Proxy Statement as
Annex A. You should read it carefully.
If this merger is completed, the businesses and operations of
BancorpSouth and Pinnacle will be combined into a single, larger company, and
Pinnacle's subsidiary bank will be combined with BancorpSouth Bank into a
single, larger bank. BancorpSouth and Pinnacle hope to complete the merger
during the first quarter of 2002.
WHAT PINNACLE SHAREHOLDERS WILL RECEIVE IN THE MERGER (PAGE 24)
If the merger is completed, Pinnacle shareholders, except for Pinnacle
shareholders who properly exercise their rights to dissent from the merger, will
receive, at the holder's election,
5
$1,134.10 in cash, the number of shares of BancorpSouth common stock as
determined by the exchange ratio or some combination of cash and shares of
BancorpSouth common stock in exchange for each of their shares of Pinnacle
common stock. Pinnacle and BancorpSouth have agreed that 49% of the total merger
consideration to be paid by BancorpSouth to the Pinnacle shareholders will be
cash and the remaining 51% of the total merger consideration will be shares of
BancorpSouth common stock. The percentage of shares of Pinnacle common stock
that will be convertible into the right to receive cash is therefore fixed at
49%, and the percentage of shares of Pinnacle common stock that will be
convertible into the right to receive BancorpSouth common stock is fixed at 51%.
In the event that more than 49% of the outstanding shares of Pinnacle common
stock elect or otherwise receive cash consideration, the amount of cash that a
given Pinnacle shareholder will have the right to receive upon exchange of his
or her shares of Pinnacle common stock will be adjusted on a pro rata basis so
that, in the aggregate, 49% of the shares of Pinnacle common stock will be
converted into the right to receive cash and the remaining 51% of the shares of
Pinnacle common stock will be converted into the right to receive BancorpSouth
common stock. In the event that more than 51% of the outstanding shares of
Pinnacle common stock elect to receive stock consideration, the amount of
BancorpSouth common stock that a given Pinnacle shareholder will have the right
to receive upon exchange of his or her shares of Pinnacle common stock will be
adjusted on a pro rata basis so that, in the aggregate, 51% of the shares of
Pinnacle common stock will be converted into the right to receive shares of
BancorpSouth common stock and the remaining 49% of the shares of Pinnacle common
stock will be converted into the right to receive cash. As a result, a Pinnacle
shareholder may receive a different combination of consideration than he or she
elected, based on the choices made by other Pinnacle shareholders or other
circumstances.
BancorpSouth will not issue any fractional shares of BancorpSouth
common stock. Instead, a Pinnacle shareholder will receive cash equal to the
product of the average of the last reported sale prices per share of
BancorpSouth common stock as reported on the New York Stock Exchange for the 10
consecutive trading days ending on the fifth day immediately before the date on
which the merger is completed, times the fraction of a share of BancorpSouth
common stock to which the shareholder otherwise would be entitled.
The exchange ratio will be adjusted to reflect changes in the market
price of BancorpSouth common stock. The exchange ratio will be 85.8516 shares of
BancorpSouth common stock for each share of Pinnacle common stock if the average
price per share of BancorpSouth common stock for the 10 consecutive trading days
ending on the fifth trading day immediately preceding the merger is less than or
equal to $13.209. The exchange ratio will be 63.4639 shares of BancorpSouth
common stock for each share of Pinnacle common stock if the average price per
share of BancorpSouth common stock for this period is greater than or equal to
$17.871. If the average price per share of BancorpSouth common stock for this
period is between $13.209 and $17.871, the number of shares of BancorpSouth
common stock exchangeable for each share of Pinnacle common stock will be
determined by dividing $1,134.10 by the average price per share.
If the merger is completed, each outstanding and unexercised option to
purchase shares of Pinnacle common stock will no longer represent a right to
acquire shares of Pinnacle common stock and will be replaced promptly following
the merger by an option to purchase shares of BancorpSouth common stock. The
number of shares underlying each new option will be adjusted to provide for a
number of shares of BancorpSouth common stock (rounded to the nearest whole
number) to which the option holder would have been entitled had such options
been exercised in full immediately prior to the effective time of the merger and
had such holder received only stock consideration in the merger. The exercise
price will be adjusted to reflect an exercise price equal to the quotient
(rounded to the nearest whole number) of the aggregate exercise price of
Pinnacle common stock under the original options, divided by the number of
shares of BancorpSouth common stock issuable under the new options.
6
BANCORPSOUTH'S STOCK PRICE WILL FLUCTUATE (PAGE 26)
BancorpSouth expects the market price of its common stock to fluctuate
due to market factors beyond its control before and following the merger.
Because the exchange ratio fluctuates only if the average closing price per
share of BancorpSouth common stock for the ten consecutive days ending on the
fifth trading day preceding the merger is between $13.209 and $17.871 and is
otherwise fixed and the market price of BancorpSouth common stock may fluctuate,
if the average closing price per share of BancorpSouth common stock for such
period is less than $13.209 or greater than $17.871, the value of the shares of
BancorpSouth common stock that Pinnacle shareholders will receive in the merger
may increase or decrease prior to completion of the merger. BancorpSouth cannot
assure you that the market price of BancorpSouth common stock will not decrease
before or after completion of the merger.
SPECIAL SHAREHOLDERS MEETING (PAGE 17)
A special meeting of the shareholders of Pinnacle will be held on
February 28, 2002 at the following time and place:
February 28, 2002
10:00 a.m. (Central Time)
425 West Capitol Avenue, Suite 1100
Little Rock, Arkansas 72201
At the special meeting, shareholders of Pinnacle will be asked to
approve the agreement and plan of merger between Pinnacle and BancorpSouth.
THE BOARD OF DIRECTORS OF PINNACLE RECOMMENDS THAT ITS SHAREHOLDERS APPROVE THE
AGREEMENT AND PLAN OF MERGER (PAGE 27)
The Board of Directors of Pinnacle believes that the merger between
Pinnacle and BancorpSouth is in the best interests of Pinnacle shareholders, and
unanimously recommends that Pinnacle shareholders vote "FOR" the proposal to
approve the agreement and plan of merger. This belief is based on a number of
factors described in this document.
VOTE REQUIRED TO COMPLETE MERGER (PAGE 18)
In order for the merger to be approved, at least a majority of the
outstanding shares of Pinnacle common stock must be voted in favor of the
agreement and plan of merger. Pinnacle expects that its executive officers and
directors will vote all of their shares of Pinnacle common stock in favor of the
agreement and plan of merger.
7
The following chart describes the Pinnacle shareholder vote required to
approve the agreement and plan of merger:
Number of shares of common stock of Pinnacle outstanding
on January 28, 2002....................................... 17,137
Number of votes necessary to approve the agreement and plan
of merger................................................. 8,570
Percentage of outstanding shares of Pinnacle common stock
necessary to approve the agreement and plan of merger..... 50.01%
Number of votes that executive officers and directors of
Pinnacle and their affiliates can cast as of January
28, 2002.................................................. 5,969
Percentage of votes that executive officers and
directors of Pinnacle and their affiliates can cast
as of January 28, 2002.................................... 34.83%
RECORD DATE; VOTING POWER (PAGE 18)
You can vote at the special meeting of Pinnacle shareholders if you
owned Pinnacle common stock as of the close of business on January 28, 2002, the
record date set by Pinnacle's Board of Directors. Each share of Pinnacle common
stock is entitled to one vote. On January 28, 2002, there were 17,137 shares of
Pinnacle common stock outstanding and entitled to vote on the agreement and plan
of merger.
BACKGROUND OF THE MERGER (PAGE 26)
In late August, 2001, management and the Board of Directors of Pinnacle
began initial discussions with representatives of Stephens Inc., an investment
banking firm, regarding the alternatives available to Pinnacle to maximize
shareholder value. Pinnacle's Board of Directors retained Stephens to assist the
Board in establishing a reasonable value for Pinnacle and in soliciting
expressions of interest from third parties regarding a potential business
combination.
On October 19, 2001, BancorpSouth informed Stephens that it would like
to make a bid for Pinnacle. Based upon the favorable price proposed by
BancorpSouth and upon the advice of Stephens, Pinnacle informed BancorpSouth
that it would deal exclusively with BancorpSouth for an unspecified limited
period of time, if Pinnacle representatives believed, in their discretion, that
the parties were making substantial progress towards the execution of a
definitive agreement.
Pinnacle's Board met on November 9, 2001 to discuss and consider the
proposed transaction with BancorpSouth. Stephens made a presentation regarding
the financial rationale supporting the transaction, which included a detailed
financial analysis concerning Pinnacle and a detailed review of the potential
transaction values and likelihood of success of pursuing a combination with
other potential merger partners. Although no fairness opinion was rendered by
Stephens, Stephens indicated to the board that, as a result of these analyses,
it believed it unlikely that another potential merger candidate would be willing
to propose a transaction that was financially superior to the transaction
proposed by BancorpSouth, and that, if requested, it was prepared to render an
opinion as to the fairness of the transaction from a financial point of view.
Pinnacle's Board also considered the timing and prospects for completion of the
BancorpSouth transaction and the significant risk of jeopardizing the
transaction if it pursued other alternatives.
8
After a review of all aspects of the proposed transaction and
considerable discussion, Pinnacle's Board authorized some of Pinnacle's officers
and directors to complete the final negotiations with BancorpSouth and enter
into a definitive merger agreement. On November 14, 2001, Pinnacle and
BancorpSouth executed the agreement and plan of merger.
WHY BANCORPSOUTH AND PINNACLE ARE SEEKING TO MERGE (PAGES 27 AND 32)
The merger will combine the strengths of BancorpSouth and Pinnacle and
their subsidiary banks. The combined company resulting from the merger should
eventually be able to achieve superior financial performance compared to each
company operating independently. By merging with BancorpSouth, Pinnacle will
have access to the substantially larger capital base and lending limits of
BancorpSouth, as well as a broader array of financial products to offer its
current and potential customers. The combined company is also expected to be
able to reduce costs by eliminating overlap in the companies' operations and by
applying BancorpSouth's investments in technology to Pinnacle's operations. The
competitiveness of the financial services industry is increasing continually,
and the greater strength realized through combining the companies is expected to
enable them to provide superior products and services to their customers and
benefits to their shareholders.
In determining whether to approve the merger, the Board of Directors of
Pinnacle consulted with its senior management and legal and financial advisors
and considered the strategic, financial and other consideration referred to
under "The Merger - Pinnacle's Reasons for the Merger; Recommendation of the
Board of Directors," starting at page 27.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (PAGE 33)
Your U.S. federal income tax consequences will depend primarily on
whether you exchange your Pinnacle common stock solely for BancorpSouth common
stock, solely for cash or for a combination of BancorpSouth common stock and
cash. If you exchange your Pinnacle shares solely for BancorpSouth common stock,
you should not recognize any gain or loss (except with respect to the cash you
receive instead of a fractional share) for U.S. federal income tax purposes. If
you exchange your Pinnacle shares solely for cash, you should recognize gain or
loss on the exchange. If you exchange your Pinnacle shares for a combination of
BancorpSouth common stock and cash, you should recognize a gain, but not any
loss, on the exchange to the extent of the lesser of cash received or gain
realized in the exchange. The actual U.S. federal income tax consequences to you
of electing to receive cash, BancorpSouth common stock or a combination of both
will not be ascertainable at the time you make your election because we will not
know at that time if, or to what extent, the allocation and proration procedures
will apply.
THIS TAX TREATMENT MAY NOT APPLY TO ALL PINNACLE SHAREHOLDERS.
DETERMINING THE ACTUAL TAX CONSEQUENCES OF THE MERGER TO YOU CAN BE COMPLICATED.
YOU SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF THE MERGER'S
TAX CONSEQUENCES THAT ARE PARTICULAR TO YOU.
BancorpSouth and Pinnacle will not be obligated to complete the merger
unless they each receive an opinion from their respective legal counsel, dated
the closing date, that the merger will be treated for U.S. federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code and that BancorpSouth and Pinnacle will each be a party to
that reorganization. If such opinions are rendered, the U.S. federal income tax
treatment of the merger should be as described above. The opinions of the
parties' respective counsel, however, do not bind the Internal Revenue Service
and do not preclude the IRS or the courts from adopting a contrary position.
9
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE 37)
Directors and executive officers of Pinnacle will be issued shares of
BancorpSouth common stock in the merger on the same basis as other shareholders
of Pinnacle. The following chart shows the number of shares of BancorpSouth
common stock that may be issued to directors and executive officers of Pinnacle
in the merger assuming that each such officer and director elects to receive all
of his or her consideration in the form of BancorpSouth common stock:
Shares of Pinnacle common stock beneficially owned, including
stock options that may be exercised within 60 days, by its
executive officers and directors on January 28, 2002.....7,289
Maximum number of shares of BancorpSouth common stock that may
be received in the merger by executive officers and directors
based upon this beneficial ownership...................625,772
Mr. Robert M. Althoff, who is currently the President and Chief
Executive Officer and a Director of Pinnacle, will become a Vice President of
BancorpSouth Bank and President or a comparable officer, as determined by
BancorpSouth, of the Little Rock, Arkansas community bank of BancorpSouth Bank
after the merger. Mr. Dabbs Cavin, currently the Executive Vice President and
Chief Lending Officer and a Director of Pinnacle, will become a Vice President
of BancorpSouth Bank and assistant branch manager or a comparable officer, as
determined by BancorpSouth, of the Little Rock, Arkansas community bank, after
the merger. Both Mr. Althoff and Mr. Cavin have entered into agreements with
BancorpSouth that are effective upon completion of the merger. Messrs. Althoff's
and Cavin's new agreements with BancorpSouth provide for stock bonuses, which
vest fully upon their termination without cause or a change of control of
BancorpSouth or BancorpSouth Bank. These agreements replace and supersede these
officers' existing severance agreements with Pinnacle, which provide for, among
other things, severance payments upon termination of employment without cause or
following a change of control of Pinnacle.
Ms. Beth Harvey, Senior Vice President of Pinnacle, and Mr. Thomas C.
Evans, Executive Vice President and Chief Financial Officer of Pinnacle, are
each party to an employment agreement with Pinnacle which provides for the
payment of severance benefits upon termination of employment without cause or a
change of control of Pinnacle. Ms. Harvey has agreed to terminate her employment
agreement in exchange for a payment of $25,000. Also, nine non-executive
officers are parties to a bonus agreement in the event of a change of control of
Pinnacle Bank pursuant to which Pinnacle Bank has agreed to pay each of the
officers a bonus payment equal to three months base salary if the officer
continues to be employed by Pinnacle Bank or any successor company for 180 days
from the date of the change of control or upon termination without cause
following a change of control. It is anticipated that the merger would
constitute a change of control for purposes of these agreements.
The following executive officers will receive an aggregate bonus of
$565,000 upon the closing of the merger: Robert M. Althoff, Dabbs Cavin, Thomas
C. Evans and Beth Harvey.
Robert C. Nolan, a director of BancorpSouth, owns around 2.4% of the
issued and outstanding shares of Pinnacle.
10
YOU MAY DISSENT FROM THE MERGER (PAGE 19)
Arkansas law permits Pinnacle shareholders to dissent from the merger
and to receive the fair value of their shares of Pinnacle common stock in cash.
To do this, a Pinnacle shareholder must follow certain procedures, including
filing certain notices with Pinnacle and refraining from voting their shares in
favor of the merger. If they properly dissent from the merger, their shares of
Pinnacle common stock will not be exchanged for shares of BancorpSouth common
stock in the merger, and their only right will be to receive the appraised fair
value of their shares of Pinnacle common stock in cash. A copy of the Arkansas
statutes describing these dissenters' rights and the procedures for exercising
them is attached as Annex B to this Prospectus Supplement/Proxy Statement.
Pinnacle shareholders who perfect their dissenters' rights and receive cash in
exchange for their shares of Pinnacle common stock may recognize gain or loss
for U.S. federal income tax purposes.
WE MUST OBTAIN REGULATORY APPROVALS TO COMPLETE THE MERGER (PAGE 33)
We cannot complete the merger unless we obtain the approval of the
Federal Deposit Insurance Corporation. The U.S. Department of Justice has input
into the FDIC's approval process. Once the FDIC has approved the merger, federal
law requires that we wait for 15 to 30 days to complete the merger in order to
give the Department of Justice the opportunity to review and object to the
merger. BancorpSouth expects to obtain approval of the merger from the FDIC on
February 5, 2002 and expects that the waiting period for the Department of
Justice will expire on February 20, 2002, 15 days after receipt of the FDIC
approval.
In addition, the merger is subject to the approval of the Mississippi
Department of Banking and Consumer Finance and the Arkansas State Bank
Department. BancorpSouth and Pinnacle have filed all of the required notices and
applications, as appropriate, with these federal and state regulatory
authorities, and approval of the merger is expected to be received prior to the
approval of the agreement and plan of merger by the shareholders of Pinnacle.
While we believe that we will obtain the remaining regulatory approvals
in a timely manner, we cannot be certain if or when we will obtain them.
CONDITIONS TO COMPLETION OF THE MERGER (PAGE 42)
The completion of the merger depends on a number of conditions being
met, including the following:
- Shareholders of Pinnacle approving the agreement and plan of
merger;
- Receipt of all required regulatory approvals, including that
of the FDIC, and the expiration of any regulatory waiting
periods;
- The absence of any governmental order blocking completion of
the merger, or of any proceedings by a government body trying
to block it; and
- Receipt of opinions of legal counsel to each company that the
merger will be treated for U.S. federal income tax purposes as
a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code and that BancorpSouth and Pinnacle will
each be a party to that reorganization.
11
In cases where the law permits, a party to the agreement and plan of
merger could elect to waive a condition that has not been satisfied and complete
the merger although the party is entitled not to complete the merger. We cannot
be certain whether or when any of these conditions will be satisfied (or waived,
where permissible), or that the merger will be completed.
TERMINATION OF THE AGREEMENT AND PLAN OF MERGER (PAGE 42)
We can agree at any time to terminate the agreement and plan of merger
without completing the merger, even if the shareholders of Pinnacle have already
voted to approve it.
BancorpSouth may terminate the agreement and plan of merger if the
Pinnacle shareholders fail to approve the agreement and plan of merger or if
Pinnacle's Board of Directors has withdrawn or changed in a manner adverse to
BancorpSouth its approval of the merger, or its recommendation to its
shareholders that such shareholders approve the agreement and plan of merger and
the transactions contemplated in the agreement and plan of merger. In addition,
BancorpSouth may terminate the agreement and plan of merger if Pinnacle enters
into any letter of intent, agreement in principle, or acquisition or similar
agreement related to any tender or exchange offer, proposal for a merger,
consolidation or other business combination involving Pinnacle or any of its
subsidiaries or any proposal, inquiry or offer to acquire in any manner all or a
10% or greater interest in, or all or a substantial portion of the assets of,
Pinnacle or any of its subsidiaries, other than the transactions described in
this Prospectus Supplement/Proxy Statement. In the event the agreement and plan
of merger is terminated for any reason other than BancorpSouth's failure to
perform its obligations, after the expiration of any applicable cure periods,
and if any such offer or proposal has been made or is made at any time within a
six month period after such termination of the agreement and plan of merger,
Pinnacle shall pay $500,000 in cash to BancorpSouth on demand.
In addition, either of us can terminate the agreement and plan of
merger in the following circumstances:
- After a final decision by a governmental authority to prohibit
the merger, or 60 days after the rejection of an application
for a required governmental approval;
- If the merger is not completed by April 30, 2002; or
- If the other party violates, in a significant way, any of its
representations, warranties, covenants or obligations
contained in the agreement and plan of merger.
Generally, a party can only terminate the agreement and plan of merger
in one of these situations if that party is not in violation of the agreement
and plan of merger or if its violations of the agreement and plan of merger are
not the cause of the event permitting termination.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (PAGE 47)
Shares of BancorpSouth common stock are listed on the New York Stock
Exchange. On November 13, 2001, the last full trading day prior to the public
announcement of the merger, BancorpSouth common stock closed at $15.54 per
share. On January ___, 2002, BancorpSouth common stock closed at $_____ per
share. Of course, the market price of BancorpSouth common stock will fluctuate
prior to and after completion of the merger. You should obtain current stock
price quotations for BancorpSouth common stock.
There is no established trading market for shares of Pinnacle common
stock, which is inactively traded in private transactions. Therefore, reliable
information is not available about the prices at which shares of Pinnacle common
stock have been bought and sold.
12
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE (PAGE 78)
This document, and other documents to which you are referred in this
document, contain forward-looking statements that are subject to risks and
uncertainties. These forward-looking statements include information about the
anticipated performance of the combined companies after the merger.
Forward-looking statements generally refer to a future period and/or include any
of the words "believes," "expects," "anticipates," "should," "will,"
"estimates," "plans" or "intends" or similar expressions. Many possible events
or factors could affect each of our future financial results and performance and
that of the combined company after the merger and could cause those results or
performance to differ materially from those expressed in forward-looking
statements. These possible events or factors include the following:
- Problems or delays in bringing us together, either before or
after the merger is completed;
- Legal and regulatory risks and uncertainties;
- Economic, political and competitive forces affecting our
businesses, markets, constituencies or securities; and
- Inaccuracies in our analyses of these risks and forces, and
lack of success of strategies developed to deal with them.
13
SELECTED FINANCIAL DATA
The following tables show summarized unaudited historical consolidated
financial data for BancorpSouth. The information set forth for the nine-month
period ended September 30, 2001 does not indicate what the results will be for
the full 2001 fiscal year.
The information in the following tables is based on the historical
financial information of BancorpSouth that has been presented in its prior
filings with the Securities and Exchange Commission (and which have been
incorporated by reference into this Prospectus Supplement/Proxy Statement). All
of the summary financial information provided in the following tables should be
read in connection with this historical financial information. For information
on how to obtain BancorpSouth's historical financial information presented in
its prior filings, you should refer to the section of this document captioned
"Where You Can Find More Information." The financial information as of and for
the interim periods ended September 30, 2001 and 2000 has not been audited and
in the opinion of management reflects all adjustments (consisting only of normal
recurring adjustments) necessary to a fair presentation of such data.
14
BANCORPSOUTH, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
For the Nine
Months Ended
September 30,
For the Years Ended December 31, (Unaudited)
------------------------------------------------------------------ ------------------------
2000 1999 1998 1997 1996 2001 2000
---------- ---------- ---------- ---------- ---------- ---------- ----------
(Dollars in thousands, except per share amounts)
EARNINGS SUMMARY:
Interest revenue ............... $ 674,035 $ 596,670 $ 574,414 $ 523,770 $ 476,862 $ 508,799 $ 495,640
Interest expense ............... 346,883 280,150 277,104 246,945 222,806 261,839 251,287
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest revenue ....... 327,152 316,520 297,310 276,825 254,056 246,960 244,353
Provision for credit losses .... 26,166 17,812 19,310 15,682 11,643 15,718 20,669
Other revenue .................. 85,578 100,321 85,418 77,835 71,388 86,674 75,526
Other expense .................. 274,227 251,882 232,928 225,199 198,360 219,363 204,561
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income tax ... 112,337 147,147 130,490 113,779 115,441 98,553 94,649
Applicable income taxes ........ 37,941 44,736 42,249 34,141 37,031 31,405 32,528
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income ..................... $ 74,396 $ 102,411 $ 88,241 $ 79,638 $ 78,410 $ 67,148 $ 62,121
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA:
Basic earnings ................. $ 0.88 $ 1.20 $ 1.04 $ 0.96 $ 0.98 $ 0.81 $ 0.73
Diluted earnings ............... 0.88 1.19 1.03 0.96 0.98 0.80 0.73
Cash dividends ................. 0.53 0.49 0.45 0.40 0.35 0.42 0.39
Book value (end of period) ..... 9.40 8.84 8.44 7.72 7.08 8.74 8.25
BALANCE SHEET DATA (PERIOD END):
Total assets ................... $9,044,034 $8,441,697 $7,899,655 $7,207,205 $6,398,872 $9,388,462 $9,301,602
Loans, net of unearned income .. 6,095,315 5,541,961 4,935,668 4,400,643 3,909,003 6,061,146 5,922,564
Allowance for credit losses .... 81,730 74,232 68,385 61,932 56,657 82,605 78,100
Securities ..................... 2,046,529 2,111,597 2,147,609 2,032,644 1,793,779 2,314,856 2,674,783
Deposits ....................... 7,480,920 7,066,645 6,720,906 6,102,882 5,553,941 7,810,741 7,388,072
Long-term debt ................. 152,049 166,247 182,720 n/a n/a 141,223 165,803
Total stockholders' equity ..... $ 789,576 $ 757,111 $ 723,162 $ 639,012 $ 566,183 $ 796,441 $ 766,827
BALANCE SHEET DATA (AVERAGES):
Total assets ................... $8,756,454 $8,139,196 $7,574,870 $6,780,305 $6,166,162 $9,232,750 $8,653,681
Total stockholders' equity ..... $ 761,884 $ 737,526 $ 681,483 $ 614,105 $ 530,489 $ 793,014 $ 758,044
Average number of diluted shares
outstanding ................. 84,811 86,008 85,680 83,000 79,443 83,437 84,993
SELECTED RATIOS (ANNUALIZED):
Return on average assets ....... 0.85% 1.26% 1.16% 1.17% 1.27% 0.97% 0.96%
Return on average stockholders'
equity ...................... 9.76 13.89 12.95 12.97 14.78 11.32 10.93
Net interest margin ............ 4.14 4.32 4.35 n/a n/a 3.97 4.18
Net charge-offs to average
loans ....................... 0.34 0.25 0.30 0.28 0.27 0.33 0.39
Tier 1 capital to risk-weighted
assets ...................... 11.31 12.75 n/a n/a n/a 10.33 11.85
Total capital to risk-weighted
assets ...................... 12.56 14.02 n/a n/a n/a 11.52 13.10
Leverage ratio ................. 8.10 8.83 n/a n/a n/a 7.88 8.35
---------------
"n/a" - not available for the period indicated.
15
The following table shows summarized unaudited historical consolidated
financial data for Pinnacle, which should be read in conjunction with the
unaudited financial statements of Pinnacle included in pages F-1 through F-4 of
this Prospectus Supplement/Proxy Statement. The information has been prepared by
Pinnacle and has not been audited or reviewed by outside accountants. Because
the Pinnacle unaudited financial statements and information have not been
prepared in accordance with accounting principles generally accepted in the
United States of America, there can be no assurance that they fairly present the
financial position or historical results of operations of Pinnacle as of the
dates or for the periods indicated.
PINNACLE BANCSHARES, INC.
SELECTED UNAUDITED FINANCIAL DATA
For the Years ended December 31,
(Unaudited)
-----------------------------------------------------------------------
EARNINGS SUMMARY: 2001 2000 1999 1998 1997
---------- ---------- --------- --------- ---------
(Dollars in Thousands, except per share amounts)
Interest revenue .......................... $ 9,294 $ 8,247 $ 5,717 $ 3,185 $ 1,148
Interest expense .......................... 4,907 4,907 3,156 1,666 410
---------- ---------- --------- --------- ---------
Net interest revenue .................... 4,387 3,340 2,561 1,519 738
Provision for loan losses ................. 275 288 448 195 286
Other revenue ............................. 1,649 571 345 99 24
Other expense ............................. 3,477 2,452 2,003 1,352 834
---------- ---------- --------- --------- ---------
Income (loss) before income tax ......... 2,284 1,171 455 71 (358)
Applicable income taxes ................... 839 396 -- -- --
---------- ---------- --------- --------- ---------
Net income (loss) ......................... $ 1,445 $ 775 $ 455 $ 71 $ (358)
========== ========== ========= ========= =========
PER SHARE DATA:
Basic earnings (loss) ..................... $ 82.59 $ 43.10 $ 25.29 $ 03.95 $ (21.56)
Diluted earnings (loss) ................... 75.32 39.47 23.24 03.68 (20.45)
Cash dividends ............................ 0 0 0 0 0
Book value ................................ 511.92 442.38 393.02 376.57 373.59
BALANCE SHEET DATA (PERIOD END):
Total assets .............................. $ 135,218 $ 115,066 $ 93,265 $ 62,719 $ 26,120
Loans, net of unearned income ............. 122,804 95,931 75,702 46,828 18,791
Allowance for loan losses ................. 1,228 1,079 844 481 286
Securities ................................ 4,888 14,970 15,693 10,777 5,233
Deposits .................................. 101,770 87,129 78,049 54,914 19,074
Total stockholders' equity ................ $ 8,936 $ 7,957 $ 7,070 $ 6,774 $ 6,720
BALANCE SHEET DATA (AVERAGES):
Total assets .............................. $ 123,603 $ 104,399 $ 77,844 $ 41,876 $ 16,835
Total stockholders' equity ................ $ 8,332 $ 7,403 $ 6,906 $ 6,739 $ 6,430
Average number of diluted shares
outstanding ............................. 19,184 19,637 19,578 19,299 17,505
SELECTED RATIOS (ANNUALIZED):
Return on average assets .................. 1.17% 0.74% 0.58% 0.17% (2.13)%
Return on average stockholders'
equity .................................. 17.34 10.47 6.59 1.05 (5.57)
Net interest margin ....................... 3.68 3.27 3.38 3.77 4.97
Net charge-offs to average loans .......... 0.11 0.06 0.14 0 0
Tier 1 capital to risk-weighted
assets................................... 7.92 7.27 7.57 11.29 26.81
Total capital to risk-weighted
assets .................................. 9.01 8.25 8.45 12.10 27.96
Leverage ratio ............................ 6.85 7.32 8.13 12.49 28.38
16
THE SPECIAL MEETING
GENERAL
This Prospectus Supplement/Proxy Statement is first being mailed, on or
about January __, 2002, to all persons who were Pinnacle shareholders on January
28, 2002.
Along with this Prospectus Supplement/Proxy Statement, Pinnacle
shareholders are being provided with a Notice of Special Meeting, a form of
proxy card that is solicited by Pinnacle's Board of Directors for use at the
special meeting of Pinnacle shareholders and at any adjournments or
postponements of that meeting, and an election form and letter of transmittal
for the return of Pinnacle shares.
At the special meeting, Pinnacle shareholders will consider and vote
upon a proposal to approve the Agreement and Plan of Merger, dated as of
November 14, 2001, between Pinnacle and BancorpSouth, which provides for the
merger of Pinnacle with and into BancorpSouth.
The special meeting of Pinnacle shareholders will be held at the
following time and place:
February 28, 2002
10:00 a.m. (Central Time)
425 West Capitol Avenue, Suite 1100
Little Rock, Arkansas 72201
PROXIES
We encourage Pinnacle shareholders to promptly vote their proxies by
completing, signing, dating and returning the enclosed proxy card solicited by
Pinnacle's Board of Directors if they are unable to attend the special meeting
in person or wish to have their shares of Pinnacle common stock voted by proxy
even if they do attend the meeting.
A Pinnacle shareholder may revoke any proxy given in connection with
this solicitation by:
- Delivering to SunTrust Bank, Atlanta, N.A. prior to 5:00 p.m.,
Central Standard Time, on February 26, 2002 a written notice
revoking the proxy;
- Delivering to SunTrust Bank, Atlanta, N.A. prior to 5:00 p.m.,
Central Standard Time, on February 26, 2002 a duly executed
proxy relating to the same shares bearing a later date;
- Delivering at the special meeting a duly executed proxy
relating to the same shares; or
- Attending the meeting and voting in person (however,
attendance at the special meeting without voting at the
meeting will not in and of itself constitute a revocation of a
proxy).
Pinnacle shareholders should address all written notices of revocation
and other communications with respect to the revocation of proxies to the
following:
SunTrust Bank, Atlanta
Stock Transfer Department
58 Edgewood Avenue
Room 225, Annex
Atlanta, Georgia 30303
17
For a notice of revocation or later proxy to be valid, however,
SunTrust Bank, Atlanta must actually receive it prior to the vote of Pinnacle
shareholders at the special meeting. Pinnacle will vote all shares of Pinnacle
common stock represented by valid proxies received through this solicitation and
not revoked before they are exercised for approval of the agreement and plan of
merger. If no specification is made, shares of Pinnacle common stock represented
by proxies received will be voted for approval of the agreement and plan of
merger and in the discretion of the proxy holder as to any other matters that
properly may come before the special meeting.
Pinnacle is currently unaware of any other matters that may be
presented for action at the special meeting. If other matters do properly come
before the special meeting, then shares of Pinnacle common stock represented by
proxies will be voted (or not voted) by the persons named in the proxies in
their discretion.
SOLICITATION OF PROXIES
In addition to the solicitation of proxies by mail, if necessary,
Pinnacle may use several of its regular employees to solicit proxies from
Pinnacle shareholders, either personally or by telephone, telegram, facsimile or
special delivery letter. Such employees will not be specially compensated.
RECORD DATE AND VOTING RIGHTS
Pinnacle's Board of Directors has fixed January 28, 2002 as the record
date for the determination of Pinnacle shareholders entitled to receive notice
of and to vote at Pinnacle's special meeting of shareholders. Accordingly, only
Pinnacle shareholders of record at the close of business on January 28, 2002
will be entitled to notice of and to vote at the special meeting. At the close
of business on Pinnacle's record date, there were 17,137 shares of Pinnacle
common stock entitled to vote at the special meeting held by around 141 holders
of record, and the directors and executive officers of Pinnacle beneficially
owned 39.49% of the outstanding shares of Pinnacle common stock.
The presence, in person or by proxy, of shares of Pinnacle common stock
representing a majority of the votes entitled to be cast at the Pinnacle special
meeting is necessary to constitute a quorum. Each share of Pinnacle common stock
outstanding on Pinnacle's record date entitles its holder to one vote as to the
approval of the agreement and plan of merger or any other proposal that may
properly come before the special meeting.
For purposes of determining the presence or absence of a quorum for the
transaction of business, Pinnacle will count shares of Pinnacle common stock
present in person at the special meeting but not voting, and shares of Pinnacle
common stock for which it has received proxies but with respect to which holders
of such shares have abstained, as present at the special meeting. Abstentions
are counted as present at the Pinnacle special meeting for purposes of
determining whether a quorum exists and have the effect of a vote "against" any
matter as to which they are specified.
Under Arkansas law, approval of the agreement and plan of merger
requires the affirmative vote of the holders of a majority of all votes entitled
to be cast on the agreement and plan of merger. Because approval of the
agreement and plan of merger requires the affirmative vote of the holders of a
majority of the outstanding shares of Pinnacle common stock, abstentions will
have the same effect as negative votes. Accordingly, Pinnacle's Board of
Directors urges Pinnacle shareholders to complete, date and sign the
accompanying proxy card and return it promptly in the enclosed, postage-paid
envelope.
18
RECOMMENDATION OF THE BOARD OF DIRECTORS
Pinnacle's Board of Directors has unanimously approved the agreement
and plan of merger. Pinnacle's Board of Directors believes that the merger is in
the best interests of Pinnacle and Pinnacle shareholders and recommends that
Pinnacle shareholders vote "FOR" approval of the agreement and plan of merger.
The conclusion of Pinnacle's Board of Directors with respect to the merger is
based on a number of factors. See "THE MERGER - Pinnacle's Reasons for the
Merger; Recommendation of the Board of Directors."
DISSENTERS' RIGHTS
Holders of Pinnacle common stock who do not vote in favor of the merger
will be entitled to dissenters' rights and to demand payment of the fair value
of their shares as a result of the merger under Subchapter 13 of the Arkansas
Business Corporation Act of 1987. If the statutory procedure is followed and
dissenting holders and the surviving corporation do not otherwise agree on the
value of such holders' shares, these rights could lead to a judicial
determination of the fair value required to be paid to such dissenting holders
for their shares. Arkansas law defines "fair value" as the value of the shares
immediately before consummation of the merger, excluding any appreciation or
depreciation in anticipation of the merger unless such exclusion would be
inequitable, but it does not prescribe a method for determining fair value.
Consequently, any judicial determination of the fair value of the shares could
be based upon any valuation method or combination of methods the court deems
appropriate, and the value so determined could be more or less than the
consideration paid in the merger. If any holder of shares who demands payment
under Arkansas law fails to perfect, or effectively waives, his or her right to
payment as a dissenting shareholder, as provided under Arkansas law, each of the
shares of the holder will be converted into the consideration paid in the merger
in accordance with the agreement and plan of merger.
A person having a beneficial interest in shares of Pinnacle common
stock that are held of record in the name of another person, such as a nominee,
must act promptly to cause the record holder to follow the steps summarized
below properly and in a timely manner to perfect whatever dissenters' rights the
beneficial owner may have, or must submit to Pinnacle the record shareholder's
written consent to the dissent not later than the time the beneficial owner
asserts dissenters' rights, and must do so with respect to all shares that such
person beneficially owns.
A Pinnacle shareholder of record may assert dissenters' rights as to
fewer than all of the shares registered in such holder's name only if the holder
dissents with respect to all shares beneficially owned by any one person and
notifies Pinnacle in writing of the name and address of each person on whose
behalf the holder asserts dissenters' rights. The rights of a partial dissenter
are determined as if the shares as to which the holder dissents and the holder's
other shares were registered in the names of different shareholders.
The following discussion is not a complete statement of the law
pertaining to dissenters' rights under the Arkansas Business Corporation Act of
1987. Any Pinnacle shareholder who wishes to exercise such dissenters' rights,
or who wishes to preserve his or her right to do so, should review Subchapter 13
of the Arkansas Business Corporation Act of 1987, a copy of which is attached as
Annex B to this Prospectus Supplement/Proxy Statement, and the following
discussion carefully.
The availability of dissenters' rights is conditioned upon full
compliance with a complicated procedure set forth in Subchapter 13 of the
Arkansas Business Corporation Act of 1987. Failure to timely and properly comply
with the procedures specified will result in the complete loss of dissenters'
rights. Accordingly, any Pinnacle shareholder who wishes to dissent from the
merger and receive the value of his or her Pinnacle common stock in cash should
consult with his or her own legal counsel. No further notice of the events
giving rise to dissenters' rights or any steps associated
19
with exercising dissenters' rights will be furnished to Pinnacle shareholders,
except as indicated below or otherwise required by law.
A Pinnacle shareholder cannot vote for the merger and pursue
dissenters' rights. However, a Pinnacle shareholder's failure to vote against
the agreement and plan of merger will not constitute a waiver of his or her
dissenters' rights. In addition, a vote against the agreement and plan of merger
will not be deemed to satisfy all of the notice requirements under Arkansas law
with respect to dissenters' rights.
PROCEDURE FOR THE EXERCISE OF PINNACLE SHAREHOLDERS DISSENTERS' RIGHTS.
In order to be eligible to exercise the right to dissent, a Pinnacle shareholder
must:
- Notify Pinnacle in writing prior to the vote on the agreement
and plan of merger that such Pinnacle shareholder intends to
demand payment for his or her shares of Pinnacle common stock
if the merger is completed; and
- Not vote such shares of Pinnacle common stock in favor of the
agreement and plan of merger.
The written notice of intent to dissent should be addressed as follows:
Pinnacle Bancshares, Inc.
2610 Cantrell Road
Little Rock, Arkansas 72202
Attention: Thomas C. Evans, Secretary
If the agreement and plan of merger is approved at the Pinnacle special
meeting, BancorpSouth must deliver a written dissenters' notice to all
dissenting Pinnacle shareholders who satisfied the requirements referred to in
the preceding paragraph. BancorpSouth must deliver the dissenters' notice within
10 days after completion of the merger. This notice must:
- State where the Pinnacle shareholders must send demand for
payment of their shares of Pinnacle common stock if the merger
is completed and where and when Pinnacle common stock
certificates must be deposited;
- Inform holders of uncertificated shares of Pinnacle common
stock to what extent transfer of the shares will be restricted
after the demand for payment is received;
- Supply a form for demanding payment that includes the date of
the first announcement of the agreement and plan of merger to
news media or to shareholders and requires the dissenting
shareholder to certify whether or not he or she or, if a
nominee asserting dissenters' rights on behalf of a beneficial
shareholder, the beneficial shareholder acquired beneficial
ownership before that date;
- Set a date by which BancorpSouth must receive the demand for
payment, which date may not be fewer than 30 nor more than 60
days after the date the dissenters' notice is delivered; and
- Be accompanied by a copy of Subchapter 13 of the Arkansas
Business Corporation Act of 1987.
20
A Pinnacle shareholder of record who is sent a dissenters' notice must
demand payment in accordance with the terms of the dissenters' notice, certify
that he or she (or the beneficial shareholder on whose behalf such holder is
asserting dissenters' rights) acquired beneficial ownership of the shares of
Pinnacle common stock before the date required to be set forth in the
dissenters' notice and deposit his or her certificates representing shares of
Pinnacle common stock in accordance with the terms of the dissenters' notice.
A Pinnacle shareholder who demands payment and deposits his or her
stock certificates in accordance with the previous paragraph retains all other
rights of a Pinnacle shareholder until those rights are canceled or modified by
the completion of the merger.
A Pinnacle shareholder who does not demand payment or deposit his or
her stock certificates where required, in each case by the date set forth in the
dissenters' notice, is not entitled to payment for his or her shares of Pinnacle
common stock except pursuant to the terms of the agreement and plan of merger.
BANCORPSOUTH'S PAYMENT OR OFFER OF PAYMENT. Except as described below,
as soon as the merger is effective, or upon receipt of a demand for payment,
BancorpSouth must pay each dissenting Pinnacle shareholder who has complied with
the payment demand and deposit requirements described above the amount
BancorpSouth estimates to be the fair value of the Pinnacle shareholder's shares
of Pinnacle common stock, plus accrued interest from the effective time of the
merger. BancorpSouth must pay the rate of interest in the manner and amount
described in Section 4-27-1301(4) of the Arkansas Business Corporation Act of
1987. This offer of payment must be accompanied by the following:
- Pinnacle's balance sheet as of the end of a fiscal year ending
not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in
shareholders' equity for that year and the latest available
interim financial statements, if any;
- A statement of BancorpSouth's estimate of the fair value of
the shares of Pinnacle common stock;
- An explanation of how the interest was calculated;
- A statement of the dissenting shareholder's right to demand
payment under Section 4-27-1328 of the Arkansas Business
Corporation Act of 1987; and
- A copy of Subchapter 13 of the Arkansas Business Corporation
Act of 1987.
BancorpSouth may elect to withhold payment from a dissenting
shareholder under Section 4-27-1327 of the Arkansas Business Corporation Act of
1987 unless he or she was the beneficial owner of the shares before the date set
forth in the dissenters' notice as the date of the first announcement to news
media or to shareholders of the agreement and plan of merger. To the extent
BancorpSouth elects to withhold payment, it must estimate, after the completion
of the merger, the fair value of the Pinnacle shareholder's shares of Pinnacle
common stock, plus accrued interest, and must pay this amount to each dissenting
shareholder who agrees to accept it in full satisfaction of his or her demand.
BancorpSouth must send with its offer a statement of its estimate of the fair
value of the shares, an explanation of how the interest was calculated and a
statement of the dissenting shareholder's right to demand payment.
21
If dissatisfied with BancorpSouth's offer of payment, a dissenting
Pinnacle shareholder may notify BancorpSouth in writing of the shareholder's own
estimate of the fair value of his or her shares of Pinnacle common stock and
amount of interest due. The dissenting shareholder may demand payment of the
shareholder's estimate (less any payments previously made) or reject
BancorpSouth's offer and demand payment of the fair value of the shareholder's
shares of Pinnacle common stock and interest due, if:
- The dissenting shareholder believes that the amount paid under
Section 4-27-1325 or offered under Section 4-27-1327 of the
Arkansas Business Corporation Act of 1987 is less than the
fair value of the shareholder's shares of BancorpSouth common
stock or that the interest due is incorrectly calculated;
- BancorpSouth fails to make payment within 60 days after the
date set forth demanding payment; or
- BancorpSouth, having failed to complete the merger, does not
return the deposited certificates or release the transfer
restrictions imposed on the uncertificated shares of Pinnacle
common stock within 60 days after the date set for demanding
payment.
However, a dissenting Pinnacle shareholder waives the right to demand such
payment unless the shareholder notifies BancorpSouth of such demand in writing
within 30 days after BancorpSouth made or offered payment for the shareholder's
shares of Pinnacle common stock.
If BancorpSouth does not complete the merger within 60 days after the
date set for demanding payment and depositing share certificates of a dissenting
Pinnacle shareholder's shares of Pinnacle common stock, BancorpSouth must return
the deposited certificates and release the transfer restrictions imposed on the
uncertificated shares of Pinnacle common stock. If BancorpSouth, after returning
deposited certificates and releasing the transfer restrictions imposed upon the
shareholder's shares of Pinnacle common stock, completes the merger, a new
dissenters' notice must be delivered to the shareholder and the payment demand
procedure discussed above must be repeated.
JUDICIAL APPRAISAL OF PINNACLE COMMON STOCK. If a demand for payment
under Section 49-27-1328 of the Arkansas Business Corporation Act of 1987
remains unsettled, BancorpSouth must commence a proceeding within 60 days after
receiving the demand for payment and petition the relevant court to determine
the fair value of the shares of Pinnacle common stock and accrued interest. If
BancorpSouth does not commence this proceeding within this 60-day period, it
must pay each dissenting Pinnacle shareholder whose demand remains unsettled the
amount demanded.
BancorpSouth must commence any such proceeding relating to Pinnacle
common stock in the circuit court of Pulaski County, Arkansas. BancorpSouth must
make all dissenting shareholders whose demands remain unsettled, whether or not
residents of Arkansas, parties to the proceeding and must serve all parties with
a copy of the petition. The court may appoint one or more persons as appraisers
to receive evidence and recommend a fair value. The appraisers will have the
powers described in the order appointing them. Dissenting shareholders are
entitled to the same discovery rights as parties to other civil proceedings.
Each dissenting Pinnacle shareholder made a party to the proceeding is
entitled to judgment for the amount the court finds as the fair value of such
shareholder's shares of Pinnacle common stock, plus interest, less the amount
paid by BancorpSouth, or for the fair value, plus accrued interest, of such
shareholder's after-acquired shares for which BancorpSouth elected to withhold
payment under Section 4-27-1327 of the Arkansas Business Corporation Act of
1987.
22
The court, in an appraisal proceeding, must determine all costs of the
proceeding, including the reasonable compensation and expense of appraisers
appointed by the court. The court must assess these costs against BancorpSouth,
except that the court may assess costs against all or some of the dissenting
shareholders in amounts the court finds equitable, to the extent that the court
finds that the dissenting shareholders acted arbitrarily, vexatiously or not in
good faith in demanding payment.
The court may also assess the reasonable fees and expenses of counsel
and experts for the respective parties, in amounts the court finds equitable, as
follows:
- Against BancorpSouth or in favor of any and all dissenting
shareholders if the court finds that BancorpSouth did not
substantially comply with the requirements of Sections
4-27-1320 through 4-27-1328 of the Arkansas Business
Corporation Act of 1987; or
- Against either BancorpSouth or a dissenting shareholder, in
favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted
arbitrarily, vexatiously or not in good faith with respect to
the rights provided by Subchapter 13 of the Arkansas Business
Corporation Act of 1987.
If the court finds that the services of counsel for any dissenting
Pinnacle shareholder were of substantial benefit to other dissenting
shareholders similarly situated, and that the fees for those services should not
be assessed against BancorpSouth, the court may award to those counsel
reasonable fees to be paid out of the amounts awarded to the dissenting Pinnacle
shareholders who were benefited.
Any dissenting Pinnacle shareholder who perfects such holder's right to
be paid the fair value of his or her shares will recognize taxable gain or loss
upon receipt of cash for his or her shares for federal income tax purposes.
23
THE MERGER
The discussion in this Prospectus Supplement/Proxy Statement of the
merger of Pinnacle into BancorpSouth does not purport to be complete and is
qualified by reference to the full text of the agreement and plan of merger and
the other annexes attached to, and incorporated by reference into, this
Prospectus Supplement/Proxy Statement.
DESCRIPTION OF THE MERGER
Upon completion of the merger, Pinnacle will merge into BancorpSouth,
the separate corporate existence of Pinnacle will cease and BancorpSouth will be
the surviving corporation. BancorpSouth will continue to exist as a Mississippi
corporation. In addition, Pinnacle's wholly-owned subsidiary, Pinnacle Bank,
will merge into BancorpSouth Bank, a Mississippi state banking corporation and a
wholly-owned subsidiary of BancorpSouth, and BancorpSouth Bank will be the
surviving bank. BancorpSouth Bank will continue its existence under the laws of
Mississippi. Subject to the satisfaction or waiver of certain conditions set
forth in the agreement and plan of merger, the merger will become effective upon
the filing of articles of merger in the offices of the Secretary of State of the
State of Arkansas and the Secretary of State of the State of Mississippi in
accordance with the Arkansas Business Corporation Act of 1987 and the
Mississippi Business Corporation Act of 1987. See "THE AGREEMENT AND PLAN OF
MERGER -- Conditions to the Merger."
The merger will have the effects set forth in Section 79-4-11.07 of the
Mississippi Business Corporation Act, Section 81-5-85 of the Mississippi Banking
Act, Section 4-27-1106 of the Arkansas Business Corporation Act of 1987 and
Section 23-48-604 of the Arkansas Banking Code of 1997.
BancorpSouth's restated articles of incorporation and amended and
restated bylaws as in effect upon completion of the merger will be those of the
surviving corporation, and BancorpSouth Bank's articles of incorporation and
bylaws as in effect upon completion of the merger will be those of the surviving
bank.
At the effective time of the merger, automatically by virtue of the
merger and without any action on the part of any party or shareholder, each
share of Pinnacle common stock outstanding immediately prior to the effective
time will become and be converted into the right to receive $1,134.10 in cash, a
number of shares of BancorpSouth common stock as determined by the exchange
ratio (which may fluctuate as described below), together with the related rights
of BancorpSouth shareholders that are exercisable under certain circumstances,
or a combination of both cash and shares of BancorpSouth common stock. Each
Pinnacle shareholder will be able to elect to receive cash, shares of
BancorpSouth common stock or a combination of both for his or her shares of
Pinnacle common stock, subject, in each case, to adjustment on a pro rata basis
as described below. In the event that more than 49% of the outstanding shares of
Pinnacle common stock elect to, or otherwise will, receive cash, only 49% of the
shares of Pinnacle common stock will be converted into the right to receive cash
and the remaining 51% of the shares of Pinnacle common stock will be converted
into the right to receive BancorpSouth common stock. In the event that more than
51% of the outstanding shares of Pinnacle common stock elect to receive stock
consideration, only 51% of the shares of Pinnacle common stock will be converted
into the right to receive shares of BancorpSouth common stock and the remaining
49% of the shares of Pinnacle common stock will be converted into the right to
receive cash. In addition, the election of merger consideration by Pinnacle
shareholders is subject to a tax-related adjustment, if necessary, in order for
the merger to qualify as a reorganization under Section 368(a) of the Internal
Revenue Code and to permit delivery of the requisite tax opinions pursuant to
the agreement and plan of merger. As a result, a Pinnacle shareholder may
receive a different combination of consideration than he or she elected, based
on the
24
choices made by other Pinnacle shareholders or other circumstances. Pinnacle
shareholders who do not return a properly completed election form with respect
to their shares of Pinnacle common stock at least two business days before the
special meeting of the Pinnacle shareholders will receive consideration of 51%
BancorpSouth common stock and 49% cash in exchange for their shares.
Shares of Pinnacle common stock with respect to which dissenters'
rights have been properly demanded in accordance with Subchapter 13 of the
Arkansas Business Corporation Act of 1987 or held by Pinnacle or any of its
subsidiaries, in each case, other than shares held in a fiduciary capacity or in
connection with a debt previously contracted, will not be converted into the
consideration described above automatically at the effective time of the merger.
At the effective time, all shares of Pinnacle common stock held by Pinnacle or
its subsidiaries, other than shares held in a fiduciary capacity or in
connection with a debt previously contracted, will be canceled and will cease to
exist, and no BancorpSouth common stock or other consideration will be delivered
in exchange for such shares. Also at the effective time, all shares of
BancorpSouth common stock held by Pinnacle or its subsidiaries, other than
shares held in a fiduciary capacity or in connection with a debt previously
contracted, will become treasury stock and all other shares of BancorpSouth
common stock outstanding as of the effective time will remain outstanding.
Shares of Pinnacle common stock as to which dissenters' rights have
been properly demanded will not be converted into the right to receive, or be
exchangeable for, BancorpSouth common stock. Instead, the holders of these
shares will be entitled to cash payment of the value of the shares in accordance
with Subchapter 13 of the Arkansas Business Corporation Act of 1987. All such
shares will be deemed cash election shares for purposes of determining how much
cash is available for distribution to other shareholders. If any holder of these
shares subsequently delivers a written withdrawal of his or her demand for
dissenters' rights, or if any holder fails to establish his or her entitlement
to dissenters' rights, the holder will forfeit the right to dissent from the
merger and his or her shares of Pinnacle common stock will be deemed to have
been converted into the right to receive, and to have become exchangeable for,
the consideration due under the agreement and plan of merger. See "SPECIAL
MEETING -- Dissenters' Rights."
At the effective time of the merger, each outstanding and unexercised
option to purchase shares of Pinnacle common stock granted by Pinnacle will no
longer represent a right to acquire shares of Pinnacle common stock and will be
replaced promptly by an option to purchase shares of BancorpSouth common stock
under the appropriate BancorpSouth stock option plan. The number of shares of
BancorpSouth common stock underlying these new options will be equal to the
number of shares of BancorpSouth common stock to which the option holder would
have been entitled, had such options been exercised in full immediately prior to
the effective time and had such holder received only stock consideration in the
merger, with any fractional shares of BancorpSouth common stock resulting from
this calculation to be rounded to the nearest whole share. The exercise price
per share of BancorpSouth common stock under these new options will be equal to
the quotient of the aggregate exercise price of Pinnacle common stock under the
original options, divided by the number of shares of BancorpSouth common stock
issuable under the new options, with the exercise price resulting from this
calculation to be rounded to the nearest cent. However, each original option to
purchase Pinnacle common stock which is an "incentive stock option" will be
adjusted in a manner that is consistent with the requirements of the Internal
Revenue Code. The duration of each new option to purchase BancorpSouth common
stock will be the same as the replaced original option to purchase Pinnacle
common stock.
At the effective time of the merger, Pinnacle shareholders, other than
those who perfect dissenters' rights, will have no further rights as Pinnacle
shareholders, other than to receive the consideration to be issued to them in
the merger. After the effective time, there will be no transfers on Pinnacle's
stock transfer books of shares of Pinnacle common stock. If, after the effective
time, stock certificates representing shares of Pinnacle common stock are
presented for transfer to SunTrust Bank, Atlanta, the exchange agent for the
merger, they will be canceled and exchanged for
25
certificates representing shares of BancorpSouth common stock as provided in the
agreement and plan of merger.
The exchange ratio will be adjusted as follows to reflect changes in
the price of BancorpSouth common stock. If the average closing price per share
of BancorpSouth common stock for the 10 consecutive trading days ending on the
fifth trading day immediately preceding the merger is less than or equal to
$13.209, the exchange ratio will be 85.8516 shares of BancorpSouth common stock
for each share of Pinnacle common stock. If the average closing price per share
of BancorpSouth common stock for this period is greater than or equal to
$17.871, the exchange ratio will be 63.4639 shares of BancorpSouth common stock
for each share of Pinnacle common stock. If the average closing price per share
of BancorpSouth common stock for this period is between $13.209 and $17.871, the
number of shares of BancorpSouth common stock exchangeable for each share of
Pinnacle common stock will be the result of dividing $1,134.10 by the average
closing price. BancorpSouth expects the market price of BancorpSouth common
stock to fluctuate due to market factors beyond its control between the date of
this Prospectus Supplement/Proxy Statement and the date on which the merger is
completed and thereafter. Since the exchange ratio may fluctuate only to a
certain point, and after such point it remains fixed, the implied market value
of BancorpSouth common stock that Pinnacle shareholders will receive in the
merger may increase or decrease prior to completion of the merger. For further
information concerning the historical market prices of BancorpSouth common
stock, see "PRICE RANGE OF COMMON STOCK AND DIVIDENDS." BancorpSouth cannot
assure you that the market price of BancorpSouth common stock will not decrease
before or after the merger.
If, prior to the merger, shares of BancorpSouth common stock are
changed into a different number or class of shares due to any reclassification,
recapitalization, split-up, combination, exchange of shares or readjustment, or
if a stock dividend is declared on the shares of BancorpSouth common stock with
a record date prior to the merger, the exchange ratio will be adjusted
accordingly.
BACKGROUND OF THE MERGER
In January, 1997, Pinnacle was formed as a holding company for Pinnacle
Bank, an Arkansas state-chartered de novo bank. As a result of certain
restrictions under Arkansas banking laws, Pinnacle was prevented, until the
fifth anniversary of the formation of Pinnacle Bank, from consummating a
transaction involving the sale or merger of Pinnacle Bank or a change in control
of Pinnacle.
In late August, 2001, in anticipation of the expiration of the
foregoing restrictions, management and the Board of Directors of Pinnacle began
initial discussions with representatives of Stephens Inc., an investment banking
firm, regarding the alternatives available to Pinnacle to maximize shareholder
value.
Between September 5, 2001 and September 20, 2001, Stephens continued to
meet with Pinnacle management and gather information about Pinnacle which would
assist Stephens in advising the Board regarding its various alternatives. On
September 21, 2001, Stephens met with Pinnacle's Board and provided initial
advice regarding the alternatives available to Pinnacle, including (1) pursuit
of a sale transaction or business combination and (2) remaining independent and
continuing to pursue Pinnacle's historical growth strategy. At the end of that
meeting, the Board voted to formally retain Stephens to assist the Board in
establishing a reasonable value for Pinnacle and in soliciting expressions of
interest from third parties regarding a potential business combination. Stephens
also agreed, if requested by Pinnacle, to assist in any negotiations relating to
any potential business combination and to provide its advice to the Board
regarding the terms of any such combination. Pinnacle's Board authorized Robert
Althoff, together with Richard Massey and Gus Blass, who are Board members, to
work with Stephens to identify and negotiate with potential business combination
candidates.
26
Following that meeting, Stephens began working with senior management
to prepare a confidential information memorandum regarding Pinnacle and Pinnacle
Bank.
On October 15, 2001, following the execution of a confidentiality
agreement, BancorpSouth received a copy of the confidential information
memorandum. On October 19, 2001, BancorpSouth informed Stephens that it would
like to make a preemptive bid for Pinnacle at a price that represented around
2.4 times Pinnacle's book value as of September 30, 2001 and around 17.9 times
Pinnacle's trailing twelve months net earnings. The non-binding bid was
conditional upon Pinnacle's providing BancorpSouth the exclusive right to
perform due diligence and negotiate a definitive merger agreement.
Based upon the favorable price proposed by BancorpSouth and upon the
advice of Stephens, Pinnacle informed BancorpSouth that they would deal
exclusively with BancorpSouth for an unspecified limited period of time, if
Pinnacle representatives believed, in their discretion, that the parties were
making substantial progress toward the execution of a definitive agreement. It
was further understood that any binding transaction between Pinnacle and
BancorpSouth would be subject to review by and final approval of Pinnacle's full
Board of Directors.
Between October 20, 2001 and November 8, 2001, BancorpSouth performed
extensive due diligence with respect to Pinnacle and the parties negotiated in
good faith toward reaching a definitive merger agreement.
Pinnacle's Board met on November 9, 2001, to discuss and consider the
proposed transaction with BancorpSouth. At that meeting, Mr. Massey, Mr. Althoff
and representatives of Stephens reviewed the status of the transaction. Stephens
made a presentation regarding the financial rationale supporting the
transaction, which included a detailed financial analysis concerning Pinnacle
and a detailed review of the potential transaction values and likelihood of
success of pursuing a combination with other potential merger partners. Although
no fairness opinion was rendered by Stephens, Stephens indicated to the board
that, as a result of these analyses, it believed it unlikely that another
potential merger candidate would be willing to propose a transaction that was
financially superior to the transaction proposed by BancorpSouth, and that, if
requested, it was prepared to render an opinion as to the fairness of the
transaction from a financial point of view. Pinnacle's Board also considered the
timing and prospects for completion of the BancorpSouth transaction and the
significant risk of jeopardizing such transaction if it pursued other
alternatives.
After a review of all aspects of the proposed transaction and
considerable discussion, Pinnacle's Board authorized Messrs. Althoff, Cavin and
Massey to complete the final negotiations with BancorpSouth and enter into a
definitive merger agreement.
On November 14, 2001, Pinnacle and BancorpSouth executed the agreement
and plan of merger.
PINNACLE'S REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
Pinnacle's Board of Directors deliberated and unanimously approved the
agreement and plan of merger at a Board meeting held on November 9, 2001. In
reaching its determination to approve the agreement and plan of merger,
Pinnacle's Board of Directors consulted with Pinnacle's management and financial
and legal advisors, and considered a number of factors. The following is a
discussion of the information and factors considered by Pinnacle's Board of
Directors in reaching this determination. This discussion is not intended to be
exhaustive, but includes the material factors
27
considered by Pinnacle's Board of Directors. In the course of its deliberations
with respect to the merger, Pinnacle's Board of Directors discussed the
anticipated impact of the merger on Pinnacle, Pinnacle's shareholders and
various other constituencies. In reaching its determination to approve and
recommend the agreement and plan of merger, Pinnacle's Board of Directors did
not assign any relative or specific weights to the factors considered in
reaching such determination, and individual members of Pinnacle's Board of
Directors may have given differing weights to different factors.
The following includes the material factors that were considered by
Pinnacle's Board of Directors:
- Pinnacle's Board considered the favorable price being offered
by BancorpSouth to be a significant factor in its
deliberation. Such price represented a multiple of around 2.4
times Pinnacle's book value as of September 30, 2001 and
around 17.9 times Pinnacle's trailing twelve months net
earnings. The Board reviewed the detailed financial analysis
and other information prepared by Stephens regarding the
proposed price. The Board also reviewed data prepared by
Stephens with respect to comparable acquisition transactions
and found that the price being paid by BancorpSouth was above
the average price paid in those transactions. Although
Stephens was not requested to render a fairness opinion
regarding the fairness of the transaction, it did indicate to
the Board that it was prepared to deliver such an opinion if
requested.
- The Board considered whether there were other potential
business combination candidates that would likely pay a higher
price for Pinnacle. The Board reviewed data prepared by
Stephens with respect to the prices that could reasonably be
expected to be paid by other bank holding companies that would
most likely be interested, and financially and otherwise
capable of engaging, in a business combination with Pinnacle.
Based upon this review and the advice of Stephens, the Board
concluded that it was unlikely that another potential
candidate would be willing to propose a transaction that was
financially superior to the BancorpSouth offer.
- The Board considered the terms of the agreement and plan of
merger, including the fact that Pinnacle shareholders would,
subject to certain limitations, be afforded the right to
receive cash, BancorpSouth common stock or a combination of
cash and BancorpSouth common stock in exchange for their
Pinnacle shares. The Board also considered the number of
shares of BancorpSouth common stock to be received by Pinnacle
shareholders pursuant to the exchange ratio described in the
agreement and plan of merger and the fact that such exchange
ratio would be adjusted (within a defined trading range) so as
to afford Pinnacle shareholders protection in the event of a
reduction in the trading price of BancorpSouth's common stock
between the date of signing of the agreement and plan of
merger and the date of the closing of the merger.
- The Board considered the historical price performance of
BancorpSouth's common stock, and the business, operations,
earnings and dividends of BancorpSouth on a historical and
prospective basis.
- The Board considered the fact that the merger would afford
Pinnacle shareholders the right, to the extent they receive
stock consideration, to become shareholders in a company whose
stock is traded on the New York Stock Exchange with sufficient
trading volume to provide liquidity for shareholders. Further,
the Board deemed important the fact that the shares of
BancorpSouth common stock to be issued to Pinnacle
shareholders in exchange for their Pinnacle shares were
expected to be issued on a tax-free basis.
28
- The Board considered, with the assistance of senior
management, other alternatives to a business combination and
determined that, based upon the current and prospective
economic and competitive environment, such alternatives were
not likely to result in greater value for Pinnacle's
shareholders than the value to be realized in the merger. Such
analysis included consideration of, among other factors,
variables relating to the ability of Pinnacle to continue to
generate revenue growth, improved profitability and superior
shareholder returns on a stand-alone basis versus combining
with a company that possesses greater financial resources to
compete more effectively in the extremely competitive
marketplace for banking and financial services.
- The Board took into account BancorpSouth's stated intention to
continue to operate the bank as a Little Rock community bank
responsive to local community needs.
- The Board considered the fact that Robert Althoff, Pinnacle's
President, would continue to serve as community bank president
of the branch location of BancorpSouth Bank in Little Rock
following the merger and that Dabbs Cavin would serve as
assistant branch manager at the same location and that such
individuals might be deemed to have interests in the merger
other than their interests as shareholders of Pinnacle. See
"Interests of Certain Persons in the Merger".
BASED ON A THOROUGH EVALUATION OF THESE FACTORS, PINNACLE'S BOARD OF
DIRECTORS BELIEVES THE MERGER IS IN THE BEST INTERESTS OF PINNACLE AND PINNACLE
SHAREHOLDERS. PINNACLE'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT PINNACLE
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT AND PLAN OF MERGER.
ANALYSIS OF PINNACLE'S FINANCIAL ADVISOR
Stephens Inc. acted as a financial advisor to Pinnacle in connection
with the proposed merger. As part of its investment banking business, Stephens
regularly engages in the valuation of securities in connection with mergers and
acquisitions and valuations for corporate, estate tax, and other purposes.
Pinnacle retained Stephens based on its experience as a financial advisor in
mergers and acquisitions of financial institutions and its knowledge of the
financial institutions industry. As part of this engagement, Stephens agreed to
provide analysis and advice to the Board on the financial implications of any
offers received. At its November 9 board meeting, Pinnacle asked Stephens to
give its advice with respect to the BancorpSouth proposal and whether a superior
offer could likely be obtained from another potential acquirer. Pinnacle did not
ask for and Stephens did not express an opinion as to the fairness of the
transaction from a financial perspective. Pinnacle had instructed Stephens to
deal exclusively with BancorpSouth once their initial proposal was made. No
other limitations were placed on Stephens. At the November 9 Pinnacle Board
meeting, Stephens presented a summary of its financial analysis to the Board. As
part of this analysis, Stephens examined values of selected bank and thrift
merger transactions, the potential merger valuation range that potential
acquirers might offer and a stand-alone valuation based on discounted cash flow
analysis.
Set forth below is a summary of the material analyses presented by
Stephens on November 9, 2001 to the Board of Pinnacle. Stephens was present to
discuss the reasonableness of a $21.2 million transaction value for Pinnacle.
Included in this value were the implied value of the Pinnacle stock options
outstanding ($1.2 million), based on the BancorpSouth proposal, and $565,000
allocated to management bonuses.
29
ANALYSIS OF SELECTED RECENT REGIONAL BANK AND THRIFT MERGER
TRANSACTIONS. Stephens reviewed the consideration paid in 28 transactions
announced between September 21, 2000 and November 6, 2001, with transaction
values between $10 million and $100 million for bank and thrift targets located
in Arkansas, Louisiana, Mississippi, Missouri, Oklahoma, Texas, Alabama and
Tennessee. For each company merged in such transactions, Stephens compiled data
comparing the transaction price at announcement to the latest twelve months'
earnings per share, the transaction price to book value, the transaction price
to tangible book value, the core deposit premium paid and the tangible core
deposit premium paid.
The characteristics of these transactions are as follows:
- a mean and median ratio of transaction price to latest twelve
months' earnings per share of 15.6x and 16.5x, respectively;
- a mean and median ratio of transaction price to book value of
1.9x and 1.8x, respectively;
- a mean and median ratio of transaction price to tangible book
value of 2.0x and 1.9x, respectively;
- a mean and median core deposit premium paid of 10.4% and 9.7%,
respectively; and
- a mean and median tangible core deposit premium paid of 10.8%
and 10.6%, respectively.
The mean and median multiples on these selected transactions when
applied to Pinnacle resulted in implied merger values of $16.1 million to $22.6
million.
No other company or transaction used in the above analysis as a
comparison is identical to Pinnacle or the proposed merger. Accordingly, an
analysis of the results of the foregoing is not mathematical; rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other factors that
could affect the acquisition of the companies to which Pinnacle is being
compared.
POTENTIAL MERGER VALUATION RANGE. Stephens prepared an analysis that
provided an estimate of the potential transaction value that selected potential
merger partners which are publicly traded, including BancorpSouth, might offer
to acquire Pinnacle. The analysis showed that, based on closing stock market
prices on November 8, 2001 and the assumption of potential cost savings of 0% to
15% of non-interest expense, the selected merger partners might offer between
$16.2 million and $24.0 million in a merger transaction. The analysis was
predicated on the assumption that each potential acquiror would be willing to
offer the transaction value that results from applying the potential acquiror's
price-to-earnings multiple to the estimated earnings of Pinnacle, adjusted to
include the after tax benefit of potential cost savings. This analysis was based
on analysts' consensus estimates of 2002 earnings per share and management's
estimate of Pinnacle's 2002 earnings. The same analysis, based on the
transaction value resulting from the application of the selected merger
partners' market multiples of 2002 cash earnings per share, suggests that the
selected merger partners might offer between $13.2 million and $23.3 million in
a merger transaction.
DISCOUNTED CASH FLOW ANALYSIS. Stephens reviewed management's financial
projections and applied assumptions about Pinnacle's cost of equity capital and
its projected future earnings growth, dividends and terminal value on December
31, 2006. Using a discount rate (cost of equity capital) of 10.5% to 12.5% and
future earnings multiples of 10.0x to 16.0x, the discounted cash flow valuation
for Pinnacle ranged from $14.8 million to $25.8 million.
30
COMPARISON OF SELECTED COMPANIES. Stephens reviewed and compared
certain public market multiples relating BancorpSouth to the publicly available
corresponding data for a group of eight selected banks which Stephens deemed to
be relevant. The selected banks consisted of SouthTrust Corporation, Regions
Financial Corporation, AmSouth Bancorporation, Union Planters Corporation,
Hibernia Corporation, Colonial BancGroup, Inc., Cullen/Frost Bankers, Inc. and
Trustmark Corporation. Based on a review of the selected bank data, Stephens
determined (in each case based on closing stock prices as of November 7, 2001)
that:
- with respect to the ratio of price to earnings per share for
the last twelve month period ended September 30, 2001, the
selected banks had a median of 14.2x compared to 16.0x for
BancorpSouth;
- with respect to the ratio of price to estimated earnings per
share for 2001, the selected banks (based on projected
earnings per share for 2001 as reported by First Call) had a
median of 13.0x compared to 13.9x for BancorpSouth;
- with respect to the multiple of stock price to estimated
earnings per share for 2002, the selected banks (based on
earnings per share for 2002 as reported by First Call) had a
median of 11.7x compared to 11.8x for BancorpSouth;
- with respect to the multiple of stock price to book value per
share, the selected banks had a median of 1.96x compared to
1.57x for BancorpSouth; and
- with respect to the multiple of stock price to tangible book
value per share, the selected banks had a median of 2.45x
compared to 1.67x for BancorpSouth.
A market price of $15.36, which was the last reported trade on November
7, 2001, was used for BancorpSouth in this analysis.
In summary, although no fairness opinion was rendered by Stephens,
Stephens indicated to the Board that, as a result of these analyses, it believed
it unlikely that another potential merger candidate would be willing to propose
a transaction that was financially superior to the transaction proposed by
BancorpSouth, and that, if requested, it was prepared to render an opinion as to
the fairness of the transaction from a financial point of view.
In performing its analyses, Stephens made numerous assumptions with
respect to industry performance, regulatory, general business and economic
conditions and other matters, many of which are beyond the control of Pinnacle
and BancorpSouth. The analyses performed by Stephens are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable than those suggested by such analyses. Such analyses were
prepared solely as part of Stephens' analysis of the consideration to be
received from a financial point of view. The analyses do not purport to be
appraisals or to reflect the prices at which a company might actually be sold or
the prices at which any securities may trade at the present time or at any time
in the future.
COMPENSATION AND INTERESTS OF STEPHENS. Pursuant to the terms of
Stephens' engagement as financial advisor, Pinnacle has agreed to pay Stephens a
fee equal to 2.0% of the transaction value at closing, which amounts to a fee of
around $426,000.
Pinnacle also agreed to reimburse Stephens for its out-of-pocket
expenses, including reasonable fees and disbursements of its outside legal
counsel, incurred in connection with its engagement, and agreed to indemnify
Stephens, its affiliates and their respective partners, directors, officers,
agents, consultants, employees and controlling persons against certain
liabilities, including liabilities under the federal securities laws.
31
In the ordinary course of its business, Stephens and its affiliates at
any time may hold long or short positions, and may trade or otherwise effect
transactions as principal or for the accounts of customers, in the equity
securities of Pinnacle and/or BancorpSouth. As of January 28, 2002, Richard N.
Massey, an affiliate of Stephens and a director of Pinnacle, beneficially owned
1,162 shares of Pinnacle common stock, or around 6.8% of the outstanding shares
of Pinnacle common stock. As of January 28, 2002, the W.R. Stephens, Jr.
Revocable Trust, an affiliate of Stephens, owned 1,000 shares of Pinnacle common
stock, or around 5.8% of the outstanding shares of Pinnacle common stock.
These affiliates will benefit from the merger in their capacities as holders of
Pinnacle's common stock to the same extent as other holders of Pinnacle's common
stock.
BANCORPSOUTH'S REASONS FOR THE MERGER
BancorpSouth's Board of Directors believes that Pinnacle's market area
is comparable to that of BancorpSouth. In addition, it believes that economies
of scale and cost savings available through combining administrative functions
at the holding company and bank levels and increased competitiveness resulting
from combined marketing efforts and budgets should enhance the operations and
financial results of the combined companies. In addition, BancorpSouth's Board
of Directors believes that the merger should strengthen the ability of the
subsidiaries of Pinnacle and Pinnacle Bank, as a part of BancorpSouth Bank, to
compete and be successful in their existing markets because BancorpSouth Bank
offers services that are not currently available to Pinnacle's customers,
provides uniform services and financial products that are not offered by
Pinnacle Bank and has the capital resources to offer larger loans than Pinnacle
on a stand-alone basis. In addition, BancorpSouth possesses computer technology
that is not currently possessed by Pinnacle.
BancorpSouth's Board of Directors discussed the agreement and plan of
merger at their meeting on October 24, 2001 and approved and adopted the
agreement and plan of merger by written consent effective November 14, 2001. In
reaching its determination to approve and adopt the agreement and plan of
merger, BancorpSouth's Board of Directors consulted with BancorpSouth's
management and financial and legal advisors and considered a number of factors.
The following is a discussion of information and factors considered by
BancorpSouth's Board of Directors in reaching this determination. This
discussion is not intended to be exhaustive, but includes the material factors
considered by BancorpSouth's Board of Directors. In the course of its
deliberations with respect to the merger, BancorpSouth's Board of Directors
discussed the anticipated impact of the merger on BancorpSouth, BancorpSouth's
shareholders and various other constituencies. BancorpSouth's Board of Directors
did not identify any material disadvantages expected to result from the merger
during these discussions. In reaching its determination to approve and recommend
the agreement and plan of merger, BancorpSouth's Board of Directors did not
assign any relative or specific weights to the factors considered in reaching
such determination, and individual members of BancorpSouth's Board of Directors
may have given differing weights to different factors.
The following includes the material factors that were considered by
BancorpSouth's Board of Directors:
- Its review, based in part on presentations by BancorpSouth's
management, legal counsel and financial advisors, of:
(1) the business, operations, technology, dividends,
financial condition and earnings of Pinnacle on a
historical and a prospective basis and of the
combined company on a pro forma basis, and
(2) the potential impact on the market value of
BancorpSouth common stock following the merger;
32
- The resulting relative interests of BancorpSouth shareholders
in the common stock of the combined company following the
merger;
- The similarity of Pinnacle's market area to BancorpSouth's
market areas;
- The terms of the agreement and plan of merger, including the
amount and form of consideration to be received by Pinnacle
shareholders in the merger, and the expectation that the
merger will be a tax-free transaction to BancorpSouth and
BancorpSouth shareholders;
- The general impact that the merger could be expected to have
on the constituencies served by BancorpSouth, including its
customers, employees and communities; and
- The anticipated cost savings, operating efficiencies and
opportunities for revenue enhancement available to the
combined companies from the merger, and the likelihood that
these would be achieved following the merger.
REGULATORY APPROVAL
Completion of the merger is conditioned on, among other things, the
receipt of approvals by the Federal Deposit Insurance Corporation, the
Mississippi Department of Banking and Consumer Finance and the Arkansas State
Bank Department. The Board of Governors of the Federal Reserve System has waived
its notification filing requirements with respect to the merger.
As a Mississippi state non-member bank, BancorpSouth Bank must file an
application with the FDIC for approval of the merger pursuant to Sections 18(c)
and 18(d) of the Federal Deposit Insurance Act. The FDIC may disapprove the
application if it finds that the merger tends to create or result in a monopoly,
substantially lessen competition or would be in restraint of trade. BancorpSouth
Bank filed this application with the FDIC on December 21, 2001. Following
approval of the application by the FDIC, the United States Department of Justice
has between 15 and 30 calendar days to submit any adverse comments relating to
competitive factors resulting from the merger. It is anticipated that
BancorpSouth will obtain approval of the merger from the FDIC on February 5,
2002, and that the Department of Justice waiting period will expire on February
20, 2002.
BancorpSouth must file an application with the Mississippi Department
of Banking and Consumer Finance for approval of the merger of Pinnacle's bank
subsidiary, Pinnacle Bank, into BancorpSouth Bank. BancorpSouth filed this
application on December 21, 2001. Approval of the bank merger by the Mississippi
Department of Banking and Consumer Finance is expected to be received prior to
approval of the agreement and plan of merger by Pinnacle shareholders.
Pinnacle and BancorpSouth also must file a change of control
application with the Arkansas State Bank Department for approval of the merger.
In addition to this application, BancorpSouth must provide to the Arkansas State
Bank Department a copy of the application filed with the FDIC and executed
originals of certain documents required for completion of the merger.
BancorpSouth provided this application to the Arkansas State Bank Department on
December 21, 2001. Approval of the merger by the Commissioner of the Arkansas
State Bank Department is expected to be received on or about January 31, 2002.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material anticipated United
States federal income tax consequences of the merger to Pinnacle shareholders
who hold their shares of Pinnacle common
33
stock as capital assets. This discussion does not address the tax consequences
of transactions effectuated prior or subsequent to, or concurrently with, the
merger (whether or not such transactions are undertaken in connection with the
merger). In addition, this discussion does not address all of the federal income
tax consequences that may be important to each taxpayer in light of its
particular circumstances, nor does this discussion address the federal income
tax consequences that may be applicable to taxpayers subject to special
treatment under the Internal Revenue Code, such as:
- tax-exempt organizations;
- financial institutions, insurance companies and broker-dealers
or persons who have elected to use the mark-to-market method
of accounting with respect to their securities holdings;
- shareholders who hold their Pinnacle shares as part of a
hedge, straddle, wash sale, synthetic security, conversion
transaction or other integrated investment comprised of
Pinnacle shares and one or more other investments;
- persons who acquired their Pinnacle shares through the
exercise of employee stock options, through a benefit plan or
otherwise in a compensatory transaction;
- shareholders who are not U.S. persons within the meaning of
the Internal Revenue Code or that have a functional currency
other than the U.S. dollar; or
- shareholders who exercise their dissenters' rights.
No information is provided in this document or the tax opinions
referred to below with respect to the tax consequences, if any, of the merger
under applicable foreign, state, local and other tax laws. This discussion and
the tax opinions are based upon the provisions of the Internal Revenue Code,
applicable Treasury regulations, administrative rulings and judicial decisions,
all as in effect as of the date of this Prospectus Supplement/Proxy Statement.
There can be no assurance that future legislative, administrative or judicial
changes or interpretations, which changes could apply retroactively, will not
affect the accuracy of this discussion or the statements or conclusions set
forth in the tax opinions referred to below.
In connection with the filing of the registration statement of which
this Prospectus Supplement/Proxy Statement is a part, BancorpSouth has received
an opinion of Waller Lansden Dortch & Davis, PLLC, and Pinnacle has received an
opinion of Kutak Rock LLP, that, as of the respective dates of such opinions, if
certain factual circumstances exist, the merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code and that BancorpSouth and Pinnacle will each be a
party to that reorganization. The parties will not be required to consummate the
merger unless they receive additional opinions of their respective counsel,
dated the closing date of the merger, confirming that the merger will be treated
for federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code and that BancorpSouth and Pinnacle
will each be a party to that reorganization.
The opinions of the parties' respective counsel regarding the merger
have relied, and the opinions regarding the merger as of the closing date will
each rely, on (1) representations and covenants made by BancorpSouth and
Pinnacle, including those contained in certificates of officers of BancorpSouth
and Pinnacle, and (2) specified assumptions, including an assumption regarding
the completion of the merger in the manner contemplated by the agreement and
plan of merger. In addition, the opinions of the parties' respective counsel
have assumed, and such counsel's ability to provide the opinions at the closing
of the merger will depend on, the absence of changes to
34
the anticipated facts or changes in law between the date of this Prospectus
Supplement/Proxy Statement and the closing date. If any of those
representations, covenants or assumptions is inaccurate, the parties' respective
counsel may not be able to provide one or more of the required opinions to be
delivered at the closing of the merger and/or the tax consequences of the merger
could differ from those described in the opinions that counsel have delivered.
The opinions of the parties' respective counsel do not bind the
Internal Revenue Service and do not preclude the IRS or the courts from adopting
a contrary position. BancorpSouth and Pinnacle do not intend to obtain a ruling
from the IRS on the tax consequences of the merger. If the IRS were to assert
successfully that the merger is not a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, then each Pinnacle shareholder
would be required to recognize gain or loss equal to the difference between (i)
the sum of the fair market value of the BancorpSouth common stock and the amount
of cash received in the exchange and (ii) the shareholder's adjusted tax basis
in the Pinnacle stock surrendered for such consideration. Such gain or loss
would be a capital gain or loss, provided that such shares of Pinnacle common
stock were held as capital assets by the shareholder at the effective time of
the merger. Such capital gain or loss recognized would be long-term capital gain
or loss if the Pinnacle shareholder's holding period for the Pinnacle common
stock was more than one year. In such event, a Pinnacle shareholder's total
initial tax basis in the BancorpSouth common stock received would be equal to
its fair market value at the effective time of the merger, and the shareholder's
holding period for the BancorpSouth common stock would begin on the day after
the merger.
Assuming that the merger qualifies as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, neither BancorpSouth nor
Pinnacle will recognize any gain or loss as a result of the merger. The federal
income tax consequences of the merger qualifying as a reorganization to a
particular Pinnacle shareholder will vary depending primarily on whether the
shareholder exchanges his or her Pinnacle common stock solely for BancorpSouth
common stock (except for cash received instead of a fractional share of
BancorpSouth common stock), solely for cash or for a combination of BancorpSouth
common stock and cash. At the time that a Pinnacle shareholder makes an election
as to the form of consideration to be received in the merger and at the time of
the vote on the merger, such shareholder will not know the extent to which the
shareholder's elected form of merger consideration will be given effect.
Regardless of whether a Pinnacle shareholder elects to receive BancorpSouth
common stock, cash or a combination of BancorpSouth common stock and cash, the
federal income tax consequences to the shareholder will depend on the actual
merger consideration received by the shareholder.
PINNACLE SHAREHOLDERS RECEIVING ONLY BANCORPSOUTH COMMON STOCK.
No gain or loss will be recognized by a holder of Pinnacle common stock
as a result of the surrender of shares of Pinnacle common stock solely in
exchange for shares of BancorpSouth common stock pursuant to the merger (except
with respect to cash received instead of fractional shares of BancorpSouth
common stock, as discussed below). The aggregate tax basis of the shares of
BancorpSouth common stock received in the merger (including any fractional
shares of BancorpSouth common stock deemed received) will be the same as the
aggregate tax basis of the shares of Pinnacle common stock surrendered in
exchange for the BancorpSouth common stock. The holding period of the shares of
BancorpSouth common stock received (including any fractional shares of
BancorpSouth common stock deemed received) will include the holding period of
shares of Pinnacle common stock surrendered in exchange for the BancorpSouth
common stock, provided that such shares were held as capital assets of the
shareholder at the effective time of the merger.
35
PINNACLE SHAREHOLDERS RECEIVING ONLY CASH.
A holder of Pinnacle common stock that does not receive any shares of
BancorpSouth common stock pursuant to the merger (and is not treated as
constructively owning, after the merger, BancorpSouth common stock held by
certain family members and entities affiliated with the holder under the
Internal Revenue Code) will generally recognize gain or loss equal to the
difference between the amount of cash received and the holder's adjusted tax
basis in the shares of Pinnacle common stock exchanged in the merger. Such gain
or loss will be a capital gain or loss, provided that such shares of Pinnacle
common stock were held as capital assets by the shareholder at the effective
time of the merger. Such capital gain or loss will be a long-term capital gain
or loss to the extent that, at the effective time of the merger, the holder has
a holding period in such Pinnacle common stock of more than one year. The
Internal Revenue Code contains limitations on the extent to which a taxpayer may
deduct capital losses from ordinary income.
PINNACLE SHAREHOLDERS RECEIVING BOTH CASH AND BANCORPSOUTH COMMON STOCK.
If a holder of Pinnacle common stock receives both BancorpSouth common
stock and cash (other than cash in lieu of a fractional interest in BancorpSouth
common stock) in the merger, that holder will recognize gain, if any, equal to
the lesser of
- the amount of cash received or
- the amount by which the sum of the amount of cash received and
the fair market value at the effective time of the
BancorpSouth common stock received exceeds the holder's
adjusted tax basis in the shares of Pinnacle common stock
exchanged in the merger.
Any recognized gain could be taxed as a capital gain or a dividend.
Such gain will generally be capital gain (provided that such shares of Pinnacle
common stock were held as capital assets by the shareholder at the effective
time of the merger), unless the holder's exchange of Pinnacle common stock for
cash and BancorpSouth common stock "has the effect of the distribution of a
dividend" after giving effect to the constructive ownership rules of the
Internal Revenue Code, in which case such gain might be treated as ordinary
income. Any capital gain recognized generally will be long-term capital gain to
the extent that, at the effective time of the merger, the holder has a holding
period in the Pinnacle common stock exchanged in the merger of more than one
year. Because the determination of whether a cash payment will be treated as
having the effect of a dividend depends primarily upon the facts and
circumstances of each Pinnacle shareholder, Pinnacle shareholders are urged to
consult their own tax advisors regarding the tax treatment of any cash received
in the merger.
The aggregate tax basis of the shares of BancorpSouth common stock
received in the merger (including any fractional shares of BancorpSouth common
stock deemed received) will be the same as the aggregate tax basis of the shares
of Pinnacle common stock surrendered in exchange for such BancorpSouth common
stock in the merger, increased by the amount of gain recognized in the exchange
(whether characterized as capital gain or a dividend) and reduced by the amount
of cash received in the exchange. The holding period of the shares of
BancorpSouth common stock received (including any fractional share of
BancorpSouth common stock deemed received) will include the holding period of
shares of Pinnacle common stock surrendered in exchange for the BancorpSouth
common stock, provided that such shares were held as capital assets of the
shareholder at the effective time of the merger. A Pinnacle shareholder who
receives a combination of BancorpSouth common stock and cash in exchange for his
or her Pinnacle common stock will not be permitted to recognize any loss for
federal income tax purposes.
A Pinnacle shareholder's federal income tax consequences will also
depend on whether his or her shares of Pinnacle common stock were purchased at
different times at different prices. If they were, the Pinnacle shareholder
could realize gain with respect to some of the shares of Pinnacle common stock
and loss with respect to other shares. Such Pinnacle shareholder would have to
36
recognize such gain to the extent such shareholder receives cash with respect to
those shares in which the shareholder's adjusted tax basis is less than the
amount of cash plus the fair market value at the effective time of the merger of
the BancorpSouth common stock received, but could not recognize loss with
respect to those shares in which the Pinnacle shareholder's adjusted tax basis
is greater than the amount of cash plus the fair market value at the effective
time of the merger of the BancorpSouth common stock received. Any disallowed
loss would be included in the adjusted basis of the BancorpSouth common stock.
Such a Pinnacle shareholder is urged to consult his or her own tax advisor
respecting the tax consequences of the merger to that shareholder.
CASH INSTEAD OF FRACTIONAL SHARES.
Holders of Pinnacle common stock who receive cash instead of a
fractional share of BancorpSouth common stock will be treated as having received
the fractional share in the merger and then as having the fractional share
redeemed by BancorpSouth in exchange for the cash actually distributed instead
of the fractional share, with such redemption qualifying as an exchange under
Section 302 of the Internal Revenue Code. Accordingly, such holders will
generally recognize gain or loss equal to the difference between the tax basis
of the holder's Pinnacle common stock allocable to that fractional share and the
amount of cash received. The gain or loss generally will be capital gain or loss
and long-term capital gain or loss if the Pinnacle stock exchanged has been held
for more than one year.
BACKUP WITHHOLDING.
A holder of Pinnacle common stock may be subject, under certain
circumstances, to backup withholding at a rate of 30.5% with respect to the
amount of cash, if any, received in the merger, including cash received instead
of fractional shares, unless the holder provides proof of an applicable
exemption or correct taxpayer identification number and otherwise complies with
applicable requirements of the backup withholding rules. Any amount withheld
under the backup withholding rules is not additional tax and may be refunded or
credited against the holder's federal income tax liability, so long as the
required information is furnished to the IRS.
THE PRECEDING SUMMARY DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR DISCUSSION
OF ALL POTENTIAL TAX EFFECTS RELEVANT TO THE MERGER. ACCORDINGLY, PINNACLE
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS,
THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of management of Pinnacle and Pinnacle's Board of
Directors may be deemed to have interests in the merger that are in addition to
their interests as Pinnacle shareholders generally. Pinnacle's Board of
Directors was aware of these interests and considered them, among other matters,
in approving the agreement and plan of merger.
In particular, Mr. Robert M. Althoff, currently the President and Chief
Executive Officer and a Director of Pinnacle, will become a Vice President of
BancorpSouth Bank and President or a comparable officer, as determined by
BancorpSouth, of the Little Rock, Arkansas community bank of BancorpSouth Bank
after the merger. Mr. Althoff has entered into a mutual termination of to be
assumed prior agreement, retention incentive, non-competition/non-solicitation/
anti-piracy and employment agreement with BancorpSouth Bank that is effective
upon completion of the merger. This agreement replaces and supersedes
Mr. Althoff's prior executive services agreement, which
37
provided for severance payments to Mr. Althoff upon termination of his
employment with Pinnacle without cause or following a change of control of
Pinnacle in an amount equal to 24 months of his base salary. Mr. Althoff will
receive an annual salary of $162,000 and will be eligible for a discretionary
bonus of 20,000 shares of BancorpSouth common stock upon completion of the
merger as consideration for his serving as an officer. Such shares will be
released from escrow over a period of three years, with one-third of the shares
being released each year, assuming certain performance requirements are
satisfied, with the first release occurring on December 31, 2002. In his
agreement, Mr. Althoff has agreed that he will not compete with BancorpSouth
Bank within a specified area during the term of his agreement and until December
31, 2004 if he is terminated for cause or resigns. In the event that Mr.
Althoff's employment agreement is terminated without just cause prior to
December 31, 2004, upon a change of control of BancorpSouth or BancorpSouth
Bank, or at the expiration of the three year employment term, Mr. Althoff will
become fully vested in the 20,000 shares of BancorpSouth common stock without
regard to any performance criteria.
Mr. Dabbs Cavin, currently the Executive Vice President and Chief
Lending Officer and a Director of Pinnacle, will become a Vice President of
BancorpSouth Bank and assistant branch manager or a comparable officer, as
determined by BancorpSouth Bank, of the Little Rock, Arkansas community bank
after the merger. Mr. Cavin has entered into a mutual termination of to be
assumed prior executive services agreement, retention incentive,
non-competition/non-solicitation/anti-piracy and employment agreement with
BancorpSouth Bank that is effective upon completion of the merger. This
agreement replaces and supersedes Mr. Cavin's prior executive services
agreement, which provided for severance payments to Mr. Cavin upon termination
of his employment with Pinnacle without cause or following a change of control
in which (i) Mr. Cavin's responsibilities are modified in a manner inconsistent
with his position, (ii) his office is relocated to a location more than 20 miles
from its current location, or (iii) the acquiring entity fails to assume
Pinnacle's obligations under the employment agreement. The severance payment was
equal to the annualized base salary in effect on the date of termination. Mr.
Cavin's life insurance coverage and medical and dental benefits also continue
for one year from the date of termination at no cost to him. Mr. Cavin will
receive an annual salary of $135,000 and will be eligible for a discretionary
bonus of 8,000 shares of BancorpSouth common stock upon completion of the merger
as consideration for his serving as an officer. Such shares will be released
from escrow over a period of three years, with one-third of the shares being
released each year, assuming certain performance requirements are satisfied,
with the first release occurring on December 31, 2002. In his agreement, Mr.
Cavin has agreed that he will not compete with BancorpSouth Bank within a
specified area during the term of his agreement and until December 31, 2004 if
he is terminated for cause or resigns. In the event that Mr. Cavin's employment
agreement is terminated without just cause prior to December 31, 2004, upon a
change of control of BancorpSouth or BancorpSouth Bank, or at the expiration of
the three year employment term, Mr. Cavin will become fully vested in the 8,000
shares of BancorpSouth common stock without regard to performance criteria.
In addition to the agreements with Messrs. Althoff and Cavin, Pinnacle
has entered into employment agreements with Ms. Beth Harvey, as Senior Vice
President, and Mr. Thomas C. Evans, as Executive Vice President and Chief
Financial Officer. Each of these agreements provides for the payment of
severance benefits upon terms equivalent to those found in Mr. Cavin's agreement
with Pinnacle. Ms. Harvey has agreed to terminate her employment agreement in
exchange for a payment of $25,000. Also, nine non-executive officers are parties
to a bonus agreement in the event of a change of control of Pinnacle Bank
pursuant to which Pinnacle Bank has agreed to pay each of the officers a bonus
payment equal to three months base salary if the officer continues to be
employed by Pinnacle Bank or any successor company for 180 days from the date of
the change of control or upon termination without cause following a change of
control.
The following executive officers will receive an aggregate bonus of
$565,000 upon the closing of the merger: Robert M. Althoff, Dabbs Cavin, Thomas
C. Evans and Beth Harvey.
38
Directors and executive officers of Pinnacle will receive shares of
BancorpSouth common stock in the merger on the same basis as other Pinnacle
shareholders. The following chart shows the number of shares of BancorpSouth
common stock that may be issued to directors and executive officers of Pinnacle,
and their affiliates, in the merger assuming that each such officer and director
elects to receive all of his or her consideration in the form of BancorpSouth
common stock:
Beneficial ownership by executive officers and directors of Pinnacle,
and their affiliates, as of January 28, 2002 (including stock options
that may be exercised within 60 days).......................................... 7,289
Maximum number of shares of BancorpSouth common stock to be received in
the merger (based on such beneficial ownership)................................ 625,772
Members of Pinnacle's Board of Directors have certain interests under
the agreement and plan of merger regarding indemnification and continuation of
liability insurance coverage following the merger. See "AGREEMENT AND PLAN OF
MERGER -- Indemnification."
Robert C. Nolan, a director of BancorpSouth, owns around 2.4% of the
issued and outstanding shares of Pinnacle.
COMPARISON OF RIGHTS OF SHAREHOLDERS
At the effective time of the merger, Pinnacle shareholders will
automatically become BancorpSouth shareholders (except for those Pinnacle
shareholders who only receive cash consideration for their shares of Pinnacle
common stock or who properly exercise dissenters' rights). BancorpSouth is a
Mississippi corporation governed by provisions of the Mississippi Business
Corporation Act and BancorpSouth's restated articles of incorporation and
amended and restated bylaws. Pinnacle is an Arkansas corporation governed by
provisions of the Arkansas Business Corporation Act of 1987 and Pinnacle's
articles of incorporation, as amended, and bylaws. See "COMPARISON OF RIGHTS OF
SHAREHOLDERS."
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of BancorpSouth common stock issuable to Pinnacle
shareholders upon completion of the merger have been registered under the
Securities Act of 1933. These shares may be traded freely without restriction by
those shareholders who are not deemed to be "affiliates" of Pinnacle or
BancorpSouth, as that term is defined in SEC rules under the Securities Act. An
"affiliate" of a company generally includes its directors and executive officers
and holders of a significant amount of the company's voting stock.
Shares of BancorpSouth common stock received by those Pinnacle
shareholders who are deemed to be affiliates of Pinnacle at the time of the
Pinnacle special meeting may be resold without registration under the Securities
Act only as permitted by Rule 145 under the Securities Act. Under Rule 145,
during the one-year period following completion of the merger, affiliates of
Pinnacle may resell shares of BancorpSouth common stock received by them in the
merger subject to limitations on the number of shares that may be sold during
any three-month period and the manner in which the shares may be sold, including
the use of a broker and non-solicitation of a buyer.
Pinnacle has agreed in the agreement and plan of merger to use its
reasonable best efforts to cause each person who is an affiliate, for purposes
of Rule 145 under the Securities Act, to deliver to BancorpSouth a written
agreement intended to ensure compliance with the Securities Act.
39
THE AGREEMENT AND PLAN OF MERGER
The following summary of certain terms and provisions of the agreement
and plan of merger is qualified in its entirety by reference to the agreement
and plan of merger, which is incorporated into this document by reference and,
with the exception of exhibits and schedules to the agreement and plan of
merger, is attached as Annex A to this Prospectus Supplement/Proxy Statement.
EXCHANGE OF CERTIFICATES; CASH ELECTION
BancorpSouth will deposit with SunTrust Bank, Atlanta, N.A., as the
exchange agent for the merger, certificates representing shares of BancorpSouth
common stock, the cash consideration and cash to be paid in lieu of fractional
shares to which a holder of certificates formerly representing Pinnacle common
stock would otherwise be entitled based on the exchange ratio. The exchange
ratio will be adjusted to reflect changes in the market price of BancorpSouth
common stock. The exchange ratio will be 85.8516 shares of BancorpSouth common
stock for each share of Pinnacle common stock if the average of the closing
prices of BancorpSouth common stock as reported on the New York Stock Exchange
at the end of the regular session for the 10 consecutive trading days ending on
the fifth trading day immediately preceding the closing date of the merger is
less than or equal to $13.209. The exchange ratio will be 63.4639 shares of
BancorpSouth common stock for each share of Pinnacle common stock if the average
price of BancorpSouth common stock for this period is greater than or equal to
$17.871. If the average price per share of BancorpSouth common stock for this
period is between $13.209 and $17.871, the number of shares of BancorpSouth
common stock exchangeable for each share of Pinnacle common stock will be
determined by dividing $1,134.10 by the average per share price.
Enclosed is an election form and letter of transmittal. The election
form enables Pinnacle shareholders to choose to exchange some or all of their
Pinnacle shares for cash and/or some or all of their Pinnacle shares for shares
of BancorpSouth common stock, subject to the limitations described below.
Pinnacle shareholders have until two business days before the special meeting of
the Pinnacle shareholders to make their elections and return their election
forms to Pinnacle. BancorpSouth will pay 49% of the total merger consideration
in cash and 51% of the total merger consideration in shares of BancorpSouth
common stock. In the event that more than 49% of the outstanding shares of
Pinnacle common stock elect or otherwise are to receive cash consideration, the
amount of cash that a given Pinnacle shareholder will have the right to receive
upon exchange of his or her shares of Pinnacle common stock will be adjusted on
a pro rata basis so that, in the aggregate, 49% of the shares of Pinnacle common
stock will be converted into the right to receive cash and the remaining 51% of
the shares of Pinnacle common stock will be converted into the right to receive
BancorpSouth common stock. In the event that more than 51% of the outstanding
shares of Pinnacle common stock elect to receive stock consideration, the amount
of BancorpSouth common stock that a given Pinnacle shareholder will have the
right to receive upon exchange of his or her shares of Pinnacle common stock
will be adjusted on a pro rata basis so that, in the aggregate, 51% of the
shares of Pinnacle common stock will be converted into the right to receive
shares of BancorpSouth common stock and the remaining 49% of the shares of
Pinnacle common stock will be converted into the right to receive cash. As a
result, a Pinnacle shareholder may receive a different combination of
consideration than he or she elected, based on the choices made by other
Pinnacle shareholders or other circumstances. Pinnacle shareholders who do not
return a properly completed election form will receive consideration of 51%
BancorpSouth common stock and 49% cash in exchange for their shares.
In order for the merger to qualify as a reorganization under Section
368(a) of the Internal Revenue Code and to permit delivery of the requisite tax
opinions pursuant to the agreement and plan of merger, the aggregate amount of
cash paid to all Pinnacle shareholders, including dissenters, cannot exceed
approximately 55% of the total fair market value of all of the shares of
BancorpSouth
40
common stock and cash delivered by BancorpSouth to Pinnacle's shareholders. As a
result, all elections by Pinnacle shareholders are subject to an additional
adjustment by BancorpSouth to reduce the total amount of cash to be received in
the merger to the extent necessary to preserve this reorganization status and
not exceed the 55% threshold. If the tax-related adjustment were necessary, the
amount of cash a Pinnacle shareholder would have received, after taking into
account such holder's election and any proration, will be reduced and the
shareholder will receive additional BancorpSouth common stock instead. Whether
the tax-related adjustment will be made, and the magnitude of the adjustment, if
made, will be based on a number of factors, including the trading price per
share of BancorpSouth common stock at the time the merger is completed versus
the average closing price per share of BancorpSouth common stock, the number of
shares of Pinnacle common stock outstanding at that time and the number of
shares for which dissenters' rights are exercised.
The letter of transmittal provides that, upon surrender of a Pinnacle
stock certificate for exchange and cancellation to the exchange agent, together
with the duly executed letter of transmittal, the holder of a Pinnacle
certificate will be entitled to receive the amount of cash elected and/or the
number of whole shares of BancorpSouth common stock elected, unless adjusted on
a pro rata basis by the exchange agent, and cash for any fractional shares to
which such holder has become entitled in accordance with the agreement and plan
of merger. BancorpSouth will pay to each Pinnacle shareholder who would
otherwise be entitled to a fractional share of BancorpSouth common stock, after
taking into account all Pinnacle certificates delivered by the shareholder, an
amount in cash to be paid in lieu of fractional shares, determined by
multiplying such fraction by the average of the last sales prices of
BancorpSouth common stock as reported on the New York Stock Exchange for the 10
consecutive trading days ending on the fifth trading day immediately preceding
the merger. Pinnacle certificates so surrendered will immediately be canceled.
No interest will be paid or accrued on any cash to be paid upon such surrender,
whether in lieu of fractional shares of BancorpSouth common stock or with
respect to unpaid dividends or distributions on such shares.
Any part of the BancorpSouth common stock certificates and cash
deposited with the exchange agent that remains unclaimed by Pinnacle
shareholders for 12 months after the merger will be paid to BancorpSouth. After
such time, Pinnacle shareholders may look only to BancorpSouth for payment of
their portion of the cash consideration and their shares of BancorpSouth common
stock, cash in lieu of fractional shares, and unpaid dividends and distributions
on BancorpSouth common stock deliverable in respect of each share of Pinnacle
common stock held by the shareholder, as determined pursuant to the agreement
and plan of merger, in each case, without interest. None of Pinnacle,
BancorpSouth or the exchange agent, or any other person, will be liable to any
former Pinnacle shareholder for any amounts properly delivered to a public
official under applicable abandoned property, escheat or similar laws.
If any certificate formerly representing Pinnacle common stock is lost,
stolen or destroyed, BancorpSouth can require the holder to give an affidavit of
that fact and to post a bond in an amount that is customarily required by
BancorpSouth and the exchange agent as indemnity against any claim that may be
made with respect to this Pinnacle certificate. Upon making such affidavit
and/or posting such bond, the exchange agent will issue the consideration due
under the agreement and plan of merger.
No dividends or other distributions with respect to BancorpSouth common
stock declared after the merger and payable to BancorpSouth shareholders of
record will be paid to the holder of any unsurrendered Pinnacle certificate
until the holder of the certificate surrenders the Pinnacle certificate. After
the proper surrender of a Pinnacle certificate, the record holder of the
certificate will receive any such dividends or other distributions, without any
interest, which the holder would have received if he or she had exchanged his or
her Pinnacle certificate immediately after the merger.
41
CONDITIONS TO THE MERGER
The obligations of Pinnacle and BancorpSouth to complete the merger are
subject to the satisfaction (or waiver, where legally allowed), at or prior to
the effective time of the merger, of a number of conditions, which are set forth
in the agreement and plan of merger. These conditions include:
- Approval of the agreement and plan of merger by Pinnacle
shareholders;
- Receipt of the required regulatory approvals, including
approval by the FDIC;
- The absence of any legal prohibition to completion of the
merger;
- The accuracy of the parties' representations and performance
of the parties' obligations under the agreement and plan of
merger; and
- Receipt of the required tax opinions.
We cannot guarantee that the required regulatory approvals will be
obtained or that all of the other conditions precedent to the merger will be
satisfied or, where legally permitted, waived by the party permitted to do so.
TERMINATION OF THE AGREEMENT AND PLAN OF MERGER
The agreement and plan of merger may be terminated at any time prior to
the effective time of the merger, whether before or after approval of the merger
by Pinnacle shareholders, by mutual consent of BancorpSouth and Pinnacle. In
addition, the agreement and plan of merger may be terminated by either party if:
- A governmental entity issues a final order prohibiting the
merger or (subject to a 60 day waiting period) rejects an
application for a required regulatory approval;
- The merger is not completed on or before April 30, 2002; or
- The other party materially breaches its representations or
covenants set forth in the agreement and plan of merger and
fails to cure that breach within the prescribed time limit.
BancorpSouth may terminate the agreement and plan of merger if Pinnacle
shareholders fail to approve the agreement and plan of merger or Pinnacle's
Board of Directors has withdrawn or changed in a manner adverse to BancorpSouth
its approval of the merger, or its recommendation to its shareholders that such
shareholders approve the agreement and plan of merger and the transactions
contemplated in the agreement and plan of merger. In addition, BancorpSouth may
terminate the agreement and plan of merger if Pinnacle enters into any letter of
intent, agreement in principle, or acquisition or similar agreement related to
any tender or exchange offer, proposal for a merger, consolidation or other
business combination involving Pinnacle or any of its subsidiaries or any
proposal, inquiry or offer to acquire in any manner all or a 10% or greater
interest in, or all or a substantial portion of the assets of, Pinnacle or any
of its subsidiaries, other than the transactions described in this Prospectus
Supplement/Proxy Statement.
In the event the agreement and plan of merger is terminated for any
reason other than BancorpSouth's failure to perform its obligations, after the
expiration of any applicable cure periods (if BancorpSouth fails to cure any
such breach), and if any tender or exchange offer, proposal for a
42
merger, consolidation or other business combination involving Pinnacle or any
subsidiary of Pinnacle or any proposal, inquiry or offer to acquire in any
manner all or a 10% or greater equity interest in, or all or a substantial
portion of the assets of, Pinnacle or any subsidiary of Pinnacle, other than the
transactions contemplated or permitted by the agreement and plan of merger has
been made or is made at any time within a six month period after such
termination of the agreement and plan of merger, Pinnacle shall pay $500,000 in
cash to BancorpSouth on demand.
In the event of termination of the agreement and plan of merger, the
agreement and plan of merger will become void and have no effect, except with
respect to the parties' obligations regarding confidential information and
expenses as set forth in the agreement and plan of merger. Termination also will
not relieve or release a breaching party from liability or damages for its
willful breach of the agreement and plan of merger, and Pinnacle shall not be
relieved or released from any obligation to make the $500,000 payment to
BancorpSouth described above.
CONDUCT OF BUSINESS PRIOR TO THE MERGER AND OTHER COVENANTS
In the agreement and plan of merger, Pinnacle and BancorpSouth agreed
that, except as expressly contemplated or permitted by the agreement and plan of
merger or with the prior written consent of the other party, each party will
carry on their respective businesses in the ordinary course consistent with past
practice. Each of the parties also agreed to refrain from engaging in, or
permitting its subsidiaries to engage in, certain activities which are described
in the agreement and plan of merger.
Pinnacle has agreed to refrain from:
- Declaring or paying any dividends on, or making other
distributions in respect of, any of its capital stock during
any period, other than dividends or distributions from a
subsidiary of Pinnacle to Pinnacle;
- Issuing or acquiring its capital stock other than for the
issuance of common stock upon the exercise or fulfillment of
rights or options issued or existing pursuant to the Pinnacle
option plans all to the extent outstanding and in existence on
the date of the agreement and plan of merger and in accordance
with their terms as of such date;
- Issuing any options or other securities convertible into or
exchangeable for its capital stock;
- Amending its articles of incorporation or bylaws;
- Making capital expenditures in excess of $250,000 in the
aggregate;
- Entering into any new line of business;
- Engaging in a material acquisition of another business;
- Taking any action intended or reasonably expected to result in
any of its representations and warranties in the agreement and
plan of merger being or becoming untrue, or in any of the
conditions to the merger set forth in the agreement and plan
of merger not being satisfied;
- Changing its methods of accounting in effect at December 31,
2000, except as required by changes in generally accepted
accounting principles or regulatory accounting principles;
43
- Adopting or amending any employee benefit plan or compensation
arrangement, except as otherwise requested by BancorpSouth;
- Entering into any loans in an original principal amount in
excess of $750,000 or renewing, or committing to renew, any
existing loans in a principal amount in excess of $750,000, or
entering into new loan transactions subject to the
requirements of Regulation O of the Federal Reserve Board in
excess of $500,000 in the aggregate without having provided
prior written notice to BancorpSouth of the persons to whom
such loans are made and the terms and purposes of such loans;
- Incurring any indebtedness other than in the ordinary course
of business consistent with past practice;
- Filing any application to relocate or terminate the operations
of any of its or its subsidiaries' banking offices;
- Taking any action or entering into any agreement that could
reasonably be expected to jeopardize or materially delay the
receipt of any required regulatory approval;
- Disposing of any material assets, properties or other rights
or agreements other than in the ordinary course of business
consistent with past practice; or
- Entering into, renewing, amending or terminating any material
contract, other than the renewal in the ordinary course of
business of any lease the term of which expires prior to the
merger.
BancorpSouth has agreed to refrain from:
- Taking any action intended or reasonably expected to result in
any of its representations and warranties in the agreement and
plan of merger being or becoming untrue, or in any of the
conditions to the merger set forth in the agreement and plan
of merger not being satisfied;
- Changing its methods of accounting in effect at December 31,
2000, except as required by changes in generally accepted
accounting principles or regulatory accounting principles;
- Taking any action or entering into any agreement that could
reasonably be expected to jeopardize or materially delay the
receipt of any required regulatory approval; or
- Selling, leasing, encumbering or otherwise disposing of any of
its material assets, properties or other rights or agreements
other than in the ordinary course of business consistent with
past practice.
In addition, Pinnacle agreed that, prior to the merger, it will not
authorize or permit any of its officers, directors, employees or agents to,
directly or indirectly, solicit, initiate, facilitate, encourage or participate
in any inquiries, proposals, discussions or negotiations relating to a tender or
exchange offer, merger, consolidation or other business combination involving
Pinnacle or the acquisition of a substantial portion of its capital stock or
assets. Pinnacle agreed to immediately cease and terminate any existing
activities, discussions or negotiations previously conducted with any parties
other than BancorpSouth with respect to any of these activities, and to notify
BancorpSouth immediately if it receives any such inquiry or proposal or request
for information. Pinnacle also agreed to promptly inform BancorpSouth in writing
of all of the relevant details with respect to any such inquiry or proposal or
request for information, including the material terms and
44
conditions and the identity of the person or group making such request, proposal
or inquiry. Additionally, Pinnacle agreed to keep BancorpSouth fully informed of
the status and details of any such request, proposal or inquiry.
Pinnacle further agreed that it would not provide third parties with
any nonpublic information relating to any such inquiry or proposal. It may,
however, communicate information about any such inquiry or proposal to its
shareholders if, in the judgment of Pinnacle's Board of Directors, the
communication is required under applicable law. In addition, Pinnacle may, and
may authorize and permit its officers, directors, employees or agents to,
provide or cause to be provided such information and participate in such
discussions or negotiations if Pinnacle's Board of Directors has determined that
the failure to do so could cause the members of Pinnacle's Board of Directors to
breach their fiduciary duties under applicable laws. Pinnacle agreed to submit
the agreement and plan of merger to its shareholders prior to the submission of
any other such inquiry or proposal.
The agreement and plan of merger also contains certain other agreements
relating to the conduct of the parties prior to the merger, including, among
other things, those requiring each party:
- To apply for and obtain all consents and approvals required to
complete the merger;
- To afford to the other party and its representatives access
during normal business hours to all of such party's
information concerning its business, properties and personnel
as the other party may reasonably request; and
- To take all actions required to comply with any legal
requirements to complete the merger.
Pinnacle agreed to cause each director, executive officer and other
person who is an "affiliate" of Pinnacle for purposes of Rule 145 under the
Securities Act to deliver to BancorpSouth a written agreement intended to ensure
compliance with the Securities Act.
Pinnacle agreed to call and hold a special meeting of its shareholders
and, through its Board of Directors, to recommend the agreement and plan of
merger for approval to its shareholders. BancorpSouth agreed to cause the shares
of BancorpSouth common stock to be issued in the merger to be approved for
listing on the New York Stock Exchange.
INDEMNIFICATION
BancorpSouth agreed to provide indemnification to the officers,
directors and employees of Pinnacle to the full extent permitted by law after
the merger and to provide, for three years after the merger, directors' and
officers' liability insurance for the directors and officers of Pinnacle to the
maximum extent available at an annual premium not to exceed 150% of the amount
expended by Pinnacle as of November 14, 2001.
AMENDMENT OF THE AGREEMENT AND PLAN OF MERGER
Subject to compliance with applicable law, the agreement and plan of
merger may be amended by Pinnacle and BancorpSouth, by action taken or
authorized by their respective Boards of Directors, at any time before or after
the Pinnacle shareholders approve the agreement and plan of merger. However,
after any approval of the agreement and plan of merger by Pinnacle shareholders,
there may not be, without further approval of the Pinnacle shareholders, any
amendment of the agreement and plan of merger which reduces the amount or
changes the form of the consideration due under the agreement and plan of
merger, other than as contemplated in the agreement and plan of merger. The
agreement and plan of merger provides that it may not be amended except by an
instrument in writing signed on behalf of BancorpSouth and Pinnacle.
45
WAIVER
Prior to the merger, BancorpSouth and Pinnacle may extend the time for
the performance of any of the obligations or other acts of the other party to
the agreement and plan of merger, waive any inaccuracies in the representations
or warranties of the other party contained in the agreement and plan of merger
or, where the law permits, waive compliance with any of the agreements or
conditions of the other party contained in the agreement and plan of merger.
EXPENSES
Each party to the agreement and plan of merger will bear all expenses
incurred by it in connection with the agreement and plan of merger and the
merger.
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
After the merger, BancorpSouth will be managed by the same Board of
Directors and executive officers as existed prior to the merger. Pinnacle will
be merged with and into BancorpSouth. The surviving corporation will operate
under the name "BancorpSouth, Inc." and will continue to engage in the same
business as prior to the merger. Pinnacle Bank will merge with and into
BancorpSouth Bank. The surviving subsidiary bank will operate under the name
"BancorpSouth Bank".
46
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
BANCORPSOUTH
BancorpSouth common stock is listed on the New York Stock Exchange
under the symbol "BXS." As of January ___, 2002, BancorpSouth common stock was
held of record by around ________ persons. The following table sets forth the
high and low sale prices for BancorpSouth common stock as reported on the New
York Stock Exchange, and cash dividends declared per share of BancorpSouth
common stock, for the periods indicated:
Stock Prices Cash
-------------------------- Dividends
High Low Per Share
-------- -------- ---------
2002
First Quarter (through January __, 2002)....... $ $ $
2001
First Quarter.................................. $15.6250 $12.0625 $0.14
Second Quarter................................. 17.0000 14.0000 0.14
Third Quarter ................................. 16.9700 13.4500 0.14
Fourth Quarter................................. 17.0000 14.2500 0.15
2000
First Quarter.................................. $16.6250 $14.0000 $0.13
Second Quarter................................. 17.2500 14.0000 0.13
Third Quarter.................................. 15.3125 13.8125 0.13
Fourth Quarter................................. 14.8750 11.8750 0.14
1999
First Quarter.................................. $19.4375 $15.7500 $0.12
Second Quarter................................. 19.1250 15.8125 0.12
Third Quarter.................................. 19.3750 15.3750 0.12
Fourth Quarter ................................ 17.5000 16.3125 0.13
PINNACLE
There is no established trading market for shares of Pinnacle common
stock, which is inactively traded in private transactions. Therefore, reliable
information is not available about the prices at which shares of Pinnacle common
stock have been bought and sold. As of January 28, 2002, Pinnacle common stock
was held of record by around 141 persons. Pinnacle has never paid any cash
dividends on its common stock.
47
PINNACLE MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion presents an analysis of the unaudited consolidated
financial statements of Pinnacle, its subsidiary, Pinnacle Bank, and the
subsidiaries of Pinnacle Bank, Pinnacle Bank Home Loan Company and Pinnacle
Capital Resources, Inc., for the periods indicated. The analysis below should be
read in conjunction with the unaudited financial statements of Pinnacle included
in pages F-1 through F-4 of this Prospectus Supplement/Proxy Statement. The
financial information and the discussion below have been prepared by Pinnacle.
The financial information has not been audited or reviewed by outside
accountants. Because the Pinnacle financial statements and information have not
been prepared in accordance with accounting principles generally accepted in the
United States of America (as the statement of cash flow and footnotes are not
included), there can be no assurance that they fairly present the financial
position or historical results of operations as of the dates or for the periods
indicated.
GENERAL
For the year ended December 31, 2001, net income was $1,445,000, an 86%
increase over net income of $775,000 for the year 2000. Diluted earnings for the
year 2001 were $75.32 per share, compared to $39.47 per share for 2000, a 91%
increase.
Year 2000 net income increased 70% from net income of $454,851 in 1999.
Diluted earnings increased 70% to $39.47 per share for 2000, compared to $23.24
per share for 1999.
Annualized returns on average assets and average stockholders' equity
for the year 2001 were 1.17% and 17.34%, respectively, compared with 0.74% and
10.47%, respectively, for the year 2000, and 0.58% and 6.59%, respectively, for
1999.
The improvement in 2001 results is attributable primarily to the
decline in interest rates, loan growth of around $27 million, and the increased
operations of Pinnacle Bank Home Loan Company, the mortgage subsidiary. The
comparative 2000 and 1999 results are attributable to loan growth of around $20
million and a 65% increase in non-interest income from service charge income and
mortgage loan origination fee income.
Total assets increased from $115 million at December 31, 2000 to $135
million at December 31, 2001. Loans increased to $122.8 million at December 31,
2001, compared to $95.9 million at December 31, 2000. Deposits increased to
$101.8 million at December 31, 2001 from $87.1 million at December 31, 2000. The
$20 million increase in total assets resulted primarily from growth of the loan
portfolio attributable to Pinnacle's hiring of in-market lenders. The increase
in total deposits was comprised primarily of an increase in money market
accounts attained by paying market favorable interest rates. The reduction in
investment securities principally resulted from a shift in earnings assets from
the U.S. government agency securities to higher yielding loans.
Stockholders' equity increased from $8.0 million at December 31, 2000,
to $8.9 million at December 31, 2001, resulting in book value per share
increasing from $442.38 to $511.92.
Pinnacle's equity to assets ratio was 6.61%, 6.92% and 7.58% at
December 31, 2001, December 31, 2000 and December 31, 1999, respectively.
Pinnacle has not paid dividends since its inception.
48
ANALYSIS OF RESULTS OF OPERATIONS
Pinnacle's results of operations depend primarily on net interest
income, which is the difference between the interest income from earning assets,
such as loans and investments, and the interest expense incurred on
interest-bearing liabilities, such as deposits and other borrowings. Pinnacle
also generates non-interest income, including service charges on deposit
accounts, mortgage lending income and other charges and fees. Pinnacle's
non-interest expenses primarily consist of employee compensation and benefits,
occupancy, equipment and other operating expenses. Pinnacle's results of
operations are also impacted by its provision for loan losses. The following
discussion provides a summary of Pinnacle's operations for each of the fiscal
years ended December 31, 2001, 2000 and 1999.
Net Interest Income. Net interest income is traditionally analyzed on a fully
taxable equivalent basis. The adjustment to convert certain income to a fully
taxable equivalent basis consists of dividing tax-exempt income by one minus the
statutory federal income tax rate (34%). For purposes of this earnings analysis,
no adjustment is required because substantially all earning assets of Pinnacle
are fully taxable at the federal rate of 34%.
Net interest income for the year ended December 31, 2001 increased 31%
to $4,387,312, from $3,340,103, for the year ended December 31, 2000. The
increase in net interest income from the year ended December 31, 2000 to the
year ended December 31, 2001 was primarily caused by a general decline in
interest rates, growth in the loan portfolio, and a shift in earning assets from
the lower yielding investment portfolio into the loan portfolio.
Net interest income for fiscal year 2000 increased $778,880, or 30.4%,
over fiscal 1999. The increase in net interest income from 1999 to 2000 was
primarily caused by growth of the loan portfolio attributable to Pinnacle's
hiring of in-market lenders.
Interest expense was around $4,907,000 for the year ended December 31,
2001, the same as for the year 2000. There was no significant change in interest
expense because the expense resulting from a growth in deposits was offset by
declining interest rates. Total interest expense increased by $1,750,912, or
55%, in 2000 from 1999. The interest expense increase from 1999 to 2000 was
primarily caused by increases in money market deposits, certificates of deposit
and advances from the Federal Home Loan Bank.
The trend in net interest income is commonly evaluated in terms of
average rates using the net interest margin and the interest rate spread. The
net interest margin, or the net yield on earning assets, is computed by dividing
fully taxable equivalent net interest income by average earning assets. The
interest rate spread represents the difference between the average yield on
average earning assets and the average rate paid for all funds used to support
those earning assets including both interest-bearing and non-interest-bearing
sources. The interest rate spread eliminates the impact of non-interest bearing
funds and gives a direct perspective on the effect of market interest rate
movements.
The annualized net interest margin increased 41 basis points in the
year ended December 31, 2001 to 3.68% from 3.27% for the year ended December 31,
2000. The annualized net interest spread increased 55 basis points from 2.68%
for the year ended December 31, 2000 to 3.23% for the year ended December 31,
2001. The annualized net cost of funds, defined as interest expense divided by
average earning assets, decreased 71 basis points from 4.82% in the year ended
December 31, 2000 to 4.11% in the year ended December 31, 2001. These changes
resulted from the declining interest rate market, in which interest rates on
deposit accounts decreased faster than interest rates on loans. The net interest
margin decreased 11 basis points in 2000 to 3.27% from 3.38% for 1999. The net
interest spread decreased 40 basis points from 3.08% for 1999 to 2.68% for 2000.
The net cost of funds increased 65 basis points from 4.17% in 1999 to 4.82% in
2000.
49
There are many factors that affect the rates earned on assets and paid
on liabilities. Strong competition for loans and deposits in the markets served
has a major impact on the yields earned and the rates paid. Federal Reserve
monetary policies and the international monetary markets also have a direct or
indirect impact on interest rates and therefore affect the net interest spread
and net yields earned by Pinnacle.
The following table details average yields earned by Pinnacle on its
earnings assets and the average rates paid on its deposits and other
interest-bearing liabilities for the periods indicated.
ANALYSIS OF NET INTEREST INCOME
(FTE-Fully Taxable Equivalent)
Year Ended
December 31,
------------------------------------
2001 2000 1999
------ ------ ------
(Dollars in thousands)
Interest Income............................................ $9,294 $8,247 $5,717
FTE adjustment............................................. -- -- --
------ ------ ------
Interest income - FTE...................................... 9,294 8,247 5,717
Interest expense........................................... 4,907 4,907 3,156
------ ------ ------
Net interest income - FTE.................................. 4,387 $3,340 $2,561
Yield on interest earning assets - FTE..................... 7.79% 8.08% 7.55%
Cost of interest-bearing liabilities....................... 4.57 5.40 4.47
Net interest spread - FTE.................................. 3.23 2.68 3.08
Net interest margin - FTE.................................. 3.68 3.27 3.38
50
AVERAGE CONSOLIDATED BALANCE SHEET AND NET INTEREST ANALYSIS
Year Ended December 31,
2001 2000 1999
----------------------------- ------------------------------ -----------------------------
Interest Average Interest Average Interest Average
Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/
Balance Expense Rates Balance Expense Rates Balance Expense Rates
-------- -------- ------- -------- -------- ------- ------- -------- -------
ASSETS:
Interest-earning assets:
Loans................... $110,136 $8,873 8.06% $ 84,997 $7,258 8.52% $58,801 $4,790 8.15%
Investment securities
Taxable............... 7,886 367 4.65 15,726 925 5.87 14,681 820 5.59
Tax-exempt............ -- -- -- -- -- --
-------- ------ -------- ------ ------- ------
Total investment
securities.......... 7,886 367 4.65 15,726 925 5.87 14,681 820 5.59
-------- ------ -------- ------ ------- ------
Interest-bearing deposits
in banks................... 39 1 3.76 49 3 5.20
Federal funds sold......... 1,203 53 4.44 1,006 63 6.27 2,166 105 4.83
-------- ------ -------- ------ ------- ------
Total interest-earning
assets/ $119,264 $9,294 7.79 $101,729 $8,247 8.08 $75,697 $5,717 7.55
Interest income.....
Cash due from banks........ 2,245 1,839 1,488
Other assets............... 3,252 1,800 1,317
Allowance for loan losses.. (1,158) (969) (658)
-------- -------- -------
Total assets.......... $123,603 $104,399 $77,844
======== ======== =======
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Interest-earning
liabilities:
Demand deposits......... $ 6,604 $ 184 2.78% $ 4,854 $ 151 3.09% $ 3,574 $ 80 2.25%
Savings................. 41,090 1,589 3.87 32,115 1,625 5.05 26,234 1,228 4.68
Time deposits........... 37,586 2,061 5.48 37,396 2,179 5.81 32,837 1,684 5.13
Other borrowings........ 22,156 1,073 4.85 16,115 952 5.89 3,322 163 4.91
-------- ------ -------- ------ ------- ------
Total interest-bearing
liabilities/
Interest expense.... $107,436 4,907 4.57% $ 90,480 $4,907 5.41% $65,967 $3,156 4.78%
Noninterest-bearing
demand deposits............ 7,457 6,033 4,664
Other liabilities.......... 378 483 307
Shareholders' equity....... 8,332 7,403 6,906
-------- -------- -------
Total liabilities and
shareholders'
equity............. $123,603 $104,399 $77,844
======== ======== =======
Net interest earnings/net
interest spread......... 3.23% 2.68% 3.08%
Net yield on earning assets 3.68% 3.27% 3.38%
Taxable equivalent
adjustment:
Investment securities... 0 0 0
Loans................... 0 0 0
------ ------ ------
Total taxable
equivalent
adjustment.......... 0 0 0
------ ------ ------
Net interest income........ $4,387 $3,340 $2,561
====== ====== ======
51
The following table provides the components of changes in net interest
income in the format of a rate/volume analysis and analyzes the dollar amount of
changes in interest income and interest expense for major components of
interest-earning assets and interest-bearing liabilities.
RATE/VOLUME ANALYSIS
Average Volume Change in Volume Average Rate
------------------------------- ------------------- ----------------------
2001 2000 1999 2001-00 2000-99 2001 2000 1999
-------- -------- ------- ------- ------- ---- ---- ----
(In thousands)
INTEREST-EARNING ASSETS:
Loans ...................................... $110,136 $ 84,997 $58,801 $25,139 $26,196 8.06% 8.52% 8.15%
Investment securities
Taxable ................................. 7,886 15,726 14,681 (7,840) 1,045 4.65 5.87 5.59
Tax exempt .............................. -- -- -- -- -- -- -- --
-------- -------- ------- ------- -------
Total investment securities ........... 7,886 15,726 14,681 (7,840) 1,045 4.65 5.87 5.59
-------- -------- ------- ------- -------
Federal funds sold ......................... 1,203 1,006 2,166 197 (1,160) 4.44 6.27 4.83
Interest-bearing deposits in banks ......... 39 -- 49 39 (49) 3.76 -- 5.20
-------- -------- ------- ------- -------
Total interest-earning assets ........... $119,264 $101,729 $75,697 $17,535 $26,032 7.79% 8.08% 7.55%
======== ======== ======= ======= =======
INTEREST-BEARING LIABILITIES:
Demand deposits ............................ 6,604 4,854 3,574 1,750 1,280 2.78% 3.09% 2.25%
Savings .................................... 41,090 32,115 26,234 8,975 5,881 3.87 5.05 4.68
Time certificates .......................... 37,586 37,396 32,837 190 4,559 5.48 5.81 5.13
Other borrowings ........................... 22,156 16,115 3,322 6,041 12,793 4.85 5.89 4.91
-------- -------- ------- ------- ------- ---- ---- ----
Total interest-bearing liabilities ...... $107,436 $ 90,480 $65,967 $16,956 $24,513 4.57% 5.41% 4.78%
======== ======== ======= ======= ======= ==== ==== ====
Net interest income/net interest spread..... 3.23 2.68 3.08
Net yield on earning assets................. 3.68 3.27 3.38
Net cost of funds........................... 4.11 4.82 4.17
Income/Expense Variance 2001 2000
------------------------ ----------------- ------------------------ ----------------------
2001 2000 1999 2001-00 2000-99 Volume Rate Mix Volume Rate Mix
------ ------ ------ ------- ------- ------ ----- ----- ------ ---- ----
INTEREST-EARNING ASSETS:
Loans ...................... $8,873 $7,259 $4,789 $1,614 $2,470 $2,142 $(391) $(137) $2,135 $218 $117
Investment securities:
Taxable .................... 367 925 820 (558) 105 (460) (192) 94 58 41 6
Tax exempt..................
------ ------ ------ ------ ------ ------ ----- ----- ------ ---- ----
Total investment
securities ................. $ 367 $ 925 $ 820 $ (558) $ 105 $ (460) $(192) $ 94 $ 58 $ 41 $ 6
------ ------ ------ ------ ------ ------ ----- ----- ------ ---- ----
Federal funds sold ......... 53 63 105 (10) (42) 12 (18) (4) (56) 31 (17)
Interest bearing
balances ................... 1 0 3 1 (3) 0 0 1 (3) 0 0
------ ------ ------ ------ ------ ------ ----- ----- ------ ---- ----
Total interest-earning
assets ..................... $9,294 $8,247 $5,717 $1,047 $2,530 $1,694 $(601) $ (46) $2,134 $290 $106
====== ====== ====== ====== ====== ====== ===== ===== ====== ==== ====
Interest-bearing
liabilities:
Demand deposits ............ $ 184 $ 150 $ 81 $ 34 $ 69 $ 54 $ (15) $ (5) $ 29 $ 30 $ 10
Savings .................... 1,589 1,626 1,228 (37) 398 453 (379) (111) 275 97 26
Time certificates .......... 2,061 2,179 1,684 (118) 495 11 (123) (6) 234 223 38
Other borrowings ........... 1,073 952 163 121 789 356 (168) (67) 628 33 128
------ ------ ------ ------ ------ ------ ----- ----- ------ ---- ----
Total interest-bearing
liabilities ................ $4,907 $4,907 $3,156 $ 0 $1,751 $ 874 $(685) $(189) $1,166 $383 $202
====== ====== ====== ====== ====== ====== ===== ===== ====== ==== ====
Net interest income ........ $4,387 $3,340 $2,561 $1,047 $ 779 $ 820 $ 84 $ 143 $ 968 $(93) $(96)
====== ====== ====== ====== ====== ====== ===== ===== ====== ==== ====
52
Non-interest Income. Pinnacle's non-interest income can primarily be
broken down into three main sources: (1) service charges on deposit accounts,
(2) mortgage lending income, and (3) other charges and fees.
Non-interest income increased by 189%, or around $1,078,000, to around
$1,649,000 for the year ended December 31, 2001, as compared to around $571,000
for the year 2000. The increase was primarily caused by the operations of
Pinnacle Bank Home Loan Company during 2001 and the fees resulting from the
origination of mortgage loans.
Non-interest income increased by 65%, or around $226,000, to around
$571,000 for the year ended December 31, 2000, as compared to around $345,000
for the same period in 1999. The increase was a result of growth in deposits
generating fee income and the operations of Pinnacle Bank Home Loan Company
generating fee income from the origination of mortgage loans. Service charges on
deposit accounts were $307,500 in 2001, $173,000 in 2000 and $109,000 in 1999.
Fee income from the origination of mortgage loans was $1,168,000 in 2001,
$357,000 in 2000 and $201,000 in 1999.
Non-interest Expense. Non-interest expense increased to $3,477,000 for
the year ended December 31, 2001, or 42% higher than for the year ended December
31, 2000. This increase of around $1,025,000, as compared to the year 2000, is
primarily attributable to increased salary expenses, computer expenses and
general operating expense. Non-interest expense was $2,452,000 in 2000,
$449,000, or 22%, higher than in 1999. Non-interest expense for the year ending
December 31, 1999 was $2,003,000.
Non-interest expense as a percentage of average assets was 2.81% in
2001, 2.35% in 2000 and 2.57% in 1999. Salaries and employee benefits expenses
increased $810,000, or 53.9%, in 2001, increased $279,000, or 23%, in 2000, and
increased $434,000, or 55%, in 1999. Other expense (excluding expenses of
premises and fixed assets) was $860,000 in 2001, $701,000 in 2000 and $564,000
in 1999. Expenses of premises and fixed assets increased $56,000, or 23%, to
$302,000 for the year ended December 31, 2001 from $246,000 for 2000. Expenses
of premises and fixed assets increased $32,000, or 15%, for the year ended
December 31, 2000, from $214,000 for the comparable 1999 period. The increase
from 1999 to 2000 was primarily attributable to increased salary expenses,
computer expenses and general operating expense generated by Pinnacle's growth.
Income Taxes. The provision for income taxes for the years ended
December 31, 2001 and 2000 was $839,000 and $396,000, respectively. Pinnacle's
effective tax rate for the year 2001 increased to 37% from 34% for the same
period in 2000. This increase in the effective tax rate was primarily
attributable to the use of all of Pinnacle's net operating losses in 2000. No
income tax expense was recorded for the year ended December 31, 1999 due to net
operating losses carried forward from previous years.
ANALYSIS OF FINANCIAL CONDITION
Loans. Loans, net of unearned interest, increased $26.9 million, or
28%, to $122.8 million as of December 31, 2001, as compared to December 31,
2000. This increase was attributable primarily to Pinnacle's hiring of
experienced in-market lenders. The allowance for loan losses was $1,228,407 and
$1,079,421 as of December 31, 2001 and 2000, respectively. Allowance for loan
losses represented 1.00% of total loans as of December 31, 2001, as compared to
1.13% as of December 31, 2000. The most significant concentration of loans
consisted of commercial and residential real estate secured loans.
Loans, net of unearned interest, increased $20 million, or 26.7%, to
$95.9 million as of December 31, 2000, from $75.7 million for the comparable
1999 period. This increase was
53
attributable primarily to Pinnacle's hiring of experienced in-market lenders.
The allowance for loan losses was $843,766 at year-end 1999. The most
significant concentration of loans consisted of commercial and residential real
estate secured loans.
The following table summarizes Pinnacle's loan portfolio at December
31, 2001, 2000 and 1999.
December 31,
-----------------------------------
2001 2000 1999
-------- ------- -------
(In thousands)
Real estate loans:
Construction and land development..................... $ 34,170 $26,281 $18,249
Secured by residential properties..................... 47,812 35,608 29,493
-------- ------- -------
Total real estate loans........................... 81,982 61,889 47,742
-------- ------- -------
Commercial and industrial loans............................ 29,808 22,309 20,037
Consumer loans............................................. 11,014 11,733 7,923
All other loans............................................ -- -- --
-------- ------- -------
Total loans....................................... $122,804 $95,931 $75,702
Less:
Unearned income............................................ 0 0 0
Allowance for loan losses.................................. 1,228 1,079 844
-------- ------- -------
Net loans ........................................ $121,576 $94,852 $74,858
======== ======= =======
The following table reflects loans classified by remaining maturities
at December 31, 2001 by type and by fixed or floating interest rates. This table
is based on actual maturities and does not reflect amortizations, projected
paydowns or the earliest repricing for floating rate loans. Many loans have
maturities exceeding one year but have principal paydowns scheduled in less than
a year. Also many variable rate loans have maturities exceeding one year but are
repriceable in periods of one year or less.
LOAN MATURITIES
Over 1
Year
1 Year Through Over
or Less 5 Years 5 Years Total
---------------------------------------------
(Dollars in thousands)
---------------------------------------------
Real estate............................................... $22,614 $51,045 $ 8,323 $ 81,982
Consumer.................................................. 2,659 8,272 83 11,014
Commercial and industrial................................. 11,785 12,571 5,452 29,808
------- ------- ------- --------
$37,058 $71,888 $13,858 $122,804
======= ======= ======= ========
Fixed rate................................................ 30,345 63,937 12,476 106,758
Floating rate............................................. 6,713 7,951 1,382 16,046
------- ------- ------- --------
$37,058 $71,888 $13,858 $122,804
======= ======= ======= ========
Nonperforming Assets. Nonperforming assets include nonperforming loans
and foreclosed real estate held for sale. Nonperforming loans include loans
classified as nonaccrual or renegotiated. Accrual of interest is discontinued
when there is reasonable doubt as to the full, timely collections of interest or
principal. When a loan becomes contractually past due 90 days with respect to
interest or principal, it is reviewed and a determination is made as to whether
it should be placed on nonaccrual
54
status. When a loan is placed on nonaccrual status, interest accrued but not
collected is reversed against current period interest income. Income on such
loans is then recognized only to the extent that cash is received and where the
future collection of principal is probable. Interest accruals are resumed on
such loans only when they are brought fully current with respect to principal
and interest. Restructured loans are those loans on which concessions in terms
have been granted because of a borrower's financial difficulty. Interest is
generally accrued on such loans in accordance with the new terms.
The following table sets forth information with respect to
nonperforming loans of Pinnacle on the dates indicated.
December 31,
----------------------------
2001 2000 1999
------ ------ ------
(Dollars in thousands)
Nonaccrual loans ............................................... $ 141 $ 53 $ 0
Restructured loans ............................................. 0 0 0
Loans past due 90 days and still accruing ...................... 0 0 27
Foreclosed assets held for sale and
repossessions .................................................. 105 0 0
Nonperforming loans as a percentage of net loans before
allowance for loan losses ................................. 0.12% 0.06% 0.04%
Allowance for loan losses as a percentage of
nonperforming loans ....................................... 871% 2,036% 3,126%
Allowance And Provision For Loan Losses. Credit risk and exposure to
loss are inherent parts of the banking business. Pinnacle's management seeks to
manage and minimize these risks through its loan and investment policies and
loan review procedures. Management establishes and continually reviews lending
and investment criteria and approval procedures that it believes reflect the
risk sensitive nature of Pinnacle. The loan review procedures are set to monitor
adherence to the established criteria and to ensure that on a continuing basis
such standards are enforced and maintained.
Management's objective in establishing lending and investment standards
is to manage the risk of loans and to provide for income generation through
pricing policies.
The loan portfolio is regularly reviewed and management evaluates the
adequacy of the allowance and determines the amount of loans to be charged-off.
In addition, such factors as Pinnacle's previous loan loss experience,
prevailing and anticipated economic conditions, industry concentrations and the
overall quality of the loan portfolio are considered. While management uses
available information to recognize losses on loans and real estate owned, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the allowances for losses on
loans and real estate owned. Such agencies may require Pinnacle to recognize
additions to the allowances based on their judgments about information available
at the time of their examinations. In addition, any loan or portion thereof
which is classified as a "loss" by regulatory examiners is charged-off.
The allowance for loan losses is increased by provisions charged to
operating expense. The allowance is reduced by charging off loans or portions of
loans at the time they are deemed by management to be uncollectible and
increased when loans previously charged off are recovered. The resulting
allowance for loan losses is viewed by management as a single, unallocated
allowance available for all loans and, in management's opinion, is adequate to
provide for reasonably
55
foreseeable potential loan losses. The risk associated with loans varies with
the credit-worthiness of the borrower, the type of loan (consumer, commercial or
real estate) and its maturity. Cash flows adequate to support a repayment
schedule is an element considered for all types of loans. Real estate loans are
impacted by market conditions regarding the value of the underlying property
used as collateral. Commercial loans are also impacted by the management of the
business as well as economic conditions.
The amount of loan charge-offs by category during 2001 is as follows
(in thousands):
Real estate loans .............................. $ 95
Commercial and industrial loans ................ 0
All other loans ................................ 35
----
Total.................................. $130
====
Rules and formulas relative to the adequacy of the allowance, although
useful as guidelines to management, are not rigidly applied. The allowance for
loan losses was $1,228,407 as of December 31, 2001, or 1.00% of net loans
outstanding. The allowance for loan losses was $1,079,421 at year end 2000, or
1.13% of loans outstanding compared to $843,766 or 1.11% at year end 1999.
56
The following table summarizes the allowance and provision for loan
losses for the periods indicated:
December 31,
-------------------------------------
2001 2000 1999
--------- -------- --------
(Dollars in thousands)
Total loans:
Average outstanding during the period ........... $ 110,136 $ 84,997 $ 58,801
========= ======== ========
Allowance for loan losses:
Balance at beginning period ..................... $ 1,079 $ 844 $ 481
Loans Charged-offs:
Real estate loans ............................... 95 0 0
Installment loans ............................... 34 65 0
Credit cards and related plans .................. 1 0 0
Commercial and all other loans .................. 2 85
--------- -------- --------
Total loans charged off ..................... 130 67 85
--------- -------- --------
Recoveries of loans previously charged-off:
Real estate loans ............................... 0 0 0
0 1 2 0
Credit cards related plans ...................... 0 0 0
Commercial ...................................... 3 12 0
--------- -------- --------
Total recoveries ............................ 4 14 0
--------- -------- --------
Net loan (charge-offs) recoveries .................... (126) (53) (85)
--------- -------- --------
Provision charged to operating expense ............... 275 288 448
--------- -------- --------
Balance at end of period ............................. $ 1,228 $ 1,079 $ 844
========= ======== ========
Allowance for loan losses to net charge-offs ......... 975% 2,035% 993%
Net charge-offs to average loans outstanding ......... 0.11% 0.06% 0.14%
Allowance for loan losses to average loans
outstanding ...................................... 1.11% 1.27% 1.44%
Investments and Securities. The objective of Pinnacle's investment
policy is to invest funds not otherwise needed to meet Pinnacle's loan demand to
earn the maximum return for Pinnacle, yet still maintain sufficient liquidity to
meet fluctuations in Pinnacle's loan demand and deposit structure. Pinnacle has
classified its investment securities as either held to maturity or available for
sale. The classification of certain investment securities as available for sale
is consistent with Pinnacle's investment philosophy of maintaining flexibility
to manage the portfolio. Around $55,000 of unrealized losses was deducted from
shareholders' equity related to the available for sale investment securities as
of December 31, 2000. At December 31, 2001, there were no unrealized gains or
losses in the available for sale investment securities portfolio.
At the end of the years 2001, 2000 and 1999, obligations of the United
States Government or its agencies and obligations of states and political
subdivisions, including Fannie Mae, Freddie Mac, Ginnie Mae and Small Business
Administration loans represented around 71.6%, 92.8%, and 96.9%, respectively of
the total investment portfolio. The following table presents the book value of
Pinnacle's investment portfolio at the indicated periods.
57
December 31,
----------------------------------
2001 2000 1999
------ ------- -------
(In thousands)
HELD TO MATURITY:
U.S. Government and agencies...................... $ 0 $ 0 $ 0
States and political subdivisions................. 0 0 0
Mortgage-backed securities........................ 0 0 0
------ ------- -------
Total hold to maturity portfolio............... $ 0 $ 0 $ 0
====== ======= =======
AVAILABLE FOR SALE:
U.S. Government and agencies...................... 3,498 13,892 15,207
States and political subdivisions................. 0 0 0
Mortgage backed securities........................ 0 0 0
Equity securities................................. 1,390 1,078 486
------ ------- -------
Total available for sale portfolio............. $4,888 $14,970 $15,693
====== ======= =======
Total investment portfolio..................... $4,888 $14,970 $15,693
====== ======= =======
Pinnacle's investment securities portfolio decreased 67%, or
$10,082,000 to $4,888,000 as of December 31, 2001, from $14,970,000 at December
31, 2000. The primary reason for the decrease was to fund loan demand.
Pinnacle's investment securities portfolio decreased 4.6%, or $723,000,
to $14,970,000 as of December 31, 2000, from $15,693,000 at December 31, 1999.
The primary reason for the decrease was to fund loan demand.
58
The following table presents the maturity distribution of the cost and
estimated fair value of Pinnacle's investment portfolio at December 31, 2001.
The weighted average yields on these instruments are presented based on final
maturity.
December 31, 2001
------------------------------------------
Amortized Estimated Weighted
Cost Fair Value Average Yield
--------- ---------- -------------
(In thousands)
HELD TO MATURITY:
Total investments held to maturity ............ $ 0 $ 0 --
========= ========
AVAILABLE FOR SALE:
U.S. Government and agencies:
Due within 1 year ................................ $ 3,498 $ 3,498 2.50%
Due after 1 year but within 5 years .............. -- -- --
Due after 5 years but within 10 years ............ -- -- --
Due after 10 years ............................... -- -- --
--------- --------
Total ......................................... 3,498 3,498
--------- --------
Equity securities .................................... 1,390 1,390
--------- --------
Total investments available for sale .......... $ 4,888 $ 4,888 2.47%
========= ========
Total investments portfolio ................... $ 4,888 $ 4,888 2.47%
========= ========
The book value of securities issued by the Federal Home Loan Bank and
the Federal Farm Credit Bank and held by Pinnacle totals around $1,999,000 and
$1,499,000, respectively, which exceeds 10% of equity of Pinnacle at December
31, 2001. The aggregate fair value of these securities at December 31, 2001 are
around $1,999,000 and $1,499,000, respectively.
Deposits. Pinnacle's primary sources of funds are deposits. The
following table sets forth Pinnacle's deposit structure at December 31, 2001,
2000 and 1999.
December 31,
-------------------------------------
2001 2000 1999
--------- -------- --------
(In thousands)
Noninterest-bearing deposits:
Individuals, partnerships and corporations ....... $ 10,205 $ 6,593 $ 5,769
U. S. Government and states and political
subdivisions ..................................... 21 85 2
Certified and official checks .................... 411 864 405
--------- -------- --------
Total non-interest-bearing deposits ........... 10,637 7,542 6,176
--------- -------- --------
Interest-bearing deposits:
Interest-bearing demand accounts ................. 7,532 6,146 4,726
Savings accounts ................................. 45,902 31,005 30,003
Certificates of deposit, less than $100,000 ...... 16,386 20,359 18,969
Certificates of deposit, more than $100,000 ...... 21,313 22,077 18,175
--------- -------- --------
Total interest-bearing deposits ............... 91,133 79,587 71,873
--------- -------- --------
Total deposits ................................ $ 101,770 $ 87,129 $ 78,049
========= ======== ========
59
The following table presents a breakdown by category of the average
amount of deposits and the average rate paid on deposits for the periods
indicated:
December 31,
------------------------------------------------------------------
2001 2000 1999
---------------- ------------------ ----------------
(Dollars in thousands)
Amount Rate Amount Rate Amount Rate
------- ---- ------- ---- ------- ----
Noninterest-bearing deposits........... $ 7,457 0% $ 6,033 0% $ 4,664 0%
Savings deposits....................... 41,090 3.87 32,115 5.05 26,234 4.68
Time deposits.......................... 37,586 5.48 37,396 5.81 32,837 5.13
Interest-bearing deposits.............. 6,604 2.78 4,854 3.09 3,574 2.25
------- ------- -------
Total deposits..................... $92,737 4.13% $80,398 4.91% $67,309 4.45%
======= ======= =======
At December 31, 2001, time deposits greater than $100,000 aggregated
around $21,313,000. The following table indicates, as of December 31, 2001, the
dollar amount of $100,000 or more by the time remaining until maturity:
December 31, 2001
----------------------------------------------------
3 Months 3 to 6 6 to 12 Over 12
or less Months Months Months
-------- ------ ------- -------
(In thousands)
Time certificates.................................... $8,983 $6,781 3,835 $1,714
====== ====== ===== ======
INTEREST RATE SENSITIVITY
The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest rate sensitivity
gap is defined as the difference between the amount of interest-earning assets
maturing or repricing within a specific time period and the amount of
interest-bearing liabilities maturing or repricing within that time period. A
gap is considered positive when the amount of interest rate sensitive assets
exceeds the amount of interest rate sensitive liabilities. A gap is considered
negative when the amount of interest rate sensitive liabilities exceeds the
amount of interest rate sensitive assets. During a period of rising interest
rates, a negative gap would tend to adversely affect net interest income while a
positive gap would tend to result in an increase in net interest income. During
a period of falling interest rates, a negative gap would tend to result in an
increase in net interest income while a positive gap would tend to adversely
affect net interest income.
The asset/liability committee, which consists of the president, the
chief financial officer and certain board members, is charged with monitoring
the liquidity and funds position of Pinnacle. The committee regularly reviews
(a) the rate sensitivity position on a three-month, six-month and one-year time
horizon; (b) loans to deposits ratio; and (c) average maturity for certain
categories of liabilities.
The following table represents an interest sensitivity profile for
Pinnacle as of December 31, 2001. The table represents a static point in time
and does not consider other variables, such as changing spread relationships or
interest rate levels. "Net repricing gap" is the difference between total
earning assets and total interest bearing liabilities repricing in any given
period and
60
"cumulative gap" is the sum of the net repricing gap from period to period.
Since interest-bearing demand deposits and savings accounts do not reprice on a
regular basis, these balances have been included in the "After 5 years and
non-rate sensitive" category.
December 31, 2001
After 5 years
Within 3 After 3 months After 12 months and Non-rate
months Within 12 months Within 5 years Sensitive Total
-------- ---------------- --------------- ------------- -----
(In thousands)
EARNING ASSETS:
Loans ................................ $ 37,070 $ 24,819 $58,372 $ 2,543 $122,804
Investment securities ................ 3,498 0 0 1,390 4,888
Balances due from other banks ........ 35 0 0 0 35
-------- -------- ------- ------- --------
Total earning assets .............. 40,603 24,819 58,372 3,933 127,727
-------- -------- ------- ------- --------
INTEREST-BEARING LIABILITIES:
Interest-bearing deposits ............ 68,980 18,533 3,620 0 91,133
Other borrowed funds ................. 18,621 0 5,000 0 23,621
-------- -------- ------- ------- --------
Total interest-bearing
liabilities ..................... 87,601 18,533 8,620 0 114,754
-------- -------- ------- ------- --------
RATE SENSITIVITY GAP:
Net repricing gap .................... $(46,998) $ 6,286 $49,752 $ 3,933 $ 12,973
======== ======== ======= ======= ========
Net repricing gap as a percentage
of total earning assets ........... (115.8)% 25.3% 85.2% 100%
======== ======== ======= =======
Cumulative gap ....................... $(46,998) $(40,712) $ 9,040 $12,973
======== ======== ======= =======
Cumulative gap as a percentage
of total earning assets ........... (36.8)% (31.9)% 7.1% 10.2%
======== ======== ======= =======
The above table indicates that in a rising interest rate environment,
Pinnacle's earnings may be adversely affected in the 0-365 day periods where
liabilities will reprice faster than assets.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity. Liquidity represents an institution's ability to provide
funds to satisfy day-to-day demands from depositors and borrowers by either
converting assets into cash or accessing new or existing sources of incremental
funds. Because of the importance of sound liquidity management to depositors,
creditors and regulators, Pinnacle devotes resources to insure funds are
available at all times. Pinnacle projects on a monthly basis the funds required
to meet projected cash flow needs over the next 30 and 90 day periods.
Generally, Pinnacle Bank relies on customer deposits and loan
repayments as its primary sources of funds. However, deposit levels may be
affected by a number of factors, including rates paid by competitors, general
interest rate levels, returns available to customers on alternative investments
and general economic conditions. Loan repayments are a relatively stable source
of funds, but such loans generally are not readily convertible to cash.
Accordingly, Pinnacle may be required from time to time to rely on secondary
sources of liquidity to meet loan and withdrawal demands or otherwise fund
operations. Such sources include Federal Home Loan Bank advances and federal
funds lines of credit from correspondent banks. Pinnacle has used these funds to
make loans, acquire investment securities and other assets and to fund
continuing operations.
At December 31, 2001, Pinnacle Bank had substantial unused borrowing
availability. This availability primarily consisted of the following sources:
$13,921,000 from the Federal Home Loan Bank and $3,835,000 from correspondent
banks out of federal funds lines of credit.
61
Management does not know of any cash flow trends or demands which are
likely to result in liquidity increasing or decreasing in any material manner
and believes the liquidity levels are adequate. Management anticipates that
Pinnacle Bank will continue to rely primarily on customer deposits and loan
repayments to provide liquidity. However, where necessary, the above described
borrowing sources will be used to augment Pinnacle's primary funding sources.
The following are Pinnacle's average loan to average deposit ratios for
the periods indicated:
December 31,
---------------------------- ----
2001 2000 1999
----- ----- ----
Average loans to average deposits.................. 118.8% 105.7% 87.4%
===== ===== ====
Capital Compliance. The Office of the Comptroller of the Currency and
the Federal Reserve have adopted capital guidelines governing the activities of
banks and bank holding companies. These guidelines require the maintenance of an
amount of capital based on risk-adjusted assets so that categories of assets
with potentially higher credit risk will require more capital backing than
assets with lower risk. In addition, bank and bank holding companies are
required to maintain capital to support, on a risk-adjusted basis, certain
off-balance sheet activities such as loan commitments.
The capital guidelines classify capital into two tiers, referred to as
Tier I and Tier II. Under risk-based capital requirements, total capital
accounts consists of Tier I capital which is generally common shareholders'
equity less goodwill and Tier II capital which is primarily a portion of the
allowance for loan losses and certain qualifying debt instruments. In
determining risk-based capital requirements, assets are assigned risk-weights of
0% to 100%, depending primarily on the regulatory assigned levels of credit risk
associated with such assets. Off-balance sheet items are considered in the
calculation of risk-adjusted assets through conversion factors established by
the regulators. The framework for calculating risk-based capital requires banks
and bank holding companies to meet the regulatory minimums of 4% Tier I and 8%
total risk-based capital. Banks and bank holding companies must also maintain a
minimum leverage ratio (comparing Tier I capital to total average assets less
goodwill) of at least 3%.
62
The following table provides information regarding Pinnacle's capital
ratios:
December 31,
2001 2000 1999
-------- -------- --------
(Dollars in thousands)
Capital:
Tier I capital:
Stockholders' equity ...................................... $ 8,936 $ 7,957 $ 7,070
Less disallowed intangibles ............................... 0 1 0
Plus unrealized losses on available-for-sale securities ... 0 (55) (168)
-------- -------- --------
Total Tier I capital .................................. 8,936 8,011 7,238
Tier II capital:
Qualifying allowance for loan losses ...................... 1,228 1,079 844
-------- -------- --------
Total Tier II capital ................................. 1,228 1,079 844
-------- -------- --------
Total capital .................................................. $ 10,164 $ 9,090 $ 8,082
======== ======== ========
Risk-adjusted assets ........................................... $112,805 $110,215 $ 95,608
======== ======== ========
Quarterly average assets ....................................... $130,526 $109,434 $ 89,082
======== ======== ========
Ratios:
Tier I capital to risk-adjusted assets ......................... 7.92% 7.27% 7.57%
Tier II capital to risk-adjusted assets ........................ 1.09 0.98 0.88
Total capital to risk-adjusted assets .......................... 9.01 8.25 8.45
Leverage-Tier I capital to quarterly average assets less
disallowed intangibles ............................... 6.85 7.32 8.13
EFFECTS OF INFLATION AND CHANGING PRICES
Inflation generally increases the cost of funds and operating overhead
and, to the extent loans and other assets bear variable rates, the yields on
such assets. Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates generally have a more significant impact on the performance of a
financial institution than the effects of general levels of inflation. Although
interest rates do not necessarily move in the same direction or to the same
extent as the prices of goods and services, increases in inflation generally
have resulted in increased interest rates.
63
INFORMATION ABOUT BANCORPSOUTH
BancorpSouth, Inc. is a Mississippi corporation and a bank holding
company with commercial banking and financial services operations in
Mississippi, Tennessee, Alabama, Arkansas, Texas and Louisiana. BancorpSouth's
principal subsidiary is BancorpSouth Bank. BancorpSouth conducts a general
commercial banking and trust business through BancorpSouth Bank, which has its
principal office in Tupelo, Lee County, Mississippi, and operates offices in
Mississippi, Tennessee, Alabama, Arkansas, Texas and Louisiana. BancorpSouth
Bank has grown through the acquisition of other banks, the purchase of assets
from federal regulators and through the opening of new branches and offices.
BancorpSouth's lending activities include both commercial and consumer
loans. Loan originations are derived from a number of sources including real
estate broker referrals, mortgage loan companies, direct solicitation by our
loan officers, existing savers and borrowers, builders, attorneys, walk-in
customers and, in some instances, other lenders. BancorpSouth has established
disciplined and systematic procedures for approving and monitoring loans that
vary depending on the size and nature of the loan.
BancorpSouth offers a variety of services through the trust department
of BancorpSouth Bank, including personal trust and estate services, certain
employee benefit accounts and plans, including individual retirement accounts,
and limited corporate trust functions.
BancorpSouth provides, through its subsidiaries, a range of financial
services to individuals and small-to-medium size businesses. BancorpSouth Bank
operates investment services, consumer finance, credit life insurance and
insurance agency subsidiaries which engage in investment brokerage services,
consumer lending, credit life insurance sales and sales of other insurance
products.
As previously disclosed, in some states in which BancorpSouth operates,
there has been a trend toward increased class action lawsuits and other
litigation against financial services companies in connection with lending and
other financial transactions. This trend is especially true with respect to
Mississippi. These actions tend to seek substantial damages for transactions
that involve relatively small amounts of money. Some of these actions have
resulted in large settlements or substantial damage awards. Some of
BancorpSouth's subsidiaries are defendants in similar lawsuits in which the
plaintiffs are seeking substantial damages. The number of these lawsuits
increased during 2001. Similarly, the number of plaintiffs participating in
these lawsuits has increased significantly. BancorpSouth's management has no
reason to believe that these trends will not continue. It is not possible to
determine with any certainty at this point in time the potential exposure
related to damages in connection with these suits. Future legislation and court
decisions in some states may limit the amount of damages that can be recovered
in legal proceedings; however, BancorpSouth cannot predict at this time whether
such legislation and court decisions will occur or the effect they may have on
cases involving BancorpSouth's subsidiaries.
BancorpSouth's principal office is located at One Mississippi Plaza,
Tupelo, Mississippi 38804 and its telephone number is (662) 680-2000.
64
INFORMATION ABOUT PINNACLE
GENERAL
Pinnacle Bancshares, Inc. Pinnacle is an Arkansas business corporation
registered under the Bank Holding Company Act of 1956. Pinnacle owns all of the
issued and outstanding capital stock of its state chartered subsidiary bank,
Pinnacle Bank, which conducts banking operations through two full service
offices in Little Rock, Arkansas. In addition, Pinnacle Bank owns 100% of
Pinnacle Bank Home Loan Company and Pinnacle Capital Resources, Inc.
As of December 31, 2001, Pinnacle had, on a consolidated basis, total
assets of around $135.2 million, total deposits of around $101.8 million, total
loans of around $122.8 million and total shareholders' equity of around $8.9
million.
Pinnacle does not, as an entity, engage in separate business activities
of a material nature apart from the activities it performs for Pinnacle Bank.
The primary activities of Pinnacle are to provide assistance in the management
and coordination of Pinnacle Bank's financial resources and to provide capital
and public relations services for Pinnacle Bank. Pinnacle Bank has a board of
directors separate from that of Pinnacle and operates under the day-to-day
management of its own officers. Pinnacle Bank formulates its own policies with
respect to banking and business matters.
As a bank holding company, Pinnacle is subject to regulation by the
Federal Reserve in accordance with the requirements set forth in the Bank
Holding Company Act and by the rules and regulations promulgated under this Act
by the Federal Reserve. Certain of these rules and regulations applicable to
Pinnacle are summarized below.
Pinnacle Bank. Pinnacle Bank is an Arkansas banking corporation with
its main office in Little Rock, Arkansas. The bank was originally chartered in
1997 under the laws of Arkansas. Pinnacle Bank has two wholly-owned
subsidiaries, Pinnacle Bank Home Loan Company and Pinnacle Capital Resources,
Inc. As an Arkansas banking corporation, Pinnacle Bank is subject to regulation
by the Arkansas Banking Department and the FDIC. Certain of these rules and
regulations applicable to Pinnacle Bank are summarized in this section below.
Pinnacle Bank provides a wide range of retail and commercial banking
services. Deposit services include checking, savings, money market, time deposit
and individual retirement accounts. Loan services include various types of real
estate, consumer, commercial, industrial and agricultural loans. Pinnacle Bank
also provides direct deposit services, wire transfer facilities, ATMs, telephone
banking, internet banking and debit cards (with access to local, state and
nationwide networks). Deposits of Pinnacle Bank are insured by the FDIC.
The majority of Pinnacle Bank's loan portfolio consists of real estate
and commercial loans, while consumer deposits comprise the majority of its
deposit base. As of December 31, 2001, Pinnacle Bank had total assets of around
$135.1 million, total deposits of around $101.8 million, total loans of around
$122.8 million and total shareholders' equity of around $9.2 million.
Pinnacle Bank considers its primary market to be the Little Rock,
Arkansas metropolitan area, which covers that portion of Pulaski County,
Arkansas south of the Arkansas River. Pinnacle Bank uses two branch locations
for its banking operations. The main office facility is leased by Pinnacle Bank
and the west branch facility is owned. Pinnacle Bank's management consider these
facilities to be adequate for the operations of the bank.
65
Pinnacle Bank Home Loan Company. Pinnacle Bank Home Loan Company is an
Arkansas corporation and a wholly-owned subsidiary of Pinnacle Bank. Pinnacle
Bank Home Loan Company was formed by Pinnacle Bank in 1999 to engage in the
mortgage lending business. Substantially all loans originated are sold into the
secondary market on a servicing released basis. As an operating subsidiary of
Pinnacle Bank and a mortgage lending company doing business in Arkansas,
Pinnacle Bank Home Loan Company is not subject to regulation independently of
Pinnacle Bank. As of December 31, 2001, Pinnacle Bank Home Loan Company had
total assets of around $603,000.
Pinnacle Capital Resources, Inc. Pinnacle Capital Resources is an
Arkansas corporation and a wholly-owned subsidiary of Pinnacle Bank. Pinnacle
Capital Resources was formed by Pinnacle Bank in April 2001 to engage in the
business of purchasing owner-financed mortgages throughout the United States.
After buying mortgages at a discount, Pinnacle Capital Resources places these
loans in pools and sells them to investors. As of December 31, 2001, Pinnacle
Capital Resources had total assets of around $125,000.
Whether or not the merger with BancorpSouth is completed, management of
Pinnacle Bank has decided to discontinue the business operations of Pinnacle
Capital Resources.
SUPERVISION AND REGULATION
In addition to the generally applicable state and federal laws
governing businesses and employers, bank holding companies and banks are
extensively regulated under both federal and state law. With few exceptions,
state and federal banking laws have as their principal objective either the
maintenance of the safety and soundness of the Bank Insurance Fund of the FDIC
or the protection of consumers or classes of consumers, rather than the specific
protection of the shareholders of Pinnacle.
Pinnacle Bancshares, Inc. Pinnacle is a bank holding company registered
under the Bank Holding Company Act, and it operates one banking subsidiary,
Pinnacle Bank. As a registered bank holding company, Pinnacle is subject to
supervision and regulation by the Federal Reserve under the Bank Holding Company
Act. As a bank holding company, Pinnacle is required to furnish the Federal
Reserve an annual report of its operations at the end of each fiscal year and to
furnish such additional information as the Federal Reserve may require pursuant
to the Bank Holding Company Act. The Federal Reserve may also make examinations
of Pinnacle.
The Bank Holding Company Act requires, subject to certain exceptions,
every bank holding company to obtain the prior approval of the Federal Reserve:
- Before it may acquire direct or indirect ownership or control
of any voting shares of any bank if, after such acquisition,
such bank holding company will directly or indirectly own or
control more than 5% of the voting shares of such bank;
- Before it or any of its subsidiaries, other than a bank, may
acquire all or substantially all of the assets of a bank; or
- Before it may merge or consolidate with any other bank holding
company.
In addition, the Bank Holding Company Act prohibits (with specific exceptions)
Pinnacle from engaging in non-banking activities or from acquiring or retaining
direct or indirect control of any company engaged in non-banking activities. The
Federal Reserve by regulation or order may make exceptions for activities
determined to be so closely related to banking or managing or controlling banks
as to be a proper incident to such activities. In determining whether a
particular activity is permissible, the Federal Reserve considers whether the
performance of an activity can reasonably be expected to produce benefits to the
public, such as greater convenience, increased competition or
66
gains in efficiency that outweigh possible adverse effects, such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest or unsound banking practices. For example, making, acquiring or
servicing loans, leasing personal property, providing certain investment or
financial advice, performing certain data processing services, acting as agent
or broker in selling credit life insurance and certain other types of insurance
in connection with credit transactions by the bank holding company and certain
limited insurance underwriting activities have all been determined by
regulations of the Federal Reserve to be permissible activities. The Bank
Holding Company Act does not place territorial limitations on permissible
bank-related activities of bank holding companies. However, despite prior
approval, the Federal Reserve has the power to order a holding company or its
subsidiaries to terminate any activity, or terminate its ownership or control of
a subsidiary, when it has reasonable cause to believe that continuation of such
activity or such ownership or control constitutes a serious risk to the
financial safety, soundness or stability of any bank subsidiary of that holding
company.
Pinnacle is also subject to the Arkansas Bank Holding Company Act of
1983 which places certain restrictions on the acquisition of banks by bank
holding companies. Any acquisition by Pinnacle of more than 10% of any class of
the outstanding capital stock of any bank located in Arkansas, would require the
Arkansas Bank Commissioner's approval. Further, no bank holding company may
acquire any bank if after such acquisition the holding company would control,
directly or indirectly, banks having 25% of the total bank deposits (excluding
deposits from other banks and public funds) in the State of Arkansas. Under the
Arkansas Bank Holding Company Act a bank holding company cannot own more than
one bank subsidiary if any of its bank subsidiaries has been chartered for less
than five years.
Effective January 1, 1999 Arkansas law allows Pinnacle to engage in
branching activities for its bank subsidiaries on a statewide basis. Immediately
prior to that date, the state's branching laws prevented state and national
banks from opening branches in any county of the state other than their home
county and the counties contiguous to their home county.
Pinnacle Bank. Pinnacle Bank is an Arkansas state chartered bank and
member of the Federal Reserve System. As a state member bank, Pinnacle Bank is
subject to supervision by the Arkansas State Bank Department and the Federal
Reserve Bank of St. Louis and has its deposits insured by the FDIC. Pinnacle
Bank is regulated and subject to periodic examination by these governmental
authorities, each of which imposes regulations related to reserves, investments,
loans, issuance of securities, establishment of branches and other aspects of
operation.
Regulations of the Arkansas State Bank Department limit the ability of
Pinnacle Bank to pay dividends to Pinnacle without the prior approval of such
agencies. The Arkansas State Bank Department currently limits the amount of
dividends that Pinnacle Bank may pay Pinnacle to 75% of the bank's net profits
after taxes for the current year plus 75% of its retained net profits after
taxes for the immediately preceding year.
Federal law substantially restricts transactions between financial
institutions and their affiliates, particularly their non-financial institution
affiliates. As a result, Pinnacle Bank is sharply limited in making extensions
of credit to Pinnacle or any non-bank subsidiary, in investing in the stock or
other securities of Pinnacle or any non-bank subsidiary, in buying the assets
of, or selling assets to, Pinnacle, and/or in taking such stock or securities as
collateral for loans to any borrower. Moreover, transactions between Pinnacle
Bank and Pinnacle (or any non-bank subsidiary) must generally be on terms and
under circumstances at least as favorable to Pinnacle Bank as those prevailing
in comparable transactions with independent third parties or, in the absence of
comparable transactions, on terms and under circumstances that in good faith
would be available to nonaffiliated companies.
67
The federal banking laws require all insured banks, including Pinnacle
Bank, to maintain reserves against their checking and transaction accounts
(primarily checking accounts, NOW and Super NOW checking accounts). Because
reserves must generally be maintained in cash or in non-interest bearing
accounts, the effect of the reserve requirements is to increase Pinnacle Bank's
cost of funds. Arkansas law requires state chartered banks to maintain such
reserves as are required by the applicable federal regulatory agency.
Pinnacle Bank is subject to Section 23A of the Federal Reserve Act,
which places limits on the amount of loans or extensions of credit to,
investments in or certain other transactions with affiliates, including
Pinnacle. In addition, limits are placed on the amount of advances to third
parties collateralized by the securities or obligations of affiliates. Most of
these loans and certain other transactions must be secured in prescribed
amounts. Pinnacle Bank is also subject to Section 23B of the Federal Reserve
Act, which prohibits an institution from engaging in transactions with certain
affiliates unless the transactions are on terms substantially the same, or at
least as favorable to such institution or its subsidiaries, as those prevailing
at the time for comparable transactions with non-affiliated companies. Pinnacle
Bank is subject to restrictions on extensions of credit to executive officers,
directors, certain principal stockholders, and their related interests. These
extensions of credit must be made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with third parties and must not involve more than the normal risk
of repayment or present other unfavorable features.
The Arkansas Constitution provides, in summary, that "consumer loans
and credit sales" have a maximum percentage limitation of 17% per annum and that
all "general loans" have a maximum limitation of 5% over the Federal Reserve
Discount Rate in effect at the time the loan was made. The Arkansas Supreme
Court has determined that "consumer loans and credit sales" are also "general
loans" and are thus subject to an interest rate limitation equal to the lesser
of 5% over the Federal Reserve Discount Rate or 17% per annum. The Arkansas
Constitution also provides penalties for usurious "general loans" and "consumer
loans and credit sales," including forfeiture of all principal and interest on
consumer loans and credit sales made at a greater rate of interest than 17% per
annum. Additionally, "general loans" made at a usurious rate may result in
forfeiture of uncollected interest and a refund to the borrower of twice the
interest collected.
Arkansas usury laws have historically been preempted by federal law
with respect to first residential real estate loans and certain loans guaranteed
by the Small Business Administration. Furthermore, the Gramm-Leach-Bliley
Financial Modernization Act of 1999 preempted the application of the Arkansas
Constitution's usury limits to Pinnacle Bank, effective November 12, 1999. In a
non-adversarial test case involving undisputed facts, the Eighth Circuit Court
of Appeals affirmed the District Court's ruling that the preemptive provisions
of the Gramm-Leach Bliley Act are constitutional. Although the constitutionality
of the preemption provision could be raised again in the future, Pinnacle Bank
currently may charge interest at rates over and above the limitations set forth
in the Arkansas Constitution.
Capital Adequacy Requirements. The FRB monitors the capital adequacy of
bank holding companies such as Pinnacle, and the FDIC monitors the capital
adequacy of Pinnacle Bank. The federal bank regulators use a combination of
risk-based guidelines and leverage ratios to evaluate capital adequacy.
Under the risk-based capital guidelines, bank regulators assign a risk
weight to each category of assets based generally on the perceived credit risk
of the asset class. The risk weights are then multiplied by the corresponding
asset balances to determine a "risk-weighted" asset base. The minimum ratio of
total risk-based capital to risk-weighted assets is 8.0%. At least half of the
risk-based capital must consist of Tier 1 capital, which is comprised of common
equity, retained earnings and certain types of preferred stock and excludes
goodwill and various intangible assets.
68
The remainder, or Tier 2 capital, may consist of a limited amount of
subordinated debt, certain hybrid capital instruments and other debt securities,
preferred stock, and an allowance for loan losses not to exceed 1.25% of
risk-weighted assets. The sum of Tier 1 capital and Tier 2 capital is "total
risk-based capital."
The leverage ratio is a company's Tier 1 capital divided by its
adjusted total assets. The leverage ratio requires a 3.0% Tier 1 capital to
adjusted average asset ratio for institutions with the highest regulatory rating
of 1. All other institutions must maintain a leverage ratio of 4.0% to 5.0%. For
a tabular summary of Pinnacle's consolidated risk-weighted capital and leverage
ratios, see "Management's Discussion and Analysis of Financial Condition and
Results of Operation--Liquidity and Capital Resources."
Enforcement Authority. The FRB has enforcement authority over bank
holding companies and non-banking subsidiaries to forestall activities that
represent unsafe or unsound practices or constitute violations of law. It may
exercise these powers by issuing cease-and-desist orders or through other
actions. The FRB may also assess civil penalties against companies or
individuals who violate the Bank Holding Company Act or related regulations in
amounts up to $1 million for each day's violation. The FRB can also require a
bank holding company to divest ownership or control of a non-banking subsidiary
or require such subsidiary to terminate its non-banking activities. Certain
violations may also result in criminal penalties.
The FDIC possesses comparable authority under the Federal Deposit
Insurance Act, the Federal Deposit Insurance Corporation Improvement Act and
other statutes with respect to Pinnacle Bank. In addition, the FDIC can
terminate insurance of accounts, after notice and hearing, upon a finding that
the insured institution is or has engaged in any unsafe or unsound practice that
has not been corrected, is in an unsafe and unsound condition to continue
operations, or has violated any applicable law, regulation, rule, or order of,
or condition imposed by the appropriate supervisors.
The Federal Deposit Insurance Corporation Improvement Act required
federal banking agencies to broaden the scope of regulatory corrective action
taken with respect to depository institutions that do not meet minimum capital
and related requirements and to take such actions promptly in order to minimize
losses to the FDIC. In connection with this Act, federal banking agencies
established capital measures (including both a leverage measure and a risk-based
capital measure) and specified for each capital measure the levels at which
depository institutions will be considered well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized or critically
undercapitalized. If an institution becomes classified as undercapitalized, the
appropriate federal banking agency will require the institution to submit an
acceptable capital restoration plan and can suspend or greatly limit the
institution's ability to effect numerous actions including capital
distributions, acquisitions of assets, the establishment of new branches and the
entry into new lines of business. As of December 31, 2001, Pinnacle Bank is
classified as "adequately capitalized" under these guidelines.
Other Regulation. Pinnacle's status as a registered bank holding
company under the Bank Holding Company Act does not exempt it from certain
federal and state laws and regulations applicable to corporations generally,
including, without limitation, certain provisions of the federal securities
laws. Pinnacle is under the jurisdiction of the Securities and Exchange
Commission and of state securities commissions for matters relating to the offer
and sale of its securities.
Pinnacle Bank's loan operations are subject to certain federal laws
applicable to credit transactions, such as the federal Truth-In-Lending Act,
governing disclosures of credit terms to consumer borrowers; the Home Mortgage
Disclosure Act of 1975, requiring financial institutions to provide information
to enable the public and public officials to determine whether a financial
institution is fulfilling its obligation to help meet the housing needs of the
community it serves; the
69
Equal Credit Opportunity Act, prohibiting discrimination on the basis of race,
creed or other prohibited factors in extending credit; the Fair Credit Reporting
Act of 1978, governing the use and provision of information to credit reporting
agencies; the Fair Debt Collection Act, governing the manner in which consumer
debts may be collected by collection agencies; the Fair Housing Act, prohibiting
discriminatory practices relative to real estate-related transactions, including
the financing of housing; and the rules and regulations of the various federal
agencies charged with the responsibility of implementing such federal laws. The
deposit operations of Pinnacle Bank also are subject to the Right to Financial
Privacy Act, which imposes a duty to maintain confidentiality of consumer
financial records and prescribes procedures for complying with administrative
subpoenas of financial records; the Electronic Funds Transfer Act, which governs
automatic deposits to and withdrawals from deposit accounts and customers'
rights and liabilities arising from the use of automated teller machines and
other electronic banking services; the Truth in Savings Act, requiring
depository institutions to disclose the terms of deposit accounts to consumers;
and the Expedited Funds Availability Act, requiring financial institutions to
make deposited funds available according to specified time schedules and to
disclose funds availability policies to consumers.
EMPLOYEES
Pinnacle is a bank holding company and primarily conducts its
operations through its subsidiary, Pinnacle Bank. Pinnacle employs four
executive officers. However, these four employees also conduct the business of
Pinnacle Bank and therefore are compensated as employees of Pinnacle Bank. As of
December 31, 2001, Pinnacle Bank had around 29 full-time equivalent employees
(including the four officers of Pinnacle), none of whom is represented by a
collective bargaining agreement. Management of Pinnacle Bank considers its
relations with its employees to be good. Pinnacle Bank Home Loan Company and
Pinnacle Capital Resources, Inc. lease all of their respective employees from
Pinnacle Bank.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pinnacle Bank has had, in the ordinary course of business, banking
transactions with some of its officers and directors and with certain officers
and directors of Pinnacle. All loan transactions with officers and directors of
Pinnacle, its bank subsidiary, and their related and affiliated parties, have
been in the ordinary course of business, on substantially the same terms,
including interest rates and collateral as those prevailing for comparable
transactions with other loan customers of Pinnacle, and have not included more
than the normal risk of collectibility associated with the Pinnacle's other
banking transactions or other unfavorable features.
LEGAL PROCEEDINGS
Pinnacle, Pinnacle Bank, Pinnacle Bank Home Loan Company and Pinnacle
Capital Resources are involved in routine legal proceedings occurring in the
ordinary course of business that, in the aggregate, are not believed by
management of these companies to be material to the consolidated financial
condition and results of operation of Pinnacle.
70
PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information as of January ___,
2002 regarding those persons known by Pinnacle to be beneficial owners of more
than 5% of the outstanding shares of Pinnacle common stock, and the number and
percentage of outstanding shares of Pinnacle common stock beneficially owned by
each director and executive officer of Pinnacle and all directors and executive
officers as a group. Unless otherwise indicated, each person listed is the sole
record holder of, and exercises sole voting power over, the shares listed.
Shares Percentage of
Beneficial Beneficially Shares
Owner Position Owned Outstanding
---------- -------- ------------ -------------
DIRECTORS AND EXECUTIVE OFFICERS:
William L. Cravens....................... Director (1)(2) 404 2.35%
Scott T. Ford............................ Director (1)(3) 685 3.99
Jeffrey H. Fox........................... Director (1)(4) 1,125 6.56
Robert (Ted) Gammill, Jr................. Director (1) 125 *
Richard Parker........................... Director (1)(5) 263 1.53
Richard N. Massey........................ Director (1)(6) 1,162 6.76
Gus J. Blass, III........................ Director (1)(7) 1,877 10.93
Keith Jackson............................ Director (1)(8) 14 *
David Snowden, Jr........................ Director (1)(9) 292 1.70
W. Dabbs Cavin........................... Executive Vice President, 416 2.39
Director (1)(10)
Robert M. Althoff........................ President and Chief Executive 676 3.81
Officer, Director (1)(11)
Thomas C. Evans.......................... Executive Vice President and 200 1.15
Chief Financial Officer(12)
Beth Harvey.............................. Senior Vice President(13) 50 .29
All Directors and Executive Officers
As a group (13 Persons).................. 7,289 39.49%
5% SHAREHOLDERS:
W.R. Stephens, Jr. Revocable Trust
31 East Palisades Drive 1,000 5.84%
Little Rock, AR 72207................... Shareholder
* Denotes ownership of less than 1% of the total shares of Pinnacle common
stock.
(1) Indicates Director of Pinnacle and Pinnacle Bank.
(2) Includes 100 shares owned by his spouse. Includes 29 shares issuable upon
exercise of options which were exercisable at January 28, 2002, or which
will become exercisable within 60 days thereafter.
(3) Includes 29 shares owned by his spouse, 96 shares owned by the William Arch
Ford Trust of which Mr. Ford is Trustee, 96 shares owned by the Samuel
Thomas Ford Trust of which Mr. Ford is Trustee; and 96 shares owned by the
Joseph Scott Ford Trust of which Mr. Ford is Trustee. Includes 14 shares
issuable upon exercise of options which were exercisable at January 28,
2002, or which will become exercisable within 60 days thereafter.
(4) Includes 172 shares owned by his spouse. Includes 17 shares issuable upon
exercise of options which were exercisable at January 28, 2002, or which
will become exercisable within 60 days thereafter.
(5) Includes 150 shares owned jointly with his spouse, 50 shares owned by the
Robert D. Parker Trust Fund #2 of which Mr. Parker is Trustee and 50 shares
owned by the R. Bradley Parker Trust Fund #2 of which Mr. Parker is
Trustee. Includes 13 shares issuable upon exercise of options which were
exercisable at January 28, 2002, or which will become exercisable within 60
days thereafter.
(6) Includes 1,010 shares owned jointly with his spouse. Includes 42 shares
issuable upon exercise of options which were exercisable at January 28,
2002, or which will become exercisable within 60 days thereafter.
(7) Includes 125 shares owned by his minor child. Includes 42 shares issuable
upon exercise of options which were exercisable at January 28, 2002, or
which will become exercisable within 60 days thereafter.
(8) Represents 14 shares issuable upon exercise of options which were
exercisable at January 28, 2002, or which will become exercisable within 60
days thereafter.
(9) Includes 42 shares issuable upon exercise of options which were exercisable
at January 28, 2002, or which will become exercisable within 60 days
thereafter.
(10) All shares owned jointly with his spouse. Includes 256 shares issuable upon
exercise of options which were exercisable at January 28, 2002, or which
will become exercisable within 60 days thereafter.
71
(11) Includes 626 shares issuable upon exercise of options which were
exercisable at January 28, 2002, or which will become exercisable within 60
days thereafter.
(12) Represent 200 shares issuable upon exercise of options which were
exercisable at January 28, 2002, or which will become exercisable within 60
days thereafter.
(13) All shares owned jointly with her spouse. Includes 25 shares issuable upon
exercise of options which were exercisable at January 28, 2002, or which
will become exercisable within 60 days thereafter.
72
COMPARISON OF RIGHTS OF SHAREHOLDERS
Pinnacle shareholders, whose rights are governed by Pinnacle's articles
of incorporation, as amended, and bylaws and by the Arkansas Business
Corporation Act of 1987, will become shareholders of BancorpSouth upon
completion of the merger. As such, the rights of the former Pinnacle
shareholders will thereafter be governed by BancorpSouth's restated articles of
incorporation and amended and restated bylaws and by the Mississippi Business
Corporation Act.
While it is impractical to summarize all of the pertinent differences,
set forth below are the material differences between the rights of Pinnacle
shareholders under Pinnacle's governing documents and law and the rights of
BancorpSouth shareholders under BancorpSouth's governing documents and law.
CHANGE OF CONTROL
BANCORPSOUTH. BancorpSouth's governing documents and shareholders
rights plan contain several provisions which make a change of control of
BancorpSouth more difficult to accomplish without the approval of BancorpSouth's
Board of Directors, including the following:
- BancorpSouth's Board of Directors is divided into three
classes so that one-third of the directors will be subject to
reelection at each annual meeting of the shareholders of
BancorpSouth;
- Two-thirds of the shares of BancorpSouth common stock entitled
to vote are required to constitute a quorum for the
transaction of any business at a special meeting of
shareholders. A majority of the shares of BancorpSouth common
stock entitled to vote are required to constitute a quorum at
an annual meeting of shareholders;
- BancorpSouth's bylaws provide that a vote of at least 80% of
the outstanding shares of BancorpSouth common stock is
required to increase the maximum number of members of
BancorpSouth's Board of Directors unless BancorpSouth's Board
recommends such an increase;
- BancorpSouth's articles of incorporation provide that the
affirmative vote of the holders of not less than 80% of the
outstanding shares of voting stock of BancorpSouth is required
in the event that BancorpSouth's Board of Directors does not
recommend to BancorpSouth shareholders a vote in favor of a
merger or consolidation of BancorpSouth with, or a sale or
lease of all or substantially all of the assets of
BancorpSouth to, any person or entity;
- The affirmative vote of the holders of not less than 80% of
the outstanding shares of voting stock of BancorpSouth, as
well as at least 67% of the outstanding shares of voting stock
of BancorpSouth not held by a person owning or controlling 20%
or more of BancorpSouth's voting stock, is required for the
approval of a merger, consolidation, or sale or lease of all
or substantially all of BancorpSouth's assets with or to a
controlling person, except in certain instances; and
- BancorpSouth has implemented a shareholders rights plan (which
is commonly referred to as a "poison pill") under which a
common stock purchase right attaches to and trades with each
share of BancorpSouth common stock (including shares of
BancorpSouth common stock to be issued to Pinnacle
shareholders in connection with the merger). Upon the
occurrence of certain events, including the acquisition of, or
tender offer for,
73
20% or more of the outstanding shares of BancorpSouth common
stock by any person or entity, then the holders of each such
purchase right (except those held by the person acquiring the
shares or making the tender offer) will be entitled to
purchase one share of BancorpSouth common stock at a price
equal to 50% of the then current market price.
PINNACLE. Pinnacle's governing documents do not provide for the
staggered election of members of Pinnacle's Board of Directors. Directors of
Pinnacle are elected annually for a one-year term and hold office until the next
succeeding annual meeting of Pinnacle's shareholders and until their successors
have been elected and qualified, subject to earlier resignation and removal. A
majority of the shares of Pinnacle common stock entitled to vote are required to
constitute a quorum at an annual meeting of shareholders and a special
shareholders meeting. Under Pinnacle's governing documents, a majority of such
quorum is required to decide any question to come before a shareholders meeting.
A merger requires the affirmative vote of the holders of at least a majority of
the outstanding shares of Pinnacle. Pinnacle has not adopted a shareholders
rights plan.
SHAREHOLDER NOMINATIONS AND PROPOSALS
BANCORPSOUTH. BancorpSouth's bylaws provide that proposals by
BancorpSouth shareholders of business to be considered, or nominations by
shareholders for election of directors, at an annual meeting of shareholders
must be stated in writing and filed with BancorpSouth's corporate Secretary not
later than 90 calendar days and not earlier than 120 calendar days prior to the
first anniversary date of the preceding year's annual meeting. If the annual
meeting is more than 30 calendar days from the anniversary date of the preceding
year's annual meeting, notice by the shareholders must be delivered not earlier
than 120 calendar days prior to the annual meeting and no later than the later
of 90 calendar days prior to the annual meeting or 10 calendar days following
the day that BancorpSouth first publicly announces the date of the annual
meeting.
BancorpSouth shareholders who wish to nominate any person for election
to BancorpSouth's Board of Directors at a special meeting of shareholders must
deliver written notice to BancorpSouth's corporate Secretary not earlier than
120 calendar days prior to the special meeting and not later than the later of
90 calendar days prior to the special meeting or 10 calendar days following the
day on which BancorpSouth first publicly announces the date of the special
meeting.
BancorpSouth's bylaws also require that any shareholder notice of
nomination for election of a director provide certain information concerning the
shareholder and his or her nominee, including, among other things, the
information regarding the nominee as would be required to be included in a proxy
statement filed under the proxy rules of the SEC, and the consent of the nominee
to serve as a director of BancorpSouth if elected.
The chairman of the meeting may refuse to acknowledge any shareholder
proposals or nominations that are not made in compliance with these procedures.
PINNACLE. Pinnacle's governing documents do not contain any provisions
which require Pinnacle shareholders to provide advance notice to Pinnacle prior
to proposing business or nominating persons at an annual meeting or a special
meeting of shareholders.
BOARD OF DIRECTORS
BANCORPSOUTH. BancorpSouth's Board of Directors consists of between
nine and 24 members, as determined from time to time by BancorpSouth's Board of
Directors, and on the date of this Prospectus Supplement/Proxy Statement
consisted of 12 members. The vote of at least 80% of the outstanding shares of
BancorpSouth common stock is required to increase the maximum number of members
of BancorpSouth's Board of Directors unless BancorpSouth's Board of Directors
74
recommends such an increase. Any vacancy on BancorpSouth's Board of Directors,
including a vacancy resulting from an increase in the number of directors, may
be filled by BancorpSouth's shareholders, BancorpSouth's Board of Directors, or,
if the directors remaining in office constitute fewer than a quorum of the Board
of Directors, the Board of Directors by the affirmative vote of a majority of
all of the directors remaining in office. A vacancy that will occur at a later
date, by reason of resignation effective at a later date or any other reason,
may be filled before the vacancy occurs, but the new director may not take
office until the vacancy occurs. The members of the BancorpSouth's Board of
Directors are divided into three classes, with the classes elected for staggered
three-year terms. Each director of BancorpSouth must own at least $200 of par
value of unencumbered shares of BancorpSouth common stock.
PINNACLE. Pinnacle's Board of Directors consists of between three and
15 members, as determined from time to time by Pinnacle's shareholders, and on
the date of this Prospectus Supplement/Proxy Statement consisted of 11 members.
Any vacancy on Pinnacle's Board of Directors by reason of death or resignation
is to be filled by majority vote of the Pinnacle directors then in office. Any
vacancy caused by a removal of a director shall be filled by the shareholders.
Each Pinnacle director is elected to serve a one-year term. Pinnacle's
shareholders elect directors at their annual meeting or, if the annual meeting
is not held, at a special meeting called for the purpose of the election of
directors. Directors of Pinnacle are not required to be shareholders of
Pinnacle.
REMOVAL OF DIRECTORS
BANCORPSOUTH. BancorpSouth's governing documents provide that a
director of BancorpSouth may be removed by the affirmative vote of a majority of
the entire Board of Directors of BancorpSouth and by BancorpSouth's
shareholders, only for cause, at a special meeting called for the purpose of
removing such director.
PINNACLE. Pinnacle's governing documents provide that a director may be
removed at any time with or without cause by a special shareholder's meeting
called expressly for that purpose.
AUTHORIZED CAPITAL STOCK
Authorized Shares Par Value per Share
----------------- -------------------
Pinnacle........................... 100,000 $10.00
BancorpSouth....................... 500,000,000 $ 2.50
RIGHTS OF SHAREHOLDERS TO CALL SPECIAL MEETINGS
BANCORPSOUTH. BancorpSouth's governing documents provide that a special
meeting of BancorpSouth's shareholders may be called by the Chief Executive
Officer or Secretary of BancorpSouth, or by the holders of not less than a
majority of the shares of BancorpSouth common stock entitled to vote at such
meeting.
PINNACLE. Pinnacle's bylaws provide that a special meeting of the
Pinnacle shareholders may be called at any time by the President or by the
Pinnacle Board of Directors, or any shareholders owning in the aggregate not
less than 10% of the shares of Pinnacle common stock entitled to vote on any
action to be presented at such meeting.
75
WHERE YOU CAN FIND MORE INFORMATION
BancorpSouth has filed with the SEC under the Securities Act a
registration statement on Form S-4 that registers the distribution to Pinnacle
shareholders of the shares of BancorpSouth common stock to be issued in
connection with the merger. The registration statement, including the attached
exhibits and schedules, contain additional relevant information about
BancorpSouth, Pinnacle and BancorpSouth common stock. The rules and regulations
of the SEC allow BancorpSouth and Pinnacle to omit certain information included
in the registration statement from this Prospectus Supplement/Proxy Statement.
In addition, BancorpSouth files reports, proxy statements and other
information with the SEC under the Securities Exchange Act. You may read and
copy this information at the following locations of the SEC:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. Woolworth Center Citicorp Center
Room 1024 233 Broadway 500 West Madison Street
Washington, D.C. 20549 New York, New York 10279 Suite 1400
Chicago, Illinois 60661-2511
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. You may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, like
BancorpSouth, which file electronically with the SEC. The address of that site
is http://www.sec.gov.
You can also inspect reports, proxy statements and other information
about BancorpSouth at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
The SEC allows BancorpSouth to "incorporate by reference" information
into this Prospectus Supplement/Proxy Statement from documents it has have
previously filed with the SEC. This means that BancorpSouth can disclose
important information to you by referring you to another document filed
separately with the SEC. These documents contain important information about
BancorpSouth and its financial condition, operations and business. The
information incorporated by reference is considered to be a part of this
Prospectus Supplement/Proxy Statement, except for any information that is
superseded by other information contained directly in this Prospectus
Supplement/Proxy Statement or in documents filed by BancorpSouth with the SEC
after the date of this Prospectus Supplement/Proxy Statement. Information
incorporated from another document is considered to have been disclosed to you
whether or not you chose to read the document.
This Prospectus Supplement/Proxy Statement incorporates by reference
the following documents with respect to BancorpSouth:
- BancorpSouth's Annual Report on Form 10-K for the year ended
December 31, 2000;
- BancorpSouth's Quarterly Report on Form 10-Q for the three
months ended March 31, 2001;
- BancorpSouth's Quarterly Report on Form 10-Q for the three
months ended June 30, 2001;
76
- BancorpSouth's Quarterly Report on Form 10-Q for the three
months ended September 30, 2001;
- BancorpSouth's Current Report on Form 8-K dated March 28,
2001;
- BancorpSouth's Current Report on Form 8-K dated January 18,
2002;
- BancorpSouth's Annual Report for the BancorpSouth, Inc. 401(k)
Amended and Restated Salary Deferral-Profit Sharing Employee
Stock Ownership Plan on Form 11-K for the year ended December
31, 2000;
- The description of BancorpSouth common stock contained in
BancorpSouth's Registration Statement on Form 8-A dated May
14, 1997;
- The description of BancorpSouth common stock purchase rights
contained in BancorpSouth's Registration Statement on Form 8-A
dated May 14, 1997; and
- The description of amendments to BancorpSouth common stock
purchase rights contained in an amended Registration Statement
on Form 8-A/A dated as of March 28, 2001.
BancorpSouth incorporates by reference additional documents that
BancorpSouth may file with the SEC between the date of this Prospectus
Supplement/Proxy Statement and the completion of the merger. These documents
include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K, as well as proxy statements.
BancorpSouth has supplied all information contained or incorporated by
reference in this Prospectus Supplement/Proxy Statement relating to BancorpSouth
and BancorpSouth Bank.
Pinnacle has supplied all information contained in this Prospectus
Supplement/Proxy Statement relating to Pinnacle and its subsidiaries.
You can obtain copies of the documents incorporated by reference in
this Prospectus Supplement/Proxy Statement with respect to BancorpSouth without
charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference as an exhibit in this Prospectus
Supplement/Proxy Statement, by requesting them in writing or by telephone from
BancorpSouth at the following:
BancorpSouth, Inc.
One Mississippi Plaza
Tupelo, Mississippi 38804
(662) 680-2000
Attention: Cathy S. Freeman, Secretary
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM BANCORPSOUTH, PLEASE DO SO
BY FEBRUARY 21, 2002 TO RECEIVE THEM BEFORE THE SPECIAL MEETING. You can also
obtain copies of these documents from the SEC through the SEC's Internet world
wide web site or at the SEC's address described in this section above.
You should rely only on the information contained in or incorporated by
reference in this Prospectus Supplement/Proxy Statement in considering how to
vote your shares. Neither BancorpSouth nor Pinnacle has authorized anyone to
provide you with information that is different from the information in this
document. This Prospectus Supplement/Proxy Statement is dated
77
January ___, 2002. You should not assume that the information contained in this
document is accurate as of any date other than that date. Neither the mailing of
this Prospectus Supplement/Proxy Statement nor the issuance of BancorpSouth
common stock in the merger shall create any implication to the contrary.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This Prospectus Supplement/Proxy Statement contains certain
forward-looking statements about the financial condition, results of operations
and business of BancorpSouth and Pinnacle and about the combined companies
following the merger. These statements concern the cost savings, revenue
enhancements and other advantages the companies expect to obtain from the
merger, the anticipated impact of the merger on BancorpSouth's financial
performance, tax consequences of the merger, receipt of regulatory approvals and
market prices of BancorpSouth common stock. These statements appear in several
sections of this Prospectus Supplement/Proxy Statement, including "SUMMARY" and
"BancorpSouth's Reasons for the Merger." You should carefully read other parts
of this Prospectus Supplement/Proxy Statement, and the documents which are
incorporated by reference, for other factors which could affect BancorpSouth's
or Pinnacle's operations in the future. In particular, Pinnacle Management's
Discussion and Analysis of Financial Condition and Results of Operations
includes discussions of factors affecting Pinnacle's operations. Also, the
forward-looking statements generally include any of the words "believes,"
"expects," "anticipates," "intends," "estimates," "should," "will" or "plans" or
similar expressions.
Forward-looking statements are not guarantees of future performance.
They involve risks, uncertainties and assumptions. The future results and
shareholder values of BancorpSouth and Pinnacle, and of the combined companies,
may differ materially from those expressed in these forward-looking statements.
Many of the factors that could influence or determine actual results are
unpredictable and not within the control of BancorpSouth or Pinnacle. In
addition, neither BancorpSouth nor Pinnacle intends to, nor are they obligated
to, update these forward-looking statements after this Prospectus
Supplement/Proxy Statement is distributed, even if new information, future
events or other circumstances have made them incorrect or misleading as of any
future date. For all of these statements, BancorpSouth and Pinnacle claim the
protection of the safe harbor for forward-looking statements provided in Section
27A of the Securities Act and Section 21E of the Securities Exchange Act.
Factors that may cause actual results to differ materially from those
contemplated by these forward-looking statements include, among others, the
following possibilities:
- Cost savings the companies expect from the merger might not be
fully realized or realized within the time frame the companies
anticipate;
- Revenues following the merger may be lower than expected;
- Inability to manage growth and effectively serve an expanding
customer and market base;
- Loss of deposits, employees, customers or revenues following
the merger may be greater than anticipated;
- Competitive pressure among financial services providers in the
region of the United States in which we operate or in the
financial services industry generally may increase
significantly;
- Costs or difficulties related to regulatory requirements
involved in combining the companies, including the subsidiary
banks, may be greater than expected;
78
- Interest rates may change in such a way as to reduce the
companies' margins;
- General economic or monetary conditions, either nationally or
regionally, may be less favorable than expected, resulting in
a deterioration in credit quality or a diminished demand for
the companies' services and products;
- Changes in laws or government rules, or the way in which
courts interpret these laws or rules, may adversely affect the
companies' businesses; and
- Business conditions, inflation or securities markets may
undergo significant change.
LEGAL MATTERS
Riley, Ford, Caldwell & Cork, P.A., Tupelo, Mississippi, counsel to
BancorpSouth, will pass upon the validity of the shares of BancorpSouth common
stock to be issued in the merger. Waller Lansden Dortch & Davis, PLLC,
Nashville, Tennessee, special counsel to BancorpSouth, will pass upon certain
legal matters concerning the merger on behalf of BancorpSouth. Kutak Rock LLP,
Little Rock, Arkansas, counsel to Pinnacle, will pass upon certain legal matters
concerning the merger on behalf of Pinnacle.
EXPERTS
The consolidated financial statements of BancorpSouth as of December
31, 2000 and 1999, and for each of the years in the three-year period ended
December 31, 2000, have been incorporated by reference in this Prospectus
Supplement/Proxy Statement and in the registration statement on Form S-4 in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of such firm as experts
in accounting and auditing.
79
INDEX TO PINNACLE UNAUDITED FINANCIAL STATEMENTS
Page
----
Consolidated Balance Sheet at December 31, 2001 and 2000........................... F-1
Consolidated Income Statement for the Years Ended December 31, 2001 and 2000....... F-3
Consolidated Statement of Shareholders' Equity for the Years Ended December
31, 2001 and 2000.................................................................. F-4
The following tables present unaudited historical consolidated
financial data for Pinnacle. The financial statements presented below have been
prepared by Pinnacle and have not been audited or reviewed by outside
accountants. Because the Pinnacle financial statements have not been prepared in
accordance with accounting principles generally accepted in the United States of
America (as the statement of cash flows and footnotes are not included), there
can be no assurance that they fairly present the financial position or
historical results of operations of Pinnacle as of the dates or for the periods
indicated.
PINNACLE BANCSHARES, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2001 AND 2000
(UNAUDITED)
ASSETS 2001 2000
------------- -------------
Cash and due from banks .............................. $ 5,039,325 $ 2,968,042
Interest bearing deposits in other banks ............. 34,545 50,016
Investment securities:
U.S. government agency securities .................. 3,497,776 13,981,673
Other securities ................................... 1,390,300 1,077,950
Unrealized (loss) on securities .................... 0 (89,918)
------------- -------------
Total investment securities .......................... 4,888,076 14,969,705
Total loans .......................................... 122,803,838 95,931,596
Less: allowance for loan losses ...................... (1,228,407) (1,079,421)
------------- -------------
Net loans ............................................ 121,575,431 94,852,175
Premises and equipment ............................... 2,227,388 890,052
Accrued interest receivable .......................... 1,058,899 935,434
Other assets ......................................... 394,052 400,411
------------- -------------
TOTAL ASSETS ......................................... $ 135,217,716 $ 115,065,865
============= =============
F-1
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest bearing deposits ........................................ $ 10,637,492 $ 7,541,840
Interest bearing demand .............................................. 7,532,151 6,146,317
Money market ......................................................... 45,020,246 30,355,772
Savings deposits ..................................................... 881,520 649,608
Time deposits under $100,000 ......................................... 16,385,539 20,358,402
Time deposits $100,000 and over ...................................... 21,313,077 22,077,263
------------- -------------
Total deposits ....................................................... 101,770,025 87,129,202
Federal funds purchased and securities
Sold under agreements to repurchase ............................... 4,120,530 9,157,799
Federal home loan bank advances ...................................... 19,500,000 10,000,000
Accrued interest payable ............................................. 174,560 393,076
Other liabilities .................................................... 716,178 428,339
------------- -------------
Total liabilities .................................................... 126,281,293 107,108,416
Shareholders equity:
Common stock ....................................................... 180,520 179,880
Additional paid-in-capital ......................................... 7,221,840 7,194,960
Retained earnings .................................................. 2,083,063 638,097
Unrealized gain (loss) on securities, net of deferred taxes ........ 0 (55,488)
Treasury stock at cost ............................................. (549,000) 0
------------- -------------
Total shareholders' equity ........................................... 8,936,423 7,957,449
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........................... $ 135,217,716 $ 115,065,865
============= =============
F-2
PINNACLE BANCSHARES, INC.
CONSOLIDATED INCOME STATEMENT
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(UNAUDITED)
2001 2000
------------- -------------
Interest income:
Loans, including fees ................................ $ 8,872,712 $ 7,258,348
Investment securities:
U. S. Agencies ....................................... 310,669 852,586
Other ................................................ 56,376 72,726
------------- -------------
Total interest income on investments ................. 367,045 925,312
Interest income - short term investments ............. 54,889 63,267
------------- -------------
Total interest income .................................. 9,294,646 8,246,927
Interest expense:
Deposits ............................................. 3,833,838 3,955,162
Other ................................................ 1,073,496 951,662
------------- -------------
Total interest expense ................................. 4,907,334 4,906,824
------------- -------------
Net interest income .................................... 4,387,312 3,340,103
Provision for loan losses .............................. 274,996 288,000
------------- -------------
Net interest income after provision for loan losses .... 4,112,316 3,052,103
Other income:
Investment securities (loss) ........................... -- (7,800)
------------- -------------
Service charges on deposit accounts .................. 307,525 172,799
Fees, commissions and other .......................... 1,340,986 405,863
------------- -------------
Total other income ..................................... 1,648,511 570,862
Other expenses:
Salaries and employee benefits ....................... 2,314,529 1,504,219
Occupancy ............................................ 140,074 121,942
Depreciation ......................................... 161,961 124,442
Data processing ...................................... 169,545 167,245
Insurance ............................................ 75,792 38,606
Professional fees .................................... 161,378 87,414
Advertising .......................................... 66,317 117,542
Amortization ......................................... 4,008 3,160
Directors fees ....................................... 33,600 32,000
Dues and memberships ................................. 40,880 19,490
Postage .............................................. 37,291 24,543
Supplies ............................................. 45,380 39,651
Equipment ............................................ 43,270 25,019
Miscellaneous taxes .................................. 10,982 9,269
Telephone ............................................ 70,187 52,336
Other real estate expense ............................ 7,733 1,994
Teller differences ................................... (2,768) 561
Other ................................................ 96,421 82,194
------------- -------------
Total other expense .................................... 3,476,580 2,451,627
Income before income taxes ............................. 2,284,247 1,171,338
Applicable income taxes ................................ 839,281 395,987
------------- -------------
NET INCOME ............................................. $ 1,444,966 $ 775,351
============= =============
F-3
PINNACLE BANCSHARES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(UNAUDITED)
Unrealized
Common Additional Gain
Stock Paid-in- Retained (Loss) on Treasury
Shares Amount Capital Earnings Securities Stock Total
------ -------- ---------- ---------- ---------- --------- ----------
Balance December 31, 1999 ............ 17,988 $179,880 $7,194,960 $ (137,254) $(167,998) $ 0 $7,069,588
Net income ........................... 775,351 775,351
Net unrealized change in investment
securities, net of income tax effect
of ($69,811) ...................... 112,510 112,510
------ -------- ---------- ---------- --------- --------- ----------
Balance December 31, 2000 ............ 17,988 179,880 7,194,960 638,097 (55,488) 0 7,957,449
Net income ........................... 1,444,966 1,444,966
Common stock issued .................. 64 640 26,880 27,520
Treasury stock purchased ............. (915) (549,000) (549,000)
Net unrealized change in investment
securities, net of income tax effect
of $34,429 .......................... 55,488 55,488
------ -------- ---------- ---------- --------- --------- ----------
Balance December 31, 2001 ............ 17,137 $180,520 $7,221,840 $2,083,063 $ 0 $(549,000) $8,936,423
====== ======== ========== ========== ========= ========= ==========
F-4
PROSPECTUS
15,000,000 SHARES
BANCORPSOUTH
COMMON STOCK
---------------
This prospectus relates to 15,000,000 shares of BancorpSouth common
stock that may be offered and issued from time to time, or have previously been
issued, in connection with acquisitions of other businesses, assets or
securities.
The amount and type of consideration we will offer and the other
specific terms of each acquisition will be determined by negotiations with the
owners or controlling persons of the businesses, assets or securities to be
acquired. We may structure business acquisitions in a variety of ways, including
acquiring stock, other equity interests or assets of the acquired business or
merging the acquired business with us or one of our subsidiaries. We may be
required to provide further information by means of a post-effective amendment
to the registration statement of which this prospectus is a part or a supplement
to this document once we know the actual information concerning a specific
acquisition. This document, unless amended or supplemented as previously
described, may only be used in connection with the issuance of our common stock
in connection with combinations, mergers or acquisitions which would be exempt
from registration but for the possibility of integration with other
transactions.
We do not expect to receive any cash proceeds from the sale of shares
of our common stock issued pursuant to this prospectus. We are paying all
expenses of this offering. We do not expect to pay any underwriting discounts or
commissions in connection with issuing these shares, although we may pay
finder's fees in specific acquisitions. Any person receiving a finder's fee may
be deemed an underwriter within the meaning of the Securities Act of 1933.
Our common stock is listed on the New York Stock Exchange under the
symbol "BXS."
---------------
Neither the Securities and Exchange Commission nor any state securities
commissioner has approved or disapproved of the shares of BancorpSouth
common stock to be issued under this prospectus or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
---------------
SHARES OF BANCORPSOUTH COMMON STOCK ARE NOT SAVINGS OR DEPOSIT ACCOUNTS
OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION, AND ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
---------------
The date of this prospectus is January ___, 2002.
P-1
TABLE OF CONTENTS
Page
----
BancorpSouth........................................... 1
Where You Can Find More Information.................... 1
Legal Matters.......................................... 3
Experts................................................ 3
THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL
INFORMATION THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS PROSPECTUS. THIS
INFORMATION IS AVAILABLE WITHOUT CHARGE TO SECURITY HOLDERS UPON ORAL OR WRITTEN
REQUEST TO CATHY S. FREEMAN, VICE PRESIDENT AND CORPORATE SECRETARY OF
BANCORPSOUTH, INC., ONE MISSISSIPPI PLAZA, TUPELO, MISSISSIPPI, 38804, (662)
680-2000. TO ENSURE TIMELY DELIVERY OF THE REQUESTED INFORMATION, YOU SHOULD
MAKE YOUR REQUEST BY FEBRUARY 21, 2002, WHICH IS FIVE BUSINESS DAYS BEFORE THE
DATE UPON WHICH YOU MUST MAKE THE INVESTMENT DECISION.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents that are and will be incorporated
into this prospectus, as well as amendments and supplements to this prospectus,
contain forward-looking statements that involve risks and uncertainties. The
outcome of the events described in these forward-looking statements is subject
to risks and actual results could differ materially from the events predicted in
the applicable statements. These statements relate to our future plans,
objectives, expectations and intentions. These statements may be identified by
the use of words like "anticipates," "believes," "estimates," "expects," "may,"
"might," "will," "would," "should," "seeks," "pro forma," or "intends," and
similar expressions.
We caution you not to place undue reliance on forward-looking
statements since actual results could differ materially from those discussed in
these statements due to a variety of factors, many of which are beyond our
control. Forward-looking statements speak only as of the date of the document in
which they are made, and we might not update them to reflect changes that occur
after that date. For a discussion of some of the factors that could cause actual
results to differ from our forward-looking statements, refer to our reports
filed with the Securities and Exchange Commission, including our Annual Report
on Form 10-K for the year ended December 31, 2000 in the section captioned "Risk
Factors," which is incorporated by reference into this prospectus. Refer also to
the documents we file with the SEC after the date of this prospectus, as those
documents might update information contained in previously filed documents or
provide additional information. See "Where You Can Find More Information" on
page 1.
P-2
BANCORPSOUTH
BancorpSouth, Inc. is a Mississippi corporation and a bank holding
company with commercial banking and financial services operations in
Mississippi, Tennessee, Alabama, Arkansas, Texas and Louisiana. Our principal
subsidiary is BancorpSouth Bank. We conduct a general commercial banking and
trust business through BancorpSouth Bank, which has its principal office in
Tupelo, Lee County, Mississippi, and operates offices in Mississippi, Tennessee,
Alabama, Arkansas, Texas and Louisiana. BancorpSouth Bank has grown through the
acquisition of other banks, the purchase of assets from federal regulators and
through the opening of new branches and offices.
Our lending activities include both commercial and consumer loans. Loan
originations are derived from a number of sources including real estate broker
referrals, mortgage loan companies, direct solicitation by our loan officers,
existing savers and borrowers, builders, attorneys, walk-in customers and, in
some instances, other lenders. We have established disciplined and systematic
procedures for approving and monitoring loans that vary depending on the size
and nature of the loan.
We offer a variety of services through the trust department of
BancorpSouth Bank, including personal trust and estate services, certain
employee benefit accounts and plans, including individual retirement accounts,
and limited corporate trust functions.
We provide, through our subsidiaries, a range of financial services to
individuals and small-to-medium size businesses. BancorpSouth Bank operates
investment services, consumer finance, credit life insurance and insurance
agency subsidiaries which engage in investment brokerage services, consumer
lending, credit life insurance sales and sales of other insurance products.
Our principal office is located at One Mississippi Plaza, Tupelo,
Mississippi 38804 and our telephone number is (662) 680-2000.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC under the Securities Act of 1933 a
registration statement on Form S-4 (Registration No. 333-28081) that registers
the distribution of our shares to be offered in connection with this prospectus.
The registration statement, including the attached exhibits and schedules, and
any amendments or supplements to the registration statement, if any, contain
additional relevant information about us and our common stock. The rules and
regulations of the SEC allow us to omit certain information included in the
registration statement from this prospectus.
In addition, we file reports, proxy statements and other information
with the SEC under the Securities Exchange Act of 1934. You may read and copy
this information at the following locations of the SEC:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. Woolworth Center Citicorp Center
Room 1024 233 Broadway 500 West Madison Street
Washington, D.C. 20549 New York, New York 10279 Suite 1400
Chicago, Illinois 60661-2511
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. You may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330.
P-3
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, like us, which
file electronically with the SEC. The address of that site is
http://www.sec.gov.
You can also inspect reports, proxy statements and other information
about us at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
The SEC allows us to "incorporate by reference" information into this
prospectus from documents that they we previously filed with the SEC. This means
that we can disclose important information to you by referring you to another
document filed separately with the SEC. These documents contain important
information about us and our financial condition, operations and business. The
information incorporated by reference is considered to be a part of this
prospectus, except for any information that is superseded by other information
contained directly in this prospectus or in documents filed by us with the SEC
after the date of this prospectus. Information incorporated from another
document is considered to have been disclosed to you whether or not you chose to
read the document.
This prospectus incorporates by reference the following documents:
1. Our Annual Report on Form 10-K for the year ended December 31,
2000;
2. Our Quarterly Report on Form 10-Q for the three months ended
March 31, 2001;
3. Our Quarterly Report on Form 10-Q for the three months ended
June 30, 2001;
4. Our Quarterly Report on Form 10-Q for the three months ended
September 30, 2001;
5. Our Current Report on Form 8-K dated March 28, 2001;
6. Our Current Report on Form 8-K dated January 18, 2002;
7. Our Annual Report for the BancorpSouth, Inc. 401(k) Amended
and Restated Salary Deferral-Profit Sharing Employee Stock
Ownership Plan on Form 11-K for the year ended December 31,
2000;
8. The description of our common stock contained in a
Registration Statement on Form 8-A, dated May 14, 1997;
9. The description of our common stock purchase rights contained
in a Registration Statement on Form 8-A, dated May 14, 1997;
and
10. The description of amendments to our common stock purchase
rights contained in an amended Registration Statement on Form
8-A/A, dated as of March 28, 2001.
We incorporate by reference additional documents that we may file with
the SEC after the date of this prospectus. These documents include, but are not
limited to, periodic reports, such as Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy
statements.
You can obtain copies of the documents incorporated by reference in
this prospectus without charge, excluding any exhibits to those documents unless
the exhibit is specifically incorporated by
P-4
reference as an exhibit in this prospectus, by requesting them in writing or by
telephone from Cathy S. Freeman, Vice President and Corporate Secretary of
BancorpSouth, Inc., at One Mississippi Plaza, Tupelo, Mississippi 38804, (662)
680-2000. To ensure timely delivery of the requested information, you should
make your request at least five business days before the date upon which you
must make your final investment decision. You can also obtain copies of these
documents from the SEC through the SEC's Internet world wide web site or at the
SEC's address described in this section above.
You should rely only on the information contained in or incorporated by
reference in this prospectus in making your final investment decision. We have
not authorized anyone to provide you with information that is different from the
information in this document. This prospectus is dated January __, 2002. You
should not assume that the information contained in this document is accurate as
of any date other than that date. Neither the mailing of this prospectus nor the
issuance of our common stock in connection with this prospectus shall create any
implication to the contrary.
LEGAL MATTERS
Riley, Ford, Caldwell & Cork, P.A., Tupelo, Mississippi, counsel to
BancorpSouth, will pass upon the validity of the shares of BancorpSouth common
stock to be offered in connection with this prospectus. Waller Lansden Dortch &
Davis, A Professional Limited Liability Company, Nashville, Tennessee, special
counsel to BancorpSouth, will pass upon certain legal matters concerning the
shares of BancorpSouth common stock to be offered in connection with this
prospectus.
EXPERTS
The consolidated financial statements of BancorpSouth, as of December
31, 2000 and 1999, and for each of the years in the three-year period ended
December 31, 2000, have been incorporated by reference in this prospectus and in
the registration statement on Form S-4 in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of KPMG LLP as experts in accounting and auditing.
P-5
ANNEX A
================================================================================
AGREEMENT AND PLAN OF MERGER
BETWEEN
BANCORPSOUTH, INC.
AND
PINNACLE BANCSHARES, INC.
DATED AS OF NOVEMBER 14, 2001
================================================================================
TABLE OF CONTENTS
PAGE
----
ARTICLE I. THE MERGER....................................................... A-1
1.1. The Merger....................................................... A-1
1.2. Effective Time................................................... A-2
1.3. Effects of the Merger............................................ A-2
1.4. Conversion of Pinnacle Common Stock.............................. A-2
1.5. Stock Options.................................................... A-5
1.6. BancorpSouth Common Stock........................................ A-5
1.7. Articles of Incorporation........................................ A-6
1.8. Bylaws........................................................... A-6
1.9. Directors and Officers........................................... A-6
1.10. Tax Consequences................................................. A-6
ARTICLE II. EXCHANGE OF SHARES............................................... A-6
2.1. BancorpSouth to Make Shares and Cash Available................... A-6
2.2. Exchange of Shares; Payment of Cash Consideration................ A-6
ARTICLE III. DISCLOSURE SCHEDULES; STANDARDS FOR
REPRESENTATIONS AND WARRANTIES................................... A-9
3.1. Disclosure Schedules............................................. A-9
3.2. Standards........................................................ A-9
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PINNACLE...................... A-10
4.1. Corporate Organization.......................................... A-10
4.2. Capitalization.................................................. A-11
4.3. Authority; No Violation......................................... A-12
4.4. Consents and Approvals.......................................... A-13
4.5. Reports......................................................... A-13
4.6. Financial Statements............................................ A-13
4.7. Broker's Fees................................................... A-14
4.8. Absence of Certain Changes or Events............................ A-14
4.9. Legal Proceedings............................................... A-14
4.10. Taxes........................................................... A-15
4.11. Employees....................................................... A-15
4.12. Pinnacle Information............................................ A-17
4.13. Compliance with Applicable Law.................................. A-18
4.14. Certain Contracts............................................... A-18
4.15. Agreements with Regulatory Agencies............................. A-18
4.16. Business Combination Provision; Takeover Laws................... A-18
4.17. Environmental Matters........................................... A-19
4.18. Approvals....................................................... A-19
4.19. Insurance....................................................... A-19
4.20. Loan Portfolio.................................................. A-20
4.21. Property........................................................ A-20
4.22. Reorganization.................................................. A-20
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF
BANCORPSOUTH.................................................... A-20
5.1. Corporate Organization.......................................... A-21
5.2. Capitalization.................................................. A-21
i
PAGE
----
5.3. Authority; No Violation......................................... A-22
5.4. Consents and Approvals.......................................... A-22
5.5. Reports......................................................... A-23
5.6. Reorganization.................................................. A-23
5.7. Financial Statements; SEC Reports............................... A-23
5.8. Absence of Certain Changes or Events............................ A-24
5.9. Legal Proceedings............................................... A-24
5.10. Buyer Information............................................... A-24
5.11 Compliance with Applicable Law.................................. A-24
5.12 Approvals....................................................... A-24
ARTICLE VI. COVENANTS RELATING TO CONDUCT OF BUSINESS....................... A-24
6.1. Covenants of Pinnacle........................................... A-24
6.2. Covenants of BancorpSouth....................................... A-27
6.3. Mutual Covenant................................................. A-27
ARTICLE VII. ADDITIONAL AGREEMENTS........................................... A-27
7.1. Regulatory Matters.............................................. A-27
7.2. Access to Information........................................... A-28
7.3. Shareholder Meeting............................................. A-31
7.4. Legal Conditions to Merger...................................... A-31
7.5. Affiliates...................................................... A-31
7.6. NYSE Listing.................................................... A-31
7.7. Employee Benefit Plans; Existing Agreements..................... A-31
7.8. Indemnification of Pinnacle Officers and Directors.............. A-32
7.9. Additional Agreements........................................... A-33
7.10. Coordination of Dividends....................................... A-34
7.11. Reasonable Best Efforts......................................... A-34
7.12. Tax-Free Qualification.......................................... A-34
ARTICLE VIII. CONDITIONS PRECEDENT............................................ A-34
8.1. Conditions to Each Party's Obligation to Effect the Merger...... A-34
8.2. Conditions to Obligations of BancorpSouth....................... A-35
8.3. Conditions to Obligations of Pinnacle........................... A-35
ARTICLE IX. TERMINATION AND AMENDMENT....................................... A-36
9.1. Termination..................................................... A-36
9.2. Effect of Termination........................................... A-37
9.3. Amendment....................................................... A-37
9.4. Extension; Waiver............................................... A-37
ARTICLE X. GENERAL PROVISIONS.............................................. A-37
10.1. Closing......................................................... A-37
10.2. Nonsurvival of Representations, Warranties and Agreements....... A-38
10.3. Expenses........................................................ A-38
10.4. Notices......................................................... A-38
10.5. Interpretation.................................................. A-38
10.6. Defined Terms................................................... A-39
10.7. Counterparts.................................................... A-39
10.8. Entire Agreement................................................ A-39
10.9. Governing Law................................................... A-39
ii
PAGE
----
10.10. Enforcement of Agreement........................................ A-40
10.11. Severability.................................................... A-40
10.12. Publicity....................................................... A-40
10.13. Assignment; Third Party Beneficiaries........................... A-40
iii
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of November 14, 2001
("Agreement"), between BANCORPSOUTH, INC., a Mississippi corporation
("BancorpSouth"), and PINNACLE BANCSHARES, INC., an Arkansas corporation
("Pinnacle," and collectively with BancorpSouth, the "Holding Companies").
RECITALS:
WHEREAS, BancorpSouth is the parent corporation of BancorpSouth Bank, a
Mississippi banking corporation ("BancorpSouth Bank");
WHEREAS, Pinnacle is the sole shareholder of Pinnacle Bank, an Arkansas
banking corporation ("Pinnacle Bank");
WHEREAS, BancorpSouth and Pinnacle have determined that it is in the
best interests of their respective companies and their shareholders to
consummate the business combination transactions provided for herein in which
(i) Pinnacle will merge with and into BancorpSouth (the "Holding Company
Merger") and (ii) Pinnacle Bank will merge with and into BancorpSouth Bank (the
"Bank Merger"), each subject to the terms and conditions set forth herein (the
Holding Company Merger and the Bank Merger, collectively, the "Merger");
WHEREAS, the parties intend that the Merger be treated as a
reorganization under the provisions of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the rules and regulations promulgated
thereunder; and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I. THE MERGER
1.1. The Merger.
(a) Subject to the terms and conditions of this Agreement, in
accordance with the Mississippi Business Corporation Act (the "MBCA") and the
Arkansas Business Corporation Act of 1987 (the "ABCA"), at the Effective Time
(as defined in Section 1.2), Pinnacle shall merge with and into BancorpSouth.
BancorpSouth shall be the surviving corporation (hereinafter sometimes called
the "Surviving Corporation") in the Holding Company Merger, and shall continue
its corporate existence under the laws of the State of Mississippi. The name of
the Surviving Corporation shall continue to be "BancorpSouth, Inc." Upon
consummation of the Holding Company Merger, the separate corporate existence of
Pinnacle shall terminate.
(b) Subject to the terms and conditions of this Agreement, in
accordance with the Mississippi Banking Act (the "MBA") and the Arkansas Banking
Code of 1997 (the "ABA"), as applicable, at the Effective Time, Pinnacle Bank
shall merge with and into BancorpSouth Bank. BancorpSouth Bank shall be the
surviving banking corporation (hereinafter sometimes called the "Surviving
Bank") in the Bank Merger, and shall continue its corporate existence under the
laws of the State of Mississippi. The name of the Surviving Bank shall continue
to be "BancorpSouth Bank."
A-1
Upon consummation of the Bank Merger, the separate corporate existence of
Pinnacle Bank shall terminate.
1.2. Effective Time.
(a) The Holding Company Merger shall become effective as set forth in
the articles of merger (the "Holding Company Articles of Merger") which shall be
filed on the Closing Date (as defined in Section 10.1) with the Secretary of
State of the State of Mississippi (the "Mississippi Secretary") and the
Secretary of State of the State of Arkansas (the "Arkansas Secretary") with
respect to the Holding Company Merger.
(b) The Bank Merger shall become effective as set forth in the articles
of merger (the "Bank Articles of Merger," and together with the Holding Company
Articles of Merger, the "Articles of Merger") which shall be filed on the
Closing Date (as defined in Section 10.1) with the Mississippi Department of
Banking and Consumer Finance (the "Mississippi Department"), the Arkansas State
Bank Department (the "Arkansas Department") and the Arkansas Secretary with
respect to the Bank Merger, but shall occur immediately after the Holding
Company Merger.
(c) The term "Effective Time" shall be the date and time when the
Merger becomes effective, as set forth in the Articles of Merger.
1.3. Effects of the Merger.
(a) At and after the Effective Time, the Holding Company Merger shall
have the effects set forth in Section 79-4-11.06 of the MBCA and Section
4-27-1106 of the ABCA.
(b) At and after the Effective Time, the Bank Merger shall have the
effects set forth in, as applicable, Section 81-5-85 of the MBA and Section
23-48-604 of the ABA.
1.4. Conversion of Pinnacle Common Stock.
(a) At the Effective Time, subject to Section 2.2(e) hereof, each share
of the common stock, par value $10.00 per share, of Pinnacle (the "Pinnacle
Common Stock") issued and outstanding immediately prior to the Effective Time
(other than Pinnacle Dissenting Shares as defined in this Section below and
other than shares of Pinnacle Common Stock held directly or indirectly by
BancorpSouth or Pinnacle or any of their respective Subsidiaries as defined in
Section 3.2 hereof (as adjusted below), except for Trust Account Shares and DPC
shares as such terms are defined in this Section below), shall, by virtue of the
Holding Company Merger, automatically and without any action on the part of the
holder thereof, become and be converted into, at the election of the holder,
either (i) the right to receive $1,134.10 in cash, without interest (the "Cash
Consideration," with such election referred to as a "Cash Election"), (ii) the
right to receive a number of shares of the common stock, par value $2.50 per
share, of BancorpSouth ("BancorpSouth Common Stock"), together with the number
of BancorpSouth Rights (as defined in Section 5.2 hereof) associated therewith
equal to the Exchange Ratio (as defined below) (the "Stock Consideration", with
such election referred to as a "Stock Election") or (iii) a combination of both
cash and shares of BancorpSouth Common Stock (with such election referred to as
a "Mixed Election"). Shares of Pinnacle Common Stock as to which no election has
been made are referred to herein as "No Election Shares" and shall receive the
mix of Merger Consideration specified in section (c)(iv) below. For purposes of
this Agreement, Cash Consideration, Stock Consideration and any combination
thereof shall be collectively referred to herein as "Merger Consideration."
Shares of Pinnacle Common Stock as to which a Cash Election has been made
(including pursuant to a Mixed Election) are referred to herein as "Cash
Election Shares." Shares of Pinnacle Common Stock as to which a Stock Election
has been made (including pursuant to a Mixed Election) are referred to herein as
"Stock Election Shares." All Pinnacle
A-2
Dissenting Shares will be deemed Cash Election Shares for purposes of
determining the Cash Consideration available for distribution to other
shareholders.
(b) For purposes of this Agreement, the "Exchange Ratio" shall be
equal (rounded to the nearest ten-thousandth) to (x) 85.8516, if the Average
BancorpSouth Common Stock Price is less than or equal to $13.209, (y) 63.4639,
if the Average BancorpSouth Common Stock Price is greater than or equal to
$17.871, or (z) if the Average BancorpSouth Common Stock Price is between
$13.209 and $17.871, the result obtained by dividing $1,134.10 by the Average
BancorpSouth Common Stock Price. The "Average BancorpSouth Common Stock Price"
means the average of the closing price per share of BancorpSouth Common Stock on
the New York Stock Exchange (the "NYSE") at the end of the regular session as
reported on the Consolidated Tape, Network A, for the ten consecutive trading
days ending on the fifth trading day immediately preceding the Effective Time.
(c) (i) In the event that the sum of (x) the number of Cash Election
Shares plus (y) 49.0% of No Election Shares exceeds (z) 49.0% of the issued and
outstanding shares of Pinnacle Common Stock, then the holders of Cash Election
Shares will receive a combination of cash and shares of BancorpSouth Common
Stock to be determined as follows: (A) the number of Cash Election Shares which
shall be converted into the right to receive the Cash Consideration shall equal
the amount obtained by multiplying (I) the number of shares of Pinnacle Common
Stock covered by such Cash Election by (II) a fraction of which the numerator
shall be the cash required to be made available by BancorpSouth (pursuant to
clause (iv) below) and the denominator of which shall be $1,134.10 multiplied by
the number of Cash Election Shares; and (B) the balance of such Cash Election
Shares shall be converted into the right to receive Stock Consideration.
(ii) In the event that the sum of (x) the number of Stock Election
Shares plus (y) 51.0% of No Election Shares exceeds (z) 51.0% of the issued and
outstanding shares of Pinnacle Common Stock, then the holders of Stock Election
Shares will receive a combination of cash and shares of BancorpSouth Common
Stock to be determined as follows: (A) the number of Stock Election Shares which
shall be converted into the right to receive the Stock Consideration shall equal
the amount obtained by multiplying (I) the number of shares of Pinnacle Common
Stock covered by such Stock Election by (II) a fraction of which the numerator
shall be the number of shares of BancorpSouth Common Stock required to be made
available by BancorpSouth (pursuant to clause (iv) below) and the denominator of
which shall be the Stock Consideration multiplied by the number of Stock
Election Shares; and (B) the balance of such Stock Election Shares shall be
converted into the right to receive Cash Consideration.
(iii) In the event neither of the foregoing clauses (i) or (ii) is
applicable, each holder of shares of Pinnacle Common Stock (A) that makes a
Stock Election will receive the Stock Consideration, (B) that makes a Cash
Election will receive the Cash Consideration or (C) that makes a Mixed Election
will receive the combination of BancorpSouth Common Stock and cash set forth in
such election.
(iv) For purposes of this Section, the amount of cash required to
be made available by BancorpSouth shall be equal to the difference between (A)
the amount obtained by multiplying (I) $1,134.10 by (II) 49% of the number of
outstanding shares of Pinnacle Common Stock minus (B) the amount of Cash
Consideration attributable to the Pinnacle Dissenting Shares, minus (C) the
amount of Cash Consideration required to be paid to No Election Shares. For
purposes of this Section, the number of shares of BancorpSouth Common Stock
required to be made available by BancorpSouth shall be equal to the difference
between (A) the number of shares obtained by multiplying (I) the Exchange Ratio
by (II) 51% of the number of outstanding shares of Pinnacle Common Stock minus
(B) the amount of Stock Consideration required to be paid to No Election Shares.
Regardless of the applicability of clauses (i), (ii) or (iii) above, each No
Election Share shall
A-3
be converted in the Merger into the right to receive 51% Stock Consideration and
49% Cash Consideration.
(d) Notwithstanding any other provision contained in this Agreement, it
is intended that the Merger will qualify as a reorganization under the
provisions of Section 368(a) of the Code and, in order that the Merger will not
fail to satisfy the continuity of interest requirements under applicable federal
income tax principles relating to reorganizations under Section 368(a) of the
Code, as of the Effective Time, BancorpSouth may, but shall not be obligated to,
increase the Stock Consideration and decrease the Cash Consideration
proportionally (using the Average BancorpSouth Common Stock Price to value the
additional Stock Consideration) so that the Stock Consideration measured at
current fair market value as of the Effective Time will represent at least 45%
of the value of the aggregate Merger Consideration payable to Pinnacle
shareholders at the Effective Time.
(e) Each share of Pinnacle Common Stock converted into BancorpSouth
Common Stock pursuant to this Article I shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each certificate (each a
"Certificate") previously representing any such shares of Pinnacle Common Stock
shall thereafter only represent the right to receive (i) the number of whole
shares of BancorpSouth Common Stock into which such share is convertible
pursuant to Section 1.4(a) and (ii) the cash in lieu of fractional shares into
which the shares of Pinnacle Common Stock represented by such Certificate have
been converted pursuant to Section 1.4(a) and Section 2.2(e) hereof, and (iii)
Cash Consideration pursuant to Section 1.4(a) hereof. Certificates previously
representing shares of Pinnacle Common Stock shall be exchanged for certificates
representing whole shares of BancorpSouth Common Stock and cash in lieu of
fractional shares issued in consideration therefor and Cash Consideration upon
the surrender of such Certificates in accordance with Section 2.2 hereof,
without any interest thereon. If, between the date of this Agreement and the
Effective Time, the shares of BancorpSouth Common Stock shall be changed into a
different number or class of shares by reason of any reclassification,
recapitalization, split-up, combination, exchange of shares or readjustment, or
a stock dividend thereon shall be declared with a record date within said period
(any such event, an "Anti-Dilution Event"), the Exchange Ratio and the Merger
Consideration shall be adjusted to result in the same aggregate consideration
being delivered to Pinnacle's shareholders as would have been received had such
Anti-Dilution Event not occurred.
(f) At the Effective Time, all shares of Pinnacle Common Stock that are
owned directly or indirectly by BancorpSouth or Pinnacle or any of their
respective Subsidiaries, other than shares of Pinnacle Common Stock (i) held
directly or indirectly in trust accounts, managed accounts and the like or
otherwise held in a fiduciary capacity for the benefit of third parties (any
such shares, and shares of BancorpSouth Common Stock which are similarly held,
whether held directly or indirectly by BancorpSouth or Pinnacle, as the case may
be, being referred to herein as "Trust Account Shares") and (ii) held by
BancorpSouth or Pinnacle or any of their respective Subsidiaries in respect of a
debt previously contracted (any such shares of Pinnacle Common Stock, and shares
of BancorpSouth Common Stock which are similarly held, whether held directly or
indirectly by BancorpSouth or Pinnacle, being referred to herein as "DPC
Shares"), shall be canceled and shall cease to exist, and no stock of
BancorpSouth or other consideration shall be delivered in exchange therefor. All
shares of BancorpSouth Common Stock that are owned by Pinnacle or any of its
Subsidiaries (other than Trust Account Shares and DPC Shares) shall become
treasury stock of BancorpSouth.
(g) Notwithstanding anything in this Agreement to the contrary, shares
of Pinnacle Common Stock which are outstanding immediately prior to the
Effective Time and with respect to which dissenters' rights shall have been
properly demanded in accordance with Sections 4-27-1301 et seq. of the ABCA
("Pinnacle Dissenting Shares") shall not be converted into the right to receive,
or be exchangeable for, Merger Consideration or cash in lieu of fractional
shares but, instead, the holders thereof shall be entitled to payment of the
appraised value of such Pinnacle Dissenting Shares in
A-4
accordance with the provisions of Sections 4-27-1301 et seq. of the ABCA;
provided, however, that (i) if any holder of Pinnacle Dissenting Shares shall
subsequently deliver a written withdrawal of his demand for appraisal of such
shares, or (ii) if any holder fails to establish his entitlement to dissenters'
rights as provided in Sections 4-27-1301 et seq. of the ABCA, such holder or
holders (as the case may be) shall forfeit the right to appraisal of such shares
of Pinnacle Common Stock and each of such shares shall thereupon be deemed to
have been converted into the right to receive, and to have become exchangeable
for, as of the Effective Time, Stock Consideration and/or cash in lieu of
fractional shares and/or Cash Consideration, without any interest thereon, as
provided in Sections 1.4(a) and 1.4(c) and Article II hereof.
(h) At the Effective Time, all shares of Pinnacle Bank common stock
shall be canceled and shall cease to exist and no stock of BancorpSouth or
BancorpSouth Bank or other consideration shall be delivered in exchange
therefor.
1.5. Stock Options. At the Effective Time, each option granted by Pinnacle to
purchase shares of Pinnacle Common Stock which is outstanding and unexercised
immediately prior thereto (each, a "Pinnacle Option") shall, by virtue of the
Merger and without any further action by the holder thereof, cease to represent
a right to acquire shares of Pinnacle Common Stock and shall be promptly
replaced by an option (the "New Option") issued under and subject to the
appropriate stock option plan of BancorpSouth to purchase shares of BancorpSouth
Common Stock in an amount and at an exercise price determined as provided below:
(a) The number of shares of BancorpSouth Common Stock to be subject to
the New Option shall be equal to the number of shares of BancorpSouth Common
Stock to which the holder of the Pinnacle Option would have been entitled under
Section 1.4(a) of this Agreement had the Pinnacle Option been exercised in full
immediately prior to the Effective Time and had such holder received only Stock
Consideration in the Merger, provided that any fractional shares of BancorpSouth
Common Stock resulting from such multiplication shall be rounded to the nearest
whole share; and
(b) The exercise price per share of BancorpSouth Common Stock under the
New Option shall be equal to the aggregate exercise price for the shares of
Pinnacle Common Stock otherwise purchasable under the Pinnacle Option divided by
the number of shares of BancorpSouth Common Stock issuable under the New Option
pursuant to Section 1.5(a), provided that any such exercise price which would
otherwise include a fraction of a cent shall be rounded to the nearest whole
cent. The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in section 422 of the Code) shall be and
is intended to be effected in a manner which is consistent with section 424(a)
of the Code and, to the extent it is not so consistent, such section 424(a)
shall override anything to the contrary contained herein. The duration of the
New Option shall be the same as the original option. All New Options shall be
currently exerciseable by the holder thereof to the extent required by the
option agreements for the Pinnacle Options.
(c) At or prior to the Effective Time, BancorpSouth shall take all
corporate action necessary to reserve for issuance a sufficient number of shares
of BancorpSouth Common Stock for delivery upon exercise of the New Options. At
or prior to the Effective Time, BancorpSouth shall take such action as is
necessary to ensure that a registration statement on Form S-8, S-4 or other
applicable form is effective to cover the shares of BancorpSouth Common Stock
subject to the New Options.
1.6. BancorpSouth Common Stock. Except for shares of BancorpSouth Common Stock
owned by Pinnacle or any of its Subsidiaries (other than Trust Account Shares
and DPC Shares), which shall be converted into treasury stock of BancorpSouth as
contemplated by Section 1.4 hereof, the shares
A-5
of BancorpSouth Common Stock issued and outstanding immediately prior to the
Effective Time shall be unaffected by the Merger and such shares shall remain
issued and outstanding.
1.7. Articles of Incorporation. At the Effective Time, the Amended and Restated
Articles of Incorporation of BancorpSouth, as in effect at the Effective Time,
shall be the articles of incorporation of the Surviving Corporation. At the
Effective Time, the Amended and Restated Articles of Association of BancorpSouth
Bank, as in effect at the Effective Time, shall be the articles of association
of the Surviving Bank.
1.8. Bylaws. At the Effective Time, the Bylaws of BancorpSouth, as in effect
immediately prior to the Effective Time, shall be the bylaws of the Surviving
Corporation until thereafter amended in accordance with applicable law and the
articles of incorporation of the Surviving Corporation. At the Effective Time,
the Bylaws of BancorpSouth Bank, as in effect immediately prior to the Effective
Time, shall be the bylaws of the Surviving Bank until thereafter amended in
accordance with applicable law and the articles of association of the Surviving
Bank.
1.9. Directors and Officers. The directors and officers of BancorpSouth
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation, each to hold office in accordance with the articles
of incorporation and bylaws of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified. The directors and
officers of BancorpSouth Bank immediately prior to the Effective Time shall be
the directors and officers of the Surviving Bank, each to hold office in
accordance with the articles of association and bylaws of the Surviving Bank
until their respective successors are duly elected or appointed and qualified.
1.10. Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code and that this
Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
ARTICLE II. EXCHANGE OF SHARES
2.1. BancorpSouth to Make Shares and Cash Available. At or prior to the
Effective Time, BancorpSouth shall deposit, or shall cause to be deposited, with
SunTrust Bank, Atlanta, N.A. or other bank or trust company (the "Exchange
Agent") selected by BancorpSouth and reasonably satisfactory to Pinnacle, for
the benefit of the holders of Certificates, for exchange in accordance with this
Article II, the Cash Consideration, certificates representing the shares of
BancorpSouth Common Stock constituting the Stock Consideration and the cash in
lieu of fractional shares (such cash and certificates for shares of BancorpSouth
Common Stock, together with any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund") to be issued pursuant to
Section 1.4 and paid pursuant to Section 2.2(a) in exchange for outstanding
shares of Pinnacle Common Stock.
2.2. Exchange of Shares; Payment of Cash Consideration.
(a) At the time of the mailing of the Proxy Statement and Prospectus
described in Section 7.1 hereof, BancorpSouth will cause the Exchange Agent to
send to each holder of record of shares of Pinnacle Common Stock on the record
date for the meeting of the stockholders of Pinnacle a letter of transmittal and
cash election form (collectively, the "Election Form") and other appropriate
materials providing for such holder, subject to the provisions of Section 1.4
hereof, to elect to receive (i) Stock Consideration with respect to all of such
holder's shares of Pinnacle Common Stock, (ii) Cash Consideration with respect
to all of such holder's shares of Pinnacle Common Stock, or (iii) Cash
Consideration with respect to some of such holder's shares and the Stock
Consideration with respect to such holder's remaining shares, or to make no
election or indicate that such holder has no preference as to the receipt of the
Cash Consideration or the Stock
A-6
Consideration. As of the Election Deadline (as defined below), any shares of
Pinnacle Common Stock with respect to which there shall not have been such
election by submission to the Exchange Agent of an effective, properly completed
Election Form shall be deemed to be No Election Shares.
(i) Any Cash Election, Stock Election or Mixed Election shall have
been validly made only if the Exchange Agent shall have received by 5:00 p.m.,
Central Time, on the second business day immediately preceding the meeting of
stockholders of Pinnacle described in Section 7.1 hereof (the "Election
Deadline"), an Election Form properly completed. An election by a holder of
shares of Pinnacle Common Stock shall be validly made only if the Exchange Agent
shall have received an Election Form properly completed and executed (with the
signature or signatures thereon guaranteed if required by the Election Form) by
such holder of shares of Pinnacle Common Stock. An Election Form shall be deemed
properly completed only if accompanied by one or more Certificates (or customary
affidavits and, if required by BancorpSouth, indemnification regarding the loss
or destruction of such Certificates or the guaranteed delivery of such
Certificates) representing all shares of Pinnacle Common Stock covered by such
Election Form, together with duly executed transmittal materials included with
the Election Form. BancorpSouth shall have the right to make reasonable
determinations and to establish reasonable procedures (not inconsistent with the
terms of this Agreement) in guiding the Exchange Agent in its determination as
to the validity of Election Forms and of any revision, revocation or withdrawal
thereof.
(ii) Two or more holders of shares of Pinnacle Common Stock who are
determined to constructively own shares owned by each other by virtue of Section
318(a) of the Code and who so certify to BancorpSouth's satisfaction, and any
single holder of shares of Pinnacle Common Stock who holds such shares in two or
more different names and who so certifies to BancorpSouth's satisfaction, may
submit a joint Election Form covering the aggregate shares of Pinnacle Common
Stock owned by all such holders or by such single holder, as the case may be.
For all purposes of this Agreement, each such group of holders which, and each
such single holder who, submits a joint Election Form shall be treated as a
single holder of shares of Pinnacle Common Stock.
(iii) Each holder of record of shares of Pinnacle Common Stock who
holds such shares as nominee, trustee or in other representative capacities
(each, a "Representative") may submit multiple Election Forms, provided that
such Representative certifies that each such Election Form covers all shares of
Pinnacle Common Stock held by that Representative for a particular beneficial
owner.
(iv) Any holder of shares of Pinnacle Common Stock who has made an
election by submitting an Election Form to the Exchange Agent may at any time
prior to the Election Deadline change such holder's election by submitting a
revised Election Form, properly completed and signed, that is received by the
Exchange Agent prior to the Election Deadline. Any holder of shares of Pinnacle
Common Stock may at any time prior to the Election Deadline revoke such holder's
election by written notice to the Exchange Agent received at any time prior to
the Election Deadline.
(b) As soon as practicable after the Election Deadline (the "Allocation
Date"), the Exchange Agent shall effectuate the allocation among the holders of
shares of Pinnacle Common Stock of rights to receive the Stock Consideration,
the Cash Consideration or a combination of both the Stock Consideration and the
Cash Consideration in the Merger in accordance with the terms of this Section.
As more fully set forth in Section 1.4 above, the number of shares of Pinnacle
Common Stock to be converted in the Merger into the right to receive Cash
Consideration may not exceed 49.0% of the outstanding shares of Pinnacle Common
Stock, and the number of shares of Pinnacle Common Stock to be converted in the
Merger into the right to receive Stock Consideration may not exceed 51.0% of the
total number of outstanding shares of Pinnacle Common Stock.
A-7
(c) No dividends or other distributions declared after the Effective
Time with respect to BancorpSouth Common Stock and payable to the holders of
record thereof shall be paid to the holder of any unsurrendered Certificate
until the holder thereof shall surrender such Certificate in accordance with
this Article II. After the surrender of a Certificate in accordance with this
Article II, the record holder thereof shall be entitled to receive any such
dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to shares of BancorpSouth Common
Stock represented by such Certificate.
(d) If any certificate representing shares of BancorpSouth Common Stock
is to be issued in a name other than that in which the Certificate surrendered
in exchange therefor is registered, it shall be a condition of the issuance
thereof that the Certificate so surrendered shall be properly endorsed (or
accompanied by an appropriate instrument of transfer) and otherwise in proper
form for transfer, and that the person requesting such exchange shall pay to the
Exchange Agent in advance any transfer or other taxes required by reason of the
issuance of a certificate representing shares of BancorpSouth Common Stock in
any name other than that of the registered holder of the Certificate
surrendered, or required for any other reason, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(e) After the Effective Time, there shall be no transfers on the stock
transfer books of Pinnacle of the shares of Pinnacle Common Stock which were
issued and outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates representing such shares are presented for transfer
to the Exchange Agent, they shall be canceled and exchanged for certificates
representing shares of BancorpSouth Common Stock as provided in this Article II.
(f) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of BancorpSouth Common
Stock shall be issued upon the surrender for exchange of Certificates, no
dividend or distribution with respect to BancorpSouth Common Stock shall be
payable on or with respect to any fractional share, and such fractional share
interests shall not entitle the owner thereof to vote or to any other rights of
a shareholder of BancorpSouth. In lieu of the issuance of any such fractional
share, BancorpSouth shall pay to each former stockholder of Pinnacle who
otherwise would be entitled to receive a fractional share of BancorpSouth Common
Stock an amount in cash equal to the product of (x) the Average BancorpSouth
Common Stock Price, times (y) the fraction of a share of BancorpSouth Common
Stock which such holder would otherwise be entitled to receive pursuant to
Article I hereof.
(g) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of Pinnacle for 12 months after the Effective Time shall be paid to
BancorpSouth. Any shareholders of Pinnacle who have not theretofore complied
with this Article II shall thereafter look only to BancorpSouth for payment of
their portion of the Cash Consideration and their shares of BancorpSouth Common
Stock, cash in lieu of fractional shares and unpaid dividends and distributions
on BancorpSouth Common Stock deliverable in respect of each share of Pinnacle
Common Stock such stockholder holds as determined pursuant to this Agreement, in
each case, without any interest thereon. Notwithstanding the foregoing, none of
BancorpSouth, Pinnacle, the Exchange Agent or any other person shall be liable
to any former holder of shares of Pinnacle 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
BancorpSouth, the posting by such person of a bond in such amount as is
customarily required by BancorpSouth and Exchange Agent for other shareholders
of BancorpSouth 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
A-8
the shares of BancorpSouth Common Stock and cash in lieu of fractional shares
deliverable in respect thereof pursuant to this Agreement.
ARTICLE III. DISCLOSURE SCHEDULES; STANDARDS FOR
REPRESENTATIONS AND WARRANTIES
3.1. Disclosure Schedules. On or prior to the date hereof, each of BancorpSouth
and Pinnacle has delivered to the other party a schedule (in the case of
Pinnacle, the "Pinnacle Disclosure Schedule," and in the case of BancorpSouth,
the "BancorpSouth Disclosure Schedule," and, generally, a "Disclosure Schedule")
setting forth, among other things, items the disclosure of which is necessary or
appropriate either in response to an express disclosure requirement contained in
a provision hereof or as an exception to one or more of such party's
representations or warranties contained in Article IV, in the case of Pinnacle,
or Article V, in the case of BancorpSouth, or to one or more of such party's
covenants contained in Article VI; provided, however, that the mere inclusion of
an item in a Disclosure Schedule as an exception to a representation or warranty
shall not be deemed an admission by a party that such item represents a material
exception or material fact, event or circumstance or that such item has had or
could be reasonably expected to have a Material Adverse Effect (as defined in
Section 3.2 below) with respect to either Pinnacle or BancorpSouth,
respectively.
3.2. Standards.
(a) No representation or warranty of Pinnacle contained in Article
IV, or of BancorpSouth contained in Article V, shall be deemed untrue or
incorrect for any purpose under this Agreement as a consequence of the existence
or absence of any fact, circumstance or event, unless such fact, circumstance or
event, individually or when taken together with all other facts, circumstances
or events inconsistent with any representation or warranty contained in Article
IV, in the case of Pinnacle, or Article V, in the case of BancorpSouth, has had
or could be reasonably expected to have a Material Adverse Effect with respect
to (i) Pinnacle or (ii) BancorpSouth, respectively.
(b) As used in this Agreement, the term "Material Adverse Effect"
means, with respect to Pinnacle, (i) a change in the business of Pinnacle or its
Subsidiaries which, individually or in the aggregate has resulted or is
reasonably expected by BancorpSouth, in its reasonable discretion, to result in
losses, damages, liabilities, costs, expenses, judgments or fines in an amount
of $1,000,000 or greater; or (ii) a material adverse effect on (A) the business,
results of operations or financial condition of Pinnacle and its Subsidiaries
taken as a whole or (B) the ability of Pinnacle and its Subsidiaries to
consummate the transactions contemplated hereby; provided that, for purposes of
clauses (i) and (ii), Material Adverse Effect shall specifically exclude any
adverse effect attributable to or resulting from (1) any change in banking or
similar laws, rules or regulations of general applicability or interpretations
thereof by courts or governmental authorities, (2) any change in generally
accepted accounting principles ("GAAP") or regulatory accounting principles
applicable to banks or their holding companies generally, (3) any action or
omission of Pinnacle or any Subsidiary of Pinnacle taken with the express prior
written consent of BancorpSouth, (4) any expenses incurred by Pinnacle where
such expenses are contemplated by or reasonably incurred in connection with this
Agreement or the transactions contemplated hereby, (5) the fact that Pinnacle
does not meet the revenue, profit or balance sheet predictions set forth in
Pinnacle's internal projections separately delivered to BancorpSouth, (6) any
changes in general economic conditions or changes affecting the banking industry
generally, including adverse changes in the banking or financial markets
(provided such changes do not affect Pinnacle in a materially disproportionate
manner), or (7) other than those employees listed on Schedule 3.2(b), any
termination or resignation of employment by any employee of Pinnacle or Pinnacle
Bank as a result of the pendency of the Merger, including any termination
arising as a result of the employment package (including title, level of
responsibility, location of employment or compensation) offered to such
employees by BancorpSouth or BancorpSouth Bank.
A-9
(c) As used in this Agreement, the term "Material Adverse Effect"
means, with respect to BancorpSouth, a material adverse effect on (i) the
business, results of operations or financial condition of BancorpSouth and its
Subsidiaries taken as a whole or (ii) the ability of BancorpSouth and its
Subsidiaries to consummate the transactions contemplated hereby; provided that
Material Adverse Effect shall specifically exclude any adverse effect
attributable to or resulting from (A) any change in banking or similar laws,
rules or regulations of general applicability or interpretations thereof by
courts or governmental authorities, (B) any change in GAAP or regulatory
accounting principles applicable to banks or their holding companies generally,
(C) any action or omission of BancorpSouth or any Subsidiary of BancorpSouth
taken with the express prior written consent of Pinnacle, (D) any expenses
incurred by BancorpSouth where such expenses are contemplated by or reasonably
incurred in connection with this Agreement or the transactions contemplated
hereby, (E) the announcement of the pendency of the Merger, or (F) any changes
in general economic conditions or changes affecting the banking industry
generally, including adverse changes in the banking or financial markets
(provided such changes do not affect BancorpSouth in a materially
disproportionate manner). Changes in the market price of BancorpSouth Common
Stock shall not be considered Material Adverse Effects or otherwise considered a
material change or circumstance for any purpose.
(d) As used in this Agreement, the word "Subsidiary" when used with
respect to any party means any corporation, partnership, limited liability
company or other person, entity or organization, whether incorporated or
unincorporated, with respect to which such party owns, directly or indirectly,
50% or more of the equity or ownership interests, or an amount of voting
securities or ownership interests sufficient to elect at least a majority of its
board of directors or other governing body.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PINNACLE
Subject to Article III, Pinnacle hereby represents and warrants to
BancorpSouth as follows:
4.1. Corporate Organization.
(a) Pinnacle is a corporation duly organized, validly existing and in
good standing under the laws of the State of Arkansas. Pinnacle has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary.
Pinnacle is duly registered as a bank holding company under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). The Articles of Incorporation
and Bylaws of Pinnacle, copies of which have previously been provided or will be
provided to BancorpSouth within seven days following the date hereof, are true
and correct copies of such documents as currently in effect. Pinnacle has no
Subsidiaries other than Pinnacle Bank and the following subsidiaries of Pinnacle
Bank: Pinnacle Bank Home Loan Company, Inc. ("Pinnacle Mortgage") and Pinnacle
Capital Resources, Inc. ("PCR") and, except for such entities, Pinnacle does not
own (other than in a bona fide fiduciary capacity or in satisfaction of a debt
previously contracted) beneficially, directly or indirectly (other than as set
forth in Section 4.1(a) of the Pinnacle Disclosure Schedule), any shares of
capital stock or any equity securities or similar interests of any person, or
any interest in a partnership or joint venture of any kind.
(b) Pinnacle Bank is an Arkansas state bank duly organized, validly
existing and in good standing under the laws of the State of Arkansas. The
deposit accounts of Pinnacle are insured by the Federal Deposit Insurance
Corporation (the "FDIC") through the Bank Insurance Fund (the "BIF") to the
fullest extent permitted by law, and all premiums and assessments required to be
paid
A-10
in connection therewith have been paid when due. Pinnacle Bank has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted and is duly licensed or
qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or the location of the properties and
assets owned or leased by it makes such licensing or qualification necessary.
The Articles of Association and Bylaws of Pinnacle Bank, copies of which have
previously been provided or will be provided to BancorpSouth within seven days
following the date hereof, are true and correct copies of such documents as
currently in effect. Except for Pinnacle Mortgage and PCR, Pinnacle Bank has no
Subsidiaries and does not own beneficially, directly or indirectly, any shares
of any equity securities or similar interests of any person, or any interest in
a partnership or joint venture of any kind.
(c) Pinnacle Mortgage is a corporation duly organized, validly existing
and in good standing under the laws of the State of Arkansas. Pinnacle Mortgage
has the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted and is duly
licensed or qualified to do business in each jurisdiction in which the nature of
the business conducted by it or the character or the location of the properties
and assets owned or leased by it makes such licensing or qualification
necessary. The Articles of Incorporation and Bylaws of Pinnacle Mortgage, copies
of which have previously been provided or will be provided to BancorpSouth
within seven days following the date hereof, are true and correct copies of such
documents as currently in effect. Pinnacle Mortgage has no Subsidiaries and does
not own beneficially, directly or indirectly, any shares of any equity
securities or similar interests of any person, or any interest in a partnership
or joint venture of any kind.
(d) PCR is a corporation duly organized, validly existing and in good
standing under the laws of the State of Arkansas. PCR has the corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted and is duly licensed or qualified to
do business in each jurisdiction in which the nature of the business conducted
by it or the character or the location of the properties and assets owned or
leased by it makes such licensing or qualification necessary. The Articles of
Incorporation and Bylaws of PCR, copies of which have previously been provided
or will be provided to BancorpSouth within seven days following the date hereof,
are true and correct copies of such documents as currently in effect. PCR has no
Subsidiaries and does not own (other than in a bona fide fiduciary capacity or
in satisfaction of a debt previously contracted) beneficially, directly or
indirectly, any shares of any equity securities or similar interests of any
person, or any interest in a partnership or joint venture of any kind.
(e) The minute books of Pinnacle and each of its Subsidiaries contain
true and correct records of all meetings and other corporate actions held or
taken since December 31, 1995 of their respective shareholders and Boards of
Directors (including committees of their respective Boards of Directors).
4.2. Capitalization.
(a) The authorized capital stock of Pinnacle consists of 100,000 shares
of Pinnacle Common Stock, $10.00 par value. There are 17,137 shares of Pinnacle
Common Stock issued and outstanding and 915 shares of Pinnacle Common Stock held
by Pinnacle as treasury stock. There are no shares of Pinnacle Common Stock
reserved for issuance upon exercise of outstanding stock options or otherwise
except for 1,721 shares of Pinnacle Common Stock reserved for issuance under
Pinnacle's Stock Option Plan, adopted August 30, 1996 and Pinnacle's
Non-Employee Director Stock Option Plan, effective as of January 1, 1998
(collectively, the "Pinnacle Option Plan"). There are no shares of Pinnacle
Preferred Stock issued or outstanding, held in Pinnacle's treasury or reserved
for issuance upon exercise of outstanding stock options or otherwise. All of the
issued and outstanding shares of Pinnacle Common Stock have been duly authorized
and validly issued and are fully paid, nonassessable, and were issued in
compliance with and are currently free of all preemptive rights,
A-11
with no personal liability attaching to the ownership thereof. Except for
options outstanding under the Pinnacle Option Plan to purchase a total of 1,721
shares of Pinnacle Common Stock (the "Plan Options"), Pinnacle does not have and
is not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance
of any shares of Pinnacle Common Stock or Pinnacle Preferred Stock or any other
equity security or capital stock of Pinnacle or any securities representing the
right to purchase or otherwise receive any shares of Pinnacle Common Stock or
any other equity security or capital stock of Pinnacle. Set forth in Section
4.2(a) of the Pinnacle Disclosure Schedule is a complete and correct list, for
each of the Plan Options, of the names of the optionees, the date of grant, the
number of shares subject to each such option, the expiration date of each such
option, and the price at which each such option may be exercised.
(b) Except as set forth in Section 4.2(b) of the Pinnacle Disclosure
Schedule, Pinnacle owns, directly or indirectly, all of the issued and
outstanding shares of the capital stock and equity securities of each of
Pinnacle's Subsidiaries, free and clear of all liens, charges, encumbrances and
security interests whatsoever, and all of such shares are duly authorized and
validly issued and are fully paid, nonassessable (except as otherwise provided
by applicable federal law) and free of preemptive rights, with no personal
liability attaching to the ownership thereof. Pinnacle's Subsidiaries are not
bound by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of capital stock or any other equity security of any of Pinnacle's Subsidiaries
or any securities representing the right to purchase or otherwise receive any
shares of capital stock or any other equity security of any of Pinnacle's
Subsidiaries. There are no outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character by which Pinnacle or any of its
Subsidiaries will be bound calling for the purchase or issuance of any shares of
the capital stock or equity securities of any of Pinnacle's Subsidiaries.
4.3. Authority; No Violation.
(a) Pinnacle has full corporate power and authority to execute and
deliver this Agreement and, upon the receipt of requisite approval by the
shareholders of Pinnacle of this Agreement, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
approved by the Board of Directors of Pinnacle. The Board of Directors of
Pinnacle has directed that this Agreement and the transactions contemplated
hereby be submitted to Pinnacle's shareholders for approval at a meeting of such
shareholders, and Pinnacle has approved, or promptly after the date hereof and
prior to the Closing Date will approve, this Agreement and the transactions
contemplated hereby, and the Board of Directors of Pinnacle has directed
officers of Pinnacle to so approve this Agreement and the transactions
contemplated herein in its capacity as the sole shareholder of Pinnacle Bank.
Except for the adoption of this Agreement by the requisite vote of Pinnacle's
shareholders, no other proceedings on the part of Pinnacle or its Subsidiaries
are necessary to approve this Agreement and to consummate the transactions
contemplated hereby, except for the approval, which will occur promptly after
the date hereof, of this Agreement by the board of directors of each of
Pinnacle's Subsidiaries as set forth in Section 6.3 herein. This Agreement has
been duly and validly executed and delivered by Pinnacle, and this Agreement
constitutes a valid and binding obligation of Pinnacle, enforceable against
Pinnacle in accordance with its terms, except as enforcement may be limited by
general principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally.
(b) Neither the execution and delivery of this Agreement, nor the
consummation by Pinnacle of the transactions contemplated hereby, nor compliance
by Pinnacle with any of the terms or provisions hereof or thereof, will (i)
violate any provision of the Articles of Incorporation or Bylaws
A-12
of Pinnacle or the articles of incorporation, bylaws or similar governing
documents of any of Pinnacle's Subsidiaries, or (ii) assuming that the consents
and approvals referred to in Section 4.4 hereof are duly obtained, (A) violate
any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Pinnacle or any of its Subsidiaries, or any of their
respective properties or assets, or (B) violate, conflict with, result in a
breach of any provision of or, except as provided in Section 4.14, the loss of
any benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under (except as provided in
Section 4.14), accelerate the performance required by, or result in the creation
of any lien, pledge, security interest, charge or other encumbrance upon any of
the respective properties or assets of Pinnacle or any of its Subsidiaries
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Pinnacle or any of its Subsidiaries is a party, or by which
they or any of their respective properties or assets may be bound or affected.
4.4. Consents and Approvals. Except for (a) the filing of applications and
notices, as applicable, with the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"), the FDIC, the Federal Trade Commission
(the "FTC") and the Department of Justice ("DoJ"), and approval of such
applications and notices, (b) the filing of such applications, filings,
authorizations, orders and approvals as may be required under applicable state
law, (c) the filing with, and declaration of effectiveness by, the United States
Securities and Exchange Commission ("SEC") of a registration statement on Form
S-4 (such registration statement and any post-effective amendment thereto
relating to this transaction, or any other registration statement on Form S-4
used in connection with the Merger, the "S-4") in which will be included as a
prospectus a definitive proxy statement relating to the meeting of shareholders
of Pinnacle to be held in connection with this Agreement and the transactions
contemplated herein (the "Proxy Statement"), (d) the approval of this Agreement
by the requisite vote of the shareholders of Pinnacle, (e) the filing of the
Articles of Merger with, as applicable, the Mississippi Secretary, the Arkansas
Secretary, the Mississippi Department and the Arkansas Department and (f)
approval for listing of BancorpSouth Common Stock to be issued in the Merger on
the NYSE, no consents or approvals of or filings or registrations with any
court, administrative agency or commission or other governmental authority or
instrumentality (each a "Governmental Entity") or with any third party are
necessary in connection with (i) the execution and delivery by Pinnacle of this
Agreement and (ii) the consummation by Pinnacle and its Subsidiaries of the
Merger and the other transactions contemplated hereby.
4.5. Reports. Pinnacle and each of its Subsidiaries have timely filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that they were required to file since December 31,
1995 with (i) the Federal Reserve Board, (ii) the FDIC, (iii) any Federal
Reserve Bank, (iv) any state banking commissions, including without limitation
the Arkansas Department or any other state regulatory authority (each a "State
Regulator") and (v) any self-regulatory organization (collectively, the
"Regulatory Agencies"), and have paid all fees and assessments due and payable
in connection therewith. Except for normal examinations conducted by a
Regulatory Agency in the regular course of the business of Pinnacle and its
Subsidiaries, no Regulatory Agency has initiated any proceeding or, to the
knowledge of Pinnacle, investigation into the business or operations of Pinnacle
or any of its Subsidiaries since December 31, 1995. There is no unresolved
outstanding violation, criticism, or exception by any Regulatory Agency with
respect to any report or statement relating to any examinations of Pinnacle or
any of its Subsidiaries that cannot be resolved with reasonable effort and
within a reasonable time.
4.6. Financial Statements. The unaudited consolidated financial statements of
Pinnacle and its subsidiaries for the fiscal years ended December 31, 2000, 1999
and 1998, and for the nine-month period ended September 30, 2001 (collectively,
the "Pinnacle Financial Statements"), including consolidated statements of
condition and statements of earnings, copies of which have been
A-13
previously provided to BancorpSouth, fairly present the consolidated financial
position of Pinnacle and its Subsidiaries as of the respective dates thereof,
and fairly present (subject, in the case of the unaudited statements, to
recurring audit adjustments normal in nature and amount) the results of the
consolidated operations and consolidated financial position of Pinnacle and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth; each of such Pinnacle Financial Statements (including the
related notes, where applicable) complies with applicable accounting
requirements with respect thereto; and each of such Pinnacle Financial
Statements (including the related notes, where applicable) has been prepared in
accordance with GAAP consistently applied during the periods involved, except as
indicated in the notes thereto. The books and records of Pinnacle and its
Subsidiaries have been, and are being, maintained in accordance with GAAP and
any other applicable legal and accounting requirements.
4.7. Broker's Fees. Other than Stephens Inc., neither Pinnacle nor any of its
Subsidiaries, nor any of their respective officers or directors, has employed
any broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with any of the transactions
contemplated by this Agreement.
4.8. Absence of Certain Changes or Events.
(a) Except as set forth in Section 4.8(a) of the Pinnacle Disclosure
Schedule, since September 30, 2001, there has been no change or development or
combination of changes or developments which, individually or in the aggregate,
has had or is reasonably likely to have a Material Adverse Effect with respect
to Pinnacle.
(b) Except as set forth in Section 4.8(b) of the Pinnacle Disclosure
Schedule, since September 30, 2001, Pinnacle and its Subsidiaries have carried
on their respective businesses in the ordinary course consistent with their past
practices.
(c) Section 4.8(c) of the Pinnacle Disclosure Schedule sets forth a
true and correct list of all stock options granted since September 30, 2001.
Since September 30, 2001, except as set forth in Section 4.8(c) of the Pinnacle
Disclosure Schedule, neither Pinnacle nor any of its Subsidiaries has increased
the wages, salaries, compensation, pension, or other fringe benefits or
perquisites payable to any executive officer, employee, or director from the
amount thereof in effect as of September 30, 2001, granted any severance or
termination pay, entered into any contract to make or grant any severance or
termination pay, or paid any bonus (except for salary increases and bonus
payments made in cash and in the ordinary course of business consistent with
past practices) or granted any stock option.
4.9. Legal Proceedings. Section 4.9 of the Pinnacle Disclosure Schedule lists
all pending or, to Pinnacle's knowledge, threatened, legal, administrative,
arbitral or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against Pinnacle or any of its Subsidiaries or
challenging the validity or propriety of the transactions contemplated by this
Agreement, other than regularly scheduled examinations and similar routine
investigations made by bank regulatory officials in the course of their
supervision of Pinnacle or any of its Subsidiaries. Neither Pinnacle nor any of
its Subsidiaries is a party to any, and there are no pending or, to Pinnacle's
knowledge, threatened, legal, administrative, arbitral or other proceedings,
claims, actions or governmental or regulatory investigations of any nature
against Pinnacle or any of its Subsidiaries or challenging the validity or
propriety of the transactions contemplated by this Agreement, other than
regularly scheduled examinations and similar routine investigations made by bank
regulatory officials in the course of their supervision of Pinnacle or any of
its Subsidiaries, which has had, or could reasonably be expected to have, a
Material Adverse Effect with respect to Pinnacle. There is no injunction, order,
judgment, decree or unique regulatory restriction imposed upon Pinnacle, any of
its Subsidiaries or the assets of Pinnacle or any of its Subsidiaries.
A-14
4.10. Taxes.
(a) (i) Each of Pinnacle and its Subsidiaries has duly and timely filed
all Tax Returns (as defined in this Section below) that it was required to file,
and all such Tax Returns are true, complete and accurate; (ii) Pinnacle and each
of its Subsidiaries has paid all Taxes (as defined in this Section below)
required to be paid by it, and has paid all Taxes that it was required to
withhold from amounts owing to any employee, creditor or third party; (iii)
there are no pending or, to the knowledge of Pinnacle, threatened audits,
examinations, investigations, deficiencies, claims or other proceedings in
respect of Taxes relating to Pinnacle or any Subsidiary of Pinnacle; (iv) there
are no liens for Taxes upon the assets of Pinnacle or any Subsidiary of
Pinnacle, other than liens for current Taxes not yet due; (v) neither Pinnacle
nor any of its Subsidiaries has requested any extension of time within which to
file any Tax Returns in respect of any taxable year which have not subsequently
been filed when due (pursuant to such extension), nor provided or been requested
to provide any waivers of the time to assess any Taxes that are pending or
outstanding; (vi) with respect to each taxable period of Pinnacle and its
Subsidiaries, the federal and state income Tax Returns of Pinnacle and its
Subsidiaries have either been audited by the Internal Revenue Service (the
"IRS") or appropriate state tax authorities or the time for assessing and
collecting income Tax with respect to such taxable period has closed and such
taxable period is not subject to review, except as disclosed in Section 4.10(a)
of the Pinnacle Disclosure Schedule; (vii) neither Pinnacle nor any of its
Subsidiaries has any liability for Taxes of any person (other than Pinnacle and
its Subsidiaries) under Treasury Regulation section 1.1502-6 (or any comparable
provision of state, local or foreign law) as a transferee or successor, by
contract, or otherwise; and (viii) neither Pinnacle nor any Subsidiary of
Pinnacle is a party to any tax allocation or sharing agreement.
(b) For the purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies, penalties or other assessments imposed by any federal,
state, local or foreign taxing authority, including, but not limited to income,
excise, property, sales, transfer, franchise, payroll, withholding, social
security or other taxes, including any interest, penalties or additions
attributable thereto. For purposes of this Agreement, "Tax Return" shall mean
any return, report or similar statement (including any related or supporting
information) required to be filed with respect to any Taxes, including any
information return, claim for refund, amended return or declaration of estimated
Taxes.
4.11. Employees.
(a) Section 4.11(a) of the Pinnacle Disclosure Schedule sets forth a
true, complete and correct list (all of which are collectively referred to as
the "Employee Plans") of all "employee benefit plans" as defined by section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended, and the
rules and regulations promulgated thereunder (collectively, "ERISA"), all
specified fringe benefit plans as defined in section 6039D of the Code, and all
other bonus, incentive compensation, deferred compensation, profit sharing,
stock option, stock appreciation right, stock bonus, stock purchase, employee
stock ownership, savings, severance, supplemental unemployment, layoff, salary
continuation, retirement, pension, health, life insurance, disability, group
insurance, vacation, holiday, sick leave, fringe benefit, or welfare plan, or
employment, consulting, change in control, independent contractor, professional
services, confidentiality, or non-competition agreement or any other similar
plan, agreement, policy or understanding (whether written or oral, qualified or
nonqualified), and any trust, escrow or other agreement related thereto, which
(i) is now or was for the last five (5) years maintained or contributed to by
Pinnacle or an ERISA Affiliate (as hereinafter defined), or (ii) with respect to
which Pinnacle or any ERISA Affiliate has any obligations to any current or
former officer, Employee, service provider, or the dependents of any thereof,
regardless of whether funded, or (iii) which could result in the imposition of
any liability or obligation of any kind or nature, whether accrued, absolute,
contingent, direct, indirect, known or unknown, perfected or inchoate or
otherwise, and whether or not now due or to become due to Pinnacle or any ERISA
Affiliate.
A-15
(b) Pinnacle has heretofore provided to BancorpSouth, with respect to
each of the Employee Plans, true and correct copies of each of the following
documents, as applicable: (i) the Employee Plan document, (ii) the actuarial
report, if any, for such Employee Plan for each of the last three (3) years,
(iii) the most recent determination letter from the IRS for such Employee Plan,
(iv) the IRS Form 5500 annual reports for such Employee Plan for each of the
last three (3) years, and (v) the most recent summary plan description and
related summaries of material modifications.
(c) Neither Pinnacle nor any ERISA Affiliate has been liable at any
time for contributions to a Plan that is subject to section 412 of the Code,
section 302 of ERISA and/or Title IV of ERISA.
(d) The form and operation of all Employee Plans is in compliance with
the applicable terms of ERISA, the Code, and any other applicable laws,
including the Americans with Disabilities Act of 1990, the Family Medical Leave
Act of 1993 and the Health Insurance Portability and Accountability Act of 1996,
and such Employee Plans have been operated in compliance with such laws and the
written Employee Plan documents. Neither Pinnacle nor any fiduciary of an
Employee Plan has violated the requirements of section 404 of ERISA. All
required reports and descriptions of the Employee Plans (including Internal
Revenue Service Form 5500 Annual Reports, Summary Annual Reports and Summary
Plan Descriptions and Summaries of Material Modifications) have been (when
required) timely filed with the IRS and the United States Department of Labor
(the "DOL") and distributed as required to all participants and beneficiaries,
and all notices required by ERISA or the Code with respect to the Employee Plans
have been appropriately given. There have been no prohibited transactions with
respect to the Employee Plans.
(e) Each Employee Plan that is intended to be qualified under section
401(a) of the Code has received a favorable determination letter from the IRS,
and neither Pinnacle nor ERISA Affiliate has any knowledge of any circumstances
that will or could result in revocation of any such favorable determination
letter. Each trust created under any Employee Plan has been determined to be
exempt from taxation under section 501(a) of the Code, and Pinnacle is not aware
of any circumstance that will or could result in a revocation of such exemption.
Each Employee Plan that is an employee welfare benefit plan (as defined in
section 3(1) of ERISA) that utilizes a funding vehicle described in section
501(c)(9) of the Code or is subject to the provisions of section 505 of the Code
has been the subject of a notification by the IRS that such funding vehicle
qualifies for tax-exempt status under section 501(c)(9) of the Code or that the
Employee Plan complies with section 505 of the Code, unless the IRS does not, as
a matter of policy, issue such notification with respect to the particular type
of plan. With respect to each Employee Plan, no event has occurred or condition
exists that will or could give rise to a loss of any intended tax consequence or
to any tax under section 511 of the Code.
(f) There are no pending claims, lawsuits or actions relating to any
Employee Plan (other than ordinary course claims for benefits) and, to the best
knowledge of Pinnacle, none are threatened.
(g) No written or oral representations have been made to any Employee
or former Employee of Pinnacle or any ERISA Affiliate promising or guaranteeing
any employer payment or funding, and no Employee Plans provide, for the
continuation of medical, dental, life or disability insurance coverage for any
former Employee of Pinnacle or any ERISA Affiliate for any period of time beyond
the end of the current plan year (except to the extent of coverage required
under Title I, Part 6, of ERISA).
(h) Except for the possibility of full vesting of Code section 401(a)
plan account balances which may be necessitated by Code section 411(d)(3) in
order for tax-qualified status to be retained, the consummation of the
transactions contemplated by this Agreement will not accelerate the time of
A-16
vesting, of payment, or increase the amount, of compensation to any Employee,
officer, former Employee or former officer of Pinnacle or any ERISA Affiliate.
Except as set forth in Section 4.11(h) of the Pinnacle Disclosure Schedule, no
wages, salaries, compensation, bonus, pension or other payments to any employee,
affiliate, officer, director or broker of Pinnacle or Pinnacle Bank will be
triggered by or result from the consummation of the transactions contemplated by
this Agreement. No Employee Plan or other contracts or arrangements, including
those contemplated in this Agreement, provide for payments or other benefits
that would be triggered by the consummation of the transactions contemplated by
this Agreement that would subject any person to excise tax under section 4999 of
the Code (i.e., "golden parachute" taxes). All compensation amounts that have
been paid or are payable are or will become deductible by Pinnacle or
BancorpSouth pursuant to section 162 of the Code.
(i) Pinnacle and each ERISA Affiliate have at all times complied and
currently comply in all material respects with the applicable continuation
requirements for their welfare benefit plans, including (1) section 4980B of the
Code (as well as its predecessor provision, section 162(k) of the Code) and
sections 601 through 608, inclusive, of ERISA, which provisions are hereinafter
referred to collectively as "COBRA" and (2) any applicable state statutes
mandating health insurance continuation coverage for employees. Section 3.7(i)
lists all of the former employees of Pinnacle or any ERISA Affiliate and their
beneficiaries who have elected or are eligible to elect COBRA continuation of
health insurance coverage under any Plan offering health insurance or medical
benefits.
(j) Neither Pinnacle nor any ERISA Affiliate has incurred any liability
to the DOL, the Pension Benefit Guaranty Corporation (the "PBGC") or the IRS in
connection with any of the Employee Plans, and, to the best knowledge of
Pinnacle, no condition exists that presents a risk to Pinnacle or any ERISA
Affiliate of incurring any liability to the DOL, the PBGC or the IRS.
(k) For the purpose of this Section 4.11, the term "ERISA Affiliate"
shall mean (i) any related company or trade or business that is required to be
aggregated with Pinnacle under Code sections 414(b), (c), (m) or (o); (ii) any
other company, entity or trade or business that has adopted or has ever
participated in any Employee Plan; and (iii) any predecessor or successor
company or trade or business of Pinnacle or any entity described in 4.11(k)(i)
and (k)(ii).
(l) For the purpose of this Section 4.11, the term "Employee" shall be
considered to include common law employees of Pinnacle or any ERISA Affiliate,
individuals rendering personal services to Pinnacle or any ERISA Affiliate as
independent contractors and leased employees of Pinnacle or any ERISA Affiliate
as defined in Code section 414(n) and the regulations promulgated pursuant
thereto.
(m) No lien, security interests or other encumbrances exist with
respect to any of the assets of Pinnacle or any ERISA Affiliate which were
imposed pursuant to the terms of the Code or ERISA and, to the knowledge of
Pinnacle, no condition exists or could occur that would result in the imposition
of such liens, security interests or encumbrances arising from or relating to
the Employee Plans.
4.12. Pinnacle Information. The information relating to Pinnacle and its
Subsidiaries which is provided to BancorpSouth by Pinnacle or its
representatives for inclusion in the Proxy Statement and the S-4, or in any
other document filed with any other regulatory agency in connection herewith,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading. The S-4 and the Proxy
Statement (except for such portions thereof that relate only to BancorpSouth or
any of its Subsidiaries) will comply with the provisions of the Securities Act
of 1933, as amended
A-17
(the "Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations thereunder.
4.13. Compliance with Applicable Law. Pinnacle and each of its Subsidiaries
hold, and have at all times held, all licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied with and are not in default in any
material respect under any, applicable law, statute, order, rule, regulation,
policy and/or guideline of any Governmental Entity relating to Pinnacle or any
of its Subsidiaries, and neither Pinnacle nor any of its Subsidiaries has
received notice, and Pinnacle does not know, of any violations of any of the
above.
4.14. Certain Contracts.
(a) Set forth in Section 4.14(a) of the Pinnacle Disclosure Schedule is
a list of any contract or agreement (whether written or oral) to which, Pinnacle
or any of its Subsidiaries is a party to or bound by any contract or agreement
(whether written or oral) (i) with respect to the employment of any employees,
officers, directors or consultants, (ii) which, upon the consummation of the
transactions contemplated by this Agreement, will (either alone or upon the
occurrence of any additional acts or events) result in any payment or benefits
(whether of severance pay or otherwise) becoming due, or the acceleration or
vesting of any rights to any payment or benefits, from BancorpSouth, Pinnacle,
the Surviving Corporation or any of their respective Subsidiaries to any
employee, officer, director or consultant thereof, (iii) which is a material
contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC to be
performed after the date of this Agreement, (iv) which is not terminable on 90
days or less notice involving the payment of more than $100,000 per annum, or
(v) which materially restricts the conduct of any line of business by Pinnacle
or any of its Subsidiaries. Each contract, arrangement, commitment or
understanding of the type described in this Section 4.14(a) is referred to
herein as a "Pinnacle Contract." Pinnacle has previously provided to
BancorpSouth true and correct copies of each Pinnacle Contract.
(b) Each Pinnacle Contract described in clause (iii) of Section 4.14(a)
is valid and binding and in full force and effect with respect to the
obligations of Pinnacle or its Subsidiaries and, to the knowledge of Pinnacle,
is valid and binding and in full force and effect with respect to the
obligations of the counterparties thereto. Pinnacle and each of its Subsidiaries
has performed all obligations required to be performed by it to date under each
Pinnacle Contract described in clause (iii) of Section 4.14(a). Except as set
forth in Section 4.14(b) of the Pinnacle Disclosure Schedule, no event or
condition exists which constitutes or, after notice or lapse of time or both,
would constitute, a default on the part of Pinnacle or any of its Subsidiaries
under any Pinnacle Contract described in clause (iii) of Section 4.14(a). No
other party to any Pinnacle Contract described in clause (iii) of Section
4.14(a) is, to the knowledge of Pinnacle, in default in any respect thereunder.
4.15. Agreements with Regulatory Agencies. Neither Pinnacle nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or is
a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, or has adopted any board resolutions
at the request of (each, a "Regulatory Agreement") any Regulatory Agency or
other Governmental Entity that restricts the conduct of its business or that in
any manner relates to its capital adequacy, its credit policies, its management
or its business, nor has Pinnacle or any of its Subsidiaries been advised by any
Regulatory Agency or other Governmental Entity that it is considering issuing or
requesting any Regulatory Agreement.
4.16. Business Combination Provision; Takeover Laws. Pinnacle, its Subsidiaries,
and this Agreement and the transactions contemplated hereby, are not subject to
or are exempt from the
A-18
requirements of any "moratorium", "control share," "fair price" or other
anti-takeover laws and regulations (collectively, "Takeover Laws").
4.17. Environmental Matters.
(a) Except as disclosed in Section 4.17(a) of the Pinnacle Disclosure
Schedule, each of Pinnacle and its Subsidiaries and, to the knowledge of
Pinnacle, each of the Participation Facilities and the Loan Properties (each as
defined below), are in compliance with all applicable federal, state and local
laws, including common law, regulations and ordinances, and with all applicable
decrees, orders and contractual obligations relating to pollution or the
discharge of, or exposure to, Hazardous Materials (as hereinafter defined) in
the environment or workplace ("Environmental Laws");
(b) There is no suit, claim, action or proceeding, pending or, to the
knowledge of Pinnacle, threatened, before any Governmental Entity or other forum
in which Pinnacle, any of its Subsidiaries, or, to the knowledge of Pinnacle,
any Participation Facility or any Loan Property, has been or, with respect to
threatened proceedings, may be, named as a defendant (i) for alleged
noncompliance (including by any predecessor) with any Environmental Laws, or
(ii) relating to the release, threatened release or exposure to any Hazardous
Material whether or not occurring at or on a site owned, leased or operated by
Pinnacle or any of its Subsidiaries, any Participation Facility or any Loan
Property;
(c) Except as disclosed in Section 4.17(c) of the Pinnacle Disclosure
Schedule, to the knowledge of Pinnacle, during the period of (i) Pinnacle's or
any of its Subsidiaries' ownership or operation of any of their respective
current or former properties, (ii) Pinnacle's or any of its Subsidiaries'
participation in the management of any Participation Facility, or (iii)
Pinnacle's or any of its Subsidiaries' interest in a Loan Property, there has
been no release of Hazardous Materials in, on, under or affecting any such
property. To the knowledge of Pinnacle, prior to the period of (i) Pinnacle's or
any of its Subsidiaries' ownership or operation of any of their respective
current or former properties, (ii) Pinnacle's or any of its Subsidiaries'
participation in the management of any Participation Facility, or (iii)
Pinnacle's or any of its Subsidiaries' interest in a Loan Property, there was no
release of Hazardous Materials in, on, under or affecting any such property,
Participation Facility or Loan Property; and
(d) The following definitions apply for purposes of this Section 4.17:
(i) "Hazardous Materials" means any chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum or other regulated substances or materials, (ii)
"Loan Property" means any property in which Pinnacle or any of its Subsidiaries
holds a security interest, and, where required by the context, said term means
the owner or operator of such property; and (iii) "Participation Facility" means
any facility in which Pinnacle or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such property.
4.18. Approvals. Pinnacle knows of no reason why all regulatory approvals
required for the consummation of the transactions contemplated hereby
(including, without limitation, the Holding Company Merger and the Bank Merger)
should not be obtained.
4.19. Insurance. Pinnacle and its Subsidiaries are insured with reputable
insurers against such risks and in such amounts as Pinnacle's management
reasonably has determined to be prudent in accordance with industry practices.
All of such policies are in full force and effect; Pinnacle and its Subsidiaries
are not in material default thereunder; and all claims thereunder for which a
basis is known, or reasonably should be known, by Pinnacle have been filed in
due and timely fashion.
A-19
4.20 Loan Portfolio.
(a) Except for matters disclosed in Section 4.20 of the Pinnacle
Disclosure Schedule, Pinnacle Bank is not a party to any written or oral (i)
loan agreement, note or borrowing arrangement (including, without limitation,
leases, credit enhancements, commitments, guarantees and interest-bearing
assets) (collectively, "Loans"), under the terms of which the obligor was, as of
September 30, 2001, over 90 days delinquent in payment of principal or interest
or in default of any other provision, or (ii) as of September 30, 2001, Loan
with any director, executive officer or five percent (5%) or greater shareholder
of Pinnacle, or to the knowledge of Pinnacle, any person, corporation or
enterprise controlling, controlled by or under common control with any of the
foregoing. Section 4.20 of the Pinnacle Disclosure Schedule sets forth (i) all
of the Loans of Pinnacle Bank that, as of September 30, 2001, were classified by
any bank examiner (whether regulatory or internal) as "Other Loans Specially
Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss", "Classified",
"Criticized", "Credit Risk Assets", "Concerned Loans", "Watch List" or words of
similar import, together with the principal amount of and accrued and unpaid
interest on each such Loan and the identity of the borrower thereunder, (ii) by
category of Loan (i.e., commercial, consumer, etc.), all of the other Loans of
Pinnacle Bank that, as of September 30, 2001, were classified as such, together
with the aggregate principal amount of and accrued and unpaid interest on such
Loans by category and (iii) each asset of Pinnacle Bank that, as of September
30, 2001, was classified as "Other Real Estate Owned" and the book value
thereof.
(b) Each Loan (i) is evidenced by notes, agreements or other evidences
of indebtedness which are true, genuine and what they purport to be, (ii) to the
extent secured, has been secured by valid liens and security interests which
have been perfected and (iii) to the knowledge of Pinnacle, is the legal, valid
and binding obligation of the obligor named therein, enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
4.21 Property. Pinnacle has good and marketable title, free and clear of all
liens, encumbrances, mortgages, pledges, charges, defaults or equitable
interests, to all of the properties and assets, real and personal, tangible or
intangible, which are reflected on the statement of financial condition of
Pinnacle as of December 31, 2001 or acquired after such date, except (i) liens
for taxes not yet due and payable or contested in good faith by appropriate
proceedings, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of business, (iii) such imperfections of title, easements and
encumbrances, if any, as do not interfere with the use of the respective
property as such property is used on the date of this Agreement or the
marketability thereof, (iv) dispositions and encumbrances of, or on, such
properties or assets in the ordinary course of business or (v) mechanics',
materialmen's, workmen's, repairmen's, warehousemen's, carrier's and other
similar liens and encumbrances arising in the ordinary course of business. All
leases pursuant to which Pinnacle or any of its Subsidiaries as lessee leases
real or personal property are valid and enforceable in accordance with their
respective terms, and neither Pinnacle nor any of its Subsidiaries is, nor to
the knowledge of Pinnacle, is any other party thereto, in default thereunder.
4.22. Reorganization. Pinnacle has no reason to believe that the Merger will
fail to qualify as a reorganization under Section 368(a) of the Code.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BANCORPSOUTH
Subject to Article III, BancorpSouth hereby represents and warrants to
Pinnacle as follows:
A-20
5.1. Corporate Organization.
(a) BancorpSouth is a corporation duly organized, validly existing and
in good standing under the laws of the State of Mississippi. BancorpSouth has
the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, and is duly
licensed or qualified to do business in each jurisdiction in which the nature of
the business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary.
BancorpSouth is duly registered as a bank holding company under the BHC Act. The
Amended and Restated Articles of Incorporation and Bylaws of BancorpSouth (the
"BancorpSouth Governing Documents"), copies of which have previously been made
available to Pinnacle, are true and correct copies of such documents as in
effect as of the date of this Agreement.
(b) BancorpSouth Bank is a Mississippi state bank validly existing and
in good standing. The deposit accounts of BancorpSouth Bank are insured by the
FDIC through the BIF or Savings Association Insurance Fund to the fullest extent
permitted by law, and all premiums and assessments required in connection
therewith have been paid when due. Each of BancorpSouth's other Subsidiaries is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Each Subsidiary of BancorpSouth has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary.
The Amended and Restated Articles of Incorporation and Bylaws of BancorpSouth
Bank (the "BancorpSouth Bank Governing Documents"), copies of which have
previously been made available to Pinnacle, are true and correct copies of such
documents as in effect as of the date of this Agreement.
5.2. Capitalization.
(a) The authorized capital stock of BancorpSouth consists of
500,000,000 shares of BancorpSouth Common Stock. As of November 13, 2001,
85,793,477 shares of BancorpSouth Common Stock were issued, 4,426,812 shares of
BancorpSouth Common Stock were held in BancorpSouth's treasury and 81,366,665
shares of BancorpSouth Common Stock were outstanding. As of the date of this
Agreement, no shares of BancorpSouth Common Stock were reserved for issuance,
except shares reserved for issuance pursuant to employee benefit plans, stock
option plans and BancorpSouth's shareholder rights plan pursuant to which
holders of BancorpSouth Common Stock are granted certain attached rights that
are exercisable under certain circumstances (the "BancorpSouth Rights"). All of
the issued and outstanding shares of BancorpSouth Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. Except for the plans and arrangements referred to above with respect to
reserved shares and BancorpSouth's dividend reinvestment plan, BancorpSouth does
not have and is not bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the purchase or
issuance of any shares of BancorpSouth Common Stock or any other equity
securities of BancorpSouth or any securities representing the right to purchase
or otherwise receive any shares of BancorpSouth Common Stock. The shares of
BancorpSouth Common Stock to be issued pursuant to the Merger will be duly
authorized and validly issued and, at the Effective Time, all such shares will
be fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof.
(b) Exhibit 21 to BancorpSouth's Annual Report on Form 10-K for the
year ended December 31, 2000 sets forth a true and correct list of all material
Subsidiaries of BancorpSouth as of the date of this Agreement. BancorpSouth
owns, directly or indirectly, all of the issued and
A-21
outstanding shares of capital stock of each of the Subsidiaries of BancorpSouth,
free and clear of all liens, charges, encumbrances and security interests
whatsoever, and all of such shares are duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. No Subsidiary owned as of the date
hereof by BancorpSouth has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character with any
party that is not a direct or indirect Subsidiary of BancorpSouth calling for
the purchase or issuance of any shares of capital stock or any other equity
security of such Subsidiary or any securities representing the right to purchase
or otherwise receive any shares of capital stock or any other equity security of
such Subsidiary.
5.3. Authority; No Violation.
(a) BancorpSouth has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of BancorpSouth. BancorpSouth has approved, or promptly after
the date hereof and prior to the Closing Date will approve, this Agreement and
the transactions contemplated hereby, and the Board has directed officers of
BancorpSouth to so approve this Agreement and the transactions contemplated
herein in its capacity as the sole shareholder of the BancorpSouth Bank. Other
than the approval of the Board of Directors of BancorpSouth Bank, no other
corporate proceedings on the part of BancorpSouth or BancorpSouth's Subsidiaries
are necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by BancorpSouth and constitutes a valid and binding obligation of
BancorpSouth, enforceable against BancorpSouth in accordance with its terms,
except as enforcement may be limited by general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally.
(b) Neither the execution and delivery of this Agreement by
BancorpSouth, nor the consummation by BancorpSouth of the transactions
contemplated hereby, nor compliance by BancorpSouth with any of the terms or
provisions hereof or thereof, will (i) violate any provision of the BancorpSouth
Governing Documents or the BancorpSouth Bank Governing Documents, or (ii)
assuming that the consents and approvals referred to in Section 5.4 are duly
obtained, (A) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to BancorpSouth or any of its
Subsidiaries or any of their respective properties or assets, or (B) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of BancorpSouth or
any of its Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which BancorpSouth or any of its Subsidiaries
is a party, or by which they or any of their respective properties or assets may
be bound or affected.
5.4. Consents and Approvals. Except for (a) the filing of applications and
notices, as applicable, with the Federal Reserve Board under the BHC Act, the
FDIC, the FTC, and the DoJ, and approval of such applications and notices, (b)
such applications, filings, authorizations, orders and approvals as may be
required under applicable state law, (c) the filing with, and declaration of
effectiveness by, the SEC of the S-4, (d) the filing of the Articles of Merger
with the Mississippi Secretary, the Arkansas Secretary, the Mississippi
Department and the Arkansas Department, (e) such filings and approvals as are
required to be made or obtained under the securities or "Blue Sky" laws of
various states in connection with the issuance of the shares of BancorpSouth
Common Stock pursuant to this
A-22
Agreement, (f) approval for listing of the BancorpSouth Common Stock to be
issued in the Merger on the NYSE, and (g) approval of the Board of Directors of
BancorpSouth Bank, no consents or approvals of or filings or registrations with
any Governmental Entity or with any third party are necessary in connection with
(i) the execution and delivery by BancorpSouth of this Agreement and (ii) the
consummation by BancorpSouth and BancorpSouth Bank of the Merger and the other
transactions contemplated hereby.
5.5. Reports. BancorpSouth and each of its Subsidiaries have timely filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that they were required to file since December 31,
1995 with any Regulatory Agency, and have paid all fees and assessments due and
payable in connection therewith. Except for normal examinations conducted by a
Regulatory Agency in the regular course of the business of BancorpSouth and its
Subsidiaries, no Regulatory Agency has initiated any proceeding or, to the
knowledge of BancorpSouth, investigation into the business or operations of
BancorpSouth or any of its Subsidiaries since December 31, 1995. There is no
unresolved violation, criticism, or exception by any Regulatory Agency with
respect to any report or statement relating to any examinations of BancorpSouth
or any of its Subsidiaries.
5.6. Reorganization. BancorpSouth has no reason to believe that the Merger will
fail to qualify as a reorganization under Section 368(a) of the Code.
5.7. Financial Statements; SEC Reports.
(a) The consolidated financial statements of BancorpSouth and its
subsidiaries (the "BancorpSouth Financial Statements"), including consolidated
statements of condition, statements of earnings, changes in shareholders' equity
and cash flows and related notes, included in the BancorpSouth SEC Reports (as
defined in this section below) fairly present the consolidated financial
position of BancorpSouth and its Subsidiaries as of the respective date thereof,
and fairly present (subject, in the case of the unaudited statements, to
recurring audit adjustments normal in nature and amount) the results of the
consolidated operations and consolidated financial position of BancorpSouth and
its Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth; each of such BancorpSouth Financial Statements (including the
related notes, where applicable) complies with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto; and each of such BancorpSouth Financial Statements (including
the related notes, where applicable) has been prepared in accordance with GAAP
consistently applied during the periods involved, except as indicated in the
notes thereto or, in the case of unaudited statements, as permitted by SEC Form
10-Q. The books and records of BancorpSouth and its Subsidiaries have been, and
are being, maintained in accordance with GAAP and any other applicable legal and
accounting requirements.
(b) BancorpSouth's Annual Reports on Form 10-K for the fiscal years
ended December 31, 2000, 1999 and 1998, and all other reports, registration
statements, definitive proxy statements or information statements filed by
BancorpSouth or any of its Subsidiaries subsequent to December 31, 2000 under
the Securities Act, or under Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act, or under the securities regulations of the SEC, in the form filed
(collectively, the "BancorpSouth SEC Reports") with the SEC as of the date
filed, (i) complied in all material respects as to form with the applicable
requirements under the Securities Act or the Exchange Act, as the case may be,
and (ii) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. BancorpSouth has timely filed all BancorpSouth SEC Reports
and other documents required to be filed by it under the Securities Act and the
Exchange Act, and, as of their respective dates, all BancorpSouth SEC Reports
complied with the published rules and regulations of the SEC with respect
thereto.
A-23
5.8. Absence of Certain Changes or Events. Except as disclosed in any
BancorpSouth SEC Report filed with the SEC prior to the date of this Agreement,
since December 31, 2000, BancorpSouth and its Subsidiaries have carried on their
respective businesses in the ordinary course consistent with their past
practices.
5.9. Legal Proceedings. Except as set forth in a BancorpSouth SEC Report,
neither BancorpSouth nor any of its Subsidiaries is a party to any and there are
no pending or, to BancorpSouth's knowledge, threatened, legal, administrative,
arbitral or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against BancorpSouth or any of its Subsidiaries or
challenging the validity or propriety of the transactions contemplated by this
Agreement, other than regularly scheduled examinations and similar routine
investigations made by bank regulatory officials in the course of their
supervision of BancorpSouth or any of it Subsidiaries. There is no injunction,
order, judgment, decree or regulatory restriction imposed upon BancorpSouth, any
of its Subsidiaries or the assets of BancorpSouth or any of its Subsidiaries.
5.10. BancorpSouth Information. The information relating to BancorpSouth and its
Subsidiaries to be contained in the Proxy Statement and the S-4, or in any other
document filed with any other regulatory agency in connection herewith, will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they are made, not misleading. The S-4 and the Proxy Statement (except for such
portions thereof that relate only to Pinnacle or any of its Subsidiaries) will
comply with the provisions of the Securities Act, the Exchange Act and the rules
and regulations thereunder.
5.11. Compliance with Applicable Law. BancorpSouth and each of its Subsidiaries
holds, and has at all times held, all licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied with and are not in default in any
respect under any, applicable law, statute, order, rule, regulation, policy
and/or guideline of any Governmental Entity relating to BancorpSouth or any of
its Subsidiaries, and neither BancorpSouth nor any of its Subsidiaries knows of,
or has received notice, and BancorpSouth does not know, of any violations of any
of the above.
5.12. Approvals. BancorpSouth knows of no reason why all regulatory approvals
required for the consummation of the transactions contemplated hereby
(including, without limitation, the Holding Company Merger and the Bank Merger)
should not be obtained.
ARTICLE VI. COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1. Covenants of Pinnacle. During the period from the date of this Agreement
and continuing until the Effective Time, except as expressly contemplated or
permitted by this Agreement or with the prior express written consent of
BancorpSouth, Pinnacle and its Subsidiaries shall carry on their respective
businesses in the ordinary course consistent with past practice. Without
limiting the generality of the foregoing, and except as set forth in Section 6.1
of the Pinnacle Disclosure Schedule or as otherwise contemplated by this
Agreement or as expressly consented to in writing in advance by BancorpSouth,
Pinnacle shall not, and shall not permit any of its Subsidiaries to:
(a) declare or pay any dividends on, or make other distributions in
respect of, any of its capital stock during any period, other than dividends or
distributions by a Subsidiary of Pinnacle to Pinnacle;
(b) (i) repurchase, redeem or otherwise acquire (except for the
acquisition of Trust Account Shares and DPC Shares, as such terms are defined in
Section 1.4(b) hereof) any shares of the capital stock of Pinnacle or any
Subsidiary of Pinnacle, or any securities convertible into or exercisable for
any shares of the capital stock of Pinnacle or any Subsidiary of Pinnacle, (ii)
split,
A-24
combine or reclassify any shares of its capital stock, or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock, or (iii) issue, deliver or sell,
or authorize or propose the issuance, delivery or sale of, any shares of its
capital stock or any securities convertible into or exercisable for, or any
rights, warrants or options to acquire, any such shares, or enter into any
agreement with respect to any of the foregoing, except, in the case of clauses
(ii) and (iii), for the issuance of Pinnacle Common Stock upon the exercise or
fulfillment of rights or options issued or existing pursuant to the Pinnacle
Option Plans all to the extent outstanding and in existence on the date of this
Agreement and in accordance with their current terms;
(c) amend its Articles of Incorporation, Bylaws or other similar
governing documents;
(d) directly or indirectly, (i) solicit, initiate, encourage,
facilitate, entertain or accept any Acquisition Proposal (as defined in this
subsection below), or (ii) participate or engage in any discussions or
negotiations with any person or entity other than BancorpSouth or BancorpSouth
Bank relating or with respect to any Acquisition Proposal, or (iii) provide any
nonpublic information to any person or entity other than BancorpSouth or
BancorpSouth Bank relating or with respect to any Acquisition Proposal, or (iv)
make any Acquisition Proposal to any person or entity other than BancorpSouth
and BancorpSouth Bank, or (v) enter into any agreement with respect to any
Acquisition Proposal, or (vi) otherwise facilitate any effort or attempt to make
an Acquisition Proposal, or (vii) authorize or permit any of its officers,
directors, employees, representatives or agents to do any of the foregoing;
provided, however, that in response to an unsolicited, bona-fide written
Acquisition Proposal, Pinnacle, after giving notice of such to BancorpSouth, may
do the following if the Board of Directors of Pinnacle determines in good faith
that it must do so to comply with its fiduciary duties: (i) communicate
information about such Acquisition Proposal to Pinnacle's shareholders if
required under applicable law, and (ii) authorize and permit its officers,
directors, employees, representatives, investment bankers, attorneys,
accountants, financial advisors, or agents to (A) participate or engage in such
discussions or negotiations, or (B) provide or cause to be provided nonpublic
information. Pinnacle will immediately cease and cause to be terminated as of
the date of this Agreement any existing activities, discussions or negotiations
previously or currently conducted with any persons or entities other than
BancorpSouth and BancorpSouth Bank with respect to any Acquisition Proposal or
any of the foregoing. Pinnacle will notify BancorpSouth immediately if any
Acquisition Proposal is received by, any such information is requested from, or
any such negotiations or discussions are sought to be initiated or continued
with, Pinnacle, and Pinnacle will promptly (within 24 hours) inform BancorpSouth
in writing of all of the relevant details with respect to the foregoing,
including the material terms and conditions of such request or Acquisition
Proposal and the identity of the person or group making such request or
proposal. Pinnacle will keep BancorpSouth fully informed of the status and
details (including amendments or proposed amendments) of any such request or
Acquisition Proposal. Notwithstanding the foregoing, Pinnacle must submit the
Merger contemplated by this Agreement to its shareholders for approval prior to
the submission of any other Acquisition Proposal. In the event this Agreement is
terminated for any reason other than BancorpSouth's failure to perform its
obligations hereunder, after the expiration of any applicable cure periods (if
BancorpSouth fails to cure any such breach), if an Acquisition Proposal has been
made or is made at any time within a six (6) month period after such termination
of this Agreement, Pinnacle shall pay $500,000 in cash to BancorpSouth on
demand. For purposes of this Agreement, "Acquisition Proposal" shall mean any
tender or exchange offer, proposal for a merger, consolidation or other business
combination involving Pinnacle or any Subsidiary of Pinnacle or any proposal,
inquiry or offer to acquire in any manner all or 10% or greater equity interest
in, or all or a substantial portion of the assets of, Pinnacle or any Subsidiary
of Pinnacle, other than the transactions contemplated or permitted by this
Agreement;
(e) make any capital expenditures other than those which are (i) set
forth in Section 6.1 of the Pinnacle Disclosure Schedule or (ii) are made in the
ordinary course of business or are
A-25
necessary to maintain existing assets in good repair, and in any event are in an
amount of no more than $250,000 in the aggregate, or except as necessary to
comply with applicable regulatory guidelines or requirements;
(f) enter into any new line of business;
(g) acquire or agree to acquire, by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
limited liability company, association or other business organization or entity
or division thereof, or otherwise acquire any assets, which would be material,
individually or in the aggregate, to Pinnacle, or which could reasonably be
expected to impede or delay consummation of the Merger, other than in connection
with foreclosures, settlements in lieu of foreclosure or troubled loan or debt
restructurings in the ordinary course of business consistent with past
practices;
(h) except as contemplated by Article III hereof or this Article VI,
take any action that is intended or may reasonably be expected to result in any
of its representations and warranties set forth in this Agreement being or
becoming untrue, or in any of the conditions to the Merger set forth in Article
VIII not being satisfied;
(i) change its methods of accounting in effect at December 31, 2000,
except as required by changes in GAAP or regulatory accounting principles as
concurred to by Pinnacle's independent auditors;
(j) except as set forth in Section 7.7 hereof, as required by
applicable law or as required to maintain qualification pursuant to the Code,
(i) adopt, amend, or terminate any employee benefit plan (including, without
limitation, any Plan) or any agreement, arrangement, plan or policy between
Pinnacle or any Subsidiary of Pinnacle and one or more of its current or former
directors, officers or employees, (ii) except for normal increases in the
ordinary course of business consistent with past practice or except as required
by applicable law, increase in any manner the cash compensation or fringe
benefits of any director, officer or employee or pay any benefit not required by
any Plan or agreement as in effect as of the date hereof, or (iii) grant or
award any stock options, stock appreciation rights, restricted stock, restricted
stock units or performance units or shares;
(k) other than activities in the ordinary course of business consistent
with past practice, sell, lease, encumber, assign or otherwise dispose of, or
agree to sell, lease, encumber, assign or otherwise dispose of, any of its
material assets, properties or other rights or agreements;
(l) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money or assume, guarantee,
endorse or otherwise as an accommodation become responsible for the obligations
of any other individual, corporation or other entity;
(m) file any application to relocate or terminate the operations of any
banking office of it or any of its Subsidiaries;
(n) create, renew, amend or terminate or give notice of a proposed
renewal, amendment or termination of, any material contract, agreement or lease
for goods, services or office space to which Pinnacle or any of its Subsidiaries
is a party or by which Pinnacle or any of its Subsidiaries or their respective
properties is bound, other than the renewal in the ordinary course of business
of any lease the term of which expires prior to the Closing Date, or amend or
waive the provisions of any confidentiality or standstill agreement to which
Pinnacle or any of its affiliates is a party as of the date hereof;
A-26
(o) take any action or enter into any agreement that could reasonably
be expected to jeopardize or materially delay the receipt of any Requisite
Regulatory Approval (as defined in Section 8.1(c));
(p) enter or commit to enter into any new loans outside their ordinary
course of business, consistent with past practice, or in an original principal
amount in excess of $750,000, or renew, or commit to renew, any existing loans
in a principal amount in excess of $750,000, or enter into new loan transactions
subject to the requirements of Regulation O of the Federal Reserve Board, 12
C.F.R. ss. 215 (or the equivalent) in excess of $500,000 in the aggregate (each,
an "Insider Loan") without having provided prior written notice to BancorpSouth
of the persons to whom such Insider Loans are made and the terms and purposes of
such Insider Loans; or
(q) agree or commit to do any of the foregoing.
6.2. Covenants of BancorpSouth. During the period from the date of this
Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or with the prior express written
consent of Pinnacle, BancorpSouth and its Subsidiaries shall carry on their
respective businesses in the ordinary course consistent with past practice.
Without limiting the generality of the foregoing, and except as set forth in
Section 6.2 of the BancorpSouth Disclosure Schedule or as otherwise contemplated
by this Agreement or as expressly consented to in writing in advance by
Pinnacle, BancorpSouth shall not, and shall not permit any of its Subsidiaries
to:
(a) except as contemplated by Article III hereof, take any action that
is intended or may reasonably be expected to result in any of its
representations and warranties set forth in this Agreement being or becoming
untrue, or in any of the conditions to the Merger set forth in Article VIII not
being satisfied;
(b) take any action or enter into any agreement that could reasonably
be expected to jeopardize or materially delay the receipt of any Requisite
Regulatory Approval;
(c) change its methods of accounting in effect at December 31, 2000,
except in accordance with changes in GAAP or regulatory accounting principles as
concurred to by BancorpSouth's independent auditors; or
(d) agree or commit to do any of the foregoing.
6.3. Mutual Covenant. Each of Pinnacle and BancorpSouth shall cause the boards
of directors of each of Pinnacle's Subsidiaries and BancorpSouth Bank,
respectively, to consider and act to approve this Agreement promptly after the
date hereof and prior to the Closing Date.
ARTICLE VII. ADDITIONAL AGREEMENTS
7.1. Regulatory Matters.
(a) BancorpSouth and Pinnacle shall promptly prepare and file with the
SEC the Proxy Statement, and BancorpSouth shall promptly prepare and file with
the SEC the S-4, in which the Proxy Statement will be included as a prospectus.
Each of Pinnacle and BancorpSouth shall use its reasonable best efforts to have
the S-4 declared effective under the Securities Act as promptly as practicable
after such filing, and Pinnacle shall thereafter mail the Proxy Statement to its
shareholders as promptly as practicable. BancorpSouth shall also use its
reasonable best efforts to obtain all necessary state securities law or "Blue
Sky" permits and approvals required to carry out the transactions contemplated
by this Agreement.
A-27
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including, without limitation, the Holding Company Merger and the
Bank Merger). Pinnacle and BancorpSouth shall have the right to review in
advance, and to the extent practicable each will consult the other on, in each
case subject to applicable laws relating to the exchange of information, all the
information relating to Pinnacle or BancorpSouth, as the case may be, and any of
their respective Subsidiaries, which appears in any filing made with, or written
materials submitted to, any third party or any Governmental Entity in connection
with the transactions contemplated by this Agreement. In exercising the
foregoing right, each of the parties hereto shall act reasonably and as promptly
as practicable. The parties hereto agree that they will consult with each other
with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein.
(c) BancorpSouth and Pinnacle shall, upon request, furnish each other
with all information concerning themselves, their Subsidiaries, directors,
officers and shareholders and such other matters as may be reasonably necessary
or advisable in connection with the Proxy Statement, the S-4 or any other
statement, filing, notice or application made by or on behalf of BancorpSouth,
Pinnacle or any of their respective Subsidiaries to any Governmental Entity in
connection with the Merger and the other transactions contemplated by this
Agreement.
(d) BancorpSouth and Pinnacle shall promptly furnish each other with
copies of written communications received by BancorpSouth or Pinnacle, as the
case may be, or any of their respective Subsidiaries, Affiliates or Associates
(as such terms are defined in Rule 12b-2 under the Exchange Act as in effect on
the date of this Agreement) from, or delivered by any of the foregoing to, any
Governmental Entity in respect of the transactions contemplated hereby.
7.2. Access to Information.
(a) Upon reasonable notice and subject to applicable laws relating to
the exchange of information, Pinnacle shall, and shall cause each of its
Subsidiaries to, afford to the officers, employees, accountants, attorneys,
financial advisors and other representatives (each, a "Representative") of
BancorpSouth, access during normal business hours during the period prior to the
Effective Time to all of its properties, books, contracts, commitments, records,
officers, employees, accountants, counsel and other representatives and, during
such period, it shall, and shall cause its Subsidiaries to, make available to
BancorpSouth all information concerning its business, properties and personnel
as BancorpSouth may reasonably request. In addition, Pinnacle and each of its
Subsidiaries shall permit a Representative of BancorpSouth to have access to the
premises and observe the operations of Pinnacle or any of its Subsidiaries, as
the case may be, without interfering with the operations of Pinnacle or any of
its Subsidiaries and only during normal business hours, and to attend each
meeting of their respective Boards of Directors and committees thereof (other
than during discussions regarding this Agreement and the transactions
contemplated hereby). Neither Pinnacle nor any of its Subsidiaries shall be
required to provide access to or to disclose information where such access or
disclosure would reasonably violate or prejudice the rights of its customers or
its relationship with such customers, reasonably jeopardize any attorney-client
privilege or contravene any law, rule, regulation, order, judgment, decree,
fiduciary duty or binding agreement entered into prior to the date of this
Agreement. Pinnacle shall identify the nature of any such limitation on access
and disclosure, and the parties hereto will make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply.
A-28
(b) BancorpSouth agrees that it will not use Confidential Information
related to Pinnacle or its Subsidiaries or their predecessor entities,
subsidiaries or affiliates for any purpose other than assisting BancorpSouth in
consummating the transactions contemplated hereby. BancorpSouth agrees not to
disclose or allow disclosure to others of any such Confidential Information,
except that BancorpSouth may disclose Confidential Information to its directors,
officers, employees, partners, affiliates, agents, advisors or representatives
(collectively, "BancorpSouth Representatives"), to the extent necessary to
permit such BancorpSouth Representatives to assist BancorpSouth in consummating
the transactions contemplated hereby; provided, however, that BancorpSouth shall
require each such BancorpSouth Representative to be bound by the terms of this
Section to the same extent as if they were parties hereto, and BancorpSouth
shall be responsible for any breach of this Section by any of the BancorpSouth
Representatives. In addition, BancorpSouth agrees that it will not make any
disclosure that it is having or has had discussions concerning the transactions
contemplated hereby or any terms which have been or are being discussed, that it
has received Confidential Information or that it is considering the transactions
contemplated hereby; provided that it may make such disclosure if it has
received the written opinion of its counsel that such disclosure must be made by
it in order that it not commit a violation of law and, prior to such disclosure,
it promptly advises and consults with Pinnacle and its legal counsel concerning
the information it proposes to disclose. In the event that BancorpSouth or
anyone to whom BancorpSouth transmits any Confidential Information in accordance
with this Section is requested or required (by deposition, interrogatories,
requests for information or documents in legal proceedings, subpoenas, civil
investigative demand or similar process), in connection with any proceeding, to
disclose any Confidential Information, BancorpSouth will give Pinnacle prompt
written notice of such request or requirement so that Pinnacle may seek an
appropriate protective order or other remedy and/or waive compliance with the
provisions of this Section, and BancorpSouth will cooperate with Pinnacle to
obtain such protective order. In the event that such protective order or other
remedy is not obtained or Pinnacle waives compliance with the relevant
provisions of this Section, BancorpSouth (or such other persons to whom such
request is directed) will furnish only that portion of the Confidential
Information which, in the written opinion of BancorpSouth's counsel, is legally
required to be disclosed and, upon Pinnacle's request, will use BancorpSouth's
best efforts to obtain assurances that confidential treatment will be accorded
to such information.
(c) Pinnacle and its Subsidiaries agree that they will not use
Confidential Information related to BancorpSouth or its Subsidiaries or their
predecessor entities, subsidiaries or affiliates for any purpose other than
assisting Pinnacle in consummating the transactions contemplated hereby.
Pinnacle and its Subsidiaries agree not to disclose or allow disclosure to
others of any such Confidential Information, except that Pinnacle may disclose
Confidential Information to its directors, officers, employees, partners,
affiliates, agents, advisors or representatives (collectively, "Pinnacle
Representatives") only upon obtaining the prior written consent of BancorpSouth
with respect to any disclosure of such information to a particular Pinnacle
Representative, to the extent necessary to permit such Pinnacle Representatives
to assist Pinnacle in consummating the transactions contemplated hereby;
provided, however, that Pinnacle shall require each such Pinnacle Representative
to be bound by the terms of this Section to the same extent as if they were
parties hereto, and Pinnacle shall be responsible for any breach of this Section
by any of the Pinnacle Representatives. In addition, Pinnacle and their
Subsidiaries agree that they will not make any disclosure that they are having
or have had discussions concerning the transactions contemplated hereby or any
terms which have been or are being discussed, that they have received
Confidential Information or that they are considering the transactions
contemplated hereby; provided that they may make such disclosure if they have
received the written opinion of their counsel that such disclosure must be made
by them in order that they not commit a violation of law and, prior to such
disclosure, they promptly advise and consult with BancorpSouth and its legal
counsel concerning the information they propose to disclose. In the event that
Pinnacle or one of its Subsidiaries or anyone to whom Pinnacle or one of its
Subsidiaries transmits any Confidential Information in accordance
A-29
with this Section is requested or required (by deposition, interrogatories,
requests for information or documents in legal proceedings, subpoenas, civil
investigative demand or similar process), in connection with any proceeding, to
disclose any Confidential Information, Pinnacle will give BancorpSouth prompt
written notice of such request or requirement so that BancorpSouth may seek an
appropriate protective order or other remedy and/or waive compliance with the
provisions of this Section, and Pinnacle will cooperate with BancorpSouth to
obtain such protective order. In the event that such protective order or other
remedy is not obtained or BancorpSouth waives compliance with the relevant
provisions of this Section, Pinnacle (or such other persons to whom such request
is directed) will furnish only that portion of the Confidential Information
which, in the written opinion of Pinnacle's counsel, is legally required to be
disclosed and, upon BancorpSouth's request, will use Pinnacle's best efforts to
obtain assurances that confidential treatment will be accorded to such
information.
(d) For purposes of this Section, "Confidential Information" will be
deemed to include: (a) any information (including any technology, know-how,
patent application, test result, research study, business plan, budget, forecast
or projection) relating directly or indirectly to the business of Pinnacle or
BancorpSouth, respectively, any predecessor entity or any subsidiary or other
affiliate of Pinnacle or BancorpSouth (whether prepared by Pinnacle or
BancorpSouth or by any other person and whether or not in written form) that is,
has been or will be made available to another party hereto or its Representative
by or on behalf of Pinnacle or BancorpSouth or any Representative of Pinnacle or
BancorpSouth; (b) any memorandum, analysis, compilation, summary,
interpretation, study, report or other document, record or material that is, has
been or will be prepared by or for Pinnacle or BancorpSouth or any
Representative of Pinnacle or BancorpSouth and that contains, reflects,
interprets or is based directly or indirectly upon any information of the type
referred to in clause (a) of this sentence; (c) the existence and terms of this
Agreement and the proposed terms of any other agreement contemplated hereby and
the fact that information of the type referred to in clause (a) of this sentence
has been made available to Pinnacle or BancorpSouth or any of their respective
Representatives; and (d) the fact that discussions or negotiations are or may be
taking place with respect to a possible transaction involving Pinnacle and
BancorpSouth and the proposed terms of any such transaction. "Confidential
Information" will not be deemed to include: (i) any information that is or
becomes generally available to the public other than as a direct or indirect
result of the disclosure of any of such information by either a party hereto or
by any of such party's Representatives in violation of the terms hereof; (ii)
any information that was in a disclosing party's possession prior to the time it
was first made available to such party or any of such party's Representatives by
or on behalf of the other parties hereto or any of the other party's
Representatives, provided that the source of such information was not and is not
bound by any contractual or other obligation of confidentiality to the person to
whom such information relates or any other person with respect to any of such
information; or (iii) any information that becomes available on a
non-confidential basis from a source other than the other parties hereto,
provided that such source is not bound by any contractual or other obligation of
confidentiality to the party to whom the information relates or any other person
with respect to any of such information.
(e) If the transactions contemplated hereby are not consummated or if,
at any time, either Pinnacle or BancorpSouth (each a "Requesting Party")
requests, the other party and its Representatives will promptly deliver to the
Requesting Party any Confidential Information (and all copies thereof) obtained
or possessed by such other party or any of its Representatives. Notwithstanding
the delivery to the Requesting Party of Confidential Information pursuant to
this Section, the parties and their Representatives will continue to be bound by
their confidentiality obligations and other obligations under this Section.
(f) Notwithstanding anything in any other agreement to the contrary, no
investigation by BancorpSouth or its Representatives shall affect the
representations, warranties, covenants or
A-30
agreements of Pinnacle set forth herein, and the parties shall remain
responsible to the extent provided herein, subject to Section 10.2.
(g) The parties agree that the provisions of this Section 7.2 shall
supersede any prior agreements between the parties with respect to the subject
matter hereof; provided however, that the provisions of the last paragraph on
page 2 of the Confidentiality Agreement, dated October 10, 2001, between
Pinnacle and BancorpSouth, shall survive the execution (or termination) of this
Agreement and remain in full force and effect for the term thereof.
7.3. Shareholder Meeting. Pinnacle shall take all steps in accordance with
applicable law necessary to duly call, give notice of, convene and hold a
meeting of its shareholders to be held as soon as is reasonably practicable
after the date on which the S-4 becomes effective for the purpose of voting upon
the approval and adoption of this Agreement. Pinnacle will, through its Board of
Directors, recommend to its shareholders approval of this Agreement and the
transactions contemplated hereby and such other matters as may be submitted to
its shareholders in connection with this Agreement; provided, however, that
Pinnacle's Board of Directors may submit this Agreement and the transactions
contemplated herein to its shareholders for approval without recommendation
pursuant to Section 4-27-1103 of the ABCA if Pinnacle's Board of Directors
determines in good faith that it must do so in order to comply with its
fiduciary duties.
7.4. Legal Conditions to Merger. Each of BancorpSouth and Pinnacle shall, and
shall cause its Subsidiaries to, use their reasonable best efforts (a) to take,
or cause to be taken, all actions necessary, proper or advisable to comply
promptly with all legal requirements which may be imposed on such party or its
Subsidiaries with respect to the Merger and, subject to the conditions set forth
in Article VIII hereof, to consummate the transactions contemplated by this
Agreement and (b) to obtain (and to cooperate with the other party to obtain)
any consent, authorization, order or approval of, or any exemption by, any
Governmental Entity and any other third party which is required to be obtained
by Pinnacle or BancorpSouth or any of their respective Subsidiaries in
connection with the Merger and the other transactions contemplated by this
Agreement, and to comply with the terms and conditions of such consent,
authorization, order or approval.
7.5. Affiliates. Pinnacle shall use its reasonable best efforts to cause each
director, executive officer and other person who is an "affiliate" (for purposes
of Rule 145 under the Securities Act) of such party to deliver to BancorpSouth,
as soon as practicable after the date of this Agreement, a written agreement, in
the form of Exhibit 7.5.
7.6. NYSE Listing. BancorpSouth shall make all filings required of it to cause
the shares of BancorpSouth Common Stock to be issued in the Merger to be
approved for listing on the NYSE, subject to official notice of issuance, as of
the Effective Time.
7.7. Employee Benefit Plans; Existing Agreements.
(a) As of the Effective Time, to the extent permissible under the terms
of the BancorpSouth Plans, the employees of Pinnacle and its Subsidiaries (the
"Pinnacle Employees") shall be eligible to participate in BancorpSouth's
employee benefit plans in which similarly situated employees of BancorpSouth or
BancorpSouth Bank participate, to the same extent as similarly situated
employees of BancorpSouth or BancorpSouth Bank (it being understood that
inclusion of Pinnacle Employees in BancorpSouth's employee benefit plans may
occur at different times with respect to different plans).
(b) With respect to each BancorpSouth Plan that is an "employee benefit
plan," as defined in section 3(3) of ERISA, for purposes of determining
eligibility to participate, and entitlement to benefits, including for severance
benefits and vacation entitlement (but not for vesting
A-31
or accrual of pension benefits) service with Pinnacle (or predecessor employers
to the extent Pinnacle provides past service credit) shall be treated as service
with BancorpSouth; provided, however, that such service shall not be recognized
to the extent that such recognition would result in a duplication or increase of
benefits. Such service also shall apply for purposes of satisfying any waiting
periods, evidence of insurability requirements, or the application of any
preexisting condition limitations. Each BancorpSouth Plan shall waive
pre-existing condition limitations to the same extent waived under the
applicable Pinnacle Plan. Pinnacle Employees shall be given credit for amounts
paid under a corresponding benefit plan during the same period for purposes of
applying deductibles, copayments and out-of-pocket maximums as though such
amounts had been paid in accordance with the terms and conditions of the
BancorpSouth Plan.
(c) As of the Effective Time, except as described in Section 8.2(d)
below and except as otherwise agreed, BancorpSouth shall assume and honor and
shall cause the appropriate Subsidiaries of BancorpSouth to assume and to honor
in accordance with their terms all employment, severance and other compensation
agreements and arrangements existing prior to the execution of this Agreement
which are between Pinnacle or any of its Subsidiaries and any director, officer
or employee thereof and which have been disclosed in the Pinnacle Disclosure
Schedule.
(d) BancorpSouth and Pinnacle agree to cooperate and take all
reasonable actions to effect the merger of any employee benefit plan that is
intended to be qualified under section 401(a) of the Code into the appropriate
tax-qualified retirement plan of BancorpSouth after the Merger is completed, so
that such plan merger satisfies the requirements of section 414(l) of the Code;
provided, however, that BancorpSouth shall not be obligated to effect such a
merger of a plan unless such plan is fully funded under section 412 of the Code
and section 302 of ERISA, to the extent applicable, and the merger would not
jeopardize the tax-qualified status of any BancorpSouth Plan.
(e) Notwithstanding the preceding paragraph, if requested by
BancorpSouth, prior to the Effective Time, Pinnacle shall freeze, terminate,
amend or take other action with respect to any Plan that BancorpSouth, in its
sole discretion, deems advisable and not inconsistent with this Agreement, and
provide all required notices to participants and appropriate governmental
agencies.
7.8. Indemnification of Pinnacle Directors and Officers.
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit, proceeding or
investigation in which any person who is now, or has been at any time prior to
the date of this Agreement, or who becomes prior to the Effective Time, a
director or officer of Pinnacle or any of its Subsidiaries (the "Indemnified
Parties") is, or is threatened to be, made a party based in whole or in part on,
or arising in whole or in part out of, or pertaining to (i) the fact that he or
she is or was a director or officer of Pinnacle, any of the Subsidiaries of
Pinnacle or any of their respective predecessors or affiliates or (ii) this
Agreement or any of the transactions contemplated hereby, whether in any case
asserted or arising before or after the Effective Time, the parties hereto agree
to cooperate and use their best efforts to defend against and respond thereto.
It is understood and agreed that, after the Effective Time, BancorpSouth shall
indemnify and hold harmless, as and to the fullest extent permitted by law, each
such Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorney's fees and expenses in advance of the
final disposition of any claim, suit, proceeding or investigation to each
Indemnified Party to the fullest extent permitted by law upon receipt of any
undertaking required by applicable law), judgments, fines and amounts paid in
settlement in connection with any such threatened or actual claim, action, suit,
proceeding or investigation. In the event of any such threatened or actual
claim, action, suit, proceeding or investigation (whether asserted or arising
before or after the Effective Time), the Indemnified Parties may retain counsel
reasonably satisfactory to them after consultation with BancorpSouth; provided,
however, that (1)
A-32
BancorpSouth shall have the right to assume the defense thereof and, upon such
assumption, BancorpSouth shall not be liable to any Indemnified Party for any
legal expenses of other counsel or any other expenses subsequently incurred by
any Indemnified Party in connection with the defense thereof, except that if
BancorpSouth elects not to assume such defense or if counsel for the Indemnified
Parties reasonably advises that there are issues which raise conflicts of
interest between BancorpSouth and the Indemnified Parties, the Indemnified
Parties may retain counsel reasonably satisfactory to them after consultation
with BancorpSouth, and BancorpSouth shall pay the reasonable fees and expenses
of such counsel for the Indemnified Parties, (2) BancorpSouth shall in all cases
be obligated pursuant to this paragraph to pay for only one firm of counsel for
all Indemnified Parties (unless an ethical conflict of interest arises for such
firm of counsel in representing all Indemnified Parties), (3) BancorpSouth shall
not be liable for any settlement effected without its prior written consent
(which consent shall not be unreasonably withheld) and (4) BancorpSouth shall
have no obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final and nonappealable, that indemnification of such Indemnified
Party in the manner contemplated hereby is prohibited by applicable law. Any
Indemnified Party wishing to claim Indemnification under this Section 7.8, upon
learning of any such claim, action, suit, proceeding or investigation, shall
promptly notify BancorpSouth thereof; provided that the failure to so notify
shall not affect the obligations of BancorpSouth under this Section 7.8 except
to the extent such failure to notify materially prejudices BancorpSouth.
BancorpSouth's obligations under this Section 7.8 shall continue in full force
and effect without time limit from and after the Effective Time.
(b) BancorpSouth shall cause each person serving as a director or
officer of Pinnacle immediately prior to the Effective Time to be covered for a
period of three years from the Effective Time by the directors' and officers'
liability insurance policy maintained by Pinnacle (provided that BancorpSouth
may substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are not less advantageous than such
policy) with respect to acts or omissions occurring prior to the Effective Time
which were committed by such officers and directors in their capacity as such;
provided, however, that in no event shall BancorpSouth be required to expend on
an annual basis more than 150% of the current amount expended by Pinnacle (the
"Insurance Amount") to maintain or procure insurance coverage, and further
provided that if BancorpSouth is unable to maintain or obtain the insurance
called for by this Section 7.8(b), BancorpSouth shall use all reasonable efforts
to obtain as much comparable insurance as is available for the Insurance Amount.
(c) In the event BancorpSouth or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of
BancorpSouth assume the obligations set forth in this Section.
(d) The provisions of this Section 7.8 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
7.9. Additional Agreements. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement and their respective Subsidiaries shall take all such necessary action
as may be reasonably requested by BancorpSouth.
A-33
7.10. Coordination of Dividends. After the date of this Agreement each of
BancorpSouth and Pinnacle shall coordinate with the other the declaration of any
dividends in respect of Pinnacle Common Stock and the record dates and payments
dates relating thereto, it being the intention of the parties that the holders
of Pinnacle Common Stock may (to the extent allowed by law and declared) receive
one, but not more than one, dividend for any calendar quarter or other period
with respect to their shares of Pinnacle Common Stock and any shares of
BancorpSouth Common Stock any holder of Pinnacle Common Stock receives in
exchange thereof in the Merger.
7.11. Reasonable Best Efforts. Subject to the terms and conditions of this
Agreement, each of BancorpSouth and Pinnacle agrees to use its respective
reasonable best efforts in good faith to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
desirable, or advisable under applicable laws, so as to permit consummation of
the Merger as promptly as practicable and otherwise to enable consummation of
the transactions contemplated hereby and shall cooperate fully with the other
party hereto to that end.
7.12. Tax-Free Qualification. Each of BancorpSouth and Pinnacle shall use its
reasonable best efforts not to, and shall use its reasonable best efforts not to
permit any of its Subsidiaries to, take any action that would reasonably be
expected to prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
ARTICLE VIII. CONDITIONS PRECEDENT
8.1. Conditions to Each Party's Obligation to Effect the Merger. The respective
obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Shareholder Approval. This Agreement shall have been approved and
adopted by the requisite votes of the shareholders of Pinnacle under applicable
law.
(b) Listing of Shares. The shares of BancorpSouth Common Stock which
shall be issued to the shareholders of Pinnacle upon consummation of the Merger
shall have been authorized for listing on the NYSE, subject to official notice
of issuance.
(c) Other Approvals. All regulatory approvals required to consummate
the transactions contemplated hereby (including the Merger) shall have been
obtained and shall remain in full force and effect and all statutory waiting
periods in respect thereof shall have expired (all such approvals and the
expiration of all such waiting periods being referred to herein as the
"Requisite Regulatory Approvals").
(d) S-4. The S-4 shall have become effective under the Securities Act
and no stop order suspending the effectiveness of the S-4 shall have been issued
and no proceedings for that purpose shall have been initiated or threatened by
the SEC.
(e) Minimum Age Requirements. All minimum age requirements with respect
to Pinnacle Bank arising under Section 23-48-503(a)(2) of the ABA shall have
lapsed.
(f) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Merger shall be in effect. No statute, rule, regulation, order, injunction or
decree shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits, restricts or makes illegal consummation of
the Merger.
A-34
8.2. Conditions to Obligations of BancorpSouth. The obligation of BancorpSouth
to effect the Merger is also subject to the satisfaction or waiver by
BancorpSouth at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Pinnacle set forth in Sections 4.2 and 4.8 of this Agreement shall be true
and correct in all respects without giving effect to Section 3.2 of this
Agreement, and those set forth elsewhere in this Agreement shall be true and
correct after giving effect to Section 3.2, in each case as of the date of this
Agreement and (except to the extent such representations and warranties speak
only as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date. BancorpSouth shall have received a certificate signed on
behalf of Pinnacle by the Chief Executive Officer and the Chief Financial
Officer of Pinnacle to the foregoing effect.
(b) Performance of Obligations of Pinnacle. Pinnacle shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and BancorpSouth shall
have received a certificate signed on behalf of Pinnacle by the Chief Executive
Officer and the Chief Financial Officer of Pinnacle to such effect.
(c) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
(d) Employment Agreements. The written employment agreements with the
employees listed on Schedule 3.2(b) (collectively, the "Employment Agreements"),
executed as of the date hereof, shall remain in full force and effect, and
BancorpSouth shall have no reasonable basis to believe that there is a currently
existing or anticipated breach of such Employment Agreements by any such
employees.
(e) Federal Tax Opinion. BancorpSouth shall have received an opinion
from Waller Lansden Dortch & Davis, PLLC, counsel to BancorpSouth
("BancorpSouth's Counsel"), in form and substance reasonably satisfactory to
BancorpSouth, dated the Effective Time, substantially to the effect that, on the
basis of facts, representations and assumptions set forth in such opinion which
are consistent with the state of facts existing at the Effective Time, the
Holding Company Merger will be treated as a reorganization within the meaning of
Section 368(a) of the Code and that BancorpSouth and Pinnacle will each be a
party to that reorganization. In rendering such opinion, BancorpSouth's Counsel
may require and rely upon representations and covenants, including those
contained in certificates of officers of BancorpSouth, Pinnacle and others,
reasonably satisfactory in form and substance to such counsel. BancorpSouth and
Pinnacle will cooperate with each other and BancorpSouth's Counsel in executing
and delivering to BancorpSouth's Counsel customary representations letters in
connection with such opinion.
8.3. Conditions to Obligations of Pinnacle. The obligation of Pinnacle to effect
the Merger is also subject to the satisfaction or waiver by Pinnacle at or prior
to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties
of BancorpSouth set forth in this Agreement shall be true and correct after
giving effect to Section 3.2 of this Agreement as of the date of this Agreement
and (except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the Closing
Date. Pinnacle shall have received a certificate signed on behalf of
BancorpSouth by the Chief Executive Officer and the Chief Financial Officer of
BancorpSouth to the foregoing effect.
(b) Performance of Obligations of BancorpSouth. BancorpSouth shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior
A-35
to the Closing Date, and Pinnacle shall have received a certificate signed on
behalf of BancorpSouth by the Chief Executive Officer and the Chief Financial
Officer of BancorpSouth to such effect.
(c) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
(d) Federal Tax Opinion. Pinnacle shall have received an opinion from
Kutak Rock LLP ("Pinnacle's Counsel"), or other counsel reasonably satisfactory
to Pinnacle, in form and substance reasonably satisfactory to Pinnacle, dated
the Effective Time, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts existing at the Effective Time, the Holding Company
Merger will be treated as a reorganization within the meaning of Section 368(a)
of the Code and that BancorpSouth and Pinnacle will each be a party to that
reorganization. In rendering such opinion, Pinnacle's Counsel may require and
rely upon representations and covenants, including those contained in
certificates of officers of BancorpSouth, Pinnacle and others, reasonably
satisfactory in form and substance to such counsel. BancorpSouth and Pinnacle
will cooperate with each other and Pinnacle's Counsel in executing and
delivering to Pinnacle's Counsel customary representations letters in connection
with such opinion.
ARTICLE IX. TERMINATION AND AMENDMENT
9.1. Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the shareholders of Pinnacle:
(a) By mutual consent of Pinnacle and BancorpSouth in a written
instrument, if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board;
(b) By either BancorpSouth or Pinnacle upon written notice to the other
party (i) 60 days after the date on which any request or application for a
Requisite Regulatory Approval shall have been denied or withdrawn at the request
or recommendation of the Governmental Entity which must grant such Requisite
Regulatory Approval, unless within the 60-day period following such denial or
withdrawal a petition for rehearing or an amended application has been filed
with the applicable Governmental Entity; provided, however, that no party shall
have the right to terminate this Agreement pursuant to this Section 9.1(b)(i) if
such denial or request or recommendation for withdrawal shall be due to the
failure of the party seeking to terminate this Agreement to perform or observe
the covenants and agreements of such party set forth herein or (ii) if any
Governmental Entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the Merger;
(c) By BancorpSouth or Pinnacle upon written notice to the other party
if the Merger shall not have been consummated on or before April 30, 2002,
unless the failure of the Closing to occur by such date shall be due to the
failure of the party seeking to terminate this Agreement to perform or observe
the covenants and agreements of such party set forth herein;
(d) By BancorpSouth upon written notice to Pinnacle (provided that
BancorpSouth may not terminate if it is in material breach of any of its
obligations under Section 7.3) if any approval of the shareholders of Pinnacle
required for the consummation of the Merger shall not have been obtained by
reason of the failure to obtain the required vote at a respective duly held
meeting of such shareholders or at any adjournment or postponement thereof;
A-36
(e) By either BancorpSouth or Pinnacle upon written notice to the other
party (provided that the terminating party is not then in breach of any
representation or warranty (after giving effect to Section 3.2) or material
breach of any covenant or other agreement contained herein) in the event of
either: (i) if any of the representations or warranties set forth in this
Agreement on the part of the other party hereto shall be or become untrue or
incorrect (after giving effect to Section 3.2 hereof as provided in Article
VIII), and such representation is either incapable, by its nature, of being
cured or is not cured within 30 calendar days following the giving of written
notice thereof to the party making such representation; or (ii) a material
breach by the other party of any of the covenants or agreements contained in
this Agreement, and such breach is either incapable, by its nature, of being
cured or is not cured within 30 calendar days following the giving of written
notice thereof to such other party; or
(f) By BancorpSouth upon written notice to Pinnacle if Pinnacle's Board
of Directors shall have failed to recommend in the Proxy Statement that
Pinnacle's shareholders approve and adopt this Agreement, or Pinnacle's Board of
Directors shall have withdrawn, modified or changed, in a manner adverse to
BancorpSouth, its approval or recommendation of this Agreement and the
transactions contemplated hereby, or if Pinnacle enters into any letter of
intent, agreement in principle, or acquisition or similar agreement related or
with respect to any Acquisition Proposal.
9.2. Effect of Termination. In the event of termination of this Agreement by
either BancorpSouth or Pinnacle as provided in Section 9.1, this Agreement shall
forthwith become void and have no effect except (i) Sections 7.2(b)-(e) and (g),
9.2 and 10.3 shall survive any termination of this Agreement (ii) that
notwithstanding anything to the contrary contained in this Agreement, no party
shall be relieved or released from any liabilities or damages arising out of its
breach of any provision of this Agreement, and Pinnacle shall not be relieved or
released from any obligation to make payment to BancorpSouth pursuant to Section
6.1(d) hereof.
9.3. Amendment. Subject to compliance with applicable law, this Agreement may be
amended by the parties hereto, by action taken or authorized by their respective
Boards of Directors, at any time before or after approval of the matters
presented in connection with the Merger by the shareholders of Pinnacle;
provided, however, that after any approval of the transactions contemplated by
this Agreement by Pinnacle's shareholders, there may not be, without further
approval of such shareholders, any amendment of this Agreement which reduces the
amount or changes the form of the consideration to be delivered to such
shareholders hereunder other than as contemplated by this Agreement. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
9.4. Extension; Waiver. At any time prior to the Effective Time, each of the
parties hereto, by action taken or authorized by its Board of Directors, may, to
the extent legally allowed, (a) extend the time for the performance of any of
the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions of the other party contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in a written instrument signed on behalf of
such party, but such extension or waiver or failure to insist on strict
compliance with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE X. GENERAL PROVISIONS
10.1. Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. (Central
Time) on the first day which is at least two business days after the
satisfaction or waiver (subject to applicable law) of the last to occur of the
A-37
conditions set forth in Article VIII hereof (other than those conditions which
relate to actions to be taken at the Closing) (the "Closing Date"), at the
offices of Waller Lansden Dortch & Davis, PLLC, 511 Union Street, Suite 2100,
Nashville, Tennessee 37219, or at such other time, date and place as is agreed
to by the parties hereto.
10.2. Nonsurvival of Representations, Warranties and Agreements. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement (other than Section 10.3
hereof) shall survive the Effective Time, except for those covenants and
agreements contained herein and therein which by their terms apply in whole or
in part after the Effective Time.
10.3. Expenses. All costs and expenses, including legal, accounting and
financial advisory fees and expenses, incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses.
10.4. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to BancorpSouth, to: BancorpSouth, Inc.
One Mississippi Plaza
Tupelo, Mississippi 38804
Attention: Chief Executive Officer
Facsimile: (662) 680-2006
with a copy (which shall not
constitute notice) to: Waller Lansden Dortch & Davis,
A Professional Limited Liability Company
511 Union Street, Suite 2100
Nashville, Tennessee 37219
Attention: Ralph W. Davis, Esq.
Facsimile: (615) 244-6804
and
(b) if to Pinnacle, to: Pinnacle Bancshares, Inc.
2610 Cantrell Road
Little Rock, Arkansas 72202
Attention: Robert Althoff
Facsimile: (501) 614-5005
with a copy (which shall not
constitute notice) to: Kutak Rock LLP
Suite 1100, 425 West Capitol Avenue
Little Rock, Arkansas 72201-3409
Attention: Jeffrey J. Gearhart, Esq.
Facsimile: (501) 975-3001
10.5. Interpretation.
(a) In this Agreement, unless a contrary intention appears, (i) the
words "herein," "hereof" and "hereunder" and other words of similar import refer
to this Agreement as a whole and
A-38
not to any particular Article, Section or other subdivision, and (ii) when a
reference is made in this Agreement to Articles, Sections, Exhibits or
Schedules, such reference shall be to an Article, Section of or Exhibit or
Schedule to this Agreement, as applicable. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." The phrases "the date of this
Agreement", "the date hereof" and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to November 14, 2001. Unless the
context otherwise requires, when used in this Agreement, (i) the singular shall
include the plural, the plural shall include the singular, and all nouns,
pronouns and any variations thereof shall be deemed to refer to the masculine,
feminine or neuter, as the identity of the person or persons may require, and
(ii) the term "or" shall mean "and/or." For purposes of this Agreement,
"knowledge" means, with respect to an individual, such individual is actually
aware, after reasonable inquiry, of the particular fact, matter, circumstance or
other item, and, with respect to any party, entity or other person other than an
individual, any individual who is serving as a director, chairman, chief
executive officer, president, chief operating officer, chief financial officer,
chief accounting officer, controller, chief credit officer, general counsel,
senior or executive vice president, or regional chairman of such party, entity
or other person or other officer, regardless of title, thereof charged with or
responsible for the oversight of a particular area, department or function to
which the subject matter relates, has or at any time had "knowledge" of such
fact, matter, circumstance or other item. References to any document (including
this Agreement) are references to that document as amended, consolidated,
supplemented, novated or replaced by the parties from time to time. References
to any party to this Agreement shall include references to its respective
successors and permitted assigns. References to law are references to that law
as amended, consolidated, supplemented or replaced from time to time, and shall
include references to any constitutional provision, treaty, decree, convention,
statute, act, regulation, rule, ordinance, subordinate legislation, rule of
common law and of equity and judgment and shall include the requirements of any
applicable stock exchange. References to a judgment shall include references to
any order, injunction, decree, determination or award of any court or tribunal.
References to any Governmental Entity or Regulatory Agency include any successor
to that Governmental Entity or Regulatory Agency.
(b) The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The parties hereto have each negotiated the
terms hereof, reviewed this Agreement carefully, and discussed it with their
respective legal counsel. It is the intent of the parties that each word, phrase
and sentence and other part hereof shall be given its plain meaning. No
provision of this Agreement shall be interpreted or construed against any party
hereto solely because such party or its legal representative drafted such
provision.
10.6. Defined Terms. Certain terms used in this Agreement have the meanings
ascribed thereto herein, and shall be applicable to the singular and the plural
forms of such terms, except as otherwise provided herein.
10.7. Counterparts. This Agreement may be executed in counterparts, all of which
shall be considered one and the same instrument and shall become effective when
counterparts have been signed by each of the parties and delivered to the other
party hereto, it being understood that all parties need not sign the same
counterpart.
10.8. Entire Agreement. This Agreement (including the schedules, exhibits,
documents and instruments referred to herein) constitutes the entire agreement
and, except as specifically provided herein, supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
10.9. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Mississippi, without regard to the
conflicts of laws principles of any jurisdiction.
A-39
The parties agree that the venue for resolution of any dispute arising out of
this Agreement shall be a court of competent jurisdiction in Mississippi.
10.10. Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that the provisions contained in this Agreement
were not performed in accordance with its specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions thereof in any court of the United States
or any state having jurisdiction, without having to post bond therefor or prove
actual damages, this being in addition to any other remedy to which they are
entitled at law or in equity.
10.11. Severability. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
10.12. Publicity. Except as otherwise required by law or the rules of the NYSE,
so long as this Agreement is in effect, neither BancorpSouth nor Pinnacle shall,
or shall permit any of its Subsidiaries to, issue or cause the publication of
any press release or other public announcement with respect to, or otherwise
make any public statement concerning, the transactions contemplated by this
Agreement without the consent of the other party, which such consent shall not
be unreasonably withheld or delayed.
10.13. Assignment; Successors; Third Party Beneficiaries. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns. Except as otherwise
expressly provided herein, this Agreement (including the documents and
instruments referred to herein) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
[THE FOLLOWING PAGE IS THE SIGNATURE PAGE.]
A-40
IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written for themselves and their respective
Subsidiaries.
BANCORPSOUTH, INC.
By: /s/ Aubrey S. Patterson
-------------------------------------
Aubrey B. Patterson
Chairman and Chief Executive Officer
PINNACLE BANCSHARES, INC.
By: /s/ Robert M. Althoff
-------------------------------------
Robert M. Althoff
President and Chief Executive Officer
A-41
ANNEX B
ARKANSAS BUSINESS CORPORATION ACT OF 1987
SUBCHAPTER 13
DISSENTERS' RIGHTS
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
4-27-1301. DEFINITIONS.
In this subchapter:
1. "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer;
2. "Dissenter" means a shareholder who is entitled to dissent from
corporate action under ss. 4-27-1302 and who exercises that right when and in
the manner required by ss.ss. 4-27-1320 - 4-27-1328;
3. "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable;
4. "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances;
5. "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation;
6. "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder;
7. "Shareholder" means the record shareholder or the beneficial
shareholder.
4-27-1302. RIGHT OF DISSENT.
A. A shareholder is entitled to dissent from and obtain payment of the
fair value of his shares in the event of any of the following corporate actions:
1. Consummation of a plan of merger to which the corporation is a party:
(i) If shareholder approval is required for the merger by
ss. 4-27-1103 or the articles of incorporation and the shareholder is
entitled to vote on the merger; or
(ii) If the corporation is a subsidiary that is merged with its
parent under ss. 4-27-1104;
2. Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan;
B-1
3. Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
(1) year after the date of sale;
4. An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) Alters or abolishes a preferential right of the shares;
(ii) Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares;
(iii) Alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities;
(iv) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights; or
(v) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under ss. 4-27-604; or
5. Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
B. A shareholder entitled to dissent and obtain payment for his shares
under this subchapter may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
4-27-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A. A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one (1) person and notifies the corporation in writing
of the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
B. A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
1. He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
2. He does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.
B-2
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
4-27-1320. NOTICE OF DISSENTERS' RIGHTS.
A. If proposed corporate action creating dissenters' rights under
ss. 4-27-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this chapter and be accompanied by a copy of this chapter.
B. If corporate action creating dissenters' rights under ss. 4-27-1302 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in ss. 4-27-1322.
4-27-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
A. If proposed corporate action creating dissenters' rights under
ss. 4-27-1302 is submitted to a vote at a shareholders' meeting, a shareholder
who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action is
effectuated; and
(2) Must not vote his shares in favor of the proposed action.
B. A shareholder who does not satisfy the requirements of subsection A. of
this section is not entitled to payment for his shares under this subchapter.
4-27-1322. DISSENTERS' NOTICE.
A. If proposed corporate action creating dissenters' rights under
ss. 4-27-1302 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of ss. 4-27-1321.
B. The dissenters' notice must be sent no later than ten (10) days after
the corporate action was taken, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenter's rights
certify whether or not he acquired beneficial ownership of the shares before
that date;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty (30) nor more than sixty (60)
days after the date the notice required by subsection A. of this section is
delivered; and
(5) Be accompanied by a copy of this subchapter.
B-3
4-27-1323. DUTY TO DEMAND PAYMENT.
A. A shareholder sent a dissenters' notice described in ss. 4-27-1322 must
demand payment, certify whether he acquired beneficial ownership of the shares
before the date required to be set forth in the dissenters' notice pursuant to
ss. 4-27-1322B.3, and deposit his certificates in accordance with the terms of
the notice.
B. The shareholder who demands payment and deposits his share certificates
under subsection A. of this section retains all other rights of a shareholder
until these rights are cancelled or modified by the taking of the proposed
corporate action.
C. A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this subchapter.
4-27-1324. SHARE RESTRICTIONS.
A. The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under ss. 4-27-1326.
B. The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
4-27-1325. PAYMENT.
A. Except as provided in ss. 4-27-1327, as soon as the proposed corporate
action is taken, or upon receipt of a payment demand, the corporation shall pay
each dissenter who complied with ss. 4-27-1323 the amount the corporation
estimates to be the fair value of his shares, plus accrued interest.
B. The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for that
year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment
under ss. 4-27-1328; and
(5) A copy of this subchapter.
4-27-1326. FAILURE TO TAKE ACTION.
A. If the corporation does not take the proposed action within sixty (60)
days after the date set for demanding payment and depositing share certificates,
the corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
B-4
B. If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under ss. 4-27-1322 and repeat the payment demand procedure.
4-27-1327. AFTER-ACQUIRED SHARES.
A. A corporation may elect to withhold payment required by ss. 4-27-1325
from a dissenter unless he was the beneficial owner of the shares before the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the terms of the proposed corporate action.
B. To the extent the corporation elects to withhold payment under
subsection A. of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenter's right to demand payment under ss.
4-27-1328.
4-27-1328. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
A. A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate (less any payment under ss. 4-27-1325), or reject the
corporation's offer under ss. 4-27-1327 and demand payment of the fair value of
his shares and interest due, if:
(1) The dissenter believes that the amount paid under ss. 4-27-1325 or
offered under ss. 4-27-1327 is less than the fair value of his shares or that
the interest due is incorrectly calculated;
(2) The corporation fails to make payment under ss. 4-27-1325 within
sixty (60) days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty (60) days after the date set for
demanding payment.
B. A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection A.
of this section within thirty (30) days after the corporation made or offered
payment for his shares.
JUDICIAL APPRAISAL OF SHARES
4-27-1330. COURT ACTION.
A. If a demand for payment under ss. 4-27-1328 remains unsettled, the
corporation shall commence a proceeding within sixty (60) days after receiving
the payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the proceeding
within the sixty-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
B. The corporation shall commence the proceeding in the circuit court of
the county where the corporation's principal office (or, if none in this state,
its registered office) is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the
B-5
proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
C. The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
D. The jurisdiction of the court in which the proceeding is commenced
under subsection B. of this section is plenary and exclusive. The court may
appoint one (1) or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
E. Each dissenter made a party to the proceeding is entitled to judgment:
(1) For the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the corporation; or
(2) For the fair value, plus accrued interest, of his after-acquired
shares for which the corporation elected to withhold payment under ss.
4-27-1327.
4-27-1331. COURT COSTS AND COUNSEL FEES.
A. The court in an appraisal proceeding commenced under ss. 4-27-1330
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under ss. 4-27-1328.
B. The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
1. Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the requirements
of ss.ss. 4-27-1320 - 4-27-1328; or
2. Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by this chapter.
C. If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
B-6
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
A. Restated Articles of Incorporation and Amended and Restated Bylaws.
BancorpSouth's Restated Articles of Incorporation provide that it will
indemnify, and upon request advance expenses to, any person (or his estate) who
was or is a party to any legal proceeding because he is or was a director,
officer or employee of BancorpSouth, or is or was serving at the request of
BancorpSouth as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, or other entity, against any liability
incurred in that proceeding (A) to the full extent permitted by the Mississippi
Business Corporation Act, and (B) despite the fact that such person did not meet
the standard of conduct specified in the Mississippi Business Corporation Act or
would be disqualified for indemnification under the Mississippi Business
Corporation Act, if a determination is made that (i) the person seeking
indemnity is fairly and reasonably entitled to indemnification in view of all of
the relevant circumstances, and (ii) his acts or omissions did not constitute
gross negligence or willful misconduct. A request for reimbursement or
advancement of expenses prior to final disposition of the proceeding must be
accompanied by an undertaking to repay the advances if it is ultimately
determined that he did not meet the requisite standard of conduct but it need
not be accompanied by an affirmation that the person seeking indemnity believed
he has met the standard of conduct.
BancorpSouth's Amended and Restated Bylaws provide that it will
indemnify officers and directors who are a party to any legal proceeding because
he is or was an officer or director of BancorpSouth against any expenses or
awards in connection therewith if he acted in good faith and in a manner he
reasonably believed to be in the best interest of BancorpSouth and, with respect
to any criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. BancorpSouth also will indemnify officers and directors who are a
party to any derivative suit with respect to BancorpSouth because that person is
or was an officer or director of BancorpSouth, against expenses incurred in
connection with that action unless he is found to have acted without good faith
and without that degree of care, diligence and skill which ordinarily prudent
men would exercise in similar circumstances and in like positions, unless,
despite such finding of liability, the court determines that he is entitled to
indemnity. The Amended and Restated Bylaws also provide that BancorpSouth may
(i) advance to the officer or director the expenses incurred in defending a
proceeding upon receipt of an undertaking that he will repay amounts advanced
unless it ultimately is determined that he is entitled to be indemnified, and
(ii) purchase and maintain insurance on behalf of an officer or director against
any liability arising out of his acting as such.
B. Mississippi Business Corporation Act.
In addition to the foregoing provisions of BancorpSouth's Restated
Articles of Incorporation and Amended and Restated Bylaws, directors, officers,
employees and agents of BancorpSouth and its subsidiaries may be indemnified by
BancorpSouth pursuant to Sections 79-4-8.50 through 79-4-8.57 and 79-4-8.59 of
the Mississippi Business Corporation Act.
II-1
C. Insurance.
BancorpSouth maintains and pays premiums on an insurance policy on
behalf of its officers and directors against liability asserted against or
incurred by such persons in or arising from their capacity as such.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
2.1 -- Agreement and Plan of Merger, dated as of November 14, 2001, between
BancorpSouth, Inc. and Pinnacle Bancshares, Inc.
5.1 -- Opinion of Riley, Ford, Caldwell & Cork, P.A.
8.1 -- Opinion of Waller Lansden Dortch & Davis, A Professional Limited
Liability Company, as to tax matters
8.2 -- Opinion of Kutak Rock LLP, as to tax matters
10.1 -- Mutual Termination of to be Assumed Prior Agreement, Retention
Incentive, Non-Competition/Non-Solicitation/Anti-Piracy and Employment
Agreement, dated as of November 14, 2001, between BancorpSouth, Inc.
and Robert M. Althoff
10.2 -- Mutual Termination of to be Assumed Executive Services Agreement,
Retention Incentive, Non-Competition/Non-Solicitation/Anti-Piracy and
Employment Agreement, dated as of November 14, 2001, between
BancorpSouth, Inc. and Dabbs Cavin
23.1 -- Consent of KPMG LLP
23.2 -- Consent of Waller Lansden Dortch & Davis, A Professional Limited
Liability Company (included in opinion filed as Exhibit 8.1)
23.3 -- Consent of Kutak Rock LLP (included in opinion filed as Exhibit 8.2)
23.4 -- Consent of Riley, Ford, Caldwell & Cork, P.A. (included in opinion
filed as Exhibit 5.1)
24.1 -- Power of Attorney (included on page II-5)
99.1 -- Form of Pinnacle Bancshares, Inc.'s Proxy Card
99.2 -- Form of Election Form and Letter of Transmittal
(b) Financial Statement Schedules
All schedules for which provision is made in the applicable
accounting regulations of the SEC are not required under the related
instructions or are inapplicable, and therefore have been omitted.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
II-2
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
Prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
Registration Statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
(2) 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 a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
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.
The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The Registrant undertakes that every prospectus: (i) that is filed
pursuant to the paragraph immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as 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.
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
II-3
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.
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.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Tupelo, State of Mississippi, on January 18, 2002.
BANCORPSOUTH, INC.
By: /s/ Aubrey B. Patterson
-----------------------------------
Aubrey B. Patterson
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Aubrey B. Patterson and L. Nash Allen,
Jr., and each of them, with full power to act without the other, his true and
lawful attorney-in-fact, as agent and with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacity, to sign any or all amendments to this post-effective amendment to the
registration statement and any Registration Statement relating to the same
offering as this Registration Statement that is to be effective upon filing
pursuant to Rule 4626 under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents in full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as they might or be in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, and their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment to the registration statement has been signed by the
following persons in the capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Aubrey B. Patterson Chairman of the Board, President, Chief January 18, 2002
--------------------------------- Executive Officer, Director (principal
Aubrey B. Patterson executive officer)
/s/ L. Nash Allen, Jr. Treasurer and Chief Financial Officer January 18, 2002
--------------------------------- (principal financial and accounting officer)
L. Nash Allen, Jr.
/s/ James V. Kelley President, Chief Operating Officer and Director January 18, 2002
---------------------------------
James V. Kelley
/s/ Shed H. Davis January 18, 2002
--------------------------------- Director
Shed H. Davis
/s/ Hassell H. Franklin Director January 18, 2002
---------------------------------
Hassell H. Franklin
II-5
Name Title Date
---- ----- ----
/s/ W.G. Holliman, Jr. Director January 15, 2002
---------------------------------
W.G. Holliman, Jr.
/s/ A. Douglas Jumper Director January 18, 2002
---------------------------------
A. Douglas Jumper
/s/ Turner O. Lashlee Director January 15, 2002
---------------------------------
Turner O. Lashlee
/s/ R. Madison Murphy Director January 18, 2002
---------------------------------
R. Madison Murphy
/s/ Robert C. Nolan Director January 15, 2002
---------------------------------
Robert C. Nolan
/s/ W. Cal Partee, Jr. Director January 15, 2002
---------------------------------
W. Cal Partee, Jr.
/s/ Alan W. Perry Director January 17, 2002
---------------------------------
Alan W. Perry
/s/ Travis E. Staub Director January 15, 2002
---------------------------------
Travis E. Staub
II-6
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
2.1 -- Agreement and Plan of Merger, dated as of November 14, 2001, between
BancorpSouth, Inc. and Pinnacle Bancshares, Inc.
5.1 -- Opinion of Riley, Ford, Caldwell & Cork, P.A.
8.1 -- Opinion of Waller Lansden Dortch & Davis, A Professional Limited
Liability Company, as to tax matters
8.2 -- Opinion of Kutak Rock LLP, as to tax matters
10.1 -- Mutual Termination of to be Assumed Prior Agreement, Retention Incentive,
Non-Competition/Non-Solicitation/Anti-Piracy and Employment Agreement,
dated as of November 14, 2001, between BancorpSouth, Inc. and
Robert M. Althoff
10.2 -- Mutual Termination of to be Assumed Executive Services Agreement,
Retention Incentive, Non-Competition/Non-Solicitation/Anti-Piracy and
Employment Agreement, dated as of November 14, 2001, among BancorpSouth,
Inc. and Dabbs Cavin
23.1 -- Consent of KPMG LLP
23.2 -- Consent of Waller Lansden Dortch & Davis, A Professional Limited
Liability Company (included in opinion filed as Exhibit 8.1)
23.3 -- Consent of Kutak Rock LLP (included in opinion filed as Exhibit 8.2)
23.4 -- Consent of Riley, Ford, Caldwell & Cork, P.A. (included in opinion
filed as Exhibit 5.1)
24.1 -- Power of Attorney (included on page II-5)
99.1 -- Form of Pinnacle Bancshares, Inc.'s Proxy Card
99.2 -- Form of Election Form and Letter of Transmittal
II-7