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Exhibit 4.1
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO CERTAIN
PROVISIONS CONTAINED HEREIN AND TO RESALE RESTRICTIONS UNDER THE SECURITIES ACT
OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated May 2, 1998, between Merchants
Capital Corporation, a Mississippi corporation ("Issuer"), and BancorpSouth,
Inc., a Mississippi corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and
Plan of Merger of even date herewith (the "Merger Agreement"), which agreement
has been executed by the parties hereto immediately prior to this Stock Option
Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the Merger Agreement,
the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 148,150 fully paid and nonassessable shares of Issuer's Common Stock, $5.00
par value ("Common Stock"), at a price of $63.00 per share (the "Option Price");
provided, however, that in no event shall the number of shares of Common Stock
for which this Option is exercisable exceed 19.9% of the Issuer's issued and
outstanding shares of Common Stock without giving effect to any shares subject
to or issued pursuant to the Option. The number of shares of Common Stock that
may be received upon the exercise of the Option and the Option Price are subject
to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock
are either (i) issued or otherwise become outstanding after the date of this
Agreement (other than pursuant to this Agreement) or (ii) redeemed, repurchased,
retired or otherwise cease to be outstanding after the date of the Agreement,
the number of shares of Common Stock subject to the Option shall be increased or
decreased, as appropriate, so that, after such issuance, such number equals
19.9% of the number of shares of Common Stock then issued and outstanding
without giving effect to any shares subject or issued pursuant to the Option.
Nothing contained in this Section
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1(b) or elsewhere in this Agreement shall be deemed to authorize Issuer or
Grantee to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if, both an
Initial Triggering Event (as hereinafter defined) and a Subsequent Triggering
Event (as hereinafter defined) shall have occurred prior to the occurrence of an
Exercise Termination Event (as hereinafter defined), provided that the Holder
shall have sent the written notice of such exercise (as provided in subsection
(e) of this Section 2) within 90 days following such Subsequent Triggering
Event. Each of the following shall be an "Exercise Termination Event": (i) the
Effective Time (as defined in the Merger Agreement) of the Merger; (ii)
termination of the Merger Agreement in accordance with the provisions thereof if
such termination occurs prior to the occurrence of an Initial Triggering Event
except a termination by Grantee pursuant to Section 9.1(f) of the Merger
Agreement (unless the breach by Issuer giving rise to such right of termination
is non-volitional) or Section 9.1(g) of the Merger Agreement; or (iii) the
passage of 12 months after termination of the Merger Agreement if such
termination follows the occurrence of an Initial Triggering Event or is a
termination by Grantee pursuant to Section 9.1(f) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of termination is
non-volitional) or Section 9.1(g) of the Merger Agreement. The term "Holder"
shall mean the Grantee or any future holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each
an "Issuer Subsidiary"), without having received Grantee's
prior written consent, shall have entered into an agreement to
engage in an Acquisition Transaction (as hereinafter defined)
with any person (the term "person" for purposes of this
Agreement having the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "1934 Act"), and the rules and regulations
thereunder) other than Grantee or any of its Subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of
Issuer shall have recommended that the shareholders of Issuer
approve or accept any Acquisition Transaction. For purposes of
this Agreement, "Acquisition Transaction" shall mean with
respect to any person except Grantee or any Grantee subsidiary
(w) a merger or consolidation, or any similar transaction,
involving Issuer or any Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and
Exchange Commission (the "SEC")) of Issuer, (x) a purchase,
lease or other acquisition or assumption of all or a
substantial portion of the
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assets or deposits of Issuer or any Significant Subsidiary of
Issuer, (y) a purchase or other acquisition (including by way
of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of
Issuer, or (z) any substantially similar transaction;
(ii) Issuer or any Issuer Subsidiary,
without having received Grantee's prior written consent, shall
have authorized, recommended, proposed or publicly announced
its intention to authorize, recommend or propose, to engage in
an Acquisition Transaction with any person other than Grantee
or a Grantee Subsidiary, or the Board of Directors of Issuer
shall have publicly withdrawn or modified, or publicly
announced its intention to withdraw or modify, in any manner
adverse to Grantee, its recommendation that the shareholders
of Issuer approve the transactions contemplated by the Merger
Agreement in anticipation of engaging in an Acquisition
Transaction;
(iii) Any person other than Grantee, any
Grantee Subsidiary or any Issuer Subsidiary acting in a
fiduciary capacity in the ordinary course of its business
shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 10% or more of the outstanding
shares of Common Stock (the term "beneficial ownership" for
purposes of this Agreement having the meaning assigned thereto
in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder);
(iv) Any person other than Grantee or any
Grantee Subsidiary shall have made a bona fide proposal to
Issuer or its shareholders by public announcement or written
communication that is or becomes the subject of public
disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third
party to Issuer or its shareholders to engage in an
Acquisition Transaction, Issuer shall have breached any
covenant or obligation contained in the Merger Agreement and
such breach (x) would entitle Grantee to terminate the Merger
Agreement and (y) shall not have been cured prior to the
Notice Date (as defined below); or
(vi) Any person other than Grantee or any
Grantee Subsidiary, other than in connection with a
transaction to which Grantee has given its prior written
consent, shall have filed an application or notice with the
Federal Reserve Board, or other federal or state bank
regulatory authority, which application or notice has
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been accepted for processing, for approval to engage in an
Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either
of the following events or transactions occurring after the date hereof:
(i) The acquisition by any person of
beneficial ownership of 25% or more of the then outstanding
Common Stock; or
(ii) The occurrence of the Initial
Triggering Event described in paragraph (i) of subsection (b)
of this Section 2, except that the percentage referred to in
clause (y) shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event of
which it has notice (together, a "Triggering Event"), it being understood that
the giving of such notice by Issuer shall not be a condition to the right of the
Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the date of which
being herein referred to as the "Notice Date") specifying (i) the total number
of shares it will purchase pursuant to such exercise and (ii) a place and date
not earlier than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (the "Closing Date"); provided that
if prior notification to or approval of the Federal Reserve Board or any other
regulatory agency is required in connection with such purchase, the Holder shall
promptly file the required notice or application for approval and shall
expeditiously process the same and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which any required
notification periods have expired or been terminated or such approvals have been
obtained and any requisite waiting period or periods shall have passed. Any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto.
(f) At the closing referred to in subsection (e) of this
Section 2, the Holder shall pay to Issuer the aggregate purchase price for the
shares of Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated by
Issuer, provided that failure or refusal of Issuer to designate such a bank
account shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this Section 2,
Issuer shall deliver to the Holder a certificate or certificates representing
the number of shares of Common Stock purchased by the Holder and, if the
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Option should be exercised in part only, a new Option evidencing the rights of
the Holder thereof to purchase the balance of the shares purchasable hereunder,
and the Holder shall deliver to Issuer this Agreement and a letter agreeing that
the Holder will not offer to sell or otherwise dispose of such shares in
violation of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered holder
hereof and Issuer and to resale restrictions arising under the Securities Act of
1933, as amended. A copy of such agreement is on file at the principal office of
Issuer and will be provided to the holder hereof without charge upon receipt by
Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the
resale restrictions of the Securities Act of 1933, as amended (the "1933 Act"),
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the Holder shall have delivered to Issuer a copy of a
letter from the staff of the SEC, or an opinion of counsel, in form and
substance reasonably satisfactory to Issuer, to the effect that such legend is
not required for purposes of the 1933 Act; (ii) the reference to the provisions
to this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under subsection (e) of this
Section 2 and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder. Issuer shall pay all expenses, and any and all United States
federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates under
this Section 2 in the name of the Holder or its assignee, transferee or
designee.
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3. Issuer agrees: (i) that it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued shares of Common
Stock so that the Option may be exercised without additional authorization of
Common Stock after giving effect to all other options, warrants, convertible
securities and other rights to purchase Common Stock; (ii) that it will not, by
charter amendment or through reorganization, consolidation, merger, dissolution
or sale of assets, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations or conditions to
be observed or performed hereunder by Issuer; (iii) promptly to take all action
as may from time to time be required (including (x) complying with all premerger
notification, reporting and waiting period requirements specified in 15 U.S.C.
ss.ss. 18a and regulations promulgated thereunder and (y) in the event, under
the Bank Holding Company Act of 1956, as amended (the "BHCA"), or the Change in
Bank Control Act of 1978, as amended, or any state banking law, prior approval
of or notice to the Federal Reserve Board or to any state regulatory authority
is necessary before the Option may be exercised, cooperating fully with the
Holder in preparing such applications or notices and providing such information
to the Federal Reserve Board or such state regulatory authority as they may
require) in order to permit the Holder to exercise the Option and Issuer duly
and effectively to issue shares of Common Stock pursuant hereto; and (iv)
promptly to take all action provided herein to protect the rights of the Holder
against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase, on the same terms and subject to the same conditions as are
set forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein include
any Stock Option Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option pursuant to
Section 1 of this Agreement, the number of shares of Common Stock purchasable
upon the exercise of the Option and the Option Price shall be subject to
adjustment from time to time as provided in this Section 5. In the event of any
change in, or distributions in respect of, the Common Stock by reason of stock
dividends,
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split-ups, mergers, recapitalizations, combinations, subdivisions, conversions,
exchanges of shares, distributions on or in respect of the Common Stock that
would be prohibited under the terms of the Merger Agreement, or the like, the
type and number of shares of Common Stock purchasable upon exercise hereof and
the Option Price shall be appropriately adjusted in such manner as shall fully
preserve the economic benefits provided hereunder and proper provision shall be
made in any agreement governing any such transaction to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered within 90 days of such Subsequent Triggering Event (whether on
its own behalf or on behalf of any subsequent holder of this Option (or part
thereof) or any of the shares of Common Stock issued pursuant hereto), promptly
prepare, file and keep current a shelf registration statement under the 1933 Act
covering this Option and any shares issued and issuable pursuant to this Option
and shall use its reasonable best efforts to cause such registration statement
to become effective and remain current in order to permit the sale or other
disposition of this Option and any shares of Common Stock issued upon total or
partial exercise of this Option ("Option Shares") in accordance with any plan of
disposition requested by Grantee. Issuer will use its reasonable best efforts to
cause such registration statement first to become effective and then to remain
effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. Grantee shall
have the right to demand two such registrations. The foregoing notwithstanding,
if, at the time of any request by Grantee for registration of the Option or
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practicable and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in secondary
offering underwriting agreements for
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the Issuer. Upon receiving any request under this Section 6 from any Holder,
Issuer agrees to send a copy thereof to any other person known to Issuer to be
entitled to registration rights under this Section 6, in each case by promptly
mailing the same, postage prepaid, to the address of record of the persons
entitled to receive such copies. Notwithstanding anything to the contrary
contained herein, in no event shall Issuer be obligated to effect more than two
registrations pursuant to this Section 6 by reason of the fact that there shall
be more than one Grantee as a result of any assignment or division of this
Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase
Event (as defined below), (i) following a request of the Holder, delivered prior
to an Exercise Termination Event, Issuer (or any successor thereto) shall
repurchase the Option from the Holder at a price (the "Option Repurchase Price")
equal to the amount by which (A) the Market/Offer Price (as defined below)
exceeds (B) the Option Price, multiplied by the number of shares for which this
Option may then be exercised and (ii) at the request of the owner of Option
Shares from time to time (the "Owner"), delivered within 90 days of such
occurrence (or such later period as provided in Section 10), Issuer shall
repurchase such number of the Option Shares from the Owner as the Owner shall
designate at a price (the "Option Share Repurchase Price") equal to the
Market/Offer Price multiplied by the number of Option Shares so designated. The
term "Market/Offer Price" shall mean the highest of (i) the price per share of
Common Stock at which a tender offer or exchange offer therefor has been made,
(ii) the price per share of Common Stock to be paid by any third party pursuant
to an agreement with Issuer, (iii) the highest closing price for shares of
Common Stock within the six-month period immediately preceding the date the
Holder gives notice of the required repurchase of this Option or the Owner gives
notice of the required repurchase of Option Shares, as the case may be, or (iv)
in the event of a sale of all or a substantial portion of Issuer's assets, the
sum of the price paid in such sale for such assets and the current market value
of the remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case may be,
and reasonably acceptable to the Issuer, divided by the number of shares of
Common Stock of Issuer outstanding at the time of such sale. In determining the
Market/Offer Price, the value of consideration other than cash shall be
determined by a nationally recognized investment banking firm selected by the
Holder or Owner, as the case may be, and reasonably acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise
its right to require Issuer to repurchase the Option and any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at its
principal office, this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
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Option and/or the Option Shares in accordance with the provisions of this
Section 7. Within the latter to occur of (x) five business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto and (y) the time that is
immediately prior to the occurrence of a Repurchase Event, Issuer shall deliver
or cause to be delivered to the Holder the Option Repurchase Price and/or to the
Owner the Option Share Repurchase Price therefor or the portion thereof, if any,
that Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that Issuer is prohibited under applicable
law or regulation from repurchasing the Option and/or the Option Shares in full,
Issuer shall immediately so notify the Holder and/or the Owner and thereafter
deliver or cause to be delivered, from time to time, to the Holder and/or the
Owner, as appropriate, the portion of the Option Repurchase Price and the Option
Share Repurchase Price, respectively, that it is no longer prohibited from
delivering, within five business days after the date on which Issuer is no
longer so prohibited; provided, however, that if Issuer at any time after
delivery of a notice of repurchase pursuant to paragraph (b) of this Section 7
is prohibited under applicable law or regulation from delivering to the Holder
and/or the Owner, as appropriate, the Option Repurchase Price and the Option
Share Repurchase Price, respectively, in full (and Issuer hereby undertakes to
use its best efforts to obtain all required regulatory and legal approvals and
to file any required notices as promptly as practicable in order to accomplish
such repurchase), the Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder
and/or the Owner, as appropriate, that portion of the Option Repurchase Price or
the Option Share Repurchase Price that Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to the Holder, a new Stock Option
Agreement evidencing the right of the Holder to purchase that number of shares
of Common Stock obtained by multiplying the number of shares of Common Stock for
which the surrendered Stock Option Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereof theretofore delivered to
the Holder and the denominator of which is the Option Repurchase Price, or (B)
to the Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing
(d) For purposes of this Section 7, a Repurchase Event shall
be deemed to have occurred (i) upon the consummation of any merger,
consolidation or similar transaction involving Issuer or any purchase, lease or
other acquisition of all or a substantial portion of the assets of Issuer, other
than any such transaction which would not constitute an Acquisition
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Transaction pursuant to the provisos to Section 2(b)(i) hereof or (ii) upon the
acquisition by any person of beneficial ownership of 50% or more of the then
outstanding shares of Common Stock, provided that no such event shall constitute
a Repurchase Event unless a Subsequent Triggering Event shall have occurred
prior to an Exercise Termination Event. The parties hereto agree that Issuer's
obligations to repurchase the Option or Option Shares under this Section 7 shall
not terminate upon the occurrence of an Exercise Termination Event unless no
Subsequent Triggering Event shall have occurred prior to the occurrence of an
Exercise Termination Event.
8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate with or merge
into any person, other than Grantee or one of its Subsidiaries, and shall not be
the continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or one of its Subsidiaries, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding voting shares
and voting share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that controls
the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i)
the continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (ii) Issuer in a
merger in which Issuer is the continuing or surviving person,
and (iii) the transferee of all or substantially all of
Issuer's assets.
(2) "Substitute Common Stock" shall mean the
common stock issued by the issuer of the Substitute Option
upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the
Market/Offer Price, as defined in Section 7.
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(4) "Average Price" shall mean the average
closing price of a share of the Substitute Common Stock for
the one year immediately preceding the consolidation, merger
or sale in question, but in no event higher than the closing
price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if
Issuer is the issuer of the Substitute Option, the Average
Price shall be computed with respect to a share of common
stock issued by the person merging into Issuer or by any
company which controls or is controlled by such person, as the
Holder may elect.
(c) The Substitute Option shall have the same terms as the
Option, provided, that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to the Holder. The issuer of the Substitute
Option shall also enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this Agreement, which shall
be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number
of shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute Option.
In the event that the Substitute Option would be exercisable for more than 19.9%
of the shares of Substitute Common Stock outstanding prior to exercise but for
this clause (e), the issuer of the Substitute Option (the "Substitute Option
Issuer") shall make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in this
clause (e) over (ii) the value of the Substitute Option after giving effect to
the limitation in this clause (e). This difference in value shall be determined
by a nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the Acquiring
Corporation.
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(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option
(the "Substitute Option Holder"), the Substitute Option Issuer shall repurchase
the Substitute Option from the Substitute Option Holder at a price (the
"Substitute Option Repurchase Price") equal to the amount by which (i) the
Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price
of the Substitute Option, multiplied by the number of shares of Substitute
Common Stock for which the Substitute Option may then be exercised and at the
request of the owner (the "Substitute Share Owner") of shares of Substitute
Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall
repurchase the Substitute Shares at a price (the "Substitute Share Repurchase
Price") equal to the Highest Closing Price multiplied by the number of
Substitute Shares so designated. The term "Highest Closing Price" shall mean the
highest closing price for shares of Substitute Common Stock within the six-month
period immediately preceding the date the Substitute Option Holder gives notice
of the required repurchase of the Substitute Option or the Substitute Share
Owner gives notice of the required repurchase of the Substitute Shares, as
applicable.
(b) The Substitute Option Holder and the Substitute Share
Owner, as the case may be, may exercise its respective right to require the
Substitute Option Issuer to repurchase the Substitute Option and the Substitute
Shares pursuant to this Section 9 by surrendering for such purpose to the
Substitute Option Issuer, at its principal office, the agreement for such
Substitute Option (or, in the absence of such an agreement, a copy of this
Agreement) and certificates for Substitute Shares accompanied by a written
notice or notices stating that the Substitute Option Holder or the Substitute
Share Owner, as the case may be, elects to require the Substitute Option Issuer
to repurchase the Substitute Option and/or the Substitute Shares in accordance
with the provisions of this Section 9. As promptly as practicable, and in any
event within five business days after the surrender of the Substitute Option
and/or certificates representing Substitute Shares and the receipt of such
notice or notices relating thereto, the Substitute Option Issuer shall deliver
or cause to be delivered to the Substitute Option Holder the Substitute Option
Repurchase Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or, in either case, the portion thereof which the
Substitute Option Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation from repurchasing the
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Substitute Option and/or the Substitute Shares in part or in full, the
Substitute Option Issuer following a request for repurchase pursuant to this
Section 9 shall immediately so notify the Substitute Option Holder and/or the
Substitute Share Owner and thereafter deliver or cause to be delivered, from
time to time, to the Substitute Option Holder and/or the Substitute Share Owner,
as appropriate, the portion of the Substitute Share Repurchase Price,
respectively, which it is no longer prohibited from delivering, within five
business days after the date on which the Substitute Option Issuer is no longer
so prohibited; provided, however, that if the Substitute Option Issuer is at any
time after delivery of a notice of repurchase pursuant to subsection (b) of this
Section 9 prohibited under applicable law or regulation from delivering to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
Substitute Option Repurchase Price and the Substitute Share Repurchase Price,
respectively, in full (and the Substitute Option Issuer shall use its best
efforts to obtain all required regulatory and legal approvals as promptly as
practicable in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent of
the prohibition, whereupon, in the latter case, the Substitute Option Issuer
shall promptly (i) deliver to the Substitute Option Holder or Substitute Share
Owner, as appropriate, that portion of the Substitute Option Repurchase Price or
the Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.
10. The 90-day period for exercise of certain rights under
Sections 2, 6, 7 and 13 shall be extended: (i) to the extent necessary to obtain
all regulatory approvals for the exercise of such rights and for the expiration
of all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
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contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
and validly authorized by the Board of Directors of Issuer and no other
corporate proceedings on the part of Issuer are necessary to authorize
this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by Issuer
and is enforceable against Issuer in accordance with its terms.
(b) Issuer has taken all necessary corporate action
to authorize and reserve and to permit it to issue, and at all times
from the date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance upon the
exercise of the Option, that number of shares of Common Stock equal to
the maximum number of shares of Common Stock at any time and from time
to time issuable hereunder, and all such shares, upon issuance pursuant
hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims,
liens, encumbrance and security interests and not subject to any
preemptive rights.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Grantee.
This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common
Stock or other securities acquired by Grantee upon exercise of the
Option will not be, acquired with a view to the public distribution
thereof and will not be transferred or otherwise disposed of except in
a transaction registered or exempt from registration under the 1933
Act.
13. Neither of the parties hereto may assign any of its rights
or obligations under this Option Agreement or the Option created hereunder to
any other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within 90
days following such Subsequent Triggering Event (or such later period as
provided in Section 10); provided, however, that until the date 15 days
following the date on which the Federal Reserve Board approves an application by
Grantee under the BHCA to acquire the shares of Common Stock subject to the
Option, Grantee may not assign
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its rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party acquires the right
to purchase in excess of 2% of the voting shares of Issuer, (iii) an assignment
to a single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on Grantee's behalf, or (iv)
any other manner approved by the Federal Reserve Board.
14. Each of Grantee and Issuer will use its best efforts to
make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including without limitation making application
to authorize for quotation the shares of Common Stock issuable hereunder on any
exchange or market on which the shares of Issuer may be listed upon official
notice of issuance and applying to the Federal Reserve Board under the BHCA for
approval to acquire the shares issuable hereunder, but Grantee shall not be
obligated to apply to state banking authorities for approval to acquire the
shares of Common Stock issuable hereunder until such time, if ever, as it deems
appropriate to do so.
15. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and that
the obligations of the parties hereto shall be enforceable by either party
hereto through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained
in this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5
hereof), it is the express intention of Issuer to allow the Holder to acquire or
to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by cable, telegram, telecopy or telex, or by registered or certified
mail (postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in
accordance with the laws of the State of Mississippi, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
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19. This Agreement may be executed in two counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
20. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
21. Except as otherwise expressly provided herein or in the
Merger Agreement, this Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and permitted assigns, any rights, remedies, obligations or liabilities under or
by reason of this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
MERCHANTS CAPITAL CORPORATION
BY: /s/ HOWELL N. GAGE
------------------------------------------
Name: Howell N. Gage
Title: Chairman
BANCORPSOUTH, INC.
BY: /s/ AUBREY B. PATTERSON
------------------------------------------
Name: Aubrey B. Patterson
Title: Chairman and Chief Executive Officer
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