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