As filed with the Securities and Exchange Commission on March 20, 2007
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
RENASANT CORPORATION
(Exact name of registrant as specified in its charter)
| MISSISSIPPI | 6022 | 64-0676974 | ||
| (State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
209 Troy Street
Tupelo, Mississippi 38804
(662) 680-1001
(Address, including zip code, and telephone number,
including area code, of Registrant’s principal executive offices)
| E. Robinson McGraw Renasant Corporation 209 Troy Street Tupelo, Mississippi 38804 (662) 680-1001 (Name, address, including zip code, and telephone number, including area code, of agent for service) |
Copies to: Mark A. Fullmer, Esq. Phelps Dunbar, LLP 365 Canal Street, Suite 2000 New Orleans, Louisiana 70130 (504) 584-9324 |
Copies to: Katherine M. Koops, Esq. Powell Goldstein LLP One Atlantic Center—14th Floor 1201 West Peachtree Street, N.W. Atlanta, Georgia 30309 (404) 572-6600 |
Approximate Date of Commencement of Proposed Sale of the Securities to the Public:
As soon as practicable after the effective date of this Registration Statement and the satisfaction
or waiver of all other conditions to the merger described in the enclosed proxy statement/prospectus.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box. ¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
CALCULATION OF REGISTRATION FEE
| Title of each class of securities to be registered |
Amount to be registered (1) |
Proposed maximum offering price per share |
Proposed maximum aggregate offering price (2) |
Amount of registration fee | ||||
| Common stock, par value $5.00 per share |
3,600,000 shares | Not applicable | $77,832,934 | $2,390 | ||||
| (1) | This amount is based upon the number of shares of common stock anticipated to be issued upon completion of the transactions contemplated in the Agreement and Plan of Merger dated as of February 5, 2007, as amended (the “Merger Agreement”), by and among Renasant Corporation (“Renasant”), Renasant Bank, Capital Bancorp, Inc. (“Capital”) and Capital Bank & Trust Company. |
| (2) | Determined pursuant to Rule 457(f)(1) under the Securities Act of 1933, as amended, solely for the purpose of calculating the registration fee, based on the fair market value of a share of Capital common stock, no par value, on March 16, 2007. Pursuant to Rule 457(f)(3), the cash portion of the consideration to be paid by Renasant pursuant to the Merger Agreement has been deducted from the fair market value of the securities to be received by Renasant or cancelled in the transaction. |
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
| [Capital logo] Capital Bancorp, Inc. |
[Renasant logo] Prospectus of Renasant Corporation |
Dear Capital Stockholders:
You are cordially invited to attend the special meeting of stockholders of Capital Bancorp, Inc. which will be held at 1808 West End Avenue, Nashville, Tennessee, on , June , 2007, at local time.
At the special meeting, you will be asked to vote upon a proposal to adopt and approve a merger agreement, as amended, related articles of merger and a merger of Capital Bancorp, Inc. with and into Renasant Corporation. If the merger of Capital and Renasant is completed, all of the Capital common stock you hold will be exchanged for either (1) $38.00 in cash, without interest, for each share of Capital common stock, (2) 1.2306 shares of Renasant common stock for each share of Capital common stock or (3) a combination consisting of cash for 40% of your common stock and shares of Renasant common stock for 60% of your common stock at the same price and exchange ratio set forth above. You will be asked to elect your form of payment. Regardless of your election, elections will be limited by the requirements that not less than 60% or more than 65% of the aggregate shares of Capital common stock owned by Capital stockholders be exchanged for Renasant common stock and that not less than 35% or more than 40% of the aggregate shares of Capital common stock owned by Capital stockholders be exchanged for cash. Thus, your election may be redesignated as described in this proxy statement/prospectus. Immediately after the merger of Capital with and into Renasant is completed, Capital Bank & Trust Company will be merged with and into Renasant Bank.
If you wish, you may exercise your dissenters’ rights under Tennessee law and obtain a cash payment for the fair value of your shares rather than receive the merger consideration described above. To exercise dissenters’ rights, you must not vote in favor of the adoption and approval of the merger agreement, as amended, the related articles of merger or the merger and you must strictly comply with all of the applicable requirements of Tennessee law summarized in the accompanying proxy statement/prospectus under the heading “The Merger—Dissenters’ Rights.” A copy of the Tennessee statute regarding dissenters’ rights is attached as Annex C to this proxy statement/prospectus.
Renasant common stock is listed on The NASDAQ Global Select Market under the symbol “RNST”. On , 2007, the closing price of a share of Renasant common stock was $ .
Approval of the merger requires the vote of a majority of the outstanding shares of Capital common stock in favor of the adoption and approval of the merger agreement, as amended, the related articles of merger and the merger. The proposed merger is discussed in detail in the accompanying proxy statement/prospectus. We encourage you to read this entire document carefully. You can also obtain more information about Renasant and Capital in documents that each of them has filed with the Securities and Exchange Commission.
The Capital board of directors has unanimously determined that the merger agreement, as amended, the related articles of merger and the merger are in the best interests of Capital and its stockholders and Capital Bank. On behalf of your board of directors, we encourage you to vote “FOR” the adoption and approval of the merger agreement, as amended, the related articles of merger and the merger. Regardless of your vote, please sign and date the enclosed proxy and return it in the enclosed envelope to make sure that your vote is counted.
| /s/ R. Rick Hart |
| President and Chief Executive Officer |
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the shares of common stock to be issued by Renasant in the merger, as described in this proxy statement/prospectus, or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.
The shares of Renasant common stock to be issued in the merger are not savings or deposit accounts or other obligations of any bank or savings association or non-bank subsidiary of Renasant and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.
You should read “ Risk Factors” beginning on page 17 for a description of the factors that may affect the value of the Renasant common stock to be issued in the merger and other risk factors that should be considered with respect to the merger.
This proxy statement/prospectus is dated , 2007, and it is first being mailed to Capital stockholders, along with the enclosed form of proxy card, on or about , 2007.
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and financial information about Renasant and Capital from documents that Renasant and Capital, respectively, have filed with the Securities and Exchange Commission and that have not been included in or delivered with this proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain documents incorporated by reference in this proxy statement/prospectus, other than exhibits to those documents, by requesting them in writing or by telephone from Renasant or Capital, as the case may be, at the following addresses:
| Renasant Corporation | Capital Bancorp, Inc. | |
| 209 Troy Street | 1808 West End Avenue | |
| Tupelo, Mississippi 38804 | Nashville, Tennessee 37203 | |
| Attention: Stuart R. Johnson | Attention: Sally P. Kimble | |
| Telephone: (662) 680-1001 | Telephone: (615) 327-9000 |
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO PRIOR TO , 2007 [5 business days before meeting date], IN ORDER TO RECEIVE THEM BEFORE THE SPECIAL MEETING.
See “Where You Can Find More Information” on page of this proxy statement/prospectus for more information about the documents referred to in this proxy statement/prospectus.
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| Capital’s Reasons for the Merger; Recommendation of the Capital Board |
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| UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA OF RENASANT |
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| COMPARISON OF RIGHTS OF STOCKHOLDERS OF CAPITAL AND RENASANT |
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| STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING OF STOCKHOLDERS |
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| Annex A-1 | Agreement and Plan of Merger, dated as of February 5, 2007, by and among Renasant Corporation, Renasant Bank, Capital Bancorp, Inc. and Capital Bank & Trust Company, as amended by Amendment Number One to Agreement and Plan of Merger dated as of March 2, 2007 by and among Renasant Corporation, Renasant Bank, Capital Bancorp, Inc. and Capital Bank & Trust Company | |
| Annex A-2 | Articles of Merger by and among Renasant Corporation and Capital Bancorp, Inc. and Plan of Merger | |
| Annex B | Opinion of Hovde Financial, LLC | |
| Annex C | Chapter 23 of the Tennessee Business Corporation Act |
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[Capital Bancorp, Inc. letterhead]
Capital Bancorp, Inc.
Notice of Special Meeting
, 2007
To the Stockholders of Capital Bancorp, Inc.:
A special meeting of stockholders of Capital Bancorp, Inc. will be held at 1808 West End Avenue, Nashville, Tennessee, on , June , 2007 at local time, and at any adjournments or postponements thereof, to consider and act upon the following matters:
| • | To consider and vote upon a proposal to approve and adopt (a) the Agreement and Plan of Merger dated as of February 5, 2007, by and among Capital Bancorp, Inc., Capital Bank & Trust Company, Renasant Corporation and Renasant Bank, a wholly-owned subsidiary of Renasant, as amended, pursuant to which, upon satisfaction of specified conditions, Capital Bancorp, Inc. will merge with and into Renasant Corporation, with Renasant surviving the merger, (b) the related articles of merger contemplated by the Agreement and Plan of Merger and (c) the merger of Capital with and into Renasant. |
| • | Any other business properly brought before the special meeting or any adjournment or postponement thereof. |
As a result of the merger, you, as a holder of Capital common stock, will have the right to receive for all of your shares of Capital common stock either (1) $38.00 in cash per share of Capital common stock, (2) 1.2306 shares of Renasant common stock per share of Capital common stock or (3) a combination consisting of cash for 40% of your Capital common stock and shares of Renasant common stock for 60% of your Capital common stock at the same price and exchange ratio set forth above. You will be asked to elect your form of payment. Regardless of your election, however, elections will be limited by the requirements that not less than 60% or more than 65% of the aggregate shares of Capital common stock owned by Capital stockholders be exchanged for Renasant common stock and not less than 35% or more than 40% of the aggregate shares of Capital common stock owned by Capital stockholders be exchanged for cash. Accordingly, your election may be redesignated as described under the heading “The Merger—Redesignation Procedures” on pages to of the accompanying proxy statement/prospectus.
You may exercise dissenters’ rights for your shares if the merger is completed, but only if you do not vote in favor of the merger agreement, as amended, the related articles of merger and the merger, and you otherwise comply with the applicable statutory provisions of Tennessee law. By properly exercising such dissenters’ rights, you will be entitled to receive payment in cash equal to the “fair value” of your shares, as determined in accordance with Tennessee law, in lieu of the right to receive either the cash, shares of Renasant common stock or the combination of cash and shares of Renasant common stock in exchange for each share of Capital common stock as described above. A copy of these provisions is included as Annex C to the accompanying proxy statement/prospectus. You should also review the information included under the heading “The Merger—Dissenters’ Rights” on page of the accompanying proxy statement/prospectus.
The Capital board of directors has fixed the close of business on , 2007 as the record date for the determination of stockholders entitled to notice of, and to vote at, the special meeting and any adjournments or postponements of the special meeting. Therefore, only stockholders of record on , 2007 are entitled to notice of, and to vote at, the special meeting. A list of stockholders entitled to vote will be available at Capital’s principal office located at 1808 West End Avenue, Nashville, Tennessee beginning two business days after the date of this notice for the special meeting through the date of the special meeting (including at the special meeting itself) for examination by any stockholder, his agent or his attorney.
The accompanying proxy statement/prospectus describes the terms and conditions of the merger agreement, as amended, and includes the complete text of the merger agreement, as amended, and the related articles of merger as Annex A-1 and Annex A-2, respectively. We urge you to read the enclosed materials carefully for a complete description of the merger agreement, as amended, the articles of merger, and the merger. The accompanying proxy statement/prospectus forms a part of this notice.
Your vote is very important. The merger agreement, as amended, the related articles of merger and the merger must be adopted and approved by the holders of a majority of the outstanding shares of Capital common stock. Even if you plan to attend the special meeting, we urge you to submit a valid proxy promptly so that your shares will be voted.
Your board of directors unanimously recommends that you vote “FOR” the adoption and approval of the merger agreement, as amended, the related articles of merger and the merger.
| By Order of the Board of Directors | ||||
| /s/ John W. Gregory, Jr. | ||||
| , 2007 | Secretary | |||
| Nashville, Tennessee | ||||
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus and the documents that are made part of this proxy statement/prospectus by reference to other documents filed with the Securities and Exchange Commission include various forward-looking statements about Renasant Corporation and Capital Bancorp, Inc. that are subject to risks and uncertainties. Forward-looking statements include information concerning future financial performance, business strategy, projected plans and objectives of Renasant and Capital.
Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plans,” “may increase,” “may fluctuate,” “will likely result” and similar expressions, or future or conditional verbs such as “will,” “should,” “would” and “could” are generally forward-looking in nature and not historical facts. You should understand that the following important factors, in addition to those discussed elsewhere in this proxy statement/prospectus and in the documents which are incorporated by reference into this proxy statement/prospectus, could affect the future results of the combined company following the merger, and could cause results to differ materially from those expressed in such forward-looking statements:
| • | the effect of economic conditions and interest rates on a national, regional or international basis; |
| • | the performance of Renasant’s businesses following the merger; |
| • | the timing of the implementation of changes in operations to achieve enhanced earnings or effect cost savings; |
| • | the ability of Renasant and Capital to successfully integrate their operations, the compatibility of the operating systems of the combining companies, and the degree to which existing administrative and back-office functions and costs of Renasant and Capital are complementary or redundant; |
| • | the ability to satisfy all conditions precedent to the merger (including stockholder and various regulatory approvals); |
| • | competitive pressures in the consumer finance, commercial finance, insurance, financial services, asset management, retail banking, mortgage lending and auto lending industries; |
| • | the financial resources of, and products available to, competitors; |
| • | changes in laws and regulations, including changes in accounting standards; |
| • | changes in policy by regulatory agencies; |
| • | changes in the securities and foreign exchange markets; |
| • | opportunities that may be presented to and pursued by the combined company following the merger; |
| • | Renasant’s potential growth, including its entrance or expansion into new markets, and the need for sufficient capital to support that growth; |
| • | changes in the quality or composition of Renasant’s loan or investment portfolios, including adverse developments in borrower industries or in the repayment ability of individual borrowers; |
| • | an insufficient allowance for loan losses as a result of inaccurate assumptions; |
| • | the strength of the economies in our target markets, as well as general economic, market or business conditions; |
| • | changes in demand for loan products and financial services; |
| • | concentration of credit exposure; |
| • | changes in interest rates, yield curves and interest rate spread relationship; and |
| • | other circumstances, many of which are beyond Renasant’s control. |
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Management of each of Renasant and Capital believes the forward-looking statements about Renasant and Capital, as applicable, are reasonable. However, you should not place undue reliance on them. Any forward- looking statements in the proxy statement/prospectus are not guarantees of future performance. They involve risks, uncertainties and assumptions, and actual results, developments and business decisions may differ from those contemplated by those forward-looking statements. Many of the factors that will determine these results are beyond Renasant’s and Capital’s ability to control or predict. Renasant and Capital disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section.
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QUESTIONS AND ANSWERS ABOUT THE MERGER
| Q: | What is the proposed transaction for which I am being asked to vote? |
| A: | You are being asked to vote to adopt and approve an agreement and plan of merger by and among Renasant, Renasant Bank, Capital and Capital Bank, as amended, the related articles of merger and the merger contemplated thereby. Throughout the remainder of this proxy statement/prospectus, we refer to the agreement and plan of merger, as amended, and the related articles of merger as the “merger agreement”. In the merger, Capital will be merged with and into Renasant, and Renasant will be the surviving corporation and will continue its corporate existence under Mississippi law. Immediately thereafter, Capital Bank will merge with and into Renasant Bank, and Renasant Bank will be the surviving bank and will continue its corporate existence under Mississippi law. References to the “merger” refer to the merger of Capital with and into Renasant, unless the context clearly indicates otherwise. |
| Q: | Who is Renasant? |
| A: | Renasant Corporation is a Mississippi corporation incorporated in 1982 that is the owner of the fourth largest bank headquartered in Mississippi, Renasant Bank, a Mississippi-chartered bank incorporated in 1904. Renasant and Renasant Bank are headquartered in Tupelo, Mississippi. Through Renasant Bank, Renasant also owns The Renasant Insurance Agency. As of December 31, 2006, Renasant had total assets of approximately $2.6 billion, deposits of approximately $2.1 billion and total shareholders’ equity of approximately $252 million. Renasant operates 63 banking (including loan production), financial services, mortgage and insurance offices in 38 cities throughout north and north central Mississippi, west and middle Tennessee and north and north central Alabama. Renasant Bank’s deposits are insured by the Federal Deposit Insurance Corporation. |
| Q: | What will I receive in exchange for my Capital common stock in the merger? |
| A: | In the merger, all of your shares of Capital common stock will be converted into the right to receive either (1) $38.00 in cash for each share of Capital common stock, (2) 1.2306 shares of Renasant common stock for each share of Capital common stock or (3) a combination of cash for 40% of your shares of Capital common stock and Renasant common stock for 60% of your shares of Capital common stock at the same price and exchange ratio set forth above. Please note that the market value of Renasant common stock fluctuates. Because of this fluctuation, if you elect to receive Renasant common stock for all or a portion of your shares of Capital common stock (as described in the next question and answer), the value of the Renasant common stock you receive may or may not be equivalent to the amount of cash that you would have received if you elected to exchange your Capital common stock for cash. |
| If the average of the per share closing price of Renasant common stock on The NASDAQ Global Select Market for the 20 consecutive full trading days ending on (and including) the eighth business day prior to the completion of the merger is less than $26.25 and the decline in the Renasant common stock over the measurement period described in the merger agreement exceeds by 15% or more the decline in the NASDAQ Bank Index over the measurement period, the exchange ratio of 1.2306 may be adjusted by Renasant if Capital elects to terminate the merger agreement. |
| On March 14, 2007, the average of the per share closing prices of Renasant common stock on The NASDAQ Global Select Market for the preceding 20 consecutive full trading days was less than $26.25 and the decline in Renasant common stock over the measurement period described in the merger agreement exceeded by 15% the decline in the NASDAQ Bank Index over the measurement period. As a result, Capital could have elected on March 14, 2007 to terminate the merger agreement. If Capital had elected to terminate the merger agreement, Renasant, in its sole discretion, could have elected to adjust the exchange ratio to 1.2801 shares of Renasant common stock per share of Capital common stock, based on the closing price of Renasant common stock on March 14, 2007, which would have resulted in the issuance of approximately |
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| 107,500 additional shares of its stock in the aggregate as merger consideration (assuming that 60% of the merger consideration was paid in Renasant common stock), which would have rendered Capital’s election to terminate the merger agreement null and void. |
| Q: | Can I elect the type of consideration I will receive in the merger? |
| A: | Yes. Subject to the redesignation procedures described in this proxy statement/prospectus, you may elect to receive all cash, all shares of Renasant common stock or a combination of 40% cash and 60% Renasant common stock in exchange for your shares of Capital common stock. |
Under the merger agreement, the aggregate number of shares of Capital common stock to be converted into the right to receive cash shall not be less than 35% or more than 40% of the total number of shares of Capital common stock outstanding immediately prior to the closing date of the merger (excluding shares owned by Capital, Renasant or any subsidiary of Capital or Renasant (other than in a fiduciary capacity)). The merger agreement also provides that the aggregate number of shares of Capital common stock to be converted into the right to receive shares of Renasant common stock shall not be less than 60% or more than 65% of the total number of shares of Capital common stock outstanding immediately prior to the closing date of the merger (excluding shares owned by Capital, Renasant or any subsidiary of Capital or Renasant (other than in a fiduciary capacity).
| Q: | What happens if the number of shares elected to be converted into cash exceeds 40% of the outstanding shares of Capital common stock or if the number of shares elected to be converted into shares of Renasant common stock exceeds 65% of the outstanding shares of Capital common stock? |
| A: | If the aggregate number of shares elected to be converted into cash exceeds 40% of the outstanding shares of Capital common stock, then shares of Capital common stock for which a cash election was made will be redesignated on a pro rata basis into shares to be converted into shares of Renasant common stock so that the total number of Capital shares to be converted into cash does not exceed 40% of the outstanding shares of Capital common stock. |
If the aggregate number of shares elected to be converted into shares of Renasant common stock exceeds 65% of the outstanding shares of Capital common stock, then shares of Capital common stock for which a stock election was made will be redesignated on a pro rata basis into shares to be converted into cash so that the total number of Capital shares to be converted into shares of Renasant common stock does not exceed 65% of the outstanding shares of Capital common stock.
Holders of shares of Capital common stock who elect to receive a combination of cash for 40% of their Capital common stock and shares of Renasant common stock for 60% of their Capital common stock are not subject to these redesignation procedures. Also, a holder who has elected to receive cash for all of his or her shares of Capital common stock and would receive less than 10 shares of Renasant common stock if his or her shares were redesignated is not subject to the redesignation procedures.
| Q: | If I elect to receive Renasant common stock in the merger, how many shares will I receive? |
| A: | Subject to the redesignation and adjustment procedures described in this proxy statement/prospectus, if you elect to receive Renasant common stock for all or a portion of your Capital common stock, you will receive 1.2306 shares of Renasant common stock for each share of Capital common stock that you own. |
You will not receive any fractional shares of Renasant common stock. Instead, you will be paid cash in an amount equal to the fraction of a share of Renasant common stock otherwise issuable multiplied by the average closing price as reported by The NASDAQ Global Select Market of one share of Renasant common stock for the ten trading days immediately preceding the last trading day prior to the closing date of the merger (the closing date is described in more detail in this proxy statement/prospectus).
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For instance, if the exchange ratio is 1.2306 shares of Renasant common stock for each share of Capital stock that you own and you own 1,011 shares of Capital common stock and the ten-day average closing price of Renasant common stock is $28.00 per share, a Capital stockholder who elects to receive Renasant common stock in exchange for all 1,011 shares of Capital common stock would receive 1,244 shares of Renasant common stock, plus $3.82 in cash instead of a fractional share.
| Q: | How do I elect the form of consideration I prefer to receive? |
| A: | A form of election is being mailed to you concurrently with the mailing of this proxy statement/prospectus. If your shares of Capital common stock are registered in your own name, complete and sign the form of election and send it to Registrar and Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016-3572, the exchange agent for the merger. If your shares of Capital common stock are held in the name of your nominee or other representative, such as the trustee of a trust of which you are the beneficiary, you must have such nominee or other representative submit the form of election on your behalf. |
| Q: | What if I do not send an election form, it is not received before the deadline or I improperly complete or sign my election form? |
| A: | If the exchange agent does not receive from you a properly completed and signed election form, together with certificates representing your shares of Capital common stock, before the deadline, then it will be assumed that you have elected to receive a combination of cash for 40% of your shares of Capital common stock and Renasant common stock for the remaining 60% of your shares of Capital common stock. You bear the risk of delivery and should send any election form and Capital stock certificates by mail (registered mail with proper insurance, receipt requested, is suggested) by courier, by hand or by fax, with Capital stock certificates delivered by courier or by hand, to the appropriate addresses set forth in the form of election. |
| Q: | When should I send in my stock certificate? |
| A: | If your shares of Capital common stock are registered in your name, you should send your Capital stock certificates to Registrar and Transfer Company with your completed form of election. If your shares of Capital common stock are held in the name of your nominee or other representative, such as a trust of which you are the beneficiary, you must have such nominee or other representative send your Capital stock certificates to Registrar and Transfer Company on your behalf with the form of election submitted on your behalf. Do not send in your stock certificates with your proxy. |
| Q: | Is there a deadline for making an election? |
| A: | Yes. Your completed election form and Capital stock certificates must be received by the exchange agent not later than 5:00 p.m. eastern time on June , 2007. |
| Q: | Am I entitled to dissenters’ rights? |
| A: | Yes. If you wish, you may seek an appraisal of the fair value of your shares of Capital common stock, but only if you comply with all of the requirements of Tennessee law as described under the heading “The Merger—Dissenters’ Rights.” Depending upon the determination of a Tennessee court, the appraised fair value of your shares of Capital common stock, which will be paid to you if you seek an appraisal, may be more than, less than, or equal to the $38.00 per share of Capital common stock to be paid in the merger. Any holder of Capital common stock who loses his or her dissenters’ rights on account of a failure to perfect or otherwise shall be deemed to have elected to receive the combination of cash and Renasant common stock described above. |
We have included a copy of Chapter 23 of the Tennessee Business Corporation Act, which addresses dissenters’ rights, as Annex C to this proxy statement/prospectus.
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| Q: | When and where is the special meeting? |
| A: | The Capital special meeting is scheduled to take place at 1808 West End Avenue, Nashville, Tennessee on , June , 2007 at local time. |
| Q: | Who can vote on the merger? |
| A: | Holders of record of Capital common stock at the close of business on , 2007 can vote at the special meeting. On that date, shares were outstanding and entitled to vote. |
| Q: | What vote is required for approval? |
| A: | The merger agreement and the merger must be adopted and approved by a majority of the outstanding shares of Capital common stock. Therefore, if you abstain or fail to vote, it will be the same as voting against the merger agreement and the merger. |
If you hold your shares of Capital common stock in a broker’s name (sometimes called “street name” or “nominee name”), then you must provide voting instructions to your broker. If you do not provide instructions to the broker, your shares will not be voted on any matter on which the broker does not have discretionary authority to vote, which includes the vote on the merger. A vote that is not cast for this reason is called a “broker non-vote.” Broker non-votes will be treated as shares present for the purpose of determining whether a quorum is present at the meeting. For purposes of the vote on the merger agreement, a broker non-vote has the same effect as a vote AGAINST the merger agreement and the merger. For purposes of the vote on any other matters properly brought at the special meeting, broker non-votes will not be counted as a vote FOR or AGAINST such matters or as an abstention on such matters.
The directors and executive officers of Capital and Capital Bank, in their capacity as stockholders rather than directors and executive officers of Capital, have agreed to vote an aggregate of shares (representing approximately % of the outstanding shares as of the record date) in favor of the merger.
| Q: | What do I need to do now? |
| A: | After carefully reading and considering the information contained in this proxy statement/prospectus, please complete and mail your proxy card as soon as possible so that your shares may be voted at the special meeting. Your proxy card will instruct the persons named on the proxy card to vote your shares at the special meeting as you direct. If you sign and send in your proxy card and do not indicate how you want to vote, your proxy will be voted FOR the adoption and approval of the merger agreement and the merger. If you do not vote or if you abstain, the effect will be a vote against the merger agreement and the merger. Your vote is very important. Your proxy card must be received prior to the special meeting to be held on June , 2007 in order to be counted. |
You should also complete the form of election accompanying this proxy statement/prospectus and submit it, together with the certificates for your shares of Capital common stock, to Registrar and Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016-3572, the exchange agent for the merger. The form of election, together with the certificates for your shares of Capital common stock, must be received by the exchange agent no later than June , 2007 or you will be deemed to have elected to receive a combination of cash and stock in exchange for your shares of Capital common stock.
| Q: | May I change my vote after I have mailed my signed proxy card? |
| A: | You may change your vote at any time before your proxy is voted at the special meeting. You can do this in one of three ways: |
| • | first, you can send a written notice stating that you want to revoke your proxy; |
| • | second, you can complete and submit a new proxy card bearing a later date; or |
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| • | third, if you are the record owner of your shares of Capital common stock, you can attend the Capital special meeting and vote in person. Simply attending the meeting, however, will not revoke your proxy; you must vote at the meeting. |
If you choose either of the first two methods, you must submit your notice of revocation or your new proxy card to:
Capital Bancorp, Inc.
1808 West End Avenue
Nashville, Tennessee 37203
Attention: John W. Gregory, Jr., Secretary
If your shares are held in the name of a broker, bank, trustee or other nominee, you should contact such person to change your vote.
| Q: | If I plan to attend the Capital special meeting in person, should I still grant my proxy? |
| A: | Yes. Whether or not you plan to attend the special meeting, you should grant your proxy as described above. The failure of a Capital stockholder to vote in person or by proxy will have the same effect as a vote against the adoption and approval of the merger agreement. The failure to give voting instructions to your broker will have the same effect as a vote against the adoption and approval of the merger agreement. |
| Q: | What does Capital’s board of directors recommend? |
| A: | Capital’s board of directors has unanimously determined that the proposed merger is advisable and in the best interests of Capital and its stockholders and Capital Bank and unanimously recommends that you vote FOR the proposal to adopt and approve the merger agreement. |
| Q: | Who can help answer my questions? |
| A: | If you have any questions about the merger or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card or form of election, you should contact: |
John W. Gregory, Jr.
1808 West End Avenue
Nashville, Tennessee 37203
(615) 327-9000
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This summary highlights selected information from this proxy statement/prospectus and may not contain all the information that is important to you. For a more complete understanding of the merger and for a more complete description of the legal terms of the merger and the merger agreement, you should read this entire document carefully, as well as the additional documents to which we refer you. See “Where You Can Find More Information.” References in this summary and elsewhere in this proxy statement/prospectus to the “merger” are to the merger of Capital with and into Renasant, unless the context clearly indicates otherwise.
Renasant Corporation
209 Troy Street
Tupelo, Mississippi 38804
(662) 680-1001
Renasant is a Mississippi corporation incorporated in 1982 that is the owner of the fourth largest bank headquartered in Mississippi, Renasant Bank, a Mississippi-chartered bank incorporated in 1904. Through Renasant Bank, Renasant is also the owner of The Renasant Insurance Agency. As of December 31, 2006, Renasant had total assets of approximately $2.6 billion, deposits of approximately $2.1 billion and total stockholders’ equity of approximately $252 million. Renasant operates 63 banking (including loan production), financial services, mortgage and insurance offices in 38 cities throughout north and north central Mississippi, west and middle Tennessee and north and north central Alabama. Renasant Bank’s deposits are insured by the Federal Deposit Insurance Corporation.
For financial statements and a discussion of Renasant’s recent results of operations, see Renasant’s Annual Report on Form 10-K for the year ended December 31, 2006, which is incorporated by reference in this proxy statement/prospectus.
Capital Bancorp, Inc.
1808 West End Avenue
Nashville, Tennessee 37203
(615) 327-9000
Capital is a Tennessee corporation incorporated in 2001 that is the sole stockholder of Capital Bank, a Tennessee banking corporation headquartered in Nashville, Tennessee. As of December 31, 2006, Capital had total assets of approximately $564 million, deposits of approximately $465 million and total stockholders’ equity of approximately $35 million. Capital operates seven banking offices in Franklin, Goodlettsville, Hendersonville, Hermitage and Nashville, Tennessee. The deposits of Capital Bank are insured by the Federal Deposit Insurance Corporation.
For financial statements and a discussion of Capital’s recent results of operations, see Capital’s Annual Report on Form 10-K for the year ended December 31, 2006, which is incorporated by reference into this proxy statement/prospectus.
Under the terms of the merger agreement, Capital will be merged into Renasant. After the merger, Renasant will be the surviving corporation and will continue its corporate existence under Mississippi law. Immediately after the merger of Capital into Renasant, Capital Bank will be merged into Renasant Bank, with Renasant Bank surviving the merger and continuing its existence under Mississippi law. The merger agreement and the related articles of merger of Capital into Renasant are attached to this document as Annex A-1 and Annex A-2,
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respectively, and are incorporated in this proxy statement/prospectus by reference. We encourage you to read the merger agreement carefully, as it is the legal document that governs the merger.
What You Will Receive in the Merger (pages through )
The merger agreement provides that each share of Capital common stock (other than treasury shares, shares owned by Renasant or any of the subsidiaries of Renasant or Capital (other than in a fiduciary capacity) or by any person who has perfected dissenters’ rights with respect to shares of Capital common stock) will be converted on the closing date of the merger into the right to receive the merger consideration. Subject to adjustment as provided in the merger agreement, the merger consideration is either:
| • | cash in an amount equal to $38.00 per share of Capital common stock, without interest; |
| • | 1.2306 shares of Renasant common stock per share of Capital common stock; or |
| • | a combination of cash consideration for 40% of such holder’s shares of Capital common stock and stock consideration for 60% of such holder’s shares of Capital common stock at the same price and exchange ratio set forth above. |
Subject to the redesignation procedures described below, as a holder of shares of Capital common stock, you may elect to receive all cash, all shares of Renasant common stock or the combination of cash and Renasant common stock described above as consideration in exchange for your shares of Capital common stock. Please note that the market value of Renasant common stock fluctuates. Because of this fluctuation, if you elect to receive Renasant common stock for all or a portion of your shares of Capital common stock, the value of the Renasant common stock you receive may or may not be equivalent to the amount of cash that you would have received if you elected to exchange your Capital common stock for cash.
You will not receive any fractional shares of Renasant common stock if you elect to receive all or a portion of the merger consideration as shares of Renasant common stock. Instead, you will be paid cash in an amount equal to the fraction of a share of Renasant common stock otherwise issuable upon conversion multiplied by the average closing price of one share of Renasant common stock as reported by The NASDAQ Global Select Market for the ten trading days immediately preceding the last trading day prior to the closing date of the merger.
If the average of the per share closing price of Renasant common stock on The NASDAQ Global Select Market for the 20 consecutive full trading days ending on (and including) the eighth business day prior to the completion of the merger is less than $26.25 and the decline in the Renasant common stock over the measurement period described in the merger agreement exceeds by 15% or more the decline in the NASDAQ Bank Index over the measurement period, the exchange ratio of 1.2306 may be adjusted by Renasant if Capital elects to terminate the merger agreement.
On March 14, 2007, the average of the per share closing prices of Renasant common stock on The NASDAQ Global Select Market for the preceding 20 consecutive full trading days was less than $26.25 and the decline in the Renasant common stock over the measurement period described in the merger agreement exceeded by 15% the decline in the NASDAQ Bank Index over the measurement period. As a result, Capital could have elected on March 14, 2007 to terminate the merger agreement. If Capital had elected to terminate the merger agreement, Renasant, in its sole discretion, could have elected to adjust the exchange ratio to 1.2801 shares of Renasant common stock per share of Capital common stock, based on the closing price of Renasant common stock on March 14, 2007, which would have resulted in the issuance of approximately 107,500 additional shares of its stock in the aggregate as merger consideration (assuming that 60% of the merger consideration was paid in Renasant common stock), which would have rendered Capital’s election to terminate the merger agreement null and void.
Election Procedures (pages through )
A form of election is being mailed to you concurrently with the mailing of this proxy statement/prospectus. If your shares of Capital common stock are registered in your own name, you should complete and sign the form
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of election and send it, along with the certificates representing your shares of Capital common stock, to Registrar and Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016-3572, the exchange agent for the merger. If your shares of Capital common stock are held in the name of your nominee or other representative, such as the trustee of a trust of which you are the beneficiary, you must have such nominee or other representative submit the form of election, along with the certificates representing your shares of Capital common stock, on your behalf. The form of election, along with the certificates representing your shares of Capital common stock, must be received by the exchange agent not later than 5:00 p.m. eastern time on June , 2007.
If the exchange agent does not receive from you or your nominee or other representative, as applicable, a properly completed election form, along with the certificates representing your shares of Capital common stock, before June , 2007, then it will be assumed that you have elected to receive a combination of cash for 40% of your shares of Capital common stock and Renasant common stock for the remaining 60% of your shares of Capital common stock.
Upon receipt of the forms of election and Capital stock certificates and other materials, and subject to the payment of any transfer taxes that may arise if the merger consideration is to be paid to a person other than the person in whose name the surrendered Capital stock certificate is registered, the exchange agent, within 10 business days after the completion of the merger, will deliver to the former holder of Capital common stock the merger consideration such holder elected to receive. After the effective time, the exchange agent will also provide stock certificate transmittal materials to the holders of Capital common stock who did not submit a form of election and surrender their stock certificates. Such transmittal materials will contain instructions for surrendering the Capital stock certificates for the merger consideration.
Redesignation Procedures (pages through )
The merger agreement contains redesignation procedures that may affect your election. Under the merger agreement, the number of shares of Capital common stock to be converted into the right to receive cash must not be less than 35% or more than 40% of the total number of shares of Capital common stock outstanding immediately prior to the closing date of the merger. Also, the number of shares of Capital common stock to be converted into the right to receive shares of Renasant common stock must not be less than 60% or more than 65% of the total number of shares of Capital common stock outstanding immediately prior to the closing date of the merger.
If the number of shares to be converted into the right to receive cash exceeds 40% of the outstanding shares of Capital common stock, then all shares of Capital common stock for which a cash election was made will be redesignated on a pro rata basis into a combination of shares to be converted into cash and shares to be converted into shares of Renasant common stock. Shares will be redesignated such that the total number of Capital shares converted into cash does not exceed 40% of the outstanding shares of Capital common stock.
If the number of shares to be converted into shares of Renasant common stock exceeds 65% of the outstanding shares of Capital common stock, then all shares of Capital common stock for which a stock election was made will be redesignated on a pro rata basis into a combination of shares to be converted into cash and shares to be converted into shares of Renasant common stock. Shares will be redesignated such that the total number of Capital shares exchanged for stock does not exceed 65% of the outstanding shares of Capital common stock.
Holders who chose to receive a combination of cash for 40% of their Capital common stock and shares of Renasant common stock for 60% of their Capital common stock are not subject to the redesignation procedures. Also, any holder who elected to receive cash but after the redesignation procedures would receive less than ten shares of Renasant common stock for his or her shares of Capital common stock is not subject to the redesignation procedures.
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The Special Meeting (pages through )
The Capital special meeting will be held at 1808 West End Avenue, Nashville, Tennessee, on , June , 2007 at local time. At the meeting, the holders of Capital common stock will be asked to vote upon a proposal to adopt and approve the merger agreement and the merger. The Capital board of directors has fixed the close of business on , 2007 as the record date for the determination of stockholders entitled to notice of, and to vote at, the special meeting. At the record date, approximately shares of Capital common stock were issued and outstanding and entitled to vote. Each share of Capital common stock is entitled to one vote on any matter that may properly come before the meeting. The affirmative vote of a majority of the outstanding shares of Capital common stock is required to adopt and approve the merger agreement and the merger.
Vote of Management-Owned Shares (pages through )
As of the record date, the directors and executive officers of Capital and their respective affiliates collectively owned approximately % of the outstanding shares of Capital common stock, including shares subject to options currently exercisable but not exercised. Approval of the merger requires the affirmative vote of a majority of the outstanding shares of Capital common stock. All of the directors and executive officers of Capital and Capital Bank have entered into agreements with Renasant pursuant to which they have agreed, in their capacity as stockholders of Capital, to vote all of their shares in favor of the adoption and approval of the merger agreement and the merger. Assuming that no stock options are exercised, Capital anticipates that the directors and executive officers will collectively vote % of the outstanding shares of Capital common stock in favor of the merger in accordance with those agreements.
Capital’s Reasons for the Merger; Recommendation of the Capital Board (pages and )
Capital’s board of directors has unanimously approved the merger agreement and the merger. Capital’s board of directors believes that the merger is in the best interest of Capital and its stockholders and that the merger consideration is fair to Capital stockholders from a financial point of view and unanimously recommends that Capital stockholders vote “FOR” the adoption and approval of the merger agreement, the related articles of merger and the merger. In reaching its decision, the Capital board considered a number of factors, which are described in more detail in “The Merger—Capital’s Reasons for the Merger” on the pages listed above. The Capital board of directors did not assign relative weights to the factors described in that section or the other factors considered by it. In addition, the Capital board did not reach any specific conclusion on each factor considered, but conducted an overall analysis of these factors. Individual members of the Capital board of directors may have given weights to different factors.
Conditions to the Merger (pages through )
The obligations of both Renasant and Capital to complete the merger are subject to the following conditions being fulfilled:
| • | receipt of all necessary regulatory or governmental consents and approvals required to complete the merger of Capital into Renasant and the merger of Capital Bank into Renasant Bank, the satisfaction of all conditions required under those consents and approvals and the expiration of any waiting periods required by law; |
| • | adoption and approval of the merger agreement and the merger by Capital’s stockholders and adoption and approval of the merger agreement and the merger by Renasant’s stockholders to the extent required by applicable law and the rules of The NASDAQ Stock Market; |
| • | the registration statement filed with the SEC, of which this document forms a part, having become effective and remaining effective through the completion of the merger; |
| • | receipt of all consents and approvals required for the mergers from persons other than governmental entities, except those consents which would not reasonably be expected to have a material adverse effect on any of the parties; |
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| • | absence of any governmental or judicial order or otherwise prohibiting or restricting completion of the merger; |
| • | receipt of an opinion of Phelps Dunbar LLP, Renasant’s outside counsel, that the merger will qualify as a tax-free reorganization under Section 368 of the Internal Revenue Code and that the exchange of shares in the merger will not give rise to gain or loss to the holders of Capital common stock; |
| • | approval of the shares of Renasant common stock issuable to the holders of shares of Capital common stock for listing on The NASDAQ Global Select Market; |
| • | the execution and delivery of the plan of merger and articles of merger with respect to the merger of Capital with and into Renasant and the execution and delivery of a plan of merger and articles of merger with respect to the merger of Capital Bank with and into Renasant Bank; |
| • | the execution and delivery of (1) a termination and release agreement by and among Capital, Capital Bank, Renasant and R. Rick Hart and (2) an employment agreement by and between Renasant and R. Rick Hart; |
| • | the execution and delivery of (1) a termination and release agreement by and among Capital, Capital Bank, Renasant and John W. Gregory, Jr. and (2) an employment agreement by and between Renasant Bank and John W. Gregory, Jr.; and |
| • | Renasant Bank and Capital Bank shall have executed and delivered the agreements pursuant to which Capital Bank will merge with and into Renasant Bank. |
In addition, Renasant’s obligation to complete the merger is subject to, among other things:
| • | Capital’s and Capital Bank’s performance of and compliance with in all material respects all obligations required by the merger agreement; |
| • | the representations and warranties of Capital and Capital Bank in the merger agreement being true and correct as of the date of the merger agreement and as of the closing date of the merger (except those that relate specifically to another date, which shall be true and correct as of that date); |
| • | the receipt of all permits, consents, authorizations and the like necessary in connection with the completion of the merger, none of which contain any terms or conditions which are unacceptable to Renasant; |
| • | Capital stockholders who exercise their dissenters’ rights shall not hold more than 5% of the outstanding shares of Capital common stock immediately prior to the merger; and |
| • | Capital shall have redeemed for cash all of the rights issued pursuant to the Rights Agreement dated July 18, 2001 between Capital and Registrar and Transfer Company in accordance with the Rights Agreement on terms and conditions acceptable to Renasant. The rights represent the opportunity for Capital stockholders to acquire additional shares of Capital common stock upon the occurrence of certain events as more fully described in “Comparison of Rights of Stockholders of Capital and Renasant—Shareholder Rights Plan”. |
| • | Capital shall have terminated its 401(k) plan. |
In addition, Capital’s obligation to complete the merger is subject to, among other things:
| • | Renasant’s and Renasant Bank’s performance of and compliance in all material respects with all obligations required by the merger agreement; |
| • | the representations and warranties of Renasant and Renasant Bank being true and correct as of the date of the merger agreement and as of the closing date of the merger (except those that relate specifically to another date, which shall be true and correct as of that date); |
| • | the receipt of all permits, consents, waivers, clearances, approvals and authorizations necessary in connection with the completion of the merger, none of which adversely affect the merger consideration; |
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| • | three qualified people selected by Capital from its board of directors who are reasonably acceptable to Renasant having been appointed to the board of directors of Renasant and three qualified people selected from Capital Bank’s board of directors who are reasonably acceptable to Renasant having been appointed to the board of directors of Renasant Bank; and |
| • | the shares of Renasant common stock to be issued in connection with the merger shall have been approved for listing on The NASDAQ Global Select Market and the Renasant common stock shall not have been delisted from The NASDAQ Global Select Market nor shall proceedings have been instituted or initiated with respect to such stock. |
The merger is expected to be completed promptly after Capital stockholder approval is received at the special meeting, all necessary regulatory approvals are received and other conditions to the closing described above are fulfilled. This is expected to occur during the third quarter of 2007, although fulfilling some of the conditions to closing the merger, such as receiving regulatory approvals, is not within the control of Renasant or Capital.
Covenants and Agreements (pages through )
Capital has agreed that neither it nor Capital Bank, nor any person on either’s behalf, will solicit or hold discussions with any third party regarding a merger, tender offer, recapitalization, consolidation or any similar transaction, sale or lease or other acquisition or assumption of all or a substantial portion of Capital’s or Capital Bank’s assets, purchase or acquisition of more than 20% of the voting power of Capital or any similar transaction. Under specified circumstances, however, Capital may take the following actions:
| • | provide information to a third party regarding a proposal to engage in any of the above-described transactions; |
| • | negotiate and discuss such a transaction with a third party; |
| • | recommend to the stockholders of Capital the approval of such a transaction with a third party; or |
| • | withdraw a recommendation regarding the merger with Renasant. |
Capital may take these actions only if (1) Capital’s board of directors determines in good faith (after consultation with outside legal counsel) that any of the above-described actions are necessary in order for its directors to comply with their fiduciary duties under applicable law and (2) the board of directors determines in good faith (after consultation with its financial advisor) that the transaction with the third party is likely to be consummated and to result in a transaction more favorable to Capital stockholders from a financial point of view than the merger with Renasant.
Renasant has the right to match or better any acquisition proposal from a third party within ten days after receipt of notice from Capital of the third party offer, and the merger agreement will be amended to reflect any new terms offered by Renasant. If Renasant matches or betters such proposal, Capital must cease, and cause Capital Bank or its representative to cease, all discussions with the third party.
The merger agreement requires Renasant to provide specified indemnification for a period of two years following the closing date of the merger, subject to an aggregate cap on Renasant’s indemnification liability equal to the sum of $5.0 million and the policy limits of the directors’ and officers’ liability insurance described below. Renasant must indemnify and hold harmless from liability for acts or omissions occurring at or prior to the closing date of the merger specified current or former directors and officers of Capital or Capital Bank to the same extent as such directors or officers would be indemnified under the articles of incorporation or bylaws of Renasant as if they were directors or officers of Renasant. The merger agreement also provides that Renasant shall use its reasonable best efforts to cause Renasant or Renasant Bank to obtain for a period of two years after the closing date of the merger policies of directors’ and officers’ liability insurance. This insurance must cover acts or omissions occurring prior to the closing date of the merger for such directors and officers of Capital. The
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insurance must be on terms and in amounts substantially similar to the policies in effect on the date of the merger agreement. However, neither Renasant nor Renasant Bank are required to pay an aggregate premium for such insurance coverage in excess of 200% of the amount for such coverage as currently held by Capital. In such case, Renasant or Renasant Bank shall purchase as much coverage as reasonably practicable for such amount.
Termination of the Merger Agreement (pages and )
The merger agreement may be terminated and the merger may be abandoned at any time prior to the closing date of the merger:
| • | by the mutual written consent of Renasant and Capital; |
| • | by either Renasant or Capital if: |
| • | (1) the closing date of the merger shall not have occurred on or prior to September 30, 2007 (or on or prior to December 31, 2007 where a governmental approval is pending and has not been finally resolved), (2) the merger agreement and the merger are not approved by Capital’s stockholders or (3) the merger agreement and the merger are not approved by Renasant’s stockholders, unless either (1), (2) or (3) is caused by the failure of the party seeking to terminate to perform or observe its agreements at or before the closing date or the stockholders vote, as the case may be; |
| • | there has been a breach by the other party of (1) any covenant or undertaking in the merger agreement or (2) any representation or warranty of the other party contained in the merger agreement, where such breach prevents the breaching party from satisfying a condition to closing in the merger agreement and has not been cured within thirty days following delivery of written notice of the breach; |
| • | 30 days pass after any application for regulatory or governmental approval is denied or withdrawn at the request or recommendation of the governmental entity, unless within such 30-day period a petition for rehearing or an amended application is filed. A party may terminate 30 or more days after a petition for rehearing or an amended application is denied. No party may terminate when the denial or withdrawal is due to that party’s failure to observe or perform its covenants or agreements; or |
| • | any governmental entity shall have issued a final, non-appealable order prohibiting the completion of the merger. |
| • | by Renasant if: |
| • | Capital’s board of directors fails to make, or withdraws, qualifies or changes the recommendation in this proxy statement/prospectus that Capital’s stockholders vote to adopt and approve the merger agreement and the merger, or proposes publicly to do any of the foregoing; |
| • | the special meeting to approve the merger agreement and plan of merger is not called or convened by Capital; |
| • | Capital approves or recommends, or publicly proposes to approve or recommend, an acquisition proposal by a third party; |
| • | Capital stockholders who own more than 5% of the outstanding shares of Capital common stock exercise their right to dissent; or |
| • | The Federal Deposit Insurance Corporation or the Tennessee Department of Financial Institutions closes or orders the closing of Capital Bank. |
| • | by Capital if: |
| • | the board of directors of Capital determines in good faith, after consultation with outside counsel, that it would constitute a breach of the board’s fiduciary duties (1) to hold the special meeting, (2) to recommend the merger agreement and the merger to Capital stockholders, (3) to fail to |
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| terminate the merger agreement and accept an acquisition proposal from a third party or (4) to not withdraw or modify its previous recommendation to Capital’s stockholders to adopt and approve the merger agreement and the merger; or |
| • | the shares of Renasant’s common stock do not meet the trading price target described on page of this proxy statement/prospectus. |
Capital must pay to Renasant a termination fee of $5,000,000 if:
| • | (1) prior to any event allowing either party to terminate the merger agreement, an acquisition proposal from a third party is publicly announced or otherwise made known to Capital’s senior management, board of directors or stockholders generally and not irrevocably withdrawn more than five business days prior to the special meeting, (2) the merger agreement is then terminated (x) by either Renasant or Capital, because Capital’s stockholders failed to approve the merger agreement and the merger or (y) by Renasant, because of a willful breach by Capital of any covenant, undertaking, representation or warranty contained in the merger agreement, and (3) the acquisition contained in the acquisition proposal is consummated within 12 months of the termination of the merger agreement; |
| • | Renasant terminates the merger agreement because Capital either (1) failed to recommend to its stockholders the approval of the merger agreement and the merger, (2) effected a change in such recommendation, (3) failed to call or convene the special meeting, or (4) approved or recommended, or proposed publicly to approve or recommend, any other acquisition transaction; or |
| • | Capital terminates the merger agreement because its board of directors determines that it would constitute a breach of the board’s fiduciary duties (1) to recommend the merger agreement and the merger to Capital stockholders, (2) to fail to terminate the merger agreement and accept an acquisition proposal from a third party, (3) to hold the special meeting or (4) to not withdraw or modify its previous recommendation to Capital’s stockholders to adopt and approve the merger agreement and the merger. |
Interests of Certain Persons in the Merger (pages and )
In addition to their interests as stockholders, the directors and executive officers of Capital may have interests in the merger that are different from, or in addition to, your interests. These interests exist because of rights they may have under individual employment agreements, under compensation and benefit plans, including the Capital stock option plan and under the merger agreement. These interests include, among other things:
| • | an employment agreement to be entered into by Renasant and R. Rick Hart on the closing date, pursuant to which R. Rick Hart will serve as an Executive Vice President of Renasant and as President of the Tennessee Division of Renasant Bank, for a period commencing on the closing date and ending five years after the closing date, subject to renewal; |
| • | a termination and release agreement pursuant to which R. Rick Hart will receive a payment of $ from Renasant upon the closing of the merger; |
| • | an employment agreement to be entered into by Renasant Bank and John W. Gregory, Jr. on the closing date, pursuant to which John W. Gregory, Jr. will serve as Executive Vice President of Renasant Bank, for a period commencing on the closing date and ending five years after the closing date, subject to renewal; |
| • | a termination and release agreement pursuant to which John W. Gregory, Jr. will receive a payment of $ from Renasant upon the closing of the merger; |
| • | full conditional vesting of all Capital stock options on the date of the merger agreement (February 5, 2007); |
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| • | full vesting of benefits on the closing date of the merger under the Supplemental Executive Retirement Benefit Plan Agreements between Sally P. Kimble and Capital Bank and the Change of Control Severance Agreement by and among Sally P. Kimble, Capital and Capital Bank; |
| • | a termination payment, pursuant to which H. Edward Jackson, III will receive a payment from Capital Bank of approximately $60,000 when his employment by Capital Bank is terminated prior to the merger; |
| • | the appointment of three Capital directors to Renasant’s board of directors and Renasant Bank’s board of directors; and |
| • | Renasant’s agreement to indemnify and hold harmless duly elected present and former directors and officers of Capital and Capital Bank. |
The members of the Capital board of directors knew of these additional interests, and considered them when they approved the merger agreement.
Dissenters’ Rights (pages through )
Under Tennessee law, if a Capital stockholder follows the appropriate procedures for demanding dissenters’ rights and does not vote in favor of the adoption and approval of the merger agreement and the merger, such individual will be entitled to receive a cash payment equal to the “fair value” of the shares of Capital common stock owned by such stockholder, as determined by a Tennessee court, in lieu of the stockholder’s right to receive the merger consideration.
If a Capital stockholder desires to exercise dissenters’ rights under Tennessee law, the stockholder is required to comply with Chapter 23 of the Tennessee Business Corporation Act, which is summarized under the heading “The Merger—Dissenters’ Rights.” A copy of Chapter 23 is attached to this proxy statement/prospectus as Annex C. Failure to take all of the steps required under Tennessee law may result in the loss of dissenters’ rights by the Capital stockholder. If a Capital stockholder loses his or her dissenters’ rights, such stockholder will be deemed to have elected to receive cash for 40% of his or her shares of Capital common stock and shares of Renasant common stock for 60% of his or her shares of Capital common stock, at the same price and exchange ratio described above.
Tax Consequences of the Merger (pages through )
Assuming that the merger is completed as currently contemplated, a holder of Capital common stock will not recognize any gain or loss for United States federal income tax purposes on any of the Capital shares exchanged for Renasant shares in the merger, except with respect to cash received in lieu of a fractional Renasant share. A holder of Capital common stock may recognize gain or loss if Capital shares are exchanged solely for cash in the merger. Further, a holder of Capital common stock may recognize gain, but not loss, if the Capital shares are exchanged for a combination of Renasant shares and cash, but not in excess of the cash received in the merger.
Regulatory and Third-Party Approvals (pages and )
Under the merger agreement, Renasant and Capital have agreed to use their best efforts to obtain all necessary actions, indications of no objection, waivers, consents and approvals from any governmental authority necessary to complete and make effective the merger and other transactions contemplated by the merger agreement. The required regulatory approvals include approval from the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Mississippi Department of Banking and Consumer Finance and the Tennessee Department of Financial Institutions. All applications and notices have been filed, or are in the process of being filed. While Renasant and Capital believe that they will receive the requisite approvals for the merger, there can be no assurance regarding the timing of the approvals, the ability of the companies to obtain the approvals on satisfactory terms, the absence of litigation challenging such approvals or otherwise.
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In addition to the other information included in or incorporated by reference into this proxy statement/prospectus and the matters addressed under the heading “Forward Looking Statements” on page 1 of this proxy statement/prospectus, you should carefully consider the following risk factors in determining whether to adopt and approve the merger agreement and the merger. If any of the following risks or other risks which have not been identified or which Renasant may believe are immaterial or unlikely, actually occur, Renasant’s business, financial condition and results of operations could be harmed. Many factors, including those described below, could cause actual results to differ materially from those discussed in forward-looking statements.
Risks Related to Renasant’s Business and Industry
Renasant is subject to interest rate risk.
Renasant’s earnings and cash flows are largely dependent upon Renasant’s net interest income. Net interest income is the difference between interest earned on assets, such as loans and securities, and the cost of interest-bearing liabilities, such as deposits and borrowed funds. Interest rates are highly sensitive to many factors that are beyond Renasant’s control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve. Changes in monetary policy, including changes in interest rates, could influence not only the interest Renasant receives on loans and securities and the amount of interest Renasant pays on deposits and borrowings, but such changes could also affect (1) Renasant’s ability to originate loans and obtain deposits, which could reduce the amount of fee income generated, (2) the fair value of Renasant’s financial assets and liabilities and (3) the average duration of Renasant’s mortgage-backed securities portfolio. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, Renasant’s net interest income could be adversely affected, which in turn could negatively affect Renasant’s earnings. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.
Although Renasant’s management believes it has implemented effective asset and liability management strategies to reduce the potential effects of changes in interest rates on the results of Renasant’s operations, any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on Renasant’s financial condition and results of operations. Volatility in interest rates may also result in disintermediation, which is the flow of funds away from financial institutions into direct investments, such as U.S. Government and Agency securities and other investment vehicles, including mutual funds, which generally pay higher rates of return than financial institutions because of the absence of federal insurance premiums and reserve requirements. Disintermediation could also result in material adverse effects on Renasant’s financial condition and results of operations.
Renasant is subject to lending risk.
There are inherent risks associated with Renasant’s lending activities. These risks include, among other things, the impact of changes in interest rates and changes in the economic conditions in the markets where Renasant operates as well as those across the United States. Increases in interest rates and/or weakening economic conditions could adversely impact the ability of borrowers to repay outstanding loans or the value of the collateral securing these loans.
As of December 31, 2006, approximately 61% of Renasant’s loan portfolio consisted of commercial, construction and commercial real estate loans. These types of loans are generally viewed as having more risk to our financial condition than residential real estate loans or consumer loans due primarily to the large amounts loaned to individual borrowers. Because the loan portfolio contains a significant number of commercial, construction and commercial real estate loans with relatively large balances, the deterioration of one or a few of
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these loans could cause a significant increase in non-performing loans. An increase in non-performing loans could result in a net loss of earnings from these loans, an increase in the provision for possible loan losses and an increase in loan charge-offs, all of which could have a material adverse effect on Renasant’s financial condition and results of operations.
In addition, approximately 82.6% of Renasant’s loan portfolio had real estate as a primary or secondary component of the collateral securing the loan. An adverse change in the value of real estate generally and in Renasant’s markets specifically could significantly impair the value of the collateral securing Renasant’s loans and Renasant’s ability to sell the collateral upon foreclosure for an amount necessary to satisfy the borrower’s obligations to Renasant, which could have a material adverse effect on Renasant’s financial condition and results of operations.
Renasant has a concentration of credit exposure in commercial real estate.
At December 31, 2006, Renasant had approximately $629 million in commercial real estate loans, representing approximately 34.45% of Renasant’s loans outstanding on that date. In addition to the general risks associated with Renasant’s lending activities described above, commercial real estate loans are subject to additional risks. Commercial real estate loans depend on cash flows from the property to service the debt. Cash flows may be affected significantly by general economic conditions, and a downturn in the local economy generally or in occupancy rates where the property is located could increase the likelihood of default. In addition, banking regulators are giving commercial real estate lending greater scrutiny and may require banks with higher levels of commercial real estate loans to implement improved underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly higher levels of allowances for possible losses and capital levels as a result of commercial real estate lending growth and exposure. Any of these factors could have a material adverse effect on Renasant’s financial condition and results of operations.
Renasant depends on the accuracy and completeness of information furnished by others about customers and counterparties.
In deciding whether to extend credit or enter into other transactions, Renasant often relies on information furnished by or on behalf of customers and counterparties, including financial statements, credit reports and other financial information. Renasant may also rely on representations of those customers, counterparties or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports or other financial information could have a material adverse effect on Renasant’s business and, in turn, Renasant’s financial condition and results of operations.
Renasant’s allowance for loan losses may be insufficient.
Although Renasant tries to maintain diversification within Renasant’s loan portfolio in order to minimize the effect of economic conditions within a particular industry, management also maintains an allowance for loan losses, which is a reserve established through a provision for loan losses charged to expense, to absorb probable credit losses inherent in the entire loan portfolio. The appropriate level of the allowance is based on management’s quarterly analysis of the loan portfolio and represents an amount that management deems adequate to provide for inherent losses, including collective impairment. Among other considerations in establishing the allowance for loan losses, management considers economic conditions reflected within industry segments, the unemployment rate in Renasant’s markets, loan segmentation and historical losses that are inherent in the loan portfolio. The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires management to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of Renasant’s control, may require an increase in the allowance for loan losses.
In addition, bank regulatory agencies periodically review the allowance for loan losses and may require an increase in the provision for loan losses or the recognition of further loan charge-offs, based on judgments
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different than those of management. In addition, if charge-offs in future periods exceed the allowance for loan losses, Renasant will need additional provisions to increase the allowance for loan losses. Any increases in the allowance for loan losses will result in a decrease in net income and, possibly, capital and may have a material adverse effect on Renasant’s financial condition and results of operations.
Liquidity needs could adversely affect Renasant’s results of operations and financial condition.
Renasant relies on the dividends from Renasant’s bank subsidiary as Renasant’s primary source of funds. The primary source of funds of Renasant’s bank subsidiary are customer deposits and loan repayments. While scheduled loan repayments are a relatively stable source of funds, they are subject to the ability of borrowers to repay the loans. The ability of borrowers to repay loans can be adversely affected by a number of factors, including changes in economic conditions, adverse trends or events affecting business industry groups, reductions in real estate values or markets, business closings or lay- offs, inclement weather, natural disasters and international instability. Additionally, deposit levels may be affected by a number of factors, including rates paid by competitors, general interest rate levels, returns available to customers on alternative investments and general economic conditions. Accordingly, Renasant may be required from time to time to rely on secondary sources of liquidity to meet withdrawal demands or otherwise fund operations or to support growth. Such sources include Federal Home Loan Bank advances and federal funds lines of credit from correspondent banks. While Renasant believes that these sources are currently adequate, there can be no assurance they will be sufficient to meet future liquidity demands, particularly if Renasant continues to grow and experience increasing loan demand.
If the aforementioned sources of liquidity are not adequate for Renasant’s needs, Renasant may attempt to raise additional capital in the capital markets. Renasant’s ability to raise additional capital, if needed, will depend on conditions in such markets at that time, which are outside Renasant’s control, and on Renasant’s financial performance. Accordingly, Renasant cannot assure you of Renasant’s ability to raise additional capital in this manner.
If Renasant is unable to meet its liquidity needs, Renasant may be required to slow or discontinue loan growth, capital expenditures or other investments or liquidate assets.
Renasant’s business strategy includes the continuation of growth plans, and Renasant’s financial condition and results of operations could be negatively affected if Renasant fails to grow or fails to manage Renasant’s growth effectively.
Since 2004, Renasant has significantly grown its business outside its Mississippi footprint through the acquisition of entire financial institutions and through de novo branching. Renasant intends to continue pursuing a growth strategy for its business through de novo branching. In addition, although Renasant has no current intentions regarding new acquisitions in the next few years, Renasant expects to continue to evaluate attractive acquisition opportunities that are presented to it. Renasant’s prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in growth stages of development, including the following:
Management of Growth. Renasant may be unable to successfully:
| • | maintain loan quality in the context of significant loan growth; |
| • | maintain adequate management personnel and systems to oversee such growth; |
| • | maintain adequate internal audit, loan review and compliance functions; and |
| • | implement additional policies, procedures and operating systems required to support such growth. |
Operating Results. There is no assurance that Renasant’s existing offices or future offices will maintain or achieve deposit levels, loan balances or other operating results necessary to avoid losses or produce profits.
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Renasant’s growth and de novo branching strategy necessarily entails growth in overhead expenses as Renasant routinely adds new offices and staff. Renasant’s historical results may not be indicative of future results or results that may be achieved as Renasant continues to increase the number and concentration of its branch offices. Should any new location be unprofitable or marginally profitable, or should any existing location experience a decline in profitability or incur losses, the adverse effect on Renasant’s results of operations and financial condition could be more significant than would be the case for a larger company.
Development of Offices. There are considerable costs involved in opening branches, and new branches generally do not generate sufficient revenues to offset their costs until they have been in operation for at least a year or more. Accordingly, Renasant’s de novo branches can be expected to negatively impact its earnings for some period of time until the branches reach certain economies of scale. Renasant’s expenses could be further increased if it encounters delays in opening any of its de novo branches. Renasant may be unable to accomplish future branch expansion plans due to a lack of available satisfactory sites, difficulties in acquiring such sites, increased expenses or loss of potential sites due to complexities associated with zoning and permitting processes, higher than anticipated acquisition costs or other factors. Finally, Renasant has no assurance that its de novo branches or branches that it may acquire will be successful even after they have been established or acquired, as the case may be.
Expansion into New Markets. Much of Renasant’s recent growth, and all of Renasant’s growth through acquisitions, has been focused in the highly-competitive Memphis and Nashville, Tennessee and Birmingham and Huntsville, Alabama metropolitan markets. The customer demographics and financial services offerings in these markets are unlike those found in the Mississippi markets that Renasant has historically served. In these growth markets Renasant faces competition from a wide array of financial institutions, including much larger, well-established financial institutions. Renasant’s expansion into these new markets may be unsuccessful if Renasant is unable to meet customer demands or compete effectively with the financial institutions operating in these markets.
Regulatory and Economic Factors. Renasant’s growth and expansion plans may be adversely affected by a number of regulatory and economic developments or other events. Failure to obtain required regulatory approvals, changes in laws and regulations or other regulatory developments and changes in prevailing economic conditions or other unanticipated events may prevent or adversely affect Renasant’s continued growth and expansion. Such factors may cause Renasant to alter its growth and expansion plans or slow or halt the growth and expansion process, which may prevent Renasant from entering certain target markets or allow competitors to gain or retain market share in its existing or expected markets.
Failure to successfully address these issues could have a material adverse effect on Renasant’s financial condition and results of operations, and could adversely affect its ability to successfully implement its business strategy. Also, if Renasant’s growth occurs more slowly than anticipated or declines, its operating results could be materially adversely affected.
Renasant may face risks with respect to future acquisitions.
When Renasant attempts to expand its business through mergers and acquisitions, Renasant seeks partners that are culturally similar to it, have experienced management and possess either significant market presence or have potential for improved profitability through economies of scale or expanded services. Acquiring other banks, businesses or branches involves various risks commonly associated with acquisitions, including, among other things:
| • | the time and costs associated with identifying and evaluating potential acquisition and merger partners; |
| • | inaccuracies in the estimates and judgments used to evaluate credit, operations, management and market risks with respect to the target institution; |
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| • | the time and costs of evaluating new markets, hiring experienced local management and opening new bank locations, and the time lags between these activities and the generation of sufficient assets and deposits to support the costs of the expansion; |
| • | Renasant’s ability to finance an acquisition and possible dilution to its existing stockholders; |
| • | the diversion of Renasant’s management’s attention to the negotiation of a transaction; |
| • | the incurrence of an impairment of goodwill associated with an acquisition and adverse effects on Renasant’s results of operations; |
| • | entry into new markets where Renasant lacks experience; and |
| • | risks associated with integrating the operations and personnel of the acquired business, which are discussed below. |
Although Renasant has no current intentions regarding new acquisitions in the next few years, Renasant expects to continue to evaluate merger and acquisition opportunities that are presented to it and conduct due diligence activities related to possible transactions with other financial institutions. As a result, merger or acquisition discussions and, in some cases, negotiations may take place, and future mergers or acquisitions involving cash, debt or equity securities may occur at any time. Acquisitions typically involve the payment of a premium over book and market values, and, therefore, some dilution of Renasant’s tangible book value and net income per common share may occur in connection with any future transaction. Furthermore, failure to realize the expected revenue increases, cost savings, increases in geographic or product presence and/or other projected benefits from an acquisition could have a material adverse effect on Renasant’s financial condition and results of operations.
Renasant’s integration efforts following any future mergers or acquisitions, including Renasant’s proposed acquisition of Capital, may not be successful. After giving effect to an acquisition, Renasant may not be able to achieve profits comparable to or better than its historical experience.
The success of any merger or acquisition Renasant enters into, including its proposed acquisition of Capital, will depend primarily on Renasant’s ability to consolidate operations, systems and procedures and to eliminate redundancies and costs. Renasant may not be able to integrate its operations without encountering difficulties, such as:
| • | the loss of key employees and customers; |
| • | the disruption of its ongoing business and operations; |
| • | its inability to maintain and increase competitive presence; |
| • | deposit attrition and revenue loss; |
| • | possible inconsistencies in standards, controls, procedures and policies; |
| • | unexpected problems with costs, operations, personnel, technology and credit; and/or |
| • | problems with the assimilation of new operations, sites or personnel. |
Additionally, general market and economic conditions or governmental actions affecting the financial industry generally may inhibit Renasant’s successful integration of operations.
If Renasant has difficulties with the integration, it might not achieve the economic benefits it expects to result from the acquisition. Failure to achieve these anticipated benefits could result in greater than expected costs, decreases in the amount of expected revenues and diversion of management’s time and energy, all of which could materially impact Renasant’s business, financial condition and results of operations. In addition, the attention and effort devoted to the integration of an acquired business may divert management’s attention from
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other important issues and could seriously harm Renasant’s business. Finally, cost savings from any acquisitions may be offset by losses in revenues or charges to earnings.
Competition in the banking industry is intense and may adversely affect Renasant’s profitability.
Renasant faces substantial competition in all areas of its operations from a variety of different competitors, many of which are larger and have substantially greater resources than Renasant, including higher total assets and capitalization, greater access to capital markets and a broader offering of financial services. Such competitors primarily include national, regional and community banks within the various markets in which Renasant operates. Renasant also faces competition from many other types of financial institutions, including savings and loans, credit unions, finance companies, brokerage firms, insurance companies, factoring companies and other financial intermediaries.
Renasant’s industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of Renasant’s competitors have fewer regulatory constraints and may have lower cost structures.
Renasant’s ability to compete successfully depends on a number of factors, including, among other things:
| • | the ability to develop, maintain and build upon long-term customer relationships based on top quality service, high ethical standards and safe, sound assets; |
| • | the ability to expand Renasant’s market position; |
| • | the scope, relevance and pricing of products and services offered to meet customer needs and demands; |
| • | the rate at which Renasant introduces new products and services relative to its competitors; |
| • | customer satisfaction with Renasant’s level of service; and |
| • | industry and general economic trends. |
Failure to perform in any of these areas could significantly weaken Renasant’s competitive position, which could adversely affect Renasant’s growth and profitability, which, in turn, could have a material adverse effect on Renasant’s financial condition and results of operations.
Renasant’s profitability depends significantly on economic conditions in the states of Mississippi, Tennessee and Alabama.
Renasant’s success depends primarily on the general economic conditions of the states of Mississippi, Tennessee and Alabama and the specific local markets in each of those states in which Renasant operates. Unlike larger national or other regional banks that are more geographically diversified, 73% of Renasant’s loans and 61% of Renasant’s deposits are principally located in the Tupelo, Oxford and DeSoto County, Mississippi; Memphis and Nashville, Tennessee; and Birmingham and Huntsville, Alabama metropolitan areas. The local economic conditions in these areas have a significant impact on the demand for Renasant’s products and services as well as the ability of Renasant’s customers to repay loans, the value of the collateral securing loans and the stability of Renasant’s deposit funding sources.
Renasant’s earnings are significantly affected by general business and economic conditions.
In addition to the risks associated with the general economic conditions in the markets in which Renasant operates, Renasant’s operations and profitability are also impacted by general business and economic conditions
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in the United States and abroad. These conditions include short-term and long-term interest rates, inflation, money supply, political issues, legislative and regulatory changes, fluctuations in both debt and equity capital markets, broad trends in industry and finance and the strength of the U.S. economy and the local economies in which Renasant operates, all of which are beyond its control. A deterioration in economic conditions could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for Renasant’s products and services, among other things, any of which could have a material adverse effect on its financial condition and results of operations.
Renasant is subject to extensive government regulation, and such regulation could limit or restrict its activities and adversely affect its earnings.
Renasant and Renasant Bank are subject to extensive federal and state regulation and supervision. Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, not the economic or other interests of stockholders. These regulations affect Renasant’s lending practices, capital structure, investment practices, dividend policy and growth, among other things. Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of the foregoing, could affect Renasant and/or Renasant Bank in substantial and unpredictable ways. Such changes could subject Renasant to additional costs, limit the types of financial services and products it may offer and/or increase the ability of non-banks to offer competing financial services and products, among other things.
Under regulatory capital adequacy guidelines and other regulatory requirements, Renasant and Renasant Bank must meet guidelines that include quantitative measures of assets, liabilities and certain off-balance sheet items, subject to qualitative judgments by regulators about components, risk weightings and other factors. If Renasant fails to meet these minimum capital guidelines and other regulatory requirements, its financial condition would be materially and adversely affected. Renasant’s failure to maintain the status of “well capitalized” under its regulatory framework could affect the confidence of its customers in it, thus compromising its competitive position. In addition, failure to maintain the status of “well capitalized” under Renasant’s regulatory framework or “well managed” under regulatory examination procedures could compromise its status as a bank holding company and related eligibility for a streamlined review process for acquisition proposals.
Renasant is also subject to laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and new SEC regulations. These laws, regulations and standards are subject to varying interpretations in many cases, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Renasant is committed to maintaining high standards of corporate governance and public disclosure. As a result, Renasant’s efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased expenses and a diversion of management time and attention.
Failure to comply with laws, regulations or policies could also result in sanctions by regulatory agencies and/or civil money penalties, which could have a material adverse effect on Renasant’s business, financial condition and results of operations. While Renasant has policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur.
Renasant’s recent results may not be indicative of its future results.
Renasant does not expect to be able to sustain its historical rate of growth, and Renasant may not even be able to grow its business at all. Renasant’s recent and rapid growth, which was due in large part to Renasant’s acquisitions of Renasant Bancshares and Heritage Financial Holding Corporation in 2004 and 2005, respectively, may distort some of its historical financial ratios and statistics. In the future, Renasant may not have the benefit of several recently favorable factors, such as a generally stable interest rate environment, a strong residential
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mortgage market or the ability to find suitable expansion opportunities. In addition, Renasant has no current intentions regarding future acquisitions of financial institutions. Thus, Renasant’s future rate of growth is unlikely to reflect the rate of growth it has experienced since 2004. Various factors, such as economic conditions, regulatory and legislative considerations and competition, which are discussed in more detail above, may also impede or prohibit Renasant’s ability to expand its market presence. If Renasant experiences a significant decrease in its historical rate of growth, its results of operations and financial condition may be adversely affected.
Renasant may not be able to attract and retain skilled people.
Renasant’s success depends in part on its ability to retain key executives and to attract and retain additional qualified personnel who have experience both in sophisticated banking matters and in operating a bank of Renasant’s size. Competition for such personnel is intense in the banking industry, and Renasant may not be successful in attracting or retaining the personnel it requires. The unexpected loss of one or more of Renasant’s key personnel could have a material adverse effect on its business because of their skills, knowledge of its markets, years of industry experience and the difficulty of promptly finding qualified replacements. Renasant expects to effectively compete in this area by offering financial packages that are competitive within the industry.
Renasant is subject to environmental liability risk associated with lending activities.
A significant portion of Renasant’s loan portfolio is secured by real property. During the ordinary course of business, Renasant may foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, Renasant may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require Renasant to incur substantial expenses and may materially reduce the affected property’s value or limit its ability to use or sell the affected property. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on Renasant’s financial condition and results of operations. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase Renasant’s exposure to environmental liability. Although management has policies and procedures to perform an environmental review before the loan is recorded and before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards.
Severe weather, natural disasters, acts of war or terrorism and other external events could significantly impact Renasant’s business.
Severe weather, natural disasters, acts of war or terrorism and other adverse external events could have a significant impact on Renasant’s ability to conduct business. Such events could affect the stability of Renasant’s deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause Renasant to incur additional expenses. For example, during 2005, Hurricanes Katrina and Rita made landfall and subsequently caused extensive flooding and destruction along the coastal areas of the Gulf of Mexico. Although Renasant’s operations were not disrupted by these hurricanes or their aftermath, other severe weather or natural disasters, acts of war or terrorism or other adverse external events may occur in the future. Although management has established disaster recovery policies and procedures, the occurrence of any such event could have a material adverse effect on Renasant’s business, which, in turn, could have a material adverse effect on its financial condition and results of operations.
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Risks Related to the Merger and Renasant’s Common Stock
Shares eligible for future sale could have a dilutive effect.
Shares of Renasant’s common stock eligible for future sale, including those that may be issued in the acquisition of Capital and any offering of Renasant’s common stock for cash, could have a dilutive effect on the market for Renasant’s common stock and could adversely affect market prices.
As of February 28, 2007, there were 75,000,000 shares of Renasant’s common stock authorized, of which approximately 15,560,006 shares were outstanding, excluding 1,174,883 shares issuable under outstanding options and warrants to purchase Renasant’s common stock as of February 28, 2007. Renasant currently estimates that approximately 5.2 million shares will be issued in connection with the Capital acquisition, assuming no increase in the number of shares of Renasant common stock to be issued in the merger as a result of the decline in the price of Renasant common stock outside of the parameters described in the merger agreement after February 5, 2007, the date of the merger agreement.
Renasant’s stock price can be volatile.
Stock price volatility may make it more difficult for you to resell your common stock when you want and at prices you find attractive. Renasant’s stock price can fluctuate significantly in response to a variety of factors including, among other things:
| • | actual or anticipated variations in quarterly results of operations; |
| • | recommendations by securities analysts; |
| • | operating and stock price performance of other companies that investors deem comparable to Renasant; |
| • | news reports relating to trends, concerns and other issues in the banking and financial services industry; |
| • | perceptions in the marketplace regarding Renasant and/or its competitors; |
| • | new technology used, or services offered, by Renasant or its competitors; |
| • | significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving Renasant or its competitors; |
| • | failure to integrate acquisitions or realize anticipated benefits from acquisitions; |
| • | changes in government regulations; and |
| • | geopolitical conditions such as acts or threats of terrorism or military conflicts. |
General market fluctuations, industry factors and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes or credit loss trends, could also cause Renasant’s stock price to decrease regardless of operating results.
The trading volume in Renasant’s common stock is less than that of other larger bank holding companies.
Although Renasant’s common stock is listed for trading on The NASDAQ Global Select Market, the average daily trading volume in Renasant’s common stock is low, generally less than that of many of its competitors and other larger bank holding companies. For the three months ended February 28, 2007, the average daily trading volume for Renasant common stock was approximately 25,500 shares per day. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of Renasant’s common stock at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which Renasant has no control. Significant sales of Renasant’s common stock, or the expectation of these sales, could cause volatility in the price of its common stock.
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Renasant’s ability to declare and pay dividends is limited by law, and Renasant may be unable to pay future dividends.
Renasant is a separate and distinct legal entity from Renasant Bank, and Renasant receives substantially all of its revenue from dividends from Renasant Bank. These dividends are the principal source of funds to pay dividends on Renasant’s common stock and interest and principal on debt. Various federal and/or state laws and regulations limit the amount of dividends that Renasant Bank may pay to Renasant. In the event Renasant Bank is unable to pay dividends to Renasant, Renasant may not be able to service debt, pay obligations or pay dividends on its common stock. The inability to receive dividends from Renasant Bank could have a material adverse effect on Renasant’s business, financial condition and results of operations.
Holders of Renasant’s junior subordinated debentures have rights that are senior to those of Renasant’s common stockholders.
Renasant has supported its continued growth through the issuance of trust preferred securities from special purpose trusts and accompanying junior subordinated debentures. Also, in connection with the acquisition of Heritage Financial Holding Corporation, Renasant assumed junior subordinated debentures issued by Heritage. At December 31, 2006, Renasant had outstanding trust preferred securities and accompanying junior subordinated debentures totaling approximately $64 million. Payments of the principal and interest on the trust preferred securities of these trusts are conditionally guaranteed by Renasant. Further, the junior subordinated debentures Renasant issued to the trusts are senior to its shares of common stock. As a result, Renasant must make payments on the junior subordinated debentures before any dividends can be paid on its common stock and, in the event of its bankruptcy, dissolution or liquidation, the holders of the junior subordinated debentures must be satisfied before any distributions can be made on Renasant’s common stock. Renasant has the right to defer distributions on its junior subordinated debentures (and the related trust preferred securities) for up to five years, during which time no dividends may be paid on its common stock. If the merger is completed, Renasant will assume Capital’s outstanding junior subordinated debentures totaling approximately $12.4 million at December 31, 2006.
An investment in Renasant’s common stock is not an insured deposit.
Renasant’s common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any deposit insurance fund or by any other public or private entity. Investment in Renasant’s common stock is inherently risky for the reasons described in this “Risk Factors” section and elsewhere and is subject to the same market forces that affect the price of common stock in any company. As a result, if you acquire Renasant’s common stock, you may lose some or all of your investment.
Renasant’s Articles of Incorporation and Bylaws, as well as certain banking laws, could decrease Renasant’s chances of being acquired even if Renasant’s acquisition is in its stockholders’ best interests.
Provisions of Renasant’s Articles of Incorporation and Bylaws and federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire Renasant, even if doing so would be perceived to be beneficial to its stockholders. The combination of these provisions impedes a non-negotiated merger or other business combination, which, in turn, could adversely affect the market price of Renasant’s common stock.
Renasant’s issuance of preferred stock could adversely affect holders of its common stock and discourage a takeover.
Renasant’s board of directors is authorized to issue up to 5,000,000 shares of preferred stock without any action on the part of its stockholders. Renasant’s board of directors also has the power, without stockholder approval, to set the terms of any series of preferred stock that may be issued, including voting rights, dividend
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rights, preferences over its common stock with respect to dividends or in the event of a dissolution, liquidation or winding up and other terms. In the event that Renasant issues preferred stock in the future that has preference over its common stock with respect to payment of dividends or upon its liquidation, dissolution or winding up, or if Renasant issues preferred stock with voting rights that dilute the voting power of its common stock, the rights of the holders of Renasant’s common stock or the market price of its common stock could be adversely affected. In addition, the ability of Renasant’s board of directors to issue shares of preferred stock without any action on the part of its stockholders may impede a takeover of Renasant and prevent a transaction favorable to its stockholders.
You may receive a form of consideration different from the form of consideration you elect.
The consideration to be received by Capital stockholders in the merger is subject to the requirement that not less than 60% or more than 65% of the shares of Capital common stock be converted into the right to receive Renasant common stock and that not less than 35% or more than 40% of the shares of Capital common stock be converted into the right to receive cash. The merger agreement contains redesignation procedures to achieve this desired result. If you elect to receive all cash and the available cash is oversubscribed, then a portion of your merger consideration will be paid in Renasant common stock. If you elect to receive all stock and the available stock is oversubscribed, then a portion of the merger consideration you receive will be paid in cash. Therefore, you may not receive exactly the form of consideration that you elect.
Changes in Renasant’s stock price may affect the total value of the consideration you receive in the merger.
Upon the closing of the merger, each share of Capital common stock you own will automatically be converted into the right to receive either $38.00 in cash, 1.2306 shares of Renasant common stock (assuming no increase in the exchange ratio as a result of a decline in the price of Renasant common stock outside of the parameters described in the merger agreement after February 5, 2007, the date of the merger agreement), or a combination of both Renasant common stock and cash. Because the market price of Renasant common stock may fluctuate, you cannot be sure of the market value of the Renasant common stock that you elect to receive in the merger. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in Renasant’s businesses, operations and prospects, and regulatory considerations. Many of these factors are beyond Renasant’s control. In addition, there will be a time period between the completion of the merger and the time when Capital stockholders receiving stock consideration actually receive certificates evidencing Renasant common stock. Until stock certificates are received, Capital stockholders will not be able to sell their Renasant shares in the open market and, thus, will not be able to avoid losses resulting from any decline in the trading price of Renasant common stock during this period.
The interests of certain directors and executive officers of Capital may cause them to view the merger differently than you would.
You should be aware that the directors and some executive officers of Capital have interests in the merger that are different from, or in addition to, the interests of stockholders generally. Such other interests may cause some of these directors and executive officers to view the proposed transaction differently than you view it. For a discussion of these interests, see “The Merger—Interests of Certain Persons in the Merger.” Notwithstanding these additional or different interests, the directors of Capital believe that the merger is in the best interests of Capital and its stockholders.
Renasant may not be able to successfully integrate Capital or realize the anticipated benefits of the merger.
Renasant’s merger with Capital involves the combination of two bank holding companies that previously have operated independently. A successful combination of the operations of the two entities will depend substantially on Renasant’s ability to consolidate operations, systems and procedures and to eliminate
27
redundancies and costs. Renasant may not be able to combine the operations of Capital with its operations without encountering difficulties, such as:
| • | the loss of key employees and customers; |
| • | the disruption of operations and business; |
| • | inability to maintain and increase competitive presence; |
| • | deposit attrition, customer loss and revenue loss; |
| • | possible inconsistencies in standards, control procedures and policies; |
| • | unexpected problems with costs, operations, personnel, technology and credit; and/or |
| • | problems with the assimilation of new operations, sites or personnel, which could divert resources from regular banking operations. |
Additionally, general market and economic conditions of governmental actions affecting the financial industry generally may inhibit Renasant’s successful integration of Capital.
Further, Renasant entered into the merger agreement with the expectation that the merger will result in various benefits including, among other things, benefits relating to enhanced revenues, a strengthened market position for the combined company in the Nashville-Davidson-Murfreesboro, Tennessee Metropolitan Statistical Area, cross selling opportunities, technology, cost savings and operating efficiencies. Achieving the anticipated benefits of the merger is subject to a number of uncertainties, including whether Renasant integrates Capital in an efficient and effective manner, and general competitive factors in the marketplace. Renasant also believes that its ability to successfully integrate Capital with its operations will depend to a large degree upon its ability to retain Capital’s existing management personnel. Although Renasant has entered into or will enter into employment and noncompetition agreements with certain officers of Capital, there can be no assurance that these officers or key employees will not depart.
Renasant’s failure to achieve these anticipated benefits could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy and could materially impact its business, financial condition and operating results. In addition, the attention and effort devoted to the integration of Capital with Renasant’s existing operations may divert management’s attention from other important issues and could seriously harm its business. Finally, any cost savings that are realized may be offset by losses in revenues or other charges to earnings.
The fairness opinion obtained by Capital from its financial advisor will not reflect changes in circumstances prior to the merger.
Hovde Financial, LLC, the financial advisor to Capital, has delivered a “fairness opinion” to the board of directors of Capital. The opinion states that as of February 5, 2007, the total transaction consideration payable to the stockholders of Capital is fair from a financial point of view to the Capital stockholders. The opinion does not reflect changes that may occur or may have occurred after February 5, 2007, including changes to the operations and prospects of Capital or Renasant, changes in general market and economic conditions or other factors. Because Capital does not plan to ask Hovde Financial, LLC to update its opinion, the February 5, 2007 opinion may not accurately address the fairness of the merger consideration, from a financial point of view, at the time the merger is completed.
If you receive Renasant common stock in the merger, you will experience a substantial reduction in percentage ownership and voting power with respect to your shares as a result of the merger.
Capital stockholders who receive Renasant common stock in the merger will experience a substantial reduction in their respective percentage ownership interests and effective voting power through their stock
28
ownership in Renasant relative to their percentage ownership interest and effective voting power in Capital prior to the merger. If the merger is consummated and 60% of the merger consideration consists of Renasant common stock, current Capital stockholders will own approximately % of Renasant’s outstanding common stock, on a fully diluted basis, based on outstanding Renasant common stock as of the record date for the Capital special meeting of stockholders. Accordingly, even if such stockholders were to vote as a group, current Capital stockholders would be outvoted by other Renasant stockholders. Furthermore, Renasant has filed a registration statement to sell shares of its common stock in a public offering of its common stock prior to the closing of the merger. This will further dilute the equity interest in Renasant that Capital stockholders receive in the merger.
In the event that the merger is not completed on a timely basis, it could have a material adverse effect on both companies, including loss of key employees and significant customers.
The completion of the merger is subject to a number of important conditions, including stockholder approval, regulatory approval and other customary closing conditions. Also, while the merger is pending, competitors may attempt to solicit key employees as well as major customers of Capital Bank and Renasant Bank.
29
SELECTED HISTORICAL FINANCIAL DATA OF RENASANT
The following table sets forth selected historical financial data of Renasant for the periods indicated. The selected historical financial data of Renasant as of and for the years 2002, 2003, 2004, 2005 and 2006 are derived from its audited consolidated financial statements and should be read in conjunction with its audited consolidated financial statements, including the notes thereto, and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Renasant’s Annual Report on Form 10-K for the year ended December 31, 2006, which is incorporated by reference into this proxy statement/prospectus. Renasant’s consolidated financial statements for the years ended December 31, 2006 and 2005 were audited by HORNE LLP, independent registered public accounting firm. Renasant’s consolidated financial statements for the years ended December 31, 2004, 2003 and 2002 were audited by Ernst & Young LLP, independent registered public accounting firm. The financial information presented in the table below is not necessarily indicative of the financial condition, results of operations or cash flows of any other period.
RENASANT SELECTED CONSOLIDATED
HISTORICAL FINANCIAL DATA
(Unaudited)
(In Thousands, except Share Data)
| At and for the Years Ended December 31, (1) | ||||||||||||||||
| 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||
| Summary of Operations: |
||||||||||||||||
| Interest income |
$ | 154,293 | $ | 128,389 | $ | 77,024 | $ | 70,810 | $ | 78,418 | ||||||
| Interest expense |
70,230 | 47,963 | 21,796 | 21,777 | 26,525 | |||||||||||
| Net interest income |
84,063 | 80,426 | 55,228 | 49,033 | 51,893 | |||||||||||
| Provision for loan losses |
2,408 | 2,990 | 1,547 | 2,713 | 4,350 | |||||||||||
| Net interest income after provision for loan losses |
81,655 | 77,436 | 53,681 | 46,320 | 47,543 | |||||||||||
| Noninterest income |
45,943 | 40,216 | 32,287 | 31,893 | 27,973 | |||||||||||
| Noninterest expense |
89,006 | 83,940 | 60,709 | 53,193 | 51,027 | |||||||||||
| Income before income taxes |
38,592 | 33,712 | 25,259 | 25,020 | 24,489 | |||||||||||
| Income taxes |
11,467 | 9,503 | 6,816 | 6,839 | 6,819 | |||||||||||
| Income before cumulative effect of accounting change |
27,125 | 24,209 | 18,443 | 18,181 | 17,670 | |||||||||||
| Cumulative effect of accounting change |
— | — | — | — | (1,300 | ) | ||||||||||
| Net income |
$ | 27,125 | $ | 24,209 | $ | 18,443 | $ | 18,181 | $ | 16,370 | ||||||
| Per Share Data: (2) |
||||||||||||||||
| Net income before cumulative effect of accounting change—basic |
$ | 1.75 | $ | 1.56 | $ | 1.43 | $ | 1.47 | $ | 1.40 | ||||||
| Net income before cumulative effect of accounting change—diluted |
1.71 | 1.54 | 1.42 | 1.46 | 1.39 | |||||||||||
| Cumulative effect of accounting change |
— | — | — | — | (0.10 | ) | ||||||||||
| Net income—basic |
1.75 | 1.56 | 1.43 | 1.47 | 1.30 | |||||||||||
| Net income—diluted |
1.71 | 1.54 | 1.42 | 1.46 | 1.29 | |||||||||||
| Dividends |
0.63 | 0.58 | 0.55 | 0.50 | 0.46 | |||||||||||
| Book value |
16.27 | 15.22 | 13.19 | 11.19 | 10.59 | |||||||||||
| Tangible book value |
9.94 | 8.70 | 9.48 | 10.72 | 10.08 | |||||||||||
30
RENASANT SELECTED CONSOLIDATED
HISTORICAL FINANCIAL DATA (continued)
| At and for the Years Ended December 31, | ||||||||||||||||||||
| 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
| Financial Condition Data: |
||||||||||||||||||||
| Total assets |
$ | 2,611,356 | $ | 2,397,702 | $ | 1,707,545 | $ | 1,415,214 | $ | 1,344,512 | ||||||||||
| Loans, net of unearned income (3) |
1,826,762 | 1,646,223 | 1,141,480 | 862,652 | 859,684 | |||||||||||||||
| Securities |
428,065 | 399,034 | 371,581 | 414,270 | 344,781 | |||||||||||||||
| Deposits |
2,108,965 | 1,868,451 | 1,318,677 | 1,133,931 | 1,099,048 | |||||||||||||||
| Borrowings |
216,423 | 266,505 | 191,547 | 125,572 | 91,806 | |||||||||||||||
| Shareholders’ equity |
252,704 | 235,440 | 179,042 | 137,625 | 132,778 | |||||||||||||||
| Tangible shareholders’ equity |
154,408 | 134,608 | 128,618 | 131,755 | 126,415 | |||||||||||||||
| Selected Performance Ratios: |
||||||||||||||||||||
| Return on average assets |
1.08 | % | 1.03 | % | 1.18 | % | 1.33 | % | 1.25 | % | ||||||||||
| Return on average equity |
11.00 | % | 10.29 | % | 11.52 | % | 13.41 | % | 12.85 | % | ||||||||||
| Return on average tangible equity |
19.10 | % | 19.08 | % | 14.50 | % | 14.32 | % | 13.88 | % | ||||||||||
| Dividend payout ratio |
36.67 | % | 37.66 | % | 38.31 | % | 34.25 | % | 35.59 | % | ||||||||||
| Net interest margin (4) |
3.93 | % | 4.04 | % | 4.14 | % | 4.23 | % | 4.66 | % | ||||||||||
| Efficiency ratio (5) |
66.75 | % | 67.70 | % | 66.94 | % | 63.16 | % | 61.55 | % | ||||||||||
| Net overhead ratio (6) |
1.72 | % | 1.86 | % | 1.81 | % | 1.55 | % | 1.76 | % | ||||||||||
| Asset Quality Ratios: (7) |
||||||||||||||||||||
| Net loans charged-off to average loans |
0.07 | % | 0.20 | % | 0.32 | % | 0.20 | % | 0.42 | % | ||||||||||
| Ratio of nonperforming assets to total assets |
0.61 | % | 0.44 | % | 0.64 | % | 0.64 | % | 0.50 | % | ||||||||||
| Ratio of nonperforming loans to total loans |
0.62 | % | 0.38 | % | 0.76 | % | 0.85 | % | 0.42 | % | ||||||||||
| Ratio of allowance for loan losses to nonperforming loans |
173.05 | % | 291.94 | % | 166.11 | % | 181.09 | % | 338.22 | % | ||||||||||
| Ratio of allowance for loan losses to total loans |
1.07 | % | 1.12 | % | 1.26 | % | 1.53 | % | 1.42 | % | ||||||||||
| Capital Ratios: |
||||||||||||||||||||
| Tier 1 leverage ratio (8) |
8.95 | % | 8.73 | % | 8.97 | % | 10.85 | % | 9.28 | % | ||||||||||
| Tier 1 risk-based capital |
11.31 | % | 11.31 | % | 12.40 | % | 16.21 | % | 13.72 | % | ||||||||||
| Total risk-based capital |
12.31 | % | 12.35 | % | 13.61 | % | 17.46 | % | 14.97 | % | ||||||||||
| Average equity to average assets |
9.83 | % | 10.00 | % | 10.21 | % | 9.89 | % | 9.75 | % | ||||||||||
| Other Data: |
||||||||||||||||||||
| Office locations (9) |
60 | 58 | 48 | 39 | 40 | |||||||||||||||
| Full-time equivalent employees |
813 | 789 | 703 | 580 | 587 | |||||||||||||||
| (1) | Selected historical financial data includes the effect of acquisitions from the date of each acquisition. Refer to Note T, “Mergers and Acquisitions”, in the Notes to the Consolidated Financial Statements in Renasant’s Annual Report on Form 10-K for the year ended December 31, 2006, which is incorporated by reference into this proxy statement/prospectus, for additional information about these acquisitions. |
| (2) | Amounts have been restated to reflect the effect of Renasant’s three-for-two stock split effected in the form of a share dividend on August 28, 2006 and the three-for-two stock split effected in the form of a share dividend on December 1, 2003. |
| (3) | Does not include loans held for sale. |
| (4) | Net interest margin is net interest income, on a fully taxable equivalent basis, divided by total average earning assets. |
31
| (5) | Efficiency ratio is noninterest expense divided by the sum of net interest income, on a fully taxable equivalent basis, and noninterest income. |
| (6) | Net overhead ratio is the difference between noninterest expense and noninterest income, divided by average assets. |
| (7) | Nonperforming loans include loans 90 or more days past due, nonaccrual loans and restructured loans. |
| (8) | Tier 1 leverage ratio is defined as Tier 1 capital (pursuant to risk-based capital guidelines) as a percentage of adjusted average assets. |
| (9) | Includes banking (including loan production), financial services and mortgage offices. |
GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures
Certain financial information included in Renasant’s selected historical financial data is determined by methods other than in accordance with accounting principles generally accepted within the United States, or GAAP. These non-GAAP financial measures are “tangible book value per share,” “tangible shareholders’ equity” and “return on average tangible equity.” Renasant’s management uses these non-GAAP measures in its analysis of its performance.
| • | “Tangible book value per share” is defined as total equity reduced by recorded goodwill and other intangible assets divided by total common shares outstanding. This measure is important to investors interested in changes from period-to-period in book value per share exclusive of changes in intangible assets. Goodwill, an intangible asset that is recorded in a purchase business combination, has the effect of increasing total book value while not increasing the tangible assets of a company. For companies such as Renasant that have engaged in business combinations, purchase accounting can result in the recording of significant amounts of goodwill related to such transactions. |
| • | “Tangible shareholders’ equity” is shareholders’ equity less goodwill and other intangible assets. |
| • | “Return on average tangible equity” is defined as earnings for the period divided by average equity reduced by average goodwill and other intangible assets. |
These disclosures should not be viewed as a substitute for results determined in accordance with GAAP, and are not necessarily comparable to non-GAAP performance measures which may be presented by other companies. The following reconciliation table provides a more detailed analysis of these non-GAAP performance measures:
| At and for the Years Ended December 31, | ||||||||||||||||||||
| 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||||
| Book value per common share |
$ | 16.27 | $ | 15.22 | $ | 13.19 | $ | 11.19 | $ | 10.59 | ||||||||||
| Effect of intangible assets per share |
(6.33 | ) | (6.52 | ) | (3.71 | ) | (0.47 | ) | (0.51 | ) | ||||||||||
| Tangible book value per share |
9.94 | 8.70 | 9.48 | 10.72 | 10.08 | |||||||||||||||
| Shareholders’ equity |
$ | 252,704 | $ | 235,440 | $ | 179,042 | $ | 137,625 | $ | 132,778 | ||||||||||
| Intangible assets |
(98,296 | ) | (100,832 | ) | (50,424 | ) | (5,870 | ) | (6,363 | ) | ||||||||||
| Tangible shareholders’ equity |
154,408 | 134,608 | 128,618 | 131,755 | 126,415 | |||||||||||||||
| Return on average equity |
11.00 | % | 10.29 | % | 11.52 | % | 13.41 | % | 12.85 | % | ||||||||||
| Effect of intangible assets |
8.10 | % | 8.79 | % | 2.98 | % | 0.91 | % | 1.03 | % | ||||||||||
| Return on average tangible equity |
19.10 | % | 19.08 | % | 14.50 | % | 14.32 | % | 13.88 | % | ||||||||||
32
SELECTED HISTORICAL FINANCIAL DATA OF CAPITAL
The following table sets forth selected historical consolidated financial data from Capital’s consolidated financial statements and should be read in conjunction with Capital’s consolidated financial statements, including the notes thereto, and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in its Annual Report on Form 10-K for the year ended December 31, 2006, which is incorporated by reference in this proxy statement prospectus. The selected historical consolidated financial data as of December 31, 2006, 2005, 2004, 2003 and 2002, and for the five years ended December 31, 2006 is derived from Capital’s audited consolidated financial statements and related notes. Capital’s consolidated financial statements for the year ended December 31, 2006 were audited by Porter Keadle Moore, LLP, independent registered public accounting firm. Capital’s consolidated financial statements for the years ending December 31, 2005, 2004, 2003 and 2002 were audited by Maggart & Associates, P.C., independent registered public accounting firm. The financial information presented in the table below is not necessarily indicative of the financial condition, results of operations or cash flows of any other period.
CAPITAL SELECTED CONSOLIDATED
HISTORICAL FINANCIAL DATA
(Unaudited)
(In Thousands, Except Share Data)
| Year ended December 31, | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||
| Income Statement Data: |
|||||||||||||||
| Interest income |
$ | 37,310 | $ | 26,728 | $ | 17,724 | $ | 15,029 | $ | 13,721 | |||||
| Interest expense |
18,516 | 11,229 | 5,958 | 5,261 | 5,170 | ||||||||||
| Provision for loan losses |
1,328 | 1,665 | 1,514 | 1,090 | 1,090 | ||||||||||
| Noninterest income |
2,637 | 2,277 | 2,210 | 2,578 | 1,978 | ||||||||||
| Noninterest expense |
13,576 | 11,127 | 8,555 | 7,568 | 6,853 | ||||||||||
| Income before income taxes |
6,527 | 4,984 | 3,907 | 3,688 | 2,586 | ||||||||||
| Income taxes |
2,346 | 1,760 | 534 | 1,291 | 959 | ||||||||||
| Net income |
4,181 | 3,224 | 3,373 | 2,367 | 1,627 | ||||||||||
| Per Share Common Data: |
|||||||||||||||
| Net-income basic |
$ | 1.18 | $ | 0.93 | $ | 1.04 | $ | 0.77 | $ | 0.52 | |||||
| Net income—diluted |
1.14 | 0.88 | 1.00 | 0.72 | 0.50 | ||||||||||
| Book value at period end |
9.75 | 8.22 | 7.45 | 6.62 | 5.95 | ||||||||||
| Closing stock price at period end |
25.00 | 19.00 | 20.60 | 10.13 | 9.19 | ||||||||||
| Balance Sheet Data at Period End: |
|||||||||||||||
| Loans, net of unearned income |
$ | 458,593 | $ | 385,098 | $ | 289,338 | $ | 214,334 | $ | 173,385 | |||||
| Securities |
67,784 | 57,040 | 60,789 | 47,144 | 43,347 | ||||||||||
| Assets |
564,442 | 473,894 | 374,109 | 281,969 | 239,405 | ||||||||||
| Deposits |
464,952 | 378,670 | 280,027 | 224,230 | 189,895 | ||||||||||
| Long term debt |
52,984 | 54,493 | 41,536 | 24,507 | 25,787 | ||||||||||
| Shareholders’ equity |
34,969 | 28,612 | 25,788 | 20,843 | 18,632 | ||||||||||
33
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA OF RENASANT
The following unaudited pro forma condensed combined financial data (the “pro forma financial information”) set forth below gives effect to the following transactions as if they had occurred on January 1, 2006, in the case of the consolidated income statement data, and December 31, 2006, in the case of consolidated balance sheet data:
| • | The sale of approximately 2.5 million shares of Renasant common stock in a public offering that Renasant expects to complete prior to the special meeting of Capital stockholders, and Renasant’s receipt of approximately $56.2 million in estimated net proceeds after deducting the underwriting discount and the estimated expenses of the offering; and |
| • | The merger of Renasant and Capital, and the related issuance of approximately 2.674 million shares of Renasant common stock and payment of approximately $55 million in cash. The foregoing assumes that 60% of the merger consideration will be paid in stock and 40% will be paid in cash. In the event that both the market value of Renasant common stock and the value of the NASDAQ Bank Index decline by amounts specified in the merger agreement as of the date of determination, Renasant may adjust the exchange ratio used in the merger agreement to account for the decline in the value of its stock price; if no adjustment is made, Capital may terminate the merger agreement. The pro forma financial information shows the impact of the merger on the companies’ respective financial positions and results of operations under the purchase method of accounting with Renasant as the acquiror. Under this method of accounting, Renasant will record the assets and liabilities of Capital at their estimated fair values as of the date the merger is completed. |
According to the terms of the merger agreement that was announced on February 5, 2007, each Capital stockholder can elect to receive one of the three following options: (1) 1.2306 shares of Renasant common stock for each share of Capital common stock, (2) $38.00 in cash for each share of Capital common stock, or (3) a combination of 40% cash, in the amount listed above, and 60% common stock, at the exchange ratio listed above. The merger agreement imposes an overall limitation that the aggregate stock consideration be no more than 65% and no less than 60% of the total consideration received by Capital stockholders. In the event that both the market value of our common stock and the value of the NASDAQ Bank Index decline by amounts specified in the merger agreement as of the date of determination, we may adjusted the exchange ratio used in the merger to account for the decline in the value of our stock price; if no adjustment is made, Capital may terminate the merger agreement.
The pro forma financial information has been derived from, and should be read in conjunction with, the historical consolidated financial statements and related notes of Renasant and Capital incorporated by reference herein. The pro forma financial information is presented for illustrative purposes only and does not purport to be indicative of the operating results or financial position that would have actually occurred or existed if the transactions above had occurred on the dates indicated, nor is it indicative of Renasant’s future operating results or Renasant’s financial position. The pro forma adjustments are based on the information and assumptions available at the date of this proxy statement/prospectus. This pro forma financial information does not include any cost savings or revenue enhancements that may be achieved or realized as a result of the acquisition of Capital. In addition, as explained in more detail in the accompanying notes to the pro forma financial information, the allocation of the purchase price for the Capital acquisition that is reflected in the pro forma financial information is subject to adjustment and may vary from the actual purchase price allocation that will be recorded upon completion of the Capital acquisition.
34
| As of the Year Ended December 31, 2006 | ||||||||||||||||||||
| Renasant | Equity Adjustments (1) |
Capital | Capital Adjustments |
Combined | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Consolidated Balance Sheet Data: |
||||||||||||||||||||
| Cash and due from banks |
$ | 98,201 | $ | 56,150 | $ | 11,234 | $ | (58,277 | )(2) | $ | 107,308 | |||||||||
| Investment securities |
428,065 | — | 67,784 | — | 495,849 | |||||||||||||||
| Mortgage loans held for sale |
38,672 | — | 1,589 | — | 40,261 | |||||||||||||||
| Loans, net of unearned income |
1,826,762 | — | 464,198 | (3,271 | )(3) | 2,287,689 | ||||||||||||||
| Allowance for loan losses |
(19,534 | ) | — | (5,605 | ) | — | (25,139 | ) | ||||||||||||
| Net loans |
1,807,228 | — | 458,593 | (3,271 | ) | 2,262,550 | ||||||||||||||
| Premises and equipment |
41,350 | — | 5,780 | 1,000 | (4) | 48,130 | ||||||||||||||
| Intangibles |
98,296 | — | — | 103,373 | (5) | 201,669 | ||||||||||||||
| Other assets |
99,544 | — | 19,462 | (1,509 | )(6) | 117,497 | ||||||||||||||
| Total assets |
$ | 2,611,356 | $ | 56,150 | $ | 564,442 | $ | 41,316 | $ | 3,273,264 | ||||||||||
| Deposits |
$ | 2,108,965 | $ | — | $ | 464,952 | $ | 1,037 | (7) | $ | 2,574,954 | |||||||||
| Borrowings |
216,423 | — | 56,984 | (633 | )(8) | 272,774 | ||||||||||||||
| Other liabilities |
33,264 | — | 7,537 | — | 40,801 | |||||||||||||||
| Total liabilities |
2,358,652 | — | 529,473 | 404 | 2,888,529 | |||||||||||||||
| Shareholders’ equity |
252,704 | 56,150 | 34,969 | 40,912 | (9) | 384,735 | ||||||||||||||
| Total liabilities and shareholders’ equity |
$ | 2,611,356 | $ | 56,150 | $ | 564,442 | $ | 41,316 | $ | 3,273,264 | ||||||||||
| _________ * In the adjustment columns, bracketed items ( ) represent credits, non bracketed items represent debits. |
| |||||||||||||||||||
| For the Year Ended December 31, 2006 | ||||||||||||||||||||
| Renasant | Equity Adjustments (1) |
Capital | Capital Adjustments |
Combined | ||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||||
| Consolidated Income Statement Data: |
||||||||||||||||||||
| Interest income |
$ | 154,293 | $ | — | $ | 37,310 | $ | 1,636 | (3) | $ | 193,239 | |||||||||
| Interest expense |
70,230 | — | 18,516 | (766 | )(7)(8) | 87,980 | ||||||||||||||
| Net interest income |
84,063 | — | 18,794 | 2,402 | 105,259 | |||||||||||||||
| Provision for loan losses |
2,408 | — | 1,328 | — | 3,736 | |||||||||||||||
| Net interest income after provision for loan losses |
81,655 | — | 17,466 | 2,402 | 101,523 | |||||||||||||||
| Noninterest income |
45,943 | — | 2,637 | — | 48,580 | |||||||||||||||
| Noninterest expense |
89,006 | — | 13,576 | 945 | (4)(5) | 103,527 | ||||||||||||||
| Income taxes |
11,467 | — | 2,346 | 557 | (10) | 14,370 | ||||||||||||||
| Net income |
$ | 27,125 | $ | — | $ | 4,181 | $ | 900 | $ | 32,206 | ||||||||||
| Per Common Share: |
||||||||||||||||||||
| Book value per share at year end |
$ | 16.27 | $ | 3.12 | $ | 9.75 | $ | 1.98 | $ | 18.59 | ||||||||||
| Basic earnings per share |
1.75 | — | 1.18 | 0.34 | 1.56 | |||||||||||||||
| Diluted earnings per share |
1.71 | — | 1.14 | 0.32 | 1.52 | |||||||||||||||
| Average shares outstanding—basic |
15,515,223 | 2,486,531 | (11) | 3,537,936 | 2,674,026 | (12) | 20,675,780 | |||||||||||||
| Average shares outstanding—diluted |
15,853,014 | 2,486,531 | (11) | 3,655,102 | 2,855,054 | (12) | 21,194,599 | |||||||||||||
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Note 1—Basis of Pro Forma Presentation
The pro forma financial information related to the merger and equity offering is included as of and for the year ended December 31, 2006. The pro forma adjustments assume that 60% of the merger consideration will be paid in Renasant common stock and 40% in cash. The estimated purchase price of $134.2 million, which includes the value of assumed stock options and estimated transaction costs, is based on a per share price for Renasant common stock of $26.59, the average price of Renasant’s common stock as quoted on The NASDAQ Global Select Market over a five-day period beginning on February 2, 2007.
The pro forma adjustments included herein also reflect the sale of approximately 2.5 million shares of Renasant’s common stock in a public offering and the receipt of approximately $56.2 million in estimated net proceeds. Renasant expects to complete this public offering prior to the special meeting of Capital stockholders. A portion of the net proceeds of the public offering will be used to pay the cash portion of the merger consideration.
The merger will be accounted for using the purchase method of accounting and, accordingly, the pro forma financial information includes estimated adjustments to record the assets and liabilities of Capital at their respective fair values and represents management’s estimates based on available information. The pro forma adjustments included herein may be revised as additional information becomes available and as additional analyses are performed. The final allocation of the purchase price will be determined after the merger is completed and after completion of a final analysis to determine the fair values of Capital’s tangible, and identifiable intangible, assets and liabilities as of the completion date. Therefore, the final purchase accounting adjustments and integration charges may be materially different from the pro forma adjustments presented in this document. Increases or decreases in the fair value of the net assets of Capital as compared to the information shown in this document may change the amount of the purchase price allocated to goodwill and other assets and liabilities and may impact the statement of income due to adjustments in yield and/or amortization or accretion of the adjusted assets or liabilities.
The pro forma financial information presented in this document does not necessarily indicate the results of operations or the combined financial position that would have resulted had the merger been completed at the beginning of the applicable period presented, nor is it indicative of the results of operations in future periods or the future financial position of the combined company.
The following table summarizes the allocation of purchase price to assets and liabilities acquired based on their fair values on December 31, 2006:
Allocation of Purchase Price (dollar amounts in thousands, except per share data)
| Purchase Price: |
||||||
| Capital shares to settled in Renasant stock (assuming 60%)* |
2,172,945 | |||||
| Exchange factor |
1.2306 | |||||
| Renasant shares to be issued |
2,674,026 | |||||
| Purchase price per Renasant common share |
$ | 26.59 | ||||
| Value of Renasant shares issued |
$ | 71,102 | ||||
| Capital shares to settled in cash (assuming 40%)* |
1,448,630 | |||||
| Cash price for Capital shares |
$ | 38.00 | ||||
| Cash paid for Capital shares |
55,048 | |||||
| Fair value of Capital options assumed |
4,779 | |||||
| Transaction costs |
3,229 | |||||
| Total Purchase Price |
$ | 134,158 | ||||
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| Net Assets Acquired: |
|||||||
| Capital’s stockholders’ equity |
$ | 34,969 | |||||
| Adjustments to reflect fair value of assets and liabilities acquired: |
|||||||
| Loans, net of unearned income |
(3,271 | ) | |||||
| Premises and equipment |
1,000 | ||||||
| Core deposits intangible |
4,797 | ||||||
| Non-compete agreements |
1,000 | ||||||
| Deposits |
(1,037 | ) | |||||
| Borrowings |
633 | ||||||
| Deferred income taxes |
(1,509 | ) | 36,582 | ||||
| Goodwill resulting from merger |
$ | 97,576 | |||||
| * | Assumes 3,621,575 shares outstanding |
Note 2—Pro Forma Adjustments
The pro forma financial information for the merger and equity offering includes the pro forma condensed combined balance sheet as of December 31, 2006 assuming that both the merger with Capital and Renasant’s public offering of its common stock were completed on December 31, 2006. The pro forma income statement for the year ended December 31, 2006 was prepared assuming the merger with Capital and Renasant’s public offering were completed on January 1, 2006.
The pro forma financial information reflects the issuance of approximately 2.7 million shares of Renasant’s common stock with an aggregate value of $71.1 million and the conversion of approximately 246,000 Capital stock options with a fair value of approximately $4.8 million. The aggregate value of the common stock is calculated using the average price of Renasant’s common stock as quoted on The NASDAQ Global Select Market over a five day period beginning on February 2, 2007.
The pro forma adjustments included in the unaudited pro forma condensed combined balance sheet as of December 31, 2006 and the pro forma condensed combined statements of income for the year ended December 31, 2006 are as follows:
| (1) | Equity Adjustment—Adjustment to reflect the net proceeds from the sale of approximately 2.5 million shares of Renasant common stock in a public offering, after deducting underwriting discounts and other estimated offering expenses (based on an offering size of $60.0 million and excluding any proceeds from the exercise of the underwriters’ overallotment option, if exercised, to purchase approximately 372,980 additional shares of Renasant common stock). |
| (2) | Capital Adjustment—Adjustment to reflect the payment of the cash portion of the merger consideration to Capital stockholders. Also reflects the payment of approximately $3,229,000 of anticipated merger related expenses. Anticipated merger related expenses consist of investment banking fees, legal fees, accounting fees, registration fees, employment contracts, printing costs, etc. |
| (3) | Capital Adjustment—Adjustment to fair-value the loan and lease portfolio. The adjustment will be recognized over the estimated remaining life of the loan and lease portfolio. The impact of the adjustment was to increase interest income by approximately $1,636,000 for the year ended December 31, 2006. |
| (4) | Capital Adjustment—Adjustment to fair-value the premises and equipment. The adjustment will be recognized over the life of the premises and equipment. The impact of the adjustment was to increase noninterest expense by approximately $25,000 for the year ended December 31, 2006. |
| (5) | Capital Adjustment—Adjustments to record goodwill and amortizable intangible assets of core deposit intangible and employment agreements created as a result of the merger. Adjustment reflects |
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| approximately $97,576,000 in goodwill which does not have an impact on the pro forma condensed combined statement of income. The core deposit intangible of $4,797,000 is recognized over an estimated useful life of 10 years on a 150% declining balance basis. The value of employment agreements of $1,000,000 is recognized straight-line over an estimated useful life of 5 years. The amortization expense associated with the core deposit intangible and employment agreements increased noninterest expense $720,000 and $200,000 respectively, for the year ended December 31, 2006. |
| (6) | Capital Adjustment—Adjustment to reflect the deferred taxes associated with the adjustments to record the assets and liabilities of Capital at fair value using Renasant’s statutory tax rate of 38.25%. |
| (7) | Capital Adjustment—Adjustment to fair-value the fixed rate deposit liabilities based on current interest rates for similar instruments. The adjustment will be recognized over the estimated remaining term of the related deposit liability. The impact of the adjustment was to decrease interest expense by approximately $1,037,000 for the year ended December 31, 2006. |
| (8) | Capital Adjustment—Adjustment to fair-value the outstanding long-term debt instruments. The adjustment will be recognized over the remaining life of the long-term-debt instruments. The impact of the adjustment was to increase interest expense by approximately $271,000 for the year ended December 31, 2006. |
| (9) | Capital Adjustment—Adjustment to eliminate Capital’s historical stockholders’ equity and additionally to reflect the issuance of Renasant common stock to Capital stockholders and the conversion of Capital stock options into Renasant stock options. |
| (10) | Capital Adjustment—Adjustment to reflect the tax effect of the purchase accounting adjustments using Renasant’s statutory tax rate of 38.25%. |
| (11) | Equity Adjustment—Adjustment to reflect the issuance of approximately 2.5 million shares of Renasant common stock in a public offering. |
| (12) | Capital Adjustment—Adjustment to reflect the number of Renasant’s common shares issued, including the incremental number of shares issued for Capital’s options using the Treasury Stock Method, using the exchange ratio of 1.2306 shares of Renasant’s common stock for each share of Capital common stock. |
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The following table sets forth for Renasant common stock and Capital common stock historical, pro forma and pro forma-equivalent per share financial information. The pro forma and pro forma-equivalent per share information assumes that Renasant has completed the sale of approximately 2.5 million shares of Renasant common stock in a public offering which Renasant expects to complete prior to the special meeting of Capital stockholders. In addition, with respect to book value information, the pro forma and pro forma-equivalent per share information gives effect to the merger of Capital into Renasant as if the merger had been effective as of December 31, 2006. With respect to net income per share data, the pro forma and pro forma-equivalent per share information gives effect to the merger of Capital into Renasant as if merger had been effective as of January 1, 2006. The pro forma data in the tables assume that the mergers are accounted for using the purchase method of accounting and represent a current estimate based on available information of the combined company’s results of operations. See “The Merger—Accounting Treatment” on page of this proxy statement/prospectus. The pro forma financial adjustments record the assets and liabilities of Capital at its estimated fair value and is subject to adjustment as additional information becomes available and as additional analyses are performed. This table should be read in conjunction with, and is qualified in its entirety by, the historical financial statements, including the notes thereto, of Renasant and Capital. See “Where You Can Find More Information” on page of this proxy statement/prospectus in order to obtain copies of such historical financial statements.
The unaudited comparative per share data is presented for illustrative purposes only and does not indicate the financial results of the combined companies had the companies actually been combined at the beginning of each period presented and had the impact of possible revenue enhancements and expense efficiencies, among other factors, been considered and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical results of the combined company would have been had the companies been combined during this period.
Capital has not historically paid cash dividends on its common stock.
| December 31, 2006 (12 months) | |||||||||
| Income* | Book Value** |
Cash Dividends | |||||||
| Renasant Historical |
$ | 1.71 | $ | 16.27 | $ | 0.63 | |||
| Capital Historical |
1.14 | 9.75 | -0- | ||||||
| Pro Forma Combined |
1.52 | 18.59 | 0.63 | ||||||
| Per Equivalent Capital Share*** |
1.87 | 22.88 | 0.77 | ||||||
| * | Income per share is calculated on diluted shares. |
| ** | Book Value per share is calculated on the number of shares outstanding as of the end of the period. |
| *** | Per Equivalent Capital Share is pro forma combined multiplied by the exchange factor of 1.2306. |
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COMPARATIVE PER SHARE MARKET PRICE INFORMATION
Renasant common stock trades on The NASDAQ Global Select Market under the symbol “RNST”, and Capital common stock trades on the over the counter electronic bulletin board under the symbol “CPBB.OB”. The following table presents the closing prices of Renasant common stock and Capital common stock on February 2, 2007, the last trading day before the announcement of the merger, and on , 2007, the last practicable date prior to mailing this proxy statement/prospectus. The table also presents the equivalent value of the merger consideration per share of Capital common stock on those dates calculated by multiplying the closing price of Renasant common stock on those dates by 1.2306, representing the number of shares of Renasant common stock that Capital stockholders electing to receive Renasant common stock would receive in the merger for each share of Capital common stock.
| Date |
Renasant Closing Price |
Capital Closing Price |
Equivalent Per Share Value |
|||||||||
| February 2, 2007 |
$ | 27.92 | $ | 25.75 | $ | 34.36 | ||||||
| , 2007 |
$ | [ | ] | $ | [ | ] | $ | [ | ] | |||
The market price of shares of Renasant common stock is subject to fluctuation. As a result, Capital stockholders are urged to obtain current market quotations for Renasant common stock.
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This proxy statement/prospectus is being furnished to you in connection with the solicitation of proxies by the Capital board of directors from holders of Capital common stock, the only class of Capital stock outstanding, for use at the special meeting to be held at 1808 West End Avenue, Nashville, Tennessee, on , June , 2007, at local time and at any adjournments or postponements of the special meeting. This proxy statement/prospectus and the form of election are first being distributed to Capital stockholders on or about , 2007.
At the special meeting, holders of Capital common stock will be asked to consider and vote upon:
| • | a proposal to adopt and approve the merger agreement and the merger; |
| • | such other matters as may properly come before the meeting. |
The Capital board of directors has fixed the close of business on , 2007 as the record date for determining the holders of Capital common stock entitled to notice of, and to vote at, the special meeting. Only holders of record of Capital common stock at the close of business on the record date will be entitled to notice of, and to vote at, the special meeting.
On the record date, shares of Capital common stock were issued and outstanding and entitled to vote at the special meeting. Each share of Capital common stock is entitled to one vote on any matter which may properly come before the special meeting. Votes may be cast at the special meeting in person or by proxy.
The presence at the special meeting, either in person or by proxy, of the holders of a majority of the outstanding Capital common stock entitled to vote is necessary to constitute a quorum in order to transact business at the special meeting. However, if a quorum is not present at the special meeting, it is expected that the meeting will be adjourned or postponed in order to solicit additional proxies.
Approval of the proposal to adopt and approve the merger agreement and the merger will require the affirmative vote of a majority of the outstanding shares of Capital common stock. Under applicable Tennessee law, in determining whether the proposal to adopt and approve the merger agreement and the merger has received the requisite number of affirmative votes, abstentions and failures to vote will have the same effect as a vote against the proposal.
Capital stockholders may not cumulate votes on the proposal to adopt and approve the merger agreement and the merger.
Share Ownership of Management and Certain Stockholders
As of the record date, directors and executive officers of Capital and Capital Bank and their affiliates may be deemed to be the beneficial owners of approximately outstanding shares of Capital common stock, including shares subject to options not exercised but currently exercisable (collectively representing approximately % of the voting power of the common stock). The directors and executive officers of Capital and Capital Bank are parties to agreements with Renasant whereby they agreed, in their capacity as stockholders
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of Capital, to vote their shares for adoption and approval of the merger agreement and the merger. Renasant and Capital have been informed that approximately % of the outstanding shares of Capital common stock owned by the directors and executive officers of Capital and Capital Bank and their respective affiliates will be voted in favor of the approval and adoption of the merger agreement and the merger.
Shares represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in the manner specified by such proxies. If your proxy is properly executed but does not contain voting instructions, your proxy will be voted FOR adoption and approval of the merger agreement and the merger. If other matters are properly presented before the special meeting, the persons named in such proxy will have authority to vote in accordance with their judgment on any other such matter, including without limitation, any proposal to adjourn or postpone the meeting or otherwise concerning the conduct of the special meeting. Please note, however, that a proxy that has been designated to vote against the adoption and approval of the merger agreement and the merger will not be voted, either directly or through a separate proposal, to adjourn the meeting to solicit additional votes. It is not expected that any matter other than as described in this proxy statement/prospectus will be brought before the special meeting.
If a stockholder holds shares of Capital in a broker’s name (sometimes called “street name” or “nominee name”), then the stockholder must provide voting instructions to the broker. If the stockholder does not provide instructions to the broker, the shares will not be voted on any matter on which the broker does not have discretionary authority to vote, which includes the vote on the merger. A vote that is not cast for this reason is called a “broker non-vote.” Broker non-votes will be treated as shares present for the purpose of determining whether a quorum is present at the meeting. For purposes of the vote on the merger agreement, a broker non-vote is the same as a vote AGAINST the merger agreement. For purposes of the vote on other matters properly brought at the special meeting, broker non-votes will not be counted as a vote FOR or AGAINST such matter or as an abstention on such matter.
The grant of a proxy on the enclosed proxy card does not preclude a stockholder from voting in person at the special meeting. You may revoke a proxy at any time prior to your proxy being voted at the special meeting by:
| • | delivering, prior to the special meeting, a written notice of revocation bearing a later date or time than the proxy to the Secretary of Capital at 1808 West End Avenue, Nashville, Tennessee 37203; |
| • | submitting another proxy by mail that is later dated and properly signed; or |
| • | if you are the record owner of shares of Capital common stock, attending the special meeting and voting such shares in person. |
If your shares are held in the name of a broker, bank, trustee or other nominee, you should contact such person to change your vote. Attendance at the special meeting will not by itself constitute revocation of a proxy. If an adjournment or postponement occurs, it will have no effect on the ability of stockholders of record as of the record date to exercise their voting rights or to revoke any previously delivered proxies.
Capital generally will bear the cost of solicitation of proxies. In addition to solicitation by mail, the directors, officers and employees of Capital and its subsidiaries may solicit proxies from stockholders by telephone, facsimile or in person. These individuals will receive no additional compensation for any solicitation undertaken with respect to proxies for the special meeting.
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Directors and Officers of Surviving Corporation
If you approve the merger, which is described below, Capital will merge into Renasant, which will be the surviving corporation. The directors and officers of Renasant in office immediately prior to the closing date of the merger will remain in office after the closing date of the merger, until their respective successors are duly elected, appointed or qualified or until their earlier death, resignation or removal in accordance with the Articles of Incorporation and Bylaws of Renasant. In addition, effective immediately after the closing of the merger:
| • | Renasant has agreed to appoint Albert J. Dale, III, R. Rick Hart and Michael D. Shmerling to its board of directors and the board of directors of Renasant Bank; |
| • | R. Rick Hart will manage our operations in our middle Tennessee market as an Executive Vice President of Renasant and President of the Tennessee Division of Renasant Bank; and |
| • | John W. Gregory, Jr. will serve as Executive Vice President of Renasant Bank. |
Information with respect to the directors and officers of Renasant, and their duties, compensation and transactions, if any, with Renasant can be found under the headings “Directors and Executive Officers and Corporate Governance,” “Executive Compensation” and “Certain Relationships and Related Transactions and Director Independence” in the Company’s most recent annual report on Form 10-K, dated March 7, 2007 and filed with the Securities and Exchange Commission. Such annual report is incorporated by reference into this proxy statement/prospectus.
Information with respect to R. Rick Hart, John W. Gregory, Jr., Albert J. Dale, III and Michael D. Shmerling, their respective ownership of Capital common stock, and their duties, compensation and transactions, if any, with Capital can be found under the headings “Directors and Executive Officers and Corporate Governance”; “Executive Compensation”; “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters”; and “Certain Relationships and Related Transactions and Director Independence” in Capital’s most recent annual report on Form 10-K, dated March 8, 2007, as amended by amendment number one to Form 10-K dated March 9, 2007, and filed with the Securities and Exchange Commission. Such annual report is incorporated by reference into this proxy statement/prospectus.
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The discussion in this proxy statement/prospectus of the merger and the principal terms of the merger agreement is subject to, and qualified in its entirety by reference to, the merger agreement and the related articles of merger, copies of which accompany this proxy statement/prospectus as Annex A-1 and A-2, respectively, and are incorporated into this proxy statement/prospectus by reference. References in this discussion and elsewhere in this proxy statement/prospectus to the “merger” are to the merger of Capital with and into Renasant, unless the context clearly indicates otherwise.
On February 5, 2007, the Capital board of directors unanimously approved the merger agreement and the merger. If all of the conditions set forth in the merger agreement are satisfied or waived (to the extent permitted by law) and if the merger is otherwise completed, Capital will merge with and into Renasant, and Renasant will be the surviving corporation and will continue its corporate existence under Mississippi law. Immediately after the merger of Capital with and into Renasant, Capital Bank will merge with and into Renasant Bank, and Renasant Bank will be the surviving corporation and will continue its existence under Mississippi law.
Upon consummation of the merger, all shares of Capital common stock outstanding immediately before the closing date of the merger (except as provided below) will, by virtue of the merger and without any action on the part of any stockholder, and subject to the election, redesignation procedures and adjustment procedures described below, be converted into the right to receive (1) $38.00 in cash, without interest, for each share of Capital common stock or (2) 1.2306 shares of Renasant common stock, plus cash in lieu of any fractional share interest, for each share of Capital common stock.
Capital stockholders will have the opportunity to elect the form of consideration to be received for all shares of Capital common stock held by them, subject to redesignation procedures set forth in the merger agreement. The redesignation procedures are intended to ensure that not less than 60% or more than 65% of the outstanding shares of Capital common stock in the aggregate will be converted into the right to receive Renasant common stock and that not less than 35% or more than 40% of the outstanding shares of Capital common stock in the aggregate will be converted into the right to receive cash. The redesignation procedures are described in more detail below. Shares of Capital common stock held by Renasant or Capital or their subsidiaries, other than in a fiduciary capacity, or by Capital stockholders who have elected to exercise and have maintained dissenters’ rights, will not be converted into the right to receive the merger consideration upon completion of the merger.
In early October 2005, representatives of Hovde Financial, LLC (“Hovde Financial”), an investment banking firm, met with Renasant executives to discuss recent merger and acquisition activity and Renasant’s interest in acquiring an institution in the Nashville, Tennessee market. Also in early October 2005, R. Rick Hart, Capital’s Chairman, Chief Executive Officer and President, and John W. Gregory, Jr., Capital’s Chief Operating Officer and Secretary, met with representatives of Hovde Financial for an update on relevant market developments and merger and acquisition transactions. At this meeting, Hovde Financial recommended that Capital consider strategic planning options to maximize stockholder value.
In the first quarter of 2006, representatives of Hovde Financial presented an analysis of Capital’s available strategic alternatives to Capital’s board of directors as described in “Capital’s Reasons for the Merger—Alternatives” below. After the presentation, representatives of Hovde Financial arranged an introductory visit between E. Robinson McGraw, Renasant’s Chief Executive Officer, and Messrs. Hart and Gregory. In March 2006, Mr. McGraw traveled to Nashville, Tennessee, where he met Messrs. Hart and Gregory, learned generally about Capital’s operations and expressed Renasant’s interest in purchasing loan participations from Capital. At
44
approximately the same time, representatives of Hovde Financial met with another potential acquirer to determine its level of interest in a possible acquisition of Capital.
In early May 2006, Mr. McGraw and Harold Livingston, Renasant’s Chief Credit Officer, traveled to Nashville, Tennessee and met with Messrs. Hart and Gregory for further discussions regarding Renasant’s purchase of loan participations from Capital and Capital’s operations. Subsequent to this meeting, Hovde Financial presented a preliminary term sheet to both Renasant and the other potential acquirer. While Renasant indicated interest in pursuing discussions with Capital, the other potential acquirer indicated that it would not be able to pursue negotiations on the proposed terms.
In August 2006, Messrs. Hart and Gregory traveled to Tupelo, Mississippi to visit Renasant and learn more about its operations. In early September 2006, Messrs. Hart, Gregory and McGraw commenced discussions regarding the terms of a potential merger of Renasant and Capital, and Hovde Financial presented an update of its strategic analysis to Messrs. Hart and Gregory. On September 16, 2006, Messrs. Hart, Gregory, McGraw and Stuart Johnson, Renasant’s Chief Financial Officer, met briefly while attending an investor conference in New York City and continued their discussions.
From October through early December 2006, Messrs. Hart and Gregory and representatives of Hovde Financial engaged in detailed discussions on Capital’s behalf with Messrs. McGraw and Johnson regarding specific merger terms, social issues, tax implications, employment agreement terms for Messrs. Hart and Gregory, financial impact, modeling analysis, and deal structure. On December 11, 2006, after negotiations with Messrs. McGraw and Johnson and Renasant’s financial advisor, Keefe Bruyette & Woods (“KBW”), regarding pricing issues, Hovde Financial received a verbal preliminary indication as to the proposed per share transaction value from Renasant. On December 19, 2006, representatives of Hovde Financial met with Messrs. Hart and Gregory to discuss Renasant’s preliminary verbal indication, its potential ability to pay, modeling analysis, transaction structure, and additional terms of the merger.
On December 20, 2006, Mr. Hart informed Hovde Financial that the preliminary price proposed by Renasant was not acceptable, and Hovde Financial subsequently advised KBW and Renasant accordingly. On December 21, 2006, Messrs. Hart and McGraw met in Lexington, Tennessee, and following further negotiations agreed upon the price, cash/stock mix, price protections and other business terms of the prospective merger as set forth in the merger agreement and described in this proxy statement, subject in each case to approval by their respective boards of directors and, to the extent applicable, stockholders.
On January 3, 2007, the Capital board of directors met with counsel to discuss the proposed terms of the merger, the legal implications of the proposed transaction, and the obligations of directors when considering a merger. The board also met with representatives of Hovde Financial to discuss the financial terms and impact of the proposed transaction. Following this discussion, the board authorized management to proceed with due diligence and the negotiation and preparation of a definitive merger agreement with Renasant.
Between January 12, 2007 and January 31, 2007, Renasant and Capital both conducted on-site due diligence. They also negotiated, with the assistance of counsel and their respective financial advisors, the terms of the merger agreement. Messrs. Hart and Gregory also negotiated, with counsel’s assistance, the terms of their proposed employment agreements with Renasant.
On February 1, 2007, KBW representatives made a presentation to Renasant’s board of directors at which they discussed, among other things, the fairness, from a financial point of view, to Renasant of the merger consideration to be paid to Capital stockholders. Following this presentation and further discussion, Renasant’s board of directors unanimously approved the proposed merger and merger agreement and authorized management to finalize and execute and deliver the merger agreement and all related documents on behalf of Renasant.
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On the morning of February 5, 2007, the Capital board of directors met with counsel and representatives of Hovde Financial. Counsel reviewed the board’s fiduciary duties regarding this consideration of the merger and summarized the provisions of the merger agreement. Following the board’s discussion of the terms of the merger and the directors’ obligations relating to the transaction, the Hovde Financial representatives presented Hovde Financial’s verbal and written opinions that as of that date, the total transaction consideration to be issued in the proposed merger was fair, from a financial point of view, to Capital’s stockholders. Following this presentation and further discussion, the board voted unanimously to approve the proposed merger and merger agreement and authorized management to execute and deliver the merger agreement and all related documents on behalf of Capital.
After the market closed on February 5, 2007, Renasant and Capital executed the merger agreement and issued a joint press release announcing the proposed merger.
Capital’s Reasons for the Merger
In reaching its determination that the merger and the merger agreement are fair to, and in the best interest of, Capital and its stockholders, Capital’s board of directors consulted with its financial advisor and counsel, as well as with Capital’s management, and considered a number of factors, including, without limitation, the following:
| • | Merger Consideration—the value of the consideration to be received by Capital’s stockholders relative to the book value and earnings per share of Capital common stock and the price protection afforded to Capital’s stockholders in the event of a significant decrease in the market price of the Renasant common stock. |
| • | Market Prices—the historic and current market prices and trading volumes of Capital’s and Renasant’s common stock. |
| • | Information Regarding Renasant—information concerning Renasant’s financial condition, results of operations, dividend history and business prospects. |
| • | Terms of Comparable Transactions—the financial terms of recent business combinations in the financial services industry and a comparison of the multiples of selected comparable combinations with the terms of the proposed merger with Renasant. |
| • | Liquidity—the merger will enable Capital’s stockholders to exchange their relatively illiquid shares of Capital’s common stock for shares that are more widely held and actively traded. |
| • | Tax Considerations—the acquisition of Renasant common stock will be tax-free to Capital’s stockholders, except to the extent of any cash received. |
| • | Effect on Employees—the anticipated impact of the proposed merger on Capital’s employees and Renasant’s willingness and ability to retain key Capital management personnel after the merger. |
| • | Opinion of Financial Advisor—the opinion of Hovde Financial that based on the assumptions and qualifications stated in its opinion letter dated February 5, 2007, a copy of which is attached to this proxy statement/prospectus as Annex B, the total transaction consideration to be received by Capital’s stockholders in the merger is fair from a financial point of view. |
| • | Integration Issues—Renasant’s success in integrating prior acquisitions, the likelihood of a successful integration of Capital’s business, operations and employees with those of Renasant’s and the successful operation of the combined company despite the challenges of such integration, together with the belief that customer disruption in the transition phase would not be significant based on the complementary nature of the markets, lines of business, customer bases, and management and customer service styles of the two companies. |
| • | Regulatory Approval—the likelihood of the proposed merger being approved by applicable regulatory authorities without undue conditions or delay. |
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| • | Product and Services—the enhanced array of products and services and higher lending limit that would be available to Capital’s customers as a result of its combination with a larger institution. |
| • | Competition—the increasingly competitive market for financial institutions in Capital’s market area. |
| • | Alternatives—the alternatives to the merger represented by Capital’s existing strategic plan and the timing and likelihood of success in trying to achieve such plan. Specifically, if the merger opportunity had not been presented, Capital would have continued to grow organically in existing markets or possibly by acquisition of other institutions in attractive new or existing markets. These alternatives would require significant capital, however, and would present a more gradual geographic and product line expansion than is presented by the proposed merger. Additionally, as a stand-alone entity, Capital would face increased regulatory compliance costs beginning in 2007 as a result of the testing, attestation regarding its internal controls under Section 404 of the Sarbanes-Oxley Act, as well as other ongoing regulatory compliance activities. |
In the course of its deliberations regarding the merger, Capital’s board also considered the following information, which the board determined did not outweigh the benefits to Capital and its stockholders expected to be generated by the merger:
| • | Value of the Stock Consideration Unknown Prior to Closing—because the exchange ratio is fixed and the market price of Renasant’s common stock will fluctuate until the closing of the merger, Capital’s stockholders cannot be sure of the exact value of the stock consideration, if any, that they will receive in the merger for their shares of Capital common stock. |
| • | Business Interruption—the possible disruption to Capital’s business that may result between the announcement and closing of the merger and the resulting distraction of management’s attention from day-to-day operations. |
| • | Integration Issues—the difficulty inherent in integrating two businesses and the risk that the cost efficiencies, synergies and other benefits expected to be obtained in the merger may not be fully realized. |
| • | Operational Restrictions—the restrictions contained in the merger agreement on the operation of Capital’s business during the period between the signing of the merger agreement and the closing of the merger. See “The Merger Agreement—Covenants and Agreements.” |
| • | Termination, No-Approval and Break-Up Fees—in certain circumstances where the merger agreement is terminated following Capital’s receipt of a superior acquisition proposal prior to the consummation of the merger, Capital may be required to pay a break-up fee of $5,000,000. See “The Merger Agreement—Termination Fee.” |
| • | Risk of Termination—the possibility that the merger might not be completed and the effect of the resulting public announcement of the termination of the merger agreement on, among other things, the market price of the Capital common stock and Capital’s operating results, particularly in light of the costs incurred in connection with the transaction. |
| • | Payments to Management—the $ and $ payments that Messrs. Hart and Gregory will receive, respectively, under the terms of their termination and release agreements upon consummation of the merger. |
| • | Other Matters—other matters described in the sections entitled “Risk Factors” and “The Merger—Interests of Certain Persons in the Merger.” |
The foregoing discussion of the information considered by Capital’s board of directors is not intended to be exhaustive, but includes all of the material factors considered by the board. In reaching its determination to approve and recommend the merger, the board did not assign any relative or specific weights to the factors considered in reaching that determination and individual directors may have given differing weights to different
47
factors. Given the above, the board determined that the merger agreement is in the best interests of Capital and its stockholders and unanimously approved the merger.
FOR THE REASONS SET FORTH ABOVE, THE CAPITAL BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT CAPITAL STOCKHOLDERS VOTE “FOR” THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT, THE RELATED ARTICLES OF MERGER AND THE MERGER.
Renasant’s Reasons for the Merger
On February 1, 2007, Renasant’s board of directors approved the merger agreement, the merger and the other transactions contemplated by those agreements. In connection with its approval of the merger, Renasant’s board of directors recognized that:
| • | the merger will expand Renasant’s business into the demographically attractive markets of the Nashville–Davidson–Murfreesboro, Tennessee Metropolitan Statistical Area; |
| • | the merger will increase Renasant’s core deposit base, an important funding source; |
| • | the merger will provide Renasant with an experienced management team and quality bank branches in Tennessee; |
| • | the merger will provide Renasant with the opportunity to sell Renasant’s broad array of products to Capital’s client base; and |
| • | the merger is expected to be accretive to Renasant’s earnings per share within 24 months following the completion of the merger. |
The Renasant board of directors also considered the following risks associated with the merger in connection with its deliberations of the proposed transaction:
| • | the challenges of integrating Capital’s businesses, operations and workforce with those of Renasant; |
| • | the increased exposure to the highly-competitive Nashville-Davidson-Murfreesboro, Tennessee Metropolitan Statistical Area markets and the possible effects on Renasant’s deposit pricing resulting from such competition; and |
| • | whether or not Renasant would be able to retain key management of Capital. |
The foregoing discussion of the factors considered by the board of directors is not intended to be exhaustive, but, rather, includes all principal factors considered by the board of directors. In reaching its decision to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, the board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The board of directors considered all these factors as a whole, and overall considered them to be favorable to, and to support, its determination.
Opinion of Hovde Financial, LLC
Hovde Financial has delivered to the board of directors of Capital its opinion that, based upon and subject to the various considerations set forth in its written opinion dated February 5, 2007, the total transaction consideration to be paid to the shareholders of Capital is fair from a financial point of view as of such date. In requesting Hovde Financial’s advice and opinion, no limitations were imposed by Capital upon Hovde Financial with respect to the investigations made or procedures followed by it in rendering its opinion. The full text of the opinion of Hovde Financial, dated February 5, 2007, which describes the procedures followed, assumptions made, matters considered and limitations on the review undertaken, is attached hereto as Annex B. The shareholders of Capital should read this opinion in its entirety.
Hovde Financial is a nationally recognized investment banking firm and, as part of its investment banking business, is continually engaged in the valuation of financial institutions in connection with mergers and acquisitions, private placements and valuations for other purposes. As a specialist in securities of financial
48
institutions, Hovde Financial has experience in, and knowledge of, banks, thrifts and bank and thrift holding companies. The board of directors of Capital selected Hovde Financial to act as its financial advisor in connection with the merger on the basis of the firm’s reputation and expertise in transactions such as the merger.
Hovde Financial will receive a fee contingent upon the completion of the merger for services rendered in connection with advising Capital regarding the merger, including the fairness opinion and financial advisory services provided to Capital. As of the date of the initial fairness opinion, that fee would have been approximately $1.5 million, and Hovde Financial will receive substantially all of that fee upon the close of the transaction.
Hovde Financial’s opinion is directed only to the fairness, from a financial point of view, of the total transaction consideration, and, as such, does not constitute a recommendation to any shareholder of Capital as to how the shareholder should vote at the Capital shareholder meeting. The summary of the opinion of Hovde Financial set forth in this joint statement/prospectus is qualified in its entirety by reference to the full text of the opinion.
The following is a summary of the analyses performed by Hovde Financial in connection with its fairness opinion. Certain of these analyses were confirmed in a presentation to the board of directors of Capital by Hovde Financial. The summary set forth below does not purport to be a complete description of the analyses performed by Hovde Financial in rendering its opinion or the presentation delivered by Hovde Financial to the board of directors of Capital, but it does summarize all of the material analyses performed and presented by Hovde Financial.
The preparations of a fairness opinion involves various determinations as to the most appropriate and relevant methods of financial analyses and the application of those methods to the particular circumstances. In arriving at its opinion, Hovde Financial did not attribute any particular weight to any analysis and factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, Hovde Financial believes that its analyses and the following summary must be considered as a whole and that selecting portions of its analyses, without considering all factors and analyses, could create an incomplete view of the process underlying the analyses set forth in its report to the board of directors of Capital and its fairness opinion.
In performing its analyses, Hovde Financial made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Capital and Renasant. The analyses performed by Hovde Financial are not necessarily indicative of actual value or actual future results, which may be significantly more or less favorable than suggested by such analyses. Such analyses were prepared solely as part of Hovde Financial’s analysis of the fairness of the transaction consideration, from a financial point of view, to the shareholders of Capital The analyses do not purport to be an appraisal or to reflect the prices at which a company might actually be sold or the prices at which any securities may trade at the present time or at any time in the future. Hovde Financial’s opinion does not address the relative merits of the merger as compared to any other business combination in which Capital might engage. In addition, as described above, Hovde Financial’s opinion to the board of directors of Capital was one of many factors taken into consideration by the board of directors of Capital in making its determination to approve the merger agreement.
During the course of its engagement, and as a basis for arriving at its opinion, Hovde Financial reviewed and analyzed material bearing upon the financial and operational conditions of Capital and Renasant and material prepared in connection with the merger, including, among other things, the following.
| • | the merger agreement; |
| • | certain historical publicly available information concerning Capital and Renasant; |
| • | certain internal financial statements and other financial and operating data concerning Capital and Renasant; |
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| • | certain financial projections prepared by the managements of Capital and Renasant; |
| • | certain other information provided to Hovde Financial by members of the senior managements of Capital and Renasant for the purpose of reviewing the future prospects of Capital and Renasant, including financial forecasts related to the respective businesses, earnings, assets, liabilities and the amount and timing of cost savings expected to be achieved as a result of the merger; |
| • | Historical market prices and trading volumes for Renasant common stock; |
| • | The nature and terms of recent merger and acquisition transactions to the extent publicly available, involving banks, thrifts and bank and thrift holding companies that we considered relevant; |
| • | The pro forma ownership of Renasant’s common stock by the shareholders of Capital relative to the pro forma contribution of Capital’s assets, liabilities, equity and earnings to the combined company; |
| • | The pro forma impact of the merger on the combined company’s earnings per share, consolidated capitalization and financial ratios; and |
| • | Such other information and factors as it deemed appropriate. |
Hovde Financial also took into account its assessment of general economic, market and financial conditions and its experience in other transactions, as well as its knowledge of the commercial banking industry and its general experience in securities valuations.
In rendering its opinion, Hovde Financial assumed, without independent verification, the accuracy and completeness of the financial and other information and relied upon the accuracy of the representations of the parties contained in the merger agreement. Hovde Financial also assumed that the financial forecasts furnished to or discussed with Hovde Financial by Capital and Renasant were reasonably prepared and reflected the best currently available estimates and judgments of senior management of Capital and Renasant, as to the future financial performance of Capital, Renasant, or the combined company, as the case may be. Hovde Financial has not made any independent evaluation or appraisal of any properties, assets or liabilities of Capital or Renasant. Hovde Financial assumed and relied upon the accuracy and completeness of the publicly available and other non-public financial information provided to it by Capital and Renasant, relied upon the representations and warranties of Capital and Renasant made pursuant to the merger agreement, and did not independently attempt to verify any of such information.
Analysis of Selected Mergers. As parts of its analysis, Hovde Financial reviewed three groups of comparable merger transactions. The first peer group included transactions which have occurred since January 1, 2006, that involved target banks in the entire United States that had total assets between $300 million and $600 million and a return on average assets between .50% and 1.25% (the “Nationwide Merger Group”). This Nationwide Merger Group consisted of the following 16 transactions:
| Buyer |
Seller | |
| UCBH Holdings Inc. |
CAB Holdings LLC | |
| Central Bancompany |
21st Century Finl Svcs Co. (OK) | |
| Banner Corp. (WA) |
F&M Bank (WA) | |
| U.S. Bancorp (MN) |
United Financial Corp. (MT) | |
| United Community Banks Inc. (GA) |
Southern Bancorp Inc. (GA) | |
| Bancshares of Florida Inc. (FL) |
Old Florida Bankshares Inc. (FL) | |
| Industrial Bank of Taiwan |
Evertrust Bank (CA) | |
| National Mercantile Bancorp (CA) |
FCB Bancorp (CA) | |
| Castle Creek Capital III LLC (CA) |
BB&T Bancshares Corp. (IL) | |
| Glacier Bancorp Inc. (MT) |
Citizens Development Co. (MT) | |
| Commerce Bankshares Corp. (MD) |
West Pointe Bancorp Inc. (IL) | |
| Mercantile Bankshares Corp. (MD) |
James Monroe Bancorp Inc. (VA) | |
| National Bancshares Inc. (IA) |
Metrocorp Inc. (IL) | |
| Banc Corp (AL) |
Kensington Bankshares Inc. (FL) | |
| Cathay General Bancorp Inc. (CA) |
Great Eastern Bank (NY) | |
| Midwest Banc Holdings Inc. (IL) |
Royal American Corporation (IL) |
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Hovde Financial then reviewed comparable mergers involving banks in the Southeast United States that had total assets between $300 million and $700 million that have sold since January 1, 2005 (the “Southeast Merger Group”). This Southeast Merger Group consisted of the following 23 transactions:
| Buyer |
Seller | |
| Banco Sabadel SA |
Transatlantic Holding Corp (FL) | |
| Castle Creek Capital LLC (CA) |
BankFirst Bancorp Inc. (FL) | |
| Superior Bancorp (AL) |
People’s Community Bancshares (FL) | |
| UCBH Holdings Inc. (CA) |
Summit Bank Corp. (GA) | |
| Park National Corp. (OH) |
Vision Bancshares Inc. (FL) | |
| United Community Bank Inc. (GA) |
Southern Bancorp Inc. (GA) | |
| Bancshares of Florida Inc. (FL) |
Old Florida Bankshares (FL) | |
| First Charter Corp. (NC) |
GBC Bancorp Inc. (GA) | |
| Alabama National BanCorp. (MD) |
PB Financial Services Corp. (GA) | |
| Banc Corp. (AL) |
Community Bancshares Inc. (AL) | |
| Mercantile Bankshares Corp. (MD) |
James Monroe Bancorp Inc. (VA) | |
| Banc Corp. (AL) |
Kensington Bankshares Inc. (FL) | |
| BB&T Corp. (NC) |
First Citizens Bancorp (TN) | |
| Seacost Banking Corp. of FL (FL) |
Big Lake Financial Corporation (FL) | |
| Synovus Financial Corp. (GA) |
Banking Corporation of Florida (FL) | |
| Pinnacle Financial Partners (TN) |
Cavalry Bancorp Inc. (TN) | |
| FNB Corp. (NC) |
Integrity Financial Corp (NC) | |
| Synovus Financial Corp. (GA) |
Riverside Bancshares Inc. (GA) | |
| Whitney Holding Corp. (LA) |
First National Bancshares Inc. (FL) | |
| Commerce Bancorp Inc. (NJ) |
Palm Beach Country Bank (FL) | |
| Capital Bank Corp. (NC) |
1st State Bancorp Inc. (NC) | |
| FLAG Financial Corp. (GA) |
First Capital Bancorp Inc. (GA) | |
| First Citizens Bancorp. (SC) |
Summit Financial Corp. (SC) |
Hovde Financial also reviewed comparable mergers involving select banks headquartered in Tennessee announced since January 1, 2002 (the “Tennessee Select Merger Group”). This Tennessee Select Merger Group consisted of the following 7 transactions:
| Buyer |
Seller | |
| Greene County Bancshares Inc. (TN) |
Civitas BankGroup (TN) | |
| BB&T Corp. (NC) |
First Citizens Bancorp (TN) | |
| Pinnacle Financial Partners (TN) |
Cavalry Bancorp Inc. (TN) | |
| BancorpSouth Inc. (MS) |
Premier Bancorp Inc. (TN) | |
| Peoples Holding Co. (MS) (now Renasant Corporation) |
Renasant Bancshares Inc. (TN) | |
| Synovus Financial Corp. (GA) |
Trust One Bank (TN) | |
| Fifth Third Bancorp (OH) |
Franklin Financial Corp. (TN) |
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Hovde Financial calculated the medians and averages of the following relevant transaction ratios in the Nationwide Merger Group, the Southeast Merger Group and the Tennessee Select Merger Group: the percentage of the offer value to the acquired company’s total assets, the multiple of the offer value to the acquired company’s tangible book value; the multiple of the offer value to the acquired company’s earnings for the twelve months preceding the announcement date of the transaction; and the tangible book value premium to core deposits. Hovde Financial compared these multiples with the corresponding multiples for the merger, valuing the total consideration that would be received pursuant to the merger agreement at $35.72 per Capital diluted share. In calculating the multiples for the merger, Hovde Financial used Capital’s earnings for the twelve months ended December 31, 2006, and Capital’s tangible book value per share, total assets, and total deposits as of December 31, 2006. The results of this analysis are as follows:
| Offer Value to | ||||||||
| Total Assets (%) |
Tangible Book Value (x) |
12 months Preceding Earnings (x) |
Ratio of Tangible (%) | |||||
| Capital |
23.9 | 3.86 | 32.3 | 36.8 | ||||
| Nationwide Merger Group average |
22.9 | 2.80 | 24.4 | 24.9 | ||||
| Southeast Merger Group average |
25.4 | 3.16 | 24.4 | 27.9 | ||||
| Tennessee Select Group average |
25.7 | 3.66 | 24.7 | 30.1 | ||||
Discounted Cash Flow Analysis. Hovde Financial estimated the present value of all shares of Capital common stock by estimating the value of Capital’s estimated future earnings stream beginning in 2007. Reflecting Capital internal projections and Hovde Financial estimates, Hovde Financial assumed net income in 2007, 2008, 2009, 2010, and 2011 of $5.500 million, $6.850 million, $7.854 million, $9.149 million, and $10.358 million, respectively. The present value of these earnings was calculated based on a range of discount rates of 11%, 12%, 13%, 14%, and 15%. In order to derive the terminal value of Capital earnings stream beyond 2011, Hovde Financial assumed a terminal value based on a multiple of between 20x and 24x applied to free cash flows in 2011. The present value of this terminal amount was then calculated based on the range of discount rates mentioned above. These rates and values were chosen to reflect different assumptions regarding the required rates of return of holders or prospective buyers of Capital common stock. This analysis and its underlying assumptions yielded a range of per share values for Capital stock of approximately $28.07 (at a 15.0% discount rate and a 20x terminal multiple) to $39.87 (at a 11% discount rate and a 24x terminal multiple). The average per share value of the range was $33.70 (at a 13% discount rate and a 22.1x terminal multiple) compared to total per share merger consideration of $35.72.
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Premium-to-Market Analysis. In addition, Hovde Financial reviewed a group of comparable merger transactions involving publicly traded target banks. The peer group included transactions which have occurred since January 1, 2005, that involved target banks in the entire United States that had total assets between $400 million and $600 million (the “Publicly-Traded Merger Group”). This Publicly-Traded Merger Group consisted of the following 18 transactions:
| Buyer |
Seller | |
| Chittenden Corp. (VT) |
Merrill Merchants Bancshares (ME) | |
| U.S. Bancorp (MN) |
United Financial Corp. (MT) | |
| City National Corp. (CA) |
Business bank Corporation (NV) | |
| Old National Bancorp (IN) |
St. Joseph Capital Corp. (IN) | |
| Provident Financial Services (NJ) |
Fist Morris bank & Trust (NJ) | |
| First State Bancorp (NM) |
Front Range Capital Corp. (CO) | |
| Conestoga Bancorp Inc. (PA) |
PSB Bancorp Inc. (PA) | |
| Community Bancorp (NV) |
Valley Bancorp (NV) | |
| National Mercantile Bancorp (CA) |
FCB Bancorp (CA) | |
| First Charter Corp. (NC) |
GBC Bancorp Inc. (GA) | |
| First Republic Bank (CA) |
BWC Financial Corp. (CA) | |
| Banc Corp. (AL) |
Community Bancshares Inc. (AL) | |
| Commerce Bancshares Inc. (MO) |
West Pointe Bancorp Inc. (IL) | |
| Mercantile Bankshares Corp. (MD) |
James Monroe Bancorp Inc. | |
| Castle Creek Capital III LLC CA) |
LDF Incorporated (IL) | |
| New York Community Bancorp (NY) |
Long Island Financial Corp. (NY) | |
| NBT Bancorp Inc. (NY) |
CNB Bancorp Inc. (NY) | |
| Fulton Financial Corp. (PA) |
SVB Financial Services Inc. (NJ) |
Hovde Financial calculated the averages of the premium-to-market percentages of these transactions and compared them with the corresponding premium-to-market for the merger. The Publicly-Traded Merger Group yielded a premium-to-market average of 24.3%. The premium-to-market Capital is receiving is 38.7% based on Capital Bancorp, Inc’s February 1, 2007 stock price at closing.
Comparable Company Analysis. Using publicly available information, Hovde Financial compared the stock market valuation of Renasant with the following other publicly traded banking institutions that were hypothetical potential buyers:
| Institution Name |
Ticker |
State | ||
| BancorpSouth, Inc. |
BXS | MS | ||
| BB&T Corporation |
BBT | NC | ||
| Fifth Third Bancorp |
FITB | OH | ||
| First Horizon National Corp. |
FHN | TN | ||
| Marshall & Ilsley Corporation |
MI | WI | ||
| National City Corporation |
NCC | OH | ||
| Park National Corporation |
PRK | OH | ||
| Regions Financial Corporation |
RF | AL | ||
| Synovus Financial Corp. |
SNV | GA | ||
| Trustmark Corporation |
TRMK | MS | ||
| U.S. Bancorp |
USB | MN | ||
| Wachovia Corporation |
WB | NC |
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Indications of such stock market valuation included closing stock market information as of February 1, 2007. Selected market information for Renasant and the group of comparable companies that was analyzed is provided below.
| Mkt. Cap ($m) |
Price/ Book (%) |
Price/ TBV (%) |
Price/ 2006E EPS (x) |
Price/ 2007E EPS (x) |
PEG Ratio (%) |
Inside Ownership (%) |
Instit’l Ownership (%) | |||||||||
| Renasant |
434.00 | 171.60 | 280.90 | 15.30 | 13.90 | 1.50 | 9.30 | 21.20 | ||||||||
| Comparable Company Average |
152.30 | 186.87 | 207.45 | 14.00 | 12.80 | 2.20 | 4.50 | 44.70 |
Contribution Analysis. Hovde Financial prepared a contribution analysis showing percentages of total assets, total net loans, total deposits, and total common equity at December 31, 2006 for Capital and for Renasant, and actual fiscal year 2006 earnings and estimated fiscal year 2007 earnings that would be contributed to the combined company on a pro-forma basis by Capital and for Renasant. This analysis indicated that, in a hypothetical 100% stock transaction, holders of Capital common stock would own approximately 23.1% of the pro forma common shares outstanding of Renasant while contributing an average of 17.1% of the financial components listed above.
| Capital Contribution To Renasant |
|||
| Total assets |
17.8 | % | |
| Total net loans |
20.0 | % | |
| Total deposits |
18.1 | % | |
| Total equity |
12.2 | % | |
| Total tangible equity |
18.5 | % | |
| Net income—Estimated GAAP 2007 |
16.0 | % | |
| Average Capital Contribution Percentage |
17.1 | % | |
| Capital Pro Forma Ownership* |
23.1 | % |
| * | Based on a hypothetical 100% stock transaction. |
Financial Implications to Capital Shareholders. Hovde Financial prepared an analysis of the financial implications of Renasant’s offer to a holder of Capital common stock. This analysis indicated that on a pro forma equivalent basis, assuming the per share merger consideration of $35.72 and excluding any potential revenue enhancement opportunities, a shareholder of Capital would achieve approximately 33.1% accretion in GAAP earnings per share, approximately 42.5% accretion in cash earnings per share, an increase in tangible book value per share of approximately 27.2%, and an increase in total book value per share of approximately 87.8% as a result of the consummation of the merger. The table below summarizes the results discussed above:
| Per Share: | ||||||||||||||||
| 2007E GAAP Earnings |
2007E Cash Earnings |
Book Value |
Tangible Book Value |
|||||||||||||
| Capital standalone |
$ | 1.49 | $ | 1.49 | $ | 10.02 | $ | 10.02 | ||||||||
| Capital Pro Forma* |
$ | 1.99 | $ | 2.13 | $ | 18.18 | $ | 12.75 | ||||||||
| % Accretion—Dilution |
33.1 | % | 42.5 | % | 87.8 | % | 27.2 | % | ||||||||
| * | Based on a hypothetical 100% stock transaction. |
Rate of Return Analysis. Hovde Financial estimated the rates of returns for four different scenarios; Capital’s standalone, Capital affiliates in 5 years, Capital affiliates with Renasant today, and Capital affiliates with Renasant and the pro forma company is acquired. For the standalone scenario (“Status Quo”) it is assumed that Capital stock sells in the market on December 31, 2011 at 18x EPS and the current Capital P/E is based on the 2007 estimate. The Status Quo scenario yielded an annual return of investment of 19.02%. For the second
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scenario (“Affiliation in 5 Years”) it is assumed that Capital affiliates with a merger partner on December 31, 2011 at 22.1x EPS, which yielded an annual return of investment of 25.28%. The third scenario (“Affiliation Today”) assumes Capital affiliates with Renasant in 2007 and the pro forma stock sells in the market on December 31, 2011 at 20x EPS with the current Capital P/E based on the 2007 estimate. The Affiliation Today scenario yielded an annual return of investment of 28.73%. The fourth scenario (“Double Dip”) assumed Capital affiliates with Renasant in 2007 and the pro forma company is acquired on December 31, 2011 at 25x EPS. The Double Dip scenario yielded an annual return of investment of 35.76%.
Based upon the foregoing analyses and other investigations and assumptions set forth in its opinion, without giving specific weightings to any one factor or comparison, Hovde Financial determined that the total transaction consideration was fair from a financial point of view to the shareholders of Capital.
Material United States Federal Income Tax Consequences
The following discussion is a summary of specified United States federal income tax consequences of the merger to a holder of shares of Capital common stock who holds the shares as capital assets (referred to in this discussion as a “Holder”). The discussion is based on laws, regulations, rulings and decisions in effect on the date hereof, all of which are subject to change, possibly with retroactive effect. This discussion is for general information only and may not be applicable with respect to Holders subject to special treatment under the Internal Revenue Code (including, but not limited to, financial institutions, tax-exempt organizations, mutual funds, insurance companies, S corporations or other pass-through entities, dealers in securities or foreign currency, Holders who exercise dissenters’ rights, foreign Holders, Holders who acquired shares of Capital common stock pursuant to the exercise of employee stock options or otherwise as compensation or through tax-qualified retirement plans, traders in securities who elect the mark-to-market method of accounting for their securities holdings, Holders subject to the alternative minimum tax, Holders who have a functional currency other than the U.S. dollar, or Holders who hold Capital common stock as part of a hedge against currency risk, straddle or a constructive sale or conversion transaction). Neither Capital nor Renasant intends to request any ruling from the Internal Revenue Service as to the United States federal income tax consequences of the merger. In addition, the discussion does not address the state, local or foreign tax consequences of the merger.
Based on factual representations provided by Capital and Renasant and on customary factual assumptions, all of which must continue to be accurate in all material respects as of the closing date of the merger, it is the opinion of Phelps Dunbar LLP, counsel to Renasant, that the material United States federal income tax consequences of the merger are as follows:
| • | the merger will be treated as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, and each of Renasant and Capital will be a party to the reorganization within the meaning of Section 368(b) of the Code; |
| • | a Holder will not recognize gain or loss if the Holder exchanges Capital common stock solely for Renasant common stock, except to the extent of any cash received in lieu of a fractional share of Renasant common stock; |
| • | where a Holder exchanges Capital common stock solely for cash in the merger, such cash will be treated as having been received as a distribution in redemption of such Holder’s Capital common stock, subject to the provisions and limitations of Section 302 of the Internal Revenue Code; |
| • | a Holder will recognize gain (but not loss) if the Holder exchanges Capital common stock for a combination of Renasant common stock and cash, and the Holder’s gain will be equal to the lesser of: |
(1) the excess, if any, of:
(a) the sum of the cash (excluding any cash received in lieu of a fractional share of Renasant common stock) and the fair market value of the Renasant common stock received (including any
55
fractional share of Renasant common stock which is deemed to be distributed in the merger and then redeemed by Renasant), over
(b) the Holder’s tax basis in the Capital common stock surrendered in the exchange, or
(2) the amount of cash received;
| • | a Holder’s tax basis in the Renasant common stock received in the merger will equal the Holder’s tax basis in the Capital common stock surrendered (less the tax basis allocable to any fractional share which is deemed to be distributed in the merger and then redeemed by Renasant), increased by (1) the amount, if any, treated as a dividend and (2) the amount of gain which was recognized by the Holder on such exchange (not including any portion of such gain which was treated as a dividend), and decreased by the amount of cash received in the merger (excluding any cash received in lieu of a fractional share interest); |
| • | a Holder’s holding period for the Renasant common stock received in the merger will include the holding period for the shares of Capital common stock surrendered in exchange therefor, provided that the Capital common stock was held as a capital asset at the time of the merger; and |
| • | the receipt of cash in lieu of fractional shares of Renasant common stock will be treated as if the fractional shares were distributed in the merger and then redeemed by Renasant. Generally, these cash payments will be treated as having been received as distributions in full payment in exchange for the shares considered redeemed. |
If a Holder acquired different blocks of Capital common stock at different times and at different prices, any gain or loss will be determined separately with respect to each block of Capital common stock, and the cash and Renasant common stock received will be allocated proportionately to each block of stock. In addition, a Holder’s basis and holding period in the Renasant common stock received in the merger will be determined separately with reference to each block of Capital common stock surrendered in the exchange.
Taxation of Capital Gain. Subject to the discussion under “Possible Treatment of Gain as a Dividend” set forth below, gain or loss recognized in connection with the merger will constitute long-term capital gain or loss if a Holder’s holding period in the Capital common stock is greater than one year as of the date of the merger. If a Holder is not a corporation, this long-term capital gain generally will be taxed at a maximum United States federal income tax rate of 15%. The deductibility of capital losses is subject to limitations.
Possible Treatment of Gain as a Dividend. In general, in determining whether the gain recognized in the merger will be treated as capital gain or dividend income, a Holder (other than a Holder who exchanges Capital common stock solely for cash) will be treated as if it first exchanged all of the Holder’s shares of Capital common stock solely for Renasant common stock and then Renasant immediately redeemed a portion of that Renasant common stock in exchange for the cash that the Holder actually received. Gain recognized in this deemed-redemption of Renasant common stock will result in capital gain if there is a “meaningful reduction” in the Holder’s deemed percentage stock ownership in Renasant. The Internal Revenue Service has ruled that a relatively minor reduction in the percentage stock ownership of a minority stockholder in a publicly held corporation whose relative stock interest is minimal and who exercises no control with respect to corporate affairs is a “meaningful reduction.” Accordingly, in most circumstances, gain recognized by a Holder that exchanges its shares of Capital common stock for a combination of Renasant common stock and cash will be capital gain. Each Holder that may be subject to these rules should consult its tax advisor.
Dissenters’ Rights. Stockholders who exercise their dissenters’ rights and who receive cash in exchange for their shares of Capital common stock will be treated as having received that payment in redemption of their shares. In general, the Holder will recognize capital gain or loss measured by the difference between the amount of cash received and the Holder’s adjusted tax basis for the shares. If, however, the Holder owns, either actually or constructively, any Capital common stock that is exchanged in the merger for Renasant common stock, the
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payment for dissenting shares to the Holder could, in certain limited circumstances, be treated as a dividend. In general, under the constructive ownership rules of the Code, a Holder may be considered to own stock that is owned, and in some cases constructively owned, by certain related individuals or entities, as well as stock that the Holder (or related individuals or entities) has the right to acquire by exercising an option or converting a convertible security. In such an event, the payment for dissenting shares to the Holder would be treated as a dividend, unless the distribution is “substantially disproportionate” or is not “essentially equivalent to a dividend” as defined under applicable federal income tax law. Each Holder who contemplates exercising dissenters’ rights should consult his or her own tax advisor as to the possibility that any payment to such Holder will be treated as dividend income. A dividend received by a non-corporate stockholder from a domestic corporation currently is subject to federal income tax at a maximum rate of 15%.
Cash Received in Lieu of a Fractional Share. Cash received in lieu of a fractional share of Renasant common stock will be treated as received in redemption of the fractional share of Renasant common stock. Generally, a Holder of a fractional share will recognize gain or loss equal to the difference between the amount of cash received and the portion of the basis of the Holder’s shares of Capital common stock allocable to the fractional share. Such gain or loss generally will be capital gain or loss, and will be long-term capital gain or loss if the holding period for the Holder’s shares of Capital common stock was greater than one year as of the date of the exchange.
Backup Withholding. Unless a Holder complies with specified reporting or certification procedures or is an “exempt recipient” (i.e., in general, corporations and some other entities), the Holder may be subject to a backup withholding tax of 28% with respect to any cash payments received pursuant to the merger. A foreign stockholder should consult its tax advisor with respect to the application of withholding rules to any cash payments received by it pursuant to the merger.
Reporting Requirements. If a Holder receives Renasant common stock as a result of the merger, such Holder will be required to retain records pertaining to the merger and will be required to file with such Holder’s United States federal income tax return for the year in which the merger takes place a statement setting forth specified facts relating to the merger.
Each Capital stockholder is urged to consult his or her own tax advisor with respect to the federal, state, local and foreign tax consequences of the merger.
Renasant will account for the merger as a purchase transaction under accounting principles generally accepted in the United States. Under the purchase method of accounting, the assets and liabilities of Capital will be recorded, as of completion of the merger, at their respective fair values and added to those of Renasant. Financial statements and reported results of operations of Renasant issued after completion of the merger will reflect these values, but will not be restated retroactively to reflect the historical financial position or results of operations of Capital.
Regulatory and Third-Party Approvals
Under the merger agreement, Renasant and Capital have agreed to use their best efforts to obtain all necessary actions, indications of no objection, waivers, consents and approvals from any governmental authority necessary to complete and make effective the merger and other transactions contemplated by the merger agreement. The required regulatory approvals include approvals of federal and state agencies as described below. All other applications and notices have been filed, or are in the process of being filed.
Federal Bank Regulatory Approvals. The merger is subject to the prior approval of the Federal Reserve Board (the “Federal Reserve”) under Section 3(a)(5) of the Bank Holding Company Act (the “BHC Act”), and related federal regulations, and Renasant and Capital must wait at least 15 days after the date of such approval
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before they may complete the merger. In reviewing an application for such approvals under the BHC Act, the Federal Reserve is required to consider the following:
| • | competitive factors, such as whether the merger will result in a monopoly or whether the benefits of the merger to the public in meeting the needs and convenience of the community clearly outweigh the merger’s anticompetitive effects or restraints on trade; |
| • | banking and community factors, which includes an evaluation of: |
| • | the financial and managerial resources of Renasant, including its subsidiaries, and of Capital, and the effect of the proposed transaction on those resources; |
| • | management expertise; |
| • | internal-control and risk-management systems; |
| • | the capital of Renasant; |
| • | the convenience and needs of the communities to be served; and |
| • | the effectiveness of Renasant and Capital in combating money laundering activities. |
The application process includes publication and opportunity for comment by the public. The Federal Reserve may receive, and must consider, properly filed comments and protests from community groups and others regarding (among other issues) each institution’s performance under the Community Reinvestment Act of 1977, as amended. The Federal Reserve is also required to ensure that the proposed transaction would not violate Tennessee law regarding the number of years a bank must be in operation before it can be acquired, deposit concentration limits, Tennessee community reinvestment laws and any Tennessee antitrust statutes.
The merger of Capital Bank with and into Renasant Bank is subject to the prior approval of the Federal Deposit Insurance Corporation (“FDIC”) pursuant to Section 18(c) of the Federal Deposit Insurance Act, as amended, and related federal regulations. The FDIC considers factors generally similar to those considered by the Federal Reserve. The FDIC application process also includes publication and an opportunity for comment by the public.
State Bank Regulatory Approvals. Renasant has filed or will file applications or notices with the Mississippi Department of Banking and Consumer Finance and the Tennessee Department of Financial Institutions for approval of the merger. The standards that are required to be considered by these state bank regulatory authorities are similar to those described above with regard to the Federal Reserve.
Other Regulatory Approvals. In connection with or as a result of the merger, Renasant or Capital may be required, pursuant to other laws and regulations, either to notify or obtain the consent of other regulatory authorities and organizations to which such companies or subsidiaries of either or both companies may be subject.
If the approval of the merger by any of the authorities mentioned above is subject to compliance with any conditions, there can be no assurance that the parties or their subsidiaries will be able to comply with such conditions or that compliance or non-compliance will not have adverse consequences for the combined company after consummation of the merger. The parties believe that the proposed merger is compatible with such regulatory requirements.
While Renasant and Capital believe that they will receive the requisite regulatory approvals for the merger, there can be no assurance regarding the timing of the approvals or the ability of the companies to obtain the approvals on satisfactory terms, the absence of litigation challenging such approvals or otherwise. There can
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likewise be no assurance that any state attorney general or other domestic regulatory authority will not attempt to challenge the merger on antitrust grounds or for other reasons, or, if such a challenge is made, as to the result thereof. The merger is conditioned upon the receipt of all consents, approvals and actions of governmental authorities and the filing of all other notices with such authorities in respect of the merger. See “The Merger Agreement—Conditions to the Completion of the Merger” on pages through of this proxy statement/prospectus.
Renasant is not aware of any regulatory approvals that would be required for completion of the transactions contemplated by the merger agreement other than as described above. Should any other approvals be required, it is presently contemplated that such approvals would be sought. There can be no assurance that any other approvals, if required, will be obtained.
Third-Party Approvals. The merger is conditioned upon the receipt of all consents and approvals of third parties with respect to specified agreements, such as real property leases, unless the failure to obtain any such consent or approval would not reasonably be expected to have a material adverse effect on Renasant or Capital. Pursuant to the merger agreement, Capital and Renasant have agreed to use their best efforts to obtain all consents, approvals and waivers from third parties necessary in connection with the completion of the merger.
Effect on Employee Benefit Plans and Stock Options
Employee Benefit Plans. All employees of Capital and its subsidiaries immediately prior to the effective time of the merger will become employees of Renasant or its subsidiaries immediately following the effective time of the merger. Subject to the discretion of Renasant, such transferred employees either will be covered by the Renasant employee benefit plans on substantially the same basis as the other employees of Renasant and its subsidiaries performing services in a comparable position, or continue coverage under their existing Capital employee benefit plans. Transferred employees’ service with Capital or Capital Bank shall be recognized as service with Renasant or a Renasant subsidiary, as the case may be, for purposes of eligibility to participate and vesting under the benefit plans, policies or arrangements.
Renasant will continue to provide continuation coverage as required under the Consolidated Omnibus Budget Reconciliation Act (COBRA) to former employees of Capital, and their beneficiaries, who were receiving COBRA coverage immediately prior to the effective time. Renasant has agreed that any preexisting condition, limitation or exclusion in its medical, long-term disability and life insurance plans shall not apply to transferred employees or their covered dependents who are covered under similar plans maintained by Capital or Capital Bank to the extent waived or inapplicable to such employee under the Capital or Capital Bank plan on the closing date of the merger and who then change coverage to the Renasant medical or hospitalization indemnity health plan. The merger agreement does not restrict the ability of Renasant, Renasant Bank or any other Renasant employer to amend, merge, or terminate Capital’s employee benefit plans in accordance with their terms or applicable law.
Except to the extent of commitments in the merger agreement or other contractual commitments specifically made or assumed by Renasant, no Renasant employer will have any obligation arising from the merger to continue any transferred employee in its employ or in any specific job or to provide to any transferred employee any specified level of compensation or any incentive payments, benefits or perquisites. Each transferred employee who is terminated by a Renasant employer subsequent to the effective time of the merger, excluding any employee who has a then existing contract explicitly providing for severance in lieu of severance plan benefits, shall be entitled to severance pay in accordance with the general severance policy of Renasant, if and to the extent that such transferred employee is entitled to severance pay under that policy. Such employee’s service with Capital will be treated as service with Renasant for purposes of determining the amount of severance pay, if any, under Renasant’s severance policy.
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As of the closing date of the merger, Renasant shall assume and honor in accordance with their terms all employment agreements existing immediately prior to the closing date between Capital or Capital Bank and any officer which have been disclosed to Renasant in the merger agreement except that the employment agreements between Capital Bank and each of R. Rick Hart and John W. Gregory, Jr. shall be terminated on the closing date and Renasant or Renasant Bank, as applicable, shall enter into new employment agreements with Mr. Hart and Mr. Gregory effective as of the closing date.
Following the closing date of the merger, Renasant and Renasant Bank, in their sole discretion, may determine to continue, amend, merge, or terminate any deferred compensation plan, policy, program or arrangement disclosed by Capital to Renasant, provided that any such amendment, merger, or termination does not impair the benefits due thereunder as of the date of the merger agreement (February 5, 2007), and that any such amendment, merger, or termination is permitted under such plans, policies, programs or arrangements or otherwise required by applicable law.
Capital has agreed to terminate its 401(k) plan immediately prior to the closing date and to distribute amounts under the plan in accordance with and at the times permitted under such benefits plans and under applicable law. All participants who receive a distribution from the Capital 401(k) plan may roll over such distribution to an individual retirement account as provided under applicable law. To the extent permitted under the terms of the 401(k) plan maintained by Renasant, transferred employees may elect to roll over their distributions from the Capital 401(k) plan to the Renasant 401(k) plan. Capital has also agreed to terminate its Employee Stock Purchase Plan on the closing date of the merger. After the closing date of the merger, any remaining rights to acquire shares of Capital common stock under Capital’s Employee Stock Purchase Plan shall be converted to the right to receive Renasant common stock. The number of shares of Capital common stock subject to acquisition will be multiplied by 1.2306 to determine the amount of shares of Renasant common stock subject to acquisition. The acquisition price for such shares of Renasant common stock will equal the quotient of the acquisition price for the shares determined in accordance with the Employee Stock Purchase Plan, divided by 1.2306.
Stock Options and Related Matters. Renasant shall assume at the time the merger becomes effective, whether or not then exercisable, each outstanding option to purchase shares of Capital common stock under Capital stock option plans and any shares that may then be purchased under Capital’s employee stock purchase plan, except that (1) Renasant and its Compensation Committee shall be substituted for Capital and the relevant committee of Capital’s board of directors for purposes of administering the particular Capital stock plan, (2) each Capital stock option assumed by Renasant may be exercised solely for shares of Renasant common stock, (3) the number of shares of Renasant common stock subject to each such Capital stock option shall be the number of whole shares of Renasant common stock (omitting any fractional share) determined by multiplying the number of shares of Capital common stock subject to such Capital stock option immediately prior to merger by the exchange ratio of 1.2306, and (4) the per share exercise price under each such Capital stock option shall be adjusted by dividing the per share exercise price under each such Capital stock option by the exchange ratio of 1.2306 and rounding up to the nearest cent. Any restriction on the exercise of any such Capital stock option will continue in full force and effect, and the term and other provisions of such Capital stock option will otherwise remain unchanged.
As of February 5, 2007, options to purchase an aggregate of approximately 245,934 shares of Capital common stock were outstanding and may continue to be outstanding at the effective time of the merger. On that date, all such outstanding stock options fully vested, and these fully vested stock options are exercisable when the merger is completed. Any shares of Capital common stock issued pursuant to the exercise of stock options under the Capital stock option plans before the effective time of the merger will be converted into shares of Renasant common stock in the same manner as other outstanding shares of Capital common stock.
The following table shows the number of shares of Renasant common stock to be received relating to the Capital equity compensation awards held by Capital’s executive officers as of the date hereof. No other Capital executive officers or directors hold options as of such date. The exchange ratio for the merger of 1.2306 shares of
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Renasant common stock for each share of Capital common stock was used to determine the number of shares of Renasant common stock represented by such options.
| Capital Executive Officers |
Number of Capital Options |
Number of Renasant Shares to be Received upon Exercise | ||
| Name |
||||
| Rick Hart |
||||
| John W. Gregory |
||||
| Sally P. Kimble |
Eligibility to receive stock option grants after the merger will be determined by Renasant in accordance with its plans and procedures and subject to any contractual obligations.
Renasant will reserve adequate shares of Renasant common stock for delivery upon exercise of any converted or substitute options. Promptly after the completion of the merger, Renasant shall file a registration statement on Form S-8, with respect to the shares of Renasant common stock subject to converted or substitute options and shall use its reasonable efforts to maintain the effectiveness of such registration statement for so long as such converted or substitute options remain outstanding. In addition, each Capital stock option assumed by Renasant will, in accordance with its terms, be subject to further adjustment as appropriate to reflect any stock split, division or subdivision of shares, stock dividend, recapitalization or other similar transaction subsequent to the closing date of the merger.
THIS DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING TO DISSENTERS’ RIGHTS UNDER THE TENNESSEE BUSINESS CORPORATION ACT AND IS QUALIFIED IN FULL BY THE FULL TEXT OF CHAPTER 23 OF THE TENNESSEE BUSINESS CORPORATION ACT, WHICH IS REPRINTED IN ITS ENTIRETY AS ANNEX C TO THIS PROXY STATEMENT/PROSPECTUS. ALL REFERENCES IN CHAPTER 23 AND IN THIS SUMMARY TO A “STOCKHOLDER” OR “HOLDER” ARE TO THE RECORD HOLDER OF THE SHARES OF CAPITAL COMMON STOCK AS TO WHICH DISSENTERS’ RIGHTS ARE ASSERTED.
Holders of Capital common stock are entitled to dissenters’ rights under Chapter 23 of the Tennessee Business Corporation Act. Under the Tennessee Business Corporation Act, record holders of Capital common stock who continuously hold such shares through the closing date of the merger, who follow the procedures set forth in Chapter 23 and who do not vote in favor of the merger agreement will be entitled to receive payment of the “fair value” of their shares of Capital common stock immediately before the merger as determined by Renasant as the successor by merger to Capital. In the event that such record holder believes Capital’s payment is less than the fair value of the shares, such holder has the right to have the fair value of the shares determined by a Tennessee court, which will include a fair rate of interest, if any, as determined by the court. “Fair value” is exclusive of any element of value arising from the accomplishment or expectation of the merger. The holders are, in such circumstances, entitled to dissenters’ rights because they hold stock of constituent corporations to the merger, and are required by the merger agreement to accept merger consideration in the form of cash consideration.
A person having a beneficial interest in shares of Capital common stock held of record in the name of another person, such as a broker or nominee, must act promptly to cause the record holder to follow the steps summarized below on behalf of such beneficial owner properly and in a timely manner to perfect the dissenters’ rights provided under Chapter 23 as to such beneficial owners interest in shares of Capital common stock.
Under Chapter 23, where a proposed merger is to be submitted for approval at a meeting of stockholders, as in the case of the Capital special meeting, the notice of such special meeting must state that stockholders are or
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maybe entitled to assert dissenters’ rights under Chapter 23, and be accompanied by a copy of Chapter 23. This proxy statement/prospectus constitutes the required notice to the record holders of shares of Capital common stock, and a copy of Chapter 23 is attached to this proxy statement/prospectus as Annex C. Any stockholder who wishes to exercise dissenters’ rights should review the following discussion and Annex C carefully, because failure to timely and properly comply with the procedures specified will result in the loss of dissenters’ rights under the Tennessee Business Corporation Act. A holder of shares of Capital common stock wishing to exercise his or her dissenters’ rights must take both of the following actions:
| • | The holder must deliver to Capital, before the vote on the merger agreement at the Capital special meeting is taken, a written notice that reasonably informs Capital of the identity of the record holder and the record holder’s intent to demand payment of the fair value of the record holder’s Capital common stock if the merger is effected. |
| • | The holder also must not vote in favor of the adoption of the merger agreement or the approval of the merger. |
A proxy or vote against the merger shall not constitute a demand. In addition, mere failure to execute and return a form of election to Registrar and Transfer Company, the exchange agent, does not constitute a demand. All notices and written demands for payment should be delivered to Capital at Capital Bancorp, Inc., 1808 West End Avenue, Nashville, Tennessee 37203, Attention: Secretary. A holder of record who votes against the merger but does not deliver notice to Capital before the special stockholders meeting is not entitled to payment for his or her shares pursuant to Chapter 23. Instead, such holder will be deemed to have made a combination election to receive cash consideration for 40% of the holder’s shares of Capital common stock and stock consideration for 60% of the holders Capital common stock. See “The Merger Agreement—Merger Consideration”.
A holder of shares of Capital common stock wishing to exercise his or her dissenters’ rights must hold his or her shares of record on the date the written demand for appraisal is made and must hold his or her shares continuously through the closing date of the merger. Accordingly, a record holder of shares of Capital common stock who is the record holder of Capital common stock on the date the written demand for payment is made, but who after such date transfers such stock prior to the completion of the merger, will lose any right to payment in respect of such shares.
Only a holder of record of shares of Capital common stock is entitled to assert dissenters’ rights for the shares of Capital common stock registered in that holder’s name. A demand for payment should be executed by or on behalf of the holder of record, fully and correctly, as such holder’s name appears on such holder’s stock certificates. If the shares of Capital common stock are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand should be made in that capacity. If the shares of Capital common stock are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including one or more joint owners, may execute a demand for payment on behalf of a holder of record; however; the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, the agent is agent for such owner or owners. A holder of record may assert dissenters’ rights as to fewer than all the shares registered in his or her name only if the holder of record dissents with respect to all shares beneficially owned by any one person and notifies Capital in writing of the name and address of each person on whose behalf the holder of record asserts dissenters’ rights.
If the merger, the merger agreement and the related articles of merger are approved at the special meeting, within 10 days after such special meeting, Capital (or Renasant, in the event the merger has been completed before this notice is sent) must send a notice of the approval and effectiveness of the merger to each person who has properly asserted dissenters’ rights under Chapter 23 and has not voted in favor of or consented to the merger. The notice must:
| • | state where a payment demand must be sent and where and when certificates for shares of Capital common stock must be deposited; |
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| • | provide a form for demanding payment that requires any person asserting dissenters’ rights to certify that he or she acquired beneficial ownership of his or her shares of Capital common stock before February 5, 2007, the date when the principal terms of the merger were publicly announced; |
| • | set a date by which Capital (or Renasant, if the merger will be completed by the date to be set) must receive the demand for payment from the holder of record, which date must be within 60 days of the date of the notice; and |
| • | contain a copy of Chapter 23. |
A holder of record sent the notice described in the paragraph above must demand payment, certify that he or she was the beneficial owner of shares before February 5, 2007 and deposit his or her certificates for shares of Capital stock in accordance with the notice. A holder taking such action does not lose any other of his or her rights as a holder of shares of Capital common stock until those rights are cancelled pursuant to the merger agreement. In the event that the merger is not consummated with 60 days after the date set for demanding payment and depositing share certificates, Capital will return the share certificates. A holder of record who does not comply with the terms of the notice from Capital (or Renasant) is not entitled to payment for his or her shares pursuant to Chapter 23. Instead, such holder will be deemed to have made a combination election to receive cash consideration for 40% of the holder’s shares of Capital common stock and stock consideration for 60% of the holders Capital common stock. See “The Merger Agreement—Merger Consideration”. A demand for payment may not be withdrawn without Capital’s (or Renasant’s, if the merger has been completed) consent.
Under Chapter 23, after receipt of a demand for payment or the effectuation of the merger, whichever is later, Renasant (on behalf of Capital, since the merger will have been effected) must pay each holder of record who properly complied with the requirements of the notice from Capital the fair value of such holder’s shares, with interest accrued from the date of the approval of the merger. The payment, when made, must be accompanied by:
| • | Capital’s balance sheet, income statement and a statement of changes in stockholder’s equity, each as of December 31, 2006, together with the latest available interim financial statements; |
| • | a statement of Renasant’s estimate of the fair value of a share of its common stock; |
| • | an explanation as to how interest was calculated; |
| • | a statement that a holder dissatisfied with his or her payment may seek a judicial determination of the fair value of his or her shares in accordance with Chapter 23; and |
| • | a copy of Chapter 23, if not previously delivered to such stockholder. |
If a holder of shares of Capital common stock did not own his or her shares on February 5, 2007, Capital (or Renasant, if the merger has been completed) may refuse to make any payments pursuant to Chapter 23. If payment is refused, Capital (or Renasant) may still pay a holder of record who did not own his or her shares on February 5, 2007, yet wishes to exercise his or her dissenters’ rights the fair value of such persons shares, with accrued interest, provided that such holder accepts such payment in full satisfaction of his or her demand for payment.
A holder of record who has exercised his or her dissenters’ rights may notify Renasant (rather than Capital, since the merger will have been completed) in writing of his or her own estimate of the fair value for his or her shares of Capital common stock and the amount of interest due and demand payment of any amounts above what Renasant has paid already under any of the following circumstances:
| • | a holder of record who has exercised his or her dissenters’ rights believes that the amount paid by Renasant is less than the actual fair value of his or her shares or that the interest is incorrectly calculated; |
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| • | Renasant fails to pay the holder of record within 60 days after the date by which a holder of record must demand payment; or |
| • | the merger is not consummated and Capital fails to return the holder’s stock certificates. |
A holder of record waives this right to be paid his or her own estimate of fair value if Renasant is not notified of such demand within 30 days after Renasant has paid, or offered to pay, such holder of record. If the holder of record’s demand for payment of his or her own estimate of fair value plus interest has not been settled within 60 days after receiving a demand for payment, Renasant (rather than Capital, since the merger will have been completed) must bring a proceeding in a court of record having equity jurisdiction in Davidson County, Tennessee to determine the fair value of the holder of record’s shares of Capital common stock. If Renasant fails to bring such proceeding at all or within the required time period, it must pay the holder’s demand for payment. All holders of record whose demands have not been settled must be parties to the proceeding and served with a copy of the petition.
The court hearing the case has exclusive jurisdiction. It may appoint one or more persons to receive evidence regarding the fair value of shares of Capital common stock and to recommend a decision on fair value to the court. A holder of record party to such proceeding has the same discovery rights as parties in other civil proceedings. Each holder of record party to such proceeding is entitled to judgment in the amount, if any, that the court finds such holder’s estimate of fair value plus accrued interest exceeds the amount paid by Renasant. The judgment may be the fair value plus accrued interest on the shares of Capital common stock owned by a holder of record who became a beneficial owner after February 5, 2007 and whom Capital (or Renasant) determined to withhold payment as described above.
The court shall determine all costs of the proceeding, including compensation and expenses of persons appointed by the court to receive evidence. Renasant shall pay the costs of the proceeding, except that the court may assess costs against all or some of the holders of record party to the proceeding to the extent the court finds such individuals acted arbitrarily, vexatiously or not in good faith in demanding payment. The court may also assess legal and expert fees against either Renasant or the holders or record. If the court finds that the legal fees of one attorney were substantially beneficial to all holders of record party to the suit, but that Renasant should not pay the attorneys’ fees, the court may have these fees paid out of the amount awarded to all holders of record who benefited.
Interests of Certain Persons in the Merger
Some members of Capital’s management and board of directors may be deemed to have interests in the merger that are in addition to their interests as stockholders of Capital. The proposed employment agreements between R. Rick Hart and Renasant and John W. Gregory, Jr. and Renasant Bank and the termination and release agreements among Capital, Capital Bank, Renasant and each of Mr. Hart and Mr. Gregory were a condition to Renasant’s willingness to enter into the merger agreement. The benefits to Sally P. Kimble under her Supplemental Executive Retirement Plan Agreements and Change in Control Severance Agreement with Capital Bank will fully vest and become non-forfeitable upon the completion of the merger. H. Edward Jackson, III will be entitled to receive a termination payment pursuant to his employment agreement with Capital Bank. In addition, all outstanding stock options awarded under Capital’s stock option plan fully vested on the date of the merger agreement (February 5, 2007), and these fully vested stock options are then exercisable when the merger is completed. The Capital board was aware of these interests and considered them, among other matters, in approving the merger agreement.
Employment Agreement and Termination and Release Agreement with R. Rick Hart. Effective as of the effective time of the merger, Renasant will enter into an employment agreement with R. Rick Hart, Chairman, President and Chief Executive Officer of Capital. The employment agreement provides that Mr. Hart will serve as an Executive Vice President of Renasant and as President of Renasant Bank’s Tennessee Division for a term commencing on the date of the completion of the merger and ending December 31, 2012. The employment agreement automatically renews for additional one year periods commencing January 1, 2013 unless Renasant or Mr. Hart notifies the other by October 1 of the prior year that the employment agreement shall not be further extended.
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During any period that Mr. Hart serves as an Executive Vice President of Renasant and as President of Renasant Bank’s Tennessee Division, he will perform duties assigned to him by Renasant’s chief executive officer and shall include duties of the type and nature normally assigned to persons with such title. While employed by Renasant, Mr. Hart will receive an annual salary of $339,000. His annual salary will be reviewed not less often than annually and shall be increased as of January 1 of each year of his employment in an amount not less than 5% of his annual salary for the immediately preceding year. His annual salary may only be reduced if such reduction in pay uniformly applies to all Renasant officers. As an employee of Renasant, Mr. Hart will be eligible to receive performance-based bonuses and stock options, restricted stock and such other equity awards as Renasant may adopt for its executives, provided that Mr. Hart will not participate in any nonqualified deferred compensation plan or arrangement, unless such plan or arrangement is funded solely by his voluntary deferrals and provides for deferrals in excess of the limits under the Supplemental Executive Retirement Plan Agreements currently in effect between Capital and Mr. Hart. Mr. Hart will participate in employee benefit plans maintained for senior executives or employees of Renasant, including, without limitation, profit sharing, life insurance, group medical, sick leave and vacation, and he will be entitled to the use of a leased or Renasant-owned automobile. Renasant has also agreed to reimburse Mr. Hart for expenses in connection with his duties as President of the Tennessee Division of Renasant Bank, membership in a country club and for other civic memberships. On the first business day following the 15 month anniversary of the date of the completion of the merger, Renasant shall pay in a single cash payment $ to Mr. Hart. Finally, Renasant and one or more of its subsidiaries will assume and maintain for the benefit of Mr. Hart (1) Supplemental Executive Retirement Plan Agreements between Capital and Mr. Hart; (2) any balance credited to the benefit of Mr. Hart under Capital’s Director Deferred Compensation Agreement with Mr. Hart; (3) any death benefit payable to the beneficiaries of Mr. Hart under a life insurance plan agreement between Mr. Hart and Capital Bank; (4) any outstanding options to purchase Capital common stock granted to Mr. Hart; and (5) any balance credited to the benefit of Mr. Hart under Capital’s Director Deferred Stock Compensation Plan with Mr. Hart.
If Mr. Hart dies, Renasant terminates Mr. Hart’s employment due to his disability or for “cause” or Mr. Hart terminates his employment other than on account of a “constructive termination”, Mr. Hart shall be paid any accrued but unpaid base salary through the date of termination and any performance-based bonuses for the calendar year immediately preceding his death or disability that were unpaid as of his death or disability. If Renasant terminates Mr. Hart for “cause”, Mr. Hart shall forfeit any outstanding stock options and restricted stock or other equity based awards granted or award by Renasant.
If Renasant terminates Mr. Hart’s employment other than for “cause” or Mr. Hart terminates his employment as a result of a “constructive termination” of his employment by Renasant, Mr. Hart will receive (1) any accrued but unpaid salary through the date of termination; (2) any performance-based bonuses for the calendar year immediately preceding his termination that were unpaid on the date of termination; (3) Mr. Hart’s annual salary for the remainder of the initial term of the employment agreement or any renewal term, as applicable; (4) Mr. Hart’s performance-based bonuses equal to the target bonus amounts for the year in which the termination occurs; and (5) the amount of the premium for continuation of group medical coverage under applicable law for the longest period allowed under applicable law. The amounts described in clauses (2), (3), (4) and (5) will be paid in two equal installments, one-half on the first business day of the seventh calendar month following the termination of Mr. Hart’s employment and one-half six months after the first payment.
If Mr. Hart’s employment with Renasant is terminated by Renasant without “cause” or Mr. Hart terminates his employment for “good reason” at anytime within 24 months following a “change in control” of Renasant, then Mr. Hart will receive the following in lieu of the compensation and benefits described above: (1) any accrued but unpaid salary through the date of termination in a single payment not later than three days after the termination date; (2) any performance-based bonuses for the calendar year immediately preceding his termination that were unpaid on the date of termination and the amount of premium for continuation of group medical coverage under applicable law for the longest period allowed by applicable law in a single payment on the first business day of the seventh month following such termination; and (3) an amount equal to 2.99 times the sum of the highest annual salary in effect prior to such change in control and the average annual bonus paid with
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respect to the two whole calendar years preceding such change in control (or such shorter period if two whole calendar years have not elapsed) in a single payment on the first business day of the seventh month following such termination. Additionally, all stock options shall be immediately exercisable and all restrictions under equity-based plans shall terminate on the day of such termination. If the sum of the present value of all payments and benefits due to Mr. Hart in the event of a change in control would result in a “parachute payment” under the Code, Mr. Hart will receive the aggregate payments due under the agreement, provided that the after-tax amount that would be retained by Mr. Hart (after taking into account the amount of all applicable income taxes and any excise tax under Code Section 4999 payable thereon by Mr. Hart) has a materially greater aggregate value than the after-tax amount that would be retained by Mr. Hart (after taking into account all applicable income taxes payable by Mr. Hart) if Mr. Hart were to receive such payments reduced by the minimum amount necessary so that no portion of the payments is subject to tax under Code Section 4999. In order to receive the termination payments and benefits described above, Mr. Hart must comply with noncompetition, nonsolicitation, confidentiality and other agreements in his employment agreement after the date of his termination.
Effective as of the effective time of the merger, Renasant, Renasant Bank, Capital, Capital Bank and Mr. Hart will enter into a termination and release agreement in which Capital and Capital Bank, on the one hand, and Mr. Hart, on the other hand, release each other from any claims they may have against each other arising out of Mr. Hart’s employment with Capital and Capital Bank and Mr. Hart’s employment agreement with Capital Bank. In that agreement, Renasant has agreed to pay to Mr. Hart a single payment at the effective time of the merger in the amount of $ .
Employment Agreement and Termination and Release Agreement with John W. Gregory, Jr. Effective as of the effective time of the merger, Renasant will enter into an employment agreement with John W. Gregory, Jr., Executive Vice President and Chief Operating Officer of Capital. The employment agreement provides that Mr. Gregory will serve as an Executive Vice President of Renasant Bank for a term commencing on the date of the completion of the merger and ending on December 31, 2012. The employment agreement automatically renews for additional one year periods commencing January 1, 2013 unless Renasant Bank or Mr. Gregory notifies the other by October 1 of the prior year that the employment agreement shall not be further extended.
During any period that Mr. Gregory serves as an Executive Vice President of Renasant Bank, he will perform duties assigned to him by the President of the Tennessee Division of Renasant Bank and shall include duties of the type and nature normally assigned to persons with such title. While employed by Renasant Bank, Mr. Gregory will receive an annual salary of $236,000. His annual salary will be reviewed not less often than annually and shall be increased as of January 1 of each year of his employment in an amount not less than 5% of his annual salary for the immediately preceding year. His annual salary may only be reduced if such reduction in pay uniformly applies to all Renasant Bank officers. As an employee of Renasant Bank, Mr. Gregory will be eligible to receive performance based bonuses and stock options, restricted stock and other equity awards, provided that Mr. Gregory will not participate in any nonqualified deferred compensation plan or arrangement, unless such plan or arrangement is funded solely by his voluntary deferrals and provides for deferrals in excess of the limits under the Supplemental Executive Retirement Plan Agreements currently in effect between Capital and Mr. Gregory. Mr. Gregory will participate in employee benefit plans maintained for senior executives or employees of Renasant Bank, including, without limitation, profit sharing, life insurance, group medical, sick leave and vacation, and will be entitled to use of a leased or Renasant Bank-owned automobile. Renasant Bank has also agreed to reimburse Mr. Gregory for expenses in connection with his duties as Executive Vice President, membership in a country club, and other civic memberships. On the first business day following the 15 month anniversary of the date of the completion of the merger, Renasant Bank shall pay in a single cash payment $ to Mr. Gregory. Finally, Renasant Bank or one of its affiliates will assume and maintain for the benefit of Mr. Gregory (1) Supplemental Executive Retirement Plan Agreements between Capital and Mr. Gregory; (2) any balance credited to the benefit of Mr. Gregory under Capital’s Director Deferred Compensation Agreement with Mr. Gregory; (3) any death benefit payable to the beneficiaries of Mr. Gregory under a life insurance plan agreement between Mr. Gregory and Capital Bank; (4) any outstanding options to purchase
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Capital common stock granted to Mr. Gregory; and (5) any balance credited to the benefit of Mr. Gregory under Capital’s Director Deferred Stock Compensation Plan with Mr. Gregory.
If Mr. Gregory dies, Renasant Bank terminates Mr. Gregory’s employment due to his disability or for “cause” or Mr. Gregory terminates his employment other than on account of a “constructive termination”, Mr. Gregory shall be paid any accrued but unpaid base salary through the date of termination and any performance-based bonuses for the calendar year immediately preceding his death or disability that were unpaid as of his death or disability. If Renasant Bank terminates Mr. Gregory for “cause”, Mr. Gregory shall forfeit any outstanding stock options and restricted stock or other equity based awards granted or awarded by Renasant.
If Renasant Bank terminates Mr. Gregory’s employment other than for “cause” or Mr. Gregory terminates his employment as a result of a “constructive termination” of his employment by Renasant Bank, Mr. Gregory will receive (1) any accrued but unpaid salary through the date of termination; (2) any performance-based bonuses for the calendar year immediately preceding his termination that were unpaid on the date of termination; (3) Mr. Gregory’s annual salary for the remainder of the initial term of the employment agreement or any renewal term, as applicable; (4) Mr. Gregory’s performance-based bonuses equal to the target bonus amounts for the year in which the termination occurs; and (5) the amount of the premium for continuation of group medical coverage under applicable law for the longest period allowed under applicable law. The amounts described in clauses (2), (3), (4) and (5) will be paid in two equal installments, one-half on the first business day of the seventh calendar month following the termination of Mr. Gregory’s employment and one-half six months after the first payment.
If Mr. Gregory’s employment with Renasant Bank is terminated by Renasant Bank without “cause” or Mr. Gregory terminates his employment for “good reason” at anytime within 24 months following a “change in control” of Renasant Bank, then Mr. Gregory will receive the following in lieu of the compensation and benefits described above: (1) any accrued but unpaid salary through the date of termination in a single payment not later than three days after termination; (2) any performance-based bonuses for the calendar year immediately preceding his termination that were unpaid on the date of termination and the amount of premium for continuation of group medical coverage under applicable law for the longest period allowed by applicable law in a single payment on the first business day of the seventh month following such termination; and (3) an amount equal to 2.99 times the sum of the highest annual salary in effect prior to such change in control and the average annual bonus paid with respect to the two whole calendar years preceding such change in control (or such shorter period if two whole calendar years have not elapsed) in a single payment on the first business day of the seventh month following such termination. Additionally, all stock options shall be immediately exercisable and all restrictions under equity-based plans shall terminate on the day of such termination. If the sum of the present value of all payments and benefits due to Mr. Gregory in the event of a change in control would result in a “parachute payment” under the Code, Mr. Gregory will receive the aggregate payments due under the agreement, provided that the after-tax amount that would be retained by Mr. Gregory (after taking into account the amount of all applicable income taxes and any excise tax under Code Section 4999 payable thereon by Mr. Gregory) has a materially greater aggregate value than the after-tax amount that would be retained by Mr. Gregory (after taking into account all applicable income taxes payable by Mr. Gregory) if Mr. Gregory were to receive such payments reduced by the minimum amount necessary so that no portion of the payments is subject to tax under Code Section 4999. In order to receive the termination payments and benefits described above, Mr. Gregory must comply with noncompetition, nonsolicitation, confidentiality and other agreements in his employment agreement after the date of his termination.
Effective as of the effective time of the merger, Renasant, Renasant Bank, Capital, Capital Bank and Mr. Gregory will enter into a termination and release agreement in which Capital and Capital Bank, on the one hand, and Mr. Gregory, on the other hand, release each other from any claims they may have against each other arising out of Mr. Gregory’s employment with Capital and Capital Bank and Mr. Gregory’s employment agreement with Capital Bank. In that agreement, Renasant has agreed to pay to Mr. Gregory a single payment at the effective time of the merger in the amount of $ .
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Supplemental Executive Plan Agreement with Sally P. Kimble. Sally P. Kimble is a party to Supplemental Executive Retirement Plan Agreements with Capital Bank. All benefits payable to Mrs. Kimble under the Agreements will fully vest and become non-forfeitable on the closing date of the merger. Renasant will assume those Agreements by virtue of the merger. Mrs. Kimble will receive normal retirement benefits under those Agreements at her normal retirement age (age 65). The Agreements provide for an aggregate retirement benefit of $47,000 per year, payable in monthly installments, for a period of 20 years beginning when she reaches age 65.
Change of Control Severance Agreement. Sally P. Kimble is a party to a Change of Control Severance Agreement with Capital and Capital Bank. If within six months before or after the occurrence of a change in control of Capital or Capital Bank (as defined in the Agreement) Mrs. Kimble’s employment with Capital and Capital Bank is terminated by Capital or Capital Bank, respectively, without Cause (as defined in the Agreement) or Mrs. Kimble terminates her employment with Capital and Capital Bank for good reason (as defined in the Agreement), then Mrs. Kimble shall be entitled to receive within 30 days of such termination a single cash payment equal to the base salary paid to her for the six months immediately preceding the date of such termination, and all of her options to purchase Capital stock shall become fully vested and she shall have 90 days after the date of termination to exercise such options.
Termination Payment to H. Edward Jackson, III. H. Edward Jackson, III is a party to an Employment Agreement with Capital Bank. Mr. Jackson’s employment by Capital Bank will be terminated prior to the completion of the merger. Capital Bank will pay to Mr. Jackson a termination payment of approximately $60,000 in a lump sum payment on the date of its termination of his employment.
Equity-Based Awards. The merger agreement provides that, upon completion of the merger, each then- outstanding unexercised stock option to acquire shares of Capital common stock will cease to represent the right to acquire or receive shares of Capital common stock. Each such stock option will be converted into and become a right to acquire or receive, the number of shares of Renasant common stock equal to the product of the numbers of shares of Capital common stock subject to such option and the exchange ratio (1.2306) with the exercise price of each converted stock option per share of Renasant common stock equaling the per share exercise price of the Capital stock option divided by the exchange ratio.
Pursuant to the terms of Capital’s stock option award agreements with its officers, directors and employees, stock options subject to such agreements fully vested on February 5, 2007 (the date on which the merger agreement was signed). Any options vesting solely on the execution of the merger agreement may not be exercised, however, until the merger has been completed. As of February 5, 2007, the number of unvested stock options to acquire Capital common stock that became vested and may become exercisable in connection with the merger was approximately 245,934.
Indemnification of Directors and Officers; Insurance. The merger agreement provides that for a period of two years following the closing date of the merger Renasant will indemnify and hold harmless from liability duly elected current or former directors and officers of Capital or Capital Bank. Capital directors and officers are entitled to indemnity if such persons sign an agreement with Renasant allowing Renasant to participate in or completely assume the defense of any claim for which indemnification may be sought. The indemnification applies to acts or omissions occurring at or prior to the closing date of the merger. Subject to the cap discussed below, Renasant will provide indemnification to the same extent as such Capital directors or officers would be indemnified under the articles of incorporation or bylaws of Renasant as if they were directors or officers of Renasant.
Renasant has also agreed to use reasonable efforts to obtain for a period of two years after the closing date of the merger policies of directors’ and officers’ liability insurance for directors and officers of Capital specified in the merger agreement. The insurance policies must cover acts or omissions occurring prior to the closing date of the merger. The policies must be on terms and in amounts substantially similar to those in effect on the date of the merger agreement. However, neither Renasant nor Renasant Bank are required to pay an aggregate premium
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for such insurance coverage in excess of 200% of the amount for such coverage as currently held by Capital but in such case shall purchase as much coverage as reasonably practicable for such amount.
Renasant’s liability for indemnification payments under the merger agreement is capped at an amount equal to the sum of (1) $5,000,000 and (2) the policy limits of any directors’ and officers’ liability insurance obtained by Renasant.
Board of Directors of Renasant and Renasant Bank. Following completion of the merger, Renasant will elect Albert J. Dale, III, R. Rick Hart and Michael D. Shmerling to serve on the board of directors of Renasant and the board of directors of Renasant Bank. Members of the Renasant board of directors who are not employees of, or under contract with, Renasant or an affiliate are entitled to receive fees for services as a director in accordance with the policies of Renasant as in effect from time to time. During 2006, each non-employee director was paid a cash retainer of $15,000 and an additional cash payment of $7,500, which was pro rated and paid monthly. The lead director was paid an additional $6,500 in addition to the annual fee. The chairman of the audit committee was paid $1,000, while the other members of the audit committee were paid $500, for each audit committee meeting attended in 2006. Except for audit committee meetings, non-employee directors were paid $350 for each committee meeting attended. Non-employee directors do not receive additional compensation for each board meeting attended, but they are reimbursed for expenses incurred to attend board and committee meetings.
Restrictions on Resales by Affiliates
The shares of Renasant common stock to be issued to Capital stockholders in the merger have been registered under the Securities Act. These shares may be traded freely and without restriction by those stockholders not deemed to be “affiliates” of Capital as that term is defined under the Securities Act. An affiliate of a corporation, as defined by the rules promulgated under the Securities Act, is a person who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, that corporation. Affiliates generally include directors, executive officers and beneficial owners of 10% or more of a company’s capital stock. Any stockholder deemed to be an affiliate of Capital may resell shares of Renasant common stock issued in the merger only in transactions permitted by Rule 145 promulgated under the Securities Act or as otherwise permitted under the Securities Act. These restrictions are expected to apply to the Capital directors and specified executive officers of Capital as well as to other related individuals or entities.
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The Renasant board of directors and the Capital board of directors have each unanimously approved the merger, the merger agreement and the other transactions contemplated by the merger agreement. This section of the proxy statement/prospectus describes material provisions of the merger agreement. This description does not purport to be complete and is qualified in its entirety by reference to the merger agreement and the related articles of merger, copies of which are attached as Annex A-1 and Annex A-2, respectively, to this proxy statement/prospectus and incorporated by reference herein. We urge you to read the merger agreement and the related articles of merger carefully and in their entirety.
The closing of the merger will take place on the fifth business day, or such later date as the parties mutually agree, following the receipt of all necessary approvals and consents of all governmental entities, the expiration of all statutory waiting periods and the satisfaction or waiver of the conditions to the merger set forth in the merger agreement. The merger agreement provides that in no event shall the closing of the merger take place before July 1, 2007. The merger agreement further provides that if the closing of the merger occurs after July 1, 2007, the closing shall occur on the first day of the next month after the date on which all conditions to closing are satisfied. Subject to any delays necessitated by required regulatory approvals and waiting periods, the parties have scheduled the closing date of the merger for July 1, 2007. The Articles of Merger will be filed with the office of the Tennessee Secretary of State, as required under the corporation laws of Tennessee, and the Plan of Merger will be filed in the office of the Mississippi Secretary of State, as required under the corporation laws of Mississippi. The Articles of Merger and the Plan of Merger each will establish the effective time of the merger.
At the effective time of the merger, each share of Capital common stock, except for treasury shares, shares held by Renasant or any of the subsidiaries of Renasant or Capital (other than in a fiduciary capacity) and any shares as to which a Capital stockholder exercised his or her dissenters’ rights, shall be converted into the right to receive either:
| • | cash in an amount equal to $38.00, without interest, for each share of Capital common stock; or |
| • | 1.2306 shares of Renasant common stock for each share of Capital common stock. |
Subject to the redesignation procedures set forth in the merger agreement and described below, each holder of record of shares of Capital common stock, except for treasury shares, shares held by Renasant or any of the subsidiaries of Renasant or Capital (other than those held in a fiduciary capacity) or shares as to which dissenters’ rights have been properly exercised, will be entitled to elect to receive either:
| • | the cash consideration described above with respect to all of his or her shares of Capital common stock; |
| • | the stock consideration described above with respect to all of his or her shares of Capital common stock; or |
| • | the cash consideration described above for 40% of the holder’s shares of Capital common stock and the stock consideration described above for 60% of the holder’s shares of Capital common stock. |
Please note that the market value of Renasant common stock fluctuates. Because of this fluctuation, if you elect to receive Renasant common stock for all or a portion of your shares of Capital common stock, the value of the Renasant common stock you receive may or may not be equivalent to the amount of cash that you would have received if you elected to exchange your Capital common stock for cash.
No fractional shares of Renasant common stock will be issued in connection with the merger. Instead, Renasant will make a cash payment without interest to each Capital stockholder who would otherwise receive a fractional share of Renasant common stock. The amount of such cash payment will be determined by multiplying the fraction of a share of Renasant common stock otherwise issuable to such stockholder by the average closing
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price of one share of Renasant common stock for the ten trading days immediately preceding the last trading day prior to the closing date of the merger as reported by The NASDAQ Global Select Market.
If the average of the per share closing price of Renasant common stock on The NASDAQ Global Select Market for the 20 consecutive full trading days ending on (and including) the eighth business day prior to the completion of the merger is less than $26.25 and the decline in the Renasant common stock over the measurement period described in the merger agreement exceeds by 15% or more, the decline in the NASDAQ Bank Index over the measurement period, the exchange ratio of 1.2306 may be adjusted if Capital elects to terminate the merger agreement, as described under the heading “The Merger Agreement—Termination of the Merger Agreement”.
On March 14, 2007, the average of the per share closing prices of Renasant common stock on The NASDAQ Global Select Market for the preceding 20 consecutive full trading days was less than $26.25 and the decline in the Renasant common stock over the measurement period described in the merger agreement exceeded by 15% the decline in the NASDAQ Bank Index over the measurement period. As a result, Capital could have elected on March 14, 2007 to terminate the merger agreement. If Capital had elected to terminate the merger agreement, Renasant, in its sole discretion, could have elected to adjust the exchange ratio to 1.2801 shares of Renasant common stock per share of Capital common stock, based on the closing price of Renasant common stock on March 14, 2007, which would have resulted in the issuance of approximately 107,500 additional shares of its stock in the aggregate as merger consideration (assuming that 60% of the merger consideration was paid in Renasant common stock), which would have rendered Capital’s election to terminate the merger agreement null and void.
Election and Election Procedures
A form of election on which Capital stockholders will elect to receive cash, Renasant common stock or a combination of cash and Renasant common stock accompanies this proxy statement/prospectus. After the date of the mailing of this proxy statement/prospectus, Renasant and Capital will make the form of election available to all persons who become holders of record of Capital common stock during the period between the record date of the special meeting and the close of business on the date that is five business days prior to the closing date of the merger, which is the deadline for submission of the form of election.
To be effective, a form of election must be properly completed, signed and submitted (by mail or other delivery), accompanied by the certificates representing the shares of Capital common stock as to which the election is being made, to Registrar and Transfer Company, the exchange agent, by the close of business on June , 2007. All elections will be irrevocable. Holders of record of shares of Capital common stock who hold such shares in a representative capacity (for example, as a nominee or a trustee) may submit multiple forms of election, provided that such nominee or representative certifies that each form of election covers all of the shares of Capital common stock held for a particular beneficial owner by the nominee or representative.
Renasant will have the discretion, which it may delegate in whole or in part to the exchange agent, to determine whether forms of election have been properly completed, signed and submitted and to disregard immaterial defects in forms of election. The good faith decision of Renasant or the exchange agent in such matters will be conclusive and binding. Neither Renasant nor the exchange agent will be under any obligation to notify any person of any defect in a form of election.
If a Capital stockholder does not submit a form of election to the exchange agent by 5:00 p.m., eastern time, on June , 2007 or if Renasant or the exchange agent determines that an election by a holder of Capital common stock was not properly made, then such holder will be deemed to have elected to receive cash consideration for 40% of such holder’s shares of Capital common stock at a price of $38.00 per share and stock consideration for the remaining 60% of such holder’s shares at an exchange ratio of 1.2306 shares of Renasant common stock for each share of Capital common stock.
Neither the Capital board of directors nor its financial advisor makes any recommendation as to whether stockholders should elect to receive the cash consideration or the stock consideration in the merger, or a combination of the two. You must make your own decision with respect to such election, bearing in mind the tax
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consequences of the election you choose. See “The Merger—Material United States Federal Income Tax Consequences”. It is suggested that you return your form of election, together with your stock certificate(s), by the deadline so that you may receive the merger consideration applicable to you promptly following the completion of the exchange procedures that will take place after the merger is completed. See “The Merger—Procedures for Exchange Capital Common Stock Certificates”.
Under the merger agreement, the number of shares of Capital common stock to be converted into the right to receive cash must not be less than 35% or more than 40% of the total number of shares of Capital common stock outstanding immediately prior to the closing date of the merger, excluding treasury shares and shares held by Renasant or any of the subsidiaries of Renasant or Capital (other than in a fiduciary capacity). If, after the results of the forms of election are calculated, the number of shares of Capital common stock for which a cash election was made exceeds this 40% threshold, the exchange agent will determine the number of shares convertible into cash that must be redesignated as shares convertible into Renasant common stock in order not to exceed the 40% threshold. After such determination, all holders who have elected to receive solely cash in exchange for their Capital common stock shall, on a pro rata basis, have such number of their shares redesignated as shares convertible into Renasant common stock so that the total number of shares of Capital common stock to be converted into the right to receive cash will not be greater than 40% of the outstanding shares of Capital common stock immediately prior to the closing date of the merger.
Notwithstanding the foregoing, no redesignation will be effected for a holder who has made a cash election but, as a result of such redesignation, would receive fewer than 10 shares of Renasant common stock in exchange for all of such holder’s shares of Capital common stock.
The number of shares of Capital common stock to be converted into the right to receive shares of Renasant common stock may be not less than 60% or more than 65% of the number of shares of Capital common stock outstanding immediately prior to the closing date of the merger, excluding treasury shares and shares held by Renasant or any of the subsidiaries of Renasant or Capital (other than in a fiduciary capacity). If, after the results of the forms of election are calculated, the number of shares of Capital common stock for which a stock election was made exceeds this 65% threshold, the exchange agent will determine the number of shares convertible into shares of Renasant common stock that must be redesignated as shares convertible into cash in order not to exceed the 65% threshold. After such determination, all holders who have elected to receive solely Renasant common stock in exchange for their Capital common stock will, on a pro rata basis, have a portion of their shares redesignated as shares convertible into cash so that the total number of shares of Capital common stock to be converted into the right to receive shares of Renasant common stock will not be greater than 65% of the outstanding shares of Capital common stock immediately prior to the closing date of the merger.
Holders who have elected to receive a combination of cash consideration with respect to 40% of their shares of Capital common stock and stock consideration with respect to the remaining 60% of their shares of Capital common stock will not be subject to the redesignation procedures described above.
After the redesignation procedures (if any) are completed, and effective as of the effective time of the merger, all cash election shares and 40% of the shares of Capital common stock which are subject to combination elections will be converted into the right to receive the cash consideration, and all stock election shares and 60% of the shares of Capital common stock that are subject to combination elections will be converted into the right to receive the stock consideration. Certificates previously evidencing shares of Capital common stock will, upon surrender, be exchanged, as applicable, for the cash consideration of $38.00 per share or for certificates evidencing the stock consideration of 1.2306 shares of Renasant common stock per share in such proportion as has been established by the redesignation procedure (if any). Cash will be paid for any fractional shares as described above. See “The Merger—Procedures for Exchanging Capital Common Stock Certificates”.
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Each share of Capital common stock held in the treasury of Capital and each share of Capital common stock owned by Renasant or any subsidiary of Renasant or Capital, other than in a fiduciary capacity, immediately prior to the closing date of the merger will be canceled and extinguished without any conversion thereof. No payment will be made with respect to such shares.
Holders of shares of Capital common stock who elect to exercise the dissenters’ rights provided for in Chapter 23 of the Tennessee Business Corporation Act will not have their shares converted into the right to receive merger consideration. In the event that a holder’s dissenters’ rights are lost or withdrawn, such holder will be deemed to have elected to receive a combination of cash consideration at a price of $38.00 per share with respect to 40% of his or her shares of Capital common stock and stock consideration at an exchange ratio of 1.2306 per share with respect to the remaining 60% of his or her shares of Capital common stock.
Procedures for Exchanging Capital Common Stock Certificates
Promptly after the effective time of the merger, the exchange agent will provide appropriate stock certificate transmittal materials to the holders of Capital common stock who have not already surrendered their stock certificates in connection with the completion of the forms of election prior to the effective time of the merger. The transmittal materials will contain instructions for use in effecting the surrender to the exchange agent of Capital common stock certificates in exchange for the merger consideration. After the effective time of the merger, each holder of shares of Capital common stock issued and outstanding immediately prior to the closing date (other than shares as to which the holder exercised and maintained dissenters’ rights) who has not already surrendered stock certificates shall surrender for cancellation the certificate or certificates representing such shares to the exchange agent, together with a letter of transmittal duly executed and completed, in accordance with the instructions contained in the transmittal materials, and any other documents reasonably required by the exchange agent or Renasant. Each surrendered certificate for Capital common stock shall be duly endorsed as the exchange agent may require. Until you surrender your certificate or certificates representing your shares of Capital common stock, Renasant will not be obligated to deliver the merger consideration to you.
The exchange agent, within 10 business days following the effective time of the merger, if you surrendered your Capital stock certificates with your properly completed form of election prior to the effective time of the merger, or within 10 business days after receipt of your Capital stock certificates and other documents reasonably required by the exchange agent or Renasant after the effective time of the merger, will deliver to you the merger consideration, consisting, as applicable, of Renasant common stock certificates, together with all dividends or other distributions payable on Renasant common stock after the effective time of the merger, but without interest thereon, and any cash payments due, including any cash payment for a fractional share, without interest. After the effective time of the merger, each certificate representing your outstanding shares of Capital common stock immediately prior to the effective time of the merger will be deemed for all corporate purposes, other than the payment of dividends and other distributions to which you may be entitled as a former Capital stockholder, to evidence only your right to receive the merger consideration in exchange for each such share.
Twelve months after the effective time of the merger, any merger consideration held by the exchange agent that remains undistributed to the former stockholders of Capital will be delivered to Renasant upon demand. Any former Capital stockholder who has not already complied with the surrender and exchange procedures at such time may look only to Renasant for payment of his or her claims for cash, Renasant common stock or any dividends or distributions with respect to Renasant common stock, all without any interest thereon.
From and after the closing date, the holders of certificates of Capital common stock shall not have any rights with respect to such shares represented by such certificates (other than the right to receive the payment of dividends or other distributions to which the holder was entitled before the closing date of the merger). All rights to receive the merger consideration shall be deemed to have been paid or issued in full satisfaction of all rights pertaining to such shares of Capital common stock. After the effective time, there shall be no further registration or transfers of shares of Capital common stock.
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In the event of any lost, stolen or destroyed certificates of Capital common stock, you must make an affidavit of that fact and, if required by Renasant or the exchange agent, post a bond in such amount as either Renasant or the exchange agent reasonably direct as indemnity against any claim that may be made with respect to such certificates claimed to be lost, stolen or destroyed. Upon receipt of such affidavit and the posting of any bond required, the exchange agent will issue the merger consideration with respect to such lost, stolen or destroyed certificates.
If any merger consideration is to be issued or paid in the name of a person other than the person in whose name the Capital common stock certificate being surrendered is registered, one condition to the payment and issuance of such merger consideration is that the certificate so surrendered be properly endorsed or otherwise be in proper form for transfer. Another condition will be that the person requesting the exchange pay or establish the prior payment or inapplicability of any transfer and other taxes required by reason of the payment of the merger consideration in the name of a person other than the registered holder of the Capital common stock certificate. Renasant or the exchange agent shall have the right to deduct and withhold from the merger consideration such amounts as Renasant or the exchange agent are required to deduct and withhold under any federal, state, local or foreign tax law with respect to the making of such payment. Any amounts withheld shall be treated as having been paid to the holder of shares of Capital common stock in respect of whom such deduction and withholding was made.
If you receive shares of Renasant common stock as a result of the merger, you will have the right to vote after the effective time at any meeting of Renasant stockholders, according to the number of shares of Renasant common stock you received, regardless of whether you have exchanged your certificates for shares of Capital common stock. You will also have the right to receive any dividends declared on Renasant’s common stock, but such dividends will not be paid until stock certificates are physically exchanged.
Shares as to which Dissenters’ Rights have been Exercised
No share of Capital common stock as to which the holder exercised his dissenters’ rights as provided in Chapter 23 of the Tennessee Business Corporation Act and did not vote in favor of the merger at the special meeting of stockholders shall be converted into the right to receive the merger consideration. Renasant will direct all negotiations and proceedings with respect to any demands for payment of fair value according to the provisions of Chapter 23 of the Tennessee Business Corporation Act. Capital will not, without the prior written consent of Renasant, make any payments or settle or otherwise negotiate with a holder who has exercised his dissenters’ rights. If any holder withdraws or loses (through failure to perfect or otherwise) his or her right to appraisal, such holder will be deemed to have made a combination election and will receive the merger consideration according to such election. See “The Merger—Dissenters’ Rights.”
Assumption of Capital Equity Plans
For a description of the provisions in the merger agreement regarding the Capital 2001 Stock Option Plan and the Capital 2005 Employee Stock Purchase Plan, see “The Merger—Effect on Employee Benefit Plans and Stock Options”.
Representations and Warranties
Capital and Capital Bank have made a number of representations and warranties in the merger agreement, the material aspects of which are described below. These descriptions are qualified in their entirety by reference to the merger agreement, a copy of which is attached to this proxy statement/prospectus as Annex A-1:
| • | their organization and authority to enter into the merger agreement; |
| • | their capitalization, subsidiaries, properties, employees, financial statements and financial condition; |
| • | pending and threatened litigation; |
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| • | compliance with applicable law; |
| • | their loans, investment portfolios, reserves and taxes; |
| • | insurance, employee benefits, legal and environmental matters; |
| • | loans to executives and internal controls; |
| • | their contractual obligations and contingent liabilities; and |
| • | their public reports filed with the Securities and Exchange Commission, the Federal Reserve Board, the Tennessee Department of Financial Institutions and the Federal Deposit Insurance Corporation. |
Capital and Capital Bank’s representations and warranties are generally contained in Article 3 of the merger agreement.
Renasant and Renasant Bank have made a number of representations and warranties in the merger agreement, the material aspects of which are described below. These descriptions are qualified in their entirety by reference to the merger agreement, a copy of which is attached to this proxy statement/prospectus as Annex A-1:
| • | their organization and authority to enter into the merger agreement; |
| • | their capitalization and financial statements; |
| • | pending and threatened litigation; |
| • | compliance with applicable law; |
| • | the shares of Renasant common stock to be issued in the merger; |
| • | access to funds to pay the cash portion of the merger consideration; |
| • | material contracts and deposit insurance; and |
| • | their public reports filed with the Securities and Exchange Commission, the Federal Reserve Board and the Federal Deposit Insurance Corporation. |
Renasant’s and Renasant Bank’s representations and warranties are generally contained in Article 4 of the merger agreement. Renasant’s and Renasant Bank’s representations and warranties are for the benefit of Capital and Capital Bank; they are not for the benefit of and may not be relied upon by Capital’s stockholders. The representations and warranties of the parties will not survive the effective date of the merger.
Capital and Renasant have each entered into a number of covenants and agreements relating to their respective actions prior to the consummation of the merger. Some of these covenants and agreements are described below.
No Solicitation. Capital has agreed that, until the earlier of the closing date of the merger or the date of termination of the merger agreement, neither Capital nor Capital Bank, nor any of their respective officers, directors, agents, representatives or affiliates, including any investment banker, attorney, financial advisor, accountant or other representative retained by Capital or Capital Bank, will solicit or hold discussions or negotiations with, or provide any information to, any person, entity or group concerning any “acquisition transaction.” An “acquisition transaction” is defined in the merger agreement to mean an offer or proposal by a person or entity other than Renasant or Renasant Bank for (1) a merger, tender offer, recapitalization or consolidation, or similar transaction, involving Capital or Capital Bank, (2) a purchase, lease or other acquisition or assumption of all or a substantial portion of the assets of Capital or Capital Bank, (3) a purchase or other
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acquisition of beneficial ownership of securities representing 20% or more of the voting power of Capital, or (4) any substantially similar transaction.
The merger agreement does not prevent Capital, or its board of directors, from:
| • | providing information in response to a request by a person who has made an unsolicited bona fide written proposal to engage in any acquisition transaction (an “acquisition proposal”) after receipt from such person of an executed confidentiality agreement; |
| • | engaging in any negotiations or discussions with a person who has made an acquisition proposal; |
| • | failing to recommend, or withdrawing its recommendation of, the merger agreement and the merger and/or failing to hold the special meeting to consider this agreement; or |
| • | recommending an acquisition proposal to the stockholders of Capital. |
The board of directors of Capital, however, may only undertake any of the foregoing actions after the board of directors has determined in good faith, after consultation with outside legal counsel or its financial advisers, as appropriate, that (1) such action would be required in order for the directors to fulfill their fiduciary duties under applicable law and (2) such acquisition proposal both is likely to be consummated, taking into account all aspects of the proposal and the person making the proposal, and, if consummated, would result in a transaction more favorable to Capital’s stockholders from a financial point of view than the merger with Renasant. Any proposal satisfying (1) and (2) is a “superior proposal” under the merger agreement.
Capital must communicate in writing to Renasant the terms of any proposal it receives to engage in an acquisition transaction no more than 48 hours after receipt. Within 10 days of receipt of such communication, Renasant has the right to match or better any superior proposal of which it has been notified. If Renasant notifies Capital that it will match or better the superior proposal, the merger agreement must be amended to reflect the matched or bettered terms within two days of Renasant’s decision to so match or better the superior proposal. Upon such amendment, Capital may not terminate the merger agreement and must notify the party making the superior proposal that such proposal has been matched or bettered and that the merger agreement has been amended to reflect this fact. After such amendment to the merger agreement, Capital must, and must cause Capital Bank and its representatives to, cease and terminate all discussions and negotiations regarding the superior proposal. New proposals from the third party may be made, and Renasant retains the same rights set forth above regarding such new proposals. If by the eleventh day after Capital’s notification that the acquisition proposal is a superior proposal Renasant has not notified Capital of its decision to match or better the superior proposal, Capital may terminate the merger agreement and proceed with the superior proposal.
Board Recommendation. Except to the extent as it would cause the directors on Capital’s board of directors to breach their fiduciary duties under applicable law, the board of directors of Capital, and any committee of the board, shall not
| • | withdraw, modify or qualify in any manner adverse to Renasant, the approval of the merger agreement and the related articles of merger or its recommendation to stockholders of the approval of the merger agreement and related articles of merger, or publicly propose to do any of the foregoing, or take any action or make any statement in connection with the special meeting inconsistent with such approval or its recommendation to the stockholders of Capital (collectively, a “change in recommendation”); |
| • | approve or recommend, or publicly propose to approve or recommend, any acquisition proposal; or |
| • | cause Capital to enter into any letter of intent, agreement in principal or similar agreement related to an acquisition transaction. |
A change in recommendation shall also include the failure by Capital’s board of directors to recommend against an unsolicited bona fide written proposal to engage in an acquisition transaction.
Employee Matters. For a description of the provisions in the merger agreement regarding matters for Capital employees, see “The Merger—Effect on Employee Benefit Plans and Stock Options”.
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Directors’ and Officers’ Insurance and Indemnification. The merger agreement provides that for a period of two years following the closing date of the merger Renasant will indemnify and hold harmless the duly elected current and former directors and officers of Capital and Capital Bank, and their heirs, personal representatives and estates. Renasant will indemnify such individuals against, and shall advance or reimburse any and all costs and expenses of, any judgments, interest, fines, damages or other liabilities, or amounts paid in settlement, as such are incurred in connection with any claim, action, suit or proceeding based upon or arising from the indemnified party’s capacity as an officer or director of Capital or Capital Bank. The indemnification will be provided to the same extent as such Capital directors or officers would be indemnified under the articles of incorporation or bylaws of Renasant in effect on the date of the merger agreement (February 5, 2007) if they were directors or officers of Renasant at all relevant times.
The amount of indemnification to be provided by Renasant to all indemnified parties as a group is capped at an amount equal to the sum of $5,000,000 and the policy limits of the directors’ and officers’ liability insurance obtained by Renasant. See “The Merger—Interests of Certain Persons in the Merger.” Renasant has no responsibility as to how such total sum is allocated among that group. Renasant has required that current and former directors and officers execute a joinder agreement with Renasant. The joinder agreement grants Renasant the right to participate in or completely assume the defense of such officer or director. The agreement also requires such officer or director to cooperate in the defense of any action for which indemnification is sought. Any amounts otherwise owed by Renasant pursuant to its indemnification obligations will be reduced by any amounts that an indemnified party receives from any third party.
Renasant has also agreed to indemnify and hold harmless Capital, Capital Bank and each of the directors, officers and controlling persons of either against any losses, claims, damages or liabilities arising under the Securities Act of 1933. Renasant will indemnify such individuals only insofar as such losses, claims, damages or liabilities (or actions in respect of any of the foregoing) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in this proxy statement/prospectus, or in any amendment or supplement, or arising out of or based upon the omission or alleged omission to state in any such document a material fact required to be stated or necessary to make the statements in such document not misleading. Renasant will pay or promptly reimburse such person for any legal or other expenses reasonably incurred in connection with investigating or defending any such action or claim. Renasant, however, is not obligated to indemnify such persons with respect to any such loss, claim, damage or liability (or actions in respect of any of the foregoing) which arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in this proxy statement/prospectus, or in any amendment or supplement, in reliance upon information furnished to Renasant by Capital or Capital Bank for use in this proxy statement/prospectus. Renasant is entitled to participate in the defense of any such action. If Renasant assumes the defense with counsel satisfactory to the indemnified party, after notice to the indemnified party of its election to assume the defense, Renasant will not be liable for any legal or other expenses of defense incurred by the indemnified party. The indemnification provided in connection with actions arising under the Securities Act is not subject to the aggregate limit of the sum of $5,000,000 and the policy limits of the directors’ and officers’ liability insurance obtained by Renasant described above.
The merger agreement also provides that Renasant shall use reasonable efforts to cause Renasant Bank or Renasant to obtain for a period of two years after the closing date of the merger policies of directors’ and officers’ liability insurance. The policy must cover acts or omissions occurring prior to the closing date of the merger for specified directors and officers of Capital on terms and in amounts substantially similar to the policies in effect on the date of the merger agreement. However, neither Renasant nor Renasant Bank is required to pay an aggregate premium for such insurance coverage in excess of 200% of the amount for such coverage as currently held by Capital (which is $10,000,000), but in such case shall purchase as much coverage as reasonably practicable for such amount.
Other Agreements. Capital has agreed to use its best efforts to cause each “affiliate” of Capital to agree not to dispose of any shares of Renasant common stock received in the merger except in compliance with the
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Securities Act of 1933 and the rules and regulations under such statute. An “affiliate” of Capital is any person controlling, controlled by or under common control with Capital.
Each director of Capital signed an agreement with Renasant on or after the date of the merger agreement obligating such person to vote his or her shares of Capital common stock in favor of the merger agreement and the merger. The agreement signed by the non-employee directors contains one other feature: the non-employee director is obligated not to compete with Renasant as provided in the agreement. Specifically, for a period of two years following the closing of the merger, non-employee directors are prohibited from engaging in the banking business (excluding equipment leasing, insurance, trust and investment advisory services and ownership interests in place when the merger agreement was signed) or soliciting Renasant customers with respect to competing businesses within Davidson, Marshall, Rutherford, Sumner, Trousdale, Wilson and Williamson counties in the State of Tennessee, and from soliciting employees, contractors or agents of Renasant in any geographic area.
Conditions to the Completion of the Merger
The respective obligations of the parties under the merger agreement to complete the merger shall be subject to the fulfillment on or prior to the closing date of the merger of the following conditions:
| • | All necessary regulatory or governmental approvals and consents required to complete the merger of Capital into Renasant and the merger of Capital Bank into Renasant Bank shall have been obtained, all conditions required to be satisfied prior to the closing date of the mergers by the terms of such approvals and consents shall have been satisfied, and all waiting periods required by law shall have expired. |
| • | All notices, reports and other filings required to be made with any governmental entity prior to the closing date by Renasant or Capital or any of their respective subsidiaries shall have been made and become final. |
| • | Stockholders of Capital shall have approved the merger agreement and the merger. |
| • | Stockholders of Renasant shall have approved the merger agreement and the merger, if required by applicable law or the rules of The NASDAQ Stock Market. |
| • | None of Renasant, Renasant Bank, Capital or Capital Bank shall be subject to any governmental or judicial enactment or order which prohibits, restricts or makes illegal completion of the merger. |
| • | All consents or approvals of all persons other than governmental entities required for consummation of the merger shall have been obtained unless the failure to obtain any such consent or approval would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Capital, Capital Bank, Renasant or Renasant Bank. |
| • | The SEC registration statement of which this proxy statement/prospectus forms a part shall have become effective, no stop order suspending its effectiveness shall have been issued, and no proceedings for that purpose shall have been initiated or threatened by the SEC. |
| • | Renasant and the stockholders of Capital shall have received an opinion of Phelps Dunbar LLP, satisfactory in form and substance to Renasant and Capital, stating that if the merger is consummated in accordance with the terms described in this proxy statement/prospectus, (1) it will constitute a tax-free reorganization within the meaning of Section 368 of the Internal Revenue Code and (2) the exchange of Capital common stock to the extent exchanged for Renasant common stock will not give rise to gain or loss to the stockholders of Capital with respect to such exchange. |
| • | The shares of Renasant common stock issuable in the merger shall have been approved for listing on The NASDAQ Global Select Market on or before the closing date, subject to official notice of issuance. |
| • | Renasant Bank and Capital Bank shall have executed and delivered the merger agreements pursuant to which Capital Bank will be merged with and into Renasant Bank, which will survive the merger. |
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| • | Capital, Capital Bank, Renasant and R. Rick Hart shall have executed a termination and release agreement with respect to Mr. Hart’s existing employment agreement and his employment at Capital and Capital Bank, and Renasant and Mr. Hart shall have executed an employment agreement with respect to Mr. Hart’s employment as an Executive Vice President of Renasant and as President of the Tennessee Division of Renasant Bank. |
| • | Capital, Capital Bank, Renasant and John W. Gregory, Jr. shall have executed a termination and release agreement with respect to Mr. Gregory’s existing employment agreement and his employment at Capital and Capital Bank, and Renasant Bank and Mr. Gregory shall have executed an employment agreement with respect to Mr. Gregory’s employment as an Executive Vice President of Renasant Bank. |
| • | Capital and Capital Bank shall have amended, to the reasonable satisfaction of Renasant, all option grants to, and supplemental executive retirement agreements with, each of R. Rick Hart and John W. Gregory, Jr. to provide (1) that the consummation of the merger will not constitute a change in control of Capital under those options and agreements, (2) that the options and agreements will fully vest benefits following termination of employment without cause (as defined in the employment agreements) or resignation in connection with a constructive termination (as defined in the employment agreements) and (3) that upon a termination of employment without cause or resignation in connection with a constructive termination, normal benefits shall be payable under those agreements commencing at the normal retirement age as defined in those agreements. |
The obligations of Renasant and Renasant Bank under the merger agreement to complete the merger are also subject to the fulfillment, on or prior to the closing date of the merger, of the following conditions (any one or more of which may be waived by Renasant to the extent permitted by law):
| • | Renasant shall have received a certificate from the presidents and chief executive officers of Capital and Capital Bank that (1) all obligations of Capital and Capital Bank to be performed prior to the closing date of the merger have been performed and complied with in all material respects, and (2) the representations and warranties of Capital and Capital Bank are true and correct in all respects as of the closing date of the merger as though made at that time (except that those which specifically relate to an earlier date shall be true and correct as of such date). |
| • | All permits, consents, waivers, clearances, approvals and authorizations of all governmental entities (other than banking regulatory authorities) or third parties necessary to consummate the merger shall have been obtained, none of which shall contain any terms or conditions which would materially impair the value of Capital or Capital Bank. |
| • | Dissenters’ rights shall not have been exercised with respect to more than 5% of the outstanding shares of Capital common stock immediately prior to the merger. |
| • | With respect to the Rights Agreement dated July 18, 2001 between Capital and Registrar and Transfer Company, Capital shall have redeemed for cash all but not less than all of the rights (as defined in the Rights Agreement) in accordance with Section 23 of the Rights Agreement on terms and conditions acceptable to Renasant, in its sole discretion. |
| • | Capital’s board of directors shall have adopted resolutions terminating Capital’s 401(k) plan effective as of the closing date of the merger. |
The obligations of Capital under the merger agreement to complete the merger are also subject to the fulfillment, on or prior to the closing date of the merger, of the following conditions (any one or more of which may be waived by Capital to the extent permitted by law):
| • | Capital shall have received a certificate from the presidents and chief executive officers of Renasant and Renasant Bank that (1) all obligations of Renasant and Renasant Bank required to be performed prior to the closing date of the merger have been performed and complied with in all material respects, and (2) the representations and warranties of Renasant and Renasant Bank are true and correct in all |
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| respects as of the closing date as though made at that time (except that those which specifically relate to an earlier date shall be true and correct as of such date). |
| • | All permits, consents, waivers, clearances, approvals and authorizations of all governmental entities or third parties necessary to consummate the merger shall have been obtained, none of which shall adversely affect the merger consideration to be paid to holders of Capital common stock. |
| • | Three qualified directors of Capital reasonably acceptable to Renasant shall be appointed by Renasant to Renasant’s and Renasant Bank’s respective boards of directors on the closing date. Capital has designated Albert J. Dale, III, R. Rick Hart and Michael D. Shmerling as the individuals to be appointed by Renasant to the boards of directors of Renasant and Renasant Bank. |
| • | The shares of Renasant common stock issuable in the merger shall have been approved for listing on The NASDAQ Global Select Market and shall not have been delisted, nor shall proceedings to delist such shares have begun. |
Termination of the Merger Agreement
The merger agreement may be terminated at any time prior to the closing date of the merger, whether before or after approval of the merger agreement and the merger by Capital’s stockholders:
| • | by mutual written consent of Renasant and Capital; |
| • | by Renasant or Capital if: |
| • | (1) the closing date of the merger shall not have occurred on or prior to September 30, 2007, unless delayed because approval by a governmental entity is pending and has not been finally resolved, in which event such date shall be automatically extended to December 31, 2007; (2) Capital’s stockholders do not approve the merger agreement and merger at the special meeting; or (3) Renasant’s stockholders do not approve the merger agreement and the merger to the extent required by law and the applicable rules of The NASDAQ Stock Market. A party may not terminate the merger agreement if either of the above two events occurs because of that party’s failure to perform or observe its agreements on or before the closing date or such vote, as the case may be; |
| • | 30 days pass after any application for regulatory or governmental approval is denied or withdrawn at the request or recommendation of the governmental entity, unless within such thirty-day period a petition for rehearing or an amended application is filed. A party may terminate thirty or more days after a petition for rehearing or an amended application is denied. No party may terminate when the denial or withdrawal is due to that party’s failure to observe or perform its covenants or agreements; |
| • | any governmental entity shall have issued a final, non-appealable order prohibiting the completion of the merger; or |
| • | there has been a breach by the other party of (1) any covenant or undertaking in the merger agreement or (2) any representation or warranty of the other party contained in the merger agreement, where such breach prevents the breaching party from satisfying a condition to closing in the merger agreement and has not been cured within thirty days following delivery of written notice of the breach. |
| • | by Renasant if: |
| • | Capital’s board of directors fails to make, withdraws or qualifies the recommendation in this proxy statement/prospectus that Capital’s stockholders vote to adopt and approve the merger agreement and the merger, or proposes publicly to do any of the foregoing; |
| • | the special meeting to approve the merger agreement and plan of merger is not called or convened by Capital; |
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| • | Capital approves or recommends, or publicly proposes to approve or recommend, an acquisition proposal by a third party; or |
| • | Dissenters’ rights are exercised with respect to more than 5% of the outstanding shares of Capital common stock immediately prior to the merger. |
| • | by Capital if: |
| • | the board of directors of Capital determines in good faith, after consultation with outside counsel, that it would constitute a breach of the board’s fiduciary duties (1) to hold the special meeting, (2) to recommend the merger agreement and the merger to Capital stockholders, (3) to fail to terminate the merger agreement and accept an acquisition proposal from a third party or (4) to not withdraw or modify its previous recommendation to Capital’s stockholders to adopt and approve the merger agreement and the merger; or |
| • | both (1) the average closing price for a share of Renasant common stock on the “determination date” (defined below) is less than $26.25 and (2) the change in the “average closing price” (defined below) for a share of Renasant measured against $30.88 on the “determination date” (defined below) is 15% greater than the change in the NASDAQ Bank Index on the “determination date” measured against the NASDAQ Bank Index on December 21, 2006. |
“Determination date” means the eighth business day prior to the closing date of the merger, and “average closing price” means the average of the per share closing prices for a share of Renasant common stock reported on the NASDAQ Select Global Market for the 20 consecutive full trading days ending on (and including) the determination date. If Capital terminates the merger agreement because the share price targets described above are not met, Renasant may, upon written notice to Capital, adjust the number of shares of Renasant common stock into which each share of Capital common stock will be converted in order to reflect the proportional decrease in the price per share of Renasant common stock and the index value for the NASDAQ Bank Index. In the event that Renasant takes such action, Capital’s termination of the merger agreement shall be deemed withdrawn.
There are three sets of circumstances under which Capital may owe Renasant a termination fee. In all cases, the termination fee is $5,000,000.
Under the first set of circumstances, prior to any event allowing either party to terminate the merger agreement, an acquisition proposal must have been publicly announced or otherwise made known to Capital’s senior management, board of directors or stockholders generally and not have been irrevocably withdrawn more than five business days prior to the special meeting. Next, the merger agreement must have been terminated either (1) by Renasant or Capital, because Capital’s stockholders failed to approve the merger agreement and the related articles of merger or (2) by Renasant, because of a willful breach by Capital of any covenant, undertaking, representation or warranty contained in the merger agreement. In such event, if the acquisition transaction is consummated within 12 months of the termination of the merger agreement, then on the date of such consummation Capital must pay Renasant a fee equal to $5,000,000 by wire transfer of same-day funds.
Alternatively, if Renasant terminates the merger agreement because Capital either (1) failed to recommend to its stockholders the approval of the merger agreement and the merger, (2) effected a change in such recommendation, (3) failed to call or convene the special meeting, or (4) approved or recommended, or proposed publicly to approve or recommend, any acquisition transaction, then Capital is required to pay Renasant $5,000,000 by wire transfer of same-day funds. A termination under these circumstances is not effective until Renasant receives such funds.
The final set of circumstances where a termination fee must be paid to Renasant is if Capital’s board of directors determines in good faith that it would constitute a breach of the board’s fiduciary duties (1) to hold the
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special meeting, (2) to fail to terminate the merger agreement and accept an acquisition proposal from a third party or (3) to not withdraw or modify its recommendation to Capital’s stockholders to adopt and approve the merger agreement and the merger. In any of these cases, Capital must pay Renasant $5,000,000 by wire transfer of same-day funds. As above, a termination under these circumstances is not effective until Renasant receives such funds. In no event shall Capital be required to pay the $5,000,000 fee to Renasant more than once.
If Capital fails promptly to pay the termination fee and Renasant sues for such fee and wins a judgment against Capital, Capital must also pay to Renasant its costs and expenses (including reasonable attorneys’ fees and expenses) in connection with such suit.
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INFORMATION CONCERNING BUSINESS OF RENASANT CORPORATION
General
Information with respect to Renasant can be found in Renasant’s most recent annual report on Form 10-K, dated March 7, 2007 and filed with the Securities and Exchange Commission. Such annual report is incorporated by reference into this proxy statement/prospectus.
Recent Developments
On March 15, 2007, Renasant filed with the Securities and Exchange Commission a registration statement on Form S-3 to register up to $69,000,000 of its common stock to be sold for cash to the public in a firm commitment underwriting. A portion of the net proceeds from such stock offering will be used to pay the cash portion of the merger consideration. Renasant expects to complete this offering prior to the special meting of Capital stockholders. The completion of this public offering of Renasant common stock is not a condition to the obligation of Renasant to complete the merger.
INFORMATION CONCERNING BUSINESS OF CAPITAL BANCORP, INC.
Information with respect to Capital can be found in Capital’s most recent annual report on Form 10-K, dated March 8, 2007 and filed with the Securities and Exchange Commission, and amendment number one to Annual Report on Form 10-K for the year ended December 31, 2006, dated March 9, 2007 and filed with the Securities and Exchange Commission. Such annual report, as amended, is incorporated by reference into this proxy statement/prospectus.
COMPARISON OF RIGHTS OF STOCKHOLDERS OF CAPITAL AND RENASANT
This section of the proxy statement/prospectus describes material differences between the current rights of the holders of Capital common stock and rights those stockholders will have as Renasant stockholders following the merger. The following discussion is intended only to highlight material differences between the rights of corporate stockholders under Mississippi law and Tennessee law generally and specifically with respect to Capital stockholders and the holders of Renasant common stock pursuant to the organizational documents of Capital and Renasant. The discussion does not constitute a complete comparison of the differences between the rights of such holders or the provisions of the Tennessee Business Corporation Act (“TBCA”), the Mississippi Business Corporation Act (the “MBCA”), Renasant’s articles of incorporation, Renasant’s bylaws, Capital’s charter or Capital’s bylaws.
The rights of the holders of Capital common stock are governed by Tennessee law, Capital’s charter and Capital’s bylaws. Upon completion of the merger, the rights of the holders of Capital common stock who become Renasant stockholders as a result of the merger will be governed by Mississippi law and by Renasant’s articles of incorporation and Renasant’s bylaws.
The following summary does not purport to be a complete statement of the provisions affecting, and differences between, the rights of holders of Renasant common stock and the holders of Capital common stock, the identification of specific provisions or differences is not meant to indicate that other equally or more significant differences do not exist. The summary is qualified in its entirety by reference to the TBCA, the MBCA, the articles of incorporation and bylaws of Renasant and the charter and bylaws of Capital.
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Summary of Material Differences of the Right of Renasant and Capital Stockholders (a more complete description of the items in this chart immediately follows)
| Renasant |
Capital | |||
| Authorized Capital Stock | • 75,000,000 shares of common stock
• 5,000,000 shares of preferred stock |
• 20,000,000 shares of common stock
• 20,000,000 shares of preferred stock | ||
| Dividends and Other Distribution | • Subject to statutory and regulatory restrictions |
• Subject to statutory and regulatory restrictions | ||
| Board of Directors | • Minimum size is seven.
• Maximum is twenty.
• Board is classified into three classes. Approximately one-third of the directors are elected at each year’s annual meeting. |
• Minimum is three.
• Maximum is twenty-five.
• Board is classified into three classes. Approximately one-third of the directors are elected at each year’s annual meeting. | ||
| Shareholder Nominations and Shareholder Proposals | • Bylaws establish advance notice procedures for shareholder proposals and for the nomination of candidates for election as directors.
• Proposals must comply with Rule 14a-8 under the Securities Exchange Act. |
• Bylaws establish advance notice procedures for shareholder proposals and for the nomination of candidates for election as directors.
• Proposals must comply with Rule 14a-8 under the Securities Exchange Act. | ||
| Election of Directors | • Cumulative voting is not permitted. |
• Cumulative voting is not permitted. | ||
| Removal of Directors | • The MBCA provides that directors may be removed with or without cause. |
• The charter of Capital provides that directors may be removed only for cause and that a director may not be removed without cause. | ||
| Special Meetings of Stockholders | • Under the MBCA, special meetings of stockholders may be called for any purpose by the board of directors or by a stockholder owning at least 10% of the capital stock of Renasant. |
• Under Capital’s charter, special meetings may be called by the Chairman of the Board, the Chief Executive Officer, by a vote of 80% of the Board of Directors or by stockholders owning at least 75% of the stock of Capital. | ||
| Indemnification | • Renasant will indemnify directors and officers against liabilities arising out of his or her status as a director subject to certain exceptions. |
• Capital will indemnify directors and officers against liabilities arising out of his or her status as a director subject to certain exceptions. | ||
| Limitations on Liability of Directors | • Directors have no personal liability for monetary damages for certain breaches of duty as a director. |
• Directors have no personal liability for monetary damages for certain breaches of duty as a director. | ||
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| Renasant |
Capital | |||
| Anti-Takeover Statutes | • Renasant’s articles of incorporation contain a “fair price” provision.
• The MBCA also contains laws relating to business combinations, the Shareholder Protection Act and the Control Share Act. Neither of these laws applies to Renasant because Renasant is a bank holding company. |
• Capital has opted in to the protections provided by the Tennessee Investor Protection Act, the Tennessee Business Combination Act, the Tennessee Control Share Acquisition Act, the Tennessee Authorized Corporation Protection Act and the Tennessee Greenmail Act. | ||
| Shareholder Rights Plan | • Renasant does not have a shareholder rights plan. |
• Capital does have a shareholder rights plan. | ||
| Vote on Extraordinary Corporate Transactions | • Under the MBCA, a merger, share exchange, sale, lease, exchange or other disposal of all or substantially all of Renasant’s assets or the dissolution of Renasant is approved if the votes cast in favor of the transaction exceed the votes cast against the transaction, except approval of a merger by stockholders of the surviving company is not required under certain circumstances. |
• Under Capital’s charter, a merger, share exchange, sale, lease, exchange or other disposal of all or substantially all of Capital’s assets or the dissolution of Capital requires the approval of 75% of the outstanding stock of Capital unless 75% of the directors affirmatively recommend the transaction, in which case approval by a majority of the outstanding shares of each class entitled to vote on the transaction is required. | ||
| Appraisal/Dissenters’ Rights | • The MBCA entitles a stockholder to appraisal rights and to obtain the payment of the fair value of that holder’s shares upon the occurrence of specified corporate actions, including a merger or share exchange. However, the MBCA provides that these appraisal rights are not available to the holders of shares which are listed on The NASDAQ Global Select Market, such as Renasant’s shares, subject to certain exclusions. |
• Dissenters’ rights as provided by Chapter 23 of the TBCA as described in this proxy statement prospectus. | ||
| Amendments to Articles of Incorporation/Charter | • Articles generally may be amended if the votes cast in favor of the amendment exceed the votes cast against the amendment, subject to specified exceptions. |
• Charter generally may be amended by a majority of the outstanding shares subject to specified exceptions. | ||
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| Renasant |
Capital | |||
| Amendments to Bylaws | • Under the MBCA, a corporation’s stockholders or the directors may amend the bylaws, except that a bylaw that increases a quorum or voting requirement for the board of directors may only be amended or repealed by the party that adopted such bylaw. |
• Bylaws generally may be amended by a majority vote subject to specified exceptions. | ||
| Action without a Meeting | • The MBCA allows any action required or permitted to be taken at a meeting of the stockholders of Renasant to be taken by a unanimous written consent of all of the stockholders of Renasant. |
• The charter of Capital allows any action required or permitted to be taken at a meeting of the stockholders of Capital to be taken by a unanimous written consent of all stockholders of Capital. | ||
Authorized Capital Stock
Renasant
Renasant’s authorized capital stock consists of 75,000,000 shares of common stock, par value $5.00 per share, and 5,000,000 shares of preferred stock, par value $.01 per share. Renasant’s Articles of Incorporation authorize the Renasant board of directors to issue shares of Renasant preferred stock in one or more series and to fix the designations, preferences, rights, qualifications, limitations or restrictions of the shares of Renasant preferred stock in each series. As of February 28, 2007, there were 15,560,006 shares of Renasant common stock outstanding. No shares of Renasant preferred stock were issued and outstanding as of that date.
Capital
Capital’s authorized capital stock consists of 20,000,000 shares of Capital common stock, no par value, and 20,000,000 shares of Capital preferred stock, no par value. As of February 28, 2007, there were 3,629,575 shares of Capital common stock outstanding. No shares of Capital preferred stock were issued and outstanding as of that date.
Dividends and Other Distributions
Renasant
The MBCA prohibits a Mississippi corporation from making any distributions to stockholders, including the payment of cash dividends, that would render the corporation unable to pay its debts as they become due in the usual course of business or that would result in its total assets being less than the sum of its total liabilities plus the amount that would be needed, if it were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights are superior to those receiving the distribution. The ability of Renasant to pay distributions to holders of Renasant common stock will depend to a large extent upon the amount of the dividends its received from Renasant Bank, its subsidiary, which is subject to restrictions and post by regulatory authorities, pays to Renasant. The approval of the Mississippi Department of Banking and Consumer Finance is required prior to Renasant Bank paying dividends, which are limited to earned surplus in excess of three times capital stock.
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Capital
The TBCA prohibits a Tennessee corporation from making any distributions to stockholders, including the payment of cash dividends, if after giving effect to the distribution, the corporation would not be able to pay its debts as they become due in the usual course of business or the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights are superior to those receiving the distribution. Capital’s ability to pay distributions is likewise dependent upon the amount of dividends it receives from its bank subsidiary.
Board of Directors
Renasant
Renasant’s bylaws provide for a board of directors consisting of not less than seven nor more than 20 members as determined from time to time by resolution of a majority of the members of the Renasant board of directors prior to each regular annual meeting of stockholders. Currently, the Renasant board of directors consist of 17 directors. The board of directors of Renasant is classified into three classes. Approximately one-third of the directors of Renasant are elected at each year’s annual meeting of stockholders.
Capital
Capital’s charter provides for a board consisting of not less than three nor more than 25 members as determined from time to time by resolution of a majority of the members of the Capital board of directors. Currently, the Capital board of directors consist of five directors. The board of directors is classified into three classes. Approximately one-third of the directors of Capital are elected at each year’s annual meeting of stockholders.
Stockholder Nominations and Stockholder Proposals
Renasant
Renasant’s bylaws establish advance notice procedures for stockholders proposals and the nomination, other than by or at the direction of the Renasant board of directors or one of its committees, of candidates for election as directors. Renasant’s bylaws provide that a stockholder wishing to nominate a candidate for election to the Renasant board must, in the case of an annual meeting, submit the nomination in writing to the Secretary of Renasant at least 90 days but no more than 120 days in advance of the first anniversary of the date of the immediately preceding year’s annual meeting of stockholders, and, in the case of a special meeting, submit the notification not earlier than 120 days prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made on the date of the special meeting. The notification must contain biographical information about the candidate and the stockholder’s name, share holdings and any other material interest of the stockholder in the nomination. Nominations that are not made in accordance with the foregoing provision may be ruled out of order by the presiding officer or the chairman of the meeting. In addition, a stockholder intending to make a proposal for consideration at a regularly scheduled annual meeting or special meeting of stockholders must notify the secretary of Renasant within the same timeframe as for director nominations. The notice for a stockholder proposal generally must contain a brief description of the proposal; the name, address and share holdings of the stockholder submitting the proposal; and any material interest of the stockholder in the proposal.
In accordance with the Securities and Exchange Commission Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), stockholder proposals intended to be included in the proxy statement and presented at a regularly scheduled annual meeting must be received by Renasant at least 120 days before the anniversary of the date on which the previous year’s proxy statement is first mailed to stockholders. As provided
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in rules promulgated under the Exchange Act, if the annual meeting date has been changed by more than 30 days from the date of the prior year’s meeting, or for special meetings, the proposal must be submitted within a reasonable time before Renasant begins to print and mail its proxy materials.
Capital
Capital’s charter establishes advance notice procedures for stockholder proposals and nominations, other than by or at the direction of the Capital board of directors or one of its committees, of candidates for election as directors. Capital’s charter provides that a stockholder wishing to nominate a candidate for election to the Capital board of directors must, in the case of an annual meeting, submit the nomination in writing to the secretary of Capital at least 60 but no more than 90 days in advance of the first anniversary of the date of the immediately preceding year’s annual meeting of stockholders, and, in the case of a special meeting, submit the notification no later than the 10th day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure of the meeting was made. The notification must contain biographical information about the candidate and the stockholder’s name, share holdings and any other material interest of the stockholder in the nomination. Nominations that are not made in accordance with the foregoing provision may be ruled out of order by the presiding officer or the chairman of the meeting. In addition, a stockholder intending to make a proposal for consideration at a regularly scheduled annual meeting or special meeting of stockholders must notify the Secretary of Capital of such proposal not less than 60 nor more than 90 days prior to the meeting, provided, that in the event that less than 60 days’ notice or public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be received no later than the close of business on the 10th day following the date on which such notice of the meeting was mailed or such public disclosure was made. The notice for a stockholder proposal generally must contain a brief description of the proposal; the name, address and share holdings of the stockholder submitting the proposal; and any material interest of the stockholder in the proposal.
Stockholder proposals intended to be included in the proxy statement and presented at a regularly scheduled annual meeting in accordance with Rule 14a-8 under the Exchange Act are subject to similar restrictions described above for Renasant.
Removal of Directors
Renasant
The MBCA provides that stockholders may remove one or more directors with or without cause if the number of votes cast to remove such director exceeds the number of votes cast not to remove such director.
Capital
Capital’s charter provides that directors may be removed for cause by the affirmative vote of at least 75% of the entire board of directors or by the affirmative vote of 75% of the outstanding shares of stock of Capital. Directors may not be removed without cause.
Indemnification
Renasant
Renasant’s bylaws requires Renasant to indemnify its directors and officers in connection with any proceeding against such directors and officers if such directors and officers conducted himself or herself in good faith and reasonably believed that any conduct in such directors’ or officers’ official capacity was in the best interest of Renasant, and in all other cases, such directors’ and officers’ conduct was at least not opposed to the best interest of Renasant, or in any criminal proceeding, such directors or officers had no reasonable cause to believe their conduct was unlawful. Unless ordered by a court, no indemnification shall be made in respect to any
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liability in connection with a proceeding in the right of the corporation, except for reasonable expenses incurred in connection with the proceeding if it is determined that the director or officer has met the standard of conduct described in the immediately preceding sentence, or any proceeding with respect to conduct for which the director or officer was adjudged liable on the basis that such director or officer received a financial benefit to which such director or officer was not entitled, whether or not involving action in such director’s or officer’s official capacity. A director or officer who is a party to a proceeding may apply to the court conducting the proceeding, or to another court, for indemnification or advance for expenses. After the receipt of such application, the court shall (1) order indemnification if the court determines that the director or officer is entitled to mandatory indemnification under applicable provisions of the MBCA, (2) order indemnification or advance for expenses if the court determines that the director or officer is entitled to indemnification or advance for expenses as provided in the bylaws of Renasant or (3) order indemnification or advance for expenses if the court determines that in view of all relevant circumstances it is fair and reasonable to indemnify such officer or director or to advance such expenses to such officer or director even if such officer or director has not met the standard of conduct described above. Renasant is required to indemnify a director or officer who is wholly successful, on the merits or otherwise, in the defense of any proceeding to which such director or officer was a party against reasonable expenses incurred by such director or officer in the proceeding. Renasant is required to advance funds to pay for or reimburse the reasonable expenses incurred by a director or officer who is a party to a proceeding except in limited circumstances described in the bylaws of Renasant. Renasant may purchase and maintain insurance on behalf of its directors and officers against any liability asserted against such person and incurred by such person in such capacity or arising out of such person’s status as a director or officer of Renasant.
Capital
Capital’s charter requires Capital to indemnify its directors and officers to the fullest extent permitted by the TBCA against liabilities arising out of his or status as a director or officer. The TBCA permits a corporation to indemnify or agree to indemnify an individual who is or was a director, officer, employee or agent against liability and expenses in any proceeding including a proceeding brought on behalf of the corporation itself arising out of their status as such or their activities in any of the foregoing capacities, except for activities which were at the time taken known or believes by him or her to be clearly in conflict with the best interest of the corporation. Further, the TBCA requires a corporation to indemnify a director who is wholly successful, on the merits or otherwise, in the defense of any proceeding to which he or she was a party because he or she is or was a director of the corporation against reasonable expenses incurred by him or her in connection with the proceeding.
Limitations on Liability of Directors
Renasant
The articles of incorporation and bylaws of Renasant are silent on the subject of limitation of a director’s liability. The MBCA provides that a director shall not be liable to a corporation or its stockholders for any decision to take or not take action, or any failure to take any action, as a director, unless the party asserting liability in a proceeding establishes specified information. The party must show that (1) the director was a party to or had a direct or indirect financial interest in a transaction and the transaction was not approved in accordance with the MBCA and (2) the challenged conduct consisted or was a result of (A) action not in good faith; (B) a decision which the director did not reasonably believe to be in the best interest of the corporation or as to which the director was not informed to an extent the director reasonably believed appropriate in the circumstances; (C) a lack of objectivity due to the director’s familial, financial or business relationship with, or lack of independence due to the director’s domination or control by another person having a material interest in the challenged conduct which relationship, domination or control could reasonably be expected to have affected the director’s judgment respecting the challenged conduct in a manner adverse to the corporation, and after a reasonable expectation to such effect has been established, the director shall not have established that the challenged conduct was reasonably believed by the director to be in the best interests of the corporation; (D) a sustained failure of the director to be informed about the business and affairs of the corporation, or other material
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failure of the director to discharge the oversight functions; or (E) receipt of a financial benefit to which the director was not entitled or any other benefit of the director’s duties to deal fairly with the corporation and its stockholders that is actionable under law.
Capital
Capital’s charter provides that no director of Capital shall be personally liable to Capital or its stockholders for monetary damages for breach of his or her duty of care or other duties as a director to the maximum extent permitted by the TBCA.
Anti-Takeover Statutes
Renasant
Renasant’s articles of incorporation contain a “fair price” provision. The MBCA also contains laws relating to business combinations, the Shareholder Protection Act and the Control Share Act. Neither of these laws applies to Renasant because Renasant is a bank holding company.
Capital
Provisions in Tennessee law could make it harder for someone to acquire Capital through a tender offer, proxy contest or otherwise.
Tennessee Investor Protection Act. The Tennessee Investor Protection Act places limitations on takeover proposals by stockholders beneficially owning 5% or more of any class of equity securities of a Tennessee corporation. The Tennessee Investor Protection Act does not apply to Capital because it is a bank holding company.
Tennessee Business Combination Act. The Tennessee Business Combination Act generally prohibits a “business combination” by Capital or a subsidiary with an “interested shareholder” within five years after the shareholder becomes an interested shareholder. Capital or a subsidiary can, however, enter into a business combination with an interested shareholder within that period if, before the interested shareholder became such, Capital’s board of directors approved the business combination or the transaction in which the interested shareholder became an interested shareholder. After that five-year moratorium, the business combination with the interested shareholder can be consummated only if it satisfies certain fairness provisions of the Tennessee Business Combination Act or is approved by two-thirds of the other shareholders.
For purposes of the Tennessee Business Combination Act, a “business combination” includes mergers, share exchanges, sales and leases of assets, issuances of securities, and similar transactions. An “interested shareholder” is generally any person or entity that beneficially owns 10% or more of the voting power of any outstanding class or series of Capital stock.
A corporation may enact a charter or bylaw amendment to remove itself entirely from the Tennessee Business Combination Act. Such amendment must be approved by a majority of the shareholders who have held shares for more than one year before the vote and cannot become operative until two years after the vote. Capital has not enacted such an amendment and, as a result, the Tennessee Business Combination Act is applicable to Capital.
Tennessee Control Share Acquisition Act. The Tennessee Control Share Acquisition Act generally provides that shares acquired by a person under certain circumstances which, when added to other shares owned such person, would bring such person’s effective control to one-fifth, one-third, or a majority of all voting power in the election of Capital’s directors, termed “control shares,” shall not have any voting rights. However, voting
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rights will be restored to control shares by resolution approved by the affirmative vote of the holders of a majority of Capital’s voting stock, other than shares held by the owner of the control shares. If voting rights are granted to control shares which give the holder a majority of all voting power in the election of Capital’s directors, then Capital’s other shareholders may require Capital to redeem their shares at fair value.
The Tennessee Control Share Acquisition Act is only applicable to corporations whose charters or bylaws expressly “opt in” to the act. The Capital charter contains a specific provision declaring that Capital is governed by the Tennessee Control Share Acquisition Act.
Tennessee Greenmail Act. The Tennessee Greenmail Act applies to a Tennessee corporation that has a class of voting stock registered or traded on a national securities exchange or registered with the SEC pursuant to Section 12(g) of the Exchange Act. Under the Tennessee Greenmail Act, Capital may not purchase any of its shares at a price above the “market value” of such shares from any person who holds more than 3% of the class of securities to be purchased if such person has held such shares for less than two years, unless the purchase has been approved by the affirmative vote of a majority of the outstanding shares of each class of voting stock issued by Capital or Capital makes an offer, of at least equal value per share, to all shareholders of such class. For the purposes of the Tennessee Greenmail Act, “market value” means the average of the highest and lowest closing market price for such shares during the thirty (30) trading days preceding the purchase and sale of the shares subject to this section.
Shareholder Rights Plan
Renasant
Renasant does not have a shareholder rights plan.
Capital
Capital has adopted a Shareholders Rights Agreement (the “Rights Agreement”) pursuant to which one common share purchase right (a “Right”) trades with each outstanding share of Capital’s Common Stock (the “Common Shares”). Except as described below, each Right entitles the registered holder to purchase from Capital, at any time after the Distribution Date (as defined below), one Common Share at a price per share of $45, subject to adjustment (the “Purchase Price”).
Initially the Rights attach to all certificates representing Common Shares. The Rights will separate from the Common Shares upon the earliest to occur of (1) ten days after the public announcement of a person’s or group of affiliated or associated persons’ having acquired beneficial ownership of 10% or more of the outstanding Common Shares (such person or group being hereinafter referred to as an “Acquiring Person”); or (2) ten days (or such later date as the Board may determine) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in a person or group’s becoming an Acquiring Person (the earlier of such dates being called the “Distribution Date”).
The Rights are not exercisable until the Distribution Date. The Rights will expire on July 18, 2011 (the “Final Expiration Date”), unless the Final Expiration Date is extended or unless the Rights are earlier redeemed or exchanged by Capital, in each case, as described below.
In the event that any person becomes an Acquiring Person (except pursuant to a tender or exchange offer which is for all outstanding Common Shares at a price and on terms which a majority of certain members of the board of directors determines to be adequate and in the best interests of Capital, its stockholders and other relevant constituencies, other than such Acquiring Person, its affiliates and associates (a “Permitted Offer”)), each holder of a Right will thereafter have the right (the “Flip-In Right”) to acquire a Common Share for a purchase price equal to 15% of the then current market price, or at such greater price as the Rights Committee
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shall determine (not to exceed 33.3% of such current market price). Notwithstanding the foregoing, all Rights that are, or were, beneficially owned by any Acquiring Person or any affiliate or associate thereof will be null and void and not exercisable.
In the event that, at any time following the Distribution Date, (1) Capital is acquired in a merger or other business combination transaction in which the holders of all of the outstanding Common Shares immediately prior to the consummation of the transaction are not the holders of all of the surviving corporation’s voting power, or (2) more than 50% of Capital’s assets or earning power is sold or transferred, then each holder of a Right (except Rights which have previously been voided as set forth above) shall thereafter have the right (the “Flip-Over Right”) to receive, upon exercise and payment of the Purchase Price, common shares of the acquiring company having a value equal to two times the Purchase Price. If a transaction would otherwise result in a holder’s having a Flip-In as well as a Flip-Over Right, then only the Flip-Over Right will be exercisable; if a transaction results in a holders having a Flip-Over Right subsequent to a transaction resulting in a holders having a Flip-In Right, a holder will have Flip-Over Rights only to the extent such holders Flip-In Rights have not been exercised.
At any time prior to the time a person becomes an Acquiring Person, the board of directors of Capital may redeem the Rights in whole, but not in part, at a price of $.0005 per Right, subject to adjustment by the Rights Committee at a price between $.0005 and $.005 per Right (the “Redemption Price”). The redemption of the Rights may be made effective at such time on such basis and with such conditions as the board of directors in its sole discretion may establish.
Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.
Vote on Extraordinary Corporate Transactions
Renasant
Under the MBCA, a merger, share exchange, sale, lease, exchange or other disposal of all or substantially all of Renasant’s assets or the dissolution of Renasant is approved if the votes cast in favor of the transaction exceeds the votes cast against the transaction, except approval of a merger by stockholders of the surviving company is not required in the instances specified in the MBCA.
Capital
Capital’s charter provides that the affirmative vote of the holders of 75% or more of the outstanding shares of stock of Capital is required to authorize any merger, share exchange, consolidation, sale, lease or other disposition of all or substantially all of Capital’s assets or any dissolution or liquidation of Capital, provided, however, that if at least 75% of the entire board of directors of Capital shall adopt a resolution affirmatively recommending such proposed transaction to the stockholders of Capital, and directing that it be submitted to a vote at a meeting of the stockholders, then such transaction shall be approved upon receipt of the affirmative vote of a majority of the outstanding shares of stock of Capital entitled to vote thereon.
Appraisal/Dissenters’ Rights
Renasant
The MBCA entitles a stockholder to appraisal rights and to obtain the payment of the fair value of that holder’s shares upon the occurrence of specified corporate actions, including a merger or share exchange. However, the MBCA provides that these appraisal rights are not available to the holders of shares which are listed on The NASDAQ Global Select Market, such as Renasant’s shares. This exclusion does not apply in the following situations: (1) where the corporate action requires the holders of such shares to accept for their shares
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anything other than cash or shares of any class or series of shares of any corporation, or any other proprietary interests of any other entity, that is either a public company or has less than 2,000 stockholders and the outstanding shares have a market value of at least $20,000,000; (2) the shares or assets of Renasant are being acquired by a person owning 20% or more of the voting power of Renasant or having the power to elect 25% or more of the board of directors; or (3) the shares or assets of Renasant are being required by a senior executive or director of Renasant who will receive as a result of the corporate action a financial benefit not generally available to other stockholders of Renasant common stock, with some exceptions. In the event that any of the foregoing situations occur such that a holder of Renasant common stock is allowed to exercise rights to appraisal, such rights are not materially different from the appraisal rights afforded a holder of Capital common stock.
Capital
The dissenters’ rights provided to a holder of Capital pursuant to Chapter 23 of the TBCA are described above under the caption “The Merger—Dissenters’ Rights”.
Amendments to Articles of Incorporation/Charter
Renasant
Renasant’s articles of incorporation provide that the articles of incorporation may be amended if the votes cast in favor of the amendment exceed the votes cast against the amendment provided, however, that the affirmative vote of not less than 80% of the outstanding common stock of Renasant is required to amend or repeal the provisions of the articles of incorporation that establish a classified board of directors or pertain the fair price provisions in the articles of incorporation.
Capital
Generally, the charter of Capital may be amended by a majority of a voting group with respect to which the amendment would create dissenters rights and, with respect to all other voting groups, if the votes in favor of the amendment exceed the votes against the amendment. The Capital charter provides, however, that specified provisions of the charter may be amended only by a vote of 75% or more of the outstanding shares of stock of Capital entitled to vote thereon unless at least 75% of the entire board of directors shall adopt a resolution setting forth the proposed amendment to such sections of the charter and directing that it be submitted to a vote at a meeting of the stockholders, in which event such amendment must be approved by the affirmative vote of the holders of a majority of the outstanding shares of stock of Capital entitled to vote thereon.
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The consolidated financial statements of Renasant Corporation and its subsidiaries as of December 31, 2006 and 2005 and for the two-year period ended December 31, 2006 and management’s report on the effectiveness of internal control over financial reporting as of December 31, 2006 have been audited by HORNE LLP, independent registered public accountants, as stated in their report incorporated herein, and are included in reliance upon such report and upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Renasant Corporation and its subsidiaries for the one-year period ended December 31, 2004 have been incorporated by reference herein in reliance on the report with respect to the consolidated financial statements of Ernst & Young LLP, independent registered public accountants, and the authority of said firm as experts in accounting and auditing.
Porter Keadle Moore, LLP, independent registered public accountants, have audited the consolidated financial statements of Capital included in the Capital Bancorp, Inc. Annual Report on Form 10-K for the year ended December 31, 2006, as set forth in their report, which is incorporated by reference in this proxy statement/prospectus and elsewhere in the registration statement.
Maggart & Associates, P.C., independent registered public accountants, have audited the consolidated financial statements of Capital included in the Capital Bancorp, Inc. Annual Report on Form 10-K for the year ended December 31, 2005 and for each of the years in the two-year period ended December 31, 2005, as set forth in their report, which is incorporated by reference in this proxy statement/prospectus and elsewhere in the registration statement.
The validity of the Renasant common stock to be issued pursuant to the merger will be passed upon by Phelps Dunbar LLP, Renasant outside legal counsel. The federal income tax consequences of the merger also will be passed upon for Renasant by Phelps Dunbar LLP. William M. Beasley, a partner of Phelps Dunbar LLP, is a director of Renasant. Phelps Dunbar LLP also provides legal advice to Renasant on a regular basis. As of the date of this proxy statement/prospectus, members of Phelps Dunbar LLP participating in the matters described in this paragraph as being passed upon by Phelps Dunbar LLP for Renasant owned an aggregate of approximately shares of Renasant common stock.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING OF STOCKHOLDERS
Capital will hold its 2007 annual meeting of stockholders only if the merger is not consummated. However, if the merger is not consummated and Capital does hold its annual meeting in 2007, stockholders will be entitled to propose matters for inclusion in Capital’s proxy statement for such meeting. In such a case, the annual meeting will be held more than 30 days after the anniversary date of the 2006 annual meeting. As a result, proposals to be considered for inclusion in Capital’s proxy statement must be delivered to Capital within a reasonable time before it begins to print and mail its proxy materials for the annual meeting. Such proposals also will need to comply with Securities and Exchange Commission regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be addressed to:
John W. Gregory, Jr.
Capital Bancorp, Inc.
P. O. Box 24120
Nashville, Tennessee 37202
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For a stockholder proposal that is not intended to be included in Capital’s proxy statement under Rule 14a-8, the stockholder must deliver a proxy statement and form of proxy to holders of a sufficient number of shares of Capital common stock to approve that proposal, provide the information required by Capital’s bylaws and give timely notice to Capital’s Corporate Secretary in accordance with Capital’s bylaws, which, in general, require that the notice be received by the Corporate Secretary:
| • | Not earlier than 90 days before the meeting, and |
| • | Not later than 60 days before the meeting; provided that if less than 60 days notice or prior public disclosure of the date of the meeting is given to stockholders, notice or a stockholder proposal must be received by the Corporate Secretary no later than 10 days after notice of the meeting is mailed or public disclosure is made. |
If the date of the stockholder meeting is moved more than 30 days before or 60 days after the anniversary of the Capital annual meeting for the prior year, then notice of a stockholder proposal that is not intended to be included in Capital’s proxy statement under Rule 14a-8 must be received no earlier than the close of business 120 days prior to the meeting and no later than the close of business on the later of the following two dates:
| • | 90 days prior to the meeting; and |
| • | 10 days after public announcement of the meeting date. |
WHERE YOU CAN FIND MORE INFORMATION
Renasant and Capital each file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information that Renasant or Capital files with the SEC at the SEC’s public reference rooms at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Renasant’s and Capital’s SEC filings are also available to the public from commercial document retrieval services and at the website maintained by the SEC at http://www.sec.gov. Reports, proxy statements and other information concerning Renasant are also found on Renasant’s website, www.renasant.com, under the link “Investor Relations.” Reports, proxy statements and other information concerning Capital are also found on Capital’s website, www.capitalbk.com, under the link “About Us; Corporate Information”.
Renasant filed a registration statement on Form S-4 to register with the SEC the shares of Renasant common stock to be issued to Capital stockholders in the merger. This proxy statement/prospectus is a part of that registration statement and constitutes a prospectus of Renasant and a proxy statement of Capital for the Capital special meeting.
The SEC allows Renasant and Capital to “incorporate by reference” information into this proxy statement/prospectus, which means that Renasant and Capital can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is deemed to be part of this proxy statement/prospectus, except for any information superseded by information contained directly in the proxy statement/prospectus. This proxy statement/prospectus incorporates by reference the documents set forth below that Renasant and Capital have previously filed with the SEC. These documents contain important information about Renasant and its business and about Capital and its business.
Renasant SEC Filings (File No. 001-13253)
| 1. | Annual Report on Form 10-K for the year ended December 31, 2006 filed on March 7, 2007; |
| 2. | Current Report on Form 8-K filed on January 5, 2007 announcing the adoption by Renasant Bank of its Executive Deferred Income Plan and its Directors’ Deferred Fee Plan; |
| 3. | Current Report on Form 8-K filed on January 17, 2007 announcing the financial results of Renasant for the quarter ended December 31, 2006 and the year ended December 31, 2006; |
95
| 4. | Current Report on Form 8-K filed on February 5, 2007 announcing the signing of a definitive agreement to acquire Capital and Capital Bank; |
| 5. | Current Report on Form 8-K filed on March 6, 2007 announcing the signing of amendment number one to the definitive agreement to acquire Capital and Capital Bank; |
| 6. | The description of Renasant’s common stock contained in Renasant’s Registration Statement on Form 8-A filed with the SEC on April 28, 2005 and including any other amendments or reports filed for the purpose of updating such description. |
Renasant also incorporates by reference additional documents that it may file with the SEC between the date of this proxy statement/prospectus and the date of the Capital special meeting. These include periodic reports, such as annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as proxy statements.
Notwithstanding the foregoing, information furnished by Renasant under Items 2.02 and 7.01 of any Current Report on Form 8-K, including the related exhibits, is not incorporated by reference in this proxy statement/prospectus.
You can obtain any of the documents related to Renasant and incorporated by reference in this proxy statement/prospectus, other than exhibits to those documents, without charge by requesting them in writing, as follows:
Renasant Corporation
209 Troy Street
Tupelo, Mississippi 38804
Attention: James W. Gray
Telephone: (662) 680-1217
If you would like to request any of the above documents, please do so prior to , 2007, in order to receive them before the Capital special meeting.
Capital SEC Filings (File No. 000-51114)
| 1. | Annual Report on Form 10-K for the year ended December 31, 2006 filed on March 8, 2007; |
| 2. | Amendment number one to Annual Report on Form 10-K for the year ended December 31, 2006 filed on March 9, 2007; |
| 3. | Current Report on Form 8-K filed on January 24, 2007 announcing the financial results of Capital for the quarter ended December 31, 2006 and the year ended December 31, 2006; |
| 4. | Current Report on Form 8-K filed on February 6, 2007 announcing the signing of a definitive agreement pursuant to which Capital and Capital Bank and will be acquired by Renasant and Renasant Bank, respectively; and |
| 5. | Current Report on Form 8-K filed on March 7, 2007 announcing the signing of amendment number one to the definitive agreement pursuant to which Capital and Capital Bank will be acquired by Renasant and Renasant Bank, respectively. |
Capital also incorporates by reference additional documents that it may file with the SEC between the date of this proxy statement/prospectus and the date of the Capital special meeting. These include periodic reports, such as annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as proxy statements.
Notwithstanding the foregoing, information furnished by Capital under Items 2.02 and 7.01 of any Current Report on Form 8-K, including the related exhibits, is not incorporated by reference into this proxy statement/prospectus.
96
You can obtain any of the documents related to Capital and incorporated by reference in this proxy statement/prospectus, other than exhibits to those documents, without charge by requesting them in writing, as follows:
Capital Bancorp, Inc.
P. O. Box 24120
Nashville, Tennessee 37202
Attention: Sally P. Kimble
Telephone: (615) 327-9000
If you would like to request any of the above documents, please do so prior to , 2007 [5 days prior to the meeting date], in order to receive them before the Capital special meeting.
Capital has supplied all information contained in this proxy statement/prospectus relating to Capital, and Renasant has supplied all such information relating to Renasant.
You should rely only on the information contained or incorporated by reference in this proxy statement/prospectus to vote your shares at the Capital special meeting. Capital and Renasant have not authorized anyone to provide you with information that is different from what is contained in this proxy statement/prospectus. This proxy statement/prospectus is dated , 2007. You should not assume that the information contained in the proxy statement/prospectus is accurate as of any date other than that date, and neither the mailing of this proxy statement/prospectus to Capital’s stockholders nor the issuance of Renasant common stock in the merger will create any implication to the contrary.
This proxy statement/prospectus contains a description of the representations and warranties made in the merger agreement. Representations and warranties are also set forth in contracts and other documents (including the merger agreement) that are attached or filed as exhibits to this proxy statement/prospectus or are incorporated by reference herein. These representations and warranties have been made solely for the benefit of the other party to such contracts and documents, may be subject to important qualifications and limitations agreed to by the contracting parties, and may not be complete, and such representations and warranties should not be relied on by any other person. In addition, the representations and warranties contained in the merger agreement:
| • | have been qualified by information set forth in confidential disclosure schedules exchanged by the parties in connection with signing the merger agreement—the information contained in these schedules modifies, qualifies and creates exceptions to the representations and warranties in the merger agreement; |
| • | may be intended not as statements of fact, but rather as a way of allocating the risk to one of the parties to the merger agreement if those statements turn out to be inaccurate; |
| • | are subject to the materiality standard described in the merger agreement which may differ from what may be viewed as material by you; and |
| • | were made only as of the date of the merger agreement or such other date as is specified in the merger agreement. |
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
RENASANT CORPORATION,
RENASANT BANK,
CAPITAL BANCORP, INC.
AND
CAPITAL BANK
DATED FEBRUARY 5, 2007, AS AMENDED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
RENASANT CORPORATION,
RENASANT BANK,
CAPITAL BANCORP, INC.,
AND
CAPITAL BANK & TRUST COMPANY
DATED February 5, 2007
Annex A-1 - Page 2
TABLE OF CONTENTS
| Page | ||||
| ARTICLE I | THE MERGER |
1 | ||
| 1.1 |
The Merger |
1 | ||
| 1.2 |
Effective Time |
2 | ||
| 1.3 |
The Articles of Incorporation and Bylaws of the Surviving Corporation |
2 | ||
| 1.4 |
Directors and Officers |
3 | ||
| 1.5 |
Effect of the Mergers |
3 | ||
| ARTICLE II |
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES | 4 | ||
| 2.1 |
Conversion of Shares | 4 | ||
| 2.2 |
Exchange of Seller Common Stock Certificates | 8 | ||
| 2.3 |
Dissenting Shares | 10 | ||
| 2.4 |
Additional Actions | 10 | ||
| 2.5 |
Rights as Stockholders | 10 | ||
| 2.6 |
Stock Transfer Records | 11 | ||
| 2.7 |
Subsidiary Merger | 11 | ||
| 2.8 |
Seller Stock Options and Related Matters | 11 | ||
| ARTICLE III |
REPRESENTATIONS AND WARRANTIES OF SELLER | 12 | ||
| 3.1 |
Corporate Organization | 12 | ||
| 3.2 |
Capitalization | 13 | ||
| 3.3 |
Authority; No Violation | 14 | ||
| 3.4 |
Financial Statements | 16 | ||
| 3.5 |
Absence of Certain Changes or Events | 16 | ||
| 3.6 |
Legal Proceedings | 17 | ||
| 3.7 |
Taxes and Tax Returns | 17 | ||
| 3.8 |
Employee Benefit Plans | 19 | ||
| 3.9 |
Regulatory Reports | 21 | ||
| 3.10 |
Seller Information | 21 | ||
| 3.11 |
Compliance with Applicable Law | 22 | ||
| 3.12 |
Deposit Insurance and Other Regulatory Matters | 22 | ||
| 3.13 |
Certain Contracts | 22 | ||
| 3.14 |
Properties and Insurance | 23 | ||
| 3.15 |
Environmental Matters | 24 | ||
| 3.16 |
Allowance for Loan Losses and Real Estate Owned | 26 | ||
| 3.17 |
Minute Books | 26 | ||
| 3.18 |
Affiliate Transactions | 26 | ||
| 3.19 |
Internal Controls; Disclosure Controls | 26 | ||
| 3.20 |
Risk Management Instruments | 26 | ||
| 3.21 |
Fairness Opinion | 27 | ||
| 3.22 |
Broker Fees | 27 |
Annex A-1 - Page 3
| 3.23 |
Loans | 27 | ||
| 3.24 |
Investments | 28 | ||
| 3.25 |
Employees; Compensation | 28 | ||
| 3.26 |
Tax and Regulatory Matters | 29 | ||
| 3.27 |
Intellectual Property | 29 | ||
| 3.28 |
Community Reinvestment Compliance | 30 | ||
| 3.29 |
No Existing Discussions | 30 | ||
| 3.30 |
Certain Business Practices | 30 | ||
| 3.31 |
Continuity of Business Enterprise | 30 | ||
| 3.32 |
Full Disclosure | 30 | ||
| ARTICLE IV |
REPRESENTATIONS AND WARRANTIES OF ACQUIROR | 31 | ||
| 4.1 |
Corporate Organization | 31 | ||
| 4.2 |
Authority; No Violation | 32 | ||
| 4.3 |
Financial Statements | 33 | ||
| 4.4 |
Absence of Certain Changes or Events | 34 | ||
| 4.5 |
Legal Proceedings | 34 | ||
| 4.6 |
Acquiror Information | 34 | ||
| 4.7 |
Deposit Insurance and Other Regulatory Matters | 34 | ||
| 4.8 |
Capital; Acquiror Shares | 34 | ||
| 4.9 |
Broker Fees | 35 | ||
| 4.10 |
Securities Documents and Regulatory Reports | 35 | ||
| 4.11 |
Compliance with Applicable Law | 35 | ||
| 4.12 |
Full Disclosure | 36 | ||
| 4.13 |
NASDAQ | 36 | ||
| 4.14 |
Tax and Regulatory Matters | 36 | ||
| 4.15 |
Capitalization | 36 | ||
| 4.16 |
Material Contracts | 36 | ||
| 4.17 |
Access to Funds | 36 | ||
| ARTICLE V | COVENANTS OF THE PARTIES | 36 | ||
| 5.1 |
Conduct of the Business of Seller | 36 | ||
| 5.2 |
Negative Covenants of Seller | 37 | ||
| 5.3 |
No Solicitation | 39 | ||
| 5.4 |
Negative Covenants of Acquiror | 41 | ||
| 5.5 |
Current Information | 42 | ||
| 5.6 |
Access to Properties and Records; Confidentiality | 42 | ||
| 5.7 |
Regulatory Matters | 43 | ||
| 5.8 |
Approval of Stockholders | 43 | ||
| 5.9 |
Further Assurances | 44 | ||
| 5.10 |
Disclosure Supplements | 44 | ||
| 5.11 |
Public Announcements | 44 | ||
| 5.12 |
Failure to Fulfill Conditions | 44 | ||
| 5.13 |
Certain Post-Merger Agreements | 45 | ||
| 5.14 |
Takeover Laws; No Rights Triggered | 48 | ||
| 5.15 |
Preparation of Registration Statement | 48 | ||
| 5.16 |
Affiliates | 49 | ||
| 5.17 |
Adjustment for Changes in Outstanding Shares | 49 |
Annex A-1 - Page 4
| 5.18 |
Adoption of Accounting Policies | 49 | ||
| 5.19 |
Covenant to Close | 49 | ||
| 5.20 |
Certain Agreements | 49 | ||
| 5.21 |
Hold Harmless | 50 | ||
| 5.22 |
Seller Indebtedness | 50 | ||
| ARTICLE VI | CLOSING CONDITIONS | 51 | ||
| 6.1 |
Conditions to the Parties’ Obligations under this Agreement | 51 | ||
| 6.2 |
Conditions to the Obligations of Acquiror and Acquiror Sub under this Agreement | 52 | ||
| 6.3 |
Conditions to the Obligations of Seller and Seller Subsidiary under this Agreement | 53 | ||
| ARTICLE VII | TERMINATION, AMENDMENT AND WAIVER, ETC. | 53 | ||
| 7.1 |
Termination | 53 | ||
| 7.2 |
Effect of Termination | 55 | ||
| 7.3 |
Amendment, Extension and Waiver | 56 | ||
| 7.4 |
Termination Fees | 56 | ||
| ARTICLE VIII | MISCELLANEOUS | 57 | ||
| 8.1 |
Expenses | 57 | ||
| 8.2 |
Survival | 57 | ||
| 8.3 |
Notices | 57 | ||
| 8.4 |
Parties in Interest | 58 | ||
| 8.5 |
Complete Agreement | 58 | ||
| 8.6 |
Counterparts | 59 | ||
| 8.7 |
Governing Law | 59 | ||
| 8.8 |
Interpretation | 59 | ||
| 8.9 |
Enforcement | 59 |
| Schedules: |
||
| Schedule 5.13(b) [omitted but available upon request] |
||
| Schedule 5.16 [omitted but available upon request] |
||
| Schedule 5.20-A |
||
| Schedule 5.20-B |
||
| Schedule 5.20-C |
||
| Schedule 5.20-D |
||
| Schedule 5.20-E |
||
| Schedule 5.20-F |
||
| Exhibits: | ||
| Exhibit A |
Parent Merger Documents [see Annex A-2] | |
| Exhibit B |
Subsidiary Merger Documents [omitted but available upon request] | |
Annex A-1 - Page 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (“Agreement”), dated as of February 5, 2007, by and among Renasant Corporation, a Mississippi corporation (“Acquiror”), and Renasant Bank, a Mississippi banking association (“Acquiror Sub”), on the one hand, and Capital Bancorp, Inc., a Tennessee corporation (“Seller”), and Capital Bank & Trust Company, a Tennessee banking association (“Seller Subsidiary”), on the other hand. Each of Acquiror, Acquiror Sub, Seller and Seller Subsidiary is a party (“party”) hereto, and one or more of them are parties (“parties”) to this Agreement as the context may require.
WITNESSETH:
WHEREAS, the Boards of Directors of Acquiror and Seller each have determined that it is advisable and in the best interests of their respective companies and their stockholders to consummate the business combination transactions provided for herein, including the merger of Seller with and into Acquiror subject to the terms and conditions set forth herein;
WHEREAS, the Boards of Directors of Acquiror Sub and Seller Subsidiary each have determined that it is advisable and in the best interests of their respective companies and their stockholders to consummate the business combination transactions provided in the Subsidiary Agreement (as hereinafter defined) and herein, including the merger of Seller Subsidiary with and into Acquiror Sub, subject to the term and conditions set forth therein and herein; and
WHEREAS, the parties desire to provide for certain undertakings, conditions, representations, warranties and covenants in connection with the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and the mutual covenants, representations, warranties and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger.
(a) Subject to the terms and conditions of this Agreement, at the Effective Time (as defined in Section 1.2 hereof), Seller shall be merged with and into Acquiror (the “Parent Merger”) in accordance with the Mississippi Business Corporation Act (the “MBCA”) and the Tennessee Code Annotated (the “TCA”) with Acquiror as the surviving corporation (hereinafter sometimes called the “Surviving Corporation”) which shall continue its corporate existence under the laws of the State of Mississippi, and the separate corporate existence of Seller shall terminate. The Parent Merger shall in all respects have the effects provided in Section 1.5.
(b) Subject to the terms and conditions of this Agreement, immediately after the Effective Time of the Parent Merger Seller Subsidiary shall be merged with and into Acquiror Sub (the “Subsidiary Merger” and together with the Parent Merger, the “Mergers”) in accordance with the Mississippi Code of 1972, as amended, and the TCA, with Acquiror Sub as the surviving corporation (hereinafter sometimes called the “Subsidiary Surviving Corporation”) which shall continue its corporate existence under the laws of the State of Mississippi, and the separate corporate existence of Seller Subsidiary shall terminate. The Subsidiary Merger shall in all respects have the effects provided in Section 1.5.
1.2 Effective Time. The Parent Merger shall become effective on the date and at the time that the Plan of Merger is filed with the Secretary of State of the State of Mississippi pursuant to Section 79-4-11.06 of the
Annex A-1 - Page 6
MBCA and Articles of Merger are filed with the Secretary of State of the State of Tennessee pursuant to Section 48-21-107 of the TCA substantially in the form attached hereto as Exhibit A (collectively, the “Parent Merger Documents”), unless a later date and time is specified as the effective time in such documents, provided that the parties shall cause the Parent Merger to be effective no later than the day following the date on which the Closing occurs (the “Effective Time”); provided, however, that in no event will the Parent Merger Documents be filed prior to July 1, 2007. The Subsidiary Merger shall become effective upon the later of the dates and times specified in the Certificate of Merger Approval issued by the Mississippi Commissioner of Banking and Consumer Finance (“MCB”) and the Certificate of Approval issued by the Tennessee Department of Financial Institutions (“TDFI”) based on the Plan of Merger filed with the MCB and thereafter with the Mississippi Secretary of State and the Articles of Merger filed with the TDFI and thereafter the Tennessee Secretary of State, respectively, substantially in the forms attached hereto as Exhibit B (collectively, the “Subsidiary Merger Documents” and together with the Parent Merger Documents, the “Merger Documents”). A closing (the “Closing”) shall take place at 10:00 a.m. on the fifth Business Day (the “Closing Date”) following the receipt of all necessary approvals and consents of any governmental or regulatory authority, agency, court, commission or other entity, domestic or foreign (“Governmental Entity”) and the expiration of all statutory waiting periods in respect thereof and the satisfaction or waiver, to the extent permitted hereunder, of the conditions to the consummation of the Mergers specified in Article VI of this Agreement (other than the delivery of certificates, instruments and documents to be delivered at the Closing), at the offices of Acquiror, or at such other place, at such other time or on such other date as the parties may mutually agree upon, provided, however, that in no event shall the Closing occur prior to July 1, 2007 and further provided, that if the Closing occurs at anytime after July 1, 2007, the Closing shall occur on the first day of the next month after the date on which all conditions to closing described in this sentence are satisfied. For purposes of this Agreement, a Business Day (“Business Day”) is any day, other than a Saturday, Sunday or any other day that banks located in the State of Tennessee or in the State of Mississippi are not permitted or required to be closed. At the Closing, there shall be delivered to Acquiror, Acquiror Sub, Seller and Seller Subsidiary the certificates and other documents required to be delivered under Article VI hereof.
1.3 The Articles of Incorporation and Bylaws of the Surviving Corporation and the Subsidiary Surviving Corporation. The Articles of Incorporation and the Bylaws of Acquiror and Acquiror Sub shall be the Articles of Incorporation and the Bylaws of the Surviving Corporation and the Surviving Subsidiary Corporation, respectively, until thereafter changed or amended as provided therein or by applicable law.
1.4 Directors and Officers.
(a) Immediately after the Effective Time, the directors of the Surviving Corporation shall consist of the directors of Acquiror in office immediately prior to the Effective Time, until their respective successors are duly elected, appointed or qualified or until their earlier death, resignation or removal in accordance with the Articles of Incorporation and the Bylaws of the Surviving Corporation. In addition, Acquiror agrees that three current board members of Seller’s board of directors reasonably acceptable to Acquiror shall be appointed to Acquiror’s board of directors immediately after the Effective Time. The officers of Acquiror shall, from and after the Effective Time, continue as the officers of the Surviving Corporation until their successors shall have been duly elected, appointed or qualified or until their earlier death, resignation or removal in accordance with the Articles of Incorporation and the Bylaws of the Surviving Corporation.
(b) Immediately after the effective time of the Subsidiary Merger, the directors of the Subsidiary Surviving Corporation shall consist of the directors of Acquiror Sub in office immediately prior to the effective time of the Subsidiary Merger, until their respective successors are duly elected, appointed or qualified or until their earlier death, resignation or removal in accordance with the Articles of Incorporation and the Bylaws of the Subsidiary Surviving Corporation. In addition, Acquiror and Acquiror Sub agree that three current board members of Seller Subsidiary’s board of directors reasonably acceptable to Acquiror shall be appointed to Acquiror Sub’s board of directors immediately after the effective time of the Subsidiary Merger. The officers of Acquiror Sub shall, from and after the effective time of the Subsidiary Merger, continue as the officers of the Subsidiary Surviving
Annex A-1 - Page 7
Corporation until their successors shall have been duly elected, appointed or qualified or until their earlier death, resignation or removal in accordance with the Articles of Incorporation and the Bylaws of the Subsidiary Surviving Corporation.
1.5 Effect of the Mergers.
(a) At the Effective Time, the separate existence and corporate organization of Seller shall cease, and all right, title and interest in and to all real estate and other property owned by Seller shall be allocated to and shall be vested in Acquiror, as the surviving corporation, without reversion or impairment, without further act or deed, and without any transfer or assignment having occurred (but subject to any existing liens or other encumbrances thereon), and all liabilities and obligations of Seller shall be allocated to and shall be vested in Acquiror, as the surviving corporation, as primary obligor therefor and, except as set forth herein, no other person shall be liable therefor, and all proceedings pending by or against the Seller shall be continued by or against Acquiror, as the surviving corporation, and all liabilities, obligations, assets or rights associated with such proceedings shall be allocated to and vested in Acquiror, as the surviving corporation.
(b) At the effective time of the Subsidiary Merger, the separate existence and corporate organization of Seller Subsidiary shall cease, and all right, title and interest in and to all real estate and other property owned by Seller Subsidiary shall be allocated to and shall be vested in Acquiror Sub, as the surviving corporation, without reversion or impairment, without further act or deed, and without any transfer or assignment having occurred (but subject to any existing liens or other encumbrances thereon), and all liabilities and obligations of Seller Subsidiary shall be allocated to and shall be vested in Acquiror Sub, as the surviving corporation, as primary obligors therefor and, except as set forth herein, no other person shall be liable therefor, and all proceedings pending by or against Seller Subsidiary shall be continued by or against Acquiror Sub, as the surviving corporation, and all liabilities, obligations, assets or rights associated with such proceedings shall be allocated to and vested in Acquiror Sub, as the surviving corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Conversion of Shares. All of the shares of Acquiror issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding after the Effective Time and shall be unaffected by the Parent Merger. The manner and basis of converting the shares of common stock, no par value, of Seller (the “Seller Common Stock”) upon consummation of the Mergers shall be as follows:
(a) At the Effective Time, by virtue of the Parent Merger and without any action on the part of Acquiror, Seller or the holders of Seller Common Stock: