Item 1.01 Entry into a Material Definitive Agreement
Agreement and Plan of Merger
Merger. On December 18, 2019, Southwest Georgia Financial Corporation, a Georgia
corporation (the "Company"), entered into an Agreement and Plan of Merger (the
"Merger Agreement") with The First Bancshares, Inc., a Mississippi corporation
("FBMS"), whereby the Company will be merged with and into FBMS (the "Merger").
Pursuant to and simultaneously with entering into the Merger Agreement, the
Company's wholly owned subsidiary bank, Southwest Georgia Bank, and FBMS's
wholly owned subsidiary bank, The First, A National Banking Association ("The
First"), entered into a Plan of Merger and Merger Agreement whereby Southwest
Georgia Bank will be merged with and into The First immediately following the
merger of the Company with and into FBMS (the "Bank Merger").
The Merger Agreement has been unanimously approved by the boards of directors of
the Company and FBMS. The transaction is expected to close in the second quarter
of 2020, subject to customary conditions discussed below.
Merger Consideration. Pursuant to the Merger Agreement, each outstanding share
of Company common stock issued and outstanding immediately prior to the
effective time of the Merger will be converted into the right to receive one
(1.00) share of FBMS's common stock (the "Merger Consideration"). Each share of
Company common stock subject to vesting restrictions granted under any equity
plan of the Company ("Company Restricted Shares"), or its subsidiaries, that is
outstanding immediately prior to the effective time of the Merger will also
automatically be converted into one (1.00) restricted share of FBMS's common
stock with the same vesting restrictions as were applicable to the Company
Restricted Share.
Each outstanding share of FBMS's common stock shall remain outstanding and
unaffected by the Merger.
Representations and Warranties. The Merger Agreement contains usual and
customary representations and warranties that the Company and FBMS made to each
other as of specific dates.
Covenants; No Solicitation. Each party also has agreed to customary covenants,
including, among others, covenants relating to the conduct of its business
during the interim period between the execution of the Merger Agreement and the
consummation of the Merger. Additionally, the Company has agreed (i) not to
initiate, solicit, induce or knowingly encourage or take any action or
facilitate any alternative acquisition transaction or, subject to certain
exceptions, participate in discussions or negotiations regarding, or furnish any
non-public information relating to, any alternative acquisition transaction or
(ii) subject to certain exceptions, not to withdraw or modify in a manner
adverse to FBMS, the recommendation of the Company's board of directors that the
Company's shareholders approve the Merger Agreement and the Merger. In the event
that the Company receives a proposal with respect to an alternative acquisition
transaction that the the Company board of directors determines is superior to
the Merger, FBMS will have an opportunity to match the terms of such proposal,
subject to certain requirements.
Conditions to Closing. Consummation of the Merger is subject to various
customary conditions, including (i) approval of the Merger Agreement and the
Merger by shareholders of the Company; (ii) the receipt of certain regulatory
approvals and third party consents; (iii) no injunctions or other legal
restraints preventing the consummation of the Merger; (iv) the U.S. Securities
and Exchange Commission ("SEC") having declared effective FBMS's registration
statement covering the issuance of shares of FBMS's common stock in the Merger;
(v) the receipt by each party of a tax opinion to the effect that the Merger
will qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended; (vi) the accuracy of representations
and warranties of the parties and compliance by the parties with their
respective covenants and obligations under the Merger Agreement (subject to
customary materiality qualifiers); and (vii) the absence of a material adverse
effect with respect to the either the Company or FBMS.
Termination. The Merger Agreement may be terminated in certain circumstances,
including: (i) by mutual written agreement of the parties, (ii) by either party
if any regulatory approval required for consummation of the transactions
contemplated by the Merger Agreement has been denied by final non-appealable
action by the relevant governmental authority or an application for such
approval has been permanently withdrawn at the request of a governmental
authority, (iii) by either party if the approval of the shareholders of the
Company is not obtained, (iv) by either party in the event of a material breach
by the other party of any representation, warranty or covenant contained in the
Merger Agreement and such breach is not cured within thirty days, (v) by either
party if the Merger is not consummated on or before June 30, 2020, subject to
automatic extension to August 30, 2020 if the only outstanding closing condition
is the receipt of regulatory approvals, (vi) by FBMS if the Company's board of
directors breaches its obligation not to solicit any alternative acquisition
transaction, changes its recommendation with respect to the Merger in accordance
with the terms of the Merger Agreement, or breaches its obligation to call a
special Company shareholder meeting to vote on the Merger; (vii) by the Company
in certain circumstances in order to enter into a definitive agreement to accept
a superior proposal; or (viii) by the Company in the event that the board of
directors of the Company so determines at any time during the five (5) day
period commencing prior to the date that is five (5) days prior to the Closing
Date (such date that is 5 days prior to the Closing Date being the
"Determination Date"), if, and only if, both of the following conditions are
satisfied: (A) the number obtained by dividing the average closing price of the
FBMS common stock as reported on the NASDAQ Stock Market for the ten (10)
consecutive trading days ending on the trading day immediately prior to the
Determination Date by $33.58 (the "FBMS Ratio") is less than 0.80; and (B) the
FBMS Ratio is less than the number obtained by (1) dividing the average of the
closing price on such date of the KBW Nasdaq Regional Banking Index (KRX) (the
"Index Price") for the ten (10) consecutive trading days ending on the trading
day immediately prior to the Determination Date by the Index Price on the date
of the Merger Agreement and (2) subtracting 0.20 from such quotient, provided
that FBMS, subject to certain terms and conditions in the Merger Agreement, will
have the opportunity to adjust the Merger Consideration in order to prevent the
termination of the Merger Agreement by the Company pursuant to this section
(viii).
Termination Fee. The Company will pay FBMS a termination fee equal to $3.75
million in the event (i) the Merger Agreement is terminated by FBMS because the
Company's board of directors breaches its obligation not to solicit any
alternative acquisition transaction, changes its recommendation with respect to
. . .
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers
In connection with the execution of the Merger Agreement, the Company, FBMS and
Mr. DeWitt Drew entered into an agreement, which (i) as of, and subject to the
occurrence of, the effective time of the Merger will terminate Mr. Drew's
existing employment agreement with the Company (except with respect to certain
provisions which will survive such termination, including (x) the provision
governing the split dollar insurance for Mr. Drew's benefit with premiums paid
by the Company (the "Split Dollar Plan"), (y) the provision regarding the
limitation on benefits upon termination in connection with a change in control
and (z) the provision governing restrictive covenants in favor of the Company)
and (ii) on and after the effective time of the Merger, govern his employment
with FBMS and The First. Upon termination at, and subject to, the effective time
of the Merger, the Company shall pay Mr. Drew a cash payment of $586,838. On and
after the effective time of the Merger, the agreement provides that Mr. Drew
will remain employed with FBMS and The First until the later of (i) two weeks
following the operational conversion and integration of the Company with and
into FBMS, and Southwest Georgia Bank with and into The First, anticipated to
end no earlier than June 2020 and (ii) June 30, 2020. In consideration for Mr.
Drew's service and other commitments under the agreement, during the employment
term, Mr. Drew will be paid an annual salary of $200,000 and will continue to
participate in the Split Dollar Plan and, if Mr. Drew remains employed with FBMS
and The First on the last day of the employment term, he will receive a cash
payment equal to $61,500. Upon termination without cause before the end of the
employment term, in consideration of his release of claims in favor of the
surviving entities and restrictive covenants, Mr. Drew will be eligible to
receive severance equal to his annual salary through the end of the employment
term (payable in accordance with FBMS's and The First's payroll practices) and
the cash payment of $61,500. Upon expiration of the employment term, Mr. Drew
will be entitled to receive any and all vested compensation and benefits under
any compensation arrangements or benefit plans or programs in which Mr. Drew
participated in accordance with the terms of such compensation arrangements or
benefit plans or programs.
Item 8.01 Other Events
On December 18, 2019, the Company and FBMS issued a joint press release
announcing the execution of the Merger Agreement. The complete text of the press
release is attached hereto as Exhibit 99.1. All information included in the
press release is of the date thereof, and the Company does not assume any
obligation to correct or update such information in the future.
Cautionary Statements Regarding Forward-Looking Information.
This Current Report contains "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. In general, forward-looking
statements usually use words such as "may," "believe," "expect," "anticipate,"
"intend," "will," "should," "plan," "estimate," "predict," "continue" and
"potential" or the negative of these terms or other comparable terminology,
including statements related to the expected timing of the closing of the
Merger, the expected returns and other benefits of the Merger, to shareholders,
expected improvement in operating efficiency resulting from the Merger,
estimated expense reductions resulting from the transactions and the timing of
achievement of such reductions, the impact on and timing of the recovery of the
impact on tangible book value, and the effect of the Merger on the Company's
capital ratios. Forward-looking statements represent management's beliefs, based
upon information available at the time the statements are made, with regard to
the matters addressed; they are not guarantees of future performance.
Forward-looking statements are subject to numerous assumptions, risks and
uncertainties that change over time and could cause actual results or financial
condition to differ materially from those expressed in or implied by such
statements.
Factors that could cause or contribute to such differences include, but are not
limited to (1) the risk that the cost savings and any revenue synergies from the
Merger may not be realized or take longer than anticipated to be realized,
(2) disruption from the Merger with customers, suppliers, employee or other
business partners relationships, (3) the occurrence of any event, change or
other circumstances that could give rise to the termination of the Merger
Agreement, (4) the risk of successful integration of the Company's business into
FBMS, (5) the failure to obtain the necessary approval by the Company's
shareholders, (6) the amount of the costs, fees, expenses and charges related to
the Merger, (7) the ability by FBMS to obtain required governmental approvals of
the Merger, (8) reputational risk and the reaction of each of the companies'
customers, suppliers, employees or other business partners to the Merger,
(9) the failure of the closing conditions in the Merger Agreement to be
satisfied, or any unexpected delay in closing of the Merger, (10) the risk that
the integration of the Company's operations into the operations of FBMS will be
materially delayed or will be more costly or difficult than expected, (11) the
possibility that the Merger may be more expensive to complete than anticipated,
including as a result of unexpected factors or events, (12) the dilution caused
by FBMS's issuance of additional shares of its common stock in the Merger
transaction, and (13) general competitive, economic, political and market
conditions. Additional factors which could affect the forward looking statements
can be found in the cautionary language included under the headings
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Risk Factors" in the Company's Annual Report on Form 10-K for
the year ended December 31, 2018, under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Risk Factors" in
FBMS's Annual Reports on Form 10-K for the year ended December 31, 2018, and
other documents subsequently filed by the Company and FBMS with the SEC.
Consequently, no forward-looking statement can be guaranteed. Neither the
Company nor FBMS undertakes any obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. For any forward-looking statements made in this Current
Report on Form 8-K, the exhibits hereto or any related documents, the Company
and FBMS claim protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995.
Additional Information about the Merger and Where to Find It
This document does not constitute an offer to sell or the solicitation of an
offer to buy any securities, or a solicitation of any vote or approval, nor
shall there be any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such jurisdiction. In connection with the
proposed Merger, FBMS will file with the SEC a registration statement on Form
S-4 that will include a proxy statement of the Company and a prospectus of FBMS,
as well as other relevant documents concerning the proposed transaction. WE URGE
INVESTORS AND SECURITY HOLDERS TO READ THE REGISTRATION STATEMENT ON FORM S-4,
THE PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN THE REGISTRATION STATEMENT ON
FORM S-4 AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION
WITH THE PROPOSED MERGER BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
THE COMPANY, FBMS AND THE PROPOSED MERGER. The proxy statement/prospectus will
be sent to the shareholders of the Company seeking the required shareholder
approval. Investors and security holders will be able to obtain free copies of
the registration statement on Form S-4 and the related proxy
statement/prospectus, when filed, as well as other documents filed with the SEC
by the Company and FBMS through the web site maintained by the SEC at
www.sec.gov. Documents filed with the SEC by the Company will be available free
of charge by directing a written request to Southwest Georgia Financial
Corporation, 25 Second Avenue, S. W., Moultrie, Georgia 31768, Attn: EVP and
Chief Administrative Officer, Donna Lott. The Company's telephone number is
(229) 985-1120. Documents filed with the SEC by FBMS will also be available free
of charge by directing a written request to The First Bancshares, Inc., 6480
U.S. Highway 98 West, Hattiesburg, Mississippi 39402 Attn: Corporate Secretary,
Chandra Kidd. FBMS's telephone number is (601) 268-8998.
Participants in the Transaction
The Company, FBMS and certain of their respective directors and executive
officers may be deemed to be participants in the solicitation of proxies from
the shareholders of the Company in connection with the proposed transaction.
Certain information regarding the interests of these participants and a
description of their direct and indirect interests, by security holdings or
otherwise, will be included in the proxy statement/prospectus regarding the
proposed transaction when it becomes available. Additional information about the
Company and its directors and officers may be found in the definitive proxy
statement of the Company relating to its 2019 Annual Meeting of Stockholders
filed with the SEC on April 18, 2019. Additional information about FBMS and its
directors and officers may be found in the definitive proxy statement of FBMS
relating to its 2019 Annual Meeting of Stockholders filed with the SEC on April
3, 2019. The definitive proxy statement can be obtained free of charge from the
sources described above.
Item 9.01 Financial Statements and Exhibits
(d) EXHIBITS
2.1 Agreement and Plan of Merger, dated December 18, 2019, by and between
The First Bancshares, Inc. and Southwest Georgia Financial Corporation
10.1 Agreement, dated December 18, 2019, by and between The First
Bancshares, Inc., Southwest Georgia Financial Corporation and DeWitt
Drew
99.1 Press Release dated December 18, 2019
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