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                                                                    EXHIBIT 10.2
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         THE TRANSFER OF THIS AGREEMENT AND THE SECURITIES CREATED HEREUNDER IS
         SUBJECT TO CERTAIN PROVISIONS CONTAINED HEREIN AND TO RESALE
         RESTRICTIONS UNDER THE SECURITIES ACT OF 1933, AS AMENDED

                             STOCK OPTION AGREEMENT

         THIS STOCK OPTION AGREEMENT ("Agreement"), dated as of April 16, 2000,
between FIRST UNITED BANCSHARES, INC., an Arkansas corporation ("First United"),
and BANCORPSOUTH, INC., a Mississippi corporation ("BancorpSouth").

                              W I T N E S S E T H:

         WHEREAS, BancorpSouth and First United have entered into an Agreement
and Plan of Merger (the "Merger Agreement") concurrently with the execution and
delivery of this Agreement; and

         WHEREAS, as a condition to First United's entering into the Merger
Agreement, without which First United would not have entered into the Merger
Agreement, and in consideration therefor, BancorpSouth has agreed to grant First
United the Option (as hereinafter defined) on the terms and conditions set forth
herein;

         NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:

                               A G R E E M E N T:

1.       Grant of Option.

         (a) BancorpSouth hereby grants to First United an unconditional and
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to an aggregate of 11,245,425 fully paid and nonassessable shares of
BancorpSouth's Common Stock, $2.50 par value ("BancorpSouth Common Stock"), at a
price of $16.00 per share (the "Option Price"); provided, however, that in no
event shall the number of shares of BancorpSouth Common Stock for which this
Option is exercisable exceed 19.9% of BancorpSouth's issued and outstanding
shares of BancorpSouth Common Stock without giving effect to any shares subject
to or issued pursuant to the Option. The number of shares of BancorpSouth Common
Stock that may be received upon the exercise of the Option and the Option Price
are subject to adjustment as herein set forth.

         (b) In the event that any additional shares of BancorpSouth Common
Stock are either (i) issued or otherwise become outstanding after the date of
this Agreement (other than pursuant to this Agreement) or (ii) redeemed,
repurchased, retired or otherwise cease to be outstanding after the date of the
Agreement, the number of shares of BancorpSouth Common Stock subject to the
Option shall be increased or decreased, as appropriate, so that, after such
issuance, such number equals 19.9% of the number of shares of BancorpSouth

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Common Stock then issued and outstanding without giving effect to any shares
subject or issued pursuant to the Option. Nothing contained in this Section 1(b)
or elsewhere in this Agreement shall be deemed to authorize First United or
BancorpSouth to breach any provision of the Merger Agreement.

2. Exercise of the Option.

         (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined); provided, that the Holder shall have
sent the written notice of such exercise (as provided in subsection (f) of this
Section 2) within 90 days following such Subsequent Triggering Event (or such
later period pursuant to Section 10). The term "Holder" shall mean First United
or any future holder or holders of the Option.

         (b) Each of the following shall be an "Exercise Termination Event": (i)
the Effective Time of the Merger; (ii) termination of the Merger Agreement by
BancorpSouth in accordance with the provisions of Sections 9.1(h) thereof, (iii)
termination of the Merger Agreement in accordance with the provisions thereof
(other than by BancorpSouth pursuant to Section 9.1(h) thereof), if such
termination occurs prior to the occurrence of an Initial Triggering Event
(except termination by First United pursuant to Section 9.1(e) of the Merger
Agreement, unless the breach by BancorpSouth giving rise to such right of
termination is non-volitional) (a "Listed Termination"); or (iv) the passage of
12 months after termination of the Merger Agreement (or such later period
pursuant to Section 10) if such termination follows the occurrence of an Initial
Triggering Event or a Listed Termination.

         (c) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:

                  (i) (A) BancorpSouth or any of its Subsidiaries (each an
         "BancorpSouth Subsidiary"), without having received First United's
         prior written consent, shall have entered into an agreement to engage
         in an Acquisition Transaction (as hereinafter defined) with any person
         (the term "person" for purposes of this Agreement having the meaning
         assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Securities
         Exchange Act of 1934, as amended (the "1934 Act"), and the rules and
         regulations thereunder) other than First United or any of its
         Subsidiaries (each a "First United Subsidiary"), or (B) the Board of
         Directors of BancorpSouth shall have recommended that the shareholders
         of BancorpSouth approve or accept any Acquisition Transaction.

                  (ii) BancorpSouth or any BancorpSouth Subsidiary, without
         having received First United's prior written consent, shall have
         authorized, recommended, proposed or publicly announced its intention
         to authorize, recommend or propose, to engage in an Acquisition
         Transaction with any person other than First United or a First United
         Subsidiary, or the Board of Directors of BancorpSouth shall have
         publicly withdrawn, modified or qualified, or publicly announced its
         intention to withdraw, modify or qualify, in any manner adverse to
         First United, its recommendation that the shareholders of BancorpSouth
         approve the transactions contemplated by the Merger Agreement in
         anticipation of engaging in an Acquisition Transaction;

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                  (iii) The stockholders of BancorpSouth shall have voted and
         failed to approve the Merger Agreement and the Merger at a meeting
         which has been held for that purpose or any adjournment or postponement
         thereof, or such meeting shall not have been held in violation of the
         Merger Agreement or shall have been canceled prior to termination of
         the Merger Agreement if, prior to such meeting (or if such meeting
         shall not have been held or shall have been canceled, prior to such
         termination), it shall have been publicly announced that any person
         (other than First United or any First United Subsidiary) shall have
         made, or disclosed an intention to make, a proposal to engage in an
         Acquisition Transaction;

                  (iv) Any person other than First United or any First United
         Subsidiary shall have filed with the SEC a registration statement or
         tender offer materials with respect to a potential exchange or tender
         offer that would constitute an Acquisition Transaction (or filed a
         preliminary proxy statement with the SEC with respect to a potential
         vote by its stockholders to approve the issuance of shares to be
         offered in such an exchange offer);

                  (v) Any person other than First United, any First United
         Subsidiary or any First United Subsidiary acting in a fiduciary
         capacity in the ordinary course of its business shall have acquired
         beneficial ownership or the right to acquire beneficial ownership of
         10% or more of the outstanding shares of BancorpSouth Common Stock (the
         term "beneficial ownership" for purposes of this Agreement having the
         meaning assigned thereto in Section 13(d) of the 1934 Act, and the
         rules and regulations thereunder);

                  (vi) Any person other than First United or any First United
         Subsidiary shall have made a bona fide proposal to BancorpSouth or its
         shareholders by public announcement or written communication that is or
         becomes the subject of public disclosure to engage in an Acquisition
         Transaction;

                  (vii) After an overture is made by a third party to
         BancorpSouth or its shareholders to engage in an Acquisition
         Transaction or in anticipation of an Acquisition Transaction,
         BancorpSouth shall have willfully breached any covenant or obligation
         contained in the Merger Agreement and such breach would entitle First
         United to terminate the Merger Agreement (whether immediately, upon the
         giving of notice or passage of time, or both); or

                  (viii) Any person other than First United or any First United
         Subsidiary, other than in connection with a transaction to which First
         United has given its prior written consent, shall have filed an
         application or notice with the Federal Reserve Board, or other federal
         or state bank regulatory authority, which application or notice has
         been accepted for processing, for approval to engage in an Acquisition
         Transaction.

For purposes of this Agreement, "Acquisition Transaction" shall mean with
respect to any person except First United or any First United Subsidiary, (1) a
merger or consolidation, or any similar transaction, involving BancorpSouth or
any "Significant Subsidiary" (as defined in Rule 1-02 of Regulation S-X
promulgated by the Securities and Exchange Commission (the "SEC")) of
BancorpSouth, (2) a purchase, lease or other acquisition or assumption of all or
a substantial portion of the assets or deposits of BancorpSouth or any
Significant Subsidiary of BancorpSouth, (3) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of

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BancorpSouth or any Significant Subsidiary of BancorpSouth, or (4) any
substantially similar transaction;

For purposes of this Agreement, "Subsidiary" shall have the meaning set forth in
Rule 12b-2 under the 1934 Act.

         (d) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:

                  (i) The acquisition by any person (other than First United or
         any First United Subsidiary) of beneficial ownership of 25% or more of
         the then outstanding shares of BancorpSouth Common Stock; or

                  (ii) The occurrence of the Initial Triggering Event described
         in paragraph (i) of subsection (c) of this Section 2, except that the
         percentage referred to in clause (3) of the definition of "Acquisition
         Proposal" above shall be deemed to be 25%.

         (e) BancorpSouth shall notify First United promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "Triggering Event"), it being understood that the giving of such
notice by BancorpSouth shall not be a condition to the right of the Holder to
exercise the Option.

         (f) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to BancorpSouth a written notice
(the date of which being herein referred to as the "Notice Date") specifying (i)
the total number of shares of BancorpSouth Common Stock it will purchase
pursuant to such exercise and (ii) a place and date not earlier than three
business days nor later than 60 business days after the Notice Date for the
closing of such purchase (the "Closing Date"); provided that if prior
notification to or approval of the Federal Reserve Board or any other regulatory
agency is required in connection with such purchase, the Holder shall promptly
file the required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.

         (g) At the closing referred to in subsection (f) of this Section 2, the
Holder shall pay to BancorpSouth the aggregate purchase price for the shares of
BancorpSouth Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated by
BancorpSouth; provided that failure or refusal of BancorpSouth to designate such
a bank account or to accept surrender of this Agreement shall not preclude the
Holder from exercising the Option.

         (h) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (g) of this Section 2, BancorpSouth
shall deliver to the Holder a certificate or certificates representing the
number of shares of BancorpSouth Common Stock purchased by the Holder and, if
the Option should be exercised in part only, a new Option evidencing the rights
of the Holder thereof to purchase the balance of the shares purchasable
hereunder.

          (i) Certificates for BancorpSouth Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:

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         "The transfer of the shares represented by this certificate is subject
         to certain provisions of an agreement between the registered holder
         hereof and BancorpSouth, Inc. (the "Issuer") and to resale restrictions
         arising under the Securities Act of 1933, as amended. A copy of such
         agreement is on file at the principal office of the Issuer and will be
         provided to the holder hereof without charge upon receipt by the Issuer
         of a written request therefor."

The parties acknowledge and agree that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act"), in the
above legend shall be removed by delivery of substitute certificate(s) without
such reference if the Holder shall have delivered to BancorpSouth a copy of a
letter from the staff of the SEC, or an opinion of counsel, in form and
substance reasonably satisfactory to BancorpSouth, to the effect that such
legend is not required for purposes of the 1933 Act; (ii) the reference to the
provisions to this Agreement in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.

         (j) Upon the giving by the Holder to BancorpSouth of the written notice
of exercise of the Option provided for under subsection (f) of this Section 2
and the tender of the applicable purchase price in immediately available funds,
the Holder shall be deemed to be the holder of record of the shares of
BancorpSouth Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of BancorpSouth shall then be closed or that certificates
representing such shares of BancorpSouth Common Stock shall not then be actually
delivered to the Holder. BancorpSouth shall pay all expenses, and any and all
United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issue and delivery of stock
certificates under this Section 2 in the name of the Holder or its assignee,
transferee or designee.

3. Covenants. BancorpSouth agrees: (i) that it shall at all times maintain, free
from preemptive rights, sufficient authorized but unissued shares of
BancorpSouth Common Stock so that the Option may be exercised without additional
authorization of BancorpSouth Common Stock after giving effect to all other
options, warrants, convertible securities and other rights to purchase
BancorpSouth Common Stock; (ii) that it will not, by amendment of its articles
of incorporation or through reorganization, consolidation, merger, dissolution
or sale of assets, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations or conditions to
be observed or performed hereunder by BancorpSouth; (iii) promptly to take all
action as may from time to time be required (including (A) complying with all
premerger notification, reporting and waiting period requirements specified in
15 U.S.C. Section 18a and regulations promulgated thereunder and (B) in the
event, under the Bank Holding Company Act of 1956, as amended (the "BHCA"), or
the Change in Bank Control Act of 1978, as amended, or any state banking law,
prior approval of or notice to the Federal Reserve Board or to any state
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board or such state regulatory
authority as they may require) in order to permit the Holder to exercise the
Option and BancorpSouth duly and effectively to issue shares of BancorpSouth
Common Stock pursuant hereto; and (iv) promptly to take all action provided
herein to protect the rights of the Holder against dilution.

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4. Exchange and Replacement. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Agreement at the principal office of BancorpSouth, for
other Agreements providing for Options of different denominations entitling the
holder thereof to purchase, on the same terms and subject to the same conditions
as are set forth herein, in the aggregate the same number of shares of
BancorpSouth Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any Stock Option Agreements and related Options
for which this Agreement (and the Option granted hereby) may be exchanged. Upon
receipt by BancorpSouth of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Agreement, and (in the case of loss,
theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated, BancorpSouth will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of BancorpSouth, whether or not the Agreement so lost,
stolen, destroyed or mutilated shall at any time be enforceable by anyone.

5. Anti-Dilution Adjustments. In addition to the adjustment in the number of
shares of BancorpSouth Common Stock that are purchasable upon exercise of the
Option pursuant to Section 1 of this Agreement, the number of shares of
BancorpSouth Common Stock purchasable upon the exercise of the Option and the
Option Price shall be subject to adjustment from time to time as provided in
this Section 5. In the event of any change in, or distributions in respect of,
the BancorpSouth Common Stock by reason of a stock dividend, stock split,
split-up, merger, recapitalization, combination, subdivision, conversion,
exchange of shares, distribution on or in respect of the BancorpSouth Common
Stock that would be prohibited under the terms of the Merger Agreement, or the
like, the type and number of shares or securities subject to the Option, and the
Option Price therefor, shall be appropriately adjusted in such manner as shall
fully preserve the economic benefits provided hereunder and proper provision
shall be made in any agreement governing any such transaction to provide for
such proper adjustment and the full satisfaction of the BancorpSouth's
obligations hereunder, so that the Holder shall receive, upon exercise of the
Option, the number and class of shares or other securities or property that the
Holder would have received in respect of BancorpSouth Common Stock if the Option
had been exercised immediately prior to such event, or the record date therefor,
as applicable. If any additional shares of BancorpSouth Common Stock are issued
after the date of this Agreement (other than pursuant to an event described in
the first sentence of this Section 5), the number of shares of BancorpSouth
Common Stock subject to the Option shall be adjusted so that, after such
issuance, it, together with any shares of BancorpSouth Common Stock previously
issued pursuant hereto, equals 19.9% of the number of shares of BancorpSouth
Common Stock then issued and outstanding, without giving effect to any shares
subject to or issued pursuant to the Option.

6. Registration Rights. Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, BancorpSouth shall, at the
request of Holder delivered within 180 days following such Subsequent Triggering
Event (whether on its own behalf or on behalf of any subsequent holder of this
Option (or part thereof) or any of the shares of BancorpSouth Common Stock
issued pursuant hereto), promptly prepare, file and keep current a shelf
registration statement under the 1933 Act covering this Option and any shares
issued and issuable pursuant to this Option and shall use its reasonable best
efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of this Option and any
shares of BancorpSouth Common Stock issued upon total or partial exercise of
this Option ("Option Shares") in accordance with any plan of disposition
requested by Holder. BancorpSouth will use its reasonable best efforts to cause
such registration statement first to become effective and then to remain

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effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. Holder shall
have the right to demand two such registrations. BancorpSouth shall bear the
costs of such registrations (including, but not limited to, BancorpSouth's
attorneys' fees, printing costs and filing fees, but excluding underwriting
discounts or commissions, brokers' fees and the fees and disbursements of
Holder's counsel related to the Option or Option Shares). The foregoing
notwithstanding, if, at the time of any request by Holder for registration of
the Option or Option Shares as provided above, BancorpSouth is in registration
with respect to an underwritten public offering by BancorpSouth of shares of
BancorpSouth Common Stock, and if in the good faith judgment of the managing
underwriter or managing underwriters, or, if none, the sole underwriter or
underwriters, of such offering the inclusion of the Option or the Option Shares
would interfere with the successful marketing of the shares of BancorpSouth
Common Stock offered by BancorpSouth, the number of Option Shares otherwise to
be covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the Holder
and BancorpSouth in the aggregate; and provided further, however, that if such
reduction occurs, then BancorpSouth shall file a registration statement for the
balance as promptly as practicable and no reduction pursuant to this Section 6
shall be permitted or occur and the Holder shall thereafter be entitled to one
additional registration, and the 180 day period referenced in the first sentence
of this Section 6 shall be deemed to be 360 days. Each such Holder shall provide
all information reasonably requested by BancorpSouth for inclusion in any
registration statement to be filed hereunder. If requested by any such Holder in
connection with such registration, BancorpSouth shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in secondary offering
underwriting agreements for BancorpSouth. Upon receiving any request under this
Section 6 from any Holder, BancorpSouth agrees to send a copy thereof to any
other person known to BancorpSouth to be entitled to registration rights under
this Section 6, in each case by promptly mailing the same, postage prepaid, to
the address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no event shall
BancorpSouth be obligated to effect more than two registrations pursuant to this
Section 6 by reason of the fact that there shall be more than one Holder as a
result of any assignment or division of this Agreement.

7.       Repurchase.

         (a) At First United's Option. At any time after the occurrence of a
Repurchase Event (as defined below), (i) at the request of the Holder, delivered
prior to an Exercise Termination Event (or such later period pursuant to Section
10), BancorpSouth (or any successor thereto) shall repurchase the Option from
the Holder at a price (the "Option Repurchase Price") equal to the amount by
which (A) the Market/Offer Price (as defined below) exceeds (B) the Option
Price, multiplied by the number of shares of BancorpSouth Common Stock for which
this Option may then be exercised and (ii) at the request of the owner of Option
Shares from time to time (the "Owner"), delivered prior to a Repurchase Event
(or such later period pursuant to Section 10), BancorpSouth (or any successor
thereto) shall repurchase such number of the Option Shares from the Owner as the
Owner shall designate at a price (the "Option Share Repurchase Price") equal to
the Market/Offer Price multiplied by the number of Option Shares so designated.

         For purposes of this Agreement, the term "Market/Offer Price" shall
mean the highest of (i) the price per share of BancorpSouth Common Stock at
which a tender offer or

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exchange offer therefor has been made, (ii) the price per share of BancorpSouth
Common Stock to be paid by any third party pursuant to an agreement with
BancorpSouth, (iii) the highest closing price for shares of BancorpSouth Common
Stock within the six-month period immediately preceding the date the Holder
gives notice of the required repurchase of the Option or the Owner gives notice
of the required repurchase of Option Shares, as the case may be, or (iv) in the
event of a sale of all or a substantial portion of BancorpSouth's assets or
deposits, the sum of the price paid in such sale for such assets or deposits and
the current market value of the remaining net assets of BancorpSouth as
determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably acceptable to
BancorpSouth, divided by the number of shares of BancorpSouth Common Stock
outstanding at the time of such sale. In determining the Market/Offer Price, the
value of consideration other than cash shall be determined by a nationally
recognized investment banking firm selected by the Holder or Owner, as the case
may be, and reasonably acceptable to BancorpSouth.

         The Holder and the Owner, as the case may be, may exercise its right to
require BancorpSouth to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to BancorpSouth, at its
principal office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require BancorpSouth to repurchase
this Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto, BancorpSouth
shall deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the portion
thereof that BancorpSouth is not then prohibited under applicable law and
regulation from so delivering.

         (b) At BancorpSouth's Option. At any time after the occurrence of a
Repurchase Event, (i) at the request of BancorpSouth to the Holder, delivered
prior to an Exercise Termination Event (or such later period pursuant to Section
10), BancorpSouth (or any successor thereto) may repurchase the Option from the
Holder at the Option Repurchase Price, and (ii) at the request of BancorpSouth
to the Owner, delivered prior to a Repurchase Event (or such later period
pursuant to Section 10), BancorpSouth (or any successor thereto) may repurchase
the Option Shares (except with respect to Option Shares that have theretofore
been transferred by the Holder to an unaffiliated third party) from the Owner at
the Option Share Repurchase Price.

          BancorpSouth may exercise its right to repurchase the Option and any
Option Shares pursuant to this Section 7 by surrendering for such purpose to
Holder or Owner, as applicable, at its principal office, a written notice or
notices stating that BancorpSouth elects to repurchase this Option and/or the
Option Shares in accordance with the provisions of this Section 7. As promptly
as practicable, and in any event within five business days after the surrender
of the Option and/or certificates representing Option Shares and the receipt of
such notice or notices relating thereto, BancorpSouth shall deliver or cause to
be delivered to the Holder the Option Repurchase Price and/or to the Owner the
Option Share Repurchase Price therefor.

          (c) Regulatory Restrictions. To the extent that BancorpSouth is
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from repurchasing the Option and/or the Option Shares in
full, BancorpSouth shall immediately so notify the Holder and/or the Owner and
thereafter deliver or cause to be delivered, from time to time, to the Holder
and/or the Owner, as appropriate, the portion of the Option Repurchase Price and

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the Option Share Repurchase Price, respectively, that it is no longer prohibited
from delivering, within five business days after the date on which BancorpSouth
is no longer so prohibited; provided, however, that if BancorpSouth at any time
after delivery of a notice of repurchase pursuant to paragraph (b) of this
Section 7 is prohibited under applicable law or regulation, or as a consequence
of administrative policy, from delivering to the Holder and/or the Owner, as
appropriate, the Option Repurchase Price and the Option Share Repurchase Price,
respectively, in full (and BancorpSouth hereby undertakes to use its best
efforts to obtain all required regulatory and legal approvals and to file any
required notices as promptly as practicable in order to accomplish such
repurchase), the Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, BancorpSouth shall promptly (i) deliver to the
Holder and/or the Owner, as applicable, that portion of the Option Repurchase
Price or the Option Share Repurchase Price that BancorpSouth is not prohibited
from delivering; and (ii) deliver, as applicable, either (A) to the Holder, a
new Agreement evidencing the right of the Holder to purchase that number of
shares of BancorpSouth Common Stock obtained by multiplying the number of shares
of BancorpSouth Common Stock for which the surrendered Agreement was exercisable
at the time of delivery of the notice of repurchase by a fraction, the numerator
of which is the Option Repurchase Price less the portion thereof theretofore
delivered to the Holder and the denominator of which is the Option Repurchase
Price, and/or (B) to the Owner, a certificate for the Option Shares it is then
so prohibited from repurchasing. If an Exercise Termination Event shall have
occurred prior to the date of the notice by BancorpSouth described in the first
sentence of this subsection (c), or should be scheduled to occur at any time
before the expiration of a period ending on the 30th day after such date, the
Holder shall nonetheless have the right to exercise the Option until the
expiration of such 30-day period.

         (d) For purposes of this Section 7, a "Repurchase Event" shall be
deemed to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:

                  (i) the acquisition by any person (other than First United or
         any First United Subsidiary) of beneficial ownership of 50% or more of
         the then outstanding shares of BancorpSouth Common Stock; or

                  (ii) the consummation of any Acquisition Transaction described
         in Section 2 hereof, except that the percentage of voting power
         referred to in clause (3) thereof shall be deemed to be 25%.

8.       Successor Issuer.

         (a) In the event that prior to an Exercise Termination Event,
BancorpSouth shall enter into an agreement (i) to consolidate with or merge into
any person, other than First United or a First United Subsidiary, or engage in a
plan of exchange with any person other than First United or a First United
Subsidiary, and BancorpSouth shall not be the continuing or surviving
corporation of such consolidation or merger or the acquirer in such plan of
exchange, (ii) to permit any person, other than First United or a First United
Subsidiary, to merge into BancorpSouth or be acquired by BancorpSouth in a plan
of exchange and BancorpSouth shall be the continuing or surviving corporation,
but, in connection with such merger or plan of exchange, the then outstanding
shares of BancorpSouth Common Stock shall be changed into or exchanged for stock
or other securities of any other person or cash or any other property or the
then outstanding shares of BancorpSouth Common Stock shall after such merger or
plan of exchange represent less than 50% of the outstanding voting shares and
voting share equivalents of the merged or acquiring company, or (iii) to sell or
otherwise transfer all or substantially all of its or any

                                        9
<PAGE>   10
BancorpSouth Subsidiary's assets or deposits to any person, other than First
United or a First United Subsidiary, then, and in each such case, the agreement
governing such transaction shall make proper provision so that the Option shall,
upon the consummation of any such transaction and upon the terms and conditions
set forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of the Holder, of either (x) the Acquiring
Corporation (as hereinafter defined) or (y) any person or entity that controls
the Acquiring Corporation.

         (b) The following terms have the meanings indicated:

                  (i) "Acquiring Corporation" shall mean (A) the continuing or
         surviving person of a consolidation or merger with BancorpSouth (if
         other than BancorpSouth), (B) the acquiring person in a plan of
         exchange in which BancorpSouth is acquired, (C) BancorpSouth in a
         merger or plan of exchange in which BancorpSouth is the continuing or
         surviving or acquiring person, and (D) the transferee of all or
         substantially all of BancorpSouth's assets or deposits (or the assets
         or deposits of any BancorpSouth Subsidiary).

                  (ii) "Substitute Common Stock" shall mean the common stock
         issued by the issuer of the Substitute Option upon exercise of the
         Substitute Option.

                  (iii) "Assigned Value" shall mean the Market/Offer Price, as
         defined in Section 7.

                  (iv) "Average Price" shall mean the average closing price of a
         share of the Substitute Common Stock for the one year immediately
         preceding the consolidation, merger or sale in question, but in no
         event higher than the closing price of the shares of Substitute Common
         Stock on the day preceding such consolidation, merger or sale;
         provided, that if BancorpSouth is the issuer of the Substitute Option,
         the Average Price shall be computed with respect to a share of common
         stock issued by the person merging into BancorpSouth or by any company
         which controls or is controlled by such person, as the Holder may
         elect.

         (c) The Substitute Option shall have the same terms as the Option;
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement (after giving effect for
such purpose to the provisions of Section 9), which agreement shall be
applicable to the Substitute Option.

         (d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of BancorpSouth Common Stock for which the Option was
exercisable immediately prior to the event described in the first sentence of
Section 8(a) above, divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal to
the Option Price multiplied by a fraction, the numerator of which shall be the
number of shares of BancorpSouth Common Stock for which the Option was
exercisable immediately prior to the event described in the first sentence of
Section 8(a) above and the denominator of which shall be the number of shares of
Substitute Common Stock for which the Substitute Option is exercisable.

                                       10
<PAGE>   11
         (e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
subsection (e), the issuer of the Substitute Option (the "Substitute Option
Issuer") shall make a cash payment to the Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in this
subsection (e) over (ii) the value of the Substitute Option after giving effect
to the limitation in this subsection (e). This difference in value shall be
determined by a nationally recognized investment banking firm selected by the
Holder.

         (f) BancorpSouth shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
BancorpSouth hereunder.

9.       Successor Repurchase.

         (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to the amount by which (i) the Highest Closing
Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common Stock for which
the Substitute Option may then be exercised, and at the request of the owner
(the "Substitute Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to
the Highest Closing Price multiplied by the number of Substitute Shares so
designated. The term "Highest Closing Price" shall mean the highest closing
price for shares of Substitute Common Stock within the 180 day period
immediately preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share Owner gives
notice of the required repurchase of the Substitute Shares, as applicable.

         (b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and/or certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or, in either case, the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.

         (c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share

                                       11
<PAGE>   12
Owner and thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within five business days after the date on
which the Substitute Option Issuer is no longer so prohibited; provided,
however, that if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9 prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from delivering to the Substitute Option Holder and/or the Substitute
Share Owner, as appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the Substitute
Option Issuer shall use its best efforts to obtain all required regulatory and
legal approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder or Substitute Share Owner may revoke
its notice of repurchase of the Substitute Option or the Substitute Shares
either in whole or to the extent of the prohibition, whereupon, in the latter
case, the Substitute Option Issuer shall promptly (i) deliver to the Substitute
Option Holder or Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share Repurchase Price that
the Substitute Option Issuer is not prohibited from delivering; and (ii)
deliver, as applicable, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute Common Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Issuer described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the expiration
of a period ending on the 30th day after such date, the Substitute Option Holder
shall nevertheless have the right to exercise the Substitute Option until the
expiration of such 30 day period.

10. Certain Extensions of Exercise Period. The periods for exercise of certain
rights under Sections 2, 6, 7, 9 and 11 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of such rights and
for the expiration of all statutory waiting periods; (ii) to the extent
necessary to avoid liability under Section 16(b) of the 1934 Act by reason of
such exercise; and (iii) to the extent that there exists an injunction, order or
judgment that prohibits or delays exercise of such right.

11.      Surrender.

         (a) Holder may, at any time following a Repurchase Event and prior to
the occurrence of an Exercise Termination Event (or such later period pursuant
to Section 10), relinquish the Option (together with any Option Shares issued to
and then owned by Holder) to BancorpSouth in exchange for a cash fee equal to
the Surrender Price (as hereinafter defined). The "Surrender Price" shall be
equal to (x) $22,500,000 plus, if applicable, (y) Holder's purchase price with
respect to any Option Shares, and minus, if applicable, (z) the excess of (1)
the net price, if any, received by Holder or a Holder Subsidiary pursuant to the
sale of Option Shares (or any other securities into which such Option Shares
were converted or exchanged) to any unaffiliated party, over (2) Holder's
purchase price of such Option Shares.

                                       12
<PAGE>   13
         (b) Holder may exercise its right to relinquish the Option and any
Option Shares pursuant to this Section 11 by surrendering to BancorpSouth, at
its principal office, a copy of this Agreement together with certificates for
Option Shares, if any, accompanied by a written notice stating (i) that Holder
elects to relinquish the Option and Option Shares, if any, in accordance with
the provisions of this Section 11 and (ii) the Surrender Price. The Surrender
Price shall be payable in immediately available funds on or before the second
business day following receipt of such notice by BancorpSouth.

         (c) To the extent that BancorpSouth is prohibited under applicable law
or regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Holder in full, BancorpSouth shall immediately so notify
Holder and thereafter deliver or cause to be delivered, from time to time, to
Holder, the portion of the Surrender Price that it is no longer prohibited from
paying, within five business days after the date on which BancorpSouth is no
longer so prohibited; provided, however, that if BancorpSouth at any time after
delivery of a notice of surrender pursuant to subsection (b) of this Section 11
is prohibited under applicable law or regulation, or as a consequence of
administrative policy, from paying to Holder the Surrender Price in full, then
(i) BancorpSouth shall (A) use its reasonable best efforts to obtain all
required regulatory and legal approvals and to file any required notices as
promptly as practicable in order to make such payments, (B) within five business
days after the submission or receipt of any documents relating to any such
regulatory and legal approvals, provide Holder with copies of the same, and (C)
keep Holder advised of both the status of any such request for regulatory and
legal approvals, as well as any discussions with any relevant regulatory or
other third party reasonably related to the same, and (ii) Holder may revoke
such notice of surrender by delivery of a notice of revocation to BancorpSouth
and, upon delivery of such notice of revocation, the Exercise Termination Date
shall be extended to a date 90 days following the date on which the Exercise
Termination Date would have occurred if not for the provisions of this Section
11(c) (during which period Holder may exercise any of its rights hereunder,
including any and all rights pursuant to this Section 11).

12. Maximum Total Profit. Notwithstanding any other provision of this Agreement
to the contrary, in no event shall Holder's Total Profit (as defined below)
exceed $22,500,000, and, if such Total Profit would otherwise exceed
$22,500,000, Holder, at its election in its sole discretion, shall either (i)
reduce the number of shares of BancorpSouth Common Stock subject to the Option,
(ii) deliver to BancorpSouth for cancellation without consideration Option
Shares previously purchased by Holder, (iii) pay cash to BancorpSouth, or (iv)
any combination of the foregoing, such that Holder's actually realized Total
Profit shall not exceed $22,500,000 after taking into account the foregoing
actions.

         As used in this Agreement, the term "Total Profit" shall mean the
aggregate sum (prior to the payment of taxes) of the following: (a) the amount
of Option Repurchase Price received by Holder pursuant to BancorpSouth's
repurchase of the Option (or any portion thereof) pursuant to Section 7 hereof;
plus (b) the difference of (i) the amount of Option Share Repurchase Price
received by Holder pursuant to BancorpSouth's repurchase of Option Shares
pursuant to Section 7 hereof, less (ii) Holder's purchase price for such Option
Shares; plus (c) the difference of (i) the net cash amounts received by Holder
pursuant to the sale of Option Shares (or any other securities into which such
Option Shares shall be converted or exchanged) to any unaffiliated person, less
(ii) Holder's purchase price of such Option Shares; plus (d) any amounts
received by First United on the transfer of the Option (or any portion thereof)
to any unaffiliated person; plus (e) the amount of Surrender Price received by
Holder pursuant to relinquishment of the Option and Option Shares to
BancorpSouth pursuant to Section 11 hereof.

                                       13
<PAGE>   14
         The provisions of this Section 12 shall apply to any Substitute Option.

         The parties hereto agree that this Section 12 shall not, and shall not
be deemed to, limit, prejudice or restrict any money damages, injunctive relief
or other legal or equitable remedy or relief available to BancorpSouth with
respect to any breach of the Merger Agreement or this Agreement.

13.      Representations and Warranties.

         (a) By BancorpSouth. BancorpSouth hereby represents and warrants to
First United as follows:

                  (i) BancorpSouth has full corporate power and authority to
         execute and deliver this Agreement and to consummate the transactions
         contemplated hereby. The execution and delivery of this Agreement and
         the consummation of the transactions contemplated hereby have been duly
         and validly authorized by the Board of Directors of BancorpSouth and no
         other corporate proceedings on the part of BancorpSouth are necessary
         to authorize this Agreement or to consummate the transactions so
         contemplated. This Agreement has been duly and validly executed and
         delivered by BancorpSouth and is enforceable against BancorpSouth in
         accordance with its terms.

                  (ii) BancorpSouth has taken all necessary corporate action to
         authorize and reserve and to permit it to issue, and at all times from
         the date hereof through the termination of this Agreement in accordance
         with its terms will have reserved for issuance upon the exercise of the
         Option, that number of shares of BancorpSouth Common Stock equal to the
         maximum number of shares of BancorpSouth Common Stock at any time and
         from time to time issuable hereunder, and all such shares, upon
         issuance pursuant hereto, will be duly authorized, validly issued,
         fully paid, nonassessable, and will be delivered free and clear of all
         claims, liens, encumbrance and security interests and not subject to
         any preemptive rights.

         (b) By First United. First United hereby represents and warrants to
BancorpSouth as follows:

                  (i) First United has all requisite corporate power and
         authority to enter into this Agreement and, subject to any approvals or
         consents referred to herein, to consummate the transactions
         contemplated hereby. The execution and delivery of this Agreement and
         the consummation of the transactions contemplated hereby have been duly
         and validly authorized by all necessary corporate action on the part of
         First United. This Agreement has been duly executed and delivered by
         First United.

                  (ii) The Option is not being, and any shares of BancorpSouth
         Common Stock or other securities acquired by First United upon exercise
         of the Option will not be, acquired by First United with a view to the
         public distribution thereof and will not be transferred or otherwise
         disposed of by First United except in a transaction registered under or
         exempt from registration under the 1933 Act.

14. Assignment. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, First United, subject to the express provisions hereof, may
assign in whole or in part its rights and obligations

                                       14
<PAGE>   15
hereunder; provided, however, that until the date 15 days following the date on
which the Federal Reserve Board approves an application by First United under
the BHCA to acquire the shares of BancorpSouth Common Stock subject to the
Option, First United may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
First United, (iii) an assignment to a single party (e.g., a broker or
investment banker) for the purpose of conducting a widely dispersed public
distribution on First United's behalf, or (iv) any other manner approved by the
Federal Reserve Board.

15. Best Efforts. Each of BancorpSouth and First United will use its reasonable
best efforts to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement, including, without limitation,
making application to authorize for quotation the shares of BancorpSouth Common
Stock issuable hereunder on any exchange or market on which shares of
BancorpSouth Common Stock may be listed or quoted upon official notice of
issuance and applying to the Federal Reserve Board under the BHCA for approval
to acquire the shares issuable hereunder, but First United shall not be
obligated to apply to state banking authorities for approval to acquire the
shares of BancorpSouth Common Stock issuable hereunder until such time, if ever,
as it deems appropriate to do so.

16.      Miscellaneous.

         (a) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):

         (i)  if to BancorpSouth, to:        BancorpSouth, Inc.
                                             One Mississippi Plaza
                                             Tupelo, Mississippi 38804
                                             Attention: Aubrey B. Patterson
                                             Facsimile: (662) 680-2006

          with a copy (which shall not
          constitute notice) to:             Waller Lansden Dortch & Davis,
                                             A Professional Limited Liability
                                               Company
                                             511 Union Street, Suite 2100
                                             Nashville, Tennessee 37219
                                             Attention: Ralph W. Davis, Esq.
                                             Facsimile: (615) 244-6804

          and

          (ii)  if to First United, to:      First United Bancshares, Inc.
                                             Main and Washington Streets
                                             El Dorado, Arkansas 71730
                                             Attention: James V. Kelley
                                             Facsimile: (870) 863-3181

                                       15
<PAGE>   16

     with a copy (which shall not
     constitute notice) to:            Mitchell, Williams, Selig, Gates &
                                         Woodyard, PLLC
                                       425 West Capitol Avenue, Suite 1800
                                       Little Rock, Arkansas 72201
                                       Attention: Hermann Ivester, Esq.
                                       Facsimile: (501) 688-8807

         (b) Interpretation. In this Agreement, unless a contrary intention
appears, the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Section or
other subdivision. Whenever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." The phrases "the date of this Agreement", "the date
hereof" and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to April 16, 2000. Unless the context otherwise
requires, when used in this Agreement, (i) the singular shall include the
plural, the plural shall include the singular, and all nouns, pronouns and any
variations thereof shall be deemed to refer to the masculine, feminine or
neuter, as the identity of the person or persons may require, and (ii) the term
"or" shall mean "and/or." The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The parties hereto have each negotiated the
terms hereof, reviewed this Agreement carefully, and discussed it with their
respective legal counsel. It is the intent of the parties that each word, phrase
and sentence and other part hereof shall be given its plain meaning. No
provision of this Agreement shall be interpreted or construed against any party
hereto solely because such party or its legal representative drafted such
provision.

         (c) Defined Terms. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned thereto in the Merger Agreement,
and shall be applicable to the singular and the plural forms of such terms,
except as otherwise provided herein.

         (d) Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same instrument and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other party hereto, it being understood that all parties need
not sign the same counterpart.

         (e) Entire Agreement. This Agreement constitutes the entire agreement
and supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, other than the
Merger Agreement.

         (f) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Mississippi, without regard to the
conflicts of laws principles of any jurisdiction. The parties agree that the
venue for resolution of any dispute arising out of this Agreement shall be a
court of competent jurisdiction in Mississippi or Arkansas.

         (g) Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that the provisions contained in this Agreement
were not performed in accordance with its specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions thereof in any court of the United States
or any state having jurisdiction, without having to post bond therefor or prove

                                       16
<PAGE>   17
actual damages, this being in addition to any other remedy to which they are
entitled at law or in equity.

         (h) Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable. If for any reason a court or regulatory
agency determines that the Holder is not permitted to acquire, or First United
is not permitted to repurchase pursuant to Section 7, the full number of shares
of BancorpSouth Common Stock provided in Section 1(a) hereof (as adjusted
pursuant to Section 1(b) or 5 hereof), it is the express intention of the
parties to allow the Holder to acquire, or to require or permit BancorpSouth to
repurchase pursuant to Section 7, such lesser number of shares of BancorpSouth
Common Stock as may be permissible, without any amendment or modification
hereof.

         (i) Waiver. No delay or omission on the part of any party hereto in
exercising any right hereunder shall operate as a waiver of such right or any
other right under this Agreement. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof.

         (j) Expenses. All costs and expenses, including legal, accounting and
financial advisory fees and expenses, incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses.

                                       17
<PAGE>   18

         IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.

                                   FIRST UNITED BANCSHARES, INC.

                                  By: /s/ James V. Kelley
                                      ----------------------------------------
                                          James V. Kelley
                                          Chairman and Chief Executive Officer

                                  BANCORPSOUTH, INC.

                                  By: /s/ Aubrey B. Patterson
                                      ----------------------------------------
                                          Aubrey B. Patterson
                                          Chairman and Chief Executive Officer

                                       18<PAGE>   1
                                                                    EXHIBIT 10.3
                                                                    ------------

                              STOCK BONUS AGREEMENT

         THIS STOCK BONUS AGREEMENT ("Agreement") is entered into on this 16th
day of April, 2000, by and between BANCORPSOUTH, INC. (the "Company") and JAMES
V. KELLEY ("Kelley"), pursuant to the approval of the Agreement by the Company's
board of directors (the "Board") on April 16, 2000.

                                    RECITALS:

         WHEREAS, pursuant to that certain Agreement and Plan of Merger, dated
as of April 16, 2000 (the "Merger Agreement"), between the Company and First
United Bancshares, Inc. ("First United"), First United will be merged with and
into the Company (the "Merger");

         WHEREAS, Kelley is currently the Chief Executive Officer of First
United;

         WHEREAS, First United and Kelley have previously entered into an
Executive Severance Agreement, dated July 27, 1998 (the "Severance Agreement");

         WHEREAS, the Company desires to retain the full-time, dedicated
services of Kelley after the Merger as Chief Operating Officer of the Company,
or other assigned positions, and to be assured of its right to his services in
said capacity;

         WHEREAS, Kelley desires to provide services as Chief Operating Officer
of the Company, or in such other senior officer positions as may be assigned by
the Board;

         WHEREAS, in order to provide a performance incentive, the Board took
action on the date hereof to grant shares of the Company's common stock ("Common
Stock") to Kelley that are restricted and subject to a substantial risk of
forfeiture which lapses upon the attainment of certain performance conditions;

         WHEREAS, Kelley has agreed to waive and release his rights under the
Severance Agreement effective upon the execution of this Agreement, and in
consideration of the Company entering into this Agreement and the Merger
Agreement, the Company and Kelley acknowledge that the Severance Agreement shall
be and is hereby terminated and shall (except as provided in Section 4 hereof)
be void and without effect; and

         WHEREAS, the Company desires for this arrangement to be approved by the
shareholders of the Company at a meeting following the execution of this
Agreement, and desires that the Common Stock awarded to Kelley hereunder be
treated as performance based compensation as described in Section 162(m) of the
Internal Revenue Code of 1986 (the "Code");

         NOW, THEREFORE, in consideration of the premises set forth herein and
other mutual agreements and good and valuable consideration hereinafter set
forth, the Company and Kelley hereby agree to the following:

         1. Services to be Provided by Kelley. Upon and following the Closing,
Kelley shall perform as Chief Operating Officer of the Company, or in any other
senior officer capacity assigned by the Board, pursuant to his employment
arrangement with the Company and agrees to devote substantially all his time to
performing the responsibilities of such position, or other assignments, to
perform such other reasonable services and duties as may from time to time be
assigned to him by the Board and to grant the Company his undivided loyalty as
long as he continues to be employed by the Company.

<PAGE>   2
         2. Effective Date and Term. (a) This Agreement shall be effective on
April 16, 2000 (the "Effective Date"); provided, however, that Kelley's
employment hereunder shall not commence or be effective until the Closing, and
in the event that the Merger Agreement is terminated by either party pursuant to
Article IX of the Merger Agreement, this Agreement shall be void ab initio,
cancelled and of no effect.

          (b) Except as otherwise provided herein, the term of this Agreement
shall be from the Effective Date until the date ("Expiration Date") five years
after the date of the Closing (the "Closing Date"). This Agreement is not an
employment contract. The existence of this Agreement shall not affect in any way
the Company's right to discharge Kelley.

         3. Bonus Compensation; Stock Ownership. Upon, and only upon,
consummation, if any, of the Merger Agreement at the Effective Time as defined
therein (the "Closing") and only upon such Closing, the Company shall award to
Kelley, immediately after the Closing, 100,000 shares of Common Stock (the
"Shares"), in consideration for the performance of services to the Company,
provided that such shares shall be subject to the restrictions and risks of
forfeiture described herein. Upon issuance, such Shares shall be held by the
Company or by an escrow agent, which may be any entity that is acceptable to the
Company and Kelley (any of such entities shall be referred to herein as the
"Escrow Agent"); provided that any agreement between the Company and the Escrow
Agent shall be consistent with the terms of this Agreement and shall not impose
any restrictions or risks of forfeiture that are not set forth herein. The
Company shall transfer to the Escrow Agent Shares that are either authorized but
unissued shares held in the treasury of the Company or repurchased on the open
market or in privately negotiated transactions. From and after the date that
Shares are held for Kelley's benefit by the Escrow Agent, Kelley shall have no
right to transfer the Shares or any other right to the Shares, except that
Kelley shall be entitled to receive notices of all meetings of shareholders of
the Company and to vote the Shares at such meetings and to receive dividends
paid with respect thereto. However, Kelley shall have full, nonforfeitable
rights in such Shares issued to him under this Agreement upon the earlier of (i)
the Expiration Date or (ii) the termination of this Agreement pursuant to
Section 7(b).

                  (a) The Shares held by the Escrow Agent shall become
         nonforfeitable and shall be released to Kelley each year on the
         anniversary of the Closing Date at the rate of one-fifth of the Shares
         granted pursuant to this agreement; provided that the Company achieves
         either a 0.9% Return on Average Assets or a 12.825% Return on Average
         Equity for the prior fiscal year of the Company. If such performance
         incentives are not achieved for a fiscal year, the Shares that would
         have been released shall be held by the Escrow Agent and continue to be
         held by the Escrow Agent until the earlier of (i) the Expiration Date
         or (ii) this Agreement terminates pursuant to Section 7.

                  (b) In the event this Agreement is terminated by the Company
         pursuant to Section 7(a)(i) hereof prior to the fifth anniversary of
         the Closing Date or if Kelley voluntarily terminates his employment
         with the Company other than as provided in Section 7(b) hereof, Kelley
         shall retain full ownership of the Shares that have been released to
         him by the Escrow Agent, but shall forfeit all rights, title and
         interests in and to any Shares still held by the Escrow Agent, which
         Shares shall be delivered to the Company to be held in treasury or to
         be canceled (as shall be determined by the Board).

                  (c) In the event this Agreement is terminated pursuant to
         Section 7(b) hereof prior to the fifth anniversary of the Closing Date,
         Kelley shall be entitled to receive all Shares held by the Escrow Agent
         as of such termination date and shall be entitled to retain full
         ownership of all such Shares.

                                       2
<PAGE>   3
         4. Termination of Severance Agreement. Kelley hereby agrees that this
Agreement supersedes and replaces the Severance Agreement, and that the
Severance Agreement is hereby terminated and is void and without effect. Kelley
hereby waives, relinquishes, discharges and releases all rights to any payments
or other benefits he now has or may ever have under the Severance Agreement or
any other bonus payments, performance reward payments, severance payments,
change of control payments or similar payments to which he may otherwise be or
become entitled arising out of his employment relationship with First United
(collectively, "First United Agreements"). Further, Kelley releases the Company,
BancorpSouth Bank, First United, all their subsidiaries and affiliated entities
and their respective successors and assigns and affiliates, from any and all
claims, actions or liabilities related to, or arising from, the Severance
Agreement or First United Agreements. Provided, however, in the event this
Agreement is voided ab initio pursuant to Section 2(a) above, then the Severance
Agreement, First United Agreements and all of Kelley's rights and obligations
thereunder shall be reinstated ab initio as if this Agreement never arose.

         5. Covenants of Kelley. Kelley covenants that, as of the date of this
Agreement, he is not in violation of any agreement, covenant, court order,
consent decree, statute or other binding commitment of his to do, or refrain
from doing, any act, and that by entering into this Agreement he will not
thereby violate any such agreement, covenant, court order, consent decree,
statute or other binding commitment. Kelley represents and acknowledges that
Kelley represents and acknowledges that, as of the Effective Date, he has
received no payments whatsoever, in any form whatsoever, pursuant to the
Severance Agreement or other severance or change in control payments from First
United or any of its affiliates, as of the Effective Date, he has received no
payments whatsoever, in any form whatsoever, pursuant to the Severance Payments
or thereunder.

         6. Noncompetition. Kelley agrees not to compete with the Company as
follows:

                  (a) Noncompetition. Kelley agrees that, upon termination of
         this Agreement for any cause whatsoever other than a "change in
         control," as defined in Section 7(c) hereof, of the Company, he will
         not directly or indirectly, as principal, agent, employee or in any
         other capacity, during the Noncompetition Period (as hereinafter
         defined), enter into or engage in the same business now being carried
         on by First United or of any majority-owned subsidiary, trade or
         business of First United (each a "Subsidiary" whether or not
         incorporated) or as may be carried on by First United or a Subsidiary
         from the date hereof to the date of Kelley's termination, within a
         fifty (50) mile radius extending in all directions from any office or
         location where First United or a Subsidiary is actively engaged in a
         business immediately prior to the Closing Date.

                  (b) Respect for employee relationships. Kelley agrees that
         upon termination of this Agreement, he will not, without the prior
         written consent of the Company, directly or indirectly, as principal,
         agent, employee or in any other capacity, during the Noncompetition
         Period, hire, entice away or in any other manner persuade any employee
         of the Company (including any employee of a subsidiary) to discontinue
         his relationship with the Company or subsidiary.

                  (c) Return of documents. Kelley agrees that, upon termination
         of this Agreement for any cause whatsoever, he shall deliver to the
         Company all correspondence, agreements, contracts, books of account,
         records, files, research, manuals or other documents, and all copies
         thereof, relating to, concerning or arising out of the business and
         operations of the Company and/or any Subsidiary or affiliate of the
         Company.

                                       3
<PAGE>   4
                  (d) Reasonable nature of restrictions. Kelley represents and
         admits that, in the event of the termination of his employment for any
         reason whatsoever, his experience and capabilities are such that he can
         obtain employment in business not in competition with the Company as
         herein limited, and that enforcement of a remedy by way of injunction
         will not prevent him from earning a livelihood. Kelley further
         represents and admits that the period of two years following
         termination of his employment with the Company, during which time he
         may not compete with the Company, as herein limited, nor disturb the
         relationship between the Company and/or a subsidiary and its customers,
         clients and/or employees, is reasonably necessary to protect the
         interests of the Company and/or a subsidiary and would not unfairly or
         unreasonably restrict Kelley.

                  (e) Noncompetition Period. The period beginning upon the date
         of Closing and ending on the fifth anniversary of this Agreement.

                  (f) Survival of Noncompetition Provision. The promises,
         covenants and terms of this Section 6 shall survive the termination of
         this Agreement.

         7. Termination and Severance. It is the contemplation of the parties
hereto that this Agreement shall not be terminated prior to the expiration of
the term set forth in Section 2 hereof.

                  (a) Termination by the Company. Notwithstanding the foregoing,
         the Company shall have the immediate right to terminate this Agreement
         upon the happening of any of the following events:

                           (i) an act by Kelley, in the good faith judgment of
                  the Board, of dishonesty, embezzlement or fraud against the
                  Company and/or a subsidiary; Kelley's conviction of a
                  misdemeanor involving dishonesty or breach of trust; Kelley's
                  conviction of a felony; or the issuance of any order for
                  Kelley's removal as an employee of the Company or a subsidiary
                  by any state or federal regulatory agency or court of
                  competent jurisdiction; or

                           (ii) the death of Kelley or the mental or physical
                  illness, disability or incapacity of Kelley which, in the
                  reasonable and good faith judgment of the Board, prevents
                  Kelley from performing his duties hereunder and the
                  continuance of such illness, disability or incapacity for a
                  period of 90 days.

                  (b) Termination by Kelley. Notwithstanding the foregoing,
         Kelley shall have the immediate right to terminate this Agreement and
         become fully vested in the Shares held by the Escrow Agent in the event
         there is a change in control of the Company, as defined in (c) below.

                  (c) Change in Control. Change in control of an entity shall be
         deemed to have occurred if:

                           (i) any "person" as such term is used in Sections
                  13(d) and 14(d) of the Securities Exchange Act of 1934, as
                  amended, other than a trustee or other fiduciary holding
                  securities under an employee benefit plan of the entity or a
                  corporation controlling the entity or owned directly or
                  indirectly by the stockholders of the entity in substantially
                  the same proportions as their ownership of stock of such
                  entity, becomes the "beneficial owner" (as defined in Rule
                  13d-3 under said Act), directly or indirectly, of securities
                  of such

                                       4
<PAGE>   5
                  entity representing more than 25% of the total voting power
                  represented by such entity's then outstanding Voting
                  Securities (as defined below), or

                           (ii) during any period of two consecutive years,
                  individuals who at the beginning of such period constitute the
                  Board of such entity and any new director whose election by
                  the Board or nomination for election by such entity's
                  stockholders was approved by a vote of at least two-thirds of
                  the directors then still in office who either were directors
                  at the beginning of the period or whose election or nomination
                  for election was previously so approved, cease for any reason
                  to constitute a majority thereof, or

                           (iii) the stockholders of such entity approve a
                  merger or consolidation of such entity with any other
                  corporation, other than a merger or consolidation which would
                  result in the Voting Securities of such entity outstanding
                  immediately prior to the merger or consolidation continuing to
                  represent (either by remaining outstanding or by being
                  converted into Voting Securities of the surviving entity) more
                  than 65% of the total voting power represented by the Voting
                  Securities of such entity or such surviving entity outstanding
                  immediately after such merger or consolidation, or the
                  stockholders of such entity approve a plan of complete
                  liquidation of such entity or an agreement for the sale or
                  disposition by such entity of all or substantially all of its
                  assets.

         For purposes of this section "Voting Securities" of an entity shall
         mean any securities of the entity which vote generally in the election
         of its directors.

         8. Merger. Upon a merger or consolidation in which the Company is not
the surviving entity, this Agreement shall continue unless terminated by Kelley
pursuant to Section 7(b), and the surviving corporation shall substitute shares
of its common shares having a then value equivalent to the then value of the
Shares.

         9. Election. Kelley may desire to make an election under Section 83(b)
of the Code regarding the timing and amount of compensation income to be
recognized by him on account of his receipt of Common Stock. The making of such
an election shall be wholly within the discretion of Kelley and it shall be the
sole responsibility of Kelley to see that such election, if desired, is properly
made and timely filed. If Kelley makes such an election, he shall inform the
Company in writing immediately thereafter.

         10. Withholding. Whenever Kelley shall recognize compensation income as
a result of the receipt of Common Stock, he shall remit to the Company the
minimum amount of federal and state income and employment tax withholding which
a subsidiary or the Company is required to remit to the Internal Revenue Service
or applicable state department of revenue in accordance with the then current
provisions of the Code or applicable state law ("Withholding Tax"). The full
amount of the Withholding Tax shall be remitted simultaneously with the filing
of an election described in Section 9 or upon the occurrence of any other event
under this Agreement which results in the recognition of income by Kelley. The
Withholding Tax may be paid, in the discretion of Kelley, by (i) cash, (ii) a
certified check or (iii) delivery of shares of Common Stock with a fair market
value equal to the amount of the Withholding Tax.

         11. Nonassignment. No party hereto may assign any rights hereunder. Any
such purported delegation or assignment shall be void.

                                       5
<PAGE>   6
         12. Severability. It is the intention of the Company and Kelley that
the provisions of this Agreement shall be enforced to the fullest extent
permissible under the laws of the State of Mississippi, but that the
unenforceability (or the modification to conform with such laws or public
policies) of any provisions hereof shall not render unenforceable or impair the
remainder of this Agreement. Accordingly, if any provision of this Agreement
shall be determined to be invalid or unenforceable, either in whole or in part,
this Agreement shall be deemed amended to delete or modify, as necessary, the
offending provisions and to alter the balance of this Agreement in order to
render the same valid and enforceable to the fullest extent permissible as
aforesaid.

         13. Certain Additional Payments.

                  (a) Anything in this Agreement to the contrary
         notwithstanding, in the event it shall be determined that any payment
         or distribution by or on behalf of the Company to or for the benefit of
         Kelley as a result of a change in control (as defined in Section 280G
         of the Internal Revenue Code of 1986 (the "Code") (whether paid or
         payable or distributed or distributable pursuant to the terms of this
         Agreement or otherwise, but determined without regard to any additional
         payments required under this Section 13 (a "Payment")) would be subject
         to the excise tax imposed by Section 4999 of the Code, or any interest
         or penalties are incurred by Kelley with respect to such excise tax
         (such excise tax, together with any such interest and penalties, are
         hereinafter collectively referred to as the "Excise Tax"), then Kelley
         shall be entitled to receive an additional payment (a "Gross-Up
         Payment") in an amount such that after payment by Kelley of all taxes
         (including any interest or penalties imposed with respect to such
         taxes), including, without limitation, any income taxes (and any
         interest and penalties imposed with respect thereto) and Excise Tax
         imposed upon the Gross-Up Payment, Kelley retains an amount of the
         Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

                  (b) Subject to the provisions of Section 13(c), all
         determinations required to be made under this Section 13, including
         whether and when a Gross-Up Payment is required and the amount of such
         Gross-Up Payment and the assumptions to be utilized in arriving at such
         determination, shall be made by a nationally recognized accounting firm
         selected by the Company (the "Accounting Firm"); provided, however,
         that the Accounting Firm shall not determine that no Excise Tax is
         payable by Kelley unless it delivers to Kelley a written opinion (the
         "Accounting Opinion") that failure to pay the Excise Tax and to report
         the Excise Tax and the payments potentially subject thereto on or with
         Kelley's applicable federal income tax return will not result in the
         imposition of an accuracy-related or other penalty on Kelley. All fees
         and expenses of the Accounting Firm shall be borne solely by the
         Company. Within 15 business days of the receipt of notice from Kelley
         that there has been a Payment, or such earlier time as is requested by
         the Company, the Accounting Firm shall make all determinations required
         under this Section 13, shall provide to the Company and Kelley a
         written report setting forth such determinations, together with
         detailed supporting calculations, and, if the Accounting Firm
         determines that no Excise Tax is payable, shall deliver the Accounting
         Opinion to Kelley. Any Gross-Up Payment, as determined pursuant to this
         Section 13, shall be paid by the Company to Kelley within fifteen days
         of the receipt of the Accounting Firm's determination. Subject to the
         remainder of this Section 13, any determination by the Accounting Firm
         shall be binding upon the Company and Kelley; provided, however, that
         Kelley shall only be bound to the extent that the determinations of the
         Accounting Firm hereunder, including the determinations made in the
         Accounting Opinion, are reasonable and reasonably supported by
         applicable law. As a result of the

                                       6
<PAGE>   7
         uncertainty in the application of Section 4999 of the Code at the time
         of the initial determination by the Accounting Firm hereunder, it is
         possible that Gross-Up Payments which will not have been made by the
         Company should have been made ("Underpayment"), consistent with the
         calculations required to be made hereunder. In the event that it is
         ultimately determined in accordance with the procedures set forth in
         Section 13(c) that Kelley is required to make a payment of any Excise
         Tax, the Accounting Firm shall reasonably determine the amount of the
         Underpayment that has occurred and any such Underpayment shall be
         promptly paid by the Company to or for the benefit of Kelley. In
         determining the reasonableness of Accounting Firm's determinations
         hereunder, and the effect thereof, Kelley shall be provided a
         reasonable opportunity to review such determinations with the
         Accounting Firm and Kelley's tax counsel. The Accounting Firm's
         determinations hereunder, and the Accounting Opinion, shall not be
         deemed reasonable until Kelley's reasonable objections and comments
         thereto have been satisfactorily accommodated by Accounting Firm.

                  (c) Kelley shall notify the Company in writing of any claims
         by the Internal Revenue Service that, if successful, would require the
         payment by the Company of the Gross-Up Payment. Such notification shall
         be given as soon as practicable but no later than 30 calendar days
         after Kelley actually receives notice in writing of such claim and
         shall apprise the Company of the nature of such claim and the date on
         which such claim is requested to be paid; provided, however, that the
         failure of Kelley to notify the Company of such claim (or to provide
         any required information with respect thereto) shall not affect any
         rights granted to Kelley under this Section 13 except to the extent
         that the Company is materially prejudiced in the defense of such claim
         as a direct result of such failure. Kelley shall not pay such claim
         prior to the expiration of the 30-day period following the date on
         which he gives such notice to the Company (or such shorter period
         ending on the date that any payment of taxes with respect to such claim
         is due). If the Company notifies Kelley in writing prior to the
         expiration of such period that it desires to contest such claim, Kelley
         shall:

                  I.       give the Company any information reasonably requested
                           by the Company relating to such claim;

                  II.      take such action in connection with contesting such
                           claim as the Company shall reasonably request in
                           writing from time to time, including, without
                           limitation, accepting legal representation with
                           respect to such claim by an attorney selected by the
                           Company and reasonably acceptable to Kelley;

                  III.     cooperate with the Company in good faith in order
                           effectively to contest such claim; and

                  IV.      if the Company elects not to assume and control the
                           defense of such claim, permit the Company to
                           participate in any proceedings relating to such
                           claim;

         provided, however, that the Company shall bear and pay directly all
         costs and expenses (including additional interest and penalties)
         incurred in connection with such contest and shall indemnify and hold
         Kelley harmless, on an after-tax basis, for any Excise Tax or income
         tax (including interest and penalties with respect thereto) imposed as
         a result of such representation and payment of costs and expenses.
         Without limiting the foregoing provisions of this Section 13, the
         Company shall have the right, at its sole option, to assume the defense
         of and control all proceedings in connection with such contest, in
         which case it may pursue or forego any and all

                                       7
<PAGE>   8
         administrative appeals, proceedings, hearings and conferences with the
         taxing authority in respect of such claim and may either direct Kelley
         to pay the tax claimed and sue for a refund or contest the claim in any
         permissible manner, and Kelley agrees to prosecute such contest to a
         determination before any administrative tribunal, in a court of initial
         jurisdiction and in one or more appellate courts, as the Company shall
         determine; provided, however, that if the Company directs Kelley to pay
         such claim and sue for a refund, the Company shall advance the amount
         of such payment to Kelley, on an interest-free basis and shall
         indemnify and hold Kelley harmless, on an after-tax basis, from any
         Excise Tax or income tax (including interest or penalties with respect
         thereto) imposed with respect to such advance or with respect to any
         imputed income with respect to such advance; and further provided that
         any extension of the statute of limitations relating to payment of
         taxes for the taxable year of Kelley with respect to which such
         contested amount is claimed to be due is limited solely to such
         contested amount. Furthermore, the Company's right to assume the
         defense of and control the contest shall be limited to issues with
         respect to which a Gross-Up Payment would be payable hereunder and
         Kelley shall be entitled to settle or contest, as the case may be, any
         other issue raised by the Internal Revenue Service or any other taxing
         authority.

                  (d) If, after the receipt by Kelley of an amount advanced by
         the Company pursuant to Section 13, Kelley becomes entitled to receive
         any refund with respect to such claim, Kelley shall (subject to the
         Company's complying with the requirements of Section 13(c)) promptly
         pay to the Company the amount of such refund (together with any
         interest paid or credited thereon after taxes applicable thereto). If,
         after the receipt by Kelley of an amount advanced by the Company
         pursuant to Section 13(c), a determination is made that Kelley is not
         entitled to a refund with respect to such claim and the Company does
         not notify Kelley in writing of its intent to contest such denial of
         refund prior to the expiration of 30 days after such determination,
         then such advance shall, to the extent of such denial, be forgiven and
         shall not be required to be repaid and the amount of forgiven advance
         shall offset, to the extent thereof, the amount of Gross-Up Payment
         required to be paid.

         14. Miscellaneous. (a) The existence of this Agreement shall not affect
in any way the right or power of the Company to make or authorize any
adjustment, reclassification, reorganization or other change in its capital or
business structure, any merger or consolidation of the Company, any issue or
debt or equity securities having preferences or priorities as to the Common
Stock or the rights thereof, the dissolution or liquidation of the Company, any
sale or transfer of all or any part of its business or assets, or any other
corporate act or proceeding.

                  (b) This Agreement may only be amended or modified in writing
         as agreed upon by all the parties hereto.

                  (c) All notices or other communications pursuant to this
         Agreement shall be in writing and shall be deemed to have been duly
         given, if by hand delivery, upon receipt thereof, or if mailed by
         certified or registered mail, postage prepaid, three days following
         deposit in the United States mail, and in any event, to be addressed to
         all of the parties as follows:

                  to the Company, at

                  BancorpSouth, Inc.
                  One Mississippi Plaza
                  Tupelo, Mississippi 38804
                  Attn: Chief Executive Officer

                                       8
<PAGE>   9
                  to Kelley, at

                  -----------------------------

                  -----------------------------

or to such other address as shall hereafter be provided by proper notice to the
other parties.

                  (d) The captions and headings herein are for convenience of
         reference only and shall not be deemed to be a part of the substance of
         this Agreement.

                  (e) This Agreement shall be construed and interpreted
         according to the laws of the State of Mississippi, without regard to
         the principles of conflicts of laws thereof.

                  (f) The foregoing contains the entire and only agreement
         between the parties respecting the subject matter hereof, and any
         representation, promise or condition in connection therewith not
         incorporated herein shall not be binding upon either party.

                  (g) The foregoing agreement shall be binding upon the parties
         hereto and there respective heirs, successors and assigns.

                                       9
<PAGE>   10
                  IN WITNESS WHEREOF, the parties have executed this Agreement
         the day and year first above written.

                                       BANCORPSOUTH, INC.

                                       By:/s/ Aubrey B. Patterson
                                       -----------------------------------------
                                       Name: Aubrey B. Patterson
                                       Its: Chairman and Chief Executive Officer

                                       /s/ James V. Kelley
                                       -----------------------------------------
                                       JAMES V. KELLEY

                                       10

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